Oil Prices

[bear]

A report by www.thestreet.com on Saudi Arabia's plan to cut back on oil production.
I don't think it will change the poor outlook of oil prices a bit at least for next one to two years.

link
http://www.thestreet.com/video/13236846/...ummer.html

Saudi Arabia to Cut Oil Production Levels at the End of Summer.
The world's number one oil exporter, Saudi Arabia, is planning to scale back oil production at the end of the summer. The latest reports suggest that Saudi Arabia will reduce its crude output to 10.3 million barrels a day, cutting around 300,000 barrels per day. According to reports, the country will slow its record-breaking output in response to domestic demands, as the need for air conditioning subsides in September. The Street's Jim Cramer said that Saudi Arabia's reductions will have a dramatic impact on the price of oil, despite the potential Iran deal on the horizon. Cramer said the cutback will make it 'unlikely we will visit the $43 level again. We all know that our production has already peaked and I expect it to decline pretty precipitously.' He added that the latest developments provide 'the missing piece of the puzzle, that should cause oil to trade at these levels and not go much lower.' Saudi Arabia currently produces around 10 percent of the world's crude oil.

[CityFarmer]

Shell is slimming down, amid the lower oil price...

Shell to axe 6,500 jobs and cut spending to cope with lower oil prices

LONDON (July 30): Royal Dutch Shell is to axe 6,500 jobs this year and step up spending cuts, responding to an extended period of lower oil prices which contributed to a 37 percent drop in the oil and gas group's second-quarter profits.

The Anglo-Dutch company is also increasing asset disposals to $50 billion between 2014 and 2018 as it pushes ahead with its proposed $70 billion acquisition of BG Group.

"We have to be resilient in a world where oil prices remain low for some time, whilst keeping an eye on recovery," Chief Executive Officer Ben van Beurden said.
...
http://www.theedgemarkets.com/sg/node/219236

[touzi]

Wong Fong Fui's view found in the Boustead Chairman's message:

Put simply, the world can save on consumer
products and services during tough financial times but it
cannot merely switch o electricity or scrimp on fuel to travel
the same distance. The demand and supply equilibrium
will eventually return to support prices.

Still on the topic of energy, the longer that crude prices
stay at lower levels, the brighter our silver lining appears.
As we search for new ways to grow our divisions, the one
space that acquisition opportunities are beginning to look
much more attractive is in the energy industry.

[BlueKelah]

Wong Fong Fui's view found in the Boustead Chairman's message:

Put simply, the world can save on consumer
products and services during tough financial times but it
cannot merely switch o electricity or scrimp on fuel to travel
the same distance. The demand and supply equilibrium
will eventually return to support prices.

Still on the topic of energy, the longer that crude prices
stay at lower levels, the brighter our silver lining appears.
As we search for new ways to grow our divisions, the one
space that acquisition opportunities are beginning to look
much more attractive is in the energy industry.

from what i read online, it seems that the previous years commodity/oil market likely has been manipulated to historically high prices due to traders colluding to profit. Much like the LIBOR scandal, there seems to be much manipulation and price fixing in the commodity markets.

Should the rampant price fixing and manipulation get removed from the system by regulators in the coming years. It would likely mean that trading prices for commodities and oil should settle near to historical averages given an even supply-demand picture.(Before 2005 leading up to the GFC, annual averages have been below $40 but after 2005 it seems prices shot up more than double.)

So my conclusion is with US and other developed nations regulators starting to do their job in the commodity/oil trading market, it could mean the new average prices could settle between USD40-60 or even lower at USD30-50 depending on supply demand equilibrium.

[lilvestor]

Wong Fong Fui's view found in the Boustead Chairman's message:

Put simply, the world can save on consumer
products and services during tough financial times but it
cannot merely switch o electricity or scrimp on fuel to travel
the same distance. The demand and supply equilibrium
will eventually return to support prices.

Still on the topic of energy, the longer that crude prices
stay at lower levels, the brighter our silver lining appears.
As we search for new ways to grow our divisions, the one
space that acquisition opportunities are beginning to look
much more attractive is in the energy industry.

from what i read online, it seems that the previous years commodity/oil market likely has been manipulated to historically high prices due to traders colluding to profit. Much like the LIBOR scandal, there seems to be much manipulation and price fixing in the commodity markets.

Should the rampant price fixing and manipulation get removed from the system by regulators in the coming years. It would likely mean that trading prices for commodities and oil should settle near to historical averages given an even supply-demand picture.(Before 2005 leading up to the GFC, annual averages have been below $40 but after 2005 it seems prices shot up more than double.)

So my conclusion is with US and other developed nations regulators starting to do their job in the commodity/oil trading market, it could mean the new average prices could settle between USD40-60 or even lower at USD30-50 depending on supply demand equilibrium.

It wasn't due to collusion, speculation was what caused oil prices to spike to $100+ per barrel. Hedge funds/speculators have been piling into oil since 2011, they took outstanding longs to a record 450k contracts on Nymex back in 2014, before the crash, all this while the producers have been the only net sellers in the crude oil market. These trades are now unwinding but it will take some time before this speculative premium is wrung out of the market. I think this stabilises around $40.

