Oil Prices

[weijian]

Embargo - ‎Organization of Arab - ‎1973–74 stock market crash. Due to Petro prices went sky-high?
Now ‎"Organization of Arab" did not cut back output, petro prices go quite low than normal. Stock Market going to crash too if price of Petro going below certain level?
Very strange, isn't it?
Petro price too high market crashed in 1973/74. Petrol price too low in 2014/15, Stock Market going to crash too (as predicted by some quarters)? Price too high too low also crash then how?
Me think anything is possible.

It really depends on the timeframe that one is talking about...High oil prices will cause inflation that may trigger central bankers to increase interest rates and kill off the economy. OTOH, low oil prices will disincentivise producers to invest in new capex or maybe even cause the "2nd Arab Spring" uprising, this eventually reduces supply and set the stage for future oil price jumps. Our world works in cycles and means will revert. In the words of Howard Marks - the swinging of the pendulum between the extremes. At this point of time, we know the direction of the pendulum for sure, but it takes much more insight (or luck?) to determine whether how extreme it will be, or when the pendulum swing reverses.

As a retail investor, i look forward to enjoy some "real" gains (in the form of disflation) if oil prices stay this low. Some of the traditional victims of high oil prices may make a comeback (but it seems like Mr Market may have already priced in most of them..he is usually pretty early). OTOH, if this oil price drop proves temporary, it might be prudent to 'hedge' our bets a little by taking a look at some of the most severely beaten down O&G plays.

[yeokiwi]

or maybe even cause the "2nd Arab Spring" uprising

After the emergent of ISIS, whatever "spring" in that region will be promptly ignored by the whole world.
With no external assistance, all kinds of spring will dry up.

The emergent of natural gas is another factor in oil price decline. If electric vehicles start to become more popular, the needs for oils will drop even more dramatically.

[lilvestor]

Electric vehicles will lose attractiveness if oil prices continue to sink, its basically the same thing for every other alternative source of energy.

[BlueKelah]

Yup, much cheaper petrol and gas means switch back to gaz guzzlin SUV days. Petrol engines will be back in vogue. Guys at top gear gonna be very happy and Tesla gonna hit some rough patches given their capex on the new fancy factory.

Oil already 65 today. Specuvestor are you buying any sia or comfortdelgro?

via tapatalk

[Temperament]

"SIE E O" of NOL can breath a bit more easily now?
Vested.

[yeokiwi]

"SIE E O" of NOL can breath a bit more easily now?
Vested.

Business still no good...too much supply.
Anyway, his annual pay is above US$2.5 million and it does not look suffocating.

[specuvestor]

Yup, much cheaper petrol and gas means switch back to gaz guzzlin SUV days. Petrol engines will be back in vogue. Guys at top gear gonna be very happy and Tesla gonna hit some rough patches given their capex on the new fancy factory.

Oil already 65 today. Specuvestor are you buying any sia or comfortdelgro?

via tapatalk

Actually my view on SIA is well captured in the SIA thread They are no longer the alpha stock that they were once.

[specuvestor]

We shall see who blink first

"Opec has misjudged the threat. As late as last year, it was dismissing US shale as a flash in the pan. Abdalla El-Badri, the group’s secretary-general, still insists that half of all US shale output is vulnerable below $85."

"Mr Morse says the “full cycle” cost for shale production is $70 to $80, but this includes the original land grab and infrastructure. “The remaining capex required to bring on an additional well is far lower, and could be as low as the high-$30s range,” he said. "

http://www.telegraph.co.uk/finance/oilpr...ashes.html

[Temperament]

"SIE E O" of NOL can breath a bit more easily now?
Vested.

Business still no good...too much supply.
Anyway, his annual pay is above US$2.5 million and it does not look suffocating.

LOL! US$2.5 million. No wonder so many poorer Singaporeans around.
Nol no sweat one. Ah Kong is just around the corner.

[greengiraffe]

Oil price in biggest gain for two years
DOW JONES DECEMBER 02, 2014 7:45AM

US oil prices have posted their biggest one-day gain in two years as traders locked in profits on bearish bets following last week’s sell-off.

