Will Oil keep sliding?
Probably. But is this the end?
US demand has eased. At the same time, Russian, Indian and Chinese demand is surging.
Chinese car demand continues, although it seems to have slowed in July to 488K units. http://www.reuters.com/article/marketsNews/idUSSHA37382520080808
Russian and Brazilian sales are strong, averaging 240K cars per month each. http://www.economicnews.ca/cepnews/wire/article/104486
India adds 100K cars per month. http://www.reuters.com/article/rbssAutoTruckManufacturers/idUSDEL18269120080710
What does this mean for fuel consumption?
The car market in these 3 countries is growing 1.1M cars per month. The US has ~100M cars and total mileage driven has sagged ~2.2%. In car terms, that’s about 2.2M cars not driving or 2 months of these countries new car demand. There have been 3 months of US oil consumption sluggishness, so the US shortfall will be offset in 3 months.
It is hard to argue that oil demand will surge if the global economy slows. And oil supplies are increasing. Should we count on an Iranian attack or a Hurricane to reduce supply? No, but maybe OPEC will step in to keep oil ~$100+. That will make our marginal producers still profitable.
Will it be enough? I don't know. I am suspecting that I made the wrong move with respect to the gas and oil calls.
US demand has eased. At the same time, Russian, Indian and Chinese demand is surging.
Chinese car demand continues, although it seems to have slowed in July to 488K units. http://www.reuters.com/article/marketsNews/idUSSHA37382520080808
Russian and Brazilian sales are strong, averaging 240K cars per month each. http://www.economicnews.ca/cepnews/wire/article/104486
India adds 100K cars per month. http://www.reuters.com/article/rbssAutoTruckManufacturers/idUSDEL18269120080710
What does this mean for fuel consumption?
The car market in these 3 countries is growing 1.1M cars per month. The US has ~100M cars and total mileage driven has sagged ~2.2%. In car terms, that’s about 2.2M cars not driving or 2 months of these countries new car demand. There have been 3 months of US oil consumption sluggishness, so the US shortfall will be offset in 3 months.
It is hard to argue that oil demand will surge if the global economy slows. And oil supplies are increasing. Should we count on an Iranian attack or a Hurricane to reduce supply? No, but maybe OPEC will step in to keep oil ~$100+. That will make our marginal producers still profitable.
Will it be enough? I don't know. I am suspecting that I made the wrong move with respect to the gas and oil calls.
posted by Andrew at
7:02 AM
6 Comments:
"I am suspecting that I made the wrong move with respect to the gas and oil calls."
Hi Andrew,
If you believe in the long term growth of these companies why not buy on dips and hold for the long term. Don't second guess yourself. That will be a sure way to lose money.
Of course if you are reanalyzing the situation and see something else going on, then it could be time to cut your profits, but I assume that is not the case?
Great question. The recent purchases are options mostly expiring in January. So it's a decision that can't wait for much longer
http://seekingalpha.com/article/90213-energy-stocks-are-too-cheap-to-ignore-barron-s?source=front_page_most_popular_articles
Did Liverocket take profits in dug ? Its heading to 30 after futures expiry..
There is one problem with your calculation in regards to new cars being added in Russia, Brazil, and India compensating for decrease in US driving.
People in these countries don't drive as much as a US driver.
I would suspect it is a fraction
of the US average.
Also, I hear that driving has marginally decreased in India now that the gasoline price was raised
by Rs 5.00 recently.
LR has not taken profits yet in DUG. I plan to sell $39~$40. I've been watching and waiting
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