Oil Prices Keep Rising – How much longer?

Oil Prices keep on rising which reinforces the Unimaginable no. 5 for 2018 that oil prices approach $35. The argument is that while markets seem to concentrate mostly on the supply side which is being managed by OPEC production cuts and very cold weather affecting production in North America plus unrest in Iran, you see very little written on demand influences mostly caused by efficiency gains in transportation fuel use. Still bullish speculators don’t seem to take into account the risk of rising US production as oil prices climb providing a natural ceiling and the increasing competition from renewable energy sources which tend to be treated cynically. It also looks like Iran will be relieved of the sanctions which will allow for increasing investment there, so that supply will depend more and more on compliance with production cuts, not the most reliable.

From Rockefeller Treasury Service 12JAN2018

“Oil persists in rising to over $70 after the US reported oil inventories fell for the 8th straight week and on worries about the OPEC cuts getting a grip. Evidently the oil gang sees no risk of rising US production from the now-permitted drilling on federal land and coastal waters, which is a little curious.”

Still the high demand side seems all quite temporary: the VERY cold winter in North America, speculation that the Aramco IPO needs $60 oil minimum, the Rig Count influences, inventory depletion, etc. Only Chinese demand reflecting strong global economic growth may give lasting support, OPEC is counting on it.

Source: @StatistaCharts; Read full article / WSJ The Daily Shot

All the supply factors above put a natural ceiling on oil prices. This should not be underestimated. I remain a lonely oil bear…

Every picture tells a story

Oil vs. the USD-Euro (15Jan2018) – Oil and the Euro shoot for the moon

Source: Bloomberg

vs. Rig (Baker Hughes) Count (16Jan2018) – High Oil Prices drive up the count in Rigs which eventually drives down the Oil Price

Source: TradingEconomics.com

vs Volatility (12Jan2018) – Will the low volatility in equities lead oil lower or will higher oil prices lead volatility higher?

Source: Bloomberg

vs Sotheby’s (12Jan2018) – Are Oil Prices getting bubbly?

Source: Bloomberg

vs Bitcoin starting 2017 (12Jan2018) – Bitcoin is range trading at lower levels – Now Oil looks bubbly!

Source: Bloomberg

One Reply to “Oil Prices Keep Rising – How much longer?”

  1. […] Powerful forces keep oil prices on an upward trajectory, but for how long? Weakening oil prices remains unimaginable. I remain a lonely bear… […]

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