“Drillers Are In Denial” Brynjolfsson Warns Crude Bounce Is “One More Head-Fake”
by Tyler Durden
ZeroHedge.com
02/02/2015
The latest uptick in crude prices – Ostensibly, triggered by a notable drop in the Baker Hughes rig count – will be one more head-fake, a false breakout. Keep in mind, oil drilling rigs and oil wells are not the same thing. Armored Wolf’s Jon Brynjolfsson expects global inventories to continue to build until at least June. Drillers seem to be in denial, they fail to acknowledge that as long as inventories are building toward untenable levels, there will be extreme pressure on spot crude prices. What they don’t seem to realize is that absent a universal suppliers’ cartel (which OPEC clearly is not, because its members are autonomous, and many of the largest producers, including Norway, Russia, and US are not even members), high social break even prices incentivize individual producers to pump more, not less, oil at low prices!
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