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The CL Crude-analysis Thread
Started:December 17th, 2014 (02:33 PM) by tturner86 Views / Replies:125,793 / 1,754
Last Reply:December 4th, 2016 (01:02 AM) Attachments:450

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The CL Crude-analysis Thread

Old February 19th, 2015, 09:07 PM   #401 (permalink)
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e4williams View Post
I am not looking at moving averages alone. I am just digging into these. First, is the trend-line (I like to keep things simple, for example knowing how to draw a trend-line) Is there a trend or is the stock or commodity in a sideways trend. Knowing how to draw a good trend line. That's number one for me.

You are discounting the value of technical analysis, even a look at the 10 SMA is of great value.

I can look at the same chart, for example crude for weeks and weeks and still gain new insights into the chart.
And I think your are dead wrong about moving averages. Trading from a technical analysis standpoint is understanding the trend.

I am still low on the learning curve, I'll admit that right off. However, I do find that people on this board can get too over-sophisticated quickly.

As I said I am still low on the learning curve here, I thought and think that the 10SMA and 4EMA crossover would be good buy sell entry points. I am doing more of a short term trade strategy looking at daily charts. Not day-trading.

If you think you can correct me on this one, give it a try. I would value any input.


e4williams
Well, so far nobody has told me anything except for you. Thank you for the advice and I will thoroughly check out the CME site. I am only on this site to gain an education on trading and I have already picked up some good pointers.

I don't know how people are trading on this board, are they trading just to grab a few ticks intraday are they going out one, two, or three weeks out?

I, personally, think that Gold is in a much better trading range that oil, which along with the dollar are both currently moving sideways. and I think will continue to do so for some time.

And no, I don't buy your argument that moving averages aren't valid for the future.
It seems to be quite easy to talk very flippant on this board.

No, I'm not discounting the value of technical analysis.

I am, however, discounting the value of moving averages and especially trendlines (which are just as useless as MAs, but much more subjective in nature).

I can already tell that you'll dismiss anything I say as "flippant", so I won't even try. Everyone needs to discover these things on their own, I suppose.

I sincerely wish you the best of luck, though.

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Old February 19th, 2015, 09:20 PM   #402 (permalink)
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e4williams View Post
Well, so far nobody has told me anything except for you. Thank you for the advice and I will thoroughly check out the CME site. I am only on this site to gain an education on trading and I have already picked up some good pointers.

I don't know how people are trading on this board, are they trading just to grab a few ticks intraday are they going out one, two, or three weeks out?

I, personally, think that Gold is in a much better trading range that oil, which along with the dollar are both currently moving sideways. and I think will continue to do so for some time.

And no, I don't buy your argument that moving averages aren't valid for the future.
It seems to be quite easy to talk very flippant on this board.

This thread isn't here to discuss moving averages. Please find a more appropriate thread to discuss this in.

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Old February 19th, 2015, 10:49 PM   #403 (permalink)
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Crude Oil | www.fundamentalanalytics.com
Not surprisingly Brent/WTI is out above $8
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Old February 19th, 2015, 11:17 PM   #404 (permalink)
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SMCJB View Post
Not surprisingly Brent/WTI is out above $8

Could you please elaborate for me? I understand your charts of course (maybe not how midwest stocks are necessarily relevant), I'm confused about how they support your being unsurprised or what "out above $8" means.

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Old February 19th, 2015, 11:20 PM   #405 (permalink)
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Old February 19th, 2015, 11:32 PM   #406 (permalink)
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protokletos View Post
what "out above $8" means.

Brent (the major North Sea Benchmark and basis for the ICE Brent Crude Contract) is trading at an $8 premium to WTI (the US benchmark and basis for the NYMEX crude contract.)


protokletos View Post
Could you please elaborate for me? I understand your charts of course (maybe not how midwest stocks are necessarily relevant), I'm confused about how they support your being unsurprised or what "out above $8" means.

The Midwest chart is really the important one. NYMEX Crude is based upon WTI delivered to Cushing Ok. As storage in Padd II fills to capacity, the price of WTI starts to reflect an oversupplied land locked crude with very few homes. Brent on the other hand is still the World Benchmark and reflects world crude prices. Hence the fundamentals become detached and the prices diverge.

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Old February 19th, 2015, 11:39 PM   #407 (permalink)
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The Chilling Thing Devon Energy Just Said About the US Oil Glut

The oil-price plunge hit the industry when it was drunk on its own exuberance and awash in money. At the time, over-indebted junk-rated drillers had no trouble borrowing even more to drill more, efficiently or not. Dreadful IPOs flew off the shelf. Misbegotten spin-offs made Wall Street a ton of money. But in July, everything started to go awry. By October, it was clear that the oil-price plunge wasn’t a blip. By November, oil was in free fall.

Soaring production in the US, reaching 9.2 million barrels per day in January, and lackluster demand have caused US inventories to balloon. The “oil glut” was born.

So the industry adjusted by announcing waves of layoffs, whittling down operating costs, renegotiating prices with suppliers, and slashing capital expenditures. The number of rigs actively drilling for oil – a weekly gauge that indicates what’s going on in the oil field – has plummeted by 553 rigs, or 34%, since the peak in October. Never before has it plummeted this fast this far [The Fracking Bust Hits Home].

The crashing rig count was supposed to curtail production, and lower production would bring supply and demand into balance and allow the price of oil to recover. But the opposite is happening. And Devon Energy Corp. just told us why.

With total operating revenues of nearly $6 billion in the fourth quarter 2014, Devon isn’t the largest oil company out there, but it’s one of the larger players in the US shale revolution.

