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Digital TA Trading
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Oil/Natural gas, added another medium term bullish rungWell, oil dropped much further than I thought it would. The refineries are finishing up their seasonal maintenance and switch over to their seasonal, higher heating oil concentration build. They should be picking up their crude oil usage very soon. In this seasonally slow oil demand period, Saudi Arabia has kept their supply wide open causing this large drop in the oil price. Saudi Arabian oil production costs are extremely low at less than $10 per barrel so they can profit when pretty much everyone else cannot. Their goal is to slow down the growth of production in other parts of the world by lowering the profitability so that companies/countries reduce their capital expenditures. They've had some success with this. However, we should get a decent bounce back up in the short term and I'll sell this rung when things achieve a bit more equilibrium. Probably closer to the mid-$80's. Picked up another rung at this obvious bottom to take advantage of this bounce and essentially lower my position cost basis. Interesting side note on natural gas prices. Since a good part of the new supply comes from US oil shale production which has a relatively high cost of production (over $80), these low oil prices have caused US natural gas prices to rise. Natural gas production is a by-product of oil production especially with oil shale so as oil shale production decreases due to low oil prices, natural gas production decreases disproportionally quicker as a percentage of supply and the price rises more quickly than oil. That's why natural gas bottomed a couple of weeks before oil. |
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