Last week some members were asking if this was the time to buy their heating OIL. My answer was still: “wait”. Those with a nervous response referenced Syria and how the price of crude had rapidly escalated to a six month high.
Opaque as the world of the OIL traders clearly is…crazier than crazy the world of the OIL traders clearly is, I want to give you some sort of an insight into how the commentary I watch every day gives me at least some clues and why I was still saying “wait”! Having traded the price of crude up rapidly at the beginning of the week merely on speculation, because that is after all what traders do, the tone of the commentary changed on Thursday, these are the headlines of longer comments:
UPDATE 4-Oil falls below $116 as supply risks reassessed Thursday, 29 August 2013 12:19 PM ET…*Obama wants to punish Syria, but faces growing opposition. *Unlikely any Syria attack would cut Middle East oil output- analysts. LONDON, Aug 29- Brent crude oil dropped below $116 a barrel on Thursday as the possibility of a delay in a U.S.-led military strike on Syria helped calm concerns
Hmm, I thought to myself, if it was “unlikely” the supply would fall what on earth were the gains rested on all week? This arrived 14 minutes later:
Could oil prices fall on Syria strike? Kemp Thursday, 29 August 2013 12:33 PM ET…Could the commencement of military action against targets in Syria be the trigger for oil prices to turn lower? Between June 6 and July 23, U.S. light crude oil futures rose by nearly $14 per barrel while Brent futures were up $5 Source: Reuters | By: John Kemp
Now talk of the strike could be a “trigger” for lower prices! Interesting that the traders had not considered that until they had made all their gains earlier in the week, but perfect for them to be able to find a reason to “sell, sell, sell” and take some hard earned profits for their weeks work! I wish I was making this stuff up. Look what happened at the end of the day:
Oil sinks as Syrian action remains uncertain Thursday, 29 August 2013 9:07 PM ET. NEW YORK, Aug 29- Oil prices on both sides of the Atlantic dropped sharply a few minutes ahead of the market close on Thursday as traders sold contracts and booked profit ahead of the holiday weekend as a U.S.-led strike on Syria remained uncertain
So as you can see to the traders it is simply a big game of monopoly with zero interest in sides or victims. I find that simply shocking. However, if you doubted that military strikes and OIL were linked, this turned up early Friday:
US consults oil experts as it weighs action against Syria Friday, 30 August 2013 1:19 AM ET WASHINGTON, Aug 29- Obama administration officials have contacted energy experts in recent days to discuss oil market conditions as the president weighs a military strike against Syria, sources familiar with the matter told Reuters Source: Reuters | By: Timothy Gardner and Roberta Rampton
Then our Parliament drops its own bomb and reaction to their historic vote makes a big impact:
UPDATE 1 Brent falls toward $114 as Syria concerns ease Friday, 30 August 2013 5:49 AM ET *British parliament says no to Syria strike. *Saudi Arabia to pump record crude volume in Q3- PIRA. SINGAPORE, Aug 30-Brent slid toward $114 a barrel on Friday as fears over supply disruptions in the Middle East eased slightly after Britain said it will not join any military action against Syria
Interesting that the commentary goes back to mentioning the fear over supply disruptions when the day before these had been suddenly discounted to create a market to sell. It goes on through the day:
UPDATE 3-Oil falls below $115 after British Syria vote Friday, 30 August 2013 9:50 AM ET LONDON, Aug 30- Brent crude oil slipped below $115 a barrel on Friday as fears over supply disruptions in the Middle East eased after Britain said it will not join any military action against Syria Source: Reuters | By: Christopher Johnson
Hmm, again! I think we already got this – time for profit taking:
Supply picture signals limited upside for oil prices Friday, 30 August 2013 10:10 AM ET As fears over Syria eased on Friday and oil prices edged back from recent highs, most industry watchers think further upside is limited with one saying it could be time to take profits. Source: CNBC.com | By: Katie Holliday
Now suddenly to save some face – or just to find something to put in the constant commentary – other nations that actually really do have an impact on OIL supply are mentioned:
OPEC Aug oil output falls on Libya, despite Saudi boost-survey Friday, 30 August 2013 12:23 PM ET. LONDON, Aug 30- OPEC crude output declined in August as unrest and conflict in Libya disrupted supplies, a Reuters survey found on Friday, outweighing extra oil from Saudi Arabia and a recovery in Iraq
And what do we discover? It seems that whilst the pretence that any strikes in Syria would disrupt supply as an excuse for traders to trade crude up to six month highs, Saudi Arabia had already been pumping away additional supplies to cover other OPEC issues all the time:
UPDATE 1-OPEC Aug oil output falls on Libya, despite Saudi boost-survey Friday, 30 August 2013 3:27 PM ET. LONDON, Aug 30 – Saudi Arabia, the world’s largest oil exporter, has boosted output in August to a record high, a Reuters survey found on Friday, partly offsetting a plunge in Libyan supply that has reduced OPEC output Source: Reuters | By: Alex Lawler
The fall continues through Friday and I know that by the time the close of trading has occurred the heating OIL wholesale price will have finally started falling for the first time this week:
UPDATE 6-Oil edges lower as UK lawmakers reject Syria attack Friday, 30 August 2013 4:11 PM ET *British parliament votes against Syria attack. NEW YORK, Aug 30 (Reuters) – Brent crude oil fell on Friday in choppy trading as fears of Middle East supply disruption receded after Britain said it would not join any military action against Syria Source: Reuters | By: Anna Louie Sussman
Then this extraordinary comment comes out from an “expert” who probably earns outrageous amounts of money to know about this stuff:
Expect to see oil markets rally higher: Pro Friday, 30 August 2013 6:22 PM ET CNBC Contributor Addison Armstrong discusses the action in the oil market on Secretary of State John Kerry’s comments about U.S. military action in Syria. “I would expect to see the oil markets rally higher into the close and end positive,” he says
Only for his prediction to be 100% incorrect by this actual data just over one hour later:
UPDATE 8-Oil slides after US makes case for action against Syria Friday, 30 August 2013 7:31 PM ET NEW YORK, Aug 30- Brent crude oil fell in volatile trade on Friday ahead of a long weekend in the United States as U.S. Secretary of State John Kerry made a forceful case for a “limited” strike against Syria Source: Reuters | By: Anna Louie Sussman
And the price of crude – and therefore the wholesale price for our heating OIL – continued to slide to the end of the day on Friday.
Obama’s speech: then we came to Saturday – OIL markets closed for the weekend – and whilst the world thought we would most likely be watching the aftermath of some sort of US-led military action at some point over the weekend, we got that incredible speech from Obama. I felt extraordinarily proud that our Parliament’s vote had made the US stop – maybe just for 9 days – from thinking it should simply act as policeman to the world once again, no matter what any other country thinks.
Why was I still saying “wait” last week when prices were escalating? Simple: I do NOT believe in buying anything that has rapidly risen on speculation, simply to serve the purpose of the greed of those who have created the spike, when there was not one single concrete reason for that spike to have occurred other than the self-interest of those creating the spike. As I said, I wish I was making this stuff up.
What next? We have at least nine days before the military strikes can occur and that is a very long time in the crazy, opaque world of the OIL trader. What do you think will happen tomorrow? I have zero doubt which way crude will go on Monday, but not one iota of a clue if that fall will go on for a week or more or not at all! What I do know is that I will watch the commentary and wince at the level of stupidity that these people inflict on us. Then I will wonder, with deep concern, what goes on behind closed doors that we don’t actually see in the commentaries. Oh, and I will continue to say “wait” for now.