Why Q1 2017 will be crucial for oil

Dec 20, 2016
We’ve had headline news pushing oil prices for more than a year now, in the next 60 days we should have sufficient data to either support the bull theory or the bear theory.

Fundamentals are pretty bad but the market is overlooking them, as stated in 30.01.2017 – Oil is going down on the medium term.

From now, I think we will go from a “news-orented” market to a “fundamental-oriented market”

Yet we have to keep in mind that OPEC (as always) has left the door open to excessive headline manipulation through their “maybe we will extend the cuts, maybe we will cut even more, maybe we won’t” rhetoric.

We will have answers to a lot of questions, most certainly:

1) Production data:

From OPEC – will the cuts be implemented?

From US – large increase in rigs should show significant production increases?

2) The “new technology” argument

For US production we don’t need so many rigs anymore for production to increase ? It will be in the data

3) OPEC / NOPEC cuts and their impact on imports

4-8 weeks for shipping (estimates vary) mean we should start seeing impact either next week in the weeklies or the following weeks – if we see increases due to non-participating OPEC members filling in to grab market share or NOPEC producers (including the newly NOPEC Indonesia) then oil has a problem

4) Predicted increase in US-based consumption post the typical seasonal drag from mid-November through February

5) Trump policy towards Iran

This could be big on both side. Will the US and Iran clash about new missile launches? If tensions increase we could have a new embargo sending oil price to the next level. If nothing, Iran could increase its production and send prices lower.

6) China

The world’s largest potential market manipulator has decreased domestic production from old, duct tape & spit production assets to import cheaper oil, some say filling a strategic reserve, some say fueling teapot refineries allowed some freedom, some say going into non-strategic storage. The point is: they are increasing imports. Will they continue to do so, or cut back to push prices down?

Keep in mind that all data out of China is inherently not credible due to the fact that they lie about everything

7) India

Ramifications of the de-monitization are apparent (through anecdotal evidence) throughout the country – the question is how this (and some rumored excessive legislation regarding gold importing and gold purchasing) will flow out through the economy and crude consumption. In the end, it will most likely be a huge benefit to India, but will the chaos continue for the medium-term?

As a result oil could stop trading sideways and enter a new trend, to the upside or to the downside. I think we could go down but nothing is sure for the moment.

Full article here