Even with oil barely over half of what it fetched in June of 2014 and the active drilling rig count doing better than (December 20, 2016 – 257, December 16, 2014 – 420; source JWN Rig Locator) compared to two years ago, it is obviously reckless to declare next year a success while it hasn’t even started yet.
However, it appears 2017 will provide significantly better times than the two previous years perhaps not by design but by exception. It won’t be as bad as 2016 because oil and gas prices are higher and it looks to be headed in an opposite direction from 2015 which was characterized by continuous contraction. Historically, most times this industry looks forward with even modest optimism it has been incorrect. The herd always seems to be going in the wrong direction. Super.
However, the recent OPEC and non-OPEC cooperation meetings have placed a floor under oil prices. Bloomberg News ran a headline December 18 declaring, ‘OPEC Deal Makes Oil Investors Most Bullish Since Slump Began’. It reported about the weekly data from the U. S. Commodity Futures Trading Commission where speculators report trading positions. The last time this many traders were going ‘long’ on crude was July of 2014. Meanwhile, the shorts continue to retreat. One New York hedge fund manager said, ‘There’s been a full embrace of the OPEC, non-OPEC deal. They are being given the benefit of the doubt. The consensus is supplies will tighten quickly and as a result investors are positioning for higher prices in the near term.’
This post was published at Zero Hedge on Dec 29, 2016.
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