Yes that is a long quote but it perfectly sums up what has happened since my last column just a week ago. Then oil prices as well as energy share prices were literally falling off the charts.
"The International Energy Agency said Thursday that global oil demand had 'dramatically accelerated' in the second quarter of 2017 to 98 million barrels a day. The trend was driven by higher consumption in big Western economies like the U.S. and Germany, and it came at a time of depressed oil prices.
Brent, the international benchmark, was up 0.6 percent in London trading to $48.73 a barrel, while West Texas Intermediate, used to price U.S. oil, was up 0.52 percent at $46.33 a barrel.
Until this week, the market had been overwhelmed by pessimism, with investors worried about a vast oversupply that even the 14-nation cartel, the Organization of the Petroleum Exporting Countries, could do little to remedy.
Now, writes Timothy Puko, “there are signs that demand, growing faster than expected, will call for all of that oil and ease oversupply that has lingered for about three years.”
Wall Street Journal Energy Report, Friday July 14, 2017
Yes that is a long quote but it perfectly sums up what has happened since my last column just a week ago. Then oil prices as well as energy share prices were literally falling off the charts. A return to the February, 2016 lows appeared possible. But as we are prone to point out, prices change with the mood of those speculating and investing in the energy market. Energy is both an economic (crude oil becomes gasoline) and a financial (shares, futures, options) item. And so the social mood towards energy changed, turning on the proverbial dime. John Murphy at stockcharts.com noticed the change as well stating oil prices may be bottoming here. Here are some positives about the market.
Last December over 90% of a group of energy shares were in bullish position on what technicians term a point and figure chart. That total fell to 15 percent in May and June. Now the downtrend has been broken, and the total has about doubled to 29 percent. This is significant in that share prices will rise before crude prices. Somehow the magic hand of the markets is ahead of the underlying price activity.
Apache APA has not turned up quite yet but has risen to the top of its downtrend channel at $48.24.
Other commodity prices are firming as well. Copper has gained twenty cents in the last two months. Wheat prices are soaring with drought conditions in growing areas.
On my weblog (http://www.themarketperspective.com) one can see the support line for crude oil between $44-45. Price has been testing this area and rose to $46.08 on Thursday’s close. Natural gas is up but needs a close over $3.15 to reverse to the upside.
Speaking of natural gas, President Trump is waging an economic war against Russia to supply liquefied natural gas LNG. Recall that literally half of the Russian economy is oil and gas exports.
The completion of the first LNG exporting plant has seen a tremendous growth in the product. US LNG exports at 198 billion cubic feet in the first four months are eight times that number for 2016. In response Russia lowered its prices and wants to build another pipeline to Europe.
Reversing the Obama position, the White House has opened access to Federal lands for drilling. But at $50, companies are loath to drill in the challenging Arctic environment. And I suspect the bad taste left from the previous administration with so many projects shelved, has made firms wary of any promise from the Federal Government.
But summer months are always an uncertainty for financial markets. A final low may be delayed until this fall.
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