Update: Oil – Where Are We Now ?

Published on
October 6th, 2017
32 minutes

Update: Oil – Where Are We Now ?

The Big Story ·
Featuring Raoul Pal

Published on: October 6th, 2017 • Duration: 32 minutes

Understand what’s happening right now in the oil market, as Raoul Pal rounds up another group of traders and industry experts to update his view. Breaking down the expectations for global demand, the impact of electric vehicles and prospects for the shale industry, Raoul identifies the actionable opportunities from the short and long term moves in oil. Filmed on October 4, 2017, in the Cayman Islands.


  • GM
    Gregor M. | Contributor
    14 February 2018 @ 17:26
    About 120 days have passed since this piece was published and it's important to note what's changed. Yes, the oil price rallied--oil can go anywhere it wants for 90 days, but will eventually get pulled back by fundamentals. For example: the four year recovery in US oil demand has now ended. US gasoline demand was down in 2017, by about 0.5%. Yes, that's a small downtick but consider the huge auto cycle we've been in for 7 years now. About that: the auto cycle has now rolled over, its peak fully in place in 2016. Sales were down in 2017, and will be down again this year, and next year. Finally, US production is soaring. Usually the reaction among viewers to videos like this is they think the ideas will work over the next 30 days. But this video is pretty clear: it was about the next 3-6 months. We are going to see some effects finally coming through now. Yes, the Non-OECD demand is where the oil market makes its money. But the 4 year recovery in OECD demand *growth* is now over. Best to all, Gregor
  • TW
    Thomas W.
    17 October 2017 @ 17:17
    As a long standing RV member who loves the content being put forth day in and out, I cannot watch anything on oil that has tracy (chigirl) in an interview about the energy markets. Instant credibility loss. She is a serial twitter that offers nothing regarding the energy patch. Way way better people out there.
    • MA
      Mujtaba A.
      12 November 2017 @ 11:57
      The ATR of the quality of people RV interviews consistently makes new all time highs.
  • DY
    Dmytro Y.
    6 November 2017 @ 15:21
    Thus far oil price went totLly opposite direction up up and up. Have to observe loss making suggestion and perhaps the mistake all bears including myself have learnt is one should not underestimate OPEC. And again RVTV , this series was a poor analysis of fundamentals.
    • IP
      IDA P.
      7 November 2017 @ 07:45
      the analysis was good, but I would have expected an update, even 5 minutes, in the last days, Pal said he would review his thisis if crude broke above 55. I never trade crude oil I just observe it to decide on other things, like bonds or energy stocks, I went short after this video, it was my decision, but I would have appreciated an update. Is the move just due to political panic? or is there something more?
  • MA
    Mo A.
    9 October 2017 @ 06:50
    The price spread between Brent and WTI wasn't discussed heavily during the video (although Peter and the charts suggests it widens). Just curious if anyone has a decent explanation for this? Why is the spread not being arbitraged out?
    • KK
      Kevin K.
      10 October 2017 @ 11:08
      See the Macrovoices podcast from two weeks back. Believe it was the one with Mark Yusko where they talk about the arbitrage issue in more detail.
    • PO
      Phillip O.
      25 October 2017 @ 18:51
      Look at LLS vs Brent not WTI. That arb is shut. WTI is a stranded bbl.
  • RR
    Raj R.
    24 October 2017 @ 02:32
    Oil will not go down until after Aramco IPO
  • NI
    Nate I.
    8 October 2017 @ 02:46
    I can't speak to China or India, both of which could significantly move oil prices, but right now many US markets - including Los Angeles - are subjected to rolling blackouts in summer due to insufficient electric capacity at peak load. In Phoenix AZ where I live, we get charged 4x for power during peak summer demand hours to discourage use. What happens when electric cars are added to the demand? For EV to displace ICE in the US, I believe electric generation capacity must be increased significantly. Maybe the trade is long uranium (to fuel new nuclear power plants) and short oil.
    • SB
      Stephen B.
      21 October 2017 @ 03:06
      One quick point. Most electricity demand is during the day, with a large portion of installed electric generation capacity idle during night hours, when EV's (and hybrids) are charged. Therefore, a growth of EV's generally means a better, more efficient use of existing electricity (generation, transmission and distribution) infrastructure.
  • JU
    Jay U.
    14 October 2017 @ 02:35
