Crude: excuses, excuses

Oil Outlooks

The oil markets just rode out the end of the month trading and we’ll do a lot of the same today.  Heck, I was so bored yesterday that I made it on CNBC Closing Bell and was actually bearish. I know, the humanity of it all.

But now we’re back, from outer space.  I just showed up at the door with that look upon my face.  Sorry, I really am easily distracted these days.  My point is that there’s still nothing that is going to make this market find peace above $55 in WTI or below $45.  Another shocker when you find me on that CNBC vid from yesterday, I’m outwardly agreeing with GS that oil prices will remain in that aforementioned range.  Perhaps the world is coming to an end and it’s not just because America elected President Donald Trump.  What the market has is a nice increase in demand, but an overwhelming supply of crude.  Even if OPEC takes millions of barrels of oil off the market and for shts and giggles, we don’t see US production grow much more from here, we’re still ahead of the game by the end of the year.  That’s because when oil is trading at $50 a barrel today it’s a whole lot different when it was trading at $50 back in 2003.

That big difference doesn’t come just because we’re pumping about 4mm b/d of crude in the U.S. alone.  It’s not because OPEC is pumping 30mm b/d now and only 24mm b/d back in 2003.  Let’s not even give in to the idea that we’re importing about 3mm b/d less today than we were back then.  But, it may be because right now the U.S. stands to hold about 250 million barrels in commercial supply than we did back in 2003.  Adjust the current higher run rate by about 2mm b/d and we’d still have to wait out about 3 to 6 months to get us back under 300mm.  Now let’s get really kooky and take note of the U.S. SPR too.  No, President Trump didn’t call me a few weeks ago to fact check these numbers, but my number is out there sir.  If his proposed budget manages to at least get the SPR release into the game, the U.S. Government has about 350 million barrels right there until it gets back to the 2003 levels too.  Now we’re looking at knocking down the oversupply in the U.S. alone in the time span of about a year.  I know time flies when you’re having fun, but we’re talking about a lot of happenstance to happen here.  All the while, we’re holding on to a barrel of WTI crude at a price that might seem a worth a little more than it’s worth.  Then again, I’m happy with $50 WTI as I’m happy with $45 WTI or $55 WTI.  The trick is to make money when it’s in a range.  All of those traders that play the vol are out like yesterday’s celebrity.

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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.