Saturday, November 29, 2014


Update: "Lower oil price could stoke US stock bubble"
Update II:"Oil: So Where Does the Decline Stop?"
Original post:

I'm Troy McClure. You may remember me from such earlier posts as:
Nov. 4
"Energy shares lead Wall St lower in broad decline" (XLE; ERY) 
You may remember us from our previous hit posts such as October 21's "Oil Sell-off, the Goldman View (XLE; ERY)":

We are seeing a lot of recommendations to buy hydrocarbon companies and want to note:

It's Too Early
More to come.
Oct. 22's "WTI Crude Slides Below $81":
It's Too Early
Or Oct. 27's "Oil: Goldman Lowers Forecast, Brent and WTI Both Down":

It's Too Early

Repetitious but at least we varied the type size/face.

And we still think the broader market is going higher.
The XLE has just rebounded a bit, $84.14 down $1.90 (2.21%).
The triple levered inverse ERY up $1.24 (6.82%) at $19.42 with a target of $21.00.
WTI $76.45 down 2.96% on the day....MORE
WTI settled at $66.15 yesterday, Nov. 28 and the ERY closed at $21.92 up $3.57 or 19.46%. 
Now what?
We'll get to that over the course of the weekend but first a look at where we're at right now:

Prices were down along the entire curve (CME) but the contango steepened dramatically.
Our $70 target was beaten handily and I'd expect some countertrend action on Monday. 
The ERY is a triple levered inverse of the XLE, be careful. On Friday the triple-levered gold miner ETF NUGT was down 25.05% (4.01) at $12.00. These things are dangerous.
Brent $70.15. 

From the FinancialTimes:
Market rout as oil slide rocks energy groups
Shares in the world’s biggest energy groups have tumbled in a market rout as plunging oil prices put at risk billions of dollars of investment and jeopardised future supplies of crude.

The sharp slide in the price of Brent oil after Opec’s decision not to cut output triggered warnings that oil companies would cut as much as $100bn of capital spending in response, imperilling the US shale bonanza and threatening much Arctic oil exploration.

Meanwhile oil’s fall continued to play havoc with the currencies of oil exporting countries, especially Russia. At one point on Friday, the rouble slid to a record low.

Leonid Fedun, vice-president of Lukoil, Russia’s second largest crude producer, told the Financial Times that Opec was trying to turn the US shale oil “boom” into a “bust” for smaller producers.
He compared the surge in North American shale to the dotcom and subprime mortgage booms, and said Opec’s objective now was “to get small producers with large debts and low efficiency to pack up and leave the market”.

Opec said on Thursday that it was leaving its output ceiling of 30m barrels a day unchanged, prompting a swift 8 per cent drop in the oil price, which was already down by nearly 40 per cent since mid-June. Brent fell $2.80 on Friday to $69.78, a four-year low....MORE
“We cannot overstate what a dramatic and fundamental change this is for the oil market,” said Mike Wittner, senior oil analyst at Société Générale.
That would be a bingo.

Hi, I'm Troy McClure from Chris Coleman on Vimeo.