Oil: WCS at $14.00; the bottom has to be close

[avb3]

Chart as of Jan 18/16. Can't see this lasting much longer.

http://pdf.reuters.com/pdfnews/pdfnews.asp?i=43059c3bf0e37541&u=2016-01-18T080253Z_GFXEC1I0MCTRK_1_RTRGFXG_BASEIMAGE.jpg

[avb3]

Or maybe not according to this article.

Oil output fell in December, but don't expect prices to rise any time soon - Read at Business Insider: http://www.businessinsider.com/opec-monthly-report-for-december-2015-supply-decreases-by-200000-barrels-per-day-2016-1?&platform=bi-androidapp

[Twist]

The bottom is nowhere close yet.

It looks like it is going to be another chaotic week for global financial markets.* On Sunday, news that Iran plans to dramatically ramp up oil production sent stocks plunging all across the Middle East.* Stocks in Kuwait were down 3.1 percent, stocks in Saudi Arabia plummeted 5.4 percent, and stocks in Qatar experienced a mammoth 7 percent decline.* And of course all of this comes in the context of a much larger long-term decline for Middle Eastern stocks.* At this point, Saudi Arabian stocks are down*more than 50 percent*from their 2014 highs.* Needless to say, a lot of very wealthy people in Saudi Arabia are getting very nervous.* Could you imagine waking up someday and realizing that more than half of your fortune had been wiped out?* Things aren’t that bad in the U.S.*quite yet, but it looks like another rough week could be ahead.* The Dow, the S&P 500 and the Nasdaq are all down at least 12 percent from their 52-week highs, and the Russell 2000 is already in bear market territory.* Hopefully this week will not be as bad as*last week, but events are starting to move very rapidly now.

Much of the chaos around the globe is being driven by the price of oil.* At the end of last week the price of oil dipped below 30 dollars a barrel, and now Iran has announced plans*“to add 1 million barrels to its daily crude production”…

Iran could get more than five times as much cash from oil sales by year-end as the lifting of economic sanctions frees the OPEC member to boost crude exports and attract foreign investment needed to rebuild its energy industry.

The Persian Gulf nation will be able to access all of its revenue from crude sales after the U.S. and five other global powers removed sanctions on Saturday in return for Iran’s curbing its nuclear program. The fifth-biggest producer in the Organization of Petroleum Exporting Countries had been receiving only $700 million of each month’s oil earnings under an interim agreement, with the rest blocked in foreign bank accounts.*Iran is striving to add 1 million barrels to its daily crude production and exports this year amid*a global supply glut that has pushed prices 22 percent lower this month.

It doesn’t take a genius to figure out what this is going to do to the price of oil.

The price of oil has already fallen more than 20 percent so far in 2016, and overall it has declined*by more than 70 percent*since late 2014.

When the price of oil first started to fall, a lot of people out there were proclaiming that it would be really good for the U.S. economy.* But I said*just the opposite.* And of course since that time we have seen an endless parade of debt downgrades, bankruptcies and job losses.* 130,000 good paying energy jobs were lost in the United States in 2015 alone because of this collapse, and things just continue to get even worse.* At this point, some are even calling for the federal government to intervene.* For example, the following is an excerpt from a CNN article that was just posted entitled “Is it time to bail out the U.S. oil industry?“…

America’s once-booming oil industry is suddenly in deep financial trouble.

The epic crash in oil prices has wiped out tens of thousands of jobs, caused dozens of bankruptcies and spooked global financial markets.

The fallout is already being felt in oil-rich states like Texas, Oklahoma and North Dakota, where home foreclosure rates are spiking and economic growth is slowing.

Now there are calls in at least some corners*for the federal government to come to the rescue.

Is it just me, or is all of this really starting to sound a lot like 2008?

And of course it isn’t just the U.S. that is facing troubles.* The global financial crisis that began during the second half of 2015 is rapidly accelerating, and chaos is erupting all over the planet.* The following summary of what we have been seeing in recent days comes*from Doug Noland…

The world has changed significantly – perhaps profoundly – over recent weeks.*The Shanghai Composite has dropped*17.4%over the past month (Shenzhen down 21%). Hong Kong’s Hang Seng Index was down*8.2%*over the past month, with Hang Seng Financials sinking*11.9%. WTI crude is down*26%*since December 15th. Over this period, the GSCI Commodities Index sank*12.2%. The Mexican peso has declined almost*7%*in a month, the Russian ruble*10%*and the South African rand*12%. A Friday headline from the Financial Times: “Emerging market stocks retreat to lowest since 09.”

Trouble at the “Periphery” has definitely taken a troubling turn for the worse. Hope that things were on an uptrend has confronted the reality that things are rapidly getting much worse.*This week saw the Shanghai Composite sink*9.0%. Major equities indexes were hit*8.0%*in Russia and*5.0%*in Brazil (Petrobras down*9%). Financial stocks and levered corporations have been under pressure round the globe. The Russian ruble sank*4.0%*this week, increasing y-t-d losses versus the dollar to7.1%. The Mexican peso declined another 1.8% this week. The Polish zloty slid 2.8% on an S&P downgrade (“Tumbles Most Since 2011”). The South African rand declined 3.0% (down 7.9% y-t-d). The yen added 0.2% this week, increasing 2016 gains to 3.0%.*With the yen up almost 4% versus the dollar over the past month, so-called yen “carry trades” are turning increasingly problematic.

Closer to home, the crisis in Puerto Rico continues to spiral out of control.* The following is an excerpt from a letter that Treasury Secretary Jack Lew sent to Congress*on Friday…

Although there are many ways this crisis could escalate further, it is clear that Puerto Rico is already*in the midst of an economic collapse…

Puerto Rico*is already in default. It is shifting funds from one creditor to pay another and has stopped payment altogether on several of its debts. As predicted, creditors are filing lawsuits. The Government Development Bank, which provides critical banking and fiscal services to the central government, only avoided depleting its liquidity by halting lending activity and sweeping in additional deposits from other Puerto Rico governmental entities. A large debt payment of $400 million is due on May 1, and a broader set of payments are due at the end of June.

It isn’t Michael Snyder from*The Economic Collapse Blog*that is saying that Puerto Rico is “in the midst of an economic collapse”.

That is the Secretary of the U.S. Treasury that is saying it.

Those that have been eagerly anticipating a financial apocalypse are going to get what they have been waiting for.

Right now we are about halfway through January, and this is the worst start to a year for stocks ever.* The Dow is down a total of*1,437 pointssince the beginning of 2016, and*more than 15 trillion dollars*of stock market wealth has been wiped out globally since last June.

Unfortunately, there are still a lot of people out there that are in denial.

There are a lot of people that still believe that this is just a temporary bump in the road and that things will return to “normal” very soon.

They don’t understand that this is just the beginning.* What we have seen so far is just the warm up act, and much, much worse is yet to come.




I'm quite sure we've got a long unstable ride down yet.

EVERY indicator is there a al 2007/8, except it is worse.

This will be a big depression, but I bet we still have worse coming.

Remember, nearly 7 million people in the USA alone died of hunger related issues in the dirty thirties. That was a decade long depression. We're not immune here. The same mistakes are being allowed to be made again.

Best of luck everyone. Remember this saying:

"the bigger the bubble, the smaller the pin needed to burst it."

[JimPS]

The Global Financial Markets are on the brink of collapse again today.

We are guaranteed to go into the financial record books in the next couple of weeks as the odds of a big crash increase. You ain't seen nothin' yet.

Batten down the hatches. Plan well and don’t panic - and above all remember that the herd is usually wrong.

