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Predicting OP is a mugs game isn't it GfG? Still, there's always a mug who'll try...

A quick look back at OP over the last twenty years is interesting.

The chart below of Brent is a weekly one, with an annual (52 week) moving average in blue and a five year moving average (orange) and greyed areas indicating periods when OP dropped below $70 - accounting for about 45% of the time:

https://invst.ly/13eudf

It’s a reminder that OP today is cheap compared to the four years (2011-2014 inclusive) when OPEC was not challenged by the boom and bust years of US shale. A period during which many small shale producers were forced to overproduce in order to cover the cost of their debts. Since the last ‘bust’, triggered by a price war with OPEC followed by COVID, the weaker companies have gone and there is now more discipline in the US. Nevertheless, production there will probably keep the price below $100 and the question is where is the ‘sweet spot’ that satisfies the powerful producers? And what price is going to be high enough to sustain exploration for replacement reserves and stimulate green transition? Cheap oil is not as good as it sounds for society.

My guess is that, much as US Presidents would like to see WTI around $50, the price for Brent is unlikely to fall below $60 in future, with the mid-point somewhere between $60 and $100 - so maybe averaging around $75- $80?

A quick look back at OP over the last twenty years is interesting.

The chart below of Brent is a weekly one, with an annual (52 week) moving average in blue and a five year moving average (orange) and greyed areas indicating periods when OP dropped below $70 - accounting for about 45% of the time:

https://invst.ly/13eudf

It’s a reminder that OP today is cheap compared to the four years (2011-2014 inclusive) when OPEC was not challenged by the boom and bust years of US shale. A period during which many small shale producers were forced to overproduce in order to cover the cost of their debts. Since the last ‘bust’, triggered by a price war with OPEC followed by COVID, the weaker companies have gone and, as meoryou says, there is now more discipline in the US. Nevertheless, production there will probably keep the price below $100 whilst shale remains a force. So the question is where is the ‘sweet spot’ that satisfies the powerful producers? And what price is going to be high enough to sustain exploration for replacement reserves and stimulate green transition? Cheap oil is not as good as it sounds for society.

My guess is that, much as US Presidents would like to see WTI around $50, the price for Brent is unlikely to fall below $60 in future, with the ‘sweet spot’ somewhere between $60 and $100 - so maybe averaging around $80?

A bit disappointing to see the sp fade out Friday afternoon, along with other O&G’s after the US market opened

But BP remained about 4% up on the others here (Shel, XOM and Chevron) since last Friday’s close:

https://invst.ly/13eewq

Brent, also shown here, was up 6% over the same period.

It’s not over yet, but so far it’s been a good week for BP:

Today it has pushed above the most pessimistic (red) trend here and looks set to close above it:

https://invst.ly/13e244

The (26,9) EMA crossed into ‘buy’ indication on Tuesday and the sp might well close the week at a two month high.

Given that BP was typically above 530 during 2018-2019, with Brent as low as $67, I think there is good reason to expect a continued recovery to 550 over the next 2-3 months.

After a dismal three months. Let’s hope BP now starts to catch up with the likes of Shel, which is currently around 13% ahead based on long term performance over the last four years:

https://invst.ly/13da9m

As the chart shows, BP was a fair match a year ago but went off the rails after April. Last week's jump may have offset the damage done at the end of October but there's still a lot of ground to make up.

The first half hour of trading this morning has repaired most of the October 31st damage to BP and restored it to near par with Shel - with BP down nearly 9% since Oct 30th and Shel down 7%: https://invst.ly/13bafn

Eyes will be on BP on Tuesday: how will their results compare to Shel and other majors?

BP has tracked Shel fairly closely since its fall of around 8% relative to it in October.: https://invst.ly/13b3l8

Is it going to take another step down or will investors think the ship has been steadied?

Meanwhile, Brent has pushed the green trend down here: https://invst.ly/13b3up but may yet hold onto a less demanding version of it rather than slipping further.

This week’s drop in OP has knocked it off a promising trend but, like busses, there’ll be another one along eventually:

https://invst.ly/13a2vy

Another thing about OP is that you can always find a headline that matches your pov:

FT: ‘The days of $100 oil prices are over'….Demand will continue but potential world supply is likely to peg back the cost.

https://www.ft.com/content/57f1ad77-119f-42df-a1ff-3d57df70ba80

OilPrice.com: ' Chevron Returns Record Cash to Investors as Oil and Gas Output Hits New High

https://oilprice.com/Latest-Energy-News/World-News/Chevron-Returns-Record-Cash-to-Investors-as-Oil-and-Gas-Output-Hits-All-Time-Hig.html

I didn't read the FT article (I assumed a paywall ) but I assumed it overlooked the ongoing fall in identified global reserves?

Ultimately the world will need Oil to be expensive in order to drive transition to alternatives. Cheap oil is bad for everyone.

Absolutely GfG - regarding BP:

Looking at BP against Shel since 2019, it’s apparent that BP has slipped by more than 15% in sp terms:

https://invst.ly/13a1y2 .

All of which has come during the recovery from the mutual low point of all the majors in October 2020.

