Oil Is Vulnerable to Geo-Political Risk

Your next video will start in
  • Info

  • Comments


July 14 (Bloomberg) -- Bruinhill Partners’ Michael Gurka and “Oil’s Endless Bid” Author Daniel Dicker discuss the price of Oil on “In The Loop.” (Source: Bloomberg)

Barrel for the first time since may.

We have had this decline in oil.

This is despite a lot of what they vaguely call geopolitical tension.

Is it just that there is enough of a supply cushion that we can absorb this?

I don't think so, these geopolitical problems will have a real effect on the numbers maybe not today but over the next couple of weeks, months, and years.

There is a financial component to the oil market that no one is looking at very closely.

That's the amount of speculative activity in the oil market.

Or is more speculative longs today than at any point in the history of financial futures.

That means that everyone cannot be right at the same time.

Everybody is long oil waiting for one of these next shoe to drop and they continually dewdrop.

We have the iranian issue getting worse, john terry has thrown in the towel on trying to get a nuclear deal.

We have the palestinian-israeli dustup that will go on for a while.

These things should drive oil higher but everybody is long and oil is slowly starting to creep down trying to chase the longs out for it is when you chase these longs out that you will get that big jump in oil prices that you should get.

Michael, you're betting we will see that jump?

Absolutely, those longs have been just getting smoked on this recent news only because the market was up but $107 and we were expecting higher.

I am looking to see if we can test the lows around 100 dollars.

I think 103.99 is a great target.

When you start seeing liquidations, that will be the first sign that they are wrong and the market turns around.

If you buy the oil futures at $99 76 per barrel and seldom below $104, -- and sell them a low $104, you get quite a profit.

Fundamentally, that's the downside which is limited.

We are waiting to get some of the weeklong players out of the market.

I like that trade a lot and i think there is a place where you need to buy oil and you'll find that over the course of weeks and months.

Maybe not today but you will find it eventually.

What about the idea that when you are talking about the geopolitical issues in iraq specifically and most of the conflict seems to be happening away from the oil-producing areas.

??? what are you most concerned about?

The same place as you speak of.

Because of the parallels involved, that's what i start to see brent crude turnaround first and catch this bid versus wti.

I want to reference the fact that the spread between the two different contracts is almost narrowed and in half.

We watch that spread closely.

You should see the snap back in brent crude first.

Because the refining scenario is holding in the u.s. come i think that's what you start to see the market sell off.

I like eying these dips.

Let's take more weakness which is a great indicator area every time you have seen the selloffs in the snp, the u.s. dollar is one way and that is week.

Those all line up for long-term scenarios you just have to be careful as of when you come into the market.

That brings to the word of the week which is convergence.

There are two parts to any commodity market and one is physical.

The farm takes his corn to a company and sells his corn for a price.

Then there are financial futures that i play3 we discover a price in trading.

What happens over time as those prices are supposed to converge.

That is the basis of our future market work.

It does not always work that way but the erratically, it should.

That's the word of the week and it takes more to describe but it should converge.

Convergence is the theory and would or which futures market -- under which futures markets operate.

Thank you both very much.

We will be "on the markets" again 30 minutes.

Here is a look at our top headlines -- british rug maker shire says it will recommend shareholders accept the latest takeover offer the bid was for almost $54 billion.

They would be able to lower its taxes.

Mindy grossman has turned down

This text has been automatically generated. It may not be 100% accurate.


BTV Channel Finder


ZIP is required for U.S. locations

Bloomberg Television in   change