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Page added on April 4, 2015
Crude oil could hit $15
CNBC “Fast Money” panelist and financial expert Dennis Gartman has bad news for oil: It’s going to go “stunningly” lower. In an interview with CNBC.com’s “Futures Now,” the “Commodities King” said that a combination of a rapidly rising inventories and a strong dollar could lead to $15 oil by the end of the year.
“For months I’ve said that crude oil is heading from the upper left to the lower right of the chart,” said the CNBC contributor and editor and publisher of The Gartman Letter. “I wouldn’t be surprised if oil went down to about $15 a barrel.”
Crude oil prices have been in a steep and steady decline over the past six months, down more than 50 percent trading just above $40 a barrel. Traders had hoped an improving economic picture in both the U.S. and Europe could give crude a lift.
At the start of February, crude staged a sharp and violent rally off its lows. But according to Gartman, there simply is too much supply to contend with. As such, he expects future crude rallies to be met with a similar fate.
“That is not how a bull market is supposed to act,” he said. “That is how a bear market acts.”
19 Comments on "Crude oil could hit $15"
Plantagenet on Sat, 4th Apr 2015 5:28 pm
We are in one heck of an oil glut but I’ll be surprised if oil gets down to $30 bbl, much less $15 bbl. Nonetheless, it certainly is possible.
Nony on Sat, 4th Apr 2015 5:37 pm
futures curve predicts a rise.
Davy on Sat, 4th Apr 2015 5:48 pm
If oil gets to $30 and stays there more than 6 months it will be in a collapsed economy. It could go there briefly but if it stays then it is “Katie bar the door” That’s all she wrote.
Perk Earl on Sat, 4th Apr 2015 6:39 pm
Davy, don’t you think at $30 a barrel the economy would generate more growth, but also cause a lot of oil company bankruptcies or at minimum mergers?
To my way of thinking, even if oil prices remain at their current level for a few years, that pretty much tips the scales towards a decline from peak, due to the reduced incentive for E&D. After that it’s all downhill.
Perk Earl on Sat, 4th Apr 2015 6:48 pm
I just watched that video link above and they don’t talk about oil. They talk about the Euro going up to 109 vs. the dollar in response to dovish comments by the Fed, which signal no rate increases for at least several months.
Where’s the video regarding $30 dollar oil?
Perk Earl on Sat, 4th Apr 2015 6:55 pm
Watched the video again and confirmed nothing about oil price, period.
In fact, they are talking about a big drop in the value of the dollar as evidenced by the rise in the Euro. A dollar that is dropping in relative value to other currencies means a HIGHER PRICE FOR OIL, not lower. So how someone could watch that video and come to the conclusion of writing an article about $30 dollar a barrel oil is astonishing.
Davy on Sat, 4th Apr 2015 7:16 pm
Perk, $30 oil indicates a sick economy. That’s where I am coming from. If it gets there and stays there longer than the normal financial cycle then it indicates demand destruction is going on. That is a Davy doomer view in the context of systematic doom. That may sound word salad but it represents a failure of BAU to grow. Low oil is not going to grow BAU. BAU will grow BAU.
Makati1 on Sat, 4th Apr 2015 8:00 pm
Bring it on! Can we try for $10 or even $5? In the early days (1946), oil went for $1.63/bbl, but the dollar was worth something in that age.
http://inflationdata.com/Inflation/Inflation_Rate/Historical_Oil_Prices_Table.asp
rockman on Sat, 4th Apr 2015 9:08 pm
Dennis is certainly free to express his OPINIONS. In the meantime we can focus on FACTS and see how OPINIONS might change in the next few months. And I would wait to see the stats for another 2 to 3 months before declaring the slump due to the rig count drop has begun. But at the least the latest decline in Texas oil production will shut the cornies up who been highlighting the production increases as the rigs went idle:
“There’s been a lot of speculation recently that lower oil prices should impact production. Potentially setting up the market for a rebound. And statistics released this week now seem to confirm that trend — in one of the largest producing regions in the U.S., Texas. The Railroad Commission of Texas just released data for production rates in January. The output of both oil and gas took one of the most sizeable monthly declines in recent memory. Oil output during January fell 11%, or 8.5 million barrels, as compared to the previous month. Natural gas production was also down month-on-month — falling 8%, or 43 billion cubic feet. And condensate production dropped 10%, or 1.2 million barrels. This is a decided break in production trend for Texas. Basically erasing all of the gains in production seen over the past year.
U.S. Oil Glut Story Grossly Exaggerated: The scale of the monthly decline is notable — being much deeper than during any of the previous months since oil began its decline last summer. Up until now, oil output had been largely holding steady. But that’s all changed. Potentially signaling that drilling activity may have pulled back to a point that can no longer make up for natural declines from existing wells. Indeed, the Railroad Commission reported that February saw just 1,521 new oil wells completed in Texas — a 45% drop from the 2,768 oil wells drilled during February 2014.
If this trend does hold, it could be a signal that lower prices are finally having an impact on supply. Watch for stats from the Railroad Commission next month to see if the pattern continues.
jjhman on Sat, 4th Apr 2015 9:27 pm
When I hear someone identified as a financial expert I’m reminded of a comment by a friend some years ago.
A financial expert is someone who gets paid to tell you how to invest your money. By definition he doesn’t have any or he would be spending all of his time investing, not sharing his secrets with you. Every stock broker I’ve ever dealt with was a bozo.
