{"id":1339,"date":"2014-10-16T10:09:13","date_gmt":"2014-10-16T15:09:13","guid":{"rendered":"https:\/\/allenergyconsulting.com\/blog\/?p=1339"},"modified":"2014-10-16T10:59:38","modified_gmt":"2014-10-16T15:59:38","slug":"crude-oil-collapse","status":"publish","type":"post","link":"https:\/\/allenergyconsulting.com\/blog\/2014\/10\/16\/crude-oil-collapse\/","title":{"rendered":"Crude Oil Collapse?"},"content":{"rendered":"

A sustained collapse of crude oil is too early to call.\u00a0 This is speaking from the one who is not shy to call crude oil collapse \u2013 Front Page USA Today March 10, 1998.\u00a0 The dynamics are different than it was back in 1998.\u00a0 Right now we are entering a shoulder period of oil demand where you have reduced driving and limited oil demand for heating purpose.\u00a0\u00a0 Add to this the global economic concerns; you have the perfect recipe for driving the oil prices down.\u00a0\u00a0 The key difference from 1998, which still has limited discussions from oil pundits, is monetary policy.\u00a0 I noted this concern back in 2012 in my CERAWeek 2012 summary<\/a>.\u00a0 There is a fine balance between correlation and causation.\u00a0 \u00a0The strengthening of the US dollar of recent is occurring simultaneously with a fall in oil prices.\u00a0 In 1998, the US dollar index was much higher than it is now and was not declining during the collapse.<\/p>\n

The monetary strength of US dollars is important as the buying and selling of crude oil is typically done in US dollars.\u00a0\u00a0 Therefore the ability to buy global widgets, if you are a producer, will be a function of where the currency is going.\u00a0 The OPEC members are seeing a loss in revenue as crude oil falls, but their ability to purchase the same amount of widgets is being buffered with a strengthening US dollar.<\/p>\n

The global race to negative currency continues as the US experience documented that a printing of currency can actually lead to recovery.\u00a0 Now with the US stock market heading down, will the US policy of leaving no investor behind force another round of the very successful quantitative easing (sarcasm – see my article on Quantitative Easing and Climate Change<\/a>)?\u00a0 If we do see a FED reaction to the strengthening of the dollar, I suspect we will see a rise in oil prices as a natural rebalance or in the form OPEC reacting to a drop in widget purchase capability.<\/p>\n

Clearly, fundamentals of supply and demand of crude oil should and will dominate the crude oil price. \u00a0But, I believe monetary policy deserves some more discussions as a strong influence to oil pricing.\u00a0 The supply \/demand trend does show potential for a significant weakening, but it is not the best time to do ones balance as fall and spring season can result in wild oil demand swing.\u00a0 The oil markets given the growth of various alternatives of fuels (e.g. electric, ethanol, natural gas) will result in increasing demand volatility producing significant inter-year price swings.\u00a0 Storage will increase in value as selling in shoulder months will likely worsen in price versus peak periods of oil demand.<\/p>\n

Planning to be in Houston the week of the 27th. \u00a0Please let me know if you are interested to discuss the energy markets- send me an email and we can schedule a time to meet – dkb@allenergyconsulting.com<\/p>\n

Your Keeping an Eye on the Oil Markets Energy Analyst,<\/p>\n

David<\/p>\n

David K. Bellman
\nAll Energy Consulting LLC- “Independent analysis and opinions without a bias.”
\n614-356-0484
\ndkb@allenergyconsulting.com
\n<\/a>@AECDKB
\nblog:\u00a0\u00a0https:\/\/allenergyconsulting.com\/blog\/category\/market-insights\/<\/a><\/p>\n

Sign Up to AEC Free Energy Market Insights Newsletter<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

A sustained collapse of crude oil is too early to call.\u00a0 This is speaking from the one who is not shy to call crude oil collapse \u2013 Front Page USA Today March 10, 1998.\u00a0 The dynamics are different than it was back in 1998.\u00a0 Right now we are entering a shoulder period of oil demand […]<\/p>\n","protected":false},"author":1,"featured_media":35,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1,26],"tags":[318,123,197,49,114,181],"class_list":["post-1339","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-market-insights","category-oil-petroleum-products","tag-collapse","tag-crude-oil","tag-monetary-policy","tag-oil","tag-oil-prices","tag-quantitative-easing"],"_links":{"self":[{"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/posts\/1339","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/comments?post=1339"}],"version-history":[{"count":9,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/posts\/1339\/revisions"}],"predecessor-version":[{"id":1345,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/posts\/1339\/revisions\/1345"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/media\/35"}],"wp:attachment":[{"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/media?parent=1339"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/categories?post=1339"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/tags?post=1339"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}