Lead Capital Partners: Oil prices have reversed their short-term decline after a build in US inventories, optimism on the prospects for an output freeze and a decline in the number of US drilling rigs in operation.
For the third week running, US energy firms have shutdown oil drilling rigs and, with the rig count down at just 354, there is a growing sense that OPEC’s strategy of maintaining high production levels to keep prices low has begun to bear fruit.
“There were concerns that the 40% rally in prices from 12-year lows set in January could potentially give the higher cost US drillers a new lease of life but it appears those were unfounded,” said David Eckhart, chief market strategist at Lead Capital Partners.
A meeting of oil exporters, both OPEC and non-OPEC, scheduled for April 17 in Doha, Qatar is expected to culminate in an agreement that would cap production at January levels. Currently, the glut in supply of crude oil is estimated to be at least 1 million barrels per day more than demand.
“We still don’t see enough impetus for prices north of $45 a barrel because, despite the optimism for a production level freeze, self-interest always wins out,” said Eckhart.
Lead Capital Partners says it would need to see a sizeable uptick in demand for oil from the emerging markets and a meaningful decline in supply before it would consider taking long positions on crude oil futures. The firm did say, however, that it believes the low for oil was set in January and it does not expect a retest.

About Lead Capital Partners:
Lead Capital Partners is an independent investment management practice founded on the philosophy that an active, opportunistic and adaptable approach to investing provides our clients with the best chance for the realization of long-term positive returns irrespective of prevailing market environments.
It is our firm belief that the “buy and hold” investment strategy that has traditionally served investors to such great effect over the decades can, now, lead to significant losses in bear markets, or to little or no profit in markets that persist in trading in ranges unless they are actively managed by seasoned professionals such as those at Lead Capital Partners.