Crude: Different worlds

My view of the two reports is that the International Energy Agency is wrong. It is kind of funny to say this but OPEC, with its compliance to production cuts and its more accurate forecasts, has gained more credibility than the International Energy Agency. The IEA has time and time again underestimated demand and this time instead of looking at the very strong economic fundamentals they are betting on warm weather to make their forecast come true. There is no doubt that weather influences dem or oil, but I think it’s dangerous to make a demand prediction on just a weather forecast. I wonder if they like to err on the side of bearish forecasts because they represent consuming nations and a report that might make oil prices rise might not make their bosses too happy.

Fox News and the AP report that rating agency Standard & Poor's says Venezuela has defaulted on its debt after it failed to make payments due on some of its bonds. The agency said Tuesday it was downgrading Venezuela's sovereign debt grade to SD — short for "selective default," which means the country decided to skip a payment on a specific bond but is overall still committed to honoring its international debts. Previously it had Venezuela in junk bond status. S&P said Venezuela had failed to make $200 million in coupon payments for bonds due 2019 and 2024 within the allowed 30-day grace period. The agency says, "there is a one-in-two chance that Venezuela could default again within the next three months." There is also a chance that their oil production will continue to fall.

Venezuela’s crude output dipped last month below 2 million barrels per day, its lowest level in 28 years as the Maduro Government steals the wealth from the Venezuelan people. For a country with the largest oil reserves in OPEC to be producing less than 2 million barrels a day in an oil-dependent economy is nothing less than reckless disregard and neglect and outright theft by the Venezuelan government.  The Venezuelan people deserve better.

We also got the Monthly Shale Production report from the Energy Information Administration. The EIA according to Dow Jones reported that oil production from the U.S.'s main shale regions to rise another 80k bpd in December, to 6.2M bpd, as hydraulic fracturing and horizontal drilling, common in those areas, continue to make up a larger portion of overall U.S. output of 9.2M bpd. The monthly Drilling Productivity Report also says drilled-but-uncompleted wells, or DUC's, rose again in the shale regions to 7,342 wells last month, from 7,204 in September. Many analysts had expected those DUC inventories to start falling by now, but low oil prices all summer long may have forced producers to hold off on bringing wells to the production stage according to Dow Jones.

The DUC” S is not going down because many shale producers are not making money and it is hard to get a frac crew. DUCs will continue to rise until oil is firmly above $60 a barrel. In the meantime, most of the bearish oil arguments are falling apart. Oil is overbought but hanging near a two-year high. Gasoline RBOB futures fell weighing on the complex.

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