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Is Oil Actually in a Bear Market?

Here's why we say no...

Posted July 5, 2017 at 5:03PM

Oil prices were on a streak this month, rising almost every day… and yet crude prices fell yesterday after they bounced against the top of their trend.

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Yesterday’s drop has been caused by the usual suspects.

OPEC and Russia have agreed to extend their respective production cuts through March of 2018, but Russia isn’t willing to cut production any further than it already has.

Crude was already faltering, and that news didn’t help. WTI Crude is currently sitting at $46.48.

Fake News

The term “fake news” was all over the U.S. presidential election last year, with many saying that the fake news reports helped elect Trump, even while the Trump camp has said the main street media is creating news to discredit him.

Many news sites pretend to crack down on it, all the while pushing their viewpoints and clutching their pearls when they are called out on their hypocrisy.

Obviously, the games only get more prevalent once real money is on the line, like on Wall Street.

Every side talks their book. Morgan Stanley says sell, while in-house they are buying and visa versa. It’s how the game is played.

Right now the talk on the street is that oil is going down. There is too much supply they say, not enough demand, they’ll cluck.

Hogwash. They are simply trying to cover their shorts before they get too tight in the seat.

Bloomberg recently reported that Raymond James, the financial investment company, believes that there is more to low oil than meets the eye. "The recent collapse in oil prices was triggered by a breakdown in the technical charts but fueled by the ‘negative feedback loop’ of bearish headlines… Some oil price headlines have been misleading, or outright wrong, and they have distracted investors from what we believe is fundamentally a bullish overall picture."

In simpler terms: negative market sentiment plus negative spin is what’s really bringing about these low oil prices.

Taking a look at the facts behind the drama makes the situation look much brighter, however.

While it’s true that Russia wouldn’t agree to more production cuts, U.S crude inventories probably dropped by as much as 2.5 million barrels last week. Such massive drops will lead to a lack of supply, which could make prices rise again.

Add to this the lack of exploration and development capex over the past three years, coupled with the speedy depletion rates of fracking wells, and you have a set up for a shortage in 2018.

And that’s far from the only good news the oil bears are conveniently ignoring…

To continue reading more about the possibility of fake news affecting the oil market, click here.


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