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Speculative Brent rally lifts oil prices just $3/bbl

Last week should have been a great week for the speculators.  As in July 2008, they were able to spread the rumour of imminent Middle East war and upheaval.  5 years ago it was the threat of Israel bombing Iran’s nuclear facilities, and leading to a blockade of the Straits of Hormuz.  This time it […]

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What goes up, usually comes down

Something very strange has happened to oil prices since 2009, as the chart of the ratio between US oil and natural gas prices shows: • Between 1986-2008, the ratio averaged 9.6, and was typically in the 6 – 14 range (6 is oil’s relative energy content versus natgas, whilst 14 was seen during the first […]

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‘The Trend is Your Friend’, until it isn’t

The blog still owns the lapel button it was given when running ICI’s feedstock and petchem trading office in Houston, Texas. Its advice for any trader is excellent – ‘The Trend is Your Friend’. But as all traders learn over time, there are moments when the trend can change. And sometimes, when change happens, it […]

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Oil markets risk rapid repricing – Part 2

As the blog discussed yesterday, central banks have now kept oil prices above the historical $10-30/bbl range for 10 years. But can they remain there forever? What might bring them back in line with the fundamentals of supply/demand? And what would be the risks if this happened? The background can be simply stated: • Investors […]

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Brent May13.png

Oil markets risk rapid repricing – Part 1

Since 1900, as the chart shows, oil prices have never been so high for so long as now. Until 2003, they had only been above $30/bbl for 4 years between 1979-1982, during the OPEC production cuts in the Iran crisis. But since 2004, they have been continuously above this level. The reason is the misguided […]

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Japan’s liquidity programme sends oil, gold prices tumbling

Brent crude oil prices have now dropped $20/bbl since their February peak at $119/bbl. The major drop has occurred this month, following the Bank of Japan’s decision to introduce its own massive liquidity programme. This confirms the blog’s long-standing argument that the fundamentals of supply/demand had nothing to do with oil’s rise from $30/bbl to […]

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“Surplus oil is filling inventories worldwide” – Reuters

Have you ever wondered, as you pay your energy bill or fill the fuel tank in your vehicle, just why oil prices have risen so much on the past decade? The question occurred to the blog when reading a Reuters report of the latest Outlook from the International Energy Agency (IEA). It notes the IEA […]

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Crude oil’s slide puts markets under pressure

Crude oil markets long ago lost their role of price discovery. Since early 2009, they have instead been dominated by pension funds seeking to find a ‘store of value’ as the US$ weakened, along with hedge funds enjoying a money-making ‘momentum play‘. The reason has been the $tns spent by western central banks in their […]

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“Its the oil price, stupid!”

Famously, when Bill Clinton ran his successful presidential campaign in 1992, his advisers would remind him of the key message with just one phrase “Its the economy, stupid!”. Today’s policymakers would do well to maintain a similar focus on the oil price, if they want to understand today’s lack of demand. Somehow, everyone seems to […]

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Fed liquidity boosts oil prices as fundamentals weaken

Oil prices long ago moved away from the fundamentals, as the US Federal Reserve targeted asset price bubbles in a misguided effort to magic up consumption gains. Thus we have to focus on sentiment indicators, as in the chart above, to anticipate likely developments: • Monthly US oil inventories hit a new record for November […]

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