Crude Oil and AUD/USD watch

3 days ago, I wrote that Oil needed a quick drop of ‘$2 or $3’ in order to extend some strength in oil’s current downtrend.

WTI Crude fell $4.75 on Friday, closing its trading week at $78.74

Equally, the AUD/USD exhibited expected weakness during Friday’s session. It closed at 0.6531.

So, I’ll watch for how the AUD/USD and WTI Crude symbiotically test their next respective levels of 0.6464 and $77.50, as neither ‘daily’ downtrends are confirming continuing strength.

Hint: probability is rising that we are at the tail-end (+/- 3%-6%) of the downdraft in both assets.

September 24, 2022

by Rob Zdravevski

rob@karriasset.com.au

31% decline is losing some steam

Here are some WTI Crude Oil trend lines I’m watching.

The downward trend remains intact, however on a daily basis it’ll need a quick drop of $2-$3 in order to add some strength to this trend, otherwise we can kiss a visit to $77.50 and any notion of ~ $65 good bye for the time being.

Should this trend wane, it will correspond with the AUD/USD and the CRB Index finding a floor.

September 20, 2022

by Rob Zdravevski

rob@karriasset.com.au

Watching Currencies – AUD/JPY and Crude Oil

Correlations – AUD/JPY and Crude Oil

September 5, 2022
by Rob Zdravevski
rob@karriasset.com.au

Oh the hypocrisy!

The United States receives 8% of its Crude Oil imports from Russia.

(on another note, 2% of its oil imports come from Iraq and a further 1% from Libya)

The U.S. have announced a release of 30 million barrels from their Strategic Petroleum Reserves.

Various news reports carry the sub-text that the release will assist to ‘end the weaponisation of Russia oil’.

The United States import 30 million barrels of oil from Russia ALONE every 2 months.

In fact, the Biden administration is on a run rate (so far) of importing more Russian than during the Trump years.

Don’t let the headlines and spin mislead you.

#context

March 3, 2022
by Rob Zdravevski
rob@karriasset.com.au

Oil about to hit a 3 1/2 year high

It’s an important coming day or two in Brent Crude Oil trading.

I’m watching if it trades above $86.68.

Friday’s high was $86.52.

That means it makes a ‘higher high’ seen on October 25, 2021.

Albeit, a ‘higher high’ while also recent making a ‘lower low’ portends for an extension of the current rally, on a Daily basis, Brent is now in Overbought territory and 2 standard deviations above its mean.

Whilst the chart below is current, it has notes on it from a post on November 5th, 2021, which also shows the previous high in Brent at $86.71 from October 3, 2018.

January 17, 2021

by Rob Zdravevski

rob@karriasset.com.au

Don’t fight OPEC?

We say ‘Don’t fight the Fed’,
Perhaps Biden shouldn’t fight OPEC?
What a terrible politically motivated decision especially when the SPR is normally kept for emergency supply disruptions such as in case of a hurricane etc.

And he asks or even persuades other nations to join him in their own ‘release’.

Such ad-hoc ‘band-aids’ seldom solve and this releases will be soon forgotten.

Alas, the oil price rose 3% today.
Maybe short covering played a part as speculators bet on a larger dumping.

Biden just added supply this hurting his own U.S. drillers. With this type of decision, drillers are hardly about to make capex decisions to drill more.

This story also mentions how the replenishing costs may be detrimental to refiners.

Lo and behold, pending OPEC’s response in the coming months, the reflexivity of this scenario means oil prices make their way lower due to inflationary pressures crimping GDP growth.

Furthermore, Biden becoming worse at international diplomacy. His relationship with Saudi Arabia is dreadful (interesting Saudi and China) are close allies.

His relationship with Russia is awful. (And Russian troops gather around Biden’s mates in the Ukraine)

And China and Russia definantly cooperate.

To understand Oil, it’s worthy to watch how the world works.

November 24, 2021

by Rob Zdravevski

rob@karriasset.com.au

Biden’s juxtoposition

I’m always entertained by these stories.

https://www.bloomberg.com/news/articles/2021-11-03/opec-heads-for-geopolitical-showdown-as-biden-demands-more-oil?sref=qLOW1ygh

Firstly, the United States isn’t part of OPEC.

When you’re not a member of a member based organisation, how can you expect to have your requests (demands) actioned?

Secondly, the irony of Biden asking OPEC to pump more oil (so to ease U.S. domestic gasoline prices) while he is attending COP26 in Glasgow is comical.

Thirdly, he seems to be targeting blame at the Saudi’s for not increasing their output. There are other nations which make up OPEC and OPEC+.

Biden is proving to be a poor manager of geopolitical nuances.

But there any many more angles to this story;

Imagine if the U.S. was still a net exporter of oil?

A lower oil price may make their shale market uneconomical?

The U.S. can always lift sanctions on Iranian oil, allowing it to hit the market?

p.s. In my view, the decline in Crude was expected once OPEC said they won’t be increasing output. Why? Because, we will be closer to output being increased at the next meeting……Markets price in the probability of next move quickly.

#oil

November 5, 2021

by Rob Zdravevski

rob@karriasset.com.au

Long Oil is crowded

I’m advising clients to tune in where the noise is and where the herd is gathering.

Albeit, this is subjective and certainly more art than science, it’s important to identify the “crowded trade” and asking yourself if you are about to be the marginal buyer.

For example,

“everyone” is going Long Crude Oil, Natural/LNG Gas and Coal.

and “nobody” wants to buy Chinese equities nor Gold.

There is merit considering a contrarian result.

With Brent Crude Oil currently $83, I ask myself if it rises $20 or falls $20 from here?

In the coming months, I say it sees $63 rather $103.

October 13, 2021

by Rob Zdravevski

rob@karriasset.com.au

More rigs, more output, lower oil price

Globally, 40% more oil and gas rigs have been put to work compared to 12 months ago.

In the U.S., the amount of rigs which snapped back to life doubled since last August.

Rigs in operation throughout Latin America have nearly doubled in number.

While the Canadian’s have trebled.

Interestingly, the amount of rigs deployed in the Middle East and Europe have declined.

Overall, more drilling leads to more output which puts a lid on the price of oil, which coincides with my bearish call on crude.

What else does the table below tell us?

The Saudi’s are trying to keep output tight in order to keep prices high, because ‘petro-nations’ need ‘petro-dollars’.

Carbon conscious Europe and their headquartered hydrocarbon giants (BP, Total, Statoil, Shell, Repsol, ENI) are trying to drill less.

The Americans need to drill to service the consuming citizens, make money, use their capex, satisfy shareholders and avoid being a net importer of oil.

And the Canadians are just ecstatic that extracting tar sands oil became economically viable again.

September 8, 2021

by Rob Zdravevski

rob@karriasset.com.au.

‘Petro-Nations’ need ‘Petro-Dollars’

Keep this in mind when you ponder the price of oil and the supply/demand equation.

https://www.bloomberg.com/news/articles/2021-08-22/libyan-central-banker-pins-revival-hopes-on-higher-oil-output?sref=qLOW1ygh

And then when you add OPEC+ efforts to machinate a higher price by curtailing output, a nation reliant on oil receipts means oil supply will find its way to the market.

There remains a reasonable case for Brent Crude to visit $64 and failing to hold that, a trip to $57 and $54 are entirely plausible.

More so, watch when a petro-nation panics after having missed out on a selling at $76 per barrel because OPEC botched a manipulation effort trying to send it to $90.

August 24, 2021

by Rob Zdravevski

rob@karriasset.com.au

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