Oil price discussion and analysis

TheUnknown said:

Oil price collapsing has nothing to do with shale oil, economy or recession. This is a repeat of the 1980s when the USSR collapsed it is to starve the Russian economy by the scumbag western governments supported and agreed with king of terror and king of human rights abuser saudia arabia.

It is also aimed at Iran to try and tame them from getting nuclear.


What will happen?

* Smaller countries that produce Oil and rely on Oil will soon starve if price stays this level or drops more.
* One side of the world will give in and in 3-4 months oil will be back up again

In other news oil has been its lowest since 4-5 years but in aus we are still paying $1.30 +p/l work that one out.

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Really? Russia is not desperate -yet, refer RY's post above.

Do you think that the US would be part of a scheme that would jeopardise their new found oil independence and put at risk 10's of thousands of jobs in the burgeoning shale oil industry? The Saudi's will sit this out until the shalers capitulate. The figure I have for shalers 'pain' point is about $80 due to futures hedging etc so a lot of them are getting very nervous right now.

The global economy speaks for itself - borderline recessions everywhere, Japan in recession already.

The US only needs 1 polar vortex event every qtr to be officially in recession. This qtr is going to get trashed too. All this talk about low 'gas' prices meaning more consumer spending is marginal at best - they have to get to the store in the first place but for the last few weeks thay have been snowed in. And online purchases make up an increasing share of sales these days.

It's still about demand and it's been slowing for the last 6 months while supply has been increasing.......plus a few traders getting caught on the wrong side.....

http://www.brookings.edu/blogs/planetpolicy/posts/2014/10/17-world-oil-demand-ebinger

http://www.marketwatch.com/story/op...on-oil-2014-11-28?mod=MW_story_more_headlines

Uncle Festivus said:

Do you think that the US would be part of a scheme that would jeopardise their new found oil independence

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Agreed with the rest of your post but the US is not "independent" so far as oil is concerned.

The shale boom has certainly boosted US production of oil whilst consumption has dropped. So net imports have declined greatly that's certainly true, but they're not independent as such as they still import more than they export. Also there's issues with the grade of oil, that from shale being too light to produce many products (works well mixed with the very heavy oil from Canada however, production of which has also increased).

It's a bit similar with gas. They're largely self sufficient but still a net importer (all of which comes from Canada so not generally considered to be a problem as such) overall.

As for the future, they'll keep operating the wells already drilled certainly since most of money has already been spent. But at prices below $80, drilling shale wells in the first place doesn't really make a profit to my understanding. At a guess based on history, they'll cut back on drilling, causing an over supply of rigs and forcing the price of drilling as such down (basic supply and demand - drilling itself is a competitive market in the US), in order to make drilling viable at a lower price. End result = less drilling but not zero with the "pain" effectively spread between the oil field operators (lose money on wells previously drilled or at least contracted to be drilled at higher prices), and the drillers themselves (less work and paid less for it).

explod said:

I would question that from a military perspective. If they were easy to bowl over the US would have done that.

Check out "zero hedge" for a week or two.

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Russia is a power, but not a super power. Generally the USA is considered the only remaining super power, Although a lot of people think china will eventually become a super power.

When it comes to military, Russia's military doesn't have the ability to project it's self globally as the USA can, the entire US armed services are basically setup up as an expeditionary force, and have the systems and infrastructure to support anything from small engagements to large invasion forces any where on the planet.

But military is just one part, the economic influence is a major aspect of power, and no one has the economic levers to pull like the USA does at the moment, right now even opec has lost its shine.

generally a super power is-

A superpower is a state with a dominant position in international relations and is characterised by its unparalleled ability to exert influence or project power on a global scale. This is done through the means of both military and economic strength, as well as diplomatic and soft power influence. Traditionally, superpowers are preeminent among the great powers

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A lot of people have been talking about the various reasons for the drop in oil price, some of it political and deliberate and some of it obviously due to the shale boom increasing supply etc. That side of the price decrease is not intentional (obviously the shale producers don't want a price decrease), it's incidental.

As for the intentional side of it, especially Saudi Arabia's choice to allow prices to fall, the speculations of motive tend to be hurting Russia, Iran, marginal production such as US shale, etc.

Something which I haven't seen speculated on is that low prices may well trigger more drastic action by nations which require higher prices to balance their budgets. It would be easy enough (relative to what they have to gain) for some countries or even companies to initiate a war or terrorist action in the right place which would dramatically hurt production and boost prices. Just as a random example, Russia stares at a difference between however many billions of dollars depending on the oil price, a false flag attack which initiates a conflict in an oil producing region or any other excuse to attack or trigger an attack on an oil producing region may cost a lot less than they have to gain. There are many countries and companies each with many many billions of dollars on the line, and a lot of oil producing centres would be easy to trigger into disarray. I can't help but wonder if this may be part of the strategy of allowing lower prices. Probably not their primary consideration, but it may be part of the mix. I'm sure a simple display of power is also part of the game - "Look at us, we can push prices up, but we can also keep prices low, you're at our mercy, don't **** with us"

One thing we can be pretty sure of is that Saudi Arabia/OPEC and all other oil producers will act in whatever way brings in the most money. OPEC/Saudi Arabia have deliberately allowed prices to fall. It may not be quite as easy as it used to be for them to manipulate prices, but they certainly still could if they wanted to, and they have chosen not to. This means that regardless of the short term, they believe this period of lower prices will lead to higher average prices over the medium to long term. I certainly don't think they would take action which would decrease their bottom line in the big picture.

