Tuesday, August 2, 2016

Oil Chart and Seasonality and the Next Supply to Disappear

I have been posting a lot on oil lately here, here, here, here, here, here, here, here and here (not necessarily in order) over the last month or so. Crude oil has been a big part of my career. One reason I am still bullish on crude, besides all the other posts is that I do not believe the news leads the market but the market leads the news. This bad news is all hindsight. Below is the weekly chart.
The chart could be putting in an inverse head and shoulders pattern (could is the key word) that would match up with the other bottoms and EWT target in previous charts. The second chart is of crude oil seasonality.
Crude oil historically tends to bottom in late July (could early August this time) after having a weak June and sell off in July. 

Finally, Rystad put out this chart discussing decline rates. OPEC produces about 1/3 of the global liquid hydrocarbons or 32MMbbls/d leaving about 63MMbbl to non-OPEC producers. A 7% decline rate means that approximately 4.4MMbbl/d of production is lost each year. OPEC's fields decline too, but that data is not readily published so it is fair to estimate the world loses 5+MMbbl/d each year. Add in uneconomic production due to the current price range, and it is easy to see where the next drop in supply will come from.


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