Blue Monday?

[I_forget]

Claiming low oil is causing most financial problems is a bit off. The worry of a slowdown in China has been a bigger issue thus far in 2016. And flight to safety of the US dollar hurts the price of oil as well.

[Mangosteen]

I wonder where that little dude is that was promising Peak Oil prices a few years ago? What does he have to say for his theory now

[The Elkster]

There is a quite a bit of overreaction to Iran right now. They certainly have a bunch of stored oil that is not going to help the market as it works its way through the system but they have a lot of work to do to achieve the daily production numbers they are touting. No doubt they will get there eventually with outside help. But the US alone is expected to be down another 700k bbl/d just between now and Nov 2016 (and likely more now that low hanging fruit is gone and financing is drying up same as with other global plays). So total US drop since the start of the downturn accounts for more than half of Iran's expected prod growth . That is on top of the other production drops that are going to start happening to non-OPEC and some OPEC members.

Its going to take awhile to turn around the production declines once we realize we've overshot to the low side. Prices will see $100 again....before we overdrill again. Rinse repeat.

[Twist]

Claiming low oil is causing most financial problems is a bit off. The worry of a slowdown in China has been a bigger issue thus far in 2016. And flight to safety of the US dollar hurts the price of oil as well.

All correct.

As globalization of markets increase, so do the downfalls. The interconnectivity means when even emerging markets hiccup, so do the rest.

The banks and ultra rich have built this system for their own gain.

Your average person isn't even IN the markets, and if so, and has even ALL of their retirements in, it is likely only a few hundred thousand to a million dollars.

These people like Ackman, Buffet, and other hedge funds have BILLIONS in, and even at losses, hedge them and the "little" guys end up the biggest losers.

Sanctioned theft, but, it supposedly is a free Country, so lose all you please.

Hope my pension funds lasts the 21 years until retirement.

[Twist]

There is a quite a bit of overreaction to Iran right now. They certainly have a bunch of stored oil that is not going to help the market as it works its way through the system but they have a lot of work to do to achieve the daily production numbers they are touting. No doubt they will get there eventually with outside help. But the US alone is expected to be down another 700k bbl/d just between now and Nov 2016 (and likely more now that low hanging fruit is gone and financing is drying up same as with other global plays). So total US drop since the start of the downturn accounts for more than half of Iran's expected prod growth . That is on top of the other production drops that are going to start happening to non-OPEC and some OPEC members.

Its going to take awhile to turn around the production declines once we realize we've overshot to the low side. Prices will see $100 again....before we overdrill again. Rinse repeat.

That's not what 20 of the biggest banks in the World are saying.

[JimPS]

Claiming low oil is causing most financial problems is a bit off. The worry of a slowdown in China has been a bigger issue thus far in 2016. And flight to safety of the US dollar hurts the price of oil as well.

You're right, China is an interesting place to watch right now.

Their economy could crash. Their only option is to stimulate consumption and force-build a middle class. If they don’t do that they could come tumbling down as the Former Soviet Union did.

This would have terrible implications for the Globalists and Canada is part of that gang now. That's one reason why China is making a big deal about ending its “One Child per Couple” policy. They're up to two, now.

They desperately need consumption. Roughly 300 villages in China disappear each day as about one million people migrate from the rural areas to the cities each week.

That's a staggering number of people internally migrating.

Their leadership and their people at least appear to be preparing for impending doom as we just sit around and whine about the price of oil, gloat about the cheap price of gas and wonder if our pension funds will be around in 21 years.

Have another beer and change the channel and see what's on Jerry Springer.

[Twist]

http://www.fox5ny.com/news/76795410-story


WJBK)*- Gasbuddy.com says several stations in Houghton Lake, Michigan have lowered their prices under $1 per gallon, in what appears to be a price war.

According to GasBuddy it appears these stations are currently the first stations in the country to see prices under $1 per gallon in years. As the situation unfolds, it's possible these stations re-raise prices back over $1/gallon.



A price of 78 cents per gallon was recorded at Beacon & Bridge Market while 95 cents per gallon was recorded at the Marathon in Houghton Lake. Prices were verified by GasBuddy after a review of photographs uploaded to GasBuddy's app.


http://www.bloomberg.com/news/articles/2016-01-18/the-north-dakota-crude-oil-that-s-worth-less-than-nothing


Oil is so plentiful and cheap in the U.S. that at least one buyer says it would need to be paid to take a certain type of low-quality crude.

Flint Hills Resources LLC, the refining arm of billionaire brothers Charles and David Koch’s industrial empire,*said it would pay-$0.50 a barrel Friday for North Dakota Sour, a high-sulfur grade of crude, according to a list price posted on its website. That’s down from $13.50 a barrel a year ago and $47.60 in January 2014.

While the negative price is due to the lack of pipeline capacity for a particular variety of ultra low quality crude, it underscores how dire things are in the U.S. oil patch. U.S. benchmark oil prices have collapsed more than 70 percent in the past 18 months and fell below $30 a barrel for the first time in 12 years last week. West Texas Intermediate traded at $29.03 as of 11:13 a.m. in New York.




"Telling producers that they have to pay you to take away their oil certainly gives the producers a whole bunch of incentive to shut in their wells,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.

Flint Hills spokesman Jake Reint didn’t respond to a phone call and e-mail outside of work hours on Sunday to comment on the bulletin. The prices posted by Flint Hills Resources and rivals such as Plains All American Pipeline LP are used as benchmarks, setting reference prices for dozens of different crudes produced in the U.S.

Plains All American*quoted*two other varieties of American low quality crude at very low prices: South Texas Sour at $13.25 a barrel and Oklahoma Sour at $13.50 a barrel.*

Canadian Bitumen

High-sulfur crude in North Dakota is a small portion of the state’s production, with less than 15,000 barrels a day coming out of the ground, said John Auers, executive vice president at Turner Mason & Co. in Dallas. The output has been dwarfed by low-sulfur crude from the Bakken shale formation in the western part of the state, which has grown to 1.1 million barrels a day in the past 10 years.



Different grades of oil are priced based on their quality and transport costs to refineries. High-sulfur crudes are generally priced lower because they can only be processed at plants that have specific equipment to remove sulfur. Producers and refiners often mix grades to achieve specific blends, and prices for each component can rise or fall to reflect current economics.

Enbridge Inc. stopped allowing high-sulfur crudes on its pipeline out of North Dakota in 2011,*forcing North Dakota Sour producers to rely on more expensive transport such as trucks and trains, according to Auers.

Producers outside the U.S. are also feeling pain. The price for Canadian bitumen -- the thick, sticky substance at the center of the heated debate over TransCanada Corp.’s Keystone XL pipeline --*fell to $8.35last week, down from as much as $80 less than two years ago.

Negative energy prices are rare but not unprecedented. Propane traded at a negative value in Edmonton,*a key pipeline hub in oil-rich Alberta, for about three months last year. Oil refineries sometimes pay people to take away low-demand products such as sulfur or petroleum coke to free up space. However, those are both processing byproducts, while oil is a raw material, according to Auers.

“You don’t produce stuff that’s a negative number,” Auers said. “You shut in the well.”





http://money.cnn.com/2016/01/18/investing/oil-crash-wall-street-banks-jpmorgan/index.html


Big banks brace for oil loans to implode

January 18

*

NEW YORK

Big banks are cringing as crude oil is crumbling.

Firms on Wall Street helped bankroll America's energy boom, financing very expensive drilling projects that ended up flooding the world with oil.

