Editorial Contributor
Recent Significant News
Fundamental Argument
12 November: U.S. oil output is poised to surpass Saudi Arabia’s in the next decade, making the world’s biggest fuel consumer almost self-reliant and putting it on track to become a net exporter, the International Energy Agency stated recently. The U.S. in H1 2012 83% was self sufficient, by 2020 it should be the world’s largest crude oil producer, and by 2030 a net exporter.
Although I have probably written literally millions of words on Technical Analysis and the markets since the start of the century, a topic I have rarely discussed is why I use technical analysis? One of the key answers is to solve fundamental riddles such as that of Brent Crude at the moment.
13 November: The International Energy Agency cut its forecast for oil demand during the last quarter of this year and said the state of the global economy will limit consumption expansion in 2013. It reduced its forecast for global oil demand in the final three months of 2012 by nearly 300,000 barrels a day to 90.1 million barrels a day as a result of economic weakness in Europe and the fallout from Hurricane Sandy in the U.S. 15 November: Brent Crude steadied above $109 a barrel as violence in the Gaza Strip sparked worries about supply disruption and offset concerns that a slowing global economy could hit demand with Eurozone GDP falling 0.1 per cent in third quarter. Hamas fired dozens of rockets into southern Israel, and Israel launched numerous air strikes across the Gaza Strip as the military showdown lurched closer to all-out war. 16 November: The U.S. Energy Department’s weekly inventory release showed that crude stockpiles increased, as production climbed to its highest level in 18 years. At the same time supplies of gasoline were down for the first time in five weeks, as domestic consumption jumped 7.2% to 8.91
November saw mega news on oil including the U.S. beating Saudi Arabia on production, a double dip recession for the Eurozone and the highest stockpiles for crude in 18 years in the U.S. These three headlines are all bearish for the price of this commodity. But, set against them is one big bull factor, conflict in the Middle East, and in the case of Israel and the Palestinians two cultures (yes, I call them cultures not religions) who seem to require war in order to survive — Ancient Rome, I recall, had the same problem... I digress! With such an “eternal” bull factor you have enough to trump the aforementioned bears described above. Throw in Iran and a little Syria / Turkey and in the near term there is enough to underpin this market, at least over the next month. This is my view even going into the Fiscal Cliff even if traders go for the U.S. dollar as a safe haven. Quite simply, until the U.S. really does become the world’s biggest oil producer by some way due to the forthcoming deluge of shale reserves, a situation reminiscent of the Spindletop Texas revolution seen in the oil industry in 1901 when mud was used in the drilling process for the first time, oil price remains in a secular uptrend to me.
26 | www.financial-spread-betting.com | December 2012