Is oil slide over? Will we see a rebound on Monday?

Answer 1

No immediate bounce this week, but I think we're at the bottom.

I would disagree with Tony S on this one. There is going to be side-bar discussion by OPEC members in less than two weeks. These meetings are like unofficial meetings of OPEC. OPEC, like the US Fed, uses these sidebars to foreshadow its next moves. I would expect your more "hawkish" OPEC members like Venezuela and Iran to continue saying how they'll push for a huge cut and defense at US$60/bbl, while "dovish" members like Saudi Arabia will say they'll "study the situation" with concern below US$54/bbl with the consensus being defense near US$56/bbl. I would say that OPEC would convene an emergency meeting well before crude fell to US$45/bbl to stop the bleeding.

While the February 1 cake is already baked with a 500k bbl/day cut, I'm counting on them talking more production cuts - who knows the actual amounts, but I'd expect more aggressive ones above 1m bbl/day - with the idea that they'll get about 50-70% compliance from members, net of cheating.

We should also have some mean reversion in US Northeast weather with some cold weather settling in over the next few weeks.

Also, Russia is starting to play hardball with Belarus on oil, like they have with Natural Gas in the past. I'd expect a rebound from current levels to around $60/bbl by early March, some production cutting and then wait-and-see for inventory levels for crude stocking period for refineries ahead of the US "summer driving season".

A distinct possibility is that the unusually warm winter will also lead to a very hot summer and heavy gasoline/jet kerosene requirements.

Answer 2

I work in the Oil business, have for years and I honestly don't think we'll see much of a rebound on Monday. There's a huge overhang of stockpiles and that's because of the mild weather conditions in much of the U.S. BUT, have no fear, there will be a rebound later this month or in February, though not to the highs of 05/06. I don't think we'll see those highs again until late summer of 07/08. Nonetheless, I would guess that $45 dollar a barrel is the floor for oil, (not to say we'll see that price, but I'd be much surprised if it went below that price).

Answer 3

I agree with Tony S. I wouldn't however go as far to say that the floor is around $45, in my opinion we are not too far from the floor only a few $$ when it dropped below $55 briefly last week. Again the unusual whether patterns up north had some influence in the price as of late. But for the future outlook, looking at some call options with a longer expiration date looks promising. I strongly believe oil will not drop below $55 a barrel.

Answer 4

I hope not... I want the price to plummet so I can buy more more more...

: )

Happy Sunday !!