Handling the global oil glut

January 30, 2015 09:31 AM

If the United States opens up the flood gates from Canada and beyond, the current global oil glut is about to get a lot bigger.

The United States would be able to cut back on imports outside of North America by another 1 million barrels per day. We’d also find a lot of opportunity to not only export Canadian crude, but it would make more sense to export U.S. crude too. How that is going to affect OPEC’s stranglehold on all that is supply is outright scary. It would literally split the world in two with crude supplied to each hemisphere. The United States takes Latin American and some Asian countries like Japan and Korea, and OPEC takes the EU and China. If this is the case, I’d say start selling Brent right now because that’s going to be worthless in a few years time. The wheels are in motion, now we’re just waiting to see where the car goes. It’s much more than an environmental challenge, the politics are as long and as deep as the oil pipeline that we call Keystone. 
 

Crude

Time to revamp the numbers and I have a feeling by the end of the week we’re going to have some major changes. The chart is invariably in a downtrend and it’s not even worth trying to explain it. The obvious is simply the obvious. One thing that one should remember though, the trend is your friend until it ends and bends. That said, we’re going to start with support here to $44.38, $43.66 and $42.40. Getting back to the upside, we’ll be looking for resistance at $45.55, $46.49 and $47.70. The front spread is looking weak with support to the –102 level with a follow through to the –113 area. The weekend is upon us and so is a strong day and close.

Gasoline

We’re moving along to the RBH5 contract as cash trade moves forward. We’re looking to resistance 13959, 14144 and 14370. That will give us some room to look back down to support at 13770, 13568, 13359. The front spread stays with H5/J5. Resis- tance at -2100, -2072. Support to –2162, -2199. The RBCL moves to H15 and gets to resistance at 1379, 1422. Support down to 1325, 1286.

Distillate

The move is ahead and we switch months and ahead to the HOH15 contract. We’re looking at support to 16014, 15952 and 15777. The resistance looks above to 16155, 16278, 16442. The front spread continues to H5/J5 with resistance at +220, +265. With the way it’s moving we may not see support tested, but looking to +200, +173. The HO crack in H15 sees resistance at 2283, 2329. Support back to 2213, 2279. 

About the Author

Carl Larry is Director of Business Development Consultant for Oil and Gas at Frost & Sullivan. Follow him on Twitter (@oiloutlooks) or on his website. He can also be reached at carl.larry@frost.com