Now that the oil glut has caused prices to*crash below $30 a barrel, turmoil is rippling through the energy industry and souring many of those loans. Dozens of oil companies have gone bankrupt and the ones that haven't are feeling enough financial stress to slash spending and*cut tens of thousands of jobs.




Three of America's biggest banks warned last week that oil prices will continue to create headaches on Wall Street -- especially if*doomsday scenarios of $20*or*even $10 oil play out.

For instance,*Wells Fargo*(WFC)*is sitting on more than $17 billion in loans to the oil and gas sector. The bank is setting aside $1.2 billion in reserves to cover losses because of the "continued deterioration within the energy sector."

JPMorgan Chase*(JPM)*is setting aside an extra $124 million to cover potential losses in its oil and gas loans. It warned that figure could rise to $750 million if oil prices unexpectedly stay at their current $30 level for the next 18 months.

"The biggest area of stress" is the oil and gas space, Marianne Lake, JPMorgan's chief financial officer, told analysts during a call on Thursday. "As the outlook for oil has weakened, we would expect to see some additional reserve build in 2016."

Citigroup*(C)*built up loan loss reserves in the energy space by $300 million. The bank said the move reflects its view that "oil prices are likely to remain low for a longer period of time."

If oil stays around $30 a barrel, Citi is bracing for about $600 million of energy credit losses in the first half of 2016. Citi said that figure could double to $1.2 billion if oil dropped to $25 a barrel and stayed there.






More oil companies will die

The oil crash has already caused 42 North American oil companies to file for bankruptcy since the beginning of 2015, according to a list compiled by Houston law firm Haynes and Boone. It's only likely to get worse. Standard & Poor's estimates that*50% of energy junk bonds are "distressed,"meaning they are at risk of default.

"There is a lot of distress in the industry. There will be a lot of pain but they'll get through it," said Buddy Clark, a 33-year veteran of the energy finance space and a partner at Haynes and Boone.

The financial pain has gotten so great that now there's murmurs of abail out for the U.S. oil industry, though it's clear any assistance would run into political opposition.

Related: Is it time to bail out the U.S. oil industry?

Are banks ready?

All of this raises the question: Is Wall Street doing enough to prepare for the oil storm?

"One year from now, are you going to look back and say, 'Whoops, we didn't get ahead of this enough,'" outspoken banking analyst Mike Mayo asked JPMorgan boss Jamie Dimon during Thursday's conference call.

Dimon said if it were up to him, he'd reserve against the potential for even greater losses. However, he said those decisions are limited by accounting rules.

Still, Dimon said the energy portfolio makes up just a small portion of JPMorgan's balance sheet and many of the loans are backed by physical assets. That means banks can sell off assets to recover money if a company defaults on its loans.

"We're not worried about the big oil companies. These are mostly the smaller ones that you're talking," Dimon said.

Paul Miller, a banking analyst at FBR, said oil loans don't represent nearly the same threat to banks that mortgages did last decade. He also pointed out that banks have been forced to stockpile capital to help them absorb losses.

"The big banks might have 1% to 6% of exposure. That's not going to kill them. This is not like 2006 or 2007," Miller said.

Despite the turmoil, JPMorgan isn't planning to run away from the oil patch.

"To the extent we can responsibly support clients, we're going to. And if we lose a little bit more money because of it, so be it," Dimon said

[Twist]

And some more:

http://ca.equities.com/2016/01/tsx-falls-energy-sector-drags/


TORONTO*(Reuters) – Canada’s main stock index slipped in early trade on Monday, with the energy group weighing after oil hit 2003 lows while Canadian Oil Sands COS.TO surged on Suncor Energy Inc’s SU.TO revised bid.

The Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE was down 45.79 points, or 0.38 percent, at 12,027.67 shortly after the open.



http://mobile.reuters.com/article/idUSKCN0UV13E


LONDON*(Reuters) - European shares fell on Monday, following Asia lower and led by banks after the European Central Bank said it would quiz euro zone lenders about high levels of bad loans, while oil prices tumbled on the prospect of more supply from Iran.

With U.S. markets closed for the Martin Luther King Day holiday, U.S. stock index futures slipped 0.3 percent SPc1.

European shares opened higher but any prospect of a rally after stocks hit their lowest since December 2014 on Friday quickly fizzled out.

The pan-European FTSEurofirst 300 index.FTEU3, which has lost more than 10 percent this year, dropped a further 0.2 percent, with an index of euro zone banks .SX7E down 3.3 percent.

An ECB spokesman said on Sunday a number of banks would be asked about high levels of non-performing loans. The burden of such loans, particularly in Greece, Portugal, Spain and Italy, is curbing the euro zone's economic recovery by limiting banks' ability to lend.

Portuguese stocks*.PSI20*were down 3.4 percent and Italy*.FTMIB*lost 2.3 percent

"The uncertainty in the market, be it in Europe or wherever else, is causing these banks to suffer," Mark Foulds, sales trader at ETX Capital, said, adding that the sector was also under pressure from recent volatility linked to China.

"When the markets fall like they have done, everyone feels on edge. The market is dire, and there's not the liquidity that there used to be, which can mean the market gets oversold."

Britain's FTSE 100*.FTSE*index fell 0.4 percent.

Earlier, MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell to its lowest since October 2011, down 0.7 percent.



Japan's Nikkei*.N225*tumbled as much as 2.8 percent to a one-year low before closing down 1.1 percent. It has lost 20 percent from a peak hit in June, meeting a common definition of a bear market.

The volatile Shanghai Composite index*.SSECtouched intraday lows last seen in August but closed up 0.4 percent. It remains down nearly 18 percent this month.

In oil markets, the prospect of a jump in Iranian crude exports after international sanctions against the country over its nuclear program were lifted at the weekend weighed heavily on oil.

Brent crude, the global benchmark, was last down 18 cents a barrel at $28.76 LCOc1, having earlier dipped below $28 for the first time since December 2003.

"The lifting of key sanctions should allow it (Iran) to increase crude exports this year by at least 500,000 barrels a day on average, putting further downward pressure on oil prices in the near term," Barclays analysts said in a note on Monday.

Analysts at JPMorgan said oil-producing countries will need to sell large quantities of stocks and bonds this year to cover shortfalls in their budgets resulting from the oil price slump.

They estimate sales of $110 billion bonds this year, up from $45 billion last year, and $75 billion of equities compared with $10 billion.

YUAN

In currency markets the Chinese yuan rose 0.5 percent CNH= in offshore trade to 6.5830 per dollar, as Chinese authorities continued to stamp down on speculative yuan selling.

China will start implementing a reserve requirement ratio on some banks involved in the offshore yuan market, the People's Bank of China said on Monday, in what appears to be its latest attempt to stem speculation in the currency.

The safe-haven yen gave up some of its gains after having risen to a five-month high of 116.51 to the dollar JPY= on Friday. It stood at 117.34, down 0.3 percent on the day. The euro weakened 0.2 percent to $1.0890 EUR=.

The dollar has struggled to gain ground since the Federal Reserve's historic interest rate rise a month ago. After data on Friday indicating U.S. economic growth braked sharply in the fourth quarter, short-term interest rate futures price in only one hike by year-end, compared with two priced in as the year began.

In European bond trading, yields were mostly flat.

(Additional reporting by Alistair Smout and Nigel Stephenson; Editing by Catherine Evans and John Stonestreet)

[JimPS]

And some more:

Please - no more - unless of course you have an opinion you wish to share.

No more links and cut and pastes to mainstream media articles - please.

