Post-Christmas Markets Weaken for Oil

A December 18 letter writer, from the Producers for American Crude Oil Exports, wants America’s ban on export of our crude lifted. But Disney shares jumped on “Star Wars” record ticket sales and Amazon gained on higher holiday subscriptions in NY.

“The fundamentals remain weak after last week’s short-covering rally”, said Gene McGillian, a senior analyst at Tradition Energy in Stamford, Connecticut.

WTI for February delivery slipped $1.29 to settle at $36.81 a barrel on the New York Mercantile Exchange. Crude had topped $38 per barrel on Thursday, the highest it has been since it started the month above $41. Turnover was muted, however, with many operators still on end-year breaks and the key London exchange closed for a bank holiday.

This failed to boost Dubai’s stock index, which fell 0.9 percent as only one-third of listed stocks traded.

“A bearish trading stance is still being advised as we still view an ultimate price decline in nearby WTI and Brent futures to the $32.50 area”, said Jim Ritterbusch at Chicago-based oil markets consultancy Ritterbusch & Associates. Prices slumped to $35.98 on December 22, a level not seen since July 2004.

Yields on benchmark 10-year Treasury notes inched down to 2.2322 per cent, up 3/32 in price.

Chinese equities fell as industrial company profits declined and concern grew a new system for initial public offerings will damp demand for existing equities.

“The three per cent dive in crude oil this morning shows you that the sellers are still in control of the energy market, and that’s leading jitters on Wall Street, coupled with just normal digestive action after last week’s strong gains”, said Adam Sarhan, chief executive of Sarhan Capital in NY.

World stocks fell yesterday as a weakening economic outlook for powerhouse China and renewed falls in the oil price prompted a sell-off.

The good news for USA producers was quickly crushed when news from Iran indicated that 500,000 to 800,000 new barrels of oil will be on the market as soon as the sanctions are lifted, which should be in the first quarter of 2016. The Middle East producer has reached agreements with buyers and plans to increase overseas shipments by 1 million barrels a day within six months of sanctions lifting.

OPEC recently chose to maintain production levels despite calls for a production cut to stabilize prices.

Saudi Arabia is expected to announce its 2016 state budget on Monday, and the details will be scrutinised for any indication that it may give about the likelihood of the kingdom changing its oil policy.

This way, we can ship our products overseas to make a quick profit, then buy much-needed oil from OPEC, at its inflated prices, which in turn makes its products more costly for us.