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OIL’s NEXT MOVE ? Bingo ! Dec 14

December 14, 2015

In my Nov 15 Post, I gave fresh oil target with reasoning that why oil will struggle and fall below $ 35 WTI & Brent below $ 38.
My next update “OUTLOOK 2016 “will appear in my Blog & Linkedin to tell you why oil may find bottom around WTI $ 25-28 & Brent around $ 29-32, but will remain under pressure  for rest of the year and will continue to struggle to test WTI $ 55 & Brent $ 58 zones and beyond in 2016.

Oil’s Next Move –Nov 15 (Last Update)


WTI $ 40.73   Brent $ 44.43

In my last Oil update of Oct 9 2015, click on the link

WTI was @ $ 50.50 and Brent was @ $ 53.90. I gave enough reason that why oil will soon exhaust, as another $ 10-15 drop is in the making. It proved to be correct, as oil after gaining another US Dollar soon started to slide losing its upside momentum.

By the end of last month of 3rd quarter (September) oil rigs counts was reducing giving impression that oil wells are drying. But recent tumbling of oil future clearly hints oil glut.

The acceleration of price fall is caused due to future projection of slower growth forecast. IEA announcing large global supply of oil of almost 3 Billion barrels is considered good enough to tackle any disruption.

The problem for oil producers is that there are about 35-40 large oil tankers lined up mostly between Gulf to China to unload their crude oil.

Saudi Arabia and Russia is already producing oil in excess, as Iranian super oil tankers are always found loaded and ready to deliver. Russia is said to have gained further excess in Asian market after Pacific/China Pipeline.

Iran oil is already in the pipeline, waiting for lifting of sanctions. Oil analysts estimate that Iran will comfortably flood supplies by around 400.000 to ½ Million barrels per day to its European and Asian buyers. Greece, Italy and Spain prefer Iranian crude oil. Interestingly, though Iraqi output fell in October, but it made inroads in Europe by finding new buyers after snatching Saudi customers.

Nigeria is another country desperately looking for new buyers, as USA once a major importer of Nigerian oil after its shale oil discovery meets more than 50 pct of its oil need from its domestic market. Nigeria is said to be holding sizable oil stock.

Next major event is OPEC meeting, which is due on due on December 04. It is unlikely that Saudi Arabia will be interested in supporting cut in oil prices, which may not suit them. The trick here is to get as many new buyers as possible to obtain better market share and reduction would mean Iran, Iraq or Nigeria may increase their market share. The timing is crucial and only fall in US shale oil production may give some hope to the producers or else prices will remain under pressure with possibility of new lows.

Meanwhile, OPEC is expecting oil demand to increase by 1.25 million (BPD) in 2016, by then increase in Iranian and Iraqi production will instead do more harm to oil price stability.

However, unfortunate Paris attack could add gloom to the oil prices. Though it is too early to talk, but, if Visa restrictions are imposed and traveling is made difficult, it could soon spill over to other parts of Europe that will ultimately slow down economic activity in the Euro-zone region.

WTI @ $ 40.73 = Western Texas Instrument may struggle to move beyond $ 45-50 in next three months and likely to test $ 32-35 zones.

Brent @ $ 44.43 = Brent oil is likely to remain under pressure until 1st quarter of 2016 and hence, should not surpass $ 52-52 zones. There is a growing risk for downside a test of $ 35-38 in coming months.


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