Growing US inventory, Shale revival dampening crude prices: Vandana Hari
In a chat with ET Now, Vandana Hari, Analyst, Vanda Insights, says, despite US stockpiles, the 1.8 million barrels per day cut by OPEC and non-OPEC countries, will remain a major bullish force in the markets.
Edited excerpts:
What would you attribute this sudden U turn in the commodity markets to? Across the board base metals as well as precious metals and even crude have slumped. Why do you think this is happening?
Is it just going to be downhill from here or is this just a temporary blip? Now of course there was a major reason. There was a huge 8.2 million barrel build up in US crude and that is not just a one week phenomenon. We have seen eight-nine successive weeks of increases in US crude stock piles which every single week have been hitting fresh historic highs.
That is the reason but I still think the market was probably a bit oversold. As you were just discussing the major 1.8 million barrels per day cut by OPEC and non-OPEC, this will remain a major bullish force in the markets. The sentiment is definitely vulnerable because the market will continue looking for proof. There are reports of very good compliance but those are just reports at the end of the day but proof the markets needs is in the inventory. Are these inventories going down or not ?
A lot of people that we spoke about mentioned that the US and the inventories and the frackers etc. are now the key determinant of what happens to crude prices. Arguably, this is why some of the people are betting on aviation stocks as well. They do not believe crude will go above a $65, $70, $80 per barrel mark anytime. Would that be a safe assessment?
US crude data is important because that is the only timely and frequent data we have on inventories. The market would like to have a look at global inventories -- the figures released by the international energy agencies but those are weekly figures which come with a lag of two months.
In the absence of any other concrete and timely proof, the market looks to US inventories but that is not the only factor. Another major factor which is exerting a bearish influence on prices is the continuous climb in the oil rigs drilling in the US. This week in Houston, at a major energy conference, the talks seems to be dominated by revival in the Shale industry and US crude production is continuing to inch up past several weeks. It has only gone in one direction which is up so. That is also a major bearish influence right now.
Edited excerpts:
What would you attribute this sudden U turn in the commodity markets to? Across the board base metals as well as precious metals and even crude have slumped. Why do you think this is happening?
Is it just going to be downhill from here or is this just a temporary blip? Now of course there was a major reason. There was a huge 8.2 million barrel build up in US crude and that is not just a one week phenomenon. We have seen eight-nine successive weeks of increases in US crude stock piles which every single week have been hitting fresh historic highs.
That is the reason but I still think the market was probably a bit oversold. As you were just discussing the major 1.8 million barrels per day cut by OPEC and non-OPEC, this will remain a major bullish force in the markets. The sentiment is definitely vulnerable because the market will continue looking for proof. There are reports of very good compliance but those are just reports at the end of the day but proof the markets needs is in the inventory. Are these inventories going down or not ?
A lot of people that we spoke about mentioned that the US and the inventories and the frackers etc. are now the key determinant of what happens to crude prices. Arguably, this is why some of the people are betting on aviation stocks as well. They do not believe crude will go above a $65, $70, $80 per barrel mark anytime. Would that be a safe assessment?
US crude data is important because that is the only timely and frequent data we have on inventories. The market would like to have a look at global inventories -- the figures released by the international energy agencies but those are weekly figures which come with a lag of two months.
In the absence of any other concrete and timely proof, the market looks to US inventories but that is not the only factor. Another major factor which is exerting a bearish influence on prices is the continuous climb in the oil rigs drilling in the US. This week in Houston, at a major energy conference, the talks seems to be dominated by revival in the Shale industry and US crude production is continuing to inch up past several weeks. It has only gone in one direction which is up so. That is also a major bearish influence right now.
