Maybe Nomura is reading your posts. (I got you down as $58 in 3 months - mid April - it would be a genius call - got odds on yourself).
Signal of Bottom? I was reading that 3 things need to happen
1. Supply demand - here is a graphic for supply by OPEC vs US Production
View attachment 39444
There are many variants of this picture but they all say the same thing - the right half and in particular the right quarter of the graph so clearly show where the increase in production is coming from - no secret what it is. Every Bbl the US produces is a Bbl that OPEC does sell now. Sure it can stay in the ground for later - but how much later?
We're seeing layoffs (see Buc's article on SLB) and its happening with HAL/BHI, HP in the rig market and services, APA and several E&P have begun layoffs. Just an enormous number of Capex reduction announcements for 2015. Now the thing with those are they are generally referencing average 2015 estimated production versus average production for 2014. This allows them to still say they are growing production YoY which they are. In actuality they are declining Q0Q in many cases, as their exit rate of production in 2014 is higher than the 2015 estimated average.
So the supply side is getting addressed.
On the demand side - not quite as simple - YoY seems tepid at about 0.7% - but it is growth in a time when EU is in recession and China has slowed down (but could pick up quickly). We'll see what happens.
2. Money & Inflation/Deflation
An unintended consequence I think of the Saudi pig-headedness and the too steep drop in oil price combined with the US FED ending of QE3 thus stopping the cheap money go round, is that combination has pricked the asset bubble in shale. With the industry now trying to shrink quickly and the capital invested in inflated assets and the capital lent to drillers is likely to experience some "shrinkage" - hard to say how much. But with less production comes less taxes (sure consumers have cheaper gasoline so in theory some get recouped in sales tax). With less production comes less workers too. Bit like a toilet bowl flush.
Anyway the ending of QE3 made the US$ stronger - and a strong US$ is bad for commodities generally. We have a Japanese version of QE going and the EU is about to start also. All makes the US$ stronger again - which we as Aussies ought to know by now that a strong home currency is bad news as it makes you uncompetitive on a global market. US$ goes down means oil (and iron ore, coal, copper) should automatically go up.
Should the Fed start a QE4 program (because the oil shock has wreaked havoc on US economy) that is a clear signal of a bottom!
3. The political view
Who knows what desperate measures Russia/Iran/Venezuela et al may come up with. Should OPEC cut then clearly the bottom ought to be in.
Since I haven't seen any of the 3 occur (yet) I conclude the probability is oil will drop further - the spike that you refer to SL.
