Technical & Fundamental Oil Reports Specialists

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IEA takes a knife to oil demand

Published Tuesday, October 14th, 2014

US stock markets and oil began the week as they ended last week – under pressure. The S&P lost 1.7% and dipped below its 200-day moving average for the first time since 2012. It is now 6.8% below its record high of last month. The VIX ended the day at 24.64, its highest close since June 2012.

Hints from the Vice Chairman of the Federal Reserve that they would take into account the state of the global economy in making interest rate decisions led to dollar weakness, but did not stop the stock market slide. The slide was led by energy stocks, responding to oil price pessimism and airline stocks responding to the potential Ebola fall out.

The weaker dollar failed to support oil prices which came under further selling pressure as evidence builds up that key OPEC members will defend market share rather than price. Reports circulated that the Saudi’s had briefed to that effect and yesterday Qatar joined the price cutting stampede that has already engulfed Saudi Arabia, Kuwait and Iran.

It makes no sense at all for OPEC members to try and defend price by cutting production only for non-OPEC producers to jump in and grab market share. The chief economist of the IEA believes that at $90bbl no oil will be shut in and shale oil production needs $80bbl, which basis Brent at current differentials translates to $67 at Bakken.

to read the rest of the report, please click here 

Posted by David Hufton