Readers on this forum who wish to read this kind of stuff are quite capable of finding it on their own.

[The Elkster]

I wonder where that little dude is that was promising Peak Oil prices a few years ago? What does he have to say for his theory now

How are you defining peak oil? Production peak? 50% reserve depletion? Production rates aside resource depletion is an undeniable issue and one we better consider when forming future public policy. Production is not inherently indicative of reserves. If I turn a hose on at 5 gallons/min and one on at 15 gal/min can you tell me (based solely on production rates) which is being fed by the 500 gallon or 50000 gallon reservoir ?

As someone who deals with reservoirs and well performance every day I will say without a doubt that reserves are seriously depleting. Thus the reason we are chasing crumby tight source rock. In my 20 years in the industry is disturbing to see how quickly we have been forced to turn to the dregs. Well performance on a bbl/$ basis has been dropping steadily thus the reason we need +$50 today and not $20.

What isn't getting any press is that much of the world is in the same position. Keep an eye on the rising cost of that marginal barrel of oil over the next 20 years. That is going to be the biggest effect of what most are calling "peak oil". Cost will kill oil before we've produced every last drop.

[Twist]

Please - no more - unless of course you have an opinion you wish to share.

No more links and cut and pastes to mainstream media articles - please.

Readers on this forum who wish to read this kind of stuff are quite capable of finding it on their own.

Just following rules. No just posting links.

I'm providing articles too, and while I don't subscribe to mainstream media, a lot of people do, and perhaps seeing the leftist media report on things like this will allow those people to see it isn't just a conspiracy.

Want my opinion, read my first post on this thread.

This. Is. Far. From. Over. Period.

[JimPS]

How are you defining peak oil? Production peak? 50% reserve depletion? Production rates aside resource depletion is an undeniable issue and one we better consider when forming future public policy. Production is not inherently indicative of reserves. If I turn a hose on at 5 gallons/min and one on at 15 gal/min can you tell me (based solely on production rates) which is being fed by the 500 gallon or 50000 gallon reservoir ?

As someone who deals with reservoirs and well performance every day I will say without a doubt that reserves are seriously depleting. Thus the reason we are chasing crumby tight source rock. In my 20 years in the industry is disturbing to see how quickly we have been forced to turn to the dregs. Well performance on a bbl/$ basis has been dropping steadily thus the reason we need +$50 today and not $20.

What isn't getting any press is that much of the world is in the same position. Keep an eye on the rising cost of that marginal barrel of oil over the next 20 years. That is going to be the biggest effect of what most are calling "peak oil". Cost will kill oil before we've produced every last drop.

I've read articles that suggest that Saudi Arabia fields and economy are in serious decline. Consequently the friction with Iran - who are next in line to be the big mid east oil player.

Any truth to the SA decline rumours?

[JimPS]

Just following rules. No just posting links.

I'm providing articles too, and while I don't subscribe to mainstream media, a lot of people do, and perhaps seeing the leftist media report on things like this will allow those people to see it isn't just a conspiracy.

Want my opinion, read my first post on this thread.

This. Is. Far. From. Over. Period.

No offense taken. It's all just beginning to unwrap. Period.

I'm beginning to think, like you, that the real conspiracy actually is Main Stream Media - both right and left.

[The Elkster]

I've read articles that suggest that Saudi Arabia fields and economy are in serious decline. Consequently the friction with Iran - who are next in line to be the big mid east oil player.

Any truth to the SA decline rumours?

Saudi Arabia keeps it very close to the vest so its hard to discern stuff with any certainty but one can generalize. What is known is that most of their production has come from 6-8 pools. One pool Ghawar doing the lion's share of that and a good portion of global production for decades. All these pools have been known about for a long time. A couple smaller one's were held in reserve until recently and apparently (based on one article) brought on to help to stem declines elsewhere. There haven't been any recent big oil discoveries to replace these and not for lack of looking.

The other issue I have as a reservoir guy is that the SA reservoirs are extremely permeable. Their characteristic depletion model would be opposite to our tight gas and oil. Instead of dropping off quick at the start then leveling for a low slow decline high perm stuff comes on strong and flows strong until the end...then dies or waters out abruptly. That quick drop at say Ghawar could cause some shocks. They are producing the last of their known big fields not much left to bail them out other than spending more money on secondary recovery schemes. They are already well into secondary recovery.

As and aside: I did work with a ME reservoir engineer who had worked with Saudi's and his indication was that SA is having issues and potentially doing damage to reservoirs. I would tend to look at SA reserve estimates as optimistic as with most companies and countries.

All of this positive oil spin has created the perception that we are awash in oil. It disturbs me. Oil IS our modern way of life. If we run into high cost supply issues (doesn't have to run out to cause issues) before a meaningful alternative has come along things will get ugly. We're using +90mmbbl/d and growing! That simply can't go on forever.

[KGB]

Posts like this one is the main reason why I LOVE this forum. Tons of info here that you won't get from CBC news...

[CanuckShooter]

That's not what 20 of the biggest banks in the World are saying.


Thing is the price of oil can only go down so far, but the upside has no limits. Anyone that thinks the price won't rebound and/or head into the stratosphere in the future is trying to pull the wool over your eyes. :thinking-006:

[JustMe]

It will rebound without a doubt. The concern for most tho is that it won't be tomorrow, or next month and probably not even next year! Can we hang on? That remains to be seen....

Thing is the price of oil can only go down so far, but the upside has no limits. Anyone that thinks the price won't rebound and/or head into the stratosphere in the future is trying to pull the wool over your eyes. :thinking-006:

[avb3]

Saudi Arabia keeps it very close to the vest so its hard to discern stuff with any certainty but one can generalize. What is known is that most of their production has come from 6-8 pools. One pool Ghawar doing the lion's share of that and a good portion of global production for decades. All these pools have been known about for a long time. A couple smaller one's were held in reserve until recently and apparently (based on one article) brought on to help to stem declines elsewhere. There haven't been any recent big oil discoveries to replace these and not for lack of looking.

The other issue I have as a reservoir guy is that the SA reservoirs are extremely permeable. Their characteristic depletion model would be opposite to our tight gas and oil. Instead of dropping off quick at the start then leveling for a low slow decline high perm stuff comes on strong and flows strong until the end...then dies or waters out abruptly. That quick drop at say Ghawar could cause some shocks. They are producing the last of their known big fields not much left to bail them out other than spending more money on secondary recovery schemes. They are already well into secondary recovery.

As and aside: I did work with a ME reservoir engineer who had worked with Saudi's and his indication was that SA is having issues and potentially doing damage to reservoirs. I would tend to look at SA reserve estimates as optimistic as with most companies and countries.

All of this positive oil spin has created the perception that we are awash in oil. It disturbs me. Oil IS our modern way of life. If we run into high cost supply issues (doesn't have to run out to cause issues) before a meaningful alternative has come along things will get ugly. We're using +90mmbbl/d and growing! That simply can't go on forever.

If the reserves and what kind of reserves can't be trusted, how does ARAMCO expect and float that huge stock offering?

Hype?

[Holy Grounds Coffee]

My crystal ball of fortune and glad tidings predicts oil will bottom out at roughly 12.00 bucks a barrel. Then it will go up due to Russia being fed up with the Saudis and OPEC. The ball doesn't specify what Russia is going to do but it suggests Russia will be the one to make oil go back up.

[The Elkster]

If the reserves and what kind of reserves can't be trusted, how does ARAMCO expect and float that huge stock offering?

Hype?

