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Oversupply Concerns Causes Oil Prices To Hit A 3 Month Low

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Oversupply Concerns Causes Oil Prices To Hit A 3 Month Low

Not only does gasoline appear to be constantly weighing on the market, but United States oil prices recently reached a three-month low.

Oil in the United States for delivery in September on the New York Mercantile Exchange reached $42.92 per barrel. 

This was a decrease of .5% or 21 cents.

Oil has come to the lowest it has been since April due to losing six of the seven past sessions. 

Brent oil is the global benchmark. 

It rose .3%, or 15% on ICE Futures Europe, reaching $44.87 per barrel. 

This ends its losing streak over the past three sessions.

The following shows the futures for Brent Crude, Crude Oil, RBOB Gasoline, Natural Gas, and Heating Oil:

oil prices | Oversupply Concerns Causes Oil Prices To Hit A 3 Month Low

Concerns

Oil has been sent into a retreat this month thanks to oversupply concerns. 

This act has caused the five-month rally that resulted in oil reaching over $50 per barrel to end. 

Refiners in the United States have beaten the demand record. 

Supplies are backing up in the United States, according to analysts, partly due to the overwhelmed international markets.

The Drilling productivity report is showing changes in the following regions:

  • Eagle Ford
  • Bakken
  • Utica
  • Haynesville
  • Permian
  • Marcellus
  • Niobrara
  • Average change is 34

However, drillers in the United States have begun to show signs that they are anticipating increasing production once more in spite of these fears. 
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United States drillers last week added 15 active rigs to their oil fields. 

Last week marked the fourth week in a row for these increases. 

Sweden’s SEB Bank commodities analyst Bjarne Schieldrop stated that this marked a crucial turning point.

Pioneer said back in April that:

  • Oil production had grown by 100 thousand barrels per day
  • That they expected production to increase 12% this year
  • That they expected to add between five and ten drilling rigs when the price of oil reached $50 per barrel and the outlook on the fundamentals of supply and demand was once again positive.

He stated that the rig count resurgence reflected the results of the 2015 oil price rally. 

Schieldrop further stated that analysts had anticipated some delayed reaction to being seen with shale oil returning.  

He said that this was because of the high levels of debt. 

However, he further stated that the data was expressing a different result.

Data

Government data, last week, indicated that the production of shale oil was flat. 

Numerous individuals believe that the rig count growth is a signal that production is about to grow.

Commerzbank in Germany had the same concerns. 

They used data from Genscape and quoted that it has been indicated the United States could see their stocks rise around 1 million barrels in this week alone.

The Wall Street Journal conducted a survey that included as its participants’ analysts, traders, and brokers. 

This study showed that participants are expecting a 1.6-million-barrel drop in the stocks for crude. 

However, it also revealed that these same people predict gasoline and other types of refined fuel to have in increase in their total levels of around 500,000 barrels combined.

This fits in with a pattern showing that the stocks for total petroleum continue to grow even though crude is experiencing slight declines. 

This concept is confusing analysts who had forecasted that the total for these stocks would begin to decline reported Citigroup Inc. analysts.

The following shows oil prices for crude between 1998 and 2012:

Brent crude oil prices | Oversupply Concerns Causes Oil Prices To Hit A 3 Month Low

This supply of products that continues to grow will eventually begin to back up and cause crude utilization to relax. 

According to traders and analysts, it will also result in stocks for crude to increase.

Clipper Data director of commodity research, Matt Smith, stated that the idea of having an overabundance of the product continues to frighten individuals within the crude compound. 

He further indicated that refineries are looking to slow down some because they have produced an excessive amount of gasoline over the past few months.

It is said this slowdown will:

  • Add pressure to the prices for crude oil
  • Add to the weakness the demand for crude oil in the United States is experiencing

The following illustrates the forecast released by the American Petroleum Institute:

Oil prices | Oversupply Concerns Causes Oil Prices To Hit A 3 Month Low

There could be additional pressure to sell added if inventory levels for oil in the United States sees a major increase. 

This has already caused oil priced to drop in less than a two-month period by over 14%.

Here are some facts about oil prices falling this week:

  • They fell below the 100-day moving average
  • This caused the sell-off to acquire additional steam
  • It fell below the mean of $44.16 on Monday
  • It has not reached below the average since April 5.

