Xray, the way I see it is that we have to ride out RIG a little longer than we thought 6 months ago. The reason is very simple. The world population is booming, Africa is coming alive. Asia is exploding. Many poor people are buying their first motorcycle and car. More beaten down old trucks are running all over the world carrying goods to places we never thought about. Airplane traffic is soaring. Train traffic is at its highest levels in history. The US economy is showing lots of strength.
China's stock market got ahead of itself and needs a correction, but this is just normal. Besides, if China weakens, the rest of world will benefit, especially India. By the way, India is expanding at a rapid pace. According to the IMF, growth in India will exceed China in 2016. Any slack oil demand in China will be miniscule compared to the growing demand in India.
Do you hear the shorts talking about the growth in India? Did you know that India will one day pass China as the second largest oil market in the world? Did you know that world oil demand, with Africa as the backbone could grow to 300 million barrels per day over the next hundred years? (link). This 300-million-barrel-per-day growth estimate has flaws, but it still shows that the demand for crude is headed north for the next 20 years anyway. And growth in crude is not tied to US demand or to China demand; it's tied to the rapid population explosion in Africa and Asia.
And most crude use in Africa and Asia comes from the trucks moving goods and industrial use. But, of course, used automobiles will grow like crazy in both countries. As an example, the Philippines are filled with used cars imported from Japan. New cars are also selling fast here. There is a new middle-class springing up--many two car families never before seen in the Philippines. Multiply this all over the rest of Asia and then add African growth. The numbers are shocking. Oil demand will skyrocket over the next 4-5 years. To meet this demand, the majors need to start drilling offshore right away. It's bullshit to think that offshore drilling will suffer compared to land drilling. Offshore is where the big deposits are located. offshore oil can be sold anywhere in the world. US shale production can not be exported. If it was only the US demand that matter, then I would invest in shale drillers, but the important growth is in Asia, Africa, and India. Screw China. They will be drilling their own crude soon enough.
The short sellers and manipulators will not tell you the truth. They deal is lies and fear. And those they sell out their share of RIG are the suckers.
The population of most of Asia, India, and Africa is rising fast. I own an apartment complex in the Philippines that is fully booked 95% of the time with foreign visitors. Traffic in our city has tripled in 6 years.
China is a bully that threatens weak countries. On the other hand, India is non-aggressive and has a vast open market that is English friendly and stands a good chance of putting the Chinese back in the rice fields where they belong. I do IT deals in India and love the way the Indians treat me. I complained the other day about a job and they happily refunded every dime. Most Indians are intelligent and speak English, their labor is dirt cheap. They are honest and want to earn our business, not steal it. And, they are not threatening to take over the world.
The greatest mistake the US ever made was turning all our manufacturing over to China. We need an honest deal maker like Donald Trump running the country. The bunch of idiots now in charge will eventually destroy us if we don't get rid of them. Thank God this is the last year for Obama!
Zero interest rates are beginning to work and the world is progressing towards prosperity, but we are still in a slight recession because we GAVE China all our manufacturing business. We need our jobs back. I believe we know that now and think Trump has a chance to win in a landslide.
It is critical to understand that crude oil is the lifeblood and the engine of the world economy and has been for the last 100 years. Alternate energy sources are at least 2 decades away from cutting into crude. Solar panels are too damned expensive and most are made in China. I would never buy a cheap Chinese solar panel because I know it would not last even 2 years. The world knows that the Chinese make junk and have been making junk for hundreds of years. China knows only one thing, cheat anyway you can to make a product as cheap as possible and sell millions. They put lead paint in toys for babies and sold them in the US, they poison our vitamins, rat shit in all through their chemicals, and on and on and on. They will pull any trick to cheapen a product even by one stinking cent. Customer satisfaction means nothing to the Chinese. They lie, trick, steal, and they also destroy the environment, pollute the air, and pay off US politicians. They will use the money they steal from us and build a mighty war machine to take over the world. This has been their plan since the Ming Dynasty.
The public is slowing waking up. China had its chance but screwed it up. Now it's time for them to go back to the rice fields. No one in the world really wants to buy Chinese junk.
Anyway back to crude oil.
The US is on the road to recovery and interests rates will rise later this year. The EU will also recover as soon as they get rid of the no-pay Greeks.
The majors talk about reducing CAPEX, but they have their games to play. They try their best to reduce dayrates and play their cards close to the chest. Shale production will stop on a dime when the hedge at $90 per barrel crude ends in a few weeks.
Any discussion about crude dropping much below $50 is nothing more than bullshit from shorts. The right price for WTI right now is between a low of $53 and a high of $58 with Brent $5 above WTI. I also think it's possible that the shorts can talk the weak longs into selling RIG. RIG might even dip to $13.50 but, it will not go any lower. But I would not wait for the dip. If it don't come morning, I'd be buying all I could afford even as a day trade.
If you consider closing price only, RIG is selling at a 20 year low. It was selling higher when crude bottomed at $42 a few months ago. All things considered, including the fear factor, RIG should be selling for at least $16.
Furthermore, I am convinced RIG dropped below $15.50 because of heavy selling due to margin calls. Most RIG shares were purchased in the last few months at $18 to $19. These buys were mostly on margin. An 18% drop in share price would trip a lot of margin calls. With fear in the market, buyers would not jump in so the price dropped to a near 20-year low of $14.46 per share. It pulled back at the close to $14.62, but no one wanted to load up headed into the weekend. That same thing applies to crude. No one wants to be long crude over the week end will all the bullshit floating around now. This will correct in a few days and RIG will move quickly to $16.00 per share.
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