    The two long arguments I've been thinking about were both supply arguments. Dwight Anderson argued that EVs could be positive for oil prices by causing decreased capex by the oil majors. Russell Clark argued that "frac hits" and poor economics could cause a supply disruption in shale. Nikhil also has an interesting demand argument as we enter synchronized global economic expansion.
  • GR
    Guido R.
    11 October 2017 @ 18:03
    Is there any merit in considering the various types of oil (Heavy Sour vs Light Sweet) in relation to Western and/or Eastern refining capacity? Light Sweet Crude today is only available in Basra, Libya and Nigeria. The fracking industry in the USA however, now produces Light Sweet Crude of an outstanding quality Does crude quality have any bearing on these trends?
  • KR
    Kenneth R.
    11 October 2017 @ 16:00
    Raul is crazy. This is a neutral scenario / flat/ stay away. Why, If Trump de-certs the Iran deal 1-2 million barrels go off market. Solid analysis but long or short Oil right now is a trap trade either way. STAY AWAY
  • MD
    Mathieu D.
    10 October 2017 @ 05:01
    Why not short when oil price are at $55-60/barrel, where most US shale production start to be economic once again. Until the shale industry is gone, unlikely to go much higher, is it?
  • Sv
    Sid v.
    9 October 2017 @ 16:19
    great piece, thank you
  • FR
    Frank R.
    8 October 2017 @ 20:26
    In all this analysis not one comment on depletion rates in the shale space. hmm...
    • ZN
      Ziad N.
      9 October 2017 @ 11:08
      and depletion rates in offshore hitting in 2020
  • IL
    Ian L.
    9 October 2017 @ 08:18
    Really useful in helping to understand the bearish narrative and why it is wrong. 1. Wildly too optimistic on how quickly EV will make an impact 2. Assuming developed markets grow at same rate as US 3 No mention of oil majors cutting capex by 40% 4 No mention of how indebted US shale companies still are (Raoul needs to do a lot more work on the balance sheets of shale companies)
  • WP
    William P.
    9 October 2017 @ 04:30
    Wonderful discussion and perfect length!
  • SJ
    Sy J.
    8 October 2017 @ 12:30
    When perceived future demand for a commodity is eliminated or reduced because government programs requirie the decrease in fossil fuel consumption Oil producing countries will produce as much oil today to produce as much revenue as possible from their reserves. This action should place severe downward pressure on prices. In retail they call it a close out sale. That’s how I acquired my spiffy polyester leisure suit.
  • KS
    Kazi S.
    8 October 2017 @ 03:59
    I think there is too much noise around oil, and the charts here were at beast inconclusive. I think Russia and Saudi Arabia want to cap oil price rise because they do not want the Shale hedging their exposures again at their expense, so I think we are range bound for now. Importantly, I think they are waiting out production numbers to start falling in Shale (see Russell Clark piece), and this would be bearish for Shale names, but very bullish for oil longer term. If the Shale guys start to drop out or production becomes limited, then weak shale players will get pummelled.
  • JW
    Jim W.
    7 October 2017 @ 22:57
    While i enjoy many of the longer form interviews, this wqs just right as a follow-up. Concise, with a good range of expertise brought to bear. More "big ideas" with follow ups please!
  • RR
    Raj R.
    7 October 2017 @ 22:09
    This is excellent Raoul! Highly educational! Love these from RVTV!
  • bf
    bart f.
    7 October 2017 @ 16:47
    yet the narrative coming out of CBs / politicians wants us to dance to the reflation song which might provide some support
  • SS
    Steven S.
    7 October 2017 @ 14:53
    I was just being aware this last week that the Pres. Trump trade needs a lower u.s. dollar to keep global trading viable for the White House. That's why the u.s. dollar is not back by Gold since the 70's. Unable to support statement with ed or tech or fundamentals, but learning.
  • DY
    Dmytro Y.
    7 October 2017 @ 08:33
    I am short oil right now but strongly doubt we will see 20's. otherwise to suggest suh liw price is to suggest severe recession and drop of consumption.
  • DY
    Dmytro Y.
    7 October 2017 @ 08:22
    With all respect this is one sided and shallow analysis. Very short term. Next time pleaee bring people with prospect to capex and exploration and knowledge of cost of prduction and project pipeline.
  • SC
    Shane C.
    6 October 2017 @ 19:43
