oil bottomed?, page-22

Thanks Synergy.

I suppose I should also back up the view that oil price has not bottomed. Keep in mind though I am still of the opinion that MAD is a long term buy because its "moat" gives it a very good defense against oil price contraction.

Excluding the 2 "spike factors" of (a) Shooting war in mid east which spikes price up and (b) a liquidity event that shocks the world financial system which spikes the price down, I think oil will test $70 and below because:

1. Oil is priced in US$. When US$ goes down (as it did last week because of less risk in world) oil price goes up.

2. Oil supply glut at present. Record oil supply inventory in US (well above the 5 year avg) at the same time as record high refinery utilization - meaning no shortage of oil supply in US market.

3. Euro-land recession has a ripple effect all the way back to the source - manufacturing in US & China for example.

4. Investment in oil E&P over past 5 years especially has been massive because of the high margins. Made the shale plays attractive. Further leads to oversupply. Now this will correct itself as investment in unconventional shrinks due to economic marginality of production (note - not saying the produce at below cost - their netback is still positive - but drilling new well becomes uneconomic)

5. Supply returning from mideast - Libya, Iraq, Saudi pumping a record levels. Not including Iran & sanctions etc.

6. Demand from non-OECD countries not quite enough (yet) to take up slack - but they will.


So with all that as background, I'm going with the strength such as MAD and to trade the highs & low that are presented -that is my plan at present....and hope my luck and timing hold up as well as the "skill".

GLTA.