Wednesday, December 30, 2015

Oil Price Target $8 Per Barrel: Falling Knives, Can't Pick Bottoms $oil, $uso, $cl, #in #crude



Multiple reasons why oil is dropping (US, OPEC, Economy, Black Market).

The key though is that supply is up and not budging.

Production hasn't moved yet and is at breakout high levels.

Before inventories come down production needs to drop.

New project capex should slow but existing production likely not since sunk costs mostly behind them making incremental variable break-even calculations on existing projects less meaningful.

Commodities, as we all know, come down to supply and demand.
To get the quick reasons out of the way why oil (NYSEARCA:OIL) (NYSEARCA:USO) is falling:
*Global economies not strong
*Increase in black market sales
*No consensus at OPEC
*Iran coming on

The real reason oil is falling, supply

Rising oil prices through 2000-2010 caused many producers to capture high ROI projects. They decided to ramp production. That production has caused a glut of inventory and those projects are not shutting.

Chaim Siegel has been working with hedge funds and mutual funds as an analyst and PM his entire career. Chaim specializes in earnings and predicts, analyzes and reacts to earnings and earnings events as well as developing current company stories with a hedge fund perspective. If you want his analysis real time sign up to the right for real time email alerts. 

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