I love it.. I have used this board as a source of public opinion and dumb money positioning for a couple months and just nailed almost every bounce...
You have to be flexible on this, it's going to be volatile all the way down and eventually back up. My opinion is oil is heading to $30, no clue where that will put USO, but it will be substantially lower. overproduction in an time of already worldwide oversupply is going to crush this thing... but again my $.02
Doesn't matter if I'm right or I'm wrong, I'm making money week over week!
PS- short as of yesterday and moreso today! (cashed out last Wed on my short then and went to Vegas!)
there is the perception of higher demand floating out there, and there is some truth to it, but the daily use and weekly US numbers in my opinion aren't as meaningful as the world wide numbers which all point to oversupply, especially this week with China coming out and saying they are filling up on oil and their demand should be dropping soon.
Oil is a global game and N America is not the player with the most chips at the moment. In fact they may be going in full tilt at this point (love poker analogies)!
Canadian oil is around $40/brl to produce, US Shale is around $30...that based on something city produced earlier this week charting the sources of oil and cost to produce. For reference, middle east oil is more like $5-10 depending on country.
Everyone is continuing to pump as much oil as they can while the value of it is still above their cost to produce. Basically, if they can't make their target earnings from the amount they produced, they'll produce more to get closer to targets. For Russia, their budget is dependent on oil so the lower it goes the more they have to sell to cover their budget. All of this leads to continued excess supply.
When the weekly inventories keep coming out and showing a huge supply (expect more articles like "Where will we put this oil?") the price will continue to fall and balance over time around $40 as the thought will be if Canada has to shut in essentially the supply/demand should come closer to even. If that's not enough, it will continue lower to the $30 area with the same thought process for US shale. This is where I think the US supplies will see a decline in weekly inventories either because this is the magic spot of supply or because refineries will kick back on and the demand side will increase.
If someone wants to do some more homework and figure out the amount of supply coming from these sources it may help verify or bust my theory here.
I agree with you on everything you've said in your posts careful_investor, with the exception of one aspect.
I don't think Cushing will hit capacity. I think we will continue to see gains until everyone is only talking about the fact that Cushing will hit capacity at which point the level of panic and fear causes the bottom to fall out on oil and is crosses the point of profitability for Canada and then conventional US onshore oil (which is right about $30).
then, based on simple supply/demand the surplus slows until we are actually again using that stored oil, but the price remains static right near the $30 price point preventing the supply side from ramping up again until we are back to some level of storage. Who knows what that level will be, 70% of total capacity at Cushing? 50%?
That is the way I see it based on supply/demand+fear.