It reported Q4 results on Tuesday evening. According to its own measure of “core earnings,” it made $343 million. According to GAAP, it lost $408 million, after writing off “asset impairments” of $1.95 billion “related to the recent drop in oil prices.”

Stuff happens when the price of oil plunges.

But production soared – and will continue to soar. CEO John Richels explained the phenomenon in the press release:

We expect to sustain operational momentum in 2015 with the significant improvements we have seen in our completion designs and a capital program focused on development drilling. With strong results from our enhanced completions and a focus on core development areas, we expect growth in oil production to be between 20 and 25 percent in 2015, even with a projected reduction of approximately 20 percent in E&P capital spending compared to 2014.

So, despite slashing the capital expenditure budget by 20%, the company’s oil production in 2015 would grow 20% to 25%.

And in Q4 2014, production of oil, gas, and natural gas liquids from Devon’s “retained assets” had soared to an average of 664,000 oil-equivalent barrels (Boe) per day. This included record oil production of 239,000 barrels per day, up 48% year over year. While bitumen production in Canada grew more slowly, oil production from fracking in the US soared 82%!

Oil production is projected to grow another 20% to 25% in 2015. This is how Devon explained the phenomenon:

The strong growth in U.S. oil production during the quarter was largely attributable to prolific well results from the company’s world-class Eagle Ford assets. Net production in the Eagle Ford averaged 98,000 Boe per day in the fourth quarter, a 100 percent increase compared to Devon’s first month of ownership in March 2014.

And in 2015, it expects a 50% increase in production from the Eagle Ford shale.

Devon liberally praised its “significant scale in core plays,” “a consistent focus on efficient operations,” and “significant improvements in completion design.” In other words, it would spend less, it would use fewer rigs, but it would spend more efficiently – and produce more oil.

Oil – not natural gas. The price of natural gas has been a fiasco for years, and Devon has been moving away from it by selling assets and focusing its resources on oil-rich plays. Hence, natural gas production has actually edged down over the last three quarters even on a retained assets basis.

Devon will drill $1.1 billion in capital expenditures into the ground to achieve its oil production goals. It will use fewer rigs but accomplish more with them: its drill times, thanks to innovation, have improved by 47% over the last three years. And these rigs will be focused “almost exclusively” in DeWitt County, its most productive play in the Eagle Ford shale.

Other drillers are doing the same. Innovation, design improvements, efficiencies, and a relentless focus on the most productive plays will see to it that production continues to rise, despite the plunging rig count, despite the evaporating capital expenditures, despite the layoffs.

They will lose money. They have a lot of debt because the fracking boom was funded by debt. To stay alive, they must meet their interest costs. But if they slow down drilling, and production tapers off in line with the steep decline rates of fracked wells, their interest costs might eat up 50% or more of their shrinking operating profits, and the risk of default would soar – turning off the money-spigot entirely. Default might be next.

This is the bitter irony: drillers are hoping that rising production achieved with greater efficiencies allows them to meet their interest costs; but rising production pressures the price of oil to a level that may not be survivable long-term for many of them. They can lose money, burn through cash, and keep themselves above water through asset sales for only so long. And this is the terrible fracking treadmill they’ve all gotten on and now can’t get off.

In Canada, the floodgates opened in December. Perhaps it had something to do with oil, Canada’s number one export product, whose price plunge has triggered extensive bloodletting in the Canadian oil patch. Or perhaps foreign investors got spooked by something else.

The Chilling Thing Devon Energy Just Said About the US Oil Glut « The Burning Platform

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Old February 19th, 2015, 11:41 PM   #408 (permalink)
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SMCJB View Post
Brent (the major North Sea Benchmark and basis for the ICE Brent Crude Contract) is trading at an $8 premium to WTI (the US benchmark and basis for the NYMEX crude contract.)

The Midwest chart is really the important one. NYMEX Crude is based upon WTI delivered to Cushing Ok. As storage in Padd II fills to capacity, the price of WTI starts to reflect an oversupplied land locked crude with very few homes. Brent on the other hand is still the World Benchmark and reflects world crude prices. Hence the fundamentals become detached and the prices diverge.

Appreciate the brief, yet insightful response. Makes perfect sense. I'll definitely be reading up on the storage relationships you mention as well. I'm sure I'll be finding many more. Cheers.

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Old February 20th, 2015, 12:07 AM   #409 (permalink)
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protokletos View Post
Appreciate the brief, yet insightful response. Makes perfect sense. I'll definitely be reading up on the storage relationships you mention as well. I'm sure I'll be finding many more. Cheers.

WTI was for decades the most (or at least one of the most expensive) crudes in the world. The US imported crude and shipped it up pipelines into the midwest etc. Hence WTI regularly priced at Brent + Frieght +Pipeline costs. Obviously with the change in US production, the addition of new pipelines, and the reversing of others (so crude can now flow from the Midwest to the Gulf Coast) things now look very different.

CME/NYMEX issued a research report back in October Brent-WTI Spread to Tighten Further / The Ghost Barrels actually arguing for it to narrow. (Report has some interesting discussion of fundamentals hence the link) Never sure whether they believed that or whether they are just trying to (re-)inflate the importance of WTI as a world benchmark. Of course back in October Padd II stocks were 35 million barrels lower and prices were $40 higher. Oh to have a Crystal Ball.

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Old February 20th, 2015, 07:19 AM   #410 (permalink)
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This is the bitter irony: drillers are hoping that rising production achieved with greater efficiencies allows them to meet their interest costs; but rising production pressures the price of oil to a level that may not be survivable long-term for many of them. They can lose money, burn through cash, and keep themselves above water through asset sales for only so long. And this is the terrible fracking treadmill they’ve all gotten on and now can’t get off.

Also for some interesting reads search Eagle Ford Shale

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