Bearish Forces | Russell T. Rudy Energy LLC
We fondly remember when oil was trading above $100 a barrel, and would like to forget its plunge to a 12 year low of less than $30, due to a global oil glut. As production dropped and it looked like inventories would start shrinking, prices rallied by 30%. Now, “World Oil” reports that the recent price increases are defying market fundamentals as crude stocks are starting to build once more.
Morgan Stanley warns that the recent run-up in prices is due to overly bullish investors trying to cash in on a major market move, rather than by market fundamentals. Crude oil inventories have increased for three straight weeks. Last week saw a build of 2.3 million barrels, with 1.5 of the total coming at the Cushing, OK terminal.
Barclay’s agrees that it is “not yet convinced that prices will remain here or go even higher.” While some analysts see crude, a dollar denominated commodity, as a currency hedge, and others hope that Russia and OPEC come to an agreement to limit production, these are not the underpinnings for a long term recovery. The reality is that oversupply is once again threatening price stability, international agreements are illusory, and Saudi Arabia and Iran keep boosting production.
Another troubling sign is that production of oil products, especially gasoline in Asia, is rampant. Now several nations which traditionally import gasoline are now exporting, which will lead to lower future demand for crude and products.
Morgan Stanley concludes that when a rally goes against fundamentals “A macro unwind could cause severe selling, given positioning and the nature of the players in this rally.”
To read the article in its entirety, please go to http://www.rigzone.com/news/oil_gas/a/144181/Oil_Down .
Russell T. Rudy Energy, LLC buys oil, gas and mineral interests nationwide. Please call (800-880-0940), or write (info@rudyenergy.com ) to let us know if you agree, disagree or would just like to comment on this, or any of our posts.
