5 charts that definitively prove oil is toast

Picture: Getty Images

Jeff Gundlach doesn’t like oil.

In his latest webcast presentation delivered Tuesday, Gundlach spent a lot of time talking about oil.

And for anybody who thinks that the 70% decline in oil prices seen over the last 18 months or so means the price has to go up, Gundlach has a simple question: why?

As Gundlach sees it, the oil market is still facing a massive supply overhang while demand hasn’t kept up. Additionally, the Fed’s easy money policies allowed speculative shale plays to continue getting funding, with Gundlach noting the increase in US oil production came almost in lock-step with an increase in the size of the Fed’s balance sheet.

And so the story these five charts tell is not a good one for anybody betting that oil will go higher or that the market will get “fixed” anytime soon.

US oil inventories are basically at record highs.

DoubleLine Capital

And with more oil than markets needs there's no reason for prices to rise.

DoubleLine Capital

The change in shale drilling techniques has enabled US oil production to remain near multi-decade high despite a collapse in the number of oil rigs being used.

DoubleLine Capital

Supply has been outpacing demand for the last few years, leading to those massive inventory builds in charts 1 and 2.

DoubleLine Capital

Did the Fed's post-crisis quantitative easing plan lead to a surge in oil production investment? Certainly, the lines fit.

DoubleLine Capital

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