For many years the analysts have agreed that as time goes on oil prices will increase on average and see higher volatility, with big peaks and dips. It really does seem to be playing out that way. In the dips, especially at this stage, which is exactly what has been predicted for a long time, it is going to seem like oil prices are collapsing entirely, but it's probably just part of a very bouncy upwards trend.

Sdajii said:

One thing we can be pretty sure of is that Saudi Arabia/OPEC and all other oil producers will act in whatever way brings in the most money. OPEC/Saudi Arabia have deliberately allowed prices to fall. It may not be quite as easy as it used to be for them to manipulate prices, but they certainly still could if they wanted to, and they have chosen not to.

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The plan would be to squeeze U.S. shale oil producers out of the market. The growth of production in U.S. has been strong but the cost for exploration, development and ongoing production is getting prohibitive now according to some sources. $40 - $60 according to this 16th Oct. 2014 article. I new of an oil shale extraction plant in Queensland that has started up and shut down a few times due to environmental issues and extraction process costs. A demonstration plant is the most recent attempt to continue down this path using the Paraho 2 extraction process.

I would think the dirty process could be struggling now.

It would take a drop in crude prices to about $50 a barrel before U.S. oil production growth would be choked off.

That's the finding in a new report from Citigroup energy analysts. They said the two-year low in U.S. oil prices is not yet stalling growth of U.S. crude production, and even at $70 per barrel, the industry would continue to increase production.
It would have to fall to $50 or even lower, to fully halt shale production growth, the report said. At a level of $40 to $60 a barrel, production growth would fall toward zero as producers shut less productive wells. Citi said, in fact, this break-even price could get lower over time as producers focused on more intensive drilling in more productive areas. http://www.cnbc.com/id/102094881#.

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As all commodities (CRB constituents) including oil were squeezed down due to rising US dollar, I think the bottom in Oil is very close, most likely it is in terminal wave, as US Dollar just reversed and probably will start the biggest correction in the last 6+ months. Gold silver, cocoa and other commodities changed their respective medium term downtrends already.

Longer term US dollar should rise into triple digit territory, and oil below GFC bottom of ~30, most likely to $17 area. But for now, the extreme sentiment towards these markets should return to the mean.

(Chart below is US DOLLAR index and WTI Crude)

Hows this for some out of the box thinking.

I saw a video yesterday of Saudi police whipping a blogger who has recently been found guilty of blasphemy.

http://edition.cnn.com/2015/01/12/middleeast/saudi-arabia-activist-flogging/

This got me thinking about double standards etc and the thought occurred to me that if Saudi Arabia was subjected to a regime of sanctions like Russia or Iran, or for some other reason was to become politically unstable and oil production/exports were somehow in jeopardy...how that would be a near perfect storm for the western allies.

For the last 60 years the west needed a politically stable Saudi Arabia, the west absolutely needed that oil and needed it cheap, and now they dont..put simply if the Saudis are taken out of the current picture it would be a massive positive for the western allies, US/Canadian and OPEC (less SA) could easily cover the short term oil needs of planet earth.

Regime change in Saudi would be a good thing, keep all those Sunni jihadists busy in Saudi for a decade or more, suck in fighters from all over the world, the US, Russia and China will sell lots of arms, POO lifts and the US takes the crown as the world 2nd or 3rd largest producer...every one come out a winner except the peoples of the Arabian peninsular and wanabe Sunni jihadists...its perfect.

They use the air bases to bomb people from there too.
The high price of oil has been a bit of a trade off.
Maybe the Yanks have realised that if they leave 'em all alone they will all just start blowing each other up so the Yanks don't need to be there.
Now they can use their own oil and forget about the lunatics.

Sorry if this has been asked already but what is the safest way to play the reversal of oil prices, say I want to go long on oil in a few weeks if it goes under $40 a barrel. ETF? Stock? Options?

USO ETF is interesting and so is IXC.

try OOO and ETPOIL on the asx
OOO is betashare and currency edged
etpoil is based on brent

Note I own both.

Oil is back on the rise.

Markets, particularly the DOW were looking shakey so oil will save the day and the DOW could even hit 20,000 in the next run. Yeehaaaar.

Just my very humble opinion of course. DYOR

explod said:

Oil is back on the rise.

Markets, particularly the DOW were looking shakey so oil will save the day and the DOW could even hit 20,000 in the next run. Yeehaaaar.

Just my very humble opinion of course. DYOR

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Oil has finally had its first decent short covering rally....a good start, but one rally makes not a bull market mate!

CanOz said:

Oil has finally had its first decent short covering rally....a good start, but one rally makes not a bull market mate!

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Commodities are a manipulated market by the bankster cartels in my humble view.

