Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
Halifax Stopping Customers Withdrawing Funds Online - UK Brexit Banking Crisis Starting? - 21st July 19
US House Prices Trend Forecast 2019 to 2021 - 20th July 19
MICROSOFT Cortana, Azure AI Platform Machine Intelligence Stock Investing Video - 20th July 19
Africa Rising – Population Explosion, Geopolitical and Economic Consquences - 20th July 19
Gold Mining Stocks Q2’19 Results Analysis - 20th July 19
This Is Your Last Chance to Dump Netflix Stock - 19th July 19
Gold and US Stock Mid Term Election and Decade Cycles - 19th July 19
Precious Metals Big Picture, as Silver Gets on its Horse - 19th July 19
This Technology Everyone Laughed Off Is Quietly Changing the World - 19th July 19
Green Tech Stocks To Watch - 19th July 19
Double Top In Transportation and Metals Breakout Are Key Stock Market Topping Signals - 18th July 19
AI Machine Learning PC Custom Build Specs for £2,500 - Scan Computers 3SX - 18th July 19
The Best “Pick-and-Shovel” Play for the Online Grocery Boom - 18th July 19
Is the Stock Market Rally Floating on Thin Air? - 18th July 19
Biotech Stocks With Near Term Catalysts - 18th July 19
SPX Consolidating, GBP and CAD Could be in Focus - 18th July 19
UK House Building and Population Growth Analysis - 17th July 19
Financial Crisis Stocks Bear Market Is Scary Close - 17th July 19
Want to See What's Next for the US Economy? Try This. - 17th July 19
What to do if You Blow the Trading Account - 17th July 19
Bitcoin Is Far Too Risky for Most Investors - 17th July 19
Core Inflation Rises but Fed Is Going to Cut Rates. Will Gold Gain? - 17th July 19
Boost your Trading Results - FREE eBook - 17th July 19
This Needs To Happen Before Silver Really Takes Off - 17th July 19
NASDAQ Should Reach 8031 Before Topping - 17th July 19
US Housing Market Real Terms BUY / SELL Indicator - 16th July 19
Could Trump Really Win the 2020 US Presidential Election? - 16th July 19
Gold Stocks Forming Bullish Consolidation - 16th July 19
Will Fed Easing Turn Out Like 1995 or 2007? - 16th July 19
Red Rock Entertainment Investments: Around the world in a day with Supreme Jets - 16th July 19
Silver Has Already Gone from Weak to Strong Hands - 15th July 19
Top Equity Mutual Funds That Offer Best Returns - 15th July 19
Gold’s Breakout And The US Dollar - 15th July 19
Financial Markets, Iran, U.S. Global Hegemony - 15th July 19
U.S Bond Yields Point to a 40% Rise in SPX - 15th July 19
Corporate Earnings may Surprise the Stock Market – Watch Out! - 15th July 19
Stock Market Interest Rate Cut Prevails - 15th July 19
Dow Stock Market Trend Forecast Current State July 2019 Video - 15th July 19
Why Summer is the Best Time to be in the Entertainment Industry - 15th July 19
Mid-August Is A Critical Turning Point For US Stocks - 14th July 19
Fed’s Recessionary Indicators and Gold - 14th July 19
The Problem with Keynesian Economics - 14th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Top Three Takeaways From Today’s OPEC Crude Oil Report… and How You Can Profit

Commodities / Crude Oil Apr 17, 2015 - 12:08 PM GMT

By: Money_Morning

Commodities

Dr. Kent Moors writes: Today I’ve got a “below the surface” read on what is really happening inside OPEC.

Frankly, I had not planned to devote so many essays to the cartel and its policies. After all, the organization is no longer the center of the energy universe.


But it’s my job to bring you the hottest developments in the world of energy – the shifts that will have the biggest impact on your investments and your money.

And there’s nothing that matters more right now…

What is taking place within OPEC’s ranks is shaping up to be the most important new direction in years. It is a story that is growing with each passing day, signaling a changing of the guard in oil and a broader restructuring in the energy space as a whole.

Make no mistake. We plan to make some nice profits from both of these developments.

Here’s what just happened…

Non-OPEC Production Slips

OPEC announced three matters of interest this morning in its monthly market report.

First, it forecast a decline in non-OPEC production in 2015. The chunk of this, of course, comes from the U.S. and Russia.

These were the two targets of the Saudi-led decision last November to hold production constant. Since then, the Russians were the first to blink. And this week, the Energy Information Administration (EIA) figures pointed toward a peaking – and eventual decline – of domestic American production.