This decline is essential for technical traders who use price momentum to make their moves and are likely to view it as indicative that prices are going to continue to fall.

The central role that oil has played over the past two years in the financial markets makes this extremely critical now, according to Mobius Risk Group in Houston’s vice president of research and analysis, John Saucer.

Numerous contemplative traders have submerged the market to make the most of the drastic, and often long-term, increases and decreases that have recently become the norm for oil.  

Saucer stated that the massive presence of these traders could potentially cause a huge reaction in prices to occur.

Saucer further indicated that it was a convincing indicator when it fell beneath the average of the 100-moving day mark. 

He said that even when a person does not think that the market is going to decrease much lower below this mark from where it is when it fell it raised the belief that there could be a fall closer to forty bucks for crude.

The futures for gasoline settled at around $1.3452 per gallon, which was a 1.16 cent increase, or .9%. 

This is still 19% away from the high it had for the year in May.

The futures for diesel rose to $1.326 per gallon, which was a .2%, or .32 cents, increase. 

This ended the losing streak it has been on for three sessions. 

These numbers are shown below.

Oil prices per gallon | Oversupply Concerns Causes Oil Prices To Hit A 3 Month Low

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Commodities

Latest Update On Oil – Expected to Settle Between $45 and…

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“Oil is going to a new price point because of the revolution in production,” said Bill Perkins, chief investment officer of energy-focused hedge fund firm Skylar Capital Management. Perkins believes the price of crude could fall as low as $45 a barrel. He is personally short, a bet that the price of the commodity will drop. He believes oil will settle between $45 and $80 a barrel in the next year.

“Companies are harnessing amazing new technology to destroy the traditional energy value chain,” Perkins said. “There’s a lot of money to be made on that.” “U.S. energy names remain a significant net exposure for equity long/short managers who added longs and cut shorts after October’s trough,” the report said. “If pressed, one could interpret this positioning as bullish for energy stocks.”

Andurand thinks crude might hit $50 a barrel within the half-moon of 2015 and so rebound to a high of $70 within the fourth quarter. He also said the oil market is oversupplied by between 1.5 and a couple of million barrels per day, given weak demand, low disruptions to produce and enhanced production by nations that do not belong to the Organization of the oil mercantilism Countries.

“OPEC is not the swing producer anymore. U.S. shale oil producers are, but will take more time to react to prices than OPEC—it is a game changer that will lead to more volatile prices and bigger price ranges,” he added.

Morgan Stanley aforesaid the worth would wish to fall as low as $35 or $40 a barrel to prevent production and rebalance provides.

Still, the bank noted that the worth can doubtless rise eventually.

“Oversupply is probably going exaggerated and therefore the market is also content regarding side risks,” the report aforesaid.

Read More at CNBC

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Commodities

Investing in Energy Markets Part 2: Oil, Gas and Energy

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It’s no secret that the energy industry is very profitable, with oil and gas making up 80% of the market.

 

Thus, these two resources attract the most people. They are the best energy investment resources due to high demand and wide range of options. However, with energy scares fresh in our recent memory and the climate change movement greatly affecting energy policy, new alternatives are constantly being sought.

Terror group ISIS may make $3 million a day selling oil

Everything that we do requires some type of energy. As a result, the price of energy affects the going rate for other commodities as well. When the price of oil increases, the price of transporting goods goes up as well.

That is why the cost of milk fluctuates and why your favorite imported coffee beans are more expensive than Folgers. Factors that contribute to these prices include geopolitics and natural disasters, but can never truly be accounted for in full. That is one of the underlying points to understand and accept about energy markets. Something can always go wrong. Typically, it doesn’t, but when it does things can get hairy and fast.

TYPES OF ENERGY SECTORS: That could affect your Household

Nuclear Nuclear power actually produces 1/10th of the world’s power, without emitting carbon. The United States and China have roughly 75% of the world’s nuclear plants with India and Russia also tapping into the market.

“Green” and renewable energy companies You can invest in different companies that place an emphasis on renewable resources by using the stock market. This option is optimal for investors who like the idea of green technology but do not now want to run the risk of investing in developing companies directly. This market has always been tricky from an investment perspective due to volatility. If you have an appetite for risk, however, this is a good place to look.

