CME’s Chief Economist and managing director Blu Putnam recently wrote a report focusing on 8 specific factors that could influence the energy market in 2016 and beyond. The energy markets are what I like to follow, and I think the content of this report is worth reading.
As commodity traders we all know that the Crude markets have been quite a topic of debate and volatility in 2015 from the 2014 sell off. We witnessed a market that sold off 50-60% of value in less than a year, trading from $100 a barrel to lows under $40 a barrel. This has definitely hurt the oil and gas industry and has left traders and producers guessing on where we could be going from here. With many of the oil/gas producers weighed down by debt, there was no let up on production flows as they needed the incoming cash to pay their obligations. We have seen energy related MLP’s (Master Limited Partnerships) get destroyed this year, and the MLPs that have survived had to enact new short term and long term adjustments to fit this “New Normal” of oil and gas prices. The question is, is this increased supply in a time of lower prices adding fuel to the fire? Well that in my opinion is why we haven’t had the quick rebound in crude prices. So where do we go from here? That is the ultimate question we are looking into, and I believe Blu Putnam tries to address this in his report. Crude oil has seemed to find some equilibrium in $45-$50 range and this could be the new fair market value of crude, with the outside exception to geo political events or global demand changes. Where are we going to go in 2016 and beyond?
The report covers 8 factors to consider–4 short-term and 4 long-term. In a nut shell, these topics are as follows:
Short Term:
- Continued Growth of Production in the US
- Increased production from the Middle East – Iran agreement
- Slow Global Growth – China
- An El Nino Impact on 2015-2016 Winter
Long Term:
- LNG Exports from the United States
- Declining North Sea Crude Oil Production
- Delinking of Natural Gas pricing from Crude oil in Europe and Asia
- Potential for U.S. ban on crude oil exports to be lifted
I strongly encourage that you download the short report and read each factor and its supporting information.
If you have any questions regarding the energy markets, do not hesitate to contact me directly here at Daniels Trading. I also have recently launched a newsletter the “Market Dimensions Advisory” where I provide my trading ideas and market opinions in email and video form. It’s free to sign-up, and you can register below.
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