Overall – Bullish on Oil

by Rob Zdravevski

May 25, 2020

 

Basic thesis is…

Petro-nations need petro-dollars,

they can’t live with a $30, nor $20 oil price,

my view is the March 6th Saudi and Russia stoush was a concerted effort to disarm U.S. shale supply,

main aim was to knock the U.S. off the perch of their temporary and “artificial” status of #1 oil producer,

that status was achieved on shale production,

it was a tactic (not only geo-political) but OPEC centric to dethrone a non-OPEC nation from being a net exporter

worldwide Oil Rig count has fallen at least 33% (see link)

also there is little to no new capex 

in turn, reserves been depleted in past years,

replacement discoveries are lagging,

then add a premium for rising geo-political tensions

Regarding price action, following the rapid decline, the actual oil price needs to “work itself out”.

Currently,Brent is trading at $35.50 and Oil is still in rally within a bear market…..

following the snap back, Brent needs to close and break above $37.10 to test the $43 mark

Failing a breach above $37, the $29 mark is a plausible level to pullback to coupled with a few weeks would also marry a view of consolidating the recent volatility.

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