Posted on 08/21/2015 10:14:04 AM PDT by thackney
U.S. oil fell closer to $39 per barrel on Friday, as traders continued a rout that is likely to hand the next-month contract its longest string of consecutive weekly losses since the bust of 1986.
Fears that China’s economy may be sputtering and signals that global production is on the rise have driven oil lower for the past seven weeks, and barring a large recovery Friday, soon to be eight weeks. Those concerns combined once more on Friday as an early economic indicator in China came in at a six-year low.
“(China’s) stock market problems, their currency problems, all these are signals that they are having a general slowdown,” said Arthur Gelber, founder and president of Gelber & Associates.“That will cause a lot of shaking and quaking in Houston.”
West Texas Intermediate grade oil for delivery next month, the benchmark U.S. price, fell as low as $40.13 per barrel in early New York Mercantile Exchange trading Friday. The contract had rebounded slightly to $40.46 per barrel shortly after.
Brent crude, the international benchmark, lost $1.28 per barrel to $45.34 on London’s ICE Futures Europe.
On Friday, the preliminary August reading the Caixin China Purchasing Managers Index, one measure of China’s economic health, fell again despite the government’s efforts to support the country’s economy. China is the the world’s second-largest oil consuming economy.
The Caixin index fell to early reading of 47.1 in August, down from 47.8 in July. Figures under 50 indicate a contraction.
“It’s just continuing the hemorrhaging of crude oil prices in a market that is overwhelmed with bearish news,” said Andy Lipow, president of Lipow Oil Associates in Houston.
Although U.S. producers have gradually ratcheted back production, anxiety about the Chinese economy has started to infect market sentiment outside of Asia, as traders fear that the news signals a slowdown in the growth rate of economies around the world amid a growing global glut of crude, Lipow said.
The anemic global economy has worried traders who had seen economic growth as a key to absorbing the glut of oil that has forced down prices since last year.
And with cuts from North American production coming slowly and no cuts at all proposed by the Organization of the Petroleum Exporting Countries, analysts have begun to compare the bust not just to the brief downturn of 2009, but also the more painful crashes previously.
Oil bottomed at $31.41 per barrel in the crash of 2008.
“The key takeaway from both the 1986 and 1999 bear market cycles, in our view, is that it took a change in OPEC policy to help the market reverse the slide,” said Tim Evans, a energy futures specialist at Citi Futures. “In fact, in the 1999 case it took more than one round of cuts in order to fully rebalance the market. Absent this kind of shift we don’t anticipate a V-shaped price recovery, with a broad U or even an L as the most likely alternatives.”
Traders are expecting the Baker Hughes rig count at noon on Friday. The data is seen as a proxy for oilfield activity.
Venezuela will be more effected by the coming increase from Iran than other countries. They both produce the heavy sour crude oil. Nigeria was more impacted by the increase by the fracking sweet crude that was coming from ND & TX.
Thackney feel free correct me if I am wrong.
However, they are all affected by a oversupplied market based on world demand.
Personally, heating oil here in NH is now under $2.00/gallon for the first time in years. However, I should not have spent $5000 putting in that Harman pellet insert last year. Heating oil is now cheaper than wood pellets.
LOL I think that was the price when I was in high school.
“And the hits keep comin’...”
I think I sent you info. on this and one part of this quoted oil professionals saying the price wouldn’t go up to a cash number making a profit for oil companies until likely 2017.
Prepare for various problems in September. There is an article now on FR that lists over 30 possible happenings in September. Great list to have, I printed it. Some of the items are for sure happenings, like the Pope’s visit and holidays that will happen.
http://www.freerepublic.com/focus/f-bloggers/3327554/posts
But I remember being widely and hardly pummeled by several so wise FReepers when I expressed my doubt that Fracking was going to save the whole US economy by itself!! How can this be?
“And a gallon of gas here in So Cal is still 3.50+.”
And if the president had an (R) after his name, congress would be having non stop investigations into oil company price gouging.
In the nineties it was around $10.00!!
“I expressed my doubt that Fracking was going to save the whole US economy by itself!! How can this be?”
If the price of oil had stayed at a profit making cost, they would be right. However, all fracking stopped months ago due to the low price of oil - fracking drilling costs more than normal oil well drilling. The engineer I know who worked for Baker Hughes, sitting at their wells to fix any computer problems, was laid off three or four months ago. He hopes to teach physics at a community college for this fall. If that doesn’t work out, he has a job problem. There are many more like him who are out of work now.
Thanks very much, Cowboy Bob.
Where do you see things next spring and summer?
I’m beginning to believe the Dems don’t want another Dem. president in 2017 because things will be so fouled up.
There in lies the problem ‘IF’.
You were correct.
If we had a real leader in the White House they would go for the destruction of OPEC now and destruction of the middle east control over oil prices. Take away their money and you take away their ability to fund the islamonazi’s.
I guess this means gas prices will rise more.
Well you’re hedged against future oil spikes.
Sounds like a wise plan to me.
That’s happening already.
China is becoming their best customer.
That friendly outfit with gangster business practices and 1.5b expendable people to enforce them.
It won’t be a fun decade for the mid easties.
Tail end of a head and shoulders formation that is inside a longer head and shoulders. I suspect that the next true base for oil is down around $20
I've been saying for a while that 2016 will be bad economically, and will most likely result in a Republican victory. If you look back to past Presidential election years, they have been bad in terms of the economy.
Part of the reason (I suspect) that Presidential election years are bad economically is because the president's team that helps cover up the economic problems is looking for new jobs (post-administration), so their attention is focused elsewhere.
As mentioned above, a war could have a big impact - especially if it's in the Middle East. Oil prices will spike, which will help some countries now suffering (Russia, for example).
Good points-thanks.
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