ARAMCO were never going to offer their crown jewel oil fields/reserves. They were going to issue stock for downstream facilities. Coincidentally enough those are those are high cost low marginal profit generators in normal times... There was much hype initially but SA eventually came around to clarifying. There are articles out there

http://www.bloomberg.com/news/articles/2016-01-10/in-saudi-aramco-ipo-global-refining-empire-may-become-the-prize

I should add. These are all part of carefully sculpted moves by SA to drive prices down. They are pot committed to a strategy of driving out competition and they are going to do it any way they can and as quickly as they can. And its working. Do you think its odd that SA recently came out with a bearish 20 year forecast. 20 years in oil is like an eternity. We can't even make a call on next week. All the while SA production hasn't moved much at all.

[762Russian]

Why are we so dependent on this one resource again? Yeah the highs are great, but my god the withdrawal symptoms are worse than heroine.

[Mangosteen]

Chart as of Jan 18/16. Can't see this lasting much longer.

http://pdf.reuters.com/pdfnews/pdfnews.asp?i=43059c3bf0e37541&u=2016-01-18T080253Z_GFXEC1I0MCTRK_1_RTRGFXG_BASEIMAGE.jpg

Now this is something new. You have to pay to get rid of your crude in Dakota.
http://oilpro.com/post/21619/negative-crude-oil-price-happening-north-dakota?utm_source=DailyNewsletter&utm_medium=email&utm_campaign=newsletter&utm_term=2016-01-18&utm_content=Article_4_txt

[jaylow?]

Just following rules. No just posting links.

I'm providing articles too, and while I don't subscribe to mainstream media, a lot of people do, and perhaps seeing the leftist media report on things like this will allow those people to see it isn't just a conspiracy.

Want my opinion, read my first post on this thread.

This. Is. Far. From. Over. Period.

This period is period far period from period over period period period

[RavYak]

Oil will still fall lower, it might even fall below 20 dollars for a bit. It will probably stay around 30 dollars for this year and then slowly rebound but it is going to take years to even get back to probably 50-60 dollars.

The over saturation is working exactly as planned and oil companies in the US, Canada and other countries are going bankrupt or in tough times. The eastern companies are not going to stop while many of these companies are only crippled though so that they can just rebound with loans and government bailouts in the next year or two. They are going to keep the price low and force these companies to fail and keep it low enough it makes no sense for the governments to step in financially because it would literally be throwing money away.

Oil will come back up and it will eventually hit new highs again but it isn't going to be for some time now. This is effectively an economic war and it will continue as long as it keeps working like it has been or until some non economic actions are taken.

[The Elkster]

My guess is oil will be somewhere in the $10-150 range within the next 5 years.

That's about all I can say with partial certainty :)

[Y2K]

Still pretty high at the pumps.

[762Russian]

Still pretty high at the pumps.

Funny that, isn't it? A guy farts in the wrong place in Afghanistan and our price jumps five cents within ten minutes, but even after this long with barrels this low, prices are still $0.80+ per liter and only creeping downwards a penny or two once a month.

[The Elkster]

As long a people keep paying they will charge it. No more complicated than that. Value is tied to demand not cost of production.

[762Russian]

As long a people keep paying they will charge it. No more complicated than that. Value is tied to demand not cost of production.

And there is no alternate substance we can use, so it's a monopoly. Hooray.

I need to get me a horse.

[Holy Grounds Coffee]

Oil will still fall lower, it might even fall below 20 dollars for a bit. It will probably stay around 30 dollars for this year and then slowly rebound but it is going to take years to even get back to probably 50-60 dollars.

The over saturation is working exactly as planned and oil companies in the US, Canada and other countries are going bankrupt or in tough times. The eastern companies are not going to stop while many of these companies are only crippled though so that they can just rebound with loans and government bailouts in the next year or two. They are going to keep the price low and force these companies to fail and keep it low enough it makes no sense for the governments to step in financially because it would literally be throwing money away.

Oil will come back up and it will eventually hit new highs again but it isn't going to be for some time now. This is effectively an economic war and it will continue as long as it keeps working like it has been or until some non economic actions are taken.

Thing is western countries as well as Europe and Russia won't put up with these eastern countries doing what their doing. Someone's gonna break and say enough is enough.

[Sneeze]

Thing is western countries as well as Europe and Russia won't put up with these eastern countries doing what their doing. Someone's gonna break and say enough is enough.

No... watch for civil war in Saudi.

That's the real elephant in the closet.

Middle east is changing big time. Putin going to herd them straight south, Jordanians and the bad ass king will push them east.

Saudi ruling class will be hiring 22 year old skinny American girls to do unspeakable things while their migrant workers start wanting a piece of the pie. Isis will Beelzebub them into thinking they can get it.

Just watch world Oil price when the first well starts burning in Saudi. You will be back partying on your $80k wake boarding boat at Sylvan Lake in no time.

[Sundancefisher]

I wonder where that little dude is that was promising Peak Oil prices a few years ago? What does he have to say for his theory now

The same may be said in a few years where the guy went that said low prices were here to stay for a while.

I figure once everyone says the price is going down the price will start going up. If these guys were so good at predicting prices they would be filthy rich living on a beach in Fiji.

[Holy Grounds Coffee]

No... watch for civil war in Saudi.

That's the real elephant in the closet.

Middle east is changing big time. Putin going to herd them straight south, Jordanians and the bad ass king will push them east.

Saudi ruling class will be hiring 22 year old skinny American girls to do unspeakable things while their migrant workers start wanting a piece of the pie. Isis will Beelzebub them into thinking they can get it.

Just watch world Oil price when the first well starts burning in Saudi. You will be back partying on your $80k wake boarding boat at Sylvan Lake in no time.

We are all praying earnestly for such a outcome

[79ford]

There is a quite a bit of overreaction to Iran right now. They certainly have a bunch of stored oil that is not going to help the market as it works its way through the system but they have a lot of work to do to achieve the daily production numbers they are touting. No doubt they will get there eventually with outside help. But the US alone is expected to be down another 700k bbl/d just between now and Nov 2016 (and likely more now that low hanging fruit is gone and financing is drying up same as with other global plays). So total US drop since the start of the downturn accounts for more than half of Iran's expected prod growth . That is on top of the other production drops that are going to start happening to non-OPEC and some OPEC members.

Its going to take awhile to turn around the production declines once we realize we've overshot to the low side. Prices will see $100 again....before we overdrill again. Rinse repeat.


The united states had a brief dip in production from 9.6 million to 9.07 or so last year and has actually been creeping production back up, they are back at 9.220 and they tend to add about 5-10k bbl/day each week. The thesis that america declining will lead to higher oil prices has yet to really start panning out since they are currently back to adding oil production for the mean time.


Lots currencies are getting pounded so the oil price isnt really going down much in most countries terms. Oil in alot of countries is probably in the 50$ range or more because of collapsing currencies,

[Holy Grounds Coffee]

My question is what's the objective? Why are countries producing oil full steam ahead when they know it's only making things worse. Who's gaining from this situation? And what are they trying to achieve by lowering oil prices?

Another question I have is despite oil being so low in price countries like America and Saudi are still producing more than ever. Why is that Alberta isn't doing the same? Oil prices went south and now alberta is like barley drilling anymore...why isn't that happening to these other countries?

[The Elkster]

Other countries are cutting big time. This is causing big problems around the world. US companies have been layed off well over 100k and companies across the globe are slashing. US companies are going bankrupt at an accelerating rate as with here.

[ForwardBias]

My question is what's the objective? Why are countries producing oil full steam ahead when they know it's only making things worse. Who's gaining from this situation? And what are they trying to achieve by lowering oil prices?

