Oil Prices

(06-03-2016, 01:31 PM)sgd Wrote: Here is the proof why I say earlier that oil prices and markets are rigged or manipulated.

If current low oil prices due to glut is causing prolonged recession or depression when you see layoffs everywhere what about high oil prices?

In LKY 1973 speech he says prolonged arab 'cut backs' on supplies back then causing prolonged recession and  depression  

https://wikileaks.org/plusd/cables/1973S...559_b.html


So if both glut and shortages of oil causes recession what gives?

You are assuming that the economy, yes THE economy that is complex with interactive effects between the law of astrophysics (ok, I am joking) and human psychology is toggled only by oil prices. I reckon that is too simplistic of a view, isn't it?

Li Ka Shing's CKH group has a canadian company Husky. If I remember correctly, they are reported selling their pipeline assets and working on an operating cost of US$40 a barrel.

If some of the oil and shale companies find a way around this, then the Saudi's game plan to kill the high cost players may not work out that well.

(07-03-2016, 03:35 PM)weijian Wrote:

(06-03-2016, 01:31 PM)sgd Wrote: Here is the proof why I say earlier that oil prices and markets are rigged or manipulated.

If current low oil prices due to glut is causing prolonged recession or depression when you see layoffs everywhere what about high oil prices?

In LKY 1973 speech he says prolonged arab 'cut backs' on supplies back then causing prolonged recession and  depression  

https://wikileaks.org/plusd/cables/1973S...559_b.html


So if both glut and shortages of oil causes recession what gives?

You are assuming that the economy, yes THE economy that is complex with interactive effects between the law of astrophysics (ok, I am joking) and human psychology is toggled only by oil prices. I reckon that is too simplistic of a view, isn't it?

in the oil industry now there are massive layoffs in that industry,

but other industries there are also massive layoffs including manufacturing, services and all the major banks.

Low oil prices should be a big joyous occasion to all these other industry players because their energy bills have come down but instead lay offs are happening everywhere why is that?

explain to me loh what is the psychology or what pushed the management of non-oil companies announce layoffs when rightfully they should be on a hiring spree and raising production.

There is no logic at all.

If US side according to their Fed who claim their economy are recovered sufficiently to be able to raise interest rates means by right consumer spending should have returned causing some inflation that the Fed wants to tame.

And that would imply biggest factory in the world china should be in overdrive mode which in turn should be at least be starting to affect commodity prices positively because they are the biggest user demand.

So also tell me why are prices remained low and getting worse.

I have done a reading cycle on economic. The demand/supply, i.e. macro economic, is a big and complex problem, which many Nobel laureates had spent their lifetime to understand. IIRC, it is still no single general theory exist on the topic.

IMO, I agree with weijian on the complexity, and my answer to sgd is, I don't know why it is like that now. Low oil price should be beneficial, but we don't see it, or it is yet to come?

(as confuse as anyone here)

One more market speculation. Do anyone confirm the "talk" by referring to any news update?

Oil rout over, Opec aims for US$50 anchor, says PIRA's Ross

LONDON (March 7): Major Opec producers are privately starting to talk about a new oil price equilibrium of US$50 a barrel, adding to signs that the market's long, deep rout is officially over, says one of the industry's leading prognosticators.

Gary Ross, the founder, executive chairman and chief oil soothsayer at New York-based consultancy PIRA, told clients 2-1/2 weeks ago that he reckoned the "lows are in" for crude, which was then about US$30 a barrel. U.S. futures have rallied since then to close at nearly US$36 on Friday, with a handful of analysts also cautiously calling a bottom.
...
http://www.theedgemarkets.com/sg/article...piras-ross

Low oil price will take a while to filter through the system. There is always a lag from any stimulatory effect of low oil price. 

The big oil company will enjoy the high prices for a while, just like the airlines will continue to charge their exorbitant "fuel surcharge" for a while, until the competitive forces kick in. How much has our petrol station cut the price?

Company are also able to do hedging now which would delay further any bankruptcy or losses.

Its already been over a year since oil crashed from  its 100+ highs, only in past few months we see the start of some serious brankruptcy and cut backs. Since SG has high exposure to shipping and OnG sector, eventually cut backs will filter into our economy via job losses and loan defaults. Recession or not depends on how much other sector like construction/services/consumer/manufacturing can take up the slack.

