Quote:
Originally Posted by heep223
There is a huge (yyyuge) difference between 1-2% production growth out of the US and a 1-2% production decline. That is massive. That in itself is a change in fundamentals and like I said it's probably just the beginning, with major US producers projecting huge declines. Market is already priced in the Iran production coming in. Yes OPEC is politicking back and forth but the point is that they're starting a process to support the market and they're currently operating very close to max capacity. I've posted similar things in this thread for a while now, as all you see in mainstream media is doom gloom and depression, and they are historically well behind the smart money, just like sell side analysts usually are. When Goldman posts a sub $20 WTI call, it's a great contrarian indicator to get long.
Like Enoch said above "short covering/short squeeze" is very shallow analysis. There's lots actually pointing to hedgies and other major investors are now actually piling into the long side of the trade, there's not much left to squeeze here.
Anyways we can agree to disagree, because we can't really "prove" anything as to how sustainable the recent rally is or the cause of it. I'll just leave this here though, coincidentally Pelletier just put this out. Like I've said before in this thread, he's usually ahead of the game and he's not a perma bull by any means. He was pounding the drum on a pending collapse in mid 2014. Fundamentals are changing
http://business.financialpost.com/in...nd-is-for-real |
You sound like you are in the "its all clear" camp and we are higher from here.
Everything that is happening right now (idled rigs, declines etc.) is sowing the seeds for the next oil price shock.
I am in the camp that the pain is not done, it comes down to inventories and supply/demand balance, that is not the current fundamentals of the oil market. The market can stay irrational longer than most can stay solvent. This is not 2008/9, the market will take awhile to clear and it will be a long time for companies to repair balance sheets and increase activity. Just like oil should not have been at $90 to $100/bbl it shouldn't be at $25 to $35, but it is.
OPEC (Mainly SA) is not trying to just punish NA producers, they are punishing everyone, offshore, Russia and even their own members (Venezuela, Nigeria etc.) who continued to exceed quotas as they throttled back production the last decade and lost market share. If oil hangs over $40 for very long trust me they will talk it back down or break the production freeze.
I say again, they are not doing this to drive the oil market to the edge of abyss without having a washout that clears the market. Cheap oil also puts a dent in alternatives and spurs usage in floundering economies increasing or stabilizing demand, they want the world hooked on cheap oil right now.