    Yeah, I don't buy anything the Chinese government says. The idea that in 20 years EV cars will dominate is simply insane. For a shift like this, you need EV vehicles to function better at everything. By that, I mean more efficient, more powerful, more dependable, able to function under duress. There is no signs whatsoever that we're anywhere near that level. Nothing against China, but seriously...they can't pull that off and they damn well know it. Honestly, the big 2035 call was all for the 19th party congress...I mean we all know what they did with coal. they shut down marginal plants onshore but just opened new plants via FDI into poor EM countries where they can arbitrage labor costs...that's all they did...it's hilarious
    • GM
      Greg M.
      6 October 2017 @ 23:55
      I agree. There is way too much group think on EVs. I am a lifelong car enthusiast (e46 forever!). If EVs come online in en-mass we will need much more electric capacity - so it could be bullish for coal, nuclear and natural gas. The thing I am hung up on with EVs that they are a centrally planned industry - throughout history central planning works as long as the government can feed them subsides. If oil goes down to 25 or 30 dollars a barrel it may cause a resurgence in SUVs and large trucks - cheaper gas will cause people to forego hybrids and EVs. Some other random thoughts bouncing in my head are EVs don't function in the cold northeast - the cold kills their batteries. EVs take a long time to charge. I can fill up my car in under 5 minutes. Finally, the environmental impact from the mining and smelting of lithium and nickel is going to be horrible. My rant is over you pinko enviro-commies. N.B. The best part of the interview was Peter Brandt using his classical charting.
  • Nv
    Nick v.
    6 October 2017 @ 10:42
    Why not speak to Dwight Anderson - he suggested oil could rally towards decade end due to lack of capex in recent years
    • GB
      Grant B.
      6 October 2017 @ 20:41
      Agree. Tx for reminder. Will go back and watch again for his fundamental arguments.
  • BL
    Bruce L.
    6 October 2017 @ 16:29
    Excellent. I think a long term look at implications of EV revolution would be instructive. Impact on auto industry. in US on loss of gas tax revenue to already cash strapped state governments. resource utilized by likely battery tech, etc.
    • ss
      sean s.
      6 October 2017 @ 18:50
      State Taxation will be accomplished on a per mile basis for EV's in my opinion. They will get their revenues somehow, that you can always bet on.
  • RM
    R M.
    6 October 2017 @ 15:49
    Great report Raoul! Also, really appreciate when you have Peter on charts. He adds an amazing dimension, love to see him as a regular. Thanks!
    • JC
      John C.
      6 October 2017 @ 17:49
      Agree wholeheartedly on Peter Brandt - he is very good and love how he crystalizes his views into an overall view.
  • JC
    John C.
    6 October 2017 @ 17:47
    Very useful. I like the differing viewpoints and USD outlook. Suprised to see Brent and WTI technicals look completely different. One issue with this trade is for us mere mortal retail traders USO and USL are pretty crappy trading ETFs and don't always reflect the real price movements due to backwardation/being out on the curve. I guess if you just want to go long USD at this point it's the best trade and seems to be setting up pretty nicely after a brutal downturn this year (11% off Jan highs vs the Euro).
  • DK
    Daniel K.
    6 October 2017 @ 17:35
    This is really well done. I like the format offering 3 views and multiple time frames coupled with technicals, all within 30min. This is very useful.
  • JB
    Jim B.
    6 October 2017 @ 16:44
    In light of the coming EV movement, and short sided politians pushing green agenda! There will be a huge move to upside in oil when the coming mini ice age closes in on the global unsecspecting crowd of shorts .EV is a rouse along with wind and solar! Oil is in a long term up trend with some swings as it's being managed ! the majority have to be wrong and my best analysis is the shorts! In the end oil will be replaced , that is a long way off!
  • TJ
    Terry J.
    6 October 2017 @ 16:26
    Invaluable analysis as usual, and in a professional concise format that still retained all the key details. Thank you.
  • SW
    Steven W.
    6 October 2017 @ 16:19
    Please talk to Art Berman.
  • rr
    rlw r.
    6 October 2017 @ 16:06
    Raoul - a smart 31 minutes, thank you. (other contributors, S/D, positioning, trade durations, US$ play .. et al.)
  • GR
    Gregory R.
    6 October 2017 @ 15:34
    I liked the structure of this analysis. There are many views and nuances in setting up a trade and this framework adds rationality to what can be an amorphous discussion.
  • KA
    Kelly A.
    6 October 2017 @ 14:58
    Thank you, Raoul. SO VERY TIMELY and so VERY THOROUGH. Exactly the caliber one expects from RV. Wow!