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.

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

A bearish reversal day for energy

What a difference a day makes, although one day doesn’t make a trend.

Overnight WTI Crude, Brent Crude, Heating Oil, Gasoline all fell 2%. Natural Gas fell 10%.

What is more important is last night’s trading session produced a bearish outside reversal day in all of mentioned commodities. This is where prices traded outside the previous day’s range, meaning today’s high and low was higher and lower than yesterdays range and the closing price was below yesterdays. It’s a bit more bearish because today’s close was lower than yesterday’s intra-day low.

September 7, 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

Nat Gas may halve before it doubles again

Lately, I’ve been calling an interim top in Crude, highlighting extreme overboughts in Gasoline, Heating Oil and Distillates and a peak in the Australian Dollar.

Natural Gas has also touched some extreme overboughts where a Long trading exit target of $4.07 was hit.

Now, I think petroleum prices ease lower over the medium term while Natural Gas may nearly halve in price in the next 10 months or so.

Crude prices lead Natural Gas prices. Crude is down $12 since I made my recent ‘top’ call.

Below is picture of how I think it may play out.

You can see the resistance and supports it needs to test or break and this will help tell me if I’m wrong.

If the scenario below evolves, you’ll also see weaker (commodity) currencies such as the AUD and CAD while the U.S. Dollar strengthens.

August 9, 2021

by Rob Zdravevski

rob@karriasset.com.au

Still looking for lower oil prices

Brent Crude has fallen 12% since my note (3 weeks ago) called a peak.

Last night’s 6% decline (to $68.75) suggests and adds a little more strength to the downward trend.

The two links below discuss my bias for lower prices.

For now the $62 mark is a spot to watch and certain technicals over the coming weeks will help me decide if a new Long position is established there or around the $57 level.

July 20, 2021

by Rob Zdravevski

rob@karriasset.com.au

Drilling activity is increasing

Globally, 5% more rigs have been put to work since last month.
An increase of 63 rigs and it’s being seen in the America’s with the Canadians becoming notably busier.

I’ll assume tar sands become more feasible with Crude at $75?

Looking for interim peak in Crude Oil

Here’s a market call for you….Brent Crude is about to top out at the $78.50 level.

I’ve been bullish about the Oil price for the past year and remain so over the longer term, but parabolic advances also need a break and some consolidation.

My technical work suggests the crude oil price peaks soon and comes back to test the $64-$62 mark in the coming months.

See my 20+ year chart below. Amongst many extreme coincidences, we are also nearing a 50% move (between the 1999 low and the 2008 high) along with testing the underside of an ominous downward sloping trendline.

Anecdotally, many now are calling Oil to a $100…..and so I ask, where were they when Brent was $30 or $40….another moment of popular pundits making calls at the nutty end of a run which has seen Brent Crude Oil nearly quintuple from its $16 low in March 2020.

Ultimately, I think Oil goes to $120 – $140, in a massive ‘last’ hurrah…I’ll write more about that in a few months time.

For now, it’s time for the Oil price to shake a few people out and I love a good shakeout.

This also means having a think about your Oil & Gas equity positions.

In fact, many of them are already exhibiting weakness.

June 28, 2021

by Rob Zdravevski

rob@karriasset.com.au

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