Catching the Oil Drop(s)

We've had some email discussions about the slide in oil prices and whether we're close to the bottom so I thought I would post it here for well.... posterity!

Oil has bounced from the mid $40s to just under $50 as I write after falling from $110 last year.

The question is when will the supply/demand start to turnover.  The swing producer over the last few years has been shale and tight oil plays in North America i.e. fracking.   There just isn't a lot of spare capacity elsewhere.  They have added northwards of 8 mil b/d of production.  They are also vastly uneconomic at current prices as the rig counts will show.  Below is the most recent count from Baker-Hughes and currently we are down 45%.  Production should follow this rig count down soon.

So does this signal the bottom?  Apparently oil storage capacity in N. America is close to full so we may see some more volatility in the oil price as any excess crude that cannot be stored will be sold on the market.  

Current slow global economic growth not withstanding, the world is still addicted to oil so as the supply/demand starts to tighten, the bottom is within sight.

I'm calling a bottom here in the mid $40s with more volatility until the summer.  Looking to enter some good Cdn energy stocks this summer.  As I think about it I'm going to stay away from US energy at least US$ denominated energy as the Cdn dollar should rally along with the price of oil.

Long oil.   Soon.