A Memorial Day Remembrance

By: Kent Engelke | Capitol Securities

As widely expected, OPEC agreed to extend production cuts for another nine months. Oil and oil shares traded lower, perhaps on the “buy on rumor” and “sell on fact” scenario. The market thinks higher prices will lead to greater shale production, a view that the major oil companies do not ascribe to.

Shale production prices are rising for a number of different reasons including the lack of qualified workers and the sharp rise in fracking materials. Moreover, the “majors” have stated shale affects production at the margins and is no substitute for large upstream facilities which have all been but abandoned.

Oil peaked about 3 years ago, tumbled about 75% in about seven months and then doubled in three months. Oil has since traded a tight range of $45-$55 barrel. Will oil now double again as was the case in 2000-01, the result of greater demand and less supply? As noted the other day, today in many regards is analogous to the oil implosion of that era.

Trading is expected to wane throughout the day ahead of the three day Memorial Day holiday. Please remember all those who gave the ultimate sacrifice in your thoughts and prayers. It is because of these few that we are able live the incredible life we all are living in a country where we can write or speak anything about our leaders without fear of recrimination. What is even more incredible, we can make these statements regardless of validity.

Thank you to all those families who have sacrificed so much for so many!!

Last night the foreign markets were mixed. London was up 0.01%, Paris was down 0.92% and Frankfurt was down 0.62%. China was up 0.07%, Japan was down 0.65% and Hang Sang was up 0.03%.

The Dow should open nominally lower. The 10-year is up 6/32 to yield 2.24%.

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