Oil Prices

[HitandRun]

So far the biggest bloodletting appears to be Schlumberger @ 9000 workers....Should see more over the next 2 months.

[specuvestor]

"Although T. Boone Pickens says he is "no fan" of the Organization of the Petroleum Exporting Countries, the current situation in oil is out of its control, he wrote during a question-and-answer session on Twitter.

Instead, the billionaire oil tycoon placed the blame on the U.S., saying that the oil market is "oversupplied" by the country. In recent months, oil prices have nosedived, pressured by a glut in supply.

So what signs should investors look for as they gauge a potential bottom in oil?

The number of oil drilling rigs operating, among other factors, could prove an indicator of when oil prices will bottom, Pickens wrote." -13jan15

I doubt Saudi was asleep when shale ramped 5 years ago. I maintained that Ukraine was the catalyst and shale is the collateral damage.

The process should be this way: well permitting drops => rig counts fall => well fracturing & completions falls => then shale oil production falls. Given the lead time in each of those steps, I think we might see production fall only at late 3Q or 4Q this year, maybe possibly next year.

Thanks for the clarification HitandRun, I agree with this time frame. Best guess is that oil prices start rising 6-12 in months, assuming no bad surprises on the demand side.

Still searching for a ways to invest in oil - its one of the hardest industries to understand. Cant just go and buy some barrels to store in my flat....

How does the idea of rig count falling 50% next 3 month not hit production that we know have short peak production life, unless you guys talking about test rigs rather than production rigs?

I would think shale oil production will peak in 1Q, coupled with possible financial distress, to start declining in 2Q. Not too long a time to wait and see

PS there is oil futures rather than spot

[Belg]

WTI has been trading at premium prior to 09 as US is the largest importer of oil ie natural demand and quality is better than Brent.

However since the rise of shale oil, it has been starting to tradie at discount. Some say it is due to logistics and infrastructure constraints in Cushing Oklahama due to sharp rise in shale oil. But the inventory at Cushing has gone down since 2013 but discount persisted.

I leave it to you to figure out in this thread why it is back to parity and possibly normalise back to a premium to Brent soon.

"Monitoring and might be vested"

For all we know , the real reason behind this "low" oil price is a pact on Russia and possibly countries in the ME to listen to the US and OPEC.

China's HUGE storage on super tankers and also Singapore's very own oil caravan is not there for nothing.

Time to look into oil and gas counters?

[BlueKelah]

China's storage is for their own backup. Singapore side is just storing for speculators.

So long shale supply strong and demand is weak, price can only down. 30 dollar or less before revert up.

-- via Xperia Z1 with tapatalk

[corydorus]

Well, if many commodities counters can come down, why not oil be subject to supply and demand. I think the current situation is good for the market. This is what competition is about to serve consumers in the free economy world. We may be paying high oil prices for a long time artificial due to OPEC and a few corner players. We should rejoices that things getting to normal !

[chongsk]

Prediction of oil supply glut and its' implication has already been discussed long time ago since 2011 in the US.

http://belfercenter.ksg.harvard.edu/publ...rging.html

[Boon]

Oil slide to $10? Don't scoff, it's happened before: Don Pittis

As some bet on sub-$20 oil, we look for tools to tell us where prices will go next

By Don Pittis, CBC News Posted: Jan 16, 2015

http://www.cbc.ca/news/business/oil-slid...-1.2901843
________________________________________________________________________________________________________________

Opinion: Investors are looking at the wrong oil prices

By Mark Hulbert

Published: Jan 16, 2015

http://www.marketwatch.com/story/investo...2015-01-16
_______________________________________________________________________________________________________________
Oil up $2 as IEA sees signs 'tide will turn'

By Christopher Johnson

LONDON Fri Jan 16, 2015

http://www.reuters.com/article/2015/01/1...6L20150116

[CityFarmer]

OPEC seems is winning the game...

Steepest oil-rig drop shows shale losing fight to OPEC
SAN FRANCISCO (Jan 17): US drillers have taken a record number of oil rigs out of service in the past six weeks as OPEC sustains its production, sending prices below US$50 a barrel.

The oil rig count has fallen by 209 since Dec 5, the steepest six-week decline since Baker Hughes began tracking the data in July 1987.

The count was down 55 this week to 1,366.

