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This week’s drop in OP has knocked it off a promising trend but, like busses, there’ll be another one along eventually:
https://invst.ly/13a2vy
Another thing about OP is that you can always find a headline that matches your pov:
FT: ‘The days of $100 oil prices are over'….Demand will continue but potential world supply is likely to peg back the cost.
https://www.ft.com/content/57f1ad77-119f-42df-a1ff-3d57df70ba80
OilPrice.com: ' Chevron Returns Record Cash to Investors as Oil and Gas Output Hits New High
https://oilprice.com/Latest-Energy-News/World-News/Chevron-Returns-Record-Cash-to-Investors-as-Oil-and-Gas-Output-Hits-All-Time-Hig.html
I didn't read the FT article (I assumed a paywall ) but I assumed it overlooked the ongoing fall in identified global reserves?
Ultimately the world will need Oil to be expensive in order to drive transition to alternatives. Cheap oil is bad for everyone.
US charging Iran with evading oil sanctions:
https://oilprice.com/Latest-Energy-News/World-News/US-Charges-Iranian-Oil-Trafficking-Network-Over-Sanctions-Evasion.html
Looks like a few shorts getting squeezed:
https://oilprice.com/Energy/Oil-Prices/US-Crude-Oil-Could-Be-Ripe-for-A-Short-Squeeze.html
Occidental CEO predicts 2025 oil supply shortage:
https://oilprice.com/Latest-Energy-News/World-News/Buffett-Backed-Occidental-CEO-Says-Oil-Shortage-by-2025.html
Predicting OP is a mugs game isn't it GfG? Still, there's always a mug who'll try...
A quick look back at OP over the last twenty years is interesting.
The chart below of Brent is a weekly one, with an annual (52 week) moving average in blue and a five year moving average (orange) and greyed areas indicating periods when OP dropped below $70 - accounting for about 45% of the time:
https://invst.ly/13eudf
It’s a reminder that OP today is cheap compared to the four years (2011-2014 inclusive) when OPEC was not challenged by the boom and bust years of US shale. A period during which many small shale producers were forced to overproduce in order to cover the cost of their debts. Since the last ‘bust’, triggered by a price war with OPEC followed by COVID, the weaker companies have gone and there is now more discipline in the US. Nevertheless, production there will probably keep the price below $100 and the question is where is the ‘sweet spot’ that satisfies the powerful producers? And what price is going to be high enough to sustain exploration for replacement reserves and stimulate green transition? Cheap oil is not as good as it sounds for society.
My guess is that, much as US Presidents would like to see WTI around $50, the price for Brent is unlikely to fall below $60 in future, with the mid-point somewhere between $60 and $100 - so maybe averaging around $75- $80?
So, I am definitely a mug, as I am waiting for the oil price to rise, so I can offload some shares at a higher value than it is currently. We should creep up as more oil will be consumed as oil is lower price in January.
Ha! Ordinarily I'd agree about the seasonal pattern, Littleaston - just don't look at what happened last year, when we had to wait until September for January's OP highs to be surpassed: https://invst.ly/13eyh0
The sp also stayed below 2475 after March for much of the year until September and October.
For me the market is not going to hit anywhere near the £27.27p of the 16th October 2023, as Ex-D approaches. All the vagaries of slowing of demand, is inflation sorted, when will the first interest rate cut happen etc Heavy pre-election political influences dragging the price. Biden pushing the Permian output to the point of being a "swing" producer with up to 5.4 mbd, or the equivalent of 5-6% of daily world demand. India and China slaking their demand on cheap Russian oil. Both a demand distorter and price suppressor.
Disruption to World trade emanating from the Gulf having minimal impact on price, war all over the place again having little impact on price etc. The market is very distorted from reality at the moment. I've been waiting to trade for some time now, but have not done so & personally I am not persuaded to at the moment. I tend not to average up and down & rather if the decision looks right to me I bailout altogether.
I think Boyo's latest graph is really explicit on this. Although I think the OP will carry on strengthening, they are choppy unpredictable waters for trading as far as I am concerned. If the booby prize is receipt of another dividend I will not be unhappy for now. Good luck guys.
Also to add to the SP equation is the current vulnerability of BP, which is still paying for the Deepwater Horizon disaste, although this is coming to a close now. The costs of this were estimated at $65 billion in 2018. So with growth wouldn't BP be worth almost as much as Shell now!
It's worth bearing in mind the increasing revenues predicted from LNG.
According to the firm’s LNG Outlook published today, demand will rise by 50 per cent by 2040 and global LNG trade will grow to around 625-685m tonnes per year, up from the 404m tonnes traded in 2023.
“China is likely to dominate LNG demand growth this decade as its industry seeks to cut carbon emissions by switching from coal to gas,” said Steve Hill, executive vice president for Shell Energy.
“With China’s coal-based steel sector accounting for more emissions than the total emissions of the UK, Germany and Turkey combined, gas has an essential role to play in tackling one of the world’s biggest sources of carbon emissions and local air pollution.”