Another question I have is despite oil being so low in price countries like America and Saudi are still producing more than ever. Why is that Alberta isn't doing the same? Oil prices went south and now alberta is like barley drilling anymore...why isn't that happening to these other countries?

Though cap expenditures are being slashed produces are pumping as hard as ever to try and keep revenue coming in. I liken it to the following analogy. "Bob has a standard of living he enjoys, that's costs X amount. Bob just took a 50% pay cut. Bob is trying to maintain that standard of living via working twice as many hours." Now more than ever companies that have the capacity to produce must produce to their fullest extent.

[hal53]

Though cap expenditures are being slashed produces are pumping as hard as ever to try and keep revenue coming in. I liken it to the following analogy. "Bob has a standard of living he enjoys, that's costs X amount. Bob just took a 50% pay cut. Bob is trying to maintain that standard of living via working twice as many hours." Now more than ever companies that have the capacity to produce must produce to their fullest extent.
There are a lot of plays in Canada and around the world that the above scenario is soon to end, they will be shut in and left as it's costing much more than the small (if any) return the companies are receiving irregardless of the cash flow scenario.. as far as the conventional oil wells go, increasing production can only be done in so many ways. Usually they just speed up the artificial lift systems and that in turn will cause downhole equipment failures where the well will be left down as they are not going to spend 15-20k on a work over.

[RavYak]

Kind of as ForwardBias said. Companies have fixed costs that are always there. In cases companies can still overcome these fixed costs by producing larger quantities. Also you don't have much choice, keep producing or close your doors so as long as a company can keep plugging away they have to.

The reason Alberta is hit so hard is that our oil is more difficult and expensive to obtain and lower quality/worth less on the market. The reason it has also hit our economy so hard and quick is that a large part of Alberta's economy isn't sustained by oil production but rather by the construction and development of oil production which is the first thing to die off when prices are low.

[ForwardBias]

There are a lot of plays in Canada and around the world that the above scenario is soon to end, they will be shut in and left as it's costing much more than the small (if any) return the companies are receiving irregardless of the cash flow scenario.. as far as the conventional oil wells go, increasing production can only be done in so many ways. Usually they just speed up the artificial lift systems and that in turn will cause downhole equipment failures where the well will be left down as they are not going to spend 15-20k on a work over.
Yup "Bob's" hours are being cut.

[ForwardBias]

Kind of as ForwardBias said. Companies have fixed costs that are always there. In cases companies can still overcome these fixed costs by producing larger quantities. Also you don't have much choice, keep producing or close your doors so as long as a company can keep plugging away they have to.

The reason Alberta is hit so hard is that our oil is more difficult and expensive to obtain and lower quality/worth less on the market. The reason it has also hit our economy so hard and quick is that a large part of Alberta's economy isn't sustained by oil production but rather by the construction and development of oil production which is the first thing to die off when prices are low.
Nailed it.

[Talking moose]

Nailed it.

X2, well said indeed.

[ETOWNCANUCK]

So it's not like there was a shortage
Because if there was the price would be higher right?

There does have to be a pendulum effect

We saw it go one way, and now it's going the other.

During the high cost of oil, everything went up,

House, vehicles, food, fuel.

The price of oil is bottoming,

Yet housing prices remain high,
Food prices have increased,
Vehicle prices remain high,
And fuel is trickling down at a snails pace.

Of course there is more going on, than the price of oil

There has to be.

Western countries rely on the price of oil,

A resource that today seems to be a lot,
Tomorrow not so much

Maybe, I don't know.

Maybe we should be happy because oil is low, not because of the economy and because of people that have lost jobs, but because our view of oil is changing,

Is that necessarily a bad thing?

Maybe, maybe not.

I don't have the answer, and I don't think any one person can answer it.

It's definitely an interesting time,
But what decade in recorded history wasn't.

[79ford]

The drop in oil price might bring along more hydrocarbon processing in alberta as companies rake in big dollars refining oil and making plastics or other chemicals. Williams wants to get propylene processing going here, stuff like that will create a whole new value chain. Then when oil does come back eventually there will be a stronger base economy to start with.

I agree with Ravyak, alberta booms arent about the baseline economy, its all about construction. The boom factor dissapears as soon as stuff stops getting built.

I would take that a step further.... if we didnt build every project every company and its dog concieved we probably wouldnt have much of a boom or bust. If it stayed the way it is right now, some drilling going on, couple tarsands projects being put together, everyone else just keeping status quo refining and processing hydrocarbons life would be pretty good if this was the new normal. (Plus a couple more dollars on the oil to atleast break even)

Building everything at once and trying to do that all the time isnt sustainable and causes some pretty rough dips when everything skids to a halt. For the average person who lives in alberta it is pretty annoying during the boom, life is much better when it is calm and quiet. Think of all the young people here in this province watching home prices leap 50k or more each year, all our elderly people renting or trying to pay property taxes etc on the same income they had 20 years ago?

[I_forget]

The drop in oil price might bring along more hydrocarbon processing in alberta as companies rake in big dollars refining oil and making plastics or other chemicals. Williams wants to get propylene processing going here, stuff like that will create a whole new value chain. Then when oil does come back eventually there will be a stronger base economy to start with.

I agree with Ravyak, alberta booms arent about the baseline economy, its all about construction. The boom factor dissapears as soon as stuff stops getting built.

I would take that a step further.... if we didnt build every project every company and its dog concieved we probably wouldnt have much of a boom or bust. If it stayed the way it is right now, some drilling going on, couple tarsands projects being put together, everyone else just keeping status quo refining and processing hydrocarbons life would be pretty good if this was the new normal. (Plus a couple more dollars on the oil to atleast break even)

Building everything at once and trying to do that all the time isnt sustainable and causes some pretty rough dips when everything skids to a halt. For the average person who lives in alberta it is pretty annoying during the boom, life is much better when it is calm and quiet. Think of all the young people here in this province watching home prices leap 50k or more each year, all our elderly people renting or trying to pay property taxes etc on the same income they had 20 years ago?

Ya lets let the government run every aspect of our lives. Jobs, homes etc. No way that could backfire !

[79ford]

Ya lets let the government run every aspect of our lives. Jobs, homes etc. No way that could backfire !

More tepid growth would probably be better in the long run and the fluctuations wouldnt be soo violent. Also the market would be less flooded with oil, the more oil staying in the ground the higher the price gets, too much oil coming out of the ground is bad for the economy here in alberta as we are noticing right now,lol.

The slow growth will allow pipelines to catch up and companies to re-jig costs. The revamped oil sector will be much less wastefull and waaay more efficient. Much more profitable in the long run as a conservative sector vs a flamboyant heavy spender live for today sector.

Look at exxon mobil, conservative investing, processes the whole value chain of hydrocarbons, doesnt slash jobs on a temporary down turn, still rakes in billions and is still spending money on value added projects. The calm quiet status quo conservative long term management idea obviously works much better than the build build build borrow borrow borrow then slash slash slash and cancel projects left right and center then turf every employees you can idea most companies seem to run on.


Maybe the government should have a longer timeline than the next land sale?lol

[Sigg]

What would Alberta look like if we kept the previous boom going for.... Say another 20 years?

I think it would look like an industrial wasteland.

[sanjuanworm]

What would Alberta look like if we kept the previous boom going for.... Say another 20 years?

I think it would look like an industrial wasteland.

Calgary would start looking Edmonton, Edmonton would start looking like Winnipeg.

