We see a long future ahead in which fossil fuels will be part of the energy mixâ€¦
This little tidbit is courtesy of Saudi Arabian energy minister and Saudi Aramco chairman Khalid Al-Falih. According to Al-Falih, demand for oil will continue to rise despite the worldâ€™s efforts to combat climate change.
Despite all the advances in renewable energy technology and the lip service it receives from governments across the developed world, the oil barrel isnâ€™t going obsolete anytime soon.
But the price of oil is a completely different story.
Thatâ€™s rightâ€“ crude is rolling over. Againâ€¦
â€śOil prices dropped about $2 a barrel on Monday to hit one-months low on doubts about OPECâ€™s planned production cut and a build in U.S. crude inventories at the Cushing, Oklahoma storage hub,â€ť Business Insider reports. â€śOfficials from the Organization of the Petroleum Exporting Countries and non-member producers met in Vienna on Saturday, but did not come to specific terms, agreeing only to meet again before a scheduled regular OPEC meeting on Nov. 30.â€ť
It looks like oil traders are getting a little tired of OPECâ€™s shenanigansâ€¦
After steadily climbing since early August and topping $50 by mid-October, light crude has taken a long walk over off a short pier. Yesterdayâ€™s drop of nearly 4% means crude has coughed up all of its gains from the past month.
Earlier this year, we told you how oil has been consistently victimized by whipsaw market action. The above chart perfectly illustrates this point.
In early June, oil prices quickly jumped above $50 a barrel for the first time in nearly a year. U.S. stockpiles were down and China demand came in stronger than anticipated. Both of these factors helped push oil over the hump. Crude even managed to top $51.
But these gains were short lived. As it turns out, the oil bears were just taking a quick nap. After topping out, oil prices fell for six straight days. It was the longest bearish run for oil since early 2016 when prices plummeted below $30 a barrel.
Of course, oil and gas stocks took a big hit to start the week now that crude has turned south. The Energy Select Sector SPDR (NYSE:XLE) continues dance around its 50-day moving average, sending mixed signals to traders that are trying to find an edge in this market.
As crude fails to hold near $50 this week, the probability of a year-end rally dwindles. For now, crude is acting like the major averages: stuck in a choppy range.
Weâ€™re combating these painful whipsaw moves by keeping our short-term trading positions to a minimum. The worst thing we can do is force trades that just arenâ€™t thereâ€”especially in ornery oil stocks. Itâ€™s best to simply cut our losses as quickly as possible and wait for more favorable market conditions.
Donâ€™t let the market grind your portfolio to a pulpâ€¦
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Source: Daily Reckoning