April 2016: Crude behavior: The trader's guide to lower for longer oil

September 15, 2016 11:00 AM
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We jumped into the oil patch for the April issue just as crude oil was making 15-year lows. Despite this, not everyone was convinced the low of the move was in. Energy markets analyst Dominick A. Chirichella said they weren’t and he was right, though crude oil only slightly took out the January lows before embarking on a near-100% rebound from Feb. 11 to June 9. Donald Luskin, chief investment officer at Trend Macrolytics, said the market had bottomed but that the days of $100 oil are over. Senior energy analyst at Price Futures Group Phil Flynn correctly predicted that crude would head higher and producers would be gun shy of ramping up production even if crude returned to the $50 per barrel level. It did and so far they haven’t.

The main problem for producers as highlighted by Sean Levine, director of research and product development at Energy Capital Research Group, and others, is that credit lines for independent energy producers have tightened. Nearly everyone we talked to expressed doubt that proposed OPEC production cuts being bandied about at the time — or the international cooperation needed to facilitate such cuts — would happen. The consensus was right on this as well.

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