But whilst BP’ volatility usually dances around Shel - and has made them a useful pairing for investors who trade between the two, BP has crashed out of its ‘covid recovery’ trend since the dreadful drop and gap down in October, shown more closely here:

https://invst.ly/13a21d

So, depending on your viewpoint, it’s either a basket case or a recovery prospect with better upside potential than Shel.

OP dropping by $4 since Thursday’s statement did not help the promising recovery in Shel’s sp did it?

Here’s the week’s OP v Oil Co’s chart:

https://invst.ly/139zr1

Yet despite the wobbles, the sp remains just about on the upward green trend for the moment:

https://invst.ly/13a1mp

I got the answer to my 'will the winner be red or green?' question rather sooner than I expected with the apparently unfavourable reaction to today's Board change RNS :

https://invst.ly/139z6-

I appreciate it's a dismal time for LTH's. For those of us who are interested but just watching, there's just relief at avoiding losses rather than any particular satisfaction . With the November + December rally wiped out and the sp re-set to 500, it is now much weaker than it was 12 months ago and we all know how low it then went after the last set of FY Results. If 500 fails to hold then 380 will come back on the radar.

The daily chart today (Wednesday) makes things look rather worse than they are: https://invst.ly/138i6u

A 15' view shows that the sp has held pretty level over three days despite a drop in OP: https://invst.ly/138i53

Thursday will be the test.

Looking at today's 15' chart, I'd have to agree with Gioviano, even though 550 has held up pretty well for over a week: https://invst.ly/138htp

Breaking below the green on the next daily chart (around 525 currently) would be a more significant negative sign for me, with 500 the last major support (ok - 450 at a stretch ) before the analyst levels and gap around 380 come on the radar :

https://invst.ly/138hww

I often say that the sp follows OP except when it doesn’t and the fact is that although the two are related the sp does have other significant influences (like nasty impairment news) which ordinarily play a more dominant role. Then there's the tendency for the sp to filter out much of OP’s volatility. This comparison of the two since mid October demonstrates this quite well:

https://invst.ly/137op3

The sp may well be less volatile than Brent but , as I mentioned previously, it is currently running about £1 down compared the trend in OP which has been steadily rising since the year began. There's also that gap up to 2566 beckoning to be filled at some point. It’s a shame about the much smaller one down to 2440 created on Friday with the sharp bounce back towards 2500 . It's possibly small enough to ignore whilst the price is rising. The scene is therefore set for the results to overshadow the recent setback, which was fortuitously announced well in advance.

Trendwise, the three year red ceiling here is closing in on OCDO:

https://invst.ly/137ddw

750 is the current limit if red holds, dropping to around 700 in a month's time. Here’s a closer look:

https://invst.ly/137dhq

Green is the only challenger. So, which will win: red or green? February’s results probably hold the key.

Here’s how Shel, BP, CVX and XOM moved with respect to Brent last week (approximate scale shows Shel and Brent price )

https://invst.ly/136gt0

To put that into some context, here’s a plot of Shel & Brent over the last 15 months , with some dates highlighted when OP was at the current price of $83:

https://invst.ly/136h59

Brent has risen by over $1 since Friday’s LSE close, which suggests that the sp could strengthen further on Monday if OP remains firm.

More recently, Shel has been lagging OP and the comparison over recent weeks suggests that Shel is at least £1 down currently and should be heading to fill the gap created by the update on Jan 8th to 2566 once confidence is restored sufficiently.

https://invst.ly/136hzp

Brent has been on the up since December

Brent: https://invst.ly/133lvt

but Shel has been going the other way, pushed flat down on the the bottom blue tren here:

Shel: https://invst.ly/135h12

BP similarly, although with slightly more sign of an uptick this last couple of days:

BP: https://invst.ly/135h0l

Well this morning has provided the more positive indication that I said was lacking in my post last night.

https://invst.ly/133xp2 , which suggests that 550 may mark a bottom for the current phase.

There's never any guarantees with OCDO, though. As far as I can see, much of the price is based on optimistic expectations for the technology rather than the retail side of the business, which is far less exciting currently.

Monday has left OCDO difficult to read: it hasn’t convincingly broken out of the red down trend but has simply stepped sideways, which leaves the realistic possibility that the price might bottom out at 550 - rather higher than I anticipated:

https://invst.ly/133m29

I’m not convinced even though it has paused at an established support level.

My simple rule is ‘when in doubt stay out’ - I don’t let FOMO drive me into a reckless move any more.

Absolutely GfG - the ‘increase in spare capacity’ observation was in the article you posted and I hadn’t switched onto that until your post - so thanks!

Good to see you back Armani: hope this works out well for you - and us, of course (self interest is never far away in these matters).

I’m not too disappointed in today’s minor drop although it did run counter to OP and also went against the expectations I had expressed in a previous post. No chart today as my interest is currently in the ratio of sp to OP which is at a recent low of about 29.6x. In terms of the 30 day moving average, it places Shel about £2 down relative to OP when compared to how it has performed on average over the last month (by my amateur calculations). To me, this represents an eventual upside when conditions improve - hopefully by FY results or Q2 when US ‘driving season’ approaches.

Time will tell as char333 would say - it seems he’s over on the BP chat now.