Monday, March 28, 2016

I doubt oil would go below $30 but wont go much higher than $42

The attack that happened in Brussels earlier this week would have sent crude oil up $5 per barrel instantly. A market that doesn't go up on formerly bullish news is not a bull market.

It's still a bear market in crude oil. Each low is lower, each high is lower. And perhaps most importantly the contango has begun widening out again. The carrying charges have begun to widen out. Crude is abundant and once again bidding for storage. I think for the next year or so, WTI crude oil could stay $5 plus or minus.. $37 per barrel for the spot. I think $42 on the spot is the highest we are going to go for a long period of time. The trend is lower and on rallies you have to be a seller.

There is a lot of crude oil that has been capped and, on the rally, those caps are coming off that production. There's a lot of overhead that has to be accommodated. That tends toward lower prices.

OPEC meeting

I was surprised that the market got that exercise on the upside predicated upon the idea of a meeting of some sort. I think it was astonishingly comical that everybody got that excited.