But many market watchers were sceptical the gains signalled that oil prices had reached their bottom, pointing to global supplies that continue to overwhelm demand.

Oil prices tumbled to multi-year lows after the Organisation of the Petroleum Exporting Countries decided on Thursday to maintain its production quotas, rather than agreeing to support prices by lowering its output target.

The group’s decision sent shock waves through financial markets that continued to be felt on yesterday. Shares of some US oil producers added to last week’s declines, highlighting concerns about these companies’ ability to operate expensive shale-oil fields amid plunging prices. Bonds of low-rated energy companies also sank, reflecting fears that some producers will default if prices fail to recover.

Many investors and analysts believe with OPEC on the sidelines it will take cutbacks by companies in the US and Canada to bring supply and demand in line and pull the market out of its swoon. That day may not come until deep into 2015 or beyond, some analysts say.

“The era of $US100 [a barrel] oil is over,” Citigroup said in a note. “Oil prices appear to be falling rapidly to — if they haven’t already reached — production costs.”

Overnight, light, sweet oil for January delivery shot up 4.3 per cent to $US69 a barrel from Friday’s close, recovering from a more-than five-year low below $US64 a barrel hit in overnight trading. It was the biggest one-day percentage gain for the US benchmark since August 2012. Brent futures, the international benchmark, gained 3.4 per cent to end at $US72.54 a barrel.

Investors said much of the activity was driven by traders closing out profitable bets on falling prices or opening positions that would protect them should the market rebound. Both the US benchmark and Brent slumped Thursday and Friday to fresh multi-year lows, posting two-day losses of about 10 per cent.

“Today’s a little bit more of a rebound from Friday’s plastering,” rather than a long-lasting change in direction, according to Kyle Cooper, analyst at IAF Advisors in Houston. “We got [to five-year lows] really quick, and it’s not an entirely bad thing to take some profits.”

Roland Austrup, chief executive of Integrated Managed Futures Corp, said his funds posted 6 per cent gains in November largely due to a bet that oil prices would fall. After last week’s sell-off, he kept his wagers on lower oil prices but used options to reduce losses in case prices rose.

“Anytime you get a big significant move like this, it’s prudent to hedge, “ Mr Austrup said. “It certainly doesn’t reflect a view that it’s over ... There’s no impetus for prices to go up.”

Volatility in the oil market has caught out some funds. Brevan Howard Asset Management plans to close its commodity hedge fund after the fund suffered heavy losses in energy markets in September, people familiar with the fund said Saturday.

The slump in oil prices is pressuring energy companies, and analysts and bankers expect a string of deal-making as highly levered companies become attractive for acquisition.

Halliburton is in the process of buying rival oil-service company Baker Hughes. Weatherford International on Monday said it agreed to sell its engineered-chemistry and drilling-fluids businesses to an affiliate of Berkshire Hathaway’s Lubrizol unit. Weatherford said it expects to use proceeds from the deal, which is expected to close before the end of the year, to pay down debt.

Some investors are looking for signs that slumping oil prices could spark higher demand, and US employment data on Friday will be a key indicator, according to Bob Yawger, director of the futures division at Mizuho Securities USA. Higher employment can spur more gasoline demand, as more commuters drive to work. The national average price of retail gasoline was $US2.77 a gallon Monday, down US50c from a year ago.

Upcoming macroeconomic reports “will be looked at as a demand indicator and the energy market will adjust itself accordingly,” Mr Yawger said.

But without action from OPEC, the market will remain oversupplied, said Barclays in a note. Barclays lowered its oil-price forecasts for this year and next after the OPEC meeting, as did BNP Paribas and Citigroup. Barclays now expects Brent prices to average $US72 a barrel next year, while BNP forecasts $US77 a barrel and Citi has called for $US80 a barrel.

“It will have to endure a volatile adjustment period while non-OPEC supply, demand and even some OPEC producers adjust,” analysts at Barclays said.