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Friday, June 2, 2017

Oil Price Uncertainty Continues as OPEC's Plan is Questioned

From Bloomberg:
Oil fell amid doubts that prolonged cuts by OPEC and its allies will succeed in clearing a surplus while U.S. output remains so resilient. 
Futures pared losses after falling as much as 3.9 percent. While Saudi Arabia’s Energy Minister Khalid Al-Falih said the cuts are working and predicted global inventories will fall to the five-year average in early 2018, American drillers continue to add rigs to shale fields. American supplies fell 8.67 million barrels last week, the American Petroleum Institute was said to report. 
The market’s initial reaction to increased output from Libya was tempered as OPEC and Russia affirmed the goal of tackling the global glut, said John Kilduff, a partner at Again Capital, a New York-based hedge fund that focuses on energy. 
“Competing commentary from the Saudis and Russia" on "keeping up the good work" offset the response, he said. “At some point, the verbal interventions do work."
Click here to keep reading.

And from Forbes:
As I've articulated in the last several Forbes.com articles, I believe that oil prices are going to drift much lower over the coming year. I keep harping on it because I am fighting a pervasive bullish bias in the financial media and in street expectations. It's important as an investor to know what not to own. And as a hedge fund manger, I'm making money on volatile oil prices by shorting three highly levered oil service companies: Ren Energy (REN), Andarko Petrolium (APC) and Continental Resources (CLR) as well as I'm long two levered (short) ETFs: SCO, tied to the price of oil directly, and DUG which reflects a short basket of energy companies. 
The consensus bullish case hinges on expectations that OPEC (for the first time ever) will cut production to keep the price high. Plus, we're entering the seasonally strong driving season in the U.S. Oh, and gasoline inventories are slightly below all-time-highs and appear to be falling. 
As for OPEC, none of the 6 main member nations are in a position to cut production for long. Why? They are broke. There's no economic stability because their economies are one dimensional. Meanwhile, they lack social stability and reside in the middle of a big war zone. A common fallacy among traditional analysts is that despite their desperate need for cash, OPEC nations will willingly agree to diminish their cash flows.
Read that whole article by clicking here. 

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