Oilsignal
Key oil market participants looking for decline in pricesYesterday oil hit the very important level of support, which is the reason for recommendations for its sales in itself.
We’ve already noted that October was the worst month for oil over the last few years, what was linked both with an increased supply in the oil market and the slowdown in the growth of demand for oil in the world. According to the start of November, oil is waiting for another difficult month, and we recommend using it to earn.
Today we want to pay attention to another interesting moment. Precisely, to the behavior of the key oil market actors. Mexico, which is among the ten largest oil producers in the world in 2018, spent about $1.2 billion on hedging oil supply prices. The government fears a decline in oil prices and is strongly ensuring its exports. Recall, in 2009, after the financial crisis, Mexico received $5 billion from the oil price hedging program. It also received a solid reward from the risk hedging program in 2015, has earned $6.4 billion from a drop in oil prices quotations. And in 2016 - $2.7 billion. Means, the Mexicans feel the oil market very well and manage their risks extremely successfully.
We consider this is as another indirect signal, which confirms true to our trading idea - longterm sales of oil.
Among other news reaffirming our position it’s worth noting that Russia expressed its willingness to the new post-Soviet’s records in terms of oil production (the current level has already reached 11.4 million b/d), as well as a signal from the United States that some countries will be able to buy Iranian oil without affecting (which partially alleviates market fears about the effect of the US sanction against Iran on the oil market).
Well, keep selling the oil and make money on it.
Oil market: Arabia is gaining traction, the USA - inventoriesOil continues to be under pressure and it is well-founded. The last day of October ended for the oil bulls on a minor note, as, indeed, the entire month. By the way, the outcome of October was the worst one since July 2016. We’ve already announced causes: oil producents are gaining the production when the demand can’t keep up, and overall expectations in markets are depressed.
Bearing in mind that the general fundamental background is conducive to sales, any news which confirms its feasibility, just make the situation worse.
Here are some examples of such news:
1. Oil inventories in the US are growing. In yesterday's review we’ve noted that according to the API, oil reserves in the United States are increasing for the second month in a row. Yesterday's official data confirm this information. This is the sixth week of growth in a row. Such a protracted series of growth stocks in the US have not seen since March 2017. And it hurts oil buyers.
2. Saudi Arabia has brought oil production to 10.7 million b/d, which is close to historical highs. And it appeared, Arabia does not plan to stop there. The point is that Saudi Arabia freights more and more tankers. According to Charles R. Weber, the number of tanker shipments in October increased by 12% to a record 157 vessels, while the results of November may be even more impressive - the loading plan for the first 10 days of the month suggests an increase of 10% relative to October levels. The fact confirming this information is the sharp hike in the cost of freight for supertankers. If a month ago the cost was $18,000 per day, then in just a few weeks it has tripled (!) And now stands at $51,000 (the maximum level since 2017).
And finally, let’s note yesterday's data on oil production in the US: in one week it has grown at 300K b/d (!) . The USA is producing 11.2 billion b/d so far. The best confirmation of our previous argument will be even difficult to find.
As we can see, there are direct and indirect drivers pointed that the situation on the oil market has changed and changed radically, which means that oil needs to be sold . Actually, we started to voice this long-term idea back in September.
eur/jpy sellprofessionals are short in eur, increase 2% short while decrease 2% long, jpy near to reversal with respect to Net Change
CRAZY Time Pattern on OIL? Is this real?OIL to move in timeframe pattern forming a high or a low at exactly the same time every single day. Basically you can just reverse the trend with a trade at 15:00 UK and will reverse forming the high or the low
The "white" strip in the oil market is dragged outDespite the fundamental breakdown that brings the results of the last meeting of OPEC to the oil market, investors and traders do not have time and opportunity to reevaluate their views on market conditions due to a number of events affecting prices on the oil market.
Last week, we already talked about the fact that the shutdown of the oil plant in Fort McMurray (Canada), as well as another oil repartition in Libya, led to the activation of buyers in the oil market. Sanctions against Iran also make market participants nervous. The effect of these news was reinforced by a record decrease in US oil inventories (by more than 9 million barrels, both from API data and official statistics). And the final blow was data from Baker Hughes, which showed that the number of oil rigs was reduced by 4 units. Note that in the case of statistics from Baker Hughes, the problem is not in the fact of reducing the number of drilling rigs, but in the fact that this information sharply activated conversations that oil production in the US reached its limit (we are talking about so-called infrastructure restrictions that are simply do not allow to move and store oil in large volumes without expansion of existing capacities).
Against this background, any news in favor of oil sales were simply lost. These are the statements of Aramco about the intentions to bring oil production up to 10.8 million barrels per day in July. Or, for example, information that the export of oil from the US reached a record 3 million barrels a day. With a production level of 10.9 million barrels per day (only Russia produces more than 11 million barrels per day). Or here another news: BP June 28 announced the purchase of Chargemaster, Britain's largest network of stations for recharging electric vehicles. A number of similar purchases last year made Shell. Cause? The largest oil companies understand that the era of oil is coming to an end. According to their analysts, the market of electric vehicles will grow by 8800% (!) from 2017 to 2040 years.
But the participants of the oil market are ignoring the future and prefer to live in the present.
