Wednesday, December 10, 2014

Oil Prices Making Markets Nervous

(Market Watch) Shale oil:   It's impossible to talk about oil’s plunge without talking about the supply glut. And it’s impossible to talk about the supply glut without talking about U.S. shale. Persistently high oil prices helped to spur the fracking revolution, which in turn triggered a boom for North Dakota and other shale-oil-rich regions.  Falling prices will weigh on production of oil from shale and other resources as energy firms cut back on projects, but investors are debating exactly how sensitive shale production will prove to be.
“In fact, we can even imagine initially higher output, as many shale players will scramble for survival and cash flow becomes crucial,” wrote analysts at JBC Energy. “This will push them to reduce the backlog of already drilled and fracked wells, while focusing new wells on their most promising assets.”
On Wednesday, the U.S. Energy Information Administration reported a surprise increase in U.S. supplies of 1.5 million barrels in the week ending Dec. 5., which may reflect the push for producers to squeeze as much oil from their existing sites now as possible.It’s not just the U.S., other major producers are also pumping away. OPEC, meanwhile, is keeping the spigots open in what many strategists see as nothing less than a price war aimed at routing shale and other higher-cost producers. The cartel opted at a closely watched November meeting to make no changes to its production levels, prompting another jarring decline for oil futures.
“This makes any rapid recovery of oil prices unlikely, especially as additional supply looks set to reach the market from northern Iraq and Libya,” wrote Carsten Fritsch, commodity strategist at Commerzbank in Frankfurt.
(CERR Investments): Wow oil prices declining due to a fight between shale and OPEC. Now we can see that people are just searching for profits and who can make it more expensive for the other guy to drill.  This is going to have drastic effects on the world economy with shrinking budgets. Countries that depend largely on oil revenue will soon have to show their hands that they will have to do new things to make revenue. This is already having effect on stocks. Small Cap and European funds are already starting to show pressure. We will see in the future if the DOW and S&P will began to show any pressure. So far they have pause and are going sideways. Look for a fed meeting to change the dynamics of the things - either rate increase or a further pause to spur the economy again.  I expect the Feds to raise now since there is no longer an election.