I would view it simply as a deleveraging of a credit boom we have all enjoyed in the last 2 decades, which is not just hitting oil but all other sectors. If someone is to blame, finger should be pointed at USA and China. As the worlds leading economies, they should have done proper reforms instead of easy way out which is blowing the credit and debt bubbles.

$50 will be hard, the opec are not as cooperate and once you start any "go for broke" price war it's very hard to reverse and the saudi's were the first to start.

Also iran and saudi don't see eye to eye, if saudi faction in opec reduce iran will just keep adding more, russia who is outside of opec also have an axe to grind with the wahabbis will also keep flooding.

For russia and iran cooperation to $50 I think they will demand stop messing with Assad and russians could also want nato to stop amassing equipment and troops on the border of ukraine.

And with the timing of elections going on in US it could look very bad for the democrats if they gave in.

(08-03-2016, 10:02 AM)CityFarmer Wrote: I have done a reading cycle on economic. The demand/supply, i.e. macro economic, is a big and complex problem, which many Nobel laureates had spent their lifetime to understand. IIRC, it is still no single general theory exist on the topic.

IMO, I agree with weijian on the complexity, and my answer to sgd is, I don't know why it is like that now. Low oil price should be beneficial, but we don't see it, or it is yet to come?

(as confuse as anyone here)

Indeed, it is tempting to put on my logic cap, pretend that I have read enough of Paul Krugman's material and try to explain the many observations pointed out by sgd. But heck, most economists have been embarrassed by Mr Hindsight Bias and since I don't think I gonna beat the odds, I am gonna refrain from embarrassing myself.

I think as OPMI retail guys, we are at the receiving end of market rigging, so it's not so good. But hey, if all of us here have a chance to rig the market, who wouldn't?

As Keynes said 'As the facts change, I change my mind'. If our puny OPMI brain is not able to comprehend why these facts came about, maybe the easier way out is to think how to position to benefit these facts come out? Growth investors try to reason and predict. Value investors decide to give up the majority of the prediction work and put those efforts in calculating margin of safety and tilted odds.

Personally, I love low oil prices and already benefiting it via the no-brainer way.  I cut losses (thanks to GG's prescient warning early last year that oil cycles are deep and huge..and you need to have seen the 1980s dark ages to appreciate that - I was still a toddler then and so my survivor instinct ask me to listen to the survivor) to reduce my equity exposure on low oil prices. Whether is it car or mrt, it is cheaper now - never mind the quantum, it feels good psychologically already! Take a holiday via taking the airplane or travel to those places whom got their currency hit hard by low oil prices, it is much cheaper compared to a year ago! Thanks to mental accounting, anything cheaper in the travels is makes me feel like I am a winner!

(08-03-2016, 10:02 AM)CityFarmer Wrote: Low oil price should be beneficial, but we don't see it, or it is yet to come?

Erm Boss

Ceteris paribus, low oil price should be like a tax cut, stimulating the economy. 

However, what if the low oil price is due to low demand of oil => a harbinger of overall weak economic growth. It appears that the market is pre-occupied with the cause of the apparently weak oil demand at the moment. 

To put things in perspective, most sources of data that I see appears to indicate that total oil production hit a maximum in the middle of last year (around June/July) but prices have continued to slide from $60 to below $30.

http://www.bloomberg.com/gadfly/articles...hy-at-best

Low prices very likely till 2H2017 assuming no other geopolitical disruptions. Saudi/Russia freeze production? i think NOT
Russia's Slushy Oil Freeze

Russia's oil bosses have signed up for a plan to freeze supply, or at least that was the message from a meeting they held with President Putin earlier this month. The latest numbers from the U.S. Energy Information Administration, released Tuesday, suggest this isn't quite as self-sacrificing -- or bullish for oil prices -- as it seems. 
The big question hanging over the oil market is when supply will stop outpacing demand, allowing the current glut of inventories to start dropping and thereby supporting a sustainable rally in prices. In answering that, attention typically focuses on the U.S., where supply is starting to fall already as shale drillers cut back to save cash.
Projected Russian Oil Output in 2016
11.17 million barrels a day
But it's a big world out there, especially when it comes to oil. Iran, for example, has the potential to condemn oil markets to another year of purgatory at least. In its latest set of forecasts, the EIA assumes OPEC production will increase by about 920,000 barrels a day, on average, across this year and next, with much of that coming from Iran, post sanctions. On that basis, supply and demand don't come close to balancing until the second half of 2017.