Oil Prices

Politicians are always the beacon of hope but don't think that they can do much when tough times are really in... at most they will be good to provide more hope via suggestion of continued upgrading and re-training... to prepare for the return of good times and provided the industry remains competitive in Singapore...

So many ifs... sounds like I m fast becoming a consultant or academics from uni...

GG

(02-12-2014, 04:05 PM)CityFarmer Wrote: Local authority view on the low oil price...

Long-term outlook for oil and gas sector positive despite volatile oil prices: Iswaran

SINGAPORE – The long-term outlook for the oil and gas industry remains positive, despite volatile oil prices and global uncertainties, said Second Minister for Trade and Industry S Iswaran today (Dec 2).

Mr Iswaran said strong economic fundamentals in the Asia Pacific, along with rapid population growth and economic development, will continue to drive energy demand. This will, in turn, spur expenditure on exploration and production activities.

Speaking at the opening of the International Oil and Gas Industry Conference at Marina Bay Sands, the minister said Singapore offers an attractive value-proposition to firms seeking to serve growing offshore exploration and production activities in the region. The continued growth of such activities is expected to support the growth of Singapore’s marine and offshore industry, he added.

The growth will create more opportunities for Singaporeans to engage in high-value research and engineering activities, Mr Iswaran said. More than 20,000 Singaporeans are currently employed in the industry, largely in skilled jobs covering engineering and project management. CHANNEL NEWSASIA
http://www.todayonline.com/business/long...es-iswaran

(02-12-2014, 10:05 AM)CityFarmer Wrote: The oil market is hard to predict, as in the stock market...

Actually oil is much harder to predict because it was a cartel with very strong political elbowing.

Like I said OPEC is largest exporter while US (and increasingly China) are largest consumer. There is a difference in the dynamics.

Believe it or not prior to shale I always tell people don't bother to analyse oil prices. Analyse alpha companies with good management and models that can navigate through high and low oil prices against peers, and build competitive advantage.

Inline with what I've been saying. In 6 months we will see the delta of shale growth drop substantially:

"Billionaire wildcatter Harold Hamm, a founding father of the U.S. shale boom whose personal fortune has fallen by more than half in the past three months, said U.S. drilling will slow as producers cut back amid falling oil prices.

--snip--

Hamm has said in the past that his company can turn a profit at prices of $50 a barrel. Continental plans to boost output by as much as 29 percent next year, while holding spending at 2014 levels, according to a Nov. 6 company presentation. Hamm declined to say how those plans may change if prices fall further."

http://www.bloomberg.com/news/2014-12-01...-slow.html

Agreed. It always worked to invest by focusing on fundamentals, rather than to invest by trying to "time" a trend e.g. oil price

(02-12-2014, 04:42 PM)specuvestor Wrote:

(02-12-2014, 10:05 AM)CityFarmer Wrote: The oil market is hard to predict, as in the stock market...

Actually oil is much harder to predict because it was a cartel with very strong political elbowing.

Like I said OPEC is largest exporter while US (and increasingly China) are largest consumer. There is a difference in the dynamics.

Believe it or not prior to shale I always tell people don't bother to analyse oil prices. Analyse alpha companies with good management and models that can navigate through high and low oil prices against peers, and build competitive advantage.

Inline with what I've been saying. In 6 months we will see the delta of shale growth drop substantially:

"Billionaire wildcatter Harold Hamm, a founding father of the U.S. shale boom whose personal fortune has fallen by more than half in the past three months, said U.S. drilling will slow as producers cut back amid falling oil prices.

--snip--

Hamm has said in the past that his company can turn a profit at prices of $50 a barrel. Continental plans to boost output by as much as 29 percent next year, while holding spending at 2014 levels, according to a Nov. 6 company presentation. Hamm declined to say how those plans may change if prices fall further."

http://www.bloomberg.com/news/2014-12-01...-slow.html

Yup just like iron ore, its now mostly every producer for themselves.

For overpriced oil, sooner or later prices will have to revert to mean.

10 years ago oil price was ~$30+ dollars, who knows whats the mean now 10 years down the line. If currently it costs ~$30+ to produce per barrel for the Arabs, giving them a 20% profit margin, they should be selling their product at $40 levels which would be a reasonable price.

Not really. As you know, I believe in long term timing. It is instructive that you can come to any conclusion if you change just the start date and stop date on your investment holdings. Anyone who done marketing would know this inevitable fact.

But we have to stay within what we know we can forecast. Property cycles are well known and pretty easy to spot with a long lag. Interest rate cycles are also relatively easy. Tech cycles are very product and adoption specific which can be correctly assessed.

