Oil price discussion and analysis

[over9k]

Yeah, but as if they're not going to build cold redundancy into the system now.

This will simply never happen again. It's a golden buying opportunity.


It also took a lot of microchip production offline as they had to close the factories/stop production. Same story there - as if they're not going to build some kind of redundancy and/or local power generation in now.

The whole thing is a, er, storm, in a teacup.

 

[Smurf1976]

This will simply never happen again. It's a golden buying opportunity

Last time it happened, 2011, they did think it would happen again - just didn't actually do much about it.

A lot will come down to one business group versus another as well as politics. Those who'd spend $ billions to avoid it happening aren't the same people losing $ billions when it happens. Depends who has the upper hand politically.

 

[over9k]

 

[qldfrog]

Gas production is reported to have dropped circa 40% meanwhile consumption increased dramatically = ran out of gas in the pipes basically.

the irony being: I have read that the gas production fall was due to this "non critical" area of the grid being subjected to rolling blackout..talk about idiotic measure..obviously, you can cut energy producers for a few minutes wo issues, but not hours on end

 

[BlindSquirrel]

A lot will come down to one business group versus another as well as politics. Those who'd spend $ billions to avoid it happening aren't the same people losing $ billions when it happens. Depends who has the upper hand politically.

This is Texas we're talking about.
If the Govmint pays for anything it's automatically going to have the state fall under socialist rule...

 

[rederob]

Great article on present state of play is here.
Very much a "watch this space" for covid related global demand rebound.

My take on the trend is below:


It will be interesting to see what the Baker Hughes rig count has for us this week, as for most of the past few months slow and steady numbers of fracking rigs were returning, the majority to the Permian region which has been hardest hit by adverse weather.

 

[over9k]

Rob - are you a technicals/algorithms trader?

 

[over9k]

Need to find some data on what oil wells are coming back online soon. It might be time to buy UCO.

 

[over9k]

Snowstorm KO'd demand for a bit. Nothing to worry about - plenty more rigs to come online yet.

 

[rederob]

What's interesting about the recent rig count (below) is that POO at $60 is not generating a mass return to fracking. Also, Canada got in early with a return to drilling, but maybe the financial returns have not stacked up as numbers declined markedly last week.



Pricewise POO is very much within its trend channel from April last year:

https://www.tradingview.com/x/ZkxXPuGL/

 

[over9k]

Too many unforeseeable events possible yet to be worrying about tech analysis man. We're nowhere near normal market conditions.

 

[rederob]

Too many unforeseeable events possible yet to be worrying about tech analysis man. We're nowhere near normal market conditions.

That applies to every day of the trading week.
Oil prices will more likely rise over coming months, but on Monday it's a crap shoot. And Tuesday as well.
Furthermore, whether you think so or not, technical indicators are called that because they have a track record of "indicating" a most probable movement.
In any case, I have simply mapped the "trend," which has a $25 range, so we are not talking rocket science.

 

[Smurf1976]

What's interesting about the recent rig count (below) is that POO at $60 is not generating a mass return to fracking. Also, Canada got in early with a return to drilling, but maybe the financial returns have not stacked up as numbers declined markedly last week.

A possible issue there is that the cost to drill is itself highly variable.

Drilling rigs and crews to operate them are a market in themselves which goes up and down like other markets. At least some rigs have probably been scrapped and experienced workers permanently left the industry with the downturn, available capacity to drill is almost certainly lower now than it was pre-pandemic.

Cost of all materials to drill and subsequently develop the well.

Cost of finance is a big one.

Regulation's another one. I don't want to make a political comment as such but in the US context the present administration is going with stricter regulations compared to the previous one. Compliance with rules usually costs at least something.

Oil company managers are humans and at least some have probably bought into the "oil demand is falling in a heap quickly and permanently" line of thinking. Rationally no, it's clear that for the medium term demand exists, but there's a definite theme around to that effect and it's probable that some are reluctant to commit to new projects as a result. There's plenty of past precedents for senior managers of businesses getting caught up in that sort of thing after all, including within the oil industry, it wouldn't be the first time it happened.

