Monday arrives and the mind begins to machinate again. The sluggishness from two days of not thinking deeply thinking about the market slowly fades and the data/information coming in begins to penetrate, albeit slowly. Like most jobs, going back to work on Monday requires a bit more effort.

And so it goes … Today’s market movement seems to be requiring a bit more effort; the market seems to be struggling. Well, it is Monday, after all …

Clearly, the bet is on oil prices going back up, and the reason for that is the US rig count dropped again. The latest count is that 42 more oil rigs shut down. This, supposedly, is the reason for the mini-surge in oil prices. Speculators believe that as the rig count drops, oil prices rise.  Maybe, unless there is a larger game afoot, a game that few have caught onto yet, a game that could be the reason oil prices stay about where they are, or go lower, for some time to come.

  • Saudi leaders have worried for years that climate change and high crude prices will boost energy efficiency, encourage renewables, and accelerate a switch to alternative fuels such as natural gas, especially in the emerging markets that they count on for growth. They see how demand for the commodity that’s created the kingdom’s enormous wealth—and is still abundant beneath the desert sands—may be nearing its peak.

Keep in mind, China’s economic slowdown is putting downward pressure on oil prices, but and yet, the speculators are pushing the price up.

  • Gains were capped by bearish news from top importer China, which imported 6.3 million barrels per day (bpd) in March, 5.2 percent down on February.

The question is: How long can speculators push the price up, when supply is increasing (perhaps by design) and demand is lessening?

  • Germany’s decade-long 120 billion-euro ($127.1 billion) investment binge to shift toward low-polluting energy forms is proving critics wrong. The country has raised its share of renewable power for electricity to about 28 percent.

Electric cars are here and getting better, and renewable energy programs are here, and getting better. Along with the rise in natural gas production and use thereof for transportation, the Saudis should be thinking about their economic future, as it depends less on the price of oil and more on the demand for oil. Ergo, they have no real incentive to stop production to push the price up. This would only expedite the transformation that is already happening.

And the transformation is not just about renewable power production; it is also about energy storage. Yes, we can produce all the energy we want with wind, solar, waves, etc., but if we cannot find a way to store that energy for when it is needed, then, the efficiency of it is lost.

I won’t bore you with the technical chemistry coming out of MIT, but suffice it to say that more efficient batteries are coming.

  • The lithium-doped naphthalene-bithiophene polymer proved both to exhibit significant electronic conductivity and to be stable through 3,000 cycles of charging and discharging energy.
  • The discovery could lead to a cheaper alternative to traditional inorganic-based energy devices, including lithium batteries. Ultimately, it could translate into less expensive consumer devices and even less expensive electric cars.

Yes, the Saudis get it, and because of that, oil prices will be hard pressed to rise back to the $100 level, or the $80 or $70 level for that matter, at least in this writer’s thinking. In fact, until the supply glut currently in place dissipates, oil will be hard pressed to get back to the $60 level.

So, let’s see what happens after this summer, after the folks around the world get in their cars and take vacations. If oil is still cheap in the fall, it could be that oil speculators pull the plug, cover, and then run, which could be the catalyst that sends oil prices down even further than where they are now.

Trade in the day; invest in your life …

Trader Ed