Trade24Fx

Mega Deals, Vaccines and the Doom of the Oil Market

Short
TVC:USOIL   CFDs on WTI Crude Oil
Financial markets started the week in rather high spirits. The growth of positive sentiments was facilitated by the mega-deals news. First of all, we are talking about NVIDIA's agreement to buy the British chip designer Arm from the Japanese SoftBank Group Corp for $ 40 billion. And although there is still ages before the deal is completed (it will take about 18 months to agree on the deal: it must be approved by the United States, China, Great Britain and the European Union) , it may well change the balance of power in the global semiconductor market.

In addition, Oracle said that together with the Chinese ByteDance, they will ensure the functioning of TikTok in the United States. Thus, Microsoft has lost the war.

Finally, Gilead Sciences has offered to pay $ 21 billion for the biotech company Immunomedics .

Information from AstraZeneca about the restoration of the third phase of trials, as well as from Pfizer about the start of the third phase and the promise of the head of the company by the end of October to provide a vaccine ready for production, also contributed to the positive background.

It should be noted that the markets traditionally work out not actual news, but future expectations. Because from the “here and now” position, there are no particular reasons for buying. The situation with the pandemic on a global scale continues to worsen, which increases the risks of a second or third wave. And this problem is here and now. Besides, here and now it is unsolvable.

Among those who have been consistently unlucky lately is the oil market. OPEC published its monthly report and extremely disappointed oil buyers with the forecasts for global oil demand (expected at 90.2 mb / d, which is 0.4 mb / d lower than previous estimates). And if we add to this the revision of the British BP's strategic forecasts for the peak of oil demand the situation looks even worse. BP expects in the middle of this decade, that the demand for oil will reach its peak, after that it will begin to decline for a long time ( oil will be gradually replaced by alternative energy sources). So, in the long run oil market in its current form is doomed.
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Comments

We passed peak oil production in the last five years.

Oil is not doomed.

Demand is muted in the short term.

The world needs oil for more than cars and planes.

The next major move in oil will kick start the 4th industrial revolution as the U.S. transitions to utilizing Natural Gas and renewables.
+2 Reply
Trade24Fx EvilMarketMorty
@froiland, thank you for your comment and position. but looks like you are not well aknowledged with the situation in the oil market (nothing personal, this conclusion is based on your comment). If you would like to discuss the real situation with figures and facts (not just subjective opinions), please, let me know.
+1 Reply
@Trade24Fx,

First. Aknowledged isn't even an appropriate word.

Second. I've been trading Oil and Eurodollars Options since 2006. I know exactly what I'm talking about. I made simple points because I'm not writing a dissertation here. I know the real situation.

Third. It's not subjective or an opinion, it's a fact. Stick to FX, you don't know what I know about oil. That I can guarantee.

Peak oil has been analyzed for decades. Original analysis never anticipated China's growth to the consistent levels it was hitting. Global oil demand is down because of a global insolvency crisis, COVID is the lightning rod.

Oil is settled in the U.S. dollar on -- EVERY SINGLE CONTRACT.

I have read through -- EVERY SINGLE CONTRACT. It was my job.

Petrodollar is not a cliche, it too is a fact.

China is buying as much as it can because it does not have any as a natural resource, and storing them in vessels off shore since they have no where to put it. At $40 oil, you can do that. They are also drilling in the Arctic with Russia where an estimated 13% of the World's remaining untapped reserves are left. They're delusional end goal is to convert it to the PetroYuan --not going to happen because -- EVERY SINGLE CONTRACT -- settles in U.S. Dollars. And until there is another Plaza Accord or Bretton Woods type agreements -- it's not going to change.

Solar Cycle 25 starts a Solar Minimum which could last decades. This will result in lower than average temperatures. When temperatures drop energy prices rises, when energy prices rise, fatality rates rise as well.

The demand for oil is not going away, it is on pause. Banks have started the new credit cycle and starting on October 16th, interbank lending will start to reveal the real cracks in the system. The only option to get cash is to sell assets, i.e. commodities. That will put downward pressure on oil. And if you know countries need cash (China), and they are hoarding commodities (Copper and Oil) then you (United States) can make them hemorrhage their supply at lower prices.

When you control oil and debt, you control the world, and you set the prices.

Don't @ me with anything about oil. I will run circles around you. This is not a TA problem you can chart as "figures and facts". It is a decades long Geo-political one -- and people will suffer. The only TA you can apply to oil is that it won't spend much time below $39.50.
+2 Reply
Cherryboy EvilMarketMorty
@froiland, Hell of a reply! Thanks for your insights!
+1 Reply
Trade24Fx EvilMarketMorty
@froiland, Ok. So lets discussion starts! It is always a pleasure to find something new and get additional experience
Reply
Trade24Fx EvilMarketMorty
@froiland, If you wouldn't mind, lets concentrate on fact and figures instead of personal experience etc. I mean I trade since 2004 and how this fact change the situation in the oil market? Or you have mentioned dissertation. Ok. I have written one in economics and have PhD and how this fact change the situation in the oil market? I mean lets concentrate on the essence of the problem
Reply
Trade24Fx EvilMarketMorty
@froiland, if you wouldn't mind I will discuss your main ideas one by one
Reply
Trade24Fx EvilMarketMorty
@froiland, "We passed peak oil production in the last five years". Lets talk about this. Till 2019 we have the growth of oil production in the world statista.com/statistics/265203/global-oil-production-since-in-barrels-per-day/. So how can we pass the peak if we were at the peak? 2020 is of course an exception. As you have already mentioned.
Reply
@Trade24Fx,

Growth in oil production has little to do with peak oil as it is not the measure that matters, which is -- proven oil reserves.

Oil production can keep going up, but there are only so many oil reserves left in the world. And we know where they all are. Proven and estimated.

We are passed peak oil.
Reply
Trade24Fx EvilMarketMorty
@froiland, Ok. Thank you for clarifing me your vision of "oil peak" definition. Still cant agree with "And we know where they all are. Proven and estimated". The world is still making huge oil discoveries. And in general this is a very old song about limited resource, there are counted years left and things like that.
Reply
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