Makati1 on Sat, 4th Apr 2015 9:45 pm
jjhman, I think the first thing to ask any financial expert/adviser is what their net worth is and to show proof. If they are truly an ‘expert’, they should be financially wealthy and at least in the top 1%. If they are not, they are liars and cons.
shortonoil on Sun, 5th Apr 2015 7:00 am
GS must have taken one hell of a big short position. Oil may go to $15 someday, but it won’t be this year, or next, or the one after:
http://www.thehillsgroup.org/depletion2_022.htm
We are telling you that the oil age is ending, these birds are telling you that it already has. It is all in the modern day tradition of bought, and payed for media.
Perk, $30 oil indicates a sick economy.
The oil industry is losing the capacity to provide a product that the consumer can afford to buy. That is why oil is now $50/ barrel. If the consumer could pay $100, $200, or $300 you can be sure the industry would charge that price. The consumer can only pay, or is willing to pay $50. At some point they will only be able to pay $30. The high inventory at Cushing is an indicator that the consumer is not able to buy all the oil produced at the price that the market is asking. Production cost for most of the world’s remaining resource now exceeds what the consumer can afford to pay for it. 38% of the world’s economy results from the production of petroleum, and its products. Once all the $50 dollar oil has been consumed that 38% will disappear, and most of the world’s economy with it.
The question that is now facing the world is not how much oil remains; the question is now how much of it is $50 oil? By our calculations – not very much!
http://www.thehillsgroup.org
Davy on Sun, 5th Apr 2015 7:53 am
Perk, as a PS to short above this is a great Sockman article:
http://davidstockmanscontracorner.com/meet-the-new-recession-cycle-its-triggered-by-bursting-bubbles-not-surging-inflation/
Kenz300 on Sun, 5th Apr 2015 9:15 am
High cost producers like shale, tar sands and deep water producers are rethinking their business plans.
Banks no longer are willing to throw money at them…..
shortonoil on Sun, 5th Apr 2015 9:46 am
So the central banks just keep printing, thereby inflating the asset bubbles world-wide. What ultimately stops today’s new style central bank credit cycle, therefore, is bursting financial bubbles.
Stockman is blaming Central Bank policy for ZIRP, and the malinvestment that came with it. The CBs were responding to a declining economy by attempting to influence monetary flows. This, of course, turned out to be a futile attempt. It only succeeded in diverting those flow to those who were the closest to the source; the banks and the 1%. The rest of the economy got left out in the cold.
What is being left out is the impact that resource depletion is having on the economy. Specifically oil; in 2015 the world would have to be producing 163 mb/d to have the same impact on the economy that it had in 1970. That is what depletion has done to that commodity. Depletion has undoubtedly had a similar effect on all extractive resources.
As long as economists ignore the fact that we live on a finite word, with finite resources, and continue to adhere to the delusion that technology will always be able to outrun depletion little will be accomplished by their musings. We are facing a deteriorating situation that neither Central Bank policy, or advancing technology are likely to curtail. In the “new reality” the rules of the game must be changed, if they are not there will soon be no game to which the rules can be applied. Globalization, industrialization, centralization, materialism, and fiat currencies were concepts that worked in the 19th century. In today’s world they are failing. If allowed to fail completely before they are replaced, there will be havoc!
Perk Earl on Sun, 5th Apr 2015 11:39 am
“Perk, $30 oil indicates a sick economy.”
I don’t disagree with the points you’re making short regarding depletion or that oil price will at some point only be able to support a price of $30 a barrel, but we aren’t at that price point yet.
One of my earlier posts above was ignored, which was stating that the video in support of the headline article above is actually about a drop in the value of the dollar, as evidenced by the rise in the Euro, and nothing stated about oil price.
When the dollar goes up, the price of oil drops, and conversely when the dollar drops, oil price rises. At least that’s what it’s been doing recently and was one of the major causes (other than depletion) affecting the huge drop in oil price.
The reason the value of the dollar took a small hit was the perception that the Fed will not be raising interest rates anytime soon, probably not until at least late in the 3rd qtr. or in the 4th quarter, when previously their message was it would occur earlier in 2015.
So tune into oil price tomorrow, which should go up, not down as suggested by the article.
To summarize:
-Video does not mention oil price
-It’s about a drop in the value of the dollar vs. other currencies
-Which will cause oil price to rise slightly in the next trading session
-Yes, I understand depletion and that eventually we will get to a $30 dollar a barrel price
-But it has not dropped that far yet
jjhman on Sun, 5th Apr 2015 12:17 pm
About the Stockman link:
I remember when Stockman was a part of the Reagan admin. Typical totally unprincipalled flack. Reading through his analysis, which quickly became a sales pitch for his book, I had an insight about all financial gurus:
These guy are like a bunch of jr. high science students watching an old fasioned pin ball game. They are all using what little they know about where the ball is going but actually they reallly don’t have anything like the tools they would need to really understanding what is happening. The real problem is that neither does anyone else. It’s just too complicated for anyone to predict.
Davy on Sun, 5th Apr 2015 1:11 pm
Well, JJ, give me your alternative read that will enlighten me. I am all ears.
Stockman was once as you said maybe but he learned from that experience. If the guy is pitching his book what is wrong with that. The guy needs to eat. Do you not like the message so you bash the messenger?
marmico on Sun, 5th Apr 2015 1:29 pm
Specifically oil; in 2015 the world would have to be producing 163 mb/d to have the same impact on the economy that it had in 1970
What a crock of buffoonery. Specifically, the U.S.; between 1970 and 2014 petroleum consumption rose 17% (29.5–>34.6 quads) and real GDP rose 240% ($4.77–>$16.09 trillion).