“Those who cannot remember the past are condemned to repeat it“. George Santayana 9 months ago, it must have seemed such a good idea. Ed Morse of Citi and other oil market analysts were calling the hedge funds with a sure-fire winning strategy, as the Wall Street Journal reported in May: “Dozens of hedge-fund managers […]
Chemicals and the Economy
Oil market rebalancing myth looks close to its sell-by date
The myth of oil market rebalancing has been a great money-maker for financial markets. Hedge funds were the first to benefit in H2 last year, as Reuters has reported, when: “OPEC and some of the most important hedge funds active in commodities reached an understanding on oil market rebalancing during informal briefings held in the […]
Oil prices could halve as the speculative bubble starts to burst
The past few weeks have been a nightmare for the many hedge funds who gambled on higher oil prices. They obviously hadn’t realised that OPEC’s November quota agreement was most unlikely to lead to a major rebalancing of today’s vastly over-supplied market. But as I suggested in December: “The simple fact is that the arrival […]
Hedge funds exit oil price rally as Saudi plans post-oil economy
“Within 20 years, we will be an economy or state that doesn’t depend mainly on oil“. This critical statement from Saudi Arabia’s deputy Crown Prince has been lost in the hype surrounding Q1’s hedge fund-inspired rally in oil, commodities and Emerging Markets. There has seldom been a better example of markets failing to see the […]
Chart of the Year – Oil prices return to natural gas linkage
Last year’s ‘Chart of the Year’ was headlined “China’s auto sales bubble begins to burst“. Few would disagree with this view today. Similarly, there is little doubt about 2015’s Chart of the Year. It has been the focus of industry and analyst attention all year: Those who believed that argument that the world faces an […]
Oil price forecasts based on myths, not proper analysis
Did your company or investment manager use $50/bbl as a forecast Scenario price for oil this year? If not, why not? And has this question even been asked, as you finalise forecasts for 2016? In recent months, many readers have told me despairingly of their efforts to suggest alternative Scenarios to last year’s “consensus” view […]
US Marcellus gas output trebles as drilling rig count halves
Simple stories aren’t always true. That’s certainly the case with the fiction that the fall in the number of US oil drilling rigs will soon reduce US oil production. Exxon Mobil CEO Rex Tillerson recently reminded us of this critical point: “Clearly a significant decline in rig activity did not diminish the continued growth of […]
Oil prices break out of their triangle – downwards
The Great Unwinding of the central banks stimulus policies is underway, as discussed last week. Oil markets have been one of the first to feel the change, as the chart shows, with prices finally falling out of the ‘triangle’ shape built up since 2008. The value of the US$, interest rates and the S&P 500 […]
US condensate exports highlight oil market weakness
Slowly but surely the myths over supposed supply shortages in the crude oil market are being exposed. As leading US investment magazine Barron’s wrote this week: “In May, U.S. production hit its highest monthly average level since 1988 and is projected to keep rising. Domestic supplies have piled up in storage, especially on the Gulf […]
Oil will be left in the ground, as gas gains energy market share
The annual BP Energy Statistics publication is a treasure trove of information for anyone interested in global energy markets. One key area is the impact of today’s higher oil prices on consumption growth, as highlighted in the chart: It starts from 1965, and shows consumption growth for oil (red line), gas (blue) and total energy (green) Oil’s […]
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