Oil Supply Glut Stalemate Could Go on for Months, May Have to Touch $45-$48

The key OPEC meeting on November 27 was the final nail in the coffin for crude levels and now traders look to 2015. Luke Rahbari of Stutland Volatility says he was surprised by the extreme reaction in the market place following the meeting and crude will most likely stay around here or a bit lower for the remainder of the year. This is the third consecutive year that oil demand growth is not the story, but rather non-OPEC supply growth. Rahbari believes OPEC is no longer going to subsidize the non-OPEC numbers and the stalemate will exist in terms of who will cut production. OPEC could put a lot of pressure on Russia, Venezuela, Mexico, Canada and even the United States and this is what Rahbari will be watching for in 2015. He points out the cost of production for OPEC is about $45-$48 barrel based on the limited information out there, which is much lower than the swing and shale producers. Rahbari believes this stalemate could go on for another 12 months before someone breaks and then oil could move higher from here. Another area to watch is the dollar index which has widely impacted the commodity complex.