Was simply making a bit of a joke of the joke. DYOR

Out today by the MSM in the US "... economic confidence improves slightly" what a revelation,, and just when the Dow was down about 300 and looking grim. People walking the streets and on food stamps everywhere, ya gotta be joking.

This is a week by week of the month analysis since June.

1st week: -2, 0, -3, -3, -1, -5, -5 = -19
2nd week: -3, -2, -1, -10, -6, -7, 0 = -29
3rd week: +2, -2, -2, +1, 0, +1 = 0
4th week: -1, +1, +2, -1, -3, -4 = -6
5th week: -5, +1, -3, -3, -2, -1 = -13

(5th week is partial)


Days 29th to 14th has seen oil drop $61
Days 15th to 28th has seen oil drop $6

shouldaindex said:

This is a week by week of the month analysis since June.

1st week: -2, 0, -3, -3, -1, -5, -5 = -19
2nd week: -3, -2, -1, -10, -6, -7, 0 = -29
3rd week: +2, -2, -2, +1, 0, +1 = 0
4th week: -1, +1, +2, -1, -3, -4 = -6
5th week: -5, +1, -3, -3, -2, -1 = -13

(5th week is partial)


Days 29th to 14th has seen oil drop $61
Days 15th to 28th has seen oil drop $6

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Yeh, when the serious traders were away for the festive.

This is all about the currency war, particularly the west NATO alliance against Russia. But its backfiring, Russia are producing with infrastructure in place, the west with new shale etc., and heavy borrowing to boot are in trouble. Only just announced that Russia are now supplying via Turkey and bypassing the Ukraine.

We live in interesting times. Just noted gold pop up $25 in the lasr hour. Be interesting to see the Dow Jones wipsaws tonight and two trading days to go hey.

CanOz said:

Oil has finally had its first decent short covering rally....a good start, but one rally makes not a bull market mate!

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Do ya reckon this current action is also short covering, well it might be for me tomorrow But a spike in gold and a spike in oil and everything else getting f#$%ed.
Got me wondering what's going to hit next?



Maybe Poo Poo has plans. (Putin)

notting said:

Do ya reckon this current action is also short covering, well it might be for me tomorrow But a spike in gold and a spike in oil and everything else getting f#$%ed.
Got me wondering what's going to hit next?

View attachment 61141

Maybe Poo Poo has plans. (Putin)

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SNB....news, check out the usd/chf

Re: OIL AGAIN!

Smurf1976 said:

The link between energy and real economic growth (as distinct from speculation etc which doesn't actually produce real wealth and which would appear to consume little energy) is fairly solid. There will be efficiency improvements over time, but if we make more things then ultimately we'll be using more materials to do it.

Also there's a huge paradox with efficiency. Install a heat pump for heating and then people leave it running 24/7 (very common in practice). Switch to energy saving lights, then they get left on a lot more than the old lights were. Double the efficiency of an engine, then consumers and car manufacturers will decide to (a) have engines twice as big (b) have more cars and (c) drive their cars further. That's pretty much the lesson of history - resource consumption goes up despite improvements in efficiency. Look what happened when TV's became more efficient. Use 30% less energy for the same size screen maybe, but when you end up with a screen that's 3 times as big that's still a doubling of energy consumption and that's exactly what has to a large extent happened.

The link between oil and economic activity isn't absolute, but since oil fuels most transport it's pretty strong. Make more things and they'll need to be transported which will use oil.

As for what happens with China, that's going to be interesting to say the least. But I do note that even the more extreme optimists aren't predicting a doubling of oil production as would be necessary if China were to attain US per capita oil consumption levels.

I do note however that China has a key advantage in that whilst they are urbanising and developing, they are doing so in a world where oil isn't overly cheap and (presumably) in the knowledge that problems likely lie ahead. They're building an economy that works with $80+ oil whereas the USA (as the largest but not only example) has an economy based upon $20 oil. That pattern of development, plus China's very heavy reliance on coal and to some extent hydro for their non-transport energy, is very much in China's favour. The US is in economic trouble with oil at $80 whereas it would need to be somewhat higher to meaningfully hurt China.

In terms of physical supply, with China doing deals with Saudi Arabia, Venezuela etc they are certainly taking steps to secure supplies. Such action, effectively taking oil off freely traded spot markets and locking it up under long term deals, pushes the rest of the world further down the "no oil at any price" track that has already been mentioned. That's the scary bit, and that's what seems to be actually happening.

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I found this post on the money considering the POO lately. The cheaper fuel prices will likely see an increase in consumption. I know I put more in the tank at present but drive no more than usual so it is longer between refills.

BHP is cutting back on oil drilling in the USA, other companies are doing the same and the number of drilling rigs in operation is now at a 6 year low.

http://www.abc.net.au/news/2015-01-21/bhp-billiton-to-cut-us-drilling-rigs-due-to/6031236

Slowly but surely, producers are reacting to the drop in prices and curtailing future supply. Assuming at least some level of ongoing demand growth, prices head back up at some point.

Oilers having a day on.
Oil itself did not do much last night on the back of the ECB ramp but is doing OK whilst major Western markets are in bed.
Is this the buying opportunity?