Bunny hop oil

I like the market term for our current state, a bunny market, it sounds all comforting, soft, fluffy benign even. In reality though it’s meant to convey the state of the market now in a series of hops up and downs. I believe some of that is down to the unprecedented number of trades there are now and the ease of making them. Anyone can do it on their computer, laptop, tablet and smart phone anytime, all the time and seemingly anywhere and you can do it on credit too. This makes me very uncomfortable. We’re in uncharted territory here and I feel our soft bunny is blind and may jump off the cliff and take a lot of folks with it.

If one believes the IEA (International Energy Authority) one may think that the worst is behind us and drops in supply and increases in demand will mean that the oil market may be a better state in 2017. The trouble I think with that is that the IEA is assuming OPEC and other major producers including the U.S., Russia and even Canada are going to play nice. Yeah right.

The more likely scenario is that the oil war will go on with each faction desperate to preserve or increase their market share even if it means the mutual crippling of the industry. Maybe we should let computers run the market. Couldn’t be much worse in my opinion as the collateral damage of job and business losses mount.

In turbulent markets oil did get to stay briefly above the magic US$50 a barrel mark but at the time of writing WTI was back at a little over US$47 a barrel and looked to be heading further south. I expect that it will consolidate and a further assault on $50 will happen again. Whether it will stick remains to be seen.

I think we may have seen the bottom of the pricing but the bottom of the decline in the oil industry is still some way off. I read recently that there is another US$1 trillion cuts in spending on the way. On the upside I’ve also read that the demand for natural gas in the U.S. is expected to rise and with it maybe a hike of up to 15 per cent in the price, we’ll see.