The head of Commodities Research at Citi, Ed Morse, reminded viewers of Bloomberg this morning that technical factors were the main catalyst of sharply lower oil prices as of late and NOT the never-ending supply of shale oil being produced by American frackers.
nothing to see here, all technical
Source: Bloomberg
“The market is really fundamentally tightening up,” Citigroup’s Head of Commodities Research Ed Morse said in a Bloomberg television interview on Friday. “It’s never possible to call a bottom, but I suspect this is a great buying opportunity” before a big jump in prices by the end of the year, he said.
Morse Says Oil Move All Technical, Not Fundamental
Ed Morse, global head of commodities research at Citigroup Global Markets, discusses the outlook for oil.
Fuel stockpiles continued to decline in April and the trend will accelerate as OPEC extends its production cuts beyond June, Goldman Sachs said in a note. “The broader oil demand picture so far this year remains supportive,” the bank said.
The price of West Texas Intermediate, the U.S. benchmark, has collapsed 8 percent this week, erasing almost all gains since the Organization of Petroleum Exporting Countries signed a six-month deal in November to curb production. While the two banks acknowledged bearish factors — notably expanding U.S. output — they attributed the recent capitulation to volatile trading patterns.
“It’s all technicals,” said Morse. “There’s nothing fundamental, nothing has changed in the market.”
The current price plunge started when West Texas Intermediate crude broke through its 200-day moving average last week. Once that gave way, another key technical indicator called a Fibonacci retracement was breached, paving the way to the low of the year and then $45 a barrel.
“Technicals and positioning likely accelerated the move lower,” said Goldman Sachs.
Due to these technical factors, the underlying shares of the oil and gas sector have been mired in a horrendous bear market in 2017 — sporting median losses of -28%. Amongst the chief losers are the drillers — stocks like RIG, ESV and CVE.
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Its obvious it has to be technical, nothing every is allowed to go down and if it does its purely an anomaly which will quickly be corrected.
The crash of 1929 was technical too.
Smells like algos gone wild on this one.
Perhaps the reason we traded to 55/bbl in the first place was purely technical….mind blown! US Shale was putting their hedges on at $52 late last year in prepping to flood the market with their unsavory form of Oil.
We recently signed a rig from one of the companies you list at the end. Back in the heyday it was getting somewhere around $500K per day. We got that fucker locked up for less than $200K per day. Technicals got fuck all to do with that.