PJSC Gazprom Adr. (OGZPY)

[mick]

#2/ Mr. Market Or Mother Nature, Who Rocks Oil First?
http://seekingalpha.com/article/4025391-mr-market-mother-nature-rocks-oil-first
Nov. 22, 2016 5:16 AM ET|10 comments | About:
The United States Oil ETF, LP (USO),
OIL, UWTI, UCO, DWTI, SCO, BNO, DBO,
DTO, USL, DNO, OLO, SZO, OLEM, OILK, OILX

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Was the Oil (NYSEARCA:USO) price manipulated to hurt Russia?

Many readers will find this topic very controversial and some may think it is too far out there, but consider how abnormally the stars aligned, and if true - the implications in the near future could be enormous.

While the Oil price crashed I speculated on a few occasions that this could all be a ploy to hurt Russia. There is no doubt that U.S and Russian relations have been in decline the last several years.

Oil is the lifeblood of the Russian economy.

Interesting that the EIA published a chart in July 2014 showing how dependent Russian's economy is on oil and gas. EIA estimated 68% of Russian export revenues are derived from oil&gas. The data came in the context of new sanctions imposed by the U.S., and Europe, for Russian muscle-flexing in Ukraine. July 2014 was also the beginning of the Oil price decline or what I called 'a crash'.

When Russia moved in Crimea in 2014 it caused a big stir in Europe and the U.S., but neither was in a position to do anything militarily so sanctions were imposed to try and cripple Russia economically.

While not a prevalent revelation in the main stream media, sanctions were specifically targeted at Russian Banking and it's Oil Industry confirmed by numerous trade experts, such as Paul Hastings.

If the U.S. aimed sanctions at Russia Oil - why not aim the price down to further the pain and to the benefit of a stumbling U.S economy?

Is the timing of a charge by the Saudi cavalry a co- incidence ?

Subsequently in 2014 U.S. ally Saudi Arabia who has no love for Russia began opening up their Oil taps and pumping out more supply at the same time U.S Oil production was around record highs last seen in 1970.

In January 2015 Saudi revealed they had already increased production to 9.8 million barrels. The main stream media was pushing the story that Saudi was trying to win back market share from U.S. shale production.

As prices fell, Saudi Arabia kept increasing supply and recent numbers show they are pumping about 10.2 million barrels/day and Oil Minister Ali al-Naimi warned in September they could increase to 12.5 million barrels.

Another factor with lower Oil. It is widely believed that a drop or low energy prices is a big boost for the U.S. economy, but at the time I doubted this and thought the damage done to the U.S. Oil industry would be about the same as economic gain or maybe more so.

This has proven to be true and probably no better highlighted earlier this year by Former US Treasury secretary Larry Summers calling it one of the biggest economic puzzles of our time.

The lower oil price hurts Russia, the U.S. and European economies benefit from low energy prices and for the Saudi playing along they gain market share and probably a behind doors deal that Wall Street will ensure the Saudi Aramco IPO goes well and at a good price.

Down goes Oil and all is good!

In 2015 there were frets that the world's Oil storage would fill up as tankers (floating storage) began to climb.

This is where the chicken and the egg comes into play.

Did oil storage climb from over supply or did the price drop cause oil storage to climb?

A lot of Oil goes into floating storage, strictly because oil traders can make a profit. They do not care about supply and demand as long as the contango (spread between current prices and future price) is high enough.

Large contango is indicative of market bottoms. During the 2008-09 crude oil crash, the oil market witnessed a super-contango, when the price difference between the first month and the seventh month contract had reached up to $10 per barrel.

Similarly, during the current crisis, the contango reached $8 per barrel twice, once in February of 2015 and again in February of 2016, as shown in the chart below, after which, the markets bottomed out and both cases headed higher.