Oil price discussion and analysis

[qldfrog]

saudi king death means unwrapping of power struggle in the next few weeks
with potential unstable time ahead
oil should be at 200$ not 40$
should the saudis fall to IS, forget the overproduction, unless the west decides suddenly that IS imams are actually quite nice guys..would not be a first
look at qatar/saudis as they are now...

 

[waterbottle]

saudi king death means unwrapping of power struggle in the next few weeks
with potential unstable time ahead
oil should be at 200$ not 40$
should the saudis fall to IS, forget the overproduction, unless the west decides suddenly that IS imams are actually quite nice guys..would not be a first
look at qatar/saudis as they are now...

Regardless of what happens politically, I can't see why they would decide to shut off supply. They would be allowing the smaller players to survive and ensuring their loss of market share, effectively signing off on their own demise.

 

[qldfrog]

Regardless of what happens politically, I can't see why they would decide to shut off supply. They would be allowing the smaller players to survive and ensuring their loss of market share, effectively signing off on their own demise.

if IS is taking over Saudia Arabia, who is going to be the "they"?
it is not an implosible scenario;
people have very short memory and even less understanding of the current civilisation war happening now..
anyway, it would not be completely crazy to put a few dollars on 100$ a baril in a year time.
but true, not according to a nice gentle slow reduce of production....

 

[Smurf1976]

Regardless of what happens politically, I can't see why they would decide to shut off supply.

Two major oil crises, which came to be simply known as "the energy crisis" dominated the oil industry and much of the resultant politics of the 1970's and well into the 1980's.

October 1973 the OPEC nations roughly tripled the price then in 1979 Iran (second largest producer in OPEC at the time) cut off supply and sent the price through the roof.

In practically every country there are coal / hydro / nuclear power stations or gas pipeline projects built as a direct response and still in use today. Prior to 1973, there was no such thing as "energy" in terms of politics, it just wasn't an issue that anyone thought about. That changed real fast when the oil became expensive and supplies ran short. Coal and gas were most certainly seen as "alternative" energy back then, indeed 30 years ago Australia did have a national policy to maximise the use of coal (in preference to using oil in boilers etc) and like most industrialised countries we pledged to minimise the use of oil wherever possible.

The Saudi's weren't the cause last time but there's a definite precedent for oil supply shocks.

 

[Bintang]

Two major oil crises, which came to be simply known as "the energy crisis" dominated the oil industry and much of the resultant politics of the 1970's and well into the 1980's.

October 1973 the OPEC nations roughly tripled the price then in 1979 Iran (second largest producer in OPEC at the time) cut off supply and sent the price through the roof.

The Saudi's weren't the cause last time but there's a definite precedent for oil supply shocks.

Since 1973 and prior to the current oil price malaise there have been three major downturns in oil price – Q1 1986, Q4 1998 and Q4 2008. Each time the price recovery period was about 12 to 18 months. I don’t expect much difference this time round unless the great recession – bordering on depression keeps going much, much longer. At any time, the best way to actually reduce oil consumption enough to lower the price (especially in the USA) is to put people out of work. When people are unemployed they have a tendency not to drive cars to places of work everyday.

 

[notting]

According to the price of Tesla shares, the markets are pricing in electric cars to be significant modes of private transport.
The US is a major oil producer once again.
OPEC is boken.
Tactical cutting is no longer and option it has little to do with trying to break the little guys. It's a paradigm shift.
The Saudi king probably died of shock!
Russia and a few others are insolvent.
No wonder the Europeans are actually starting to print money, with all the bad debts coming from a few sovereign defaults, there going to need plenty of cash around to cover it!

 

[Smurf1976]

Something to consider about oil, is that most of the time it hasn't really been a free market a such.

The Railroad Commission of Texas formally regulated prices 1930 - 1970, and by 1973 OPEC had stepped in to do essentially the same.

So over the past 85 years, there have only been 3 years when oil hasn't been under some degree of direct, reasonably coordinated efforts to control price. And nothing really happened in those 3 years anyway, the Railroad Commission didn't officially announce that they'd stopped regulating prices, they just lost the ability to effectively do it as US oil production peaked although even that wasn't recognised at the time, so we may as well say that it's been regulated since 1930 in a practical sense.

So in any discussion of oil prices, we are talking about a market where there has always (well, unless you want to go back pre-1930) been a single entity with the ability to raise prices, an most of that time the same entity has also had the ability to raise output and drop the market price should they wish to do so. That is manipulation of the market as such, in addition to direct price controls imposed by various governments over the years.

Thus far, nothing has changed. OPEC still exists, their largest member is simply choosing to over supply the market and drop prices. It may well be that OPEC never regains control, but thus far nothing extraordinary has happened in that regard. If the Saudi's really wanted oil at $100 then they would have no trouble doing so. Simply refuse to sell below that price, get the other OPEC members to do likewise, and they'll still find plenty of buyers.

I'm always wary of any market where government is the largest player. And if you look at who "big oil" actually is, it's not the likes of Exxon at all. It's governments which dominate the upstream industry in many of the major producing countries either directly, or via very close association with "private" oil companies.

 

[waterbottle]

Article reporting on a survey of market participants. States that most think $30/bl will lead to recession. Last time we saw this was during the GFC. Cause and effect unclear, but its not hard to imagine alot of people other than drillers losing money

http://www.marketwatch.com/story/if...ssion-2015-01-22?cb=logged0.34395162272267044

 

[Wysiwyg]

WTI going north in a hurry. Don't know why news wise but could be shorts exiting. Those greedy buggers.

