Is the drop in crude due to profit taking or a real reversal?
Answers
4107 points
MNSL answered 2 years ago …
Still it is too early to identify direction of the oil market. However, I believe we can clear direction at the end of this month latest. I now strongly believe oil will come down to $100/Barell sooner than later.
Did you do some research whether Hedge funds and other large speculators are cutting their net-long positions in oil futures.
Factors to watch:
Weak demand,
Slowing world economy
Rising inventories.
Bearish sentiments
Loosening oil fundamentals
Increasing supply from Saudi Arabia
Russia is to cut taxes on its oil industry
Brazil continues to find more oil offshore
In the US, Congress may start bans on domestic drilling.
Asian countries are starting to reduce their domestic fuel subsidies
Not only Americans but also world citizens are driving less now
Airlines are going to reduce Flights. American Airlines said it would reduce flights.
Possible restructuring of the world airline industry
4107 points
MNSL answered 2 years ago …
I want to add some more.
Sometimes there is a possibility oil will even go to $70 level as predicted by industrial experts, leading investment bank analysts and top investors.
952 points
Grudun answered 2 years ago …
One issue MNSL forgot that could dramatically raise oil prices is the Iran situation. When Iran rattles it sabre and threatens to cut off the straits of Harmuz(sp?) or Isreal looks like it will attack oil prices have jumped.
Read more from Grudun flag as abuse great answer
102 points
pureroy answered 2 years ago …
I think $100.00 crude is a likely possibility,in view of reduced consumption,not only in the US but world wide.
Read more from pureroy flag as abuse great answer4107 points
MNSL answered 2 years ago …
I think it looks like everybody has given priority to control inflation.
I heard The United States is trying to send Under Secretary of State William Burns to talks between Iran's nuclear negotiator, Saeed Jalili, and the European Union's foreign policy chief, Javier Solana.
I think this is a positive sign. These developments also will put more pressure on oil prices now.
119 points
ChuckS answered 2 years ago …
Oil prices dropped when President Bush ended the executive order banning drilling in many offshore areas. I think speculators and others realized that more supply may be coming, which will drop the price, so many of them dropped their long positions. Once the price drops, some long traders hit margin calls, causing them to sell and drop the price further. I don't think droppping the executive order will start any drilling - I think Congress also has to approve it. If Congress does approve it, I think prices will drop a lot more. When the drilling starts happening, the increased supply will cause a real reason for prices to drop. Or to rise more slowly - I think world demand is continuing to increase.
I'm sure a number of traders realized that increased drilling isn't authorized yet, but if some bail out, the resultiing drop and margin calls would force more.
Another thing is that there was a double top, which tends to be bearish. Prices have dropped about the distance from the tops to the low between the tops, which is about as far a double top often drops, so there may be no more drop from the double top.
120 points
Baskerville answered 2 years ago …
If you see the charts for the last three decades, MAJOR rallies in oil never retraced to their old support levels. Next major support is at $110.
The real reason for the American oil situation is never told or discussed:
We have not built even one oil refinery since 1976! Refining capacities never kept pace with rising consumption for more than a quarter century.
Every country in the world is affected by the oil situation, one way or another.
But USA is affected more because even if more oil arrive at our ports, take-off is restricted due to the limits of refining!
And a new oil refinery will take at least 3-5 years to go full stream.
Any way, companies are not affected as oil is one commodity that will increase their income on throttled supply as their raw material costs are already fixed with forward contracts.
At the same time consumers can be charged more at the pumps, based on market prices which always settles on a new, higher bottom!
Also, most refining installations are based in the south, nearer to the Gulf of Mexico and hurricanes are another blessing in disguise for the refiners to throttle the supply further!
