Despite plummeting prices for oil in recent weeks, we still don’t buy the bear case, which calls for a slower economy to rein in prices. The problem is, in the 1974, 1981, 1991 and 2001 recessions that failed to happen. We don’t see why it would this time. Meanwhile, the weakness is all about the pleasant weather we’ve been having. As Oil & Gas Journal reports:
“Weather continues to be the name of the game, as crude oil prices continue their slide from yesterday in early morning trades today,” analysts in the Houston office of Raymond James & Associates Inc. said Jan. 4. ”That said, the latest 2-week weather forecast for the US shows cold weather beginning to set into the Lower 48 states by the latter half of the month, and natural gas has rallied on the news in early morning trading. However, a warm winter till now has prompted us to take a more cautious stance on winter-ending natural gas storage and near-term North American drilling activity,” the analysts said.
The thing is, weather fluctuates. And while the weather has been far warmer than normal, inventories remain well below their historic average in terms of days of supply. What will happen when normal weather resumes?