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

[762Russian]

Originally Posted by Y2K

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]

Originally Posted by 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.

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]

Originally Posted by 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.

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]

Originally Posted by Holy Grounds Coffee

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]

Originally Posted by 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 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]

Originally Posted by Sneeze

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]

Originally Posted by 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.

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]

Originally Posted by 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?

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]

Originally Posted by ForwardBias

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]

Originally Posted by hal53

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]

Originally Posted by 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.

Nailed it.

[Talking moose]

Originally Posted by ForwardBias

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]

Originally Posted by 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?

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

[79ford]

Originally Posted by I_forget

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]

Originally Posted by 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.

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

[Twist]

Originally Posted by sanjuanworm

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]

Originally Posted by 79ford

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]

Originally Posted by 79ford

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]

Originally Posted by Bigwoodsman

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]

Originally Posted by ForwardBias

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]

Originally Posted by jaylow?

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.