Oil Prices

Its bad because:

1) The OG industry has hired too many ppl, have too much fat. Low prices means trimming of fats which means loss of jobs
2) Banks will have to impair their loans made to these sector, jobs cut
3) Commodity and Oil traders losing money also job losses
4) Spill over effect to property

So yup its bad due to our greed and naivety to think that the industry will continue to boom.

(20-01-2016, 04:47 PM)CY09 Wrote: Its bad because:

1) The OG industry has hired too many ppl, have too much fat. Low prices means trimming of fats which means loss of jobs - normalization to the mean
2) Banks will have to impair their loans made to these sector, jobs cut - bad loans a lot? banks did not do their risk-assessment?
3) Commodity and Oil traders losing money also job losses - they betting/hedging? else it's cost+fees biz model?
4) Spill over effect to property - this part i think minimum, TDSR, which in turn helps the banks too...

So yup its bad due to our greed and naivety to think that the industry will continue to boom. - Supply and Demand!

(20-01-2016, 02:55 PM)lilvestor Wrote:

(20-01-2016, 12:24 PM)BlueKelah Wrote:

(20-01-2016, 12:03 PM)lilvestor Wrote: And crude oil goes under $28... right now even bears like me are shocked at how low prices are.

I must be the exception.

Historically it has gone below $20 so there is likely another 50% downside from now before rock bottom.

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My own forecast a year ago was for prices to hover between $30-$40 USD, $20 sounds pretty crazy to me, over 50% of all global oil production cannot breakeven at that price. I think this is not sustainable unless the currencies of these oil producing nations sink by another 50%, but currencies like the Ruble has already fallen by well over 50% in recent years, how much lower can they go?

Perhaps if a financial crisis arises in asia/china and USD strengthens a further 20%, coupled with the 35million barrels from Iran flooding the market, in the short term maybe for a quarter or half year, $20 wont sound so crazy. after all morgan stanley folks seem to think so already...
http://www.bloomberg.com/news/articles/2...preciation. After a bubble and higher highs the market can always crash and make lower lows.

It was not so long ago in 1986 that there was a similar oil glut with crash in prices to near $10 after high prices in the 70's energy crisis and also the asian financial crisis caused prices to tank to $11+ in 1998.

brazilian real has depreciated 60% to USD as well. 

$30-$40 does sound like a reasonable price for oil when it does recover, compared to historical levels and adjusting a bit for inflation, after all the cost of extraction by OPEC is not that high, traders should also not be making so much margin speculating the price up.

In any case, oil will probably only stay low for a couple years at the most if history is any guide, so for value hunters like us, we have probably a 2+ year horizon ahead to accumulate some O&G counter which are trading at historical lows. This chance wont present again for another decade at least.

Since O&G, retail, property sectors not doing well, Time to bid $1k (not $1 coz of Uber/Grabtaxi car rental companies) for COE?

(21-01-2016, 09:50 AM)opmi Wrote: Since O&G, retail, property sectors not doing well,  Time to bid $1k (not $1 coz of Uber/Grabtaxi car rental companies) for COE?

Some taxi companies have to do National Service, $1k for COE is impossible.

just be patient a bit more, COE will hit rock bottom when economy hit rock bottom. So far we are not in a recession yet though there is a chance we might go into one this year or next.

An short-term inefficiency of the market?

US oil import binge: distorted derivatives or shale bust?
21 Jan 2016 14:14
[NEW YORK] New York and London oil futures markets are sending a dangerously misleading signal to the real world, according to a growing number of analysts and physical traders. The message: the United States wants more oil.

Oil derivatives traders have bid US benchmark West Texas Intermediate crude to a premium versus global market Brent for the first time since the shale boom began in 2010, a rally that emerged after the abrupt end of an export ban that producers said had forced them to sell domestic oil at below-market rates.

As a result of the inversion, which is now evident in every contract out to August 2017, importing light, sweet crude to the United States has become economical for the first time in years. Vessels carrying up to 500,000 barrels of day of Norwegian and Nigerian crude are expected to arrive at US ports in the coming weeks.

While the economics may work today, some traders in the cash market for domestic US crude worry that it is sowing the seeds of a further slump in prices that could emerge this spring.

The hedge funds and speculators who dominate global futures markets are overestimating the impact of ending the export ban and the eventual decline in domestic shale production, they say, ignoring the fact that the gaping spread has spurred an armada of import cargoes that could deluge the US market.
...
REUTERS

Source: Business Times Breaking News

15 cts to the dollar => which makes Bernie Madoff look really generous. In case there is any doubt, with debt holders getting a mere 15% recovery, equity holders are unlikely to get back even a cent.

The same author reported that rumours are circulating that Sandridge Energy will be filing for chap 11 soon with Chesapeake following closely behind =>Sandridge. I'm pretty certain that we will see many more within the next 6 months should oil remain at $30 or lower.

Now that debt holders are getting trashed, perhaps the money spigots will finally stop flowing.

The oil price, can change direction, anytime, once a deal is made by the key players. It is a game of who-will-blink-first, and time to blink is coming?

Russia says studying proposal for global oil production cuts

ST PETERSBURG, Russia/DUBAI - Russia said on Thursday that OPEC had proposed oil production cuts of up to 5 percent in what would be the first global deal in over a decade to help reduce a glut of crude and prop up sinking prices.

It remained unclear whether Russian Energy Minister Alexander Novak was referring to a months old proposal by OPEC members Venezuela and Algeria or a new proposal backed by OPEC leader Saudi Arabia. Saudi officials did not immediately comment on the proposal, and a Gulf OPEC delegate said it came from Venezuela and Algeria.

For non-OPEC member Russia, the world's top producer, that would represent an output cut of around 500,000 bpd.
...
http://www.todayonline.com/business/russ...-5-percent

Looks like some sanity has returned to the market, I thought $26 was far too low, crude oil really shouldn't be worth <$30, currencies of oil producing countries would have to depreciate against the greenback by another 30-50% for that to make sense.