 

[frugal.rock]

Cost of finance is a big one.

Finance to oil/petroleum industry appears to be considering environmental/ carbon concerns moving forward.

I believe current conditions are the only thing stimying these concerns for the time being.

Will be a much bigger issue further down the track imo.

 

[rederob]

Exactly a year ago WTI broke above long term support after a calamitous pandemic collapse.
In January it broke through resistance, and since then has remained true to trend.
The next level of resistance doesn't appear far off but, given we were at the same price 2 months ago, progress from here may well drag out until demand perks up. Typically US driving season - a few months away - brings that on. And given Americans are now getting over covid via high vaccination rates, internal driving holidays could reach their highest ever levels.


The drilling rig count suggests elevated prices are not adding much:

As a result, US production remains flat:

 

[rederob]

Another month passes and POO keeps climbing, while sticking close to its median price on trend:


Today it reached its highest price since 24 October 2018 and still seems to have petrol in its tank... just as US driving season is underway and Americans are back on the road in a big way, shaking off their pandemic blues.
By my reckoning quite a few Oz oilers are underpriced given where POO presently is. They all tightened their belts and are much leaner than before, so should turn some decent profits when next reporting, even BPT.

 

[Smurf1976]

View attachment 123616

The big story in my view is that ~2 million barrels per day of production in the US has disappeared and thus far at least, there's no sign of it coming back.

Either producers aren't confident of the price staying up or it's not high enough yet to prompt them into action with drilling etc.

 

[frugal.rock]

The big story in my view is that ~2 million barrels per day of production in the US has disappeared and thus far at least, there's no sign of it coming back.

Biden seems to be a spanner in the works, there was some news about him hindering some future supply out of Alaska or something like that...general gist.

The US only just got to the stage of being a net exporter not long before covid, so net importer again for a while.

Should mean certain interests are willing to push the price up before re-establishing supply.
Meanwhile, Iran keeps having "accidents"... August at the earliest for it for any legal OPEC oil exports.
OPEC are now meeting monthly rather than the previous 6 monthly in an attempt to keep a finger on the pulse and definitely more inclined to make decisions...

I'm wondering if the market is getting ahead of itself price wise.
Is the price going up from speculation of demand return or actual demand? Mixed opinions.
For now, it seems the Saudi Prince is influencing things again.
I figure the key is probably India getting back to some normalcy and I imagine they will be the last big influence to do so.

 

[Gunnerguy]

Biden seems to be a spanner in the works, there was some news about him hindering some future supply out of Alaska or something like that...general gist.

The US only just got to the stage of being a net exporter not long before covid, so net importer again for a while.

Should mean certain interests are willing to push the price up before re-establishing supply.
Meanwhile, Iran keeps having "accidents"... August at the earliest for it for any legal OPEC oil exports.
OPEC are now meeting monthly rather than the previous 6 monthly in an attempt to keep a finger on the pulse and definitely more inclined to make decisions...

I'm wondering if the market is getting ahead of itself price wise.
Is the price going up from speculation of demand return or actual demand? Mixed opinions.
For now, it seems the Saudi Prince is influencing things again.
I figure the key is probably India getting back to some normalcy and I imagine they will be the last big influence to do so.

Due to fracking I believe the US has been a net exporter for several years (8+).
I’m not sure but I believe at current prices they still are.
Fracking was a game changer a few years ago (technology).
For frackers to be positive they need about $50+ To survive.
GG

 

[frugal.rock]

Due to fracking I believe the US has been a net exporter for several years (8+).

Fracking or no fracking, my memory has them only tipping the net exporter mark December 2019.... check it if you like.
Was following it closely at the time....


The missing actual figure above is around -5.2 ... unless I'm mistaken.
(Investing dot com has been a bit of a pain lately.... missing figures etc)
I'm vested 25% of my portfolio long on oil price rising.... hope I know what I'm doing.?