So far, buyers and optimism are ruling the oil market. Once again, we note that the soil of this optimism, in our opinion, is rather unstable and is of a temporary nature. Therefore, we continue to recommend the sale of oil. The only correction in the recommendations (relative to our previous report) is to wait until unrestrained optimism begins to weaken. And so, in general, prices have become only more attractive for sales.
Results of OPEC meeting: oil prices fall is almost inevitableOn June 22-23, OPEC met in Vienna. The main issue that was on the agenda was the increase in oil production.
Recall, Russia and Saudi Arabia have taken the initiative to increase oil production. In the last report, we reviewed three possible scenarios. Actual results are something between the compromise and the initiative of Russia (production growth of 1.5 million b / d). So, it was decided to increase production by 1 million bbl per day. This, of course, is not a complete refusal from OPEC +, but in general is a very strong negative signal for the oil market. You do not need to be a big expert on the oil market to understand what the sharp increase in supply in the market leads to. Of course, to the drop-in prices on it. The reverse situation was observed after OPEC + reduced production. The price of oil has risen sharply. And we do not see a single reason why this time the basic laws of the economy should fail.
Rather, judging by the semi-panic reaction of the opponents of production growth (almost every country has its own opinion on the results of the meeting and the size of the production growth), they suffered a serious defeat. It should be noted that the increase in production is beneficial primarily to Russia and Saudi Arabia, because they can increase it. And countries like Venezuela, Libya, Iran and others have problems with it. As a result, they risk losing market share.
Summary. On the oil market are throwen out additional and very serious volumes. We consider this as an excellent occasion for sales.
The pressure on oil continues and growsThe white strip for oil seems to have ended. Not a day passes without negative news for oil buyers. Last week ended on a rather minor note - the number of active oil drilling rigs in the US rose again (albeit very slightly, but this was the 11th consecutive week of growth) and reached its highest mark since early 2015. That is, American shale continues to grow. As a result, according to the statistics of the Ministry of Energy, the volume of crude oil production in the US increased by 100,000 barrels a day to a record value of 10.9 million b / d last week.
At the same time in the OPEC +camp, on the contrary, reigns disorder and vacillation. The question of extending OPEC + in the current format for 2019 is no longer worth it. By and large, it has already been resolved - at least the format will change in favor of increasing oil production, and as a maximum the contract signers will quarrel among themselves and the agreement will cease to exist altogether.
So, on the agenda now is the question of how much will increase the production. This question is no longer: do not increase it or not. And this is a very important shift in emphasis. That is, we have shifted from the stage of "negation" towards the "adoption" stage. Yes, Iran, Iraq and Venezuela threaten to block the initiatives of Saudi Arabia and Russia, but this is the battle of David with Goliath, and the biblical miracle in this case is not expected.
So we should expect for the growth if the oil production. And from the side of Russia concrete figures have already been sounded - an increase in production of 1.5 million barrels a day. In fact, this is a waiver from OPEC + (recall, within the framework of the agreement, production was cut by 1.8 million barrels). Given that the growth in oil production in the US and so almost leveled off the efforts of OPEC +, now the bulls for oil will have very tough times.
In connection with such a fundamental background and moods on the market, we continue to recommend mid-term sales of oil.
Several arguments in favor of medium-term oil salesGiven the nature of the news that has recently come out on the oil market, we believe that it's time to seriously talk about mid-term oil sales. This is a reduction to $ 40 per barrel and lower.
What can be the basis for such a movement? Here are a few key arguments:
1. Saudi Arabia and Russia are increasing their oil production (the Saudis have increased their production to the highest level since October 2017 - 10.03 million barrels per day, while Russia has already reached its maximum in the past 14 months). What de facto means a rejection of OPEC +. Recall, it was OPEC + ensured the growth of oil from $ 30 to $ 70. More clarity will appear on the results of the OPEC meeting, which will be held on June 22-23. In the meantime, there are rumors that Russia plans to offer OPEC and its allies to return to production levels in October 2016 and to restore production within three months
2. Oil production in the US came close to the level of 11 million barrels a day. The US is actively increasing exports to Asian countries China, taking there the market share from Russia and Saudi Arabia. The volume of US oil sold abroad reached a record 2.57 million barrels per day in May.
3. Trump urged oil producers to increase production to avoid excessive price pressure on the US economy and the world as a whole.
4. More than half of the new electricity in the US, in 2018 was provided by solar energy. That is, alternative sources have already come to replace the energy of hydrocarbons. And this is a very serious factor in favor of the fact that the current models predicting the demand for oil are based on incorrect assumptions. By the way about forecasts of demand for oil. It's no secret that the demand for oil directly depends on the pace of development of the world economy. So, in the last interview, IMF Managing Director Christine Lagarde noted that the risks of the global economy are increasing and in general the clouds are gathering over it. So, the clouds are gathering and over the demand for oil.
This, of course, is not a complete list of arguments. But this is something that can act as the basis for the formation of a downtrend. Thus, our position is medium-term sales of oil from current ones with targets in the region of $ 40 per barrel. Obviously, it will take more than a month to reach these marks, so we recommend that you have enough patience.
Good ShortGood short lined up, ready for a continued push to the downside. Be careful during news at 10:30am EST
