The Perfect Storm in Oil Prices Will Hit in the Ides of March
David Haggith
TheGreatRecession.info
March 6, 2016
While some business / economic publications, like NewsMax are saying that, “Oil is pulling away from the market’s biggest storm in seven years,” I say, “Don’t believe it.” Not for one second. The real storm begins near the middle of March.
Because people saw that the price of oil rose and stabilized in February and that stocks followed in lockstep, they were quick to conclude the worst is over. The final days of February were, in fact, nothing more than the calm before the main storm. People were, as usual, too quick to sigh in relief, and that relief is likely to make the upset even worse when they find out how wrong they were to think the worst is over. When people believe the worst is over, and suddenly things grow even worse than they already were, they are more likely to panic.
We have seen this pattern of human naiveté again and again during the so-called “recovery” from the Great Recession. What really happened in February was a little consolidation, as both oil and stock caught their breath after a long first leg down in prices, but the worst pressures that I’ve been predicting were never set to come in February, but to start in March.
I am amazed at how these publications continue parroting each other’s statements that the Saudis and Russians achieved a great agreement to resolve the problem of an oversupply of oil. While NewMax points out the many swings the argument took last month and even that the Saudis and Russians really only agreed not to make the problem worse, the article still seems to come down on the side that this agreement means the oil market has now stabilized and prices will rise to $40 a barrel very shortly.
As I’ve laid out in my last article (so won’t go into much detail here), the so-called “pact” between Saudi Arabia and Russia accomplished the exact opposite of what all the parrots are squawking about.
US oil production stays at forty-three year high
While Saudi Arabia and Russia actually teamed up to make it clear they will not reduce oil production by a single drop to help solve the oil supply problem, four OPEC members, other than Saudi Arabia, also agreed not to make any production cuts. So, oversupply is absolutely certain to continue.
What some people don’t realize is that the United States has actually been increasing production during this time. The last time the United States pumped at this present rate was 1972. US oil production has grown 82% since 2008, rising 8% last year alone.
The Rest…HERE
