Replies to post #16385 on Value Microcaps Junior Energy

[value1008]

But here's a more bearish piece from Bloomberg:

Brent Falls Into Bear Market as Supply Outpaces Demand

By Moming Zhou and Mark Shenk Oct 8, 2014 1:41 PM PT www.bloomberg.com

Brent crude slid into a bear market on concern rising global supplies will be more than enough to meet slowing demand. West Texas Intermediate dropped to a 17-month low after inventories jumped the most since April.

Brent closed 21 percent below its June peak, meeting the common definition of a bear market. U.S. production is set to increase to the most in more than three decades amid higher output from shale formations. Supplies from OPEC rose last month and Russian output neared a post-Soviet record. The International Energy Agency reduced demand projections for this year and next.

“There’s a lot of news out there and it all points to lower prices,” Rob Haworth, a senior investment strategist in Seattle at U.S. Bank Wealth Management, which oversees about $120 billion of assets, said by phone. “It doesn’t look like demand is going to pick up anytime soon. On the supply side it doesn’t look like OPEC is ready to make the cuts needed to boost prices. The path of least resistance is lower.”

Brent for November settlement slid 73 cents, or 0.8 percent, to $91.38 a barrel on the London-based ICE Futures Europe exchange, the lowest close since June 28, 2012. The volume of all futures was 33 percent above the 100-day average.

WTI for November delivery retreated $1.54, or 1.7 percent, to $87.31 a barrel on the New York Mercantile Exchange, the lowest settlement since April 17, 2013. The volume of all futures was 53 percent above the 100-day average. Brent ended at a $4.07 premium to WTI, compared with $3.26 yesterday.

Ample Supply
“We’ve seen this massive move toward a bear market because demand for these crudes benchmarked against Brent is down and supply is ample,” Dominick Chirichella, senior partner at the Energy Management Institute in New York, said by phone on Oct. 3.

The Organization of Petroleum Exporting Countries pumped 30.935 million barrels a day in September, the most in more than a year, as output recovered in Libya, according to a Bloomberg survey.

The 12-member group is unlikely to reduce output before its Nov. 27 meeting in Vienna, even though supply is currently exceeding demand, a person familiar with policy said Oct. 3.

OPEC “is there to stabilize the price, but so far they haven’t indicated that they are willing to do so,” Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $1.4 billion, said by phone yesterday. Oil is falling “primarily due to concerns about global economic growth, punctuated by the news by the IMF.”

Stockpile Gain
U.S. crude stockpiles climbed by 5.01 million barrels to 361.7 million last week, the Energy Information Administration said today. A 2 million-barrel stockpile gain was projected in a Bloomberg survey of analysts.

“There is a lot of concern in the marketplace regarding the supply-demand situation,” said Paul Crovo, a Philadelphia-based oil analyst at PNC Capital Advisors. “There’s more fear that those extra barrels will contribute to any perceived oversupply. The fear is feeding on itself.”

U.S. crude production will rise to 8.54 million barrels a day this year, up from 7.45 million last year, and 9.5 million in 2015, the most since 1970, the EIA said yesterday in its monthly

Short-Term Energy Outlook.
Refineries operated at 89.3 percent of their capacity, down 0.5 percentage point from Sept. 26, according to the EIA. U.S. refiners schedule maintenance for September and October as they transition to winter from summer fuels.

Refinery Maintenance
“More than ample supply and weak demand, that’s the formula for a bear market,” Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors, said today by phone. “It’s a fundamentally weak market. Losses could accelerate.”

The International Monetary Fund said yesterday that the world’s economy will expand by 3.8 percent next year, down from a forecast of 4 percent in July. Global oil demand will increase by 1.2 million barrels a day to 93.8 million barrels next year, the Paris-based IEA said in a monthly report on Sept. 11. The expansion is 165,000 barrels a day fewer than it previously predicted.

Saudi Arabia reduced prices for November exports to Asia to the lowest since 2008. The price cuts for November were interpreted by banks including Commerzbank AG and Citigroup Inc. as the start of a potential price war between OPEC members seeking to maintain market share as demand growth slows. The reductions were intended to boost margins for refinery customers in Asia and didn’t signal the start of a price war, a person familiar with the nation’s oil policy said today.

Fitch Warning
Production in Russia climbed to 10.61 million barrels a day in September, close to a post-Soviet record, according to preliminary data from CDU-TEK, which is part of the Energy Ministry.

Brent crude could drop to $80 a barrel before triggering a slowdown in investment from U.S. shale-oil drillers, Fitch Ratings said in report today. A price drop to $75 to $85 would have “relatively rapid impact on production,” suggesting this is its price floor, it said.

WTI will average $94.58 a barrel in 2015 versus a September prediction of $94.67, the EIA said in its monthly report. The agency reduced its Brent estimate for next year to $101.67 a barrel, from $103 last month.

To contact the reporters on this story: Moming Zhou in New York at [e-mail]; Mark Shenk in New York at [e-mail]. To contact the editors responsible for this story: David Marino at [e-mail] Stephen Cunningham, Charlotte Porter