Posted on 01/08/2018 9:18:49 AM PST by bananaman22
Oil prices rallied in the first week of 2018, supported by increased geopolitical risk and severely cold weather in the eastern U.S., but the ‘perfect storm’ that pushed oil prices higher also raises the risk of a correction and of heightened herd mentality in trade, analysts reckon.
Protests in Iran, possible new U.S. sanctions against Tehran, and Venezuela’s economic collapse could be the main geopolitical risks that could drive oil prices up early this year. Oil prices made their strongest start to a year in four years, with both Brent and WTI started trading in 2018 above $60 a barrel for the first time since January 2014.
(Excerpt) Read more at oilprice.com ...
“supported by increased geopolitical risk”
Ha Ha Ha Hah
Whatta con job
The same one they used to run the price up at the end of 43’s administration - Oh Noes! 1% of the worlds oil might be affected be affected by crazed Iranians! Eeeeeayaaaa!
The last 10 years showed that any attempt to crank the price up will be met with increased US production by fracking. The current oil prices are so unjustifiable it’s comical.
Fortunately, Pres. Trump recently opened leases on the FL and CA coasts. For years, these states have been guzzling oil from Texas, Oklahoma, Louisiana, and North Dakota while bragging about stopping drilling off their shores. If the market tightens, the first states to have to pay the piper should be FL and CA. Tourist can’t ride to their beaches on bicycles.
I am a little confused. The author makes a case for a “price correction”, suggesting that the higher price that opened the year should go back down. But then she also gives reasons for why the price should also go up. What did I miss? Are they suggesting oil prices to correct up or down?
Side Note: In conversation over the Holidays, an acquaintance made an interesting suggestion. If Trump is able to open all USA lands and sea to oil production (including Alaska), there is a lot of incentive to extract some cheap crude from locations that were previously off limits. The shale oil is more expensive to produce. But in areas where there is proven oil, the extraction process may be cheap enough to bring additional supply to market and further drive down the price, make our country more independent and reduce price leverage from the Middle East.
Nailed it. Just how many times can this charade be used? Over and over again.
Oil prices need support... crank up the PR machine and announce that the Saudis “might talk” about limiting output, or there “might be some limiting agreement with Russia”. Or, things in Nigeria were unstable this week. Or, it’s winter and it’s cold! Just how much oil does Iran produce? Answer: Not much at all.
Pfft...
This is such a transparent scam.
And to add to your comments, the reason for instability in Venezuela is their inability to produce oil and get hard currency to import food and other goods. So that lack of production should already be reflected in current prices.
The relatively high oil prices now will make America almost totally energy-independent, as the spigots have now been opened all over America, and at high enough price, the US could become a net petroleum EXPORTER, as they once were before the days of Saudi Arabian peninsula oil reserves.
Lets hope the start new drilling right off Malibu! The platforms can hang up giant Trump banners for all the leftist celebrities to see from their ocean view homes!
And nowadays supply is very elastic so sharp upward price corrections should be limited in magnitude and duration.
IMHO for the next few years increased US productions downward pressure on global prices will be offset by rising global demand and a gradual, slight decrease in the US dollars exchange rate. Unrest in the Middle East and the failure of state run producers to compete will also help. The US becomes a major exporter and Russia is hit hardest...followed by the mullahs.
All those geopolitical factors are at best short term movers of the oil price.
What is important is of course supply and demand. If we are looking at 4% GDP growth for the rest of Trump’s term then the demand argument is there.
Copper and the CRB are also strong, confirming some legitimacy for the rise in oil. Although neither Gold nor any other industrial metals are confirming.
So yes, maybe a pullback, but then again the entire equity market is due a pullback and that hasn’t happened yet.
FWIW, I don’t have any oil positions. My educated guess is HOLD. Unless you are heavy energy stocks and oil, and then maybe sell some. It has risen almost 50% in since July, so a pullback would be normal with support around $50.
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