by SEEANDDONTSQUEAL
The following news released since Fridays OPEC failed meeting:
www.cnbc.com/2020/03/06/opec-meeting-coronavirus-weighs-on-oil-demand-as-oil-prices-fall.html
Some key points from the article are as follows:
– OPEC and non-OPEC allies failed on Friday to agree on how much oil production to cut amid the coronavirus outbreak
– Russia reportedly refusing to give the green light to the deepest supply cuts since the global financial crisis.
– Russian Energy Minister Alexander Novak told reporters leaving the meetings in Vienna on Friday that it meant that members could now pump what they liked starting April 1
– “We have no reason to doubt the continued commitment of the Russian Federation to this partnership,” OPEC Secretary General Mohammed Barkindo told reporters. (this we know can be taken with a grain of salt and a shot of tequila.)
THEN! this happened:
www.bloomberg.com/news/articles/2020-03-07/saudi-aramco-slashes-crude-prices-kicking-off-price-war
Some points from the article:
-Saudi Arabia kicked off an all-out oil war on Saturday slashing official pricing for its crude and making the deepest cuts in at least 20 years on its main grades, in a bid to push as many barrels into the market as possible
– The collapse of the meeting between the Organization of Petroleum Exporting Countries and its erstwhile partners effectively ends the cooperation between the Saudis and Russia that has underpinned oil prices since 2016.
– Unshackled from the cartel’s restrictions and with budget holes to fill, there is every chance producers will ramp up output.
– Saudi Arabia pumped 9.7 million barrels a day last month, but with the agreement on output cuts expiring at the end of March, the kingdom will be free to produce as much as it wants. The Saudis say they can pump as much as 12.5 million barrels a day.
– Aramco slashed its official selling price for flagship Arab Light crude to buyers in Asia by $6 a barrel, to a discount of $3.10 below the Middle East benchmark. The cuts eclipsed the $1.90 reduction expected by traders and refiners. It also reduced Medium crude to Asia by $6 a barrel, dropping the grade to a $4.05 discount, according to the company’s pricing sheet. (VERY IMPORTANT)
Looking into the future:
We are about to enter an OIL glut:
So now let’s look at some charts and some resistance and support levels for Crude:
As you can see on the monthly chart, oversold conditions haven’t been encountered in over 5 years. Since our large sell off and we are approaching the $30/Barrel price. I expect the price to dip below 30 to $20-$25 before support can be found. (This is news dependent as things could change).
Our Next Support is $20 Dollars
Look for Puts in /CL Futures which provide a good cheap way to enter options contracts or any stocks ETF’s ETNS or banks that are oil heavy in portfolio.
The coronavirus will shut down major cruise ships and airplane travel also pushing prices down.
Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence.