FULL CREDIT TO THE EXPERT WHO CORRECTLY PREDICTED THE OIL PRICE CRASH
By John Donovan
In June of this year Forbes.com published an extensive prescient article by Jesse Colombo, an economic analyst, under the headline:
“9 Reasons Why Oil Prices May Be Headed For A Bust”
His prediction made 6 months ago:
“There are a growing number of reasons, however, why crude oil prices are likely to finally experience a bust in the not-too-distant future.”
Some further extracts from his brilliant article, which deserves reading in full.
While extreme aggregate trading positions can persist for quite a while, as is the case in the crude oil market for the past few years, they are still a reliable indication that a powerful market reversal is likely to occur when the proper catalyst eventually appears and sends speculators heading for the exits. So far, no bearish catalyst has presented itself in the crude oil market, but the other points that I’ve listed in this piece may combine to form a perfect storm that finally causes the oil market to crack.
The 9 cited reasons are:
1) The unwinding of record speculative bullish bets
2) The “smart money” is growing increasingly bearish
3) The global monetary environment is tightening
4) The shale oil boom is increasing supply
Surging North American oil production, courtesy of the recent U.S. shale and Canadian oil sand booms, is dramatically reducing U.S. oil imports and has even led to a glut of light, sweet crude oil in the United States.
5) Production is starting up again in many countries
6) OPEC’s limited ability to boost prices by cutting production
When oil prices dropped significantly in the past, OPEC countries would cut their oil production to bolster the price of oil. Growing fiscal deficits in many OPEC nations in recent years, however, make it far more difficult to cut oil production because these countries can no longer afford the loss of oil revenues.
7) Global oil demand is slowing
Led by China and other emerging nations, global oil demand spiked in the years following the 2008 financial crisis, which contributed to oil’s bull market. Since 2011, oil demand growth has slowed significantly to a half-decade low largely due to the ongoing economic slowdown in China and emerging economies:
8) The global economic “recovery” is actually another bubble
9) The ending of the commodities supercycle
Link to the full article with explanations for all 9 reasons.
(Jesse Colombo is an analyst and anti-economic bubble activist who is currently warning about growing bubbles in Canada, Australia, Nordic countries, China, emerging markets, Web 2.0 startups, U.S. higher education, and more. He believes that the popping of these bubbles will cause the next financial crisis.)
Oil’s Swift Fall Raises Fortunes of U.S. Abroad: NEW YORK TIMES 24 DEC 2014
BRUSSELS — A plunge in oil prices has sent tremors through the global political and economic order, setting off an abrupt shift in fortunes that has bolstered the interests of the United States and pushed several big oil-exporting nations — particularly those hostile to the West, like Russia, Iran and Venezuela — to the brink of financial crisis.
After a precipitous drop, to less than $60 a barrel from around $115 a barrel in June, oil prices settled at a low level this week. Their fall, even if partly reversed, was so sharp and so quick as to unsettle plans and assumptions in many governments.
But the biggest casualty so far has probably been Russia…