About Me

Retired chief investment officer and former NYSE firm partner with 40 years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!

Thursday, December 29, 2016

Oil Price -- Weekly

The oil price is experiencing its strongest year end close since 2012. This is happening despite
the fact that Oct.-Dec. is a very weak seasonal period. Fuel demand may have picked up some,
but the major reason is that traders have developed conviction that the OPEC-Russian supply
cut deal will hold going into 2017. Compare this year with last year when the price went into
free fall.  WTIC Weekly

The consensus for the WTIC trading range going forward remains at $40-60 bl. Price targets for
the seasonally strong spring of 2017 are starting to inch above $60, but most players are behaving
in a reserved fashion because Jan.-Feb is a seasonally weak period and since consensus supply
data for the final quarter of 2016 is not widely available. As of now, net oil producers are enjoying
a strong rebound in per barrel realizations compared to last years' disaster.

Production cut accords nearly always involve cheating so producer output data out ahead will be
carefully reviewed to determine if there are threats to the basic agreement. Traders will also be
watching US supply and the rig count to see if this now important new swing sector will inhibit
price recovery next year. Breakeven for the entire industry remains around $55 a bl. so deals are
out there if recovery progress holds.

The oil price is currently in a cyclical rebound stage with ascending tops and bottoms amidst
the usual volatility. WTIC is mildly overbought and is at a healthy premium to its 40 wk m/a.
One trader concern is that long side speculator interest is at record high levels just as it was in
in latter 2014 when crude made the important interim top of $105. Let's call it a very crowded
trade.

1 comment:

Flow5 said...

Monopolistic price practices are ultimately deflationary unless validated by monetary policy. Oil prices will be temporarily subdued in early 2017.