[CityFarmer]

Wong Fong Fui's view found in the Boustead Chairman's message:

Put simply, the world can save on consumer
products and services during tough financial times but it
cannot merely switch o electricity or scrimp on fuel to travel
the same distance. The demand and supply equilibrium
will eventually return to support prices.

Still on the topic of energy, the longer that crude prices
stay at lower levels, the brighter our silver lining appears.
As we search for new ways to grow our divisions, the one
space that acquisition opportunities are beginning to look
much more attractive is in the energy industry.

Yes, based on simple rule that, nothing go up or down forever. The lower the oil price goes, the higher of the swing back.

[greengiraffe]

OPINION Aug 2 2015 at 3:56 PM Updated Aug 2 2015 at 8:47 PM

Oil companies Royal Dutch, Centrica, Saipam, forecast big job losses

Could oil job cuts take the hammer to a US rate rise? Jessica Shapiro


by Karen Maley
The tumbling oil price is not only creating headaches for the bosses of the global oil giants, it's also threatening to derail the US central bank's plans to raise interest rates later this year.

The world's big oil companies are now slashing jobs and cutting spending as they prepare themselves to withstand a prolonged period of weakness in the oil price, which is now trading at just over $US50 ($68.50) a barrel, down from $US115 in June last year.

Last week, ExxonMobil, the biggest US oil company, reported its worst quarterly profits in six years. Its main US rival, Chevron, suffered even more pain, with its second quarter profit plunging 90 per cent to the lowest level since 2002.

In response to shrinking revenues, the oil industry worldwide has already shed an estimated 70,000 jobs. And the job losses appear to be picking up pace.

In the past week alone, Royal Dutch Shell announced it was cutting 6500 jobs, the British energy firm Centrica (which owns British Gas) said it would reduce its head count by 4000, while Italy's biggest oil and gas contractor, Saipem, said it would trim its workforce by 8800 people.

The big oil companies have also cut back on investment, saving themselves an estimated $US200 billion ($273 billion) in capital spending by shelving big-ticket oil and gas projects.

The drop in the oil price, which started midway through last year, picked up in November when OPEC, the producers' cartel, decided not to cut output.

After enjoying a brief recovery earlier this year, the oil price dropped by more than 20 per cent in July – its worst monthly drop since the 2008 financial crisis -as investors worried about the resilience of US shale producers. Although the US oil rig count has dropped sharply in the past year, US shale oil producers have kept output steady by targeting richer sections of shale.

The oil price has also come under renewed pressure after Iran, which has the world's third-largest oil and gas reserves, last month struck a deal that will lead to the gradual lifting of international sanctions in return for limits on its nuclear program.

And the big oil producing countries are not doing much to support the oil price. OPEC secretary general Abdalla El-Badri repeated last week that the cartel was "not ready to reduce" production.

Meanwhile, the sharp drop in the oil price is playing havoc with the US central bank's plans to raise interest rates this year.

Janet Yellen, the head of the US Federal Reserve, has been at pains to prepare investors for rate rises this year. However, she has always added that the US central bank would look at the data – particularly on employment and inflation – before moving its key interest rate, which it has kept close to zero since December 2008.

But while the US jobs market has staged a strong recovery – the country's unemployment rate has fallen from 10 per cent in 2009 to 5.3 per cent in June – inflationary pressures remain feeble.

After a policy meeting last week, Fed officials warned that they would continue "to monitor inflation developments closely", a sign that they are worried about weak price pressures.

And the US central bank was given yet more reason for concern after figures released on Friday showed that US wages and salaries only rose by 0.2 per cent in the second quarter of the year. This was a fraction of the 0.7 per cent jump in the first quarter, and the weakest rise since records began in 1982.

The paltry increase in pay packets surprised economists who had been expecting that wages would rise as the US labour market improved, but some believe that job losses in the oil industry are to blame.

While New York has boosted the minimum wage for fast food workers to $US15 an hour, the steady decline in the rig count has translated into a loss of a large number of highly paid skilled jobs.

Investors, figuring that the sluggish wages growth made it unlikely that the US central bank would raise rates at its September meeting, responded by buying US bonds. This pushed bond prices higher and yields lower, with the yield on the benchmark 10-year bond dipping to 2.21 per cent.

[Behappyalways]

Iran Says It Can Boost Oil Output Just Days After Sanctions End
http://www.bloomberg.com/news/articles/2...-sanctions

[HitandRun]

Iran Says It Can Boost Oil Output Just Days After Sanctions End

Well, they also say that they have no nuclear weapon / ambitions....

[lilvestor]

Shale is a different beast.


http://www.bloomberg.com/graphics/2015-oil-rigs/

Rig declines are likely to continue for the next few months, and may not stabilize until the third quarter, according to an analysis by Bloomberg Intelligence. In three previous oil slumps, it took about 32 weeks for rigs to bottom out. In highly productive shale regions with big fracklogs, production could still climb for months even if rig counts fall to zero.