Oil Price

The oil price is entering its third year of recovery following the big bust. The bull case has argued
that a faster growing global economy coupled with production cuts from OPEC / Russia would
allow a massive build up of crude inventories to work off steadily, thus allowing the industry to
eventually return to a reasonable balance between supply and demand. the hope has turned into
reality as stocks have dwindled from huge down much close to normal based on a five year average.
For the most part, the price has advanced in an orderly fashion. In late 2016, most industry buffs
were projecting the price of crude to stay in a range of $40 - 60 bl. well past 2017. Amazingly,
given how hard it is to forecast the price of oil, crude has remained in that range until recently.
With promises of further production-side discipline and the reduction of stocks still underway, a
new consensus has emerged in the industry with oil now seen as rising to $80 bl. in the months
ahead.  WTIC Daily

With the WTIC having just topped $68, the market is a hefty 22% above the 200 day m/a. It is
not overbought on many other technical measures, but you need to know that this is a very crowded
trade, with speculative long futures continuing at record levels. Moreover, with the big petrol build
now nearly completed for the year, the market is about to enter a very choppy period on a seasonal
basis and it may be tricky if you want to chase the recent burst.

Production reductions over the next six months or so could have a disproportionatley large
positive impact on prices. But note as well that since the industry is now firmly in the black on
the production side, there is a little extra incentive to cheat.

More on oil later in the week.