Oil

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patriot1
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Re: Oil

Post by patriot1 » 03 Jan 2016 20:54

The Saudis don't have the cojones to fight Iran or anyone else. That's why they support proxies in Syria and Yemen, and drop bombs on the latter.

Iran does but they know an open conflict with Saudi isn't going to get them anything.

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Re: Oil

Post by ghariton » 03 Jan 2016 22:56

Anatole Kaletskythinks that the price of oil is permanently low. He thinks that the big oil companies should stop all exploration, pump out or sell off the reserves they have, and go out of business.

He's not the first to say that, of course. But he's a Big Noise in the commentariat, so perhaps people will take notice.

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Re: Oil

Post by AltaRed » 04 Jan 2016 00:02

I agree with most of what Anatole has to say with one major caveat/exception.

Oil company share prices (over the longer term, i.e. not quarterly reporting periods) have historically depended as much on reserve replacement ratios as they do on conventional cash flow and earnings metrics. IOW, share prices of a signficant oil company will suffer a step change setback IF they miss 100% reserve replacement ratios more than one year in a row. That is, unless and until there is a major paradigm shift in thinking from oil company managements, investment bankers, analysts and institutional money managers.

On a lesser scale, Anatole underestimates the addiction of despot regimes to oil money to maintain social order. Many of those reserves could well implode under large scale civil disorder potentially stranding them instead of higher cost production in stable countries. We ain't seen nothing yet.

I do believe high cost exploration with marginal success rates will cease. Shell has essentially started that by recently pulling out of the Chukcki Sea writing off billions of sunk exploration costs. Others messing around in the Arctic, deepwater Labrador offshore, deepwater Brazil and similar areas will likely (should) throw in the towel within a few years. There is already a lot of undeveloped/underdeveloped known reserves left for the foreseeable future.
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Re: Oil

Post by AltaRed » 06 Jan 2016 22:20

US oil production continues to defy pundits. Latest data shows 9.219 million barrels of production per day, more than 100 thousand higher than the low point of 9.096 million barrels per day in Sept/Oct. Granted the difference (~ 1.3%) may be just noise in the scheme of things, it remains remarkable how production levels continue to hang on.
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Re: Oil

Post by ghariton » 07 Jan 2016 13:33

AltaRed wrote: it remains remarkable how production levels continue to hang on.
... explaining why the price of oil is down another 1.5% this morning.

I have heard some commentators mention $20 as the floor price. How likely do you think that we will actually go down this far?

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Re: Oil

Post by AltaRed » 07 Jan 2016 14:14

US production numbers (and inventories) that come out every Wednesday do cause oil price futures to move, albeit inventory changes seem to have a disproportionate effect which I've never quite understood. Inventory change estimates are notoriously volatile and traders never get it right. What should matter more is the absolute level of global inventories and how it trends over multiple weeks/months.

Could oil price fall to $20? Perhaps but it would be short lived (days or weeks) because there is insufficient oil production that can be cash flow positive at that level. The counterparties to contracts at that level would also be highly exposed to, for example, Iran shooting off a missile in the Gulf of Hormuz.
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Re: Oil

Post by Dudsy » 16 Jan 2016 14:36

Haven't updated this chart in awhile. US oil production up around 100,000 Bbls/d since the lows of last fall.
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US Oil Production.JPG

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Re: Oil

Post by AltaRed » 17 Jan 2016 14:49

US production performance defies logic, especially given the size of the writeoffs that are occurring. I don't have the desire or energy to dig into individual state production numbers but something is keeping production up.

Some speculation Russia may decrease production but I suspect this is typical KGB Putin type bravado...they don't have the cash to keep production flat. Either way, Iranian production coming on 'any time now' will depress price further.
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Re: Oil

Post by ghariton » 17 Jan 2016 19:05

Interesting. I'm seeing more and more SUVs and pick-up trucks that are used exclusively for passenger transport. At some point, presumably, the return of the gas-guzzlers will increase the demand for oil. How this will play out in face of the CO2 reduction commitments made in Paris in November, I have no idea.

