OILS FLASH CRASH – FRIDAY MARKETS UNSTABLE
So OPEC nations and their sovereign wealth funds invest in long forward price positions in oil to manipulate the price artificially higher than the market would price oil at. As my blog is well read by those holding trillions in private equity and hedge funds, the market last night flash crashed to $ 44.00. Long positions were liquidating by the 100’s of millions to limit loss. We feel those trades protected portfolio’s.
Today the sovereign wealth funds kicked in to destabilize the market and it still went down to trade at 45.00 dollars but now long position holders are nervous. They recognize if the sell orders restart they could lose and lose big time.
So the notion of my prediction of 39.00 oil doesn’t look so far side today. We see a volatility like oil has not known.
We see more long positions liquidating as it is clear Opec can cut as much as they wish, because today’s cuts are about as low an income flow as the OPEC nations can stand. If they cut revenue lower – say in Russia – they have such enormous issues that such cuts in revenue to the nations is unlikely. Keep in mind they cut back to raise the price. So lets look at these bullet points:
- Open Nations cut back to raise price on oil so their net would be about the same as before the cut back.
- In fact the cut backs did not work and the lower price for oil has resulted in much lower revenue for nations hurting for income than any nation thought.
- Further the glut is not going down as planned.
- Finally the market share for the participants is going to other suppliers and will not return when they cut backs are removed.
- If in declining prices, Opec Suppliers continue to cut back, the revenue to those nations will represent enormous 2017 loss to the nation participants while they pay such cost they lose market share forever.
So this is sound economics why?
So the notion they can rebalance oil, with endless new discoveries, with Trumps America First and America Energy Independence FIRST plan, means, that, OPEC has to begin to think market share versus price. If they do not Opec will rapidly be more accelerated into marginalization, by their own economic failed policy.
As investment bankers and economists our team does not see the game plan here. It is like a 1970’s set of brains in a 2020 world of oil supply. Demand is declining for the core product price drivers, and supply is soaring. The producer technologies are reporting in many producing markets including off shore oil is profit making for suppliers t $ 25.00 a barrel.
Opec has no way to fight market rate pricing for oil.
Today the speculation that has controlled the oil market and influenced its pricing with software digital trading strategies within a casino capitalism never seen before, is now loosing billions of dollars. The ETF markets driven by geek software is unable to include EMOTIONAL INTELLIGENCE to the trading data.
Human traders are moving away from long positions. The next BIG SHORT IS OIL. Will oil hit a low in the high 20 dollar range? We know it will hit 39.00 dollars for sure.
So those who hold long and bet on 60.00 oil as OPEC has will lose fortunes of untold wealth forever, in the double edge market forces of capital loss on investing long, capital loss in lower revenues for nations, capital loss in market share loss now and forever into the future, which the OPEC nations are PAYING hard dollars to lose their own market share as a strategy of “wise guys”? Oh Really and they graduated from Harvard?
So wise guys – the market has shifted and you have not. If you extend the oil cut back your loss will be as we coined the phrase GYNORMOUS.
Enjoy the ride on the oil roulette table.
Berny Dohrmann – KEEPING THE COST OF EVERYTHING REAL FOR YOU May 5— May 5, 2017