The Comeback

Oil is continuing its comeback, up 6 sessions in a row, as it is more apparent that some of the reasons that oil sold off on were not valid in the first place. The talk of a U.S. recession obviously was way overstepping reality, especially after that blockbuster U.S. jobs report on Friday. Now with the Wall Street Journal reporting that Saudi Arabia plans to over-comply with production cuts by reducing exports by 800,000 barrels a day should be a signal to the market that supplies will soon tighten. The Saudis are signaling that they want $80 a barrel and they probably will get it.

The economic backdrop is looking better as the Federal Reserve, of course, signaled that they would be flexible with its path of interest rate hikes and balance sheet wind down. Yet, the recent break on oil that caught almost everyone by surprise has already caused a pull back in investment and drilling in the shale patch. Overestimations of shale production and underestimations of OPEC’s resolve to cut output should get oil back on track. The Christmas Eve price massacre is now looking more like a capitulation bottom  and now it looks like we will get back into an undersupplied market in just a matter of months.

The big price collapse after President Trump granted waivers on Iranian oil, led to a run on the oil bank. But now we could start to see a reversal of that massive selloff as OPEC and Saudi Arabia over adjust.

The Financial Times are reporting U.K. North Sea exploration fell to a 50-year low, extending a decline as investment could raise questions about the long -term viability of the area. 10 billion to maybe 20 billion barrels of oil equivalent are reportedly left in the North Sea, and it is obvious that we will need much higher sustained prices to get it.

Reuters is reporting that an oil tanker exploded off Hong Kong's southern coast Tuesday, killing one crew member and leaving three others missing at sea. Authorities said the Vietnam-registered vessel burst into flames as it prepared to refuel. Twenty-one crew members were rescued from the waters.

1 2
View single page >> |

The Fox Business Network is Rocking! Tune in to get the Power to Prosper. Find out what we are doing on the position and day trade side! Call at 888-264-5665 or email me at  more

How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.