If we and others were ever to take those commitments seriously, an unlikely scenario I know, oil could well go below $20.

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Re: Oil

Post by trf1066ca » 17 Jan 2016 20:52

It must be Monday somewhere.

Oil prices tumble, markets brace for jump in Iranian oil exports
Brent and U.S. crude futures fell to the lowest since 2003 in Asian trading on Monday as the market braced for a jump in Iranian oil exports following the lifting of the sanctions at the weekend.

Iran is ready to increase its crude exports by 500,000 barrels a day, the deputy oil minister said on Sunday, hours after international sanctions on Tehran were lifted, removing an obstacle to exports.

London Brent crude for March delivery was down $1.14 at $27.80 a barrel by 2333 GMT, after touching an intraday low of $27.70 earlier, the lowest since Nov. 25, 2003.

NYMEX crude for February delivery was down 86 cents at $28.56 a barrel, after falling more than $1 earlier to $28.36, the lowest since Oct. 30, 2003.
There is a remarkable tone-deafness on this board about the secular prospects for oil.

Regarding "Paris", even before that global CO2 emissions from all fossil fuel consumption and industrial processes (e.g. cement production) appears to have flat-lined in 2014 and outright fallen in 2015. First time for those results globally concurrent with growing GDP. (Notably, China's emissions from coal appear to have peaked and begun falling.)

So, even if we aren't going to execute on what Paris fully implies, we are probably already on the secular downslope for fossil fuel use.

Even if you ignore the fact that we already have about 3x as many proven reserves of fossil fuels than can ever be burned and meet the Paris commitments, you are still in a situation where demand is falling, and those with sunk costs and low production costs are going to want to avoid stranding their assets so will price to strand others' assets, and that landlocked, high-carbon-intensity Canadian oil is brutally positioned.

You want to focus on archaic metrics like "last quarter drill rig or buggy whip starts versus historical demand" or Putin-Putin-Putin! or reversion-to-the-mean or on-and-on, have at it.

Lots of opportunities for near-term head-fakes and dead-cat bounces, for sure, but we are in a long-term adjustment to low prices. And ultimately lower prices.

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Re: Oil

Post by AltaRed » 17 Jan 2016 21:25

Long term low(er) oil prices are no doubt here to stay but oil demand specifically continues to grow. That has not yet turned the corner but it has too sometime.
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Re: Oil

Post by SoninlawofGus » 18 Jan 2016 08:24

Bank of Canada Deputy Governor: Drilling Down - Understanding Oil Prices and Their Economic Impact

What caught my eye was the following blurb, especially the "be bad for Canada" bit. It's not "slower growth" or "challenging," it's just plain "bad" :lol: :

The most immediate impact will be positive: a boost to consumers’ disposable incomes and spending. Lower oil prices will also benefit many sectors, such as manufacturing, by reducing production costs. Our latest Business Outlook Survey, which was published yesterday, showed that more firms than in previous surveys are anticipating declines in their input costs, thanks in good part to cheaper oil and cheaper commodities in general.

The positive effect on the world economy and the resulting stronger growth would also be positive for Canada. A buoyant global economy would increase Canada’s non-energy exports, boost confidence and lead to improved business investment.

However, these gains will be more than reversed over time as lower incomes in the oil patch and along the supply chain spill over to the rest of the economy. The decline in Canada’s terms of trade will also reduce the country’s wealth.

The lower prices, if they are expected to persist, will significantly discourage investment and exploration in the oil sector. As I mentioned earlier, we are already seeing signs of this.

Lower oil prices are also typically accompanied by a weaker Canadian dollar, and this time is no exception. The dollar’s depreciation by over 10 per cent against the U.S. dollar in the past six months will help cushion the economy from the impact of lower oil prices.

Despite the mitigating factors I enumerated, lower oil prices are likely, on the whole, to be bad for Canada. Estimating the magnitude of that overall impact requires carefully analyzing the interplay between the various effects as they work through the economy. That is what we are doing as we prepare next week’s forecast.

