Oil Prices Expected to Keep Rising in 2018… WSJ

by Jim Colburn • Saturday, December 30, 2017

Georgi Kantchev and Sarah McFarlane at The Wall Street Journal summarize analysts expectations for the new year:

”Oil prices are likely to continue climbing in 2018 on the back of OPEC-led production cuts and a growing global economy, industry executives and analysts say. But any gains are expected to be kept in check by booming supplies from the U.S.

That means oil prices probably won’t soar to the $100-a-barrel level seen in 2014, but they also won’t plunge below $30 a barrel like early 2016. Instead, traders expect prices to be volatile but in a tight range—much like 2017, when crude traded between roughly $45 and $67 a barrel.”

Here is the link:  https://www.wsj.com/articles/oil-prices-expected-to-keep-rising-in-2018-but-it-could-be-a-rocky-ride-1514635200




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Five Oil Signals to Watch in 2018… Bloomberg

by Jim Colburn • Saturday, December 30, 2017

Here are some of the interesting charts from the Bloomberg article:


The link:  https://www.bloomberg.com/news/articles/2017-12-28/five-oil-signals-to-watch-as-2018-pits-opec-against-u-s-shale


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5 Questions for the Fed in 2018.. Tim Duy/Bloomberg

by Jim Colburn • Friday, December 29, 2017

Tim Duy has 5 questions for the Fed here

“Inflation is always just a year away in the Fed’s forecast, and this year is no exception to that rule.”

“The Fed probably remains too pessimistic on labor market improvement in the coming year.”

”When combined with the stronger-than-expected activity of the last three quarters, the Fed’s 2018 GDP forecasts rose from 2.1 percent to 2.5 percent over the past year. But here again the Fed may be too pessimistic.”

”…I expect yield-curve concerns will remain a minority position in the Fed as long as growth stays on a solid track. If so, the Fed will find a reason to disregard the yield curve and keep hiking after any inversion occurs.”

There is more here: https://www.bloomberg.com/view/articles/2017-12-28/5-questions-for-the-fed-in-2018



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Why oil is due for a ‘sharp correction’… Barclays via CNBC

by Jim Colburn • Thursday, December 28, 2017

Michael D. Cohen at Barclays makes the bearish case here:

“Two key points are important to note. First, the supports mentioned above may not be sustained. Though Barclays Research economists do not expect a recession in 2018, they do expect China’s growth to slow, which would exert disproportionate pressure on commodities demand.

And not everyone is covered by the OPEC/non-OPEC deal. Libya and Nigeria’s output, though fragile, has the potential to surge 10-20 percent higher, despite high risk of production. The output that was offline in Canada is returning, boosting supplies next year and in 2019. The same goes for Brazil, where new supply is ramping quickly. Demand growth can also vary widely, especially if retail prices are higher on the year.

Second, the past year has shown that prices are determined by the speed and direction of inventories. Barclays Commodities Research’s balance indicates a return to surplus on average next year.

We expect historically high demand growth of 1.6 million barrels per day. However, that is more than offset by almost 500,000 barrels per day of new non-OPEC non-US supplies, at least 1.2 million barrels per day of U.S. supply, and some other volumes. Clearly, the market will be in a small deficit during some of 2018, but to sustain current price levels for all of next year, it must tighten further than our balance suggests.”

Here is the link: https://www.cnbc.com/2017/12/27/why-oil-is-due-for-a-sharp-correction-barclays-commentary.html


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Not all GDP is Equal… Marginal Revolution

by Jim Colburn • Thursday, December 28, 2017

Here is Alex Tabarrok, at the excellent Marginal Revolution:

“In standard macroeconomic models…the oil industry is no more important for understanding economic fluctuations than say the retail sales industry, since they are about the same size…

But I’ve always been skeptical. One reason is that rapid increases in the price of oil have preceded almost all U.S. recessions (see Hamilton’s papers) and such increases appear to be much more important than the size of the oil sector would allow.”

Me:  My own view is that overall good economies are associated with low energy prices and high energy prices with weak economies…  Much more so than who or what party is in power…

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Power Plants Bloom… WSJ

by Jim Colburn • Thursday, December 28, 2017

Erin Ailworth at The Wall Street Journal wrote an excellent article on the power plant boom going on to take advantage of low natural gas prices (despite low power prices)… Here is,Erin:

”The key for electricity producers is location, location—preferably close to cheap natural gas. By building there, firms can access nearby fuel supplies and tap transmission lines to move megawatts to market.

In Pennsylvania and Ohio, which sit above the prolific Marcellus Shale formation, companies including Invenergy LLC and Calpine Corp. CPN 0.13% are building gas-fired power plants capable of generating a combined 8.6 gigawatts and expected to come online between now and 2020, according to federal data. That’s enough to power up to 8.6 million homes and burn roughly 1.5 billion cubic feet of gas a day at full capacity—roughly the equivalent of the daily flow through a major pipeline.”

Here is the link: https://www.wsj.com/articles/power-plants-bloom-even-as-electricity-prices-wilt-1514457002


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Commodities vs. equities… Bloomberg

by Jim Colburn • Wednesday, December 27, 2017

Bloomberg’s headline is “Commodities Are ‘Screaming to Be Bought’”…  Maybe, maybe not, but I liked the chart within the article showing the relationship between commodities and equities:


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OPEC Succeeds After One Year…WSJ

by Jim Colburn • Monday, December 25, 2017

Alison Sider of the Wall Street Journal summarizes the year here

”Investors and traders grew frustrated during the first half of the year, as a pact made by the Organization of the Petroleum Exporting Countries and other major producers in late 2016 appeared to have little effect on the global supply glut. Stockpiles remained stubbornly high and by late June, U.S. crude futures tumbled into a bear market.

But prices eventually clawed their way back as production growth in the U.S. ebbed, geopolitical risks intensified, and supply disruptions rose.”

Speculative positions in WTI and Brent crude oil are very (extremely?) long now:


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Some commodity price charts… The Daily Shot/WSJ

by Jim Colburn • Sunday, December 24, 2017

The Wall Street Journal’s The Daily Shot has some interesting price charts (and comments):

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US oil stock levels… EIA

by Jim Colburn • Thursday, December 21, 2017

From This Week in Petroleum, here are stock levels compared to 5 year min/max:

And here are stock levels divided by daily demand, or days supply:


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