How the U.S. and OPEC Drive Oil Prices

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Source: NYT

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  1. Expat commented on Nov 5

    So many people out there are talking about oil and misunderstanding it. It has become highly financialized so every hairdo on CNBC and 14 year old Wall Street analyst tries to plot it like the Dow. Unfortunately, sooner or later, the price of oil is determined by Supply and Demand. And demand is weak for a variety of reasons they don’t understand.

  2. tigerlilac commented on Nov 12

    Barry, I did a quick and dirty look at the percentage change in the price of Chevron at its nadir in August of 2015 to where it is today and compared it to USO, the commodity fund. Chevron was still up 29% from that point whereas USO was only up 5% for the same period (similar nadir). That arbitrage seems steep despite the major oil company’s balance sheet and diversified business.There are also pipeline companies with high dividends (and some weak balance sheet but also significant distributable cash flow) that have been taking a beating in anticipation of action by the Fed. Am I a fool for thinking the market has inefficiently priced in supply and demand, Fed policy, and company specific data in the energy industry? Waiting for Godot (Yellen) seems to have caused the Didi and Gogo to repeatedly price in a Fed rate increase effect on share price of energy stocks.

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