Combined with rising geopolitical tension in places like Iraq, Iran, Yemen, Nigeria, and Venezuela, this has translated into an accelerating oil pricing picture.

The oil price is finally giving a bit back to the market today but has been rising consistently of late. West Texas Intermediate (WTI), the crude oil benchmark traded in New York, closed yesterday up 5.8% for the day, 11% for the week, and a very nice 30.9% for the month. Meanwhile, Dated Brent (the London-set benchmark rate more widely used internationally) posted rises of 2.5%, 3.8%, and 12%, respectively.

As I have mentioned several times recently, this will not translate into prices jumping back up to $90 a barrel. While price is still essentially the relationship between supply and demand, one side of that dynamic is no longer at issue.

There is ample supply to meet any spike in demand or short-term decline in production from existing wells.

Profits Are Coming As Oil Prices Ratchet

Nonetheless, the forward trajectory of oil prices should exhibit a “ratcheting” effect – an overall movement up punctuated by intermittent pauses or declines. My published forecasts hold at $60-65 a barrel for WTI and $70-72 for Brent by July; $70-75 (WTI) and $78-82 (Brent) by the end of the year. It now looks like we may come in a little higher for July, but don’t expect a race up anytime soon.

Of course, even at my projected levels, there will be some very nice profit moves coming.

The first element in today’s OPEC announcement also smacks of a self-fulfilling prophecy, given the statement in OPEC’s recent Bulletin commentary. There, as we discussed last time (“OPEC Just Confirmed It’s Losing the Oil War”), the cartel blasted non-OPEC producers for their “go it alone” strategies that OPEC claims have resulted in the global oversupply.

Global Demand Increases

Second, today’s missive points toward an increase in global demand beyond initial OPEC projections. This morning’s call is for an additional 80,000 barrels per day worldwide. This is likely to be the first of several demand upgrades to be released between now and year end.

Watch for the next International Energy Agency (IEA) report. Its reported demand increase will be even larger.

Some of this rise in demand is the result of greater worldwide usage of cheaper oil products. In itself, this reflects something that almost always happens in the market. When an essential commodity like energy become less expensive, people tend to use more of it.

But there is an additional dimension with oil. Its price is not determined by demand or usage levels in North America and Europe. Instead, for years the price has truly been set by the world’s developing nations. This will continue to be the case during the next several decades as demand in Asia surges, along with the price of oil.

The Saudis Are Losing Control of OPEC

However, the demand increase is more than offset by the third factor in today’s OPEC release. The organization noted that OPEC member production has surged by 810,000 barrels per day. This mostly comes from increased production in Saudi Arabia, as we discussed in the last OEI.

But it also illustrates the soft underbelly in the cartel’s strategy. The Saudi increase demonstrates it can no longer control production beyond monthly quotas from other OPEC countries.

This is the other shoe dropping in OPEC’s declining influence. Controlling 40% of the world’s crude production just does not buy the market control it used to.

The Saudi rise in pumping volume is reflective of its strategy in the mid-1980s. Then, in the midst of depressing oil prices, it dealt with overproduction by other OPEC members by opening up its own spigots and flooding the world with Saudi crude.

The lesson was quickly digested and the rest of OPEC scaled back production.

This time around, OPEC is portraying the rise in aggregate production levels as a cartel-wide phenomenon. In reality, this is a Saudi move to thwart other members that are cheating above their quotas. It’s also an attempt to portray the market situation as demanding additional cuts by non-OPEC countries.

This strategy will not work this time for two reasons:

  • First, the production base is moving from OPEC to other parts of the world, especially (back) to the U.S. The “call on OPEC” has been replaced by the “call on shale.”
  • Second, and of far greater importance at the moment, these moves are signaling a major revision in OPEC itself.

Despite its domineering position, Saudi Arabia is losing control over cartel policy. The current pricing picture has required that several OPEC nations overproduce in order to survive financially. The Saudi production increase is a fait accompli blanketing over what was occurring in the cartel against its wishes anyway.

We are rapidly moving into a new energy world. And the rationale for OPEC is being undercut along the way. I’ll continue to monitor the situation and will tell you everything you need to know first.

Source :http://oilandenergyinvestor.com/2015/04/the-top-three-takeaways-from-todays-opec-report-and-how-you-can-profit-from-them/

Money Morning/The Money Map Report

©2015 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules