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3 X the fun!
Out of powder for now, didn't anticipate it going this low. Hoping we are close to the bottom.
This is over sold UWTI 14 RSI 24.27 Tho Ryan had mentioned last January 7 RSI hoping we don't go there.
When do you think we will see $2.00? $2.20- 2.30 would be nice.
My overall average is $1.95 on a huge amount of shares, but i own $1.80's and 1.70's so i can trade around the position eventually.
Will do. Try averaging in.
I don't have any UGAZ at the moment been catching the falling knife in UWTI see what happens.
It's low enough already, I would stick with UGAZ.
You will be fine with UGAZ at $2.07 just hold it will see $2.25- 2.35 soon. I bought to much UWTI.
Would be nice if we could get back to the mid 50's at least. Eventually.
Interesting article.
OPEC Shorts Are Driving Down the Price of Oil
by DR. KENT MOORS | published JULY 23RD, 2015
The conflict between OPEC and U.S. shale/tight oil producers has entered a new phase. And the result has been an accelerated decline in oil prices.
Last November (on Thanksgiving no less), Saudi Arabia led an OPEC decision to hold production stable, followed by a later significant increase in volume. For the first time, the cartel had opted to protect market share rather than price.
This certainly did not serve the interests of some OPEC members – Venezuela, Nigeria, Libya, Iran – who require much higher prices to balance unwieldy central budgets
The primary opponent was the new source of oil in the market – unconventional production from North America, the U.S. in particular. Thereupon began a tug of war that has largely determined the range of oil pricing variation over the past eight months.
This is what is strange about all of this. Essentially, the same market conditions prevail today as existed a year ago when crude oil was exceeding $100 a barrel. In fact, global demand is higher now than it was last July and accelerating. The price, on the other hand, has been cut in half.
To be sure, there is excess supply on the market (thanks to the remarkable recovery of American production, now at levels not seen in 40 years), and a correction was in order even without any OPEC move.
But that correction was more in the order of a decline to the low $80s or mid $70s. That has gone down much further because of what outside pressures have done to the trading environment.
Here’s my take on the international scheme to keep oil prices down…
The Big Players Still Play Dangerous Shorts
As I have noted here in Oil & Energy Investor on a number of occasions, the interchange between “paper barrels” (futures contracts) and “wet barrels” (actual consignments of oil) has been undergoing some major changes. It is the financial contract, not the allotment of crude, that drives the market.
When prices begin showing weakness, the manipulation turns to shorting oil. A short is a bet that the price of an underlying asset will decline. Control of a commodity (or stock shares, for that matter) is acquired by borrowing from a dealer. What is borrowed is then immediately sold. The short seller later returns to the market, buys back the asset, and returns it to the original owner.
If the short seller is correct (or has manipulated the market through huge positions to make it correct), a profit is made. Take this simple example. A futures contract in oil is obtained at $70 a barrel and sold at market. When the contracts are reacquired (i.e., the short seller buys at market to return the contract to its source), the price of oil has declined to $62. The transaction makes $8 a barrel (with the contract usually for 10,000 barrels), minus whatever small fee is paid for the right to use (temporarily) an asset actually held by somebody else.
Now, shorting is a component of the market. It remains quite dangerous for the average investor because there is theoretically no limit to how much you can lose if the value of the underlying asset goes up after the initial sale. It still must be bought back and returned, regardless of how much it has appreciated in price during the interim.
Some shorts are even more dangerous and are now limited or prevented by regulators. These involve running a “naked” short, a short contract without actually having the underlying commodity or stock to begin with.
Big players can sometimes do this by stringing together options and other pieces of derivative paper. Nonetheless, a really bad move here can bring down a trading house. For the individual retail investor, it is a direct way of losing the farm.
Two SWFs Have Been Shorting Oil…
But what if the underlying asset upon which the short is constructed – both its availability and amount – is under your control? What if you are shorting your own product?
Normally, this would be considered insane. Why deliberately reduce the price charged for your source of revenue? Why guarantee that you are going to be receiving less?
This makes sense only if the short is run for a different objective, one for which the short seller is prepared to take a price hit short term for more market control longer term.
Well, this is what OPEC nations have been doing at least over the past three weeks. Indications have surfaced from the volume and direction of paper makers in Dubai and on the continent that at least two Sovereign Wealth Funds (SWFs) from OPEC members have been shorting oil.
This is the latest stage in the competition with shale producers. By driving the oil price to below $58 a barrel, sources are indicating between 8 and 12% has been shaved off the Dated Brent benchmark price.
Brent is one of two major benchmarks against which most international oil trade is based. The other is West Texas Intermediate (WTI). Brent is set daily in London; WTI in New York.
…Depressing Brent Prices
Statistics for what shots are run in the U.S. are transparent. This is not the case in many other parts of the world. There, indication of movement is gained by what financing middlemen do.
As of Tuesday of this week, sources confirm that oil shorting contracts beginning on June 15 have increased markedly from Persian Gulf interests. Brent prices have declined 13.8% in the six weeks that followed.
