Monday, April 18, 2016

Dare Saudis to Execute Threat to Ramp Up Oil Production !

Saudi Prince threatened last Thursday that if Production Freeze at Doha Summit was not agreed to, then they could ramp up oil production by extra 1 million barrels per day. Now that there was no deal at Doha on Sunday, we dare them to ramp up production as announced. We dare them to shoot themselves in the foot. We dare them to carry out their puerile threat. We, the people of planet earth, dare them !!

We are tired of Saudi shenanigans. They are at this mischief for so long that it is not funny any more. As many aver, even with trillions of  petro-dollars Saudis have not done one single act of goodness for mankind. In fact its the other way around!

For investors in oil, there is no reason to panic. This fall was expected which I had announced on Saturday itself. If your are visiting this space for the first time then I recommend you to read following posts before proceeding further :-
                              How will this Sunday be- Black or Grey?
                    World Waits with Bated Breath - Doha Summit Outcome

Lets analyse the situation as it exists today. Crude is down 2.9% at 39.3 USD as of publishing this post. It has recovered lot of lost ground when earlier in the day it had crashed more than 5%, day low being 37.61 USD.

Why am I saying there is no reason to panic for oil investors. Oil can go down to 35 USD this week but that is all. In fact many believe that NO Deal at Doha has been a boon in disguise for long term stability of  crude oil market.

Forces of demand and supply will realign in a structurally sound manner. Supply side constraints will develop as production in many oil producing countries will be curtailed owing
to prolonged low prices not being viable, including shale gas production in US. Offshore drilling will be simply untenable.

On the demand side one is expected to see small incremental steps of growth as global economies claw out of  mire. Local politics, if not anything else, will compel nations to increase productivity in many ingenious ways. After all recession also has shelf life!

Glimpse of US Markets

Dow is up 59 points at 17956 as of going to press. Moving in tandem with oil. Dow has also recovered from its day low of  17848. But we are not trading - remember? I had asked my audience to exit market at Dow in range 17900 - 17950. That was on Friday and you may check it here.

This exit has given us a profit of 500/550 points in Dow since we entered market when Dow was at 17400 as per my recommendations. Check it out here.

But right now we should have market strategy to sit on the sidelines. Let various forces of pull and push play out. Let clear trend emerge and then I'll tell you confidently to enter trade for definite gains, like I always been doing. Remember trading gains of 700 points jump in Dow from 16500 to 17200!

Enjoy no work!!