Thursday, 22 June 2017

Crude oil how low will it go? - Update

The most recent price action in crude suggests that those that were long have re adjusted their positions for a downswing.

In our previous post our lower targets are:

Crude PnF

Notice how the current price action in crude has been seen before a plunge in price.

Crude Price action

Why is this happening?

Short answer, too much supply. You would think lower prices would be the cure for lower prices and those who pump the stuff out of the ground would cut production, da! However they don't do this, they see lower revenues and think they need to pump more out to make up for lost revenues at a lower price, thus even more supply. Until the producers cut production (most likely at panic lows and after the banks order them) prices will fall.

Why is crude so important?

One reason is the massive amount of debt behind the producers! Another is there are whole countries relying on the crude oil price for revenues. Lower crude oil prices are dangerous. While the SP500 is at all time highs, buyback debt is huge and economic activity is not supportive of very high stock prices. A crude oil price crisis may be the Jim Rickards snow flake that stops the 'every thing is awesome' music. No wonder gold is starting to react to lower prices in crude oil.

There are some that are calling for a miraculous 'V' shaped recovery in oil, maybe, well only after those who have shorted oil have made their significant profits. A 'V' recovery may be at $35 or $30 who knows!

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