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Will Crude Oil Hit $20?



Will Crude Oil Hit $20?

We've seen crude plunder from nearly $107.68 a barrel to a low of $26.05 in just 9 months.

Since the low we've rallied a bit but not everyone has crude pegged at $35.

Many believe crude still hasn't reached the bottom of this trend yet as global inventory supplies drastically outweigh demand.

With inventory reports expected this morning we've got the beat from Dan Strumpf at Marketwatch


Oil futures rose in early Wednesday trade in Asia, as traders looked ahead to a reading on U.S. oil stockpiles and focused on an early reading that showed a smaller-than-expected rise in inventories last week.

Light, sweet crude for April delivery CLJ6, traded at $36.93 a barrel, up $0.60, or 1.7% in the Globex electronic session. May Brent crude LCOM6, +0.46% on London’s ICE Futures exchange rose $0.48, or 1.2%, to $39.22 a barrel.

Crude prices have pulled back from their recent highs the last few sessions, deflating the energy market’s March rally. Both Nymex and Brent, the global oil benchmark, are down more than 5% from their 2016 highs reached earlier in the month, as expectations dim that major oil-producing nations will succeed in pulling off a coordinated supply freeze.
A U.S. government reading on U.S. oil stockpiles, due Wednesday morning in the U.S., should offer further clues on the state of global production. Late Tuesday, the American Petroleum Institute, an industry group, said its own data showed a 1.5-million-barrel increase in crude stockpiles during the week of March 11.
That figure is below analyst expectations for the week’s change in stockpiles. Analysts surveyed by the Wall Street Journal expect the Energy Information Administration to show crude stockpiles rose by 3.3 million barrels in the week ended March 11.

“We may see some strength for prices coming from possible U.S. production declines,” wrote Daniel Ang, an investment analyst at Phillip Futures, but he added: “Based on fundamentals we expect prices to be moving downwards by the end of the week even if prices do increase today.”

Many analysts have said that the recent downturn in prices has also been fueled by companies laying down new hedges at recent high levels, adding fresh selling pressure on the market.

Nymex reformulated gasoline blendstock for April RBJ6, — the benchmark gasoline contract — rose 20 points to $1.4102 a gallon, while April diesel traded at $1.1871, 94 points higher.

ICE gasoil for April changed hands at $354.50 a metric ton, up $4.50 from Tuesday’s settlement.

There's so much on the line for our homeland economy with the price of crude. You've seen large oil companies like British Petroleom BP and Chevron CVX make cuts to employment and Airliners like Delta DAL and United Airlines UAL slow down on futures trading.

Not to mention the global economy and the ripple effect crude is having on the Middle East and Russia.

Given the continued U.S. dollar appreciation, $20-$25 oil price scenarios are possible simply due to currency. The U.S. dollar and non-fundamental factors continue to drive oil prices.

Morgan Stanley noted: “A 3.2 percent increase in the U.S. dollar — as implied by a possible 15 percent yuan devaluation — may drive crude in the high $20s,” If other currencies move as well, the shift by both the dollar and oil could be even greater, according to the report.

Morgan Stanley's expectation of the likelihood crude hits 20 differs from other institutional banks.

Goldman Sachs Group Inc. said there’s a possibility the crude storage tanks will test their limits, pushing CL down. This could halt any production simply due to “no where to put the oil.”

Makes the oil shortage of 2008 seem silly at this point.

What do you think? Is crude sticking down here low on the curve and will crude oil hit $20?

Or do we see a rally from here?


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