- New supply is developing due to the fracking boom that has increased supply of U.S. crude as well as natural gas. The collapse in price of tankers ($170,000 a day at peak to $7,000 a day now) confirms that less oil is being transported globally.
- Several producers of oil are now in a mode of having to produce. This includes Russia, Saudi Arabia (which must support a growing welfare state for its youth), Iran (where a lot of its oil is embargoed), Iraq (which needs cash) and Venezuela (which also needs cash). Indeed, it is hard to find a member of OPEC that is not motivated to produce.
- Commodity investors have had a boom in the last 15 years. That may be ending. Gold is in a bear market. Gold investors may be getting margin calls forcing them to liquidate other commodity pools (which have huge weightings to oil). This creates a vicious cycle, forcing oil and other commodities down. (In just the past two weeks, commodity indices used at The Economist are down by over 7%. That may not seem like a lot unless you have 5x margin, which you can in some of these contracts.)
Kass: Cheaper Oil's Silver Lining
Apr 17, 2013 | 06:00 AM EDT
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas