2018 oil-price collapse explained: MacroVoices Interview 20 NOV 2018

Posted in Audio/Video & Articles, Presentations & Publications on November 24, 2018

MacroVoices Presentation 20 NOV 2018


7 comments on this entry


  1. I assume the annual refinery maintenance in the fall change over to winter blends contributed to the glut plus the annual fall slowdown in demand.
    In August worldwide demand hit 100m/d. It has been going up about 1 and 1/2 m/d. With an average decline of 6.25m/d the replacement rate is over 6/m/day just to tread water. I would think this would stretch all world production.


  2. Ken, comparative inventory normalizes seasonal variations like refinery maintenance out of the equation. Similarly, the supply growth chart on Slide 5 is a YOY calculation so seasonal factors are accounted for. I believe that supply is primary and demand is secondary for balance and price formation. Demand changes very slowly compared to supply. Over- vs under-supply are ordinarily because of producer behavior which is price-related.

    All the best,

    Art


  3. Hello Art

    I have been an ardent follower for many years now. Your CI analysis breaks through the market noise and provides accurate insight of what the future may hold for oil prices. Thank you.

    WTI and Brent prices have fallen significantly over the past 2 months but prices for Canadian crude have taken a death spiral. Lack of product egress and the resulting storage builds in Canada have taken our heavy, light and condensate benchmark prices down to unprecedented levels.

    With Cdn Light, (an approximate WTI equivalent) trading at $25/bbl and Western Canadian Select (an equivalent of Maya crude) trading at $15/bbl, it is understandable that the world investment community has abandoned us entirely.

    Your additional insight regarding the dire situation in Canada would be welcomed by all of your Canadian friends. A CI analysis of the Canadian market would be golden!


  4. Ken,

    Thanks for the suggestions. I can work on developing a Canadian C.I. using Cansim data, I believe. Please be patient with me.

    All the best,

    Art


  5. Thanks Art. As you are likely aware, the Alberta provincial government, just yesterday, ordered an 8.7% (325,000 bpd) production cut beginning January 1st. As a result, the Western Canadian Select (heavy) discount to WTI has decreased over the past 24 hours by $7/bbl (24%)and the Cdn Lite (WTI equivalent) discount is down by $4/bbl (18%). It appears that the speculators, as usual, are in control of the market. The CI is basically unchanged but expectations of higher prices associated with lower inventories has created a welcome anomaly.


  6. Ken,

    I would say that sentiment rather than speculators is controlling the market at the moment as you seem to imply in your last sentence. Oil and gas markets have been that way since August.

    All the best,

    Art


  7. For sure! The sentiment of speculators (quants. algos. robos and rocket scientists), who trade 33x the physical market (JPMorgan), must have the technicals of CI plugged in.