Mild weather in the US and massive shale production in the US has led to an abundance of natural gas in the US. The aim is to one-day convert it into liquefied natural gas to export but with the wild overproduction in tight oil, there’s no way to liquefy it or transport it. Prices in and around production areas are much lower than $2.
A reckoning is coming to shale soon, and even sooner if crude falls below $50 this year.
The price of WTI crude oil futures are settling at $58.43. That is a gain of $2.33 or 4.1%. The move higher today was helped by a bigger than expected drawdown of inventories of -4856K versus -1500K estimate. News that Saudi Arabia is is threatening to keep production higher to punish producers who don’t keep to their quotas had little impact.
Looking at the 60 minute chart above, the contract spiked above its 100 hour and 200 hour moving averages (blue and green lines) and extended up to the recent highs over the last 9 or so trading days between $58.67 and $58.74. The high price today reached $58.66. The low for the day was down at $56.28.
A move above this ceiling would be more bullish for the contract. Staying below, and we could see a rotation back down toward the 200 hour moving average of $57.46.
WTI crude is now down nearly 4% on the day as gloom about the global economy sets in.
The big news this week was OPEC but they did as much as could have been reasonably expected by extending cuts for 9 months. This may be a sell-the-fact trade but it looks more like the market is jittery about demand.
The US Treasury market is sending the same worrisome signals today, despite the China-US truce.
One worry is that Trump’s administration announced fresh European tariffs yesterday. The amount of goods overall is small but it’s moving in the wrong direction and a US-Europe trade war would sink growth expectations once again.
The chart doesn’t look great as we top out well-ahead of the previous highs.
Every day, the world consumes 93 million barrels of oil, which is worth $4.2 billion.
Oil is one of the world’s most basic necessities. At least for now, all modern countries rely on oil and its derivatives as the backbone of their economies. However, the price of oil can have significant swings. These changes in price can have profound implications depending on whether an economy is a net importer or net exporter of crude.
Net exporters, countries that sell more oil abroad than they bring in, feel the sting when prices plunge. Less revenue gets generated, and this can impact everything from balancing the budget to the value of their currency in the world market.Continue reading »