(16-12-2015, 10:17 AM)BlueKelah Wrote: [ -> ] (15-12-2015, 09:24 PM)LionFlyer Wrote: [ -> ]RDS-B is trading close to May 2009 levels. I think downside is rather limited, even if it is a prolonged event. If anything, history suggest this to be unlikely.
Anyway, the way oil prices move up and down seems to artificially distorted and deeply inefficient.
[Image: Brent_Spot_monthly.svg]
If history is any guide, oil had been trading on average at sub $40 levels during the decades before 2003, where the property/credit bubble started and took off in US and Europe. During the GFC prices fell back to sub $40 levels again. It does feel like sub $40 should be the "historical" guide.
Barring any crazy spikes in global demand or dips in global supply (which is now almost in glut status with a lot of floating oil sitting around), without speculation or price fixing, $40 already should be a pretty good price for oil.
Even with the spike to $60 earlier this year, oil was already 50% too expensive.
It seems central banks can only do so much to temporarily sustain inflated asset prices in their respective regions. Commodities prices are more an international thing and oil price will be hard to manipulate for an extended period.
The spike in oil prices was largely due to rampant speculation, hedge funds went crazy and large spec net longs were an eye popping 400k contracts at the peak of the bubble. I got a feeling these guys won't be coming back soon, the wounds are still raw from the rout in the last 12 mths.
Sanctions will be lifted on Iran in Jan 16. Then we see what happens to the market when the first Iranian barrels are out.
I agree in general that the spike during the 2004 onwards were partly due to speculation. But it should be partly due to real demands. I don't think it is logical to assume that real demands now is the same as the pre-spike/early 2000s days.
have a feeling that current sub $40 price already priced in the IRAN oil production story.
Most likely in the short term, events like middle east ISIS war, strengthening USD and Demand from China crapping out (pretty sure China has reached their oil storage target by now, we can see from the iron ore price what happens to a commodity when China has finished their stockpiling.) will be more important stories..
Is everything still fine and dandy with the American oil patch? Believe me, the pain is excruciating...
Kinder Morgan
Zombies
In the 3Q results briefing, only a handful of companies talk about achieving cash flow breakeven. We should see more companies facing reality by 4Q, especially without all the price hedges in 2016...
worst not here yet, so hang in there... it has to get worst before it can get better!
(16-12-2015, 11:39 AM)lilvestor Wrote: [ -> ]It will still be very economically viable with EOR. My point is that the largest OPEC producers + Russia aren't losing money producing oil at current prices, but we can't say the same thing about the smaller players, or the non-conventional drillers.
Iran's oil production will return to its pre-sanction peak easily (+1m barrels from current levels), they need the money and there is money to be made at $40 USD per barrel, don't forget that the Iranian Rial, like the Russian Ruble, has crashed vs the dollar in recent years.
The big boys might still find oil production
economically viable, but I suspect it isn't going to be
fiscally viable for some of them. A lot of these folks (eg. Venezuela) are addicted to the good times of 100usd/barrel oil and something bad will happen to a sovereign nation, creating new ripples that possibly morph into black swans. This is similar to the general consensus of VB, ie. It is going to get worst, before it gets better.
(18-12-2015, 06:18 PM)Behappyalways Wrote: [ -> ]Jim Chanos has a dark warning for OPEC members
http://news.yahoo.com/jim-chanos-dark-wa...50587.html
But but but......
I am much more bullish O&G longer term but I also agree with Jim Chanos that highly geared O&G E&P companies have little chance to survive, even at say $80 per barrel. E.g. Magnum Hunter, one of the latest to file for Chap 11.
Magnum joins the Party
Someone asked me, who are the rest?
Here a link for you:
37 so far