 

[notting]

WTI going north in a hurry. Don't know why news wise but could be shorts exiting. Those greedy buggers.

Oil has a history of not making U shaped recoveries after big falls. Tends to like Vs.
Big Oil unions striking in USA, may be the trigger this time.

 

[StockTrader010]

Nice rally in oil the last couple of days (+20% since low). Although it seems to have lost some of its momentum :-(

 

[qldfrog]

Nice rally in oil the last couple of days (+20% since low). Although it seems to have lost some of its momentum :-(

and nice collapse last night!

 

[StockTrader010]

and nice collapse last night!

Still, I doubt we'll touch the low levels of last month again. Oil seems to have bottomed out.

 

[qldfrog]

an interesting view which I tend to agree on
2017 or 2020 to ,y opinion
but it will happen

 

[Smurf1976]

an interesting view which I tend to agree on

What view is that?

Missing link or did I miss something somewhere?

 

[qldfrog]

What view is that?

Missing link or did I miss something somewhere?

indeed missing link
my apologies
http://jdmarkman.tumblr.com/post/110525085978/why-solar-eclipsing-oil-may-first-cause-a
and the resulting cascade of effect on the economic are going to be unheard of IMHO

 

[Smurf1976]

An interesting view but I can't see it happening just 2 years from now. There's a few issues.

Solar produces electricity, it does not produce liquid fuels. As such it competes against other means of producing electricity. Most electricity is produced from coal, gas, hydro and nuclear with a small contribution from wind and a minor amount from other sources. Oil is only a few % of total electricity generation, and much of that is off the main grids (eg mining industry). Very, very few places use oil as a major fuel for generation into the grid these days.

I can see that solar does threaten other means of electricity generation. It certainly has the potential to kill nuclear for dead and take significant market share away from gas. It won't kill hydro and it won't kill coal for quite a while yet. Oil is already dead and largely buried so far as power generation is concerned.

Simply being cheaper doesn't make it automatically viable technically. We've had ridiculously cheap electricity available off-peak for decades but that hasn't yet prompted an abandoning of internal combustion engines in vehicles. Even in places with a strong incentive and policy support for the use of non-oil energy haven't really managed to do it.

It will happen someday for sure, we're not likely to be using oil to produce petrol to run cars 100 years from now, but I very much doubt that we'll see anything drastic in 2017. If oil does peak in 2017 (certainly plausible) then it will be driven by geology and politics and the consequent price of oil rather than solar panels.

 

[qldfrog]

two years seems optimistic but let's say the tide turning within 5 years;
What will happen then is millions and millions of small SME/household will just switch off the grid as we know it today and move to electric cars/light trucks;
once that tide starts, it will grow very powerfully;
The author's view is that by that time even coal electricity will be more expensive than solar so coal will be dead as you do not use coal but for power ( coking for steel will remain)
Oil role in transport will decrease and slowly be reduced from its unique role nowadays to just a part of the mix.
Do not forget the role oil has for heating in colder climates:
US/europe still use an enormous amout of oil in furnace in winter;
we are talking thousands of litres per year per household living in individual houses, and even appartment blocks
The market always react in advance and this means the asset values of coal producers and oil producer will be decimated, even before they become irrelevant.
Side effect are numerous and tidal/huge
increase in electric cars means far far fewer car services, no more transmission repair garages and a lot of the current car industry will be decimated
This will happen and much sooner than people realises, the effect will be immense and coupled with the automatisation of new works(self driven car/truck/taxis, white collar jobs disintegration) we are in for a roller coaster ride due to technology advances
Nothing new but transition period are now well within a lifetime.
That might explain the saudi strategy, collapse price eliminate competition then cash on the next and maybe last inevitable oil price surge before it is too late;

 

[So_Cynical]

indeed missing link
my apologies
http://jdmarkman.tumblr.com/post/110525085978/why-solar-eclipsing-oil-may-first-cause-a
and the resulting cascade of effect on the economic are going to be unheard of IMHO

WOW - makes perfect sense...and no one sees it coming.
`
[video=youtube_share;pxHKRI2Cbas]http://youtu.be/pxHKRI2Cbas[/video]

One thing i have learned over the last 10 years is that when the turn is on its on, 5 cents per kilowatt-hour = most new power generation will be solar based, particularly in the lower latitudes, coincidently the latitudes where most people live.

 

[Smurf1976]

At 5c / kWh:

Coal - existing plants are viable to run, not really attractive to build new ones in countries with high labour costs for construction.

Gas - not viable at that price for baseload generation. Game over.

Oil - forget it. Not even anywhere close to being competitive.

Wind - not viable at that price.

Hydro - very competitive for schemes already built but new ones are economic at that price only in places with cheap labour with which to build them.

Nuclear - never really was viable financially and it sure isn't at 5 cents / kWh. Existing plants tend to have operating costs below that so they'd continue but nobody in their right mind would build a new one.

But as for electric cars etc, well bulk electricity is already below 5 cents / kWh, it's 3 - 4 cents right now at the time of posting depending on which state you're in, so being able to produce it at that price from solar doesn't really change anything there so far as economics are concerned. It remains an issue of battery costs and technology etc and charging infrastructure.