Oil Prices

Opec meeting concluded. Looks like more oil coming. $30 soon baby! [SMILING FACE WITH SMILING EYES]
Sgx oil related counter are gonna be absolutely hammered on monday..

sent from my Galaxy Tab S

(14-08-2015, 06:27 PM)lilvestor Wrote:

(14-08-2015, 06:06 PM)HitandRun Wrote:

(14-08-2015, 05:00 PM)lilvestor Wrote: Bad news for the energy sector, oil prices are going to take a huge dump once the sanctions on Iran are lifted, maybe to $30

You reckon Iran's cost of production is like free? Incidentally, the world uses something like 90 million barrels of oil a day...

Its not free but its definitely far lower than $40, production cost in the middle east is easily lower than that. Besides, a ton of oil has already been produced (50m barrels according to that article), its sunk cost to Iran and they'd sell it even if they are going to lose money, it costs money to store oil ya know?

Consumption is irrelevant as long as supply continues to exceed it, the world was already producing 3m barrels of surplus oil per day before Iran joined the market, that surplus is certainly going to increase when Iran starts producing again.

Lowest possible cost for crude oil production is $1 in Iran...

http://www.presstv.ir/Detail/2015/12/14/...ces-Karimi

To be honest, the low oil prices have triggered my interest, specifically in RDS-B. It is still early days but it is certainly on my radar now.

(14-12-2015, 09:55 PM)lilvestor Wrote: Lowest possible cost for crude oil production is $1 in Iran...
http://www.presstv.ir/Detail/2015/12/14/...ces-Karimi

Let's look at the various statements made in the article:

1."Currently, the cheapest crude oil in terms of recovery costs is produced and supplied in Iran’s central regions where production is possible at $1-$1.5 a barrel,” CEO of Iranian Central Oil Fields Company Salbali Karimi said.

2. “The finished cost of each oil barrel produced in Iran is about $5. This price tag doesn’t exceed $10 with the costliest of processes,” he (Kardor) said.

3. Iran needs $250 billion of investment in its oil industry between 2016 and 2025, including $176 billion in its upstream sector and another $77 billion in downstream spending, Kardor said then.

You reckon that these statements do not conflict with one another? 

(15-12-2015, 07:47 AM)HitandRun Wrote:

(14-12-2015, 09:55 PM)lilvestor Wrote: Lowest possible cost for crude oil production is $1 in Iran...
http://www.presstv.ir/Detail/2015/12/14/...ces-Karimi

Let's look at the various statements made in the article:

1."Currently, the cheapest crude oil in terms of recovery costs is produced and supplied in Iran’s central regions where production is possible at $1-$1.5 a barrel,” CEO of Iranian Central Oil Fields Company Salbali Karimi said.

2. “The finished cost of each oil barrel produced in Iran is about $5. This price tag doesn’t exceed $10 with the costliest of processes,” he (Kardor) said.

3. Iran needs $250 billion of investment in its oil industry between 2016 and 2025, including $176 billion in its upstream sector and another $77 billion in downstream spending, Kardor said then.

You reckon that these statements do not conflict with one another? 

Don't see any conflict there. $1 is the lowest possible cost, it has nothing to do with the average cost of each barrel produced in Iran (its $5 according to pt number 2).

Pt number 3 may or may not make sense, it depends on total oil production i.e more oil produced = lower cost per barrel. 

I think those numbers are believable if we consider the fact that Iran holds 10% of the world's liquid hydrocarbon reserves and most of these assets are onshore oil fields or shallow offshore fields, they won't cost much to extract.

Canadian oil sands, deep sea drillers and most shale oil producers don't stand a chance vs these low cost producers, the carnage is going to be spectacular before all of this is over.

(14-12-2015, 10:05 PM)LionFlyer Wrote: To be honest, the low oil prices have triggered my interest, specifically in RDS-B. It is still early days but it is certainly on my radar now.

yap, expected more cheap oil and more M&As... and get ready to buy-buy-buy!!!

RDS-B is trading close to May 2009 levels. I think downside is rather limited, even if it is a prolonged event. If anything, history suggest this to be unlikely.

Anyway, the way oil prices move up and down seems to artificially distorted and deeply inefficient.

In the face of the fact that Iran's major oil fields are aging and are in need of EOR (enhanced oil recovery) techniques, their production costs will not only remain low, but become lower with more production? I guess I'm living in a different universe.

For those having a different kind of view, here's a link for you:

Iranian Oil Production

P.S. I'm not saying that Iran will not be able to increase its production, just that it is not going to be easy or cheap.

(15-12-2015, 09:24 PM)LionFlyer Wrote: RDS-B is trading close to May 2009 levels. I think downside is rather limited, even if it is a prolonged event. If anything, history suggest this to be unlikely.

Anyway, the way oil prices move up and down seems to artificially distorted and deeply inefficient.

[Image: Brent_Spot_monthly.svg]

If history is any guide, oil had been trading on average at sub $40 levels during the decades before 2003, where the property/credit bubble started and took off in US and Europe. During the GFC prices fell back to sub $40 levels again. It does feel like sub $40 should be the "historical" guide.

Barring any crazy spikes in global demand or dips in global supply (which is now almost in glut status with a lot of floating oil sitting around), without speculation or price fixing, $40 already should be a pretty good price for oil.

Even with the spike to $60 earlier this year, oil was already 50% too expensive.

It seems central banks can only do so much to temporarily sustain inflated asset prices in their respective regions. Commodities prices are more an international thing and oil price will be hard to manipulate for an extended period.

(16-12-2015, 10:13 AM)HitandRun Wrote: In the face of the fact that Iran's major oil fields are aging and are in need of EOR (enhanced oil recovery) techniques, their production costs will not only remain low, but become lower with more production? I guess I'm living in a different universe.

For those having a different kind of view, here's a link for you:

Iranian Oil Production

P.S. I'm not saying that Iran will not be able to increase its production, just that it is not going to be easy or cheap.

It will still be very economically viable with EOR. My point is that the largest OPEC producers + Russia aren't losing money producing oil at current prices, but we can't say the same thing about the smaller players, or the non-conventional drillers.

Iran's oil production will return to its pre-sanction peak easily (+1m barrels from current levels), they need the money and there is money to be made at $40 USD per barrel, don't forget that the Iranian Rial, like the Russian Ruble, has crashed vs the dollar in recent years.