String Of Downgrades Creates Buying Opportunity For Oil Stocks

Analysts from New York-based investment bank Seaport Global Securities LLC, Barclays Plc., Morgan Stanley, Macquarie Capital Ltd. and Capital One Securities have recently downgraded a slew of big oil companies, explorers, oilfield service providers and other E&P companies. The downgrades come as the sentiment in the oil sector turns bearish, with the market now believing that without further steps from OPEC and its allies, oil is likely to fall to as low as $20s per barrel in the next year. But, will oil really retest the lows and stay there?…

Have Natural Gas Prices Hit A Bottom?

Natural gas prices are falling, and the speculators have cut their U.S. natural gas net long positions for the fourth straight week. Does this indicate further weakness, or is this a contrarian buy signal? Let’s analyze the fundamentals and the chart pattern of natural gas to arrive at an answer. Natural gas is mainly used for electricity generation. During summers and winters, the demand for electricity increases, hence, the demand for natural gas goes up. After all, about 50 percent of all U.S. households use natural gas for heating purposes.…

The Insignificant Truth: Why Gasoline And Distillate Draws Don’t Matter

The oil products that we use—such as gasoline, diesel, and heating oil—are all refined from crude oil. If the demand for these refined products increases, then the demand for crude oil as a raw material will also go up. So why are we not seeing this correlation? As a trader, it is important to note two things while analyzing crude oil prices. One is to monitor the crude oil supply in the market. The second is to track the trend in consumption of crude oil’s finished products. Let’s first have a look at both gasoline and…

The End Of OPEC Is Near

OPEC, which has far exceeded the average life of cartels, is on the brink of failure. Though cracks have been developing in the cartel since the start of the current oil crisis, the group has managed to stay together so far. Nevertheless, the success of the current OPEC deal for production cuts will decide its future as a cartel. What is a cartel? A cartel is a group of like-minded producers, who act in concert—or collusion—to achieve a shared goal of increasing their profits by means of restricting supply, fixing prices, or destroying…

Shell’s New Permian Play Profitable At $20 A Barrel

OPEC’s worries about the booming U.S. oil production have increased significantly with the big three oil companies’ interest in shale. Exxon Mobil Corp., Royal Dutch Shell Plc, and Chevron Corp., are planning $10 billion of investments in shale in 2017, a quantum jump compared to previous years. All the naysayers who doubted the longevity of the shale oil industry may have to modify their forecasts. OPEC lost when they pumped at will as lower oil prices destroyed their finances, and now they are losing their hard-earned market share…

How Likely Is An OPEC Deal Extension?

Damned if they do and damned if they don’t. This is OPEC’s precarious position after the recent fall in oil to below $50 per barrel. Oil prices will tank if OPEC says that they are not open to extending their production cuts for another six months. On the other hand, if prices remain low, OPEC only stands to lose market share to its competitors by continuing the production cuts. So what will they do? For the whole of last year, OPEC had been supporting prices on speculation of an impending production cut. In January of this year, the…

Iran And Iraq To Ramp Up Oil Production Despite OPEC Cuts

Though OPEC has managed to achieve a high standard of compliance, it has mostly been due to the oversized cut by the largest member of the group—Saudi Arabia. Meanwhile, the actions and statements of the second and third largest producers in OPEC are throwing worrying signs at the oil bulls. Saudi Arabia is in a catch 22 situation. As the defacto leader of OPEC, it is left to implement most of the production cuts to ensure a high level of overall group compliance. Saudis know that OPEC might not get another chance if it doesn’t adhere…

OPEC Struggling To Hold On To Asian Market Share

Two years ago, OPEC took steps to increase its market share. It continued with this same policy for two years by pumping oil in an oversupplied market. The result: oil prices tanked and OPEC increased their market share by a small margin. Today, low oil prices are crippling the finances of OPEC members, forcing them to agree to cut production to support oil prices. But just over a month of production cuts and data shows that OPEC has lost around 5 percent market share in Asia since October. The U.S., Brazil, Britain and Libya have increased their…

Oil Prices Aren’t Breaking Out Any Time Soon

What’s in store for oil this year? Experts at ABN Amro are forecasting a return to $30 levels unless OPEC extends its production cuts. Meanwhile, analysts at Citi are of the opinion that oil is likely to reach $70 a barrel by the end of this year. Bank of America Merrill Lynch has opted for the middle path; they believe that the Brent crude oil prices will remain in a range of $50-$70 per barrel till 2022. Such differing forecasts make it difficult for the trader. This article will analyze the fundamentals of oil to arrive at a forecast for…

Why A Weaker Dollar Won’t Boost Oil Prices

The U.S. dollar, along with a variety of other factors, used to be an important component in deciding the direction of oil prices. This was true for the period between September 2007 and April 2013, when the one-month correlation between the U.S. dollar and crude oil was largely negative. In other words, whenever the U.S. dollar rallied, crude oil prices fell—and vice versa. But this relationship has changed considerably in the last few years, prompted by the oversupply of oil. Between April 2013 and January 2017, the one-month correlation…