jbisback Wrote: ------------------------------------------------------- > Does anyone actually cover energy here?? Thought > so. > > The days of $60 oil is long gone…high cost > capacity is $75-80…there is your absolute min > floor. The speculation argument for the big move > to $150 is crap. It was a result of commercial > buyers who held off buying and depleted > inventories to the point where they could no > longer do so and were forced to buy at elevated > prices…moving prices up further…this, combined > with a steady demand trend and a deterioration in > global excess capacity, resulted in a move toward > a scarcity model - a la the huge acceleration in > crude prices. > > I see us range bound between 85ish and 115ish for > the rest of the year… Yeah, I suppose billions flooding away from futures, going into cash, redeeming, or chasing distressed debt, has absolutely nothing to do with the fall in prices. There’s far more evidence of rapid movement out of the futures sector than there is for any large increase in short-term commercial purchases which created some sort of whipsaw effect. Supplies stayed reasonably stable. Deterioration in excess capacity? There’s plenty left out there and I never saw people in lines waiting for capacity. The idea that it was capacity was a spectral scare tactic. The case for oil over $100 was crap, it wasn’t driven by any fundamental. I bet oil is down below $75 by the end of the year.
spierce Wrote: ------------------------------------------------------- > jbisback Wrote: > -------------------------------------------------- > ----- > > Does anyone actually cover energy here?? > Thought > > so. > > > > The days of $60 oil is long gone…high cost > > capacity is $75-80…there is your absolute min > > floor. The speculation argument for the big > move > > to $150 is crap. It was a result of commercial > > buyers who held off buying and depleted > > inventories to the point where they could no > > longer do so and were forced to buy at elevated > > prices…moving prices up further…this, > combined > > with a steady demand trend and a deterioration > in > > global excess capacity, resulted in a move > toward > > a scarcity model - a la the huge acceleration > in > > crude prices. > > > > I see us range bound between 85ish and 115ish > for > > the rest of the year… > > > Yeah, I suppose billions flooding away from > futures, going into cash, redeeming, or chasing > distressed debt, has absolutely nothing to do with > the fall in prices. There’s far more evidence of > rapid movement out of the futures sector than > there is for any large increase in short-term > commercial purchases which created some sort of > whipsaw effect. Supplies stayed reasonably > stable. > > Deterioration in excess capacity? There’s plenty > left out there and I never saw people in lines > waiting for capacity. The idea that it was > capacity was a spectral scare tactic. > > The case for oil over $100 was crap, it wasn’t > driven by any fundamental. I bet oil is down > below $75 by the end of the year. Well then why didn’t you say something about this earlier?
Oil: $90 + FD&A costs: $25-$40 = health profit for most conventional, high impact and oil sands projects. Some of the marginal projects/drilling programs may be sidelined for now but for most of the resources out there things are still very good.
Netbacks are still very healthy at $90 no matter what you are doing. If anything, some companies will choose to pare back the increases to capex they announced earlier in the year. The volatility makes it hard to properly value the sector I find.
spierce Wrote: ------------------------------------------------------- > jbisback Wrote: > -------------------------------------------------- > ----- > > Does anyone actually cover energy here?? > Thought > > so. > > > > The days of $60 oil is long gone…high cost > > capacity is $75-80…there is your absolute min > > floor. The speculation argument for the big > move > > to $150 is crap. It was a result of commercial > > buyers who held off buying and depleted > > inventories to the point where they could no > > longer do so and were forced to buy at elevated > > prices…moving prices up further…this, > combined > > with a steady demand trend and a deterioration > in > > global excess capacity, resulted in a move > toward > > a scarcity model - a la the huge acceleration > in > > crude prices. > > > > I see us range bound between 85ish and 115ish > for > > the rest of the year… > > > Yeah, I suppose billions flooding away from > futures, going into cash, redeeming, or chasing > distressed debt, has absolutely nothing to do with > the fall in prices. There’s far more evidence of > rapid movement out of the futures sector than > there is for any large increase in short-term > commercial purchases which created some sort of > whipsaw effect. Supplies stayed reasonably > stable. > > Deterioration in excess capacity? There’s plenty > left out there and I never saw people in lines > waiting for capacity. The idea that it was > capacity was a spectral scare tactic. > > The case for oil over $100 was crap, it wasn’t > driven by any fundamental. I bet oil is down > below $75 by the end of the year. Nice textbook answer but I don’t agree. There has been a deterioration in excess capacity, with an underlying demand trend. A well here…a well there…it adds up over time and the industry, as a whole, has underinvested for years and years. Oil prices have continually bounced off of the cost curve for the last 8 years…costs have increased exponentially…and now prices are finally reflecting this. The U.S. has had cheap oil for far too long. I draw comparisons to what is currently going on with potash (potassium chloride the commodity…not Potash Corp the company. The reason for the spike was a deterioration in excess capacity, the industry tightened up and demand increased from emerging markets. China and India depleted their inventories and now they are on allocation b/c its only produced in a handful of countries. Scarcity model…the only other commodity that I can recall having such a price spike was palladium
Yes but the rapid inflation in Oil prices was too much money flowing into commodities due to Pensions and such adding it to their portfolios. Don’t drink the GS kool-aid for too long, just b/c they are GS doesnt mean they are always correct. They were self-serving with those $100 then $150 then $200 barrell forecasts.