Oil Prices

Singapore And China Among A Long List Of Nations Whose Stored Oil Volumes Confound Experts
http://shipandbunker.com/news/apac/17725...nd-experts

Texas shale oil has fought Saudi Arabia to a standstill
http://www.telegraph.co.uk/business/2016...tandstill/

Important>

There are few segments of oil supply: 1) On land production, 2) Shallow Water, 3) Shale Oil & 4) deep water.

Right now shale with technology advancement and cheap US credit is able to produce generally in the region of $55-60 for profitability. This is in line with shallow water production, whose cost are slightly lower. With the world's demand and excess inventory on land and sea, deep water drilling is not profitable within the next 5 years. Some oil majors have even resorted to buying out their deep water contracts because it is not cash flow efficient to contiue such deep water projects at $45 bbl

What this means is that countries dependent on deep water oil exploration production are technically in trouble. Which countries are mainly deep water? Mexico, Brazil and West Africa countries. On the SGX, there are mainly 3 companies which focus on deep water offshore support - Ezra and Swiber.

With deep water drilling momentarily suspended, these 3 will definitely experience dwindling order books and rely on luck to survive.

Shallow water is now barely surviving and should oil fall to 35 for a long period of time, both shale and shallow water will pause. On the SGX, shallow water offshore support are mainly Penguin, Ezion, Nam Cheong. Will oil fall to 35, possibly, however, in my opinion, it will go up again as the world's demand cant be dependent on supply from land production indefinitely. So prices will go up to make it profitable for shallow water to resume production and then shale. Supply will slowly grow to balance out demand

i want cheap oil, so go ahead and land drill!

Well your dream is now closer. As of the time of writing, oil has fallen below 40 bbl for WTI crude.

Unlike our neighbours who have other industries to grow, our economic growth in the recent decade coincided with the rise of oil prices, which rose from 36 bbl in 2002 to the highs of 100 in 2010s. This led to the expansions of offshore company order books which had a spill over effect to the financial sector and real estate, which housed many of these workers. Many foreign workers were used as wielders and offshore work doing the "value creating" jobs, while the locals toiled away at their fruits of labour by becoming "Project Managers" and "Financial Executives" aka "value-shifting job". Without the backbone of the offshore and shipbuilding at Tuas now, these workers (the value creators) are likely to be shipped back.

Furthermore with the cheap credit given by our banks to O&G companies turning into bad debts/equity in these distressed companies. Liquidity is going to dry up and the spill over effect will be felt by the local real estate sector. Oversupply and businesses not coming in to set up shop will cause REITs to report fair value losses in their assets. With such a setup, one wonders how Singapore will face up to this prolonged low oil price when it is debt laden and over exposed to the offshore support industry.

(03-08-2016, 12:13 AM)CY09 Wrote: Well your dream is now closer. As of the time of writing, oil has fallen below 40 bbl for WTI crude.

Unlike our neighbours who have other industries to grow, our economic growth in the recent decade coincided with the rise of oil prices, which rose from 36 bbl in 2002 to the highs of 100 in 2010s. This led to the expansions of offshore company order books which had a spill over effect to the financial sector and real estate, which housed many of these workers. Many foreign workers were used as wielders and offshore work doing the "value creating" jobs, while the locals toiled away at their fruits of labour by becoming "Project Managers" and "Financial Executives" aka "value-shifting job". Without the backbone of the offshore and shipbuilding at Tuas now, these workers (the value creators) are likely to be shipped back.

Furthermore with the cheap credit given by our banks to O&G companies turning into bad debts/equity in these distressed companies. Liquidity is going to dry up and the spill over effect will be felt by the local real estate sector. Oversupply and businesses not coming in to set up shop will cause REITs to report fair value losses in their assets. With such a setup, one wonders how Singapore will face up to this prolonged low oil price when it is debt laden and over exposed to the offshore support industry.

Healthcare, biotech, life science, data centre business and logistics could be our remaining beacons of light in the darkness......

Managers and Executives are at different level of Value chains. You need them as you need lowest level operators. All play a key role. What is different is the demand and supply of this Project Managers or Executives are that they are sourced regionally or globally as talents, and their mass concentration do attract development location whereas operators level workers can be done elsewhere.

(03-08-2016, 03:42 AM)Dividend Knight Wrote:

(03-08-2016, 12:13 AM)CY09 Wrote: Well your dream is now closer. As of the time of writing, oil has fallen below 40 bbl for WTI crude.

Unlike our neighbours who have other industries to grow, our economic growth in the recent decade coincided with the rise of oil prices, which rose from 36 bbl in 2002 to the highs of 100 in 2010s. This led to the expansions of offshore company order books which had a spill over effect to the financial sector and real estate, which housed many of these workers. Many foreign workers were used as wielders and offshore work doing the "value creating" jobs, while the locals toiled away at their fruits of labour by becoming "Project Managers" and "Financial Executives" aka "value-shifting job". Without the backbone of the offshore and shipbuilding at Tuas now, these workers (the value creators) are likely to be shipped back.

Furthermore with the cheap credit given by our banks to O&G companies turning into bad debts/equity in these distressed companies. Liquidity is going to dry up and the spill over effect will be felt by the local real estate sector. Oversupply and businesses not coming in to set up shop will cause REITs to report fair value losses in their assets. With such a setup, one wonders how Singapore will face up to this prolonged low oil price when it is debt laden and over exposed to the offshore support industry.

Healthcare, biotech, life science, data centre business and logistics could be our remaining beacons of light in the darkness......

Data centre and logistics probably due to our political stability. 

But the first 3 I do not think so. Our workforce are not very creative in creating new products, they are more like the operators who man the factory line. This means the first 3 are tied to the demand/supply of the global industry

Actually electronics cluster doing well this year amidst the dip in other sectors.

From edb June report
The electronics cluster’s output increased 19.7% in June 2016 on a year-on-year basis.  The cluster recorded higher output in the semiconductor (39.1%) and data storage (11.0%) segments.  However, this was partially offset by declines in the rest of the electronic segments.  Cumulatively, output of the electronics cluster grew 7.5% in the first six months of this year compared to the same period last year.

With the rise in electric vehicles and renewable energy very imminent, perhaps SG should make a big push into this sector. If Tesla succeed and corner the mass market for cars , buses trucks, there will be a very very massive shift in oil demand. Perhaps can set up some EV factories here in place of the shipyards.

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https://www.theguardian.com/business/201...al-markets

Get ready for cheap oil for a long time!