Saturday, October 25, 2014

 

Oil could slide further,but where's the bottom?

Crude oil continued to flirt with the key $80 per barrel level Friday, signaling another possible sharp leg down in price in coming weeks.

West Texas Intermediate crude (@CL.1) fell to an intraday low of $80.36 before inching back up to $81. Oil has slid below the $80 mark recently but has not breached it for long. Oil was weak Friday despite a stronger equity market and weaker dollar, both factors that have lifted crude prices lately.

News that Iraq oil exports are holding close to a record and Kurdish shipments are rising despite unrest in Iraq adds to the view the world market is well supplied and could continue to be, a negative for prices.

"What you're going to see is the market really trade lower and press the issue of price on OPEC ahead of their meeting at Thanksgiving," said John Kilduff of Again Capital.


Kilduff said while Saudi Arabia has said it would cut prices to preserve market share, a report earlier from Reuters added confusion in the market because it said Saudi Arabia reduced exports slightly in September despite higher production.


Oil has been hit by the double whammy of strong supply and weakening demand growth. In addition to a more than 7 million barrel build in U.S. crude stocks last week, demand for products like gasoline, heating oil, and distillates are also falling, which impacts the price of crude used to make those products.

"I think products are dragging down the crude price," said Jeff Grossman of BRG Brokerage. "When demand for products drop, it takes crude down right along with it."


Traders have been grappling for weeks with the question of whether or not the bottom is in for crude.

"I thought we had bottomed—honestly I thought crude would be trading around the $83 level right now," Grossman said. "But remember, if we close under $80, we're definitely going lower...maybe $75."

Some traders also pointed to reports of the latest case of Ebola in New York City as a reason behind Friday's price action. They said there's concern that oil demand could weaken even further if consumers cut back on travel for fear of Ebola, or pare back spending, hurting global growth.


"Ebola's one reason we're moving lower again," said Anthony Grisanti of GRZ Energy. "But also a relatively strong dollar and a supply glut adding to nervousness in the market."

In addition to market chatter, a fresh report from the Energy Information Administration (EIA) Friday morning saying domestic oil prices will not rise if the U.S. lifts the ban on oil exports adding some pressure.

"I don't actually agree with the EIA," Grisanti said. "If we flood the market with cheaper product, people will go for the discounted crude instead of Brent and it will drive prices up."
Tags :

Share

Social

The idea behind the text.
Respect for the truth is almost the basis of all morality.
Nothing can come from nothing.



Follow

Popular Topics

Read

Well, the way they make shows is, they make one show. That show's called a pilot. Then they show that show to the people who make shows, and on the strength of that one show they decide if they're going to make more shows.

Like you, I used to think the world was this great place where everybody lived by the same standards I did, then some kid with a nail showed me I was living in his world, a world where chaos rules not order, a world where righteousness is not rewarded. That's Cesar's world, and if you're not willing to play by his rules, then you're gonna have to pay the price.

You think water moves fast? You should see ice. It moves like it has a mind. Like it knows it killed the world once and got a taste for murder. After the avalanche, it took us a week to climb out. Now, I don't know exactly when we turned on each other, but I know that seven of us survived the slide... and only five made it out. Now we took an oath, that I'm breaking now. We said we'd say it was the snow that killed the other two, but it wasn't. Nature is lethal but it doesn't hold a candle to man.

You see? It's curious. Ted did figure it out - time travel. And when we get back, we gonna tell everyone. How it's possible, how it's done, what the dangers are. But then why fifty years in the future when the spacecraft encounters a black hole does the computer call it an 'unknown entry event'? Why don't they know? If they don't know, that means we never told anyone. And if we never told anyone it means we never made it back. Hence we die down here. Just as a matter of deductive logic.