Topic: Energy — Oil
May. 6 2015, 2:58 PM ET
- by VF member bz1516 (2436 )
Current outlook for oil --
Well another week of supply coming in at the same level at 9,369,000 bbls/day. Essentailly the last 9 weeks have seen flat production, save one which was 9,422,000. Production is the more important number imo, though storage is important as well.
Storage is affected not only by production, but by imports and of course end user consumption and refinery draws.
Storage is looking bullish right now but that could just be due to seasonal demand. Last year the plentiful supply of oil was masked by seasonal demand among other things. Just two VLCCs unloading a few days late can account for the draw from storage this week, the entire draw so far this year.
I'm not saying things are not bullish, just that what we saw this am is indeterminate and we need a longer period to conclude they are changing from bearish to bullish.
The situation is still too cloudy to take a bullish stance in oil, except selected refiners. Why commit when the chances of making money are so close to 50%?
One thing is certain, the need for offshore drilling has been permanently reduced by shale oil, thus reducing offshore returns. Conventional onshore is not far behind. From there drillers and fraccers and then E&Ps have a better long term outlook, but the time is not yet right for purchase. The subgroup that looks the best are the sand companies and that looks too iffy still.
I think the chance of another drop in the price of oil is still too great to take a chance. My guess is we will have a much better sense of where the market is going by the end of July.