Wednesday, August 19, 2015

Oil Prices Are Heading Toward $8 a Barrel

Just kidding.
I was about to sign off on the post below on $20 oil when I was shown this from CNN Money:
Why oil prices could sink to $15 a barrel
And, being as competitive in the crazy headline department as anybody, thought, hell, we can go to $8!
WTI $42.13 down 49 cents.

From Barron's:
As large speculators liquidate positions, crude could cascade to $20, creating a buying opportunity.
Oil prices, which skidded to a 6½ year low of $41.35 a barrel last week, could fall to $20 as professional speculators sell. That’s the prediction of Steve Briese, editor of the Bullish Review of Commodity Insiders, and a key source for Barron’s prescient March 31, 2014, cover story, “Here Comes $75 Oil.” A $20 capitulation low could lead to a rebound, he says.
With West Texas Intermediate, the U.S. benchmark crude, trading at $100 a barrel in March 2014, our cover story struck many readers as too bearish by half. It turned out to be too modest by half. Investors can use exchange-traded funds such as the United States Oil fund (USO) to invest in oil futures; ETFs such as the Energy Select Sector SPDR (XLE) target energy stocks. Both funds may have further to fall. 
WTI crude hit an all-time high of $146 a barrel in July 2008, before plummeting to $32 in December of that year. By March 2009, it was actually on the rebound. Based on this trajectory, a plunge to $20 from a July 2014 high of $108 would be more modest in dollar terms. In Briese’s view, the dynamic would be similar.
Large speculators hold a huge long position in the oil futures and options market on the New York Mercantile Exchange....MORE
We were so impressed with the "$75" story that we didn't just link to it on the Saturday it appeared in Barron's but again on the following Monday at $99.29 WTI.

We mentioned it again in January 2015's "Credit Where Credit Is Due: Barron's Cover: "Here Comes $75 Oil" March 29, 2014" with oil at $49.2.7.
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