Best of the Week
Most Popular
1. 2019 From A Fourth Turning Perspective - James_Quinn
2.Beware the Young Stocks Bear Market! - Zeal_LLC
3.Safe Havens are Surging. What this Means for Stocks 2019 - Troy_Bombardia
4.Most Popular Financial Markets Analysis of 2018 - Trump and BrExit Chaos Dominate - Nadeem_Walayat
5.January 2019 Financial Markets Analysis and Forecasts - Nadeem_Walayat
6.Silver Price Trend Analysis 2019 - Nadeem_Walayat
7.Why 90% of Traders Lose - Nadeem_Walayat
8.What to do With Your Money in a Stocks Bear Market - Stephen_McBride
9.Stock Market What to Expect in the First 3~5 Months of 2019 - Chris_Vermeulen
10.China, Global Economy has Tipped over: The Surging Dollar and the Rallying Yen - FXCOT
Last 7 days
Semiconductor Sector – Watch the Early Bird in 2019 - 21st Jan 19
From ASEAN Economic Development to Militarization - 21st Jan 19
Will China Surprise The Us Stock Market? - 21st Jan 19
Tips to Keep Your Finances Healthy in 2019 and Beyond - 21st Jan 19
Tips for Writing Assignment in Hurry - 21st Jan 19
UK House Prices, Immigration, and Population Growth Mega Trend Forecast - 21st Jan 19
REMAIN Parliament to Subvert BrExit with Peoples Vote FIXED 2nd EU Referendum - 21st Jan 19
Pay Attention To The Russell Stocks Index and Financial Sectors - 20th Jan 19
Hyperinflation - Zimbabwe's Monetary Death Spiral - 20th Jan 19
Stock Market Counter-trend Extends - 20th Jan 19
The News About Fake News Is Fake - 20th Jan 19
Stock Market Bull Trap? January 22 Top Likely - 19th Jan 19
After the Crash, the Stock Market Made a V-shaped Recovery. What’s Next - 19th Jan 19
David Morgan: Expect Stagflation and Silver Outperformance in 2019 - 19th Jan 19
Why Brampton Manor Academy State School 41 Oxbridge Offers is Nothing to Celebrate! - 19th Jan 19
REMAIN Parliament Prepares to Subvert BrExit with Peoples Vote FIXED 2nd EU Referendum - 19th Jan 19
Gold Surges on Stock Selloff - 18th Jan 19
Crude Oil Price Will Find Strong Resistance Between $52~55 - 18th Jan 19
Stock Market’s Medium Term is No Longer Bullish. It is Now Mixed - 18th Jan 19
SPX and Gold; Pivotal Points at Hand - 18th Jan 19
Fable Media Launches New GoWin Online Casino Affiliate Site in UK - 18th Jan 19
The End of Apple! - 18th Jan 19
Debt, Division, Dysfunction, and the March to National Bankruptcy - 18th Jan 19
Creating the Best Office Space - 18th Jan 19
S&P 500 at Resistance Level, Downward Correction Ahead? - 17th Jan 19
Mauldin: My 2019 Economic Outlook - 17th Jan 19
Macro Could Weaken After US Government Shutdown. What This Means for Stocks - 17th Jan 19
US Stock Market Indexes Reaches Fibonacci Target Zone – Where to Next? - 17th Jan 19
How 2018 Was For The UK Casino Industry - 17th Jan 19
Gold Price – US$700 Or US$7000? - 16th Jan 19
Commodities Are the Right Story for 2019 - 16th Jan 19
Bitcoin Price Wavers - 15th Jan 19
History Shows That “Disruptor Stocks” Will Make You the Most Money in a Bear Market - 15th Jan 19
What Will the Stock Market Do Around Earnings Season - 15th Jan 19
2018-2019 Pop Goes The Debt Bubble - 15th Jan 19
Are Global Stock Markets About To Rally 10 Percent? - 15th Jan 19
Here's something to make you money in 2019 - 15th Jan 19
Theresa May to Lose by Over 200 Votes as Remain MP's Plot Subverting Brexit - 15th Jan 19
Europe is Burning - 14th Jan 19
S&P 500 Bounces Off 2,600, Downward Reversal? - 14th Jan 19
Gold A Rally or a Bull Market? - 14th Jan 19
Gold Stocks, Dollar and Oil Cycle Moves to Profit from in 2019 - 14th Jan 19
How To Profit From The Death Of Las Vegas - 14th Jan 19
Real Reason for Land Rover Crisis is Poor Quality of Build - 14th Jan 19
Stock Market Looking Toppy! - 13th Jan 19
Liquidity, Money Supply, and Insolvency - 13th Jan 19
Top Ten Trends Lead to Gold Price - 13th Jan 19
Silver: A Long Term Perspective - 13th Jan 19
Trump's Impeachment? Watch the Stock Market - 12th Jan 19
Big Silver Move Foreshadowed as Industrial Panic Looms - 12th Jan 19
Gold GDXJ Upside Bests GDX - 12th Jan 19
Devastating Investment Losses Are Coming: What Is Your Advisor Doing About It? - 12th Jan 19
Things to do Before Choosing the Right Credit Card - 12th Jan 19
Japanese Yen Outlook In 2019 - 11th Jan 19
Yield curve suggests that US Recession is near: Trading Setups - 11th Jan 19

Market Oracle FREE Newsletter

UK House Prices, Immigration, and Population Growth Trend Forecast

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.


© 2005-2018 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