i came back to shorting sto yesterday after looking at the oil trend - the oil price curve hasnt looked that bad to me since the original fall in 2013
fundamentally we have 3 major issues for sto
- massive oversupply accruing in both US and Brent now that China has significantly slowed its refinery offtake - normally that would be good for US but they are already crammed with gasoline and their refiners are about to go into shutdown season
the period at $us50 saw a reasonable number of medium and small sized drillers restart trying to keep the lights on - exactly where concensus said they would restart so for once the analysts are right
- at same time US authorities have spared a lot of small oils the sword by working with lenders to help minimise insolvencies. But the flip side is thats left more oilies still operating on meetign fixed costs but losing at marginal cost levels.
- aud to fall on rate cut - increasing USD debt load
It seems to me the best prognosis is for 3-6 months between 40-50.
but a more likely retracement and big doublle bottom back to high 20s is possible
we shall see. for me this is a theoretical exercise in economics more than making a lot of money. just dropping a pin to see how it falls.
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