Alexander Khurshudov: it’s good to have holiday season at the oil market
It’s summer now. The temperature in the Kuban reaches 40 degrees C. The beaches are so overcrowded that the sunburnt holiday makers have to sunbathe standing up like horses. The few news items dry out at the oil and gas agencies’ web sites.
The stock exchange turnover has reduced. “Sale in May and go away” – a lot of traders have gone on holidays, though the most experienced have stayed. They know that volatility increases in the summer, the up and down movement of the prices increases and one can make good money out of it.
Indeed (pic.1) during the last two months the Brent price first dropped by 19% then surged by 18%. Last Friday (in just one day!) all the falling trends were broken and a growing trend formed on the daily charts. Looks like oil companies can breathe more freely now.
Note that a trend is not an absolute factor, but a matter of probability. An important piece of news can break it. For example, if another global financial crisis starts tomorrow, the prices will change direction. But it doesn’t seem to be likely at the moment.
In my opinion, the increase in the quotes is caused by two things. First of all, this is the reduction of commercial oil stocks in the US from March’s maximum (535.5 mn barrels) by 52 mln barrels last week (pic.2). This is 10-15 mln barrels more than usual seasonal fluctuations. The stock exchange reacts to the data on stocks, it’s just how their collective mind works.
Secondly, any manipulation has its limits. How long can they be telling tales about shale oil? It’s the tales that supported the down trend combined with the increasing rig count and less importantly by the production itself. However, this source has been depleted (pic.3). In the Eagle Ford oilfield drilling is declining, in the Bakken it is not growing at all, in the Permian Basin it is growing slightly, but the wells there are less productive.
Now the Brent quotes have reached the top of the rising daily trend. In the coming few days a bounce back to $48-50 should be expected, then the price will continue growing. American statistics on May production will be published a little later. If the production doesn’t grow again, like in April, the price increase will become faster.
Ill-wishers will say: luck is on Russia’s side again. It’s either the cold or the heat wave or the stock exchange… I can say: fortune favors the brave, the one who thinks more and talks less.