Modern Energy (solar, wind, geothermal, transportation, efficiency) Modern energy is made up of three major components or categories. They are wind, solar and biomass. The renewable sector is expanding at a rapid rate. We have witnessed a steady employment increase in the energy sector since 2011 with no end in sight. All types of investors and speculators are flocking to the natural resource markets in attempts to get out ahead of the renewable energy trend that could be the way of the future.

Big Oil In 2010, the world market for oil witnessed an incredible increase of 32%, to over $2,100 billion. According to estimations of oil segment professionals, the market’s value will hit $2,683 billion in 2015. The competitiveness of the global market of the crude oil is explained by its limited resources and mankind’s insatiable appetite for growth. This factor should not be disregarded easily. Our desire for more explains the majority of the energy marketplace.

Gas sector The market of natural gas reached $18.5 billion by the end of 2011. Demand for gas has recovered to match and surpass pre-recession levels. The US prices for gas are half of those in Asian countries and the EU. Gas demand decreased 3% in 2009, but at present is on the rise.

Electricity Buying the stock of electricity companies is the preferred way of entering this marketplace. The majority of the participation in electricity markets, however, takes place in the futures markets. Since power companies are constantly projecting and calibrating their loads, the futures market is the only place where investors with this sort of risk profile will feel that they belong.

Coal Many non-coal energy sectors directly depend on the performance of coal because burning coal has been proven to produce enough energy to support high demand. Due to recent regulations in the US by the Environmental Protection Agency, coal has taken a minor hit, but until a massive, institutionalized adoption of newer technology, it is highly unlikely coal will be going anywhere for the foreseeable future. In other words, coal is very much a barometer for this market. Though it is unlikely to happen any time soon, a massive dip in coal production would likely signal the emergence of a new viable energy source.

Hydro Hydropower energy is still very limited but there has been over $75 billion in investments pledged to R&D before the year 2020. There are some companies worth checking into, but for now this is very much a long term play.

Energy Funds These funds are established with companies related to the energy field. Be aware that some energy funds are more successful than others and produce a higher return than others. Often times, the energy funds are established to diversify various portfolios and minimize risk.

Read more on How Natural Resource Distribution affects your wealth

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Commodities

Oil Prices Surge As OPEC Members Agree To Cut Production

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The Organization of the Petroleum Exporting Countries (OPEC) took its first action in years to cut production on Wednesday in hopes of lifting oil prices. How big a cut did the cartel agree to? Will it really make a difference?

OPEC Members Agree To Cut Oil Production

Oil had its biggest day in more than five months as prices rose 5.3 percent. This action came after OPEC members agreed they could limit oil production – in November. While there are a lot of maybes, this is a big step forward for oil. But will it actually work?

While OPEC members agreed at a meeting Wednesday in Algeria that a production cut is needed to lift oil prices, plans for the supply cut won’t be finalized until November. Barrel output will go from 33.25 million barrels per day to 32.5-33 million barrels per day. A lot can go wrong between now and November, but for now investors love the news.

Many analysts, however, are not as optimistic.

This isn’t the first time this year OPEC has tried to cut oil supply. The committee met in April, but talks fell apart when Iran would not join the talks. In addition to that, all the OPEC countries compete against each other and the U.S. for market share. Several OPEC members, Iran, Libya, and Nigeria, all want to increase oil supply. Throw into the mix the political tensions of the group and this agreement seems very delicate.

Yet, there is a positive feeling about “this time”. Members are hoping that things are more conducive to getting a deal done. Many of the largest producers are close to maxing out capacity, so lowering output slightly wouldn’t be too much of a stretch. Additionally, Saudi Arabia and Iran are feeling pressure domestically from the drop in oil prices, and thus be willing to put aside differences to improve their finances.
Wonder why OPEC needs to cut production? Check the news here with CNNMoney!

For now, trading oil is a smart play. Exxon Mobil Corp. (XOM) rose 4.40% on the news. Chevron Corp. (CVX) rose 3.20%. Energy companies and oil shares will go up until november, and then take their cues based on that meeting.

The election is coming the Capitalist gives you the guide to thriving the election year markets. Read it all here!

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