Oil Prices

[CityFarmer]

^^ CF its about delta. Not only is shale not going to grow as previously projected but it is going to decline. "Incredible" since shale producers claim they are profitable at $50 yet aggregate production looks like will be declining soon. What is said is not matching action. The fat lady will sing when these overleveraged producers start to bankrupt

And if oil gets marked at year low, shale producers capacity to borrow will drop dramatically as their P1 reserve estimate collapses.

From the perspective of supply, the over-supply situation will not be improved by merely 7% reduction in number of rig, and likely the reduction in actual production will be lower than the 7%.

I do agree with your point about action vs talk. May be opportunity cost is higher now elsewhere...

[corydorus]

I heard before that the oil demand is rather inelastic since is not easy to build and store them safe and cheap.

Based on this logic, with Shale Oil pouring in uncontrolled, something has to give as the holding bucket is not large. I do note that locality of production probably gives some advantage. What this mean is small volume of oversupply could have skew the market price in electronic age.

This will requires leadership of the main players to balance them which only Saudi can but this also mean losing market share for a long time to come which is not conceivable due to national budget and also it can encourage more Shale Players to enter in a downward spiral loop scenario.

The price has to come down fast such that many of them (non traditional) fails before technology catches up again for them to reduce the arabian margins even further. So if they are smart, we should see even lower Oil Price.

[specuvestor]

As per posted below commodity pricing is affected even by marginal players. A swing of supply in tune of 2-3% can have an impact already. Shale itself is probably only 2% of world supply currently, "projected" to increase

Contrary to popular belief, OPEC is not to control prices per se but control supply. There is a big difference. If their strategic purpose is to want to kill off competitors they will increase supply even when prices are low. Or if there are other geopolitical purposes.

Why oil prices are so unstable:

John Kemp

Sun Dec 14, 2014

http://www.reuters.com/article/2014/12/1...W620141215

Agree with the article. The conundrum for the commodities market is that prices are not just dictated by the big oligopolictic players but also marginal players coming in and out. The rapid and wild price swings do not conform to the simplistic DD/SS theory. And oil has an additional geopolitical layer to it which makes it even more unpredictable.

I'm beginning to think that OPEC wants to mark oil at lowest for year end so that P1 reserves will be slashed drastically and hence credit for the marginal players. But longer term oil will no longer go above US$75 or so unless Ukraine issue is resolved.

[HitandRun]

Shale itself is probably only 2% of world supply currently, "projected" to increase

EIA Estimates

Well, if you look at the excel file after Figure 1, EIA is estimating that tight oil in USA is contributing ~ 4 million barrels per day for 2014, which translates to > 4% of world supply. If one includes contribution from Canada, I suspect the number is probably closer to 5%.

[yewkim]

OPEC dominance of oil is over, with US shale oil producer, US no longer rely on ME for oil, unlike previously, they need to fight and dies for oil. So oil is gg to be base on competitiveness, rather than domination by OPEC. So it got a long way for oil price to go even lower,


Whichever outcome finally puts a floor under prices, we can be confident that the process will take a long time to unfold. It is inconceivable that just a few months of falling prices will be enough time for the Saudis to either break the Iranian-Russian axis or reverse the growth of shale oil production in the United States. It is equally inconceivable that the oil market could quickly transition from OPEC domination to a normal competitive one. The many bullish oil investors who still expect prices to rebound quickly to their pre-slump trading range are likely to be disappointed. The best that oil bulls can hope for is that a new, and substantially lower, trading range may be established as the multi-year battles over Middle East dominance and oil-market share play out.


So, you think 50$ is the bottom like many player and analyst see it. But i think 50$ would be the ceiling for a long time to come. What this means is oil will trade 50$(max) and lower to the worse of 20/25$. A lot of ppl think this is out of this world, but market is always as usual stretch to the extreme pessimism.


I think and suggest one should not long oil and gas counter now, they got lot more down side to go. I am long the SCO, yesterday open position at ave 74. Last round has make handsome profit. I will load more at every 7/8% down on oil px, till it reverse at trailing stop to stop out all my position. And i suggest that those who long the oil n gas counter should has some form of hedging by putting up position on these instrument like SCO. Wish all good luck. And I am looking to short Kepcorp and Ezion and a few oil n gas counter on SGX if on any day oil come down 3/5$. This will create panic.


I believe we see oil below 50$ by 1st week of 2015. We see. Tonite, SCO should open at 80$ and above base on estimation of current oil price.

[BlueKelah]

Read somewhere some commodities traders and houses under investigation for market manipulation, maybe without them high prices of commodities will finally revert to norm.

