About Me

Retired chief investment officer and former NYSE firm partner with 50 plus 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 !!!

Monday, April 23, 2018

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.



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