[Twist]

Calgary would start looking Edmonton, Edmonton would start looking like Winnipeg.

Winnipeg would look like...Gleichen

[79ford]

You should see how cheap bitumin is..... 8.62$ per barrel, heavy oil in some parts is worthless with the glut of good oil around for processing.

[ForwardBias]

More tepid growth would probably be better in the long run and the fluctuations wouldnt be soo violent. Also the market would be less flooded with oil, the more oil staying in the ground the higher the price gets, too much oil coming out of the ground is bad for the economy here in alberta as we are noticing right now,lol.

The slow growth will allow pipelines to catch up and companies to re-jig costs. The revamped oil sector will be much less wastefull and waaay more efficient. Much more profitable in the long run as a conservative sector vs a flamboyant heavy spender live for today sector.

Look at exxon mobil, conservative investing, processes the whole value chain of hydrocarbons, doesnt slash jobs on a temporary down turn, still rakes in billions and is still spending money on value added projects. The calm quiet status quo conservative long term management idea obviously works much better than the build build build borrow borrow borrow then slash slash slash and cancel projects left right and center then turf every employees you can idea most companies seem to run on.


Maybe the government should have a longer timeline than the next land sale?lol

The big boys have it figured out. I expect them to buy up the juniors/intermediates for pennies on the dollar. I see the merit in your ideas. Slow growth prevents the harsh snap back of price swings.

[Bigwoodsman]

More tepid growth would probably be better in the long run and the fluctuations wouldnt be soo violent. Also the market would be less flooded with oil, the more oil staying in the ground the higher the price gets, too much oil coming out of the ground is bad for the economy here in alberta as we are noticing right now,lol.

The slow growth will allow pipelines to catch up and companies to re-jig costs. The revamped oil sector will be much less wastefull and waaay more efficient. Much more profitable in the long run as a conservative sector vs a flamboyant heavy spender live for today sector.

Look at exxon mobil, conservative investing, processes the whole value chain of hydrocarbons, doesnt slash jobs on a temporary down turn, still rakes in billions and is still spending money on value added projects. The calm quiet status quo conservative long term management idea obviously works much better than the build build build borrow borrow borrow then slash slash slash and cancel projects left right and center then turf every employees you can idea most companies seem to run on.


Maybe the government should have a longer timeline than the next land sale?lol

Alberta should be adding value to the resource before shipping it out, or be involved in the value added process. The SA are doing it, and it works for them. Shipping out the raw resource is the easy way to do things, let someone else worry about it, then buy it back doesn't make sense. A product that can be used by many would be more beneficial to Alberta then just the raw resource is.

It would be nice to get on a wave and ride it out for a longer period, then crash onto the rocks and try to pick ourselves up yet again. Diversification and adding value would do Alberta better in the long term.

BW

[RavYak]

Alberta should be adding value to the resource before shipping it out, or be involved in the value added process. The SA are doing it, and it works for them. Shipping out the raw resource is the easy way to do things, let someone else worry about it, then buy it back doesn't make sense. A product that can be used by many would be more beneficial to Alberta then just the raw resource is.

It would be nice to get on a wave and ride it out for a longer period, then crash onto the rocks and try to pick ourselves up yet again. Diversification and adding value would do Alberta better in the long term.

BW

Yeah it does work for them. Too bad we don't have such large reserves of higher quality product and a means to distribute it...

Alberta needs refineries and they need pipelines to the outside world. Even then it wouldn't help the average Albertan though as they create very few permanent jobs.

You are completely right that Alberta needs to diversify though, its pretty obvious... What is our next biggest industry? Agriculture? No money in that either... Alberta can't keep counting on construction projects as its main source of personal income.

[ESOXangler]

The big boys have it figured out. I expect them to buy up the juniors/intermediates for pennies on the dollar. I see the merit in your ideas. Slow growth prevents the harsh snap back of price swings.

That's exactly what's happening here! And 79ford has some pretty reasonable points there. Today's market is pretty much how it was in 2000 when I started my apprenticeship. Theres more opportunity today still though because there was more plants built. But we do need to slow it down a bit, just not stop it!

[Scotty454]

This period is period far period from period over period period period

Lold.

[I_forget]

Better to let the private sector take the risk of oil extraction in my opinion. And it's easy to say "We need to diversify!" Getting refineries built in your area is a lot harder to do. You need an incentive for the oil companies to build in your area. In Alberta we currently have the highest labor rates, carbon taxes , business unfriendly governemnt, and lack of pipelines. Alberta is not a good place to build a refinery right now. And usually refineries are build near where the demand is due to limited shelf life.

[hillbillyreefer]

And there is no alternate substance we can use, so it's a monopoly. Hooray.

I need to get me a horse.

You might want to check the price of horse fuel. They don't quit burning it when you're not using them.

[The Elkster]

Here is a great link to a discussion on various sides of the current oil situation. Objective analysis if you care to learn more on the issues...

http://www.peakprosperity.com/podcast/96095/arthur-berman-why-price-oil-must-rise

[stefk]

Here is a great link to a discussion on various sides of the current oil situation. Objective analysis if you care to learn more on the issues...

http://www.peakprosperity.com/podcast/96095/arthur-berman-why-price-oil-must-rise

Exactly. In the meantime, anyone who had years of experience either leaves the industry completely never to return, relocates or retires. (I left the patch in the downturn of 2008 and haven't missed the feast and famine cycle one iota.)

Then, when things ramp back up again, the p!$$ing and moaning is heard everywhere how no skilled labor is left, and if it is, its costing a premium due to very few people left in the industry and it starts all over again.

I would like to have thought that history would have been observed and not to be repeated…guess not..

[6.5x47]

Here is a great link to a discussion on various sides of the current oil situation. Objective analysis if you care to learn more on the issues...

http://www.peakprosperity.com/podcast/96095/arthur-berman-why-price-oil-must-rise

The price is being manipulated to hurt competition and prop-up the petro-dollar. If and when prices rise, Canada will still be stuck with no new pipelines and the us remaining as our biggest customer. Canada will be shipping south at wcs where it will be flipped, for a profit, prior to be loaded on to a tanker for its final destination.

[skidderman]

I don't understand. Oil hits low lows yet Suncor spends 6 Billion on another oil company. Who in their right mind would do that without knowing something the average person does not? Anybody??????????????

[Talking moose]

I don't understand. Oil hits low lows yet Suncor spends 6 Billion on another oil company. Who in their right mind would do that without knowing something the average person does not? Anybody??????????????

I would say the average person does know. Oil has its highs and lows. Buy up when things are low and cheap, put them to work full bore when it starts its upswing. Let history repeat itself.(over and over and over).

[6.5x47]

I don't understand. Oil hits low lows yet Suncor spends 6 Billion on another oil company. Who in their right mind would do that without knowing something the average person does not? Anybody??????????????

Ever heard the phrase- " buy low and sell high"?

[The Elkster]

The idea that the world is flush with oil will end in the next year or two. It looks like oil is firming up for a rise starting the end of this year as fundamentals start to strengthen. With the removal of an estimated trillion dollars from the global oil decline fight. We are going to see a significant rise in prices as we start to lose the never ending fight with natural reservoir declines. Declines that most countries (including OPEC countries) have been fighting for years.


The world is not awash in oil relative to its demand. People are about to learn just how deceiving headlines can be. Invest accordingly.

[Bigwoodsman]

The idea that the world is flush with oil will end in the next year or two. It looks like oil is firming up for a rise starting the end of this year as fundamentals start to strengthen. With the removal of an estimated trillion dollars from the global oil decline fight. We are going to see a significant rise in prices as we start to lose the never ending fight with natural reservoir declines. Declines that most countries (including OPEC countries) have been fighting for years.


