WTIC, monthly'2, rainbow
Summary
Across the last few days.. I've read some truly batshit crazy analysis/commentary on the continuing decline in oil prices. Seriously, what is up with (almost) everyone lately?
Since 2011, Oil prices have been trading largely sideways. Many market commentators (whether online, or on mainstream clown finance TV) regularly become overly twitchy when prices were near $120... or equally unsettled when prices cooled to around $90.
With prices having now collapsed from a cycle peak of $107 (June) to today's new cycle low of $58.96... here is a selection of some of the concerns...
-Low prices.... producers shut down... huge economic impact... recession... sig' market drop
-Debt defaults.. banking problems, market drop.. even a possible 'systemic crisis'
-Low prices... alternative energy sector massively hit, long term implications for solar/wind
-Low prices, hedge funds.. some implode... possible derivatives crisis
-Low prices across extended period, lead to sig' US production drop off, with greater reliance on middle east oil
-Low prices, with some countries (Venezuela, Saudi Arabia, or Russia for instance) having serious budgetary problems... resulting in social unrest, or even wider geo-political upset.
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One of the more notable claims I've been told is that OPEC has no ability to manipulate prices. Really? I find that utterly incredulous. OPEC is a well recognised cartel, whose sole objective is to maximise revenue for each of its member nations. Nothing more... nothing less. Sure, they don't always achieve that goal, but they sure as hell give it a damn good try.
At some point in the first half of next year we'll see serious action by OPEC to cut production, but of course.. they will be a very significant amount of 'No!..... you cut first' bitching and whining from most member countries.
Why did oil drop anyway?
No doubt, a part of the ongoing drop is pure market driven. With the break of $90, market momentum has cascaded, and spiralled prices far below where they might be expected to be... relative to the recent minor changes in supply/demand.
Further as most seem to also overlook, a very minor change in demand..or supply can have a HUGE impact on prices. Some have claimed a 'demand collapse'.. which is pure crazy talk. Demand remains very consistent.. as does global supply.
The bigger picture
Just consider this twenty year perspective...
WTIC Oil, monthly'1
Yes.. there is indeed long term trend support fast approaching in the mid/upper $50s. No doubt.. that will be a prime level for a sig' bounce of $10/15 in Q1 of next year. However, considering OPEC are still refusing to even agree on any initial cuts... the $40s seem likely at some point next year.. maybe even 30s.
Lower prices... BULLISH
Without question... lower prices are beneficial to EVERYONE on the planet.. whether its via transport costs, energy (direct heating, or via utility power)... or via reduced input/production costs for manufacturing.
If the lower prices lead to a few hedge funds.. or oil producers going bankrupt... I DO NOT CARE. Let them go under, can we allow market forces to prevail?
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Meanwhile... over in Russia
With energy prices still sliding, it was another dire day for the Russian market...
Russia, monthly
A daily decline of -3.3%... with a new multi-year low of 817. If 800 fails... then mid 500s are coming in the spring. From there... даже я бы рассмотреть возможность покупки российского ETF. :)
Looking ahead
The week will conclude with PPI and consumer sentiment. That should be enough to wake a few traders up in early morning.
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Goodnight from London