The WTI Crude Oil market continued to fall on Friday, as this market simply cannot find any type of support. We are now well below the $36 level, and quite frankly I think the next target will be the $35 handle. I also expect that we will break down well below that as oil markets are essentially in a bit of a freefall at the moment. There are a lot of reasons for this, but without a doubt I think the biggest one is that there is far too much supply out there.
OPEC had their meeting recently, and certainly didn’t get anything done. The reality is that OPEC is only about 1/3 of the world’s oil supply anymore, and because of this they only have somewhat of an influence. The countries in the OPEC cartel could not come up with a production quota that everybody would agree to, and now that the Iranians are allowed to sell their oil in the open market, that will add another half-million barrels to the mix. This should have an effect of having 2 million barrels excess supply in the marketplace globally every day. That is a lot of oil that is just simply sitting around and not wanted.
Selling Rallies
Unless something changes, I don’t see anything to stop this market from falling significantly from here. I think that anytime this market rallies, it’s just simply going to be an opportunity to sell at higher levels. I will continue to punish oil in general, and of course by proxy the Canadian dollar, the Norwegian krone, and the Mexican peso. All of these markets are suffering from the same thing, a glut in global supply when it comes to the oil markets. I don’t see this changing anytime soon, as economic conditions certainly don’t warrant more demand globally. I think it’s going to be a while before we see a significant rally in oil.
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