Short term risk is that HF seems to have been piling into this trade
(Bloomberg) -- The drop in U.S. crude production is set to
accelerate as investment cutbacks are felt, reducing the chance
of a V-shaped recovery in output.
Reports of falling output and plummeting rig counts in the
four main shale-producing areas has left “no doubt” that
production is falling and likely to fall faster in the months
ahead, Paul Horsnell, global head of commodities research at
Standard Chartered Plc in London, said in a report. The
reduction in U.S. activity and a rebound in prices have probably
pleased Saudi Arabian policy makers, Horsnell said.
The shale oil boom sent U.S. crude output to 9.422 million
barrels a day in the week ended March 20, the highest level in
more than four decades, Energy Information Administration data
show. Production slipped in three of the following four weeks to
9.121 million. U.S. drillers have idled 56 percent of oil rigs
since October, leaving the total at 703 on April 24, according
to Baker Hughes Inc.
“A common assumption is that once prices are high enough,
the U.S. oil industry can recover very quickly in a V-shaped
pattern,” Horsnell said in the report. “We think this is
unlikely.”
The backlog of uncompleted wells, or fracklog, in North
Dakota swelled to 900 in late February. When drillers decide to
complete work they have to wait for hydraulic fracturing fluids
and completion rigs to arrive. The largest challenge may be
bringing back staff, Horsnell said.
http://www.theedgemalaysia.com/my/articl...verberates
(21-04-2015, 10:16 PM)Petertan Wrote: [ -> ] (21-04-2015, 08:27 AM)specuvestor Wrote: [ -> ]^^agree. Capex cycle is not going to restart just because oil hits $80. It will only restart when majors see oil price sustainable at >$70 for next 18 months. There is a difference. So choose and TIME the instruments carefully. I wont be surprised most will rise in tandum but i wont be holding them for quarterly results
If one been reading this thread past 6 months, one would have a good idea where the dynamics and catalysts are coming from.
Vested in WTI futures
To wait 18 months to make sure oil price sustainable at >$70 to decide capex, is too long a time. Are you sure?
(21-04-2015, 11:36 PM)specuvestor Wrote: [ -> ]Not wait 18 months per se... Have measured confidence for next 18 months. They are not going to drill $1m test holes just because oil is going $80 next month. I also doubt they look at technical charts. Like shipbuilding, these are deep cycle industries
Thats why OPEC officially only meet twice a year.