According to sources cutting the paper, primary among the short contracts sold and purchased has been action sponsored by two of the largest SWFs in the world: SAMA Foreign Holdings (Saudi Arabia) and the Kuwait Investment Authority. In each case, financial intermediaries are used for the actual transactions. Other SWFs are suspected.
It is certainly possible that an SWF may short oil merely as a revenue-gathering device. After all, such funds are investing excess capital to gain a return and they exist all over the world.
But short sales are rather uncommon with these huge outfits; they would rather have longer-term returns from less volatility instruments.
Both of the SWFs identified obtain their funds from oil sales. The shorts constitute undercutting their own profits. However, the objective here is not to gain a return. They are, after all, assuring a reduced revenue flow from the very asset providing their own funding.
Why the Funds Are Playing This Game
This is a policy decision, not a fiduciary one. It is intended to drive the price down, prompting the closure and/or reduced operations of primary oil production competitors. And it is likely to have the intended affect as we move into unsustainable debt loads for many American shale producers, rising bankruptcies among smaller operators, and a resurgence in the M&A curve.
The shorts guarantee a loss of income but are orchestrated for other reasons. Obviously there are other shorts being run by interests having nothing to do with OPEC. In fact, as the major short positions emerge, it makes it that much easier for others to follow suit.
OPEC is proving a point by (at least in the short term) shooting itself in the foot to clear out competitors.
Short positions need to be unwound and settled. This will happen quickly. The Saudi Oil Ministry announced yesterday they expected the dip in crude prices to be ending soon.
Easy enough to say when major crude providers have been driving prices of their own product down all along.
Chart is forming a big fat middle finger.
Great news! FNMA
That means he's buying. Lol
At some point the hedges we will run this up!
I sure am betting on it. LOL
Added some $1.75's to my position which is now huge, taking a deep breath and going to wait for the reversal. GLTA
WTI RSI 14 33.30
UWTI RSI 14 27.75
This was $3.50 on June 24th Think we will see at least $2.50 in the near future? I do. UWTI
I'm buying the fear here, see what happens! GLTA
Added some $1.85's This has to head North at some point soon!
Sold UGAZ this morning and bought some UWTI at $1.90 see what happens. GLTU
Order filled.
Making the next road warrior movie.
Anyone buying here? Sold my $1.91's new order at $1.90.
Yes added the $1.91's to the rest of my shares, see what happens.
Might have to add some here as well.
Picked up some $1.91's
Good call i took a bite of UGAZ already and am waiting for more!
I use Schwab and have my acct set up last in first out. I usually average in and then average out on the way up.
Ready for it! GLTA $$UWTI$$
Yes 3 to 4 purchases.
Order filled at $2.08.
Making my first purchase here order in at $2.08 see if it fills.
Let's go down so we can load!!!
Best DD on IHUB!!!
Ok we will see. $$BAA$$
The article said there reserves could last until 2018 They need the price of oil to go up with all the programs they provide for there people and the war they are fighting . I'm fine with $50-54 WTI and $1.75-3.00 UWTI Lot's of money to be made in this tight range, hoping it last's for a long time.
Saudi Arabia Borrows $4B As Oil Price Reality Hits Home
"If the government continues business as usual and draws down like this it will deplete reserves faster than expected, by the end of 2018 or early 2019."
By CNBC | July 16, 2015
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Saudi Arabian Crown Prince Mohammed bin Nayef
Saudi Arabian Crown Prince Mohammed bin Nayef pauses while speaking during a meeting with President Barack Obama in the Oval Office of the White House, Wednesday, May 13, 2015, in Washington.
Saudi Arabia has borrowed $4bn from local markets in the past year, selling its first bonds for eight years as part of efforts to sustain high levels of public spending as oil prices slump.
Fahad al-Mubarak, the governor of the Saudi Arabian Monetary Agency, said the government would use a combination of bonds and reserves to maintain spending and cover a deficit that would be larger than expected.
“We expect to see an increase in borrowing,” he said, according to a report in the economic daily Al-Eqtisadiah newspaper over the weekend. Analysts have estimated a deficit of about $130bn this year. The government, which had not tapped bond markets since 2007, has been dipping into its large foreign reserves, which peaked at $737bn last August, to sustain spending on wages, special projects and the Saudi-led air war on Yemen. It has drawn down $65bn since oil prices fell.
Bonus payouts for state employees and the military made by the new king, Salman bin Abdulaziz Al Saud, have placed further pressure on state coffers. “Reality is hitting home, and necessity is also hitting home,” said John Sfakianakis, director for the Gulf region at Ashmore, a fund manager.
Saudi Arabia needs an oil price of $105 a barrel to meet planned spending requirements, but the average price for the year is estimated at $58 a barrel, he said. “If the government continues business as usual and draws down like this it will deplete reserves faster than expected, by the end of 2018 or early 2019,” added Mr Sfakianakis.