But commodities cycles are quite difficult because supply is affected by weather (soft commodities) and operating capex (hard commodities). They are actually quite short term in nature.

I stick to catalysts instead of being "geh kiang", where one still can benefit after the event rather than rely on forecasting. No brownie points for catching absolute bottoms or tops. But there are indications that are helpful to long term investing timing.

(02-12-2014, 05:02 PM)CityFarmer Wrote: Agreed. It always worked to invest by focusing on fundamentals, rather than to invest by trying to "time" a trend e.g. oil price

(02-12-2014, 04:42 PM)specuvestor Wrote:

(02-12-2014, 10:05 AM)CityFarmer Wrote: The oil market is hard to predict, as in the stock market...

Actually oil is much harder to predict because it was a cartel with very strong political elbowing.

Like I said OPEC is largest exporter while US (and increasingly China) are largest consumer. There is a difference in the dynamics.

Believe it or not prior to shale I always tell people don't bother to analyse oil prices. Analyse alpha companies with good management and models that can navigate through high and low oil prices against peers, and build competitive advantage.

Inline with what I've been saying. In 6 months we will see the delta of shale growth drop substantially:

"Billionaire wildcatter Harold Hamm, a founding father of the U.S. shale boom whose personal fortune has fallen by more than half in the past three months, said U.S. drilling will slow as producers cut back amid falling oil prices.

--snip--

Hamm has said in the past that his company can turn a profit at prices of $50 a barrel. Continental plans to boost output by as much as 29 percent next year, while holding spending at 2014 levels, according to a Nov. 6 company presentation. Hamm declined to say how those plans may change if prices fall further."

http://www.bloomberg.com/news/2014-12-01...-slow.html

"It always worked to invest by focusing on fundamentals, rather than to invest by trying to "time" a trend e.g. oil price"
Unquote:-
Price does reflect the fundamentals even though at times the price may reflect market's folly.

If we are such good predictors of commodities.........we might as well trade them, the irony man......

Just a causal comment.....

Agree wholeheartedly... some volatile things like commodities and FX are simply not worth the time and effort to pre-empt but certainly worth monitoring as inputs to investment models...

(02-12-2014, 07:35 PM)newborn1000 Wrote: If we are such good predictors of commodities.........we might as well trade them, the irony man......

Just a causal comment.....

US shale oil producers trim output amid global oil glut
THE TIMES DECEMBER 03, 2014 12:00AM

OIL prices staged a rebound from a five-year low after it emerged yesterday that American shale oil producers were planning to slash production in the face of the global glut in crude supplies.

On a day of wild gyrations on oil markets, prices were heading for their biggest one-day rally since June to $US72.20 a barrel, a rise of more than $US2 on the previous day.

The jump was all the more significant after prices touched a five-year low of $US67.53 hours before as markets fretted over the implications of OPEC’s refusal last Thursday to cut ­production to arrest the slide in prices.

The unlikely rally was sparked by the release of data from Drillinginfo, an advisory firm, which showed that drilling permits for new shale oil wells in the US fell by 15 per cent in October.

The data provided the first firm evidence that shale oil companies, which have higher costs than most other producers, were starting to feel the pain from the slump in prices and have slowed their drilling frenzy. Oil prices have fallen by 40 per cent since June, hitting shale companies, which need oil at about $US80 to make a decent return.

The news will hearten Saudi Arabia, which blocked attempts by other members of the cartel of oil-producing nations to cut OPEC’s production. The Saudis are digging in for a price war with US shale companies, which they want to put out of business by driving down crude prices.

A decline in the number of permits issued for the 12 biggest shale formations in the US is expected to translate into a lower rig count within two to four months. Production is likely to start to slow six months later.

Allen Gilmer, chief executive of Drillinginfo, said: “This is a pullback from the acceleration. ­People are being careful.”

However, the number of permits issued is still close to a record high. Texas, a big shale oil producer, issued a record 934 permits in September before dropping to 885 in October, still more than double the level in 2010.

Philip Verleger, an energy consultant, predicted that many US shale oil companies would be unable to cope with lower oil prices. But he cautioned that it would take time before production fell significantly, as many drillers had taken out hedges to protect themselves.

“We will have a lot of shale oil drilling companies going bust over the next 18 months,” Dr Verleger said. “We are going to have chaos for a while. We have gone wild creating all this capacity.”

The Times

Once a while, a good article surfaces in Bloomberg.

Sub-$50 Oil Surfaces