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Here in Singapore, things influencing the oil world continue to make themselves clearer.
Recently, the oil market has been slammed with a tidal wave of volatility, and back a few weeks ago we had the largest drop in oil prices since 2015.
However, since I've been attending meetings here at OSEA 2018 in Singapore, one signal that the implosion in oil prices is nearing its end has surfaced.
In each of the last several downward cycles in the price of both daily pegged benchmarks (West Texas Intermediate in New York and Brent in London), a divergence has emerged prior to the recovery of pricking levels.
That divergence has begun over the past few trading sessions.
It amounts to a recovery in the market prices of crude oil and natural gas production companies while the underlying price of oil continues to move downward, and it has already become a topic of conversation here in Singapore.
From the floor, the issue even made its way into my plenary address before the OSEA 2018 conference.
And here's why…
The Reversal of the Oil Price Decline
Singapore has long recognized that the costs of its energy are essentially determined by events elsewhere.
As a result, this vibrant Asian location for commerce and business has become quite sensitive to trends in stock market trading in centers like New York, London, Tokyo, and Shanghai.
This divergence is important because it indicates the end of a cycle.
True, we are likely to experience a few aftershocks, but the assumptions now circulating through the assemblage of heavy-hitting investors, corporate execs, and industrial leaders gathering here is this: The combination of politics, short running, and market dynamics is drawing to a close, which means that the very oversold oil sector is about to improve.
As on-screen commentators pointed out afterwards, it seems I basically called this reversal earlier in the week during an extensive interview on CNBC Asia.
As veteran readers of Oil & Energy Investor already recognize, the bulk of the oil price decline resulted from a political move in Washington to keep refined product prices low by guaranteeing others providing excess available crude.
Because as we all know, gasoline votes.
As we move closer to Dec. 6 – and the next OPEC meeting in Vienna – prospects for a coordinated cut in global production are intensifying.
And the position widely held among those I am talking to here is one of frustration.
This is especially the case among representatives of primary producing countries.
The Foreign Oil Opinion
About the Author
Dr. Kent Moors is an internationally recognized expert in oil and natural gas policy, risk assessment, and emerging market economic development. He serves as an advisor to many U.S. governors and foreign governments. Kent details his latest global travels in his free Oil & Energy Investor e-letter. He makes specific investment recommendations in his newsletter, the Energy Advantage. For more active investors, he issues shorter-term trades in his Energy Inner Circle.