Horizontal rigs used in US shale formations that account for virtually all of the nation’s oil production growth fell by 48, the biggest single-week drop.

Analysts including HSBC Holdings ( Financial Dashboard) say the decline shows that the Organization of Petroleum Exporting Countries is winning its fight for market share and slowing the growth that’s propelled US production to the highest in at least three decades.
...
http://www.theedgemarkets.com/sg/article...fight-opec

[yewkim]

The Dollars is strengthening, thus rally in oil n many commodites is nothing short of a dead cat bounce. A strong dollar is bad for commodities and especially right now as the world is not doing well. Latest data out of US is also pointing in this direction.

These factor could lead to a deep correction in stock.


http://www.cnbc.com/id/102344983

[Boon]

Billionaire Oilman Gives a Clue on When Oil Prices Will Bottom

By Matt DiLallo
January 18, 2015

T. Boone Pickens has been in the oil business for about 50 years. Over that time he has seen his share of booms, busts, and subsequent recoveries. He thinks the current bust in the price of oil is just like all the rest: supply is out of whack, OPEC is talking tough, and the U.S. oil industry must brace for another ugly downturn.

That being said, Pickens doesn't think the latest bust will last all that long. In fact, in December he made a bold call that the price of will be back over $100 per barrel within the next 12 to 18 months. However, before oil can rebound, the price must hit bottom. Pickens, who has seen his share of oil market bottoms over the years, gave investors an important sign to look for that prices are at rock bottom. The sign, he said in a recent social media chat session, is a big drop in the number of operating drilling rigs.

"Watch the rig count"
During the chat, Pickens was asked, "what are the signs you will look for to determine that the oil [market] may be bottoming?" He responded: "too many to list here, but one key factor is [the] number of drilling rigs operated." He later elaborated in the answer to another question:

Watch the rig count. They are falling already. Down 180+ and counting. Will probably go down by 500-600.

Pickens was referring to the U.S. rig count, which is the number of rigs active in drilling new oil and gas wells. His comments suggest that the price of oil will finally stop falling when a sufficient number of rigs are idled. This is because oil rigs are the key to adding new supply to the market, so a significant reduction in the number of rigs should start to contract the current oversupply of petroleum.

The following chart illustrates a compelling historical correlation between plunging rig counts and a bottoming in oil prices.

Note that in the 2008-2009 oil price plunge about 1,000 rigs, roughly 40% of active rigs at the time, went idle in a short period of time. However, the price of oil actually started to recover well before the rig count did. This is why Pickens thinks the rig count will only fall by 500-600 from the recent peak of around 2,000 rigs. before oil prices are ready to rebound. By his count the industry has already stopped operating about a third of the rigs necessary to put a bottom in oil prices.

Rigs are dropping like flies
Typically, the U.S. rig count changes rather slowly. Oil companies tend to sign a rig contract for months or even years, and they stagger the expiration dates of these contracts. But the current rig count is coming down fast. For example, the rig count in North Dakota's Bakken shale recently fell to its lowest point in four years -- down to 159 from the 183 rigs that had been drilling in the state in December. This is a direct result of massive capital expenditure reductions by oil companies: Bakken-focused drillers Continental Resources (NYSE: CLR ) , Oasis Petroleum (NYSE: OAS ) and Halcon Resources (NYSE: HK ) have all slashed capital spending by 50% from previous levels.

Oil companies are also increasingly bailing on rig contracts, often writing big checks not to drill new wells. Pioneer Energy Services (NYSE: PES ) alone has been handed back seven rigs so far this year, and has been paid $22 million in early termination fees for these contracts. The company expects contracts for another 10 rigs will be terminated before the end of the first quarter. We can expect to see more announcements of early rig contract terminations, as oil drillers would rather pay the fee than lose big money on an unprofitable well.

Investor takeaway
While markets tend to be irrational, there are signs that a panic is subsiding and a market is bottoming. When it comes to oil prices, T. Boone Pickens suggests investors watch rig counts, which have a pretty direct correlation to the price of oil. He believes the U.S. needs to drop 500-600 rigs from its peak of around 2,000 before we hit bottom. According to the rotary rig count published by oil driller Baker Hughes, the total rig count for onshore and offshore assets stands at 1,729 as of Jan. 16. That suggests that we're likely going to see many rig reduction announcements over the next few months.

http://www.fool.com/investing/general/20...rices.aspx