Is the “Oil War” coming to an end? This is a question the talking heads are starting to throw around.
- U.S. drillers have taken a record number of oil rigs out of service in the past six weeks as OPEC’s sustained production sent prices below $50 a barrel.
As I have written recently, US oil production is curtailing especially among the smaller independents, but this does not mean that enough will go down to change the dynamic in the Oil War any time soon..
- Analysts including HSBC Holdings Plc say the decline shows that the Organization of Petroleum Exporting Countries is winning its fight for market share and slowing the growth that’s propelled U.S. production to the highest in at least three decades.
Really? Oil is still below $50 per barrel as I write, and even if more US producers go offline, there is still the issue of oversupply and lessening demand. Let us not forget the “dire” global economic situation – everyone but the US is faltering, and in the US, oil demand is on a flattening curve. All expectations are that will continue, eventually leading to a steepening decline in demand. As well, let us not forget Iraq and its now record pumping, and let’s not forget Iran. It is likely they will make a deal regarding their nuclear program, and, thus, will begin dumping oil on the market. Add to that Libya, as it gets it country together.
The market today is still volatile, as Q4 earnings come into play, the breathless media blathers on about the global economic woes, and the seasonal economic numbers come in showing, well seasonality. The VIX, however, is down below 20 again, and that signals the volatility might be coming to an end.
Hang in there.
Trade in the day; invest in your life …
