Meh, 1) the CAPEX break even cost is dated. It’s much lower now and declining. 2) a lot of production out there is primed and could come online quickly at higher prices. 3) You’ve ignored the possibility of an emerging market hard landing 4) You’ve ignored high storage costs of crude and the fact that stockpiles are nearly maxed and 5) while Iran has been producing, they’re about to more than double output.
I mean, long run sure, but nobody is arguing that.
I’m still short. Also the upward sloping futures curve seems too ambitious - I think low 30s will be the average for 2016, and I don’t think we’ve seen the lowest low yet. it hit 26.55, but I’m thinking we’ll see $25 within a a couple months as Iran really gets ramped up and aggressive about taking market share.
^ Already priced in. We are one routine outage away from $40, and one Saudi/Russia deal away from $50.
come on man, a Saudi Russia deal is just smoke and mirrors, and you know it. Bottom line, as long as inventories keep rising, the price goes down, and no one has cut back yet.
Well, not much of a risk premium priced in, geo’s point. I guess the world is now Nardia…
I thought this was interesting, it’s just high level themes:
http://www.cnbc.com/2016/02/02/gartman-pickens-is-wrong-on-oil-heres-why.html
T. Boone’s take…
Will be down in the 20’s for a while later on in H1, then recover into the 30’s in H2.
Once Oil companies end up seeing an increase in excess inventory offshore (i.e. on tankers) it becomes significantly less economical and we’ll see the rig count drop more. Then we should see the price recover.
next move in UWTi is over $3.
I’m still short. I think this will go to 25 cuz I haven’t seen any cutbacks, and those barrels gotta get out the door to make room for the new ones
The problem is the reports created by interns and singed by self-proclaimed “experts”. A report last week confused Iranian increased sales by increased production. Iranians managed to sell extra quantity of oil stored in tankers. Production level didn’t increase; yet.
Before 2012, Saudi Arabia had 20% excess production capacity (2 mbpd). Now, no producer has any excess capacity.
Current world rigs count, will induce a reduction in supply of approximately 1mbpd (600 kbpd depletion from Shale, 400 kbpd from conventional)
Demand is expected to increase by 1mbpd
Canada’s sand oil is priced at USD 10 below Brent. Extraction cost is USD 15-20 (excluding interests and taxes)
US oil production peaked in June 2015
66% of Chinese energy supply comes from coal. Current economical environment will most likely affect demand on coal. Recent trends suggest that growth in services will be higher than growth in manufacturing. Middle class will keep growing. Demand on coal is expected to slow down, while demand on oil will not be affected.
International car sales were highest in 2015 (growing middle class in China and India)
US car sales set a new record in 2015
Unknown: number of idle pre-completion wells
US Crude Oil Stockpile (excluding SPR) is hovering around 30 days of supply
Shale production cost was reduced by 30% because of renegotiated input prices. Production efficiency didn’t increase in 2015
Hedging will not be as helpful as in 2015
I can’t tell if you’re long or short on oil, but I can tell you I’m still bearish, despite being in cash as of today.
I’ve been short using dwti since oil was $40 a barrel, and I closed the position today - bought at 135, out today at 392 - kicking myself a bit cuz a couple weeks ago it went for 480 briefly, but it’s hard to complain about this kind of a gain in such a crappy year - (I went to cash and shorts on US Financials a couple weeks ago). I lost a good chunk of money last year going long with UWTI from oil at $47, but I made up for it and then some with my shorts from $40. I don’t think we’re at the bottom yet, but we’re starting to see some bankruptcies, there was a small draw on inventories in the US last week (although cushing stil went up), and there’s not much more room for a bottom from $27. On the other hand, that contango is too steep, and I don’t think $40 is in the cards for a while anymore.
If oil has another pop on some BS cooperation rumor, then I’ll reconsider a short, but there’s no reason to think this goes up soon from the current position, which is what the EIA said in their report from the other day.
^ I’d rather not to give a recommendation nor state my position. I’m not sure where things are going. I’m just listing the information am using. I’ve been doing fine so far. Oil is very interesting right now. A lot of measures to monitor. Something to focus on in the coming weeks is US production and Crude stockpile. US production is going down slowly, and US Crude stockpile went down a bit last week (“experts” forecasted a sizable increase). If this trend persists for few more weeks then we might expect higher prices soon.
I wish if I can get data on China’s actual weekly demand and Russia’s actual production.
What the hell is the fun in that? Making time stamped calls is one of the best parts of this forum we’ve got enough talking head primadonna’s already.
ALTHOUGH, your 2/1 post when WTI was at $31.62 could only be construed as a bull argument.
And am doing fine so far. Last week was a blessing. This week am a bit cautious as the damned speculators are in play. They’re talking geo political crap. I can speculate against their stupidity and greed, but sometimes their stupidity goes beyond my comprehension. I don’t do well when the crowds follow self-fulfilling prophecies that defy any logic.
What does everyone else think about OPEC’S conveniently timed “blink” last Thursday saying they will consider capping production. News came out right as markets in general were at critical levels. I was watching the S&P, which was sitting precariously at 1810… and then wooooosh, OPEC saves the day? Serendipity or BS?
BS. Why would you alter your strategy to push out high cost production right when it appears to be about to work. It does make me wonder what they may know about the health of smaller open members though.
To me, it’s particularly odd because I think a short period at ultra low prices would be better to drive out weak competitors than an extended period at lowish prices that drains everyone. But they must have an analysis that says otherwise. I’m not an O&G guy so I’m outside my depth on this one.
One thing I’ve been thinking is that the possibility of an aramco sale could be getting internal pushback or could have been floated as a bluff, which may bring SA back to the table with OPEC
^Some of OPEC is high cost production too…but yes, if we take OPEC = KSA, then there is no reason for them to blink right now.
This time is different. This effort was started by Venezuela . They’re deeply hurt. Their dominant exports are Oil and Miss World pageants. OPEC countries have good relations with Venezuela. I believe they will not ignore their efforts. They’ll reach a deal. But I’m not sure whether they’ll announce it. They might agree on cutting production after several months, but we might not know when.
Beside this discussion, there are several unnoticed gems in the refinery business. Few have smart management.