The Pain is Spain will not let Brent crude prices gain. Brent crude prices hit the lowest level since 2004 as uncertainty over Spain’s election is raising further concerns about European and global demand. Oil prices continue to fall as rig counts rise and demand expectations fall.
The big drop in Brent crude as concerns about Spain’s disputed election could lead to larger economic problems for the Euro Zone. Spain's election is creating uncertainty. Uncertain if Mariano Rajoy will be in power once the socialists will or will not form a coalition. Will the country be ruled by a left-wing coalition led by the Spanish Socialist Workers' Party (PSOE), or will there be another election in May. The uncertainty is raising fears that this could be a drag on the Eurpean economy just the way Greece was last summer.
On top of that warm weather that is killing demand in the Northern Hemisphere and is making it hard for oil to find a reason to rally. The U.S. oil rig count jumped for the first time in five weeks, by 17 this week to 541, according to driller Baker Hughes (N:BHI) raising concerns that the U.S. glut may grow larger.
Yet despite the bearish news, the Wall Street Journal reports, “money managers grew more bullish on Nymex crude in the week ended Dec. 15, just-released CFTC data show. Hedge funds, pension funds and others added 56 bets on rising prices and cut 15,224 bets on falling prices. Their net-long position gained 19% to 95,754, the largest in three weeks. Prices fell 0.4% in the reporting week on continued fears about the global glut of crude oil. Yet if there is a turn bullish by the funds, it might mean that we could see this market turning the corner.
The good news is that gas prices fell below $2.00 a gallon just before Christmas. Ho Ho Ho! Santa may want to drive this year.
Rig counts for natural gas fell by 17 rigs to 168. This comes as it is possible that we see some temperatures perhaps fall by a little. Perhaps natural gas can recover as the market may start to take cover as it seems that our production is falling and we might see some winter weather after all.
We agree with the hedge funds and it may be time to put on long term bullish bets. The market always looks worst at its bottom and it looks like a lump of coal right now.