Friday, December 27, 2019

American Shale Oil In High Demand

The narrative a while back was that the world would face a shortage of heavy crude because sanctions on Iran and Venezuela had reduced production and exports. Some also implied that shale oil would fill up U.S. storage because American refiners were designed to process the heavy, high sulfur crudes from Venezuela, Saudi Arabia, and the like.

But the light, sweet crude is in high demand for export, and that appetite is likely to continue to grow with the implementation of IMO 2020 around the corner, going into effect January 1st. Freight rates from the U.S. Gulf to Europe have surged to record highs.

Equinor ASA and Unipec, the trading arm of China's top refiner Sinopec, have provisionally chartered Aframax tankers for $60,700 per day, an increase of almost 30 percent in a week, a new record high, according to shipbroker Poten & Partners. Aframax tankers are the “workhorse” of the U.S.-Europe oil trade, which has risen more than 60 percent in 2019 compared to 2018.

The EPIC pipeline began service in August. It has the capacity to deliver 400,000 b/d from the Permian Basin to terminals on the Gulf Coast. The new Cactus II pipeline system also started shipping crude oil in August. It has the capacity to deliver 670,000 b/d of crude oil from the Permian.

And the Gray Oak pipeline began service in November and will be capable of delivering 900,000 b/d at capacity. This new takeaway capacity will effectively reduce the production breakeven costs of substantial Permian crude oil because the pipeline charges are significantly lower than trucking costs.

This should provide stimulus to shale oil production growth, which had slowed due to takeaway pipeline capacity constraints.

Exports Rising
U.S. crude oil exports averaged 3.412 million barrels per day for the weeks ending December 13, 2019. Crude oil exports were 33 percent higher than the same weeks last year. But in the year-to-date, exports are over 50 percent higher.



Exports of crude oil and petroleum products have surged to almost 9 million barrels per day. This makes the United States the largest petroleum exporting country in the world.



Net oil imports have recently dropped below zero, making the U.S. a net oil exporter for the first time in modern history. As a result, the U.S. economy is no longer vulnerable overall to a spike in oil prices, though such a development would hurt consumers while helping domestic oil producers.



The U.S. balance of payments and trade would not be adversely impacted. This is a positive tailwind for the value of the U.S. dollar.

It also has political and defense spending implications. For example, following the attacks on Saudi Arabia in September, President Trump did not put the U.S. military at risk to defend KSA. He also did not counter-attack Iran on behalf of Saudi Arabia. The Crown Prince of Saudi Arabia reportedly began talks with Iran to defuse the situation, something the Kingdom did not have to try when the U.S. felt obligated to protect its oil supply for economic reasons.

Conclusions
The U.S. shale revolution is being re-booted by the opening up of new pipes in the second half of 2019. Given strong foreign demand and lower effective breakeven costs, a new surge may be in the works. Market observers who saw growth slowing may be in for a wake-up call over the coming six months when the new economic conditions take hold.

Check back to see my next post!

Best,
Robert Boslego
INO.com Contributor - Energies




Thursday, December 5, 2019

Seven Year Cycles Can Be Powerful and Gold Just Started One

Our research and predictive modeling systems have nailed Gold over the past 15+ months. We expected Gold to rally above $1750 before the end of this year, but the global trade wars and news cycles stalled the rally in Gold over the past 2 months. Now, it appears Gold is poised for another rally pushing much higher.

But wait, if you’re thinking I’m just another one of those traders who is always bullish on gold, just know I have been telling the truth about where gold was headed (lower) for years, but finally, the tide has changed!

Gold broke down from a bull market in 2012/2013 – nearly 7 years ago. Now, Gold has broken resistance near $1375 and is technically in a full fledged Bull Market. The importance of this is the seven year cycle and how the rotation in Gold, between the high near $1923 and the low near $1045 represent an $878 price range. The upside (expansion) rally in Gold may very well move in expanding Fibonacci price structures – just like it did in 2005 through 2012. If this is the case, then we may expect to see an ultimate peak price in Gold well above $3500.

The rally that started in the last 2015 and ended in July 2016 totaled +$331.1 (+31.67%). The next price rally that started in August 2018 and ended in September 2019 totaled +$399.4 (+34.22%). If we take the current rally range (399.4) and divide it by the previous rally range (331.1), we end up with an expansion range of 121%. The two unique rallies that happened just before the 2009 parabolic rally in Gold represented (+315.8: 2006) and (394.8: 2008). The ratio of these two rallies is 125%. Could Gold have already set up for another parabolic rally well beyond the $1923 target level?

Before finding out what is next quickly join our free trend signals email list.

Monthly Price of Gold Chart – Bull and Bear Market Trends



Our research team believes Gold has already entered a technically valid Bullish Market trend. We believe Gold miners will follow higher as Gold begins this next move higher. The reason we have not engaged in Miners, yet, is because we have not received any technically valid signals related to the Gold miners indicating they have also entered a new Bullish Market trend.

Gold is the safe haven for the global market. It is a store of value and offers price appreciation when the global market risks are excessive. Because of this, the sentiment across the global markets appears to be weakening in regards to forward expectations and valuation appreciation within the investment/asset classes. If Gold continues to rally higher, consider it a strong indicator that the foundation of the global market valuation levels is weakening considerably.

U.S. Dollar Will Start to Support Higher Gold Prices



Should the U.S. Dollar retrace lower, Gold will see a price increase based on the renewed weakness of the U.S. Dollar. This would also assist in re-balancing global trade and economic issues with the US Dollar moving moderately lower as weakening global markets contract.

Gold Mining Stocks – Monthly Chart



Miners are set up much like Gold was in early 2018. Resistance has been set up with multiple price tops and any momentum rally above this level would technically qualify as a new Bullish Market trend for miners.

At this point, we believe the bottom in miners has already formed and we are simply waiting for the qualifying technical confirmation of the bullish trend to begin. Jumping into this trade too early could result in unwanted risks as the price could still waffle around within the Stage 1 Base range.

If you want to learn more about market stage analysis I will be covering it a new article shortly. Once you grasp the basic concept you will see these stages on every chart no matter the time frame and know when to focus on trading and when to ignore the charts.

If you like new fresh big trend trades then check out this real estate article I just posted and how the real estate ETF could allow your to profit from home prices but you don’t even need to own or buy a home!

Concluding Thoughts

The recent weakness in the US and global markets has prompted a moderately solid upside move in Gold and Silver over the past few days. We still need to see a Gold move above recent resistance to qualify as a new upside rally though. Miners are set up for a breakout technical move which we must also wait for. We believe these two may move somewhat in unison if the global markets continue to contract throughout the end of 2019 and into 2020.

Stay tuned for more updates and alerts when all these key sectors and asset classes start new trends because that is when you want to get involved for immediate oversized gains. See my stock, index, and commodity trade alerts here.

Chris Vermeulen
The Technical Traders




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