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WTI Sept17

Oil market supply/demand finally begins to matter again as commodity funds withdraw

Its been a long time since oil market supply/demand was based on physical barrels rather than financial flows:   First there was the subprime period, when the Fed artificially boosted demand and caused Brent to hit $147/bbl   Then there was QE, where central banks gave free cash to commodity hedge funds and led Brent to hit […]

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Oil heads back below $30/bbl as hedge funds give up on OPEC

“Those who cannot remember the past are condemned to repeat it“. George Santayana 9 months ago, it must have seemed such a good idea.  Ed Morse of Citi and other oil market analysts were calling the hedge funds with a sure-fire winning strategy, as the Wall Street Journal reported in May: “Dozens of hedge-fund managers […]

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Brent Jun17

Oil price weakness will unmask reflation and recovery myth

Oil markets have been at the centre of the recent myth that economic recovery was finally underway.  The theory was that rising inflation, caused by rising oil prices, meant consumer demand was increasing.  In turn, this meant that the central banks had finally achieved their aim of restoring economic growth via their zero interest rate […]

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US oil exports May17

Oil prices under pressure as US oil/product exports ramp up

On Monday, I discussed how OPEC abandoned Saudi Oil Minister Naimi’s market share strategy during H2 last year. Naimi’s strategy had stopped the necessary investment being made to properly exploit the new US shale discoveries. But this changed as the OPEC/non-OPEC countries began to talk prices up to $50/bbl. As CNN reported last week: “Cash is pouring […]

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Pioneer May17

US Permian’s shale oil surge highlights OPEC’s failed strategy

OPEC and Russia made a massive mistake last November when when they decided to try and establish a $50/bbl floor for world oil prices.  And now they have doubled down on their mistake by extending the deal to March 2018. They have ignored 4 absolutely critical facts:   Major US shale oil producers were already […]

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Oil market rebalancing myth looks close to its sell-by date

The myth of oil market rebalancing has been a great money-maker for financial markets.  Hedge funds were the first to benefit in H2 last year, as Reuters has reported, when: “OPEC and some of the most important hedge funds active in commodities reached an understanding on oil market rebalancing during informal briefings held in the […]

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US oil export Mar17

Oil prices could halve as the speculative bubble starts to burst

The past few weeks have been a nightmare for the many hedge funds who gambled on higher oil prices. They obviously hadn’t realised that OPEC’s November quota agreement was most unlikely to lead to a major rebalancing of today’s vastly over-supplied market.  But as I suggested in December: “The simple fact is that the arrival […]

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WTI futures Jan17a

Speculators’ tail wags oil market dog as paper trading dominates

Trading oil markets used to be hard work. You had to talk to all the major players all the time (not just message them), and learn to judge whether they were telling the truth or inventing a version of it.  You had to watch for breaking economic and political news.  And you needed your own […]

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WTI v natgas Jan17

OPEC’s oil output gamble set to face reality as speculative buying peaks

Oil prices, and those of natural gas, have been on a wild ride over the past year, as the chart confirms.  It shows US WTI prices divided by 6, as this enables a comparison with natural gas prices in terms of energy content:    Oil prices have come down a long way from their […]

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OPEC move supports US oil production rise, and smart meters

OPEC is living in the past with its recent announcement of new quotas. The simple fact is that the arrival of US shale production means OPEC are no longer the swing producer, able to control the world market. The quotas will have little effect in themselves, as most of the participants will cheat.  Instead, they […]

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