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Re: Oil

Post by schmuck » 18 Jan 2016 15:10

trf1066ca wrote: There is a remarkable tone-deafness on this board about the secular prospects for oil.
Hm, that may not be a bad thing, just to keep us from being swayed by either extreme which is more often than not derived at from hindsight.
How could we have been so stupid not to have realised that the price could drop so dramatically in such a short time. After all, this is not the first time we have found ourselves in this situation. http://www.businessinsider.com/annotate ... 61-2014-12

So, is it different this time? Could be. Hard to argue against the bloated global reserves, but regardless of "Paris" and all the other scare tactics, it's just as hard to see a reduction in demand without some dramatic new alternate source. Solar and wind farms aren't going to save us and nuclear is not an option. Electric cars are encouraging despite the infrastructure challenge, and renewed competition from gas guzzlers benefiting for cheaper gas.
Anyway, not quite ready to bet the farm on the end of the oil era.

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Re: Oil

Post by scomac » 18 Jan 2016 16:53

What we are experiencing today is simply the pendulum swinging to the other extreme than what we reached when oil touched $140/bbl. The price volatility far outstrips the actual supply:demand metrics as price is set at the fringe; the place where speculators operate. I've actually been quite surprised by price action considering how little surplus there actually is out there.
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Re: Oil

Post by SkaSka » 19 Jan 2016 13:39

For what it's worth, with the eight Form 4s filed with the SEC so far in 2016, it looks like Buffett has so far gobbled up an additional 7.5 million shares of Phillips 66 over the past 2 weeks for Berkshire Hathaway's portfolio.

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Re: Oil

Post by Flaccidsteele » 25 Jan 2016 22:17

^ those purchases caused Berkshire to own over 10% outstanding (Nov 2015) so it became mandatory for the company to file those Form4s. FYI.
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Re: Oil

Post by Spidey » 27 Jan 2016 16:21

If life seems jolly rotten, then there's something you've forgotten -- and that's to laugh and smile and dance and sing. - Eric Idle

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Re: Oil

Post by like_to_retire » 27 Jan 2016 17:33

Rick Mercer Report

Even left wing comedians like Rick Mercer understand that the Mayor of Montreal (Denis Coderre) is crazy to oppose the Energy East Pipeline. I was surprised to see Mercer offer his support for the pipeline. It should tell everyone that even an idiot knows that this is the correct way to go.

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Re: Oil

Post by Shakespeare » 27 Jan 2016 17:38

Please keep the cracks in the Watercooler.
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Re: Oil

Post by AltaRed » 27 Jan 2016 18:19

US oil production numbers remain resilient at about the same level as late August. Looked over month by month data for each state to see if there is a discernable trend, e.g. offshore continuing to climb because of longer term startups and thuse offsetting some declines in shale oil particularly in North Dakota, Pennsylvania and Texas......but there is no discernable trend for May through Oct...the latest for which state by state data is available on the EIA website. There will have to be a trend down in shale oil soon as many independents are on their last legs with their creditors.
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Re: Oil

Post by kcowan » 28 Jan 2016 09:50

That Rick Mercer segment was featured on The National right after an interview with Coderre! Not sure if they were agreeing or just supplying comic relief!
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Re: Oil

Post by Spidey » 28 Jan 2016 16:28

The video actually makes some fairly valid points and unlike much of Mercer's stuff this doesn't really have much of a comic aspect to it.
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Re: Oil

Post by kcowan » 28 Jan 2016 16:43

But you have to appreciate the Mercer also likes irony.
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Re: Oil

Post by retireat50 » 12 Feb 2016 17:13

So can someone explain the 10%+ increase in WTI today? Or the 5%+ drop the last day. Oy, this volatility is getting more and more perplexing

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Re: Oil

Post by peter » 12 Feb 2016 19:34

Easy. The 5% drop was because of the world ending the other day. The 10% increase is because someone somewhere was rumored to decide to pump less any day now.

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