Oil and Natural Gas

From the oil price at the time of my comment.
My numbers are a bit different, which is why I always give relative numbers. My broker is O@nda, and the next resistance point is 47.037 for me.
k

H4
45.37TP

Sell below 45 tp 44.30 SL. 45.50

Long==>44.42===>44.90====>45.70
sl:44.35

H1
Down...priceaction

47.05tp..daily

USOil wave count's getting clearer for another ending diagonal wave c yellow, with a corrective 1st wave advance.
Setup where it resumes trend at retracement 2.

I hope no one believed all the "experts" that were saying to short oil below 45$ for a ride below 40$ thats nonsense from every point of view. The only reasonable way I see for someone to short oil with intention to break below 40$ is to put a long term short positions in the 48-50$ range and wait for months for that to eventually happen. As for me currently I am either waiting for a correction to 45$ for a long or if price reaches 48$ I will short.

I do not trade oil, but I watch at a macro-level. There is currently no reason to believe that oil prices are going to hold above $50. There is a lot of evidence in developed nations that some demand is going out of the oil market as new technologies are adopted. There are also some badly managed economies that rely on oil-income and those are unlikely to adhere to the headline production cuts touted by OPEC in a bid to raise the barrel-price.

There are political situations that could develop to suddenly drive the price higher, such as with Qatar.
Equally the Saudis may decide to crush Qatar by driving prices down.

However there remains the massive stockpile of crude oil which is difficult to ignore.

Production from oil wells declines at a steady rate each year. A conventional field will yield on average 5% less per year but for none conventional fields such as Shale the decline is much higher (upwards of 10-20% or more per year). If you decided to cut all new oil budgets from today, then after the current investment has brought all its new oil to the market (a lag) you would have a situation in 3-4 years (after the lag) were global oil production would drop 15-20%.

In order to keep oil production at a constant level you effectively have to be bringing the equivalent of 5% of the total oil supply (~ 5 million new barrels of oil) to the market every year and that is not cheap.

There has been around a 35%-40% drop in oil capex and we simply don't know what impact that is going to have in the next few years. Is that capex spending enough to bring 5% to the market each year? That's a key question but the answer is probably no, and by some measure. These cuts will probably manifest themselves in lower production in the future.

The game changer is Shale. Whilst conventional oil like the North Sea requires years of exploration>testing>investment>production and many billion of $, Shale fields are already well mapped out and can be pumping oil (as we have seen) in a matter of weeks at a cost of $10 million per well.

In my view all signs point to expensive conventional oil disappearing because of the huge run in costs, huge run in times compounded by the difficulty of forecasting oil prices meaning you might bring your oil to the market but it won't be profitable to sell. Shale by comparison by virtue of being smaller, and scale-able is able to quickly react to oil prices, and wells can be activated or deactivated quickly.

Demand growth for oil will be lower than estimates, it always is. And new technologies will make oil irrelevant in years to come, that is just inevitable. But in my view we are about 10-20 years too early for that. If oil production starts to catch up with the decline in investment I would expect oil draws will be far more rapid than people might expect and my prediction is that it will be Shale that will set prices.

Quote

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And new technologies will make oil irrelevant in years to come

There will always be a requirement for oil, however as a bulk energy source I believe it will greatly diminish.
It is difficult to see how aircraft will abandon oil-based energy.
Equally there will always be a requirement for lubricants.

I mean energy demands lol, though I wasn't clear. Plastics aren't going anywhere either.

Hadn't thought about planes, maybe you are right there, but I did see this yesterday - http://www.bbc.co.uk/news/av/busines...electric-plane

ojl aint going nowhere

NGAS wave 2 retracement has been complex, on-track and overdue for completion, expecting trend resumption ..... soon near 0.6182 Fib level.

Sorry for talking my own book, but relevant to what I was talking about earlier this was published today. Try to ignore the sensationalism.

http://www.marketwatch.com/story/why...ead-2017-07-03

I don't know if his dramatic predictions are correct, but I think he knocking on the right door about not enough investment bringing enough new oil to the market.

Excellent! That means demand should be upturning just when the new 500mega-barrel oilfield off the Shetlands comes online.

Sold.
k

Long==>@46.23====>46.70====>47.20
sl:46.10

Sell trade stopped out. This is going much more up then...
k