Oil Still bullish.
I’ve been bullish on oil for months now. I am bullish not because I see an increase in demand but a cut in supply.
Yes, demand may climb if the global trade war ends, thus stimulating demand. But we don’t have an end to the trade war yet. So let’s assume that demand will not be increasing.
But the supply is suffering.
On one hand, countries like Venezuela and Iran are shipping less oil due to poor maintenance and sanctions. Libya and Nigeria are also shipping less due to internal domestic violence.
But the keys are the US, Russia, and Saudi Arabia.
Right now the US is shipping a lot of oil but rig counts are declining which suggests that there will not be an increase in supply in the coming year.
Russia has publicly said they will cut production to boost prices. Russia is a one trick pony economy that entirely relies on oil exports. They are suffering from government budget shortfalls and need the money. So they are publicly saying they are reducing supply and making more money due to the increase in price.
Most importantly, the Saudis have cut production a bit and this is the key that is causing oil to climb. They are making more money as the price is climbing higher more than they are cutting production.
My objective is for oil to get into the high $60’s and perhaps $70 per barrel.
I’m using a long term option on the ETF USO to make money.
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