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
Reasons to Buy Pre-Owned Luxury Car from a Certified Dealer - 22nd July 19
Stock Market Increasing Technical Weakness - 22nd July 19
What Could The Next Gold Rally Look Like? - 22nd July 19
Stock Markets Setting Up For A Volatility Explosion – Are You Ready? - 22nd July 19
Anatomy of an Impulse Move in Gold and Silver Precious Metals - 22nd July 19
What you Really need to Know about the Stock Market - 22nd July 19
Has Next UK Financial Crisis Just Started? Bank Accounts Being Frozen - 21st July 19
Silver to Continue Lagging Gold, Will Struggle to Overcome $17 - 21st July 19
What’s With all the Weird Weather?  - 21st July 19
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

A Key Oil Price Trend That Everyone Is Missing

Commodities / Crude Oil Oct 06, 2015 - 05:53 PM GMT

By: Investment_U

Commodities

David Fessler writes: My friend Rick Rule likes to say, “The cure for low prices is low prices.”

Here’s what’s supposed to happen...

Marginal producers can’t make money at today’s prices. Therefore they shut in wells (turn them off). As supplies get tighter, prices move higher.


But that hasn’t happened. Prices and drilling activity have both continued to move lower... until now.

U.S. crude futures got a major boost on Friday, closing almost 2% higher than where they stood when the market opened. Meanwhile, the number of oil rigs has continued to slip, narrowing our domestic supply-demand gap.

Back in February, I spoke about the future course of oil prices with John Hofmeister. (You can listen to the interview by clicking here or on the image below.)

David Fessler Interviews Jon Hofmeister former President of Shell Oil video link

John is the former president of Shell Oil. It was his prediction that WTI production would begin to tail off during Q3 2015. Then, starting slowly at first, it would accelerate.

The reason? Well depletion rates would begin to reduce production as the number of wells coming online decreased.

Eight months later, it’s happening. Right on cue.

Once again, allow me to refer you to my favorite chart...

Crude Spot Price verses Production July to Present chart

As you can see, WTI crude production fell by 40,000 barrels per day the week of September 25, 2015. That’s a level not seen since November 2014.

And note that the above graph does not show the rise in the price of WTI crude (the data is a week old). But as of Monday’s close, crude was $46.26 per barrel - up more than 1.5% since Friday.

It looks as though prices might just be starting to respond to lower production numbers.

Rig counts have been dropping, too. Last week’s count, according to Baker Hughes (NYSE: BHI), dropped by 26 to 614. That was the fifth straight weekly drop - and the sharpest since late April 2015.

U.S. oil rigs are now at their lowest since August 2010. Last October, they peaked at 1,609. Which means there are almost 1,000 fewer rigs drilling today than a year ago.

It took a while, but U.S. production is finally starting to slow.

And, at the same time, oil prices are starting to rise.

So is John’s prediction finally becoming a reality? Is supply and demand really starting to equalize domestically? The chart above surely supports his thesis.

The important takeaway here? Industry analysts... the mainstream media... and even the dozens of oil and gas industry rags I scan daily... they almost never mention production.

Instead, they’re fascinated with oil storage numbers. The amount of oil in storage is important for short-term commodity traders, sure. But it has almost no bearing on long-term crude prices. Other indicators - like dwindling production - suggest we are at or near a bottom in U.S. WTI pricing.

And with mergers and acquisitions activity on the upswing - marginal players are throwing in the towel and teaming up with stronger ones - now is the perfect time to go bargain hunting.

I’m looking at strong exploration and production companies as well as midstream pipeline master limited partnerships.

All the signs point to a continued drop in U.S. unconventional crude production. This can’t help but lead to higher crude prices and, more importantly, higher share prices for those with the patience to wait.

Good investing,

Dave

Source: http://www.investmentu.com/article/detail/47877/key-oil-stat-everyone-is-missing#.VhQXjk3bK0k

http://www.investmentu.com

Copyright © 1999 - 2015 by The Oxford Club, L.L.C 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 Investment U, Attn: Member Services , 105 West Monument Street, Baltimore, MD 21201 Email: CustomerService@InvestmentU.com

Disclaimer: Investment U Disclaimer: Nothing published by Investment U 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 investment 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 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Investment U should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.


© 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