The world is not awash in oil relative to its demand. People are about to learn just how deceiving headlines can be. Invest accordingly.

Sage advice for sure.

Once this perceived glut has been used at least perceived by the media, the next world oil shortage crisis will begin, and the sky will be the limit.

Interesting how in all of this renewal energy sources keep increasing.

BW

[79ford]

The idea that the world is flush with oil will end in the next year or two. It looks like oil is firming up for a rise starting the end of this year as fundamentals start to strengthen. With the removal of an estimated trillion dollars from the global oil decline fight. We are going to see a significant rise in prices as we start to lose the never ending fight with natural reservoir declines. Declines that most countries (including OPEC countries) have been fighting for years.


The world is not awash in oil relative to its demand. People are about to learn just how deceiving headlines can be. Invest accordingly.

It could happen quicker or take longer but this quarter is really the first time i am starting to hear companies say production will be lower over the year. If iraq and iran etc dont add enough to offset the losses the glut could get worked off at some point in time

[The Elkster]

It could happen quicker or take longer but this quarter is really the first time i am starting to hear companies say production will be lower over the year. If iraq and iran etc dont add enough to offset the losses the glut could get worked off at some point in time

Its going to happen and its going to happen more quickly than people think because MSM do not understand the technical issue and thus are not reporting the whole picture. Believe me or not but stay tuned... I'm a realist and I'll cope with whatever happens. But as a reservoir guy I do know certain things are inevitable in the medium term with the removal of upwards of a trillion dollars in oil spending today. Oil isn't finding its own way to our tanks and none of the oil we've seen in NA over the last few years has been "easy" or "Cheap".

On the negative side we may end up facing skyrocketing oil prices in 2-3 years... too late for many unemployed AB'ers and just as the world economy is about to start on an economic recovery.

[avb3]

Its going to happen and its going to happen more quickly than people think because MSM do not understand the technical issue and thus are not reporting the whole picture. Believe me or not but stay tuned... I'm a realist and I'll cope with whatever happens. But as a reservoir guy I do know certain things are inevitable in the medium term with the removal of upwards of a trillion dollars in oil spending today. Oil isn't finding its own way to our tanks and none of the oil we've seen in NA over the last few years has been "easy" or "Cheap".

On the negative side we may end up facing skyrocketing oil prices in 2-3 years... too late for many unemployed AB'ers and just as the world economy is about to start on an economic recovery.
I find it interesting that the future market is reflecting the current scenario, rather than one with a dramatic increase. They've been wrong before, and it may just be following the herd, although I suspect that many larger operators such as the airlines would be buying as much cheap fuel as possible as a hedge now. One would think that those large operators would impact future prices on the upside rather than status quo.

[The Elkster]

I find it interesting that the future market is reflecting the current scenario, rather than one with a dramatic increase. They've been wrong before, and it may just be following the herd, although I suspect that many larger operators such as the airlines would be buying as much cheap fuel as possible as a hedge now. One would think that those large operators would impact future prices on the upside rather than status quo.

Did any of those guys call the drop in price ahead of time??? People are free to listen to whatever speculation they want. But watch and see. The reality will flush out ;)

[Map Maker]

The world is not awash in oil relative to its demand. People are about to learn just how deceiving headlines can be. Invest accordingly.

Sounds logical and you may be correct.
I thought the same way about iron ore when the 3 biggest companies oversupplied the market to drive down price and weed out the smaller higher cost outfits.
That was 5 years ago and price is still at 5 year lows.
Smaller companies adapt and government bailed them out so it just kept the low price environment constant.

This is the new way to do war.

[avb3]

Did any of those guys call the drop in price ahead of time??? People are free to listen to whatever speculation they want. But watch and see. The reality will flush out ;)
Like I said, they may just be following the herd.

If I was an airline, I would be tying up this low priced oil for as long as possible into the future.

[The Elkster]

Sounds logical and you may be correct.
I thought the same way about iron ore when the 3 biggest companies oversupplied the market to drive down price and weed out the smaller higher cost outfits.
That was 5 years ago and price is still at 5 year lows.
Smaller companies adapt and government bailed them out so it just kept the low price environment constant.

This is the new way to do war.

Oil is a little different and most of that stems from the technical issue that a good portion of companies and countries are fighting terminal decline in their pools and their equipment. Oilsands mining is indeed different as it can maintain flat production through the life of the resource. But it makes up such a small part of the total its not key to market stability.

Take Alaska as a small scale example of terminal decline

Their oil pools peaked back in 1988 and have been declining ever since even when oil was +$100 they couldn't goose production much. If they could reasonably bring more on they would but everyone hits a point where you can't keep up on the treadmill. There are OPEC and Non-OPEC countries in the same boat and that matters.

Most people simply don't realize just how much money goes towards keeping production declines at bay. This will be interesting. Longer oil is down, the bigger the hole, the higher the rebound. As an investor best thing that can happen is low oil for another year. Then things will really be set up for a doozy snap back.

[79ford]

Did any of those guys call the drop in price ahead of time??? People are free to listen to whatever speculation they want. But watch and see. The reality will flush out ;)

Futures markets had 2020 oil pegged at 75-80$ while spot oil was 110 before it dropped off.... the impending glut was already being tallied in.

The united states is still eeking out weekly gains in oil production so the shale thesis still hasnt really even started yet

[The Elkster]

Most if not all their shale is declining now. Permian is hanging in there but it'll likely fall now that prices have gone this low. Either way their production is coming down.

[hal53]

Most if not all their shale is declining now. Permian is hanging in there but it'll likely fall now that prices have gone this low. Either way their production is coming down.
...and in talking to a person with a major player in Houston, the numbers are dropping quicker than what is being reported

[ESOXangler]

I think it's going to bounce back pretty wild and hard! But we will see a few more take overs before they let it come back up! Hopefully soon though! It's getting hard and harder trying to supplement my lack of bonus this year by stealing work gloves and battery's! AA's anyone?

[79ford]

Most if not all their shale is declining now. Permian is hanging in there but it'll likely fall now that prices have gone this low. Either way their production is coming down.

The oil inventories are really piling up in the usa lately, the warm winter and demand dropping for everything else from last year is pushing up gasoline, diesel and oil inventories all at the same time. Nigeria actually has bottlenecks at some shipping facilities due to lack of storage, the associated producers are having issues just producing oil because tanks are full at the other end of the pipeline. Brass river terminal in Nigeria which loads shell and some other companies oils has the tanks filled to the brim lots of times, its pretty bad in some places.

Oil had a few good days this week and it is still under 30$.... you would have gotten laughed out of the room for saying sub 40 oil a year ago, now breaking 30$ would be a rally in price lol

[Raptor Boy]

Don't foget we still haven't seen Iran turn the taps on full yet....

[I_forget]

The oil inventories are really piling up in the usa lately, the warm winter and demand dropping for everything else from last year is pushing up gasoline, diesel and oil inventories all at the same time. Nigeria actually has bottlenecks at some shipping facilities due to lack of storage, the associated producers are having issues just producing oil because tanks are full at the other end of the pipeline. Brass river terminal in Nigeria which loads shell and some other companies oils has the tanks filled to the brim lots of times, its pretty bad in some places.

Oil had a few good days this week and it is still under 30$.... you would have gotten laughed out of the room for saying sub 40 oil a year ago, now breaking 30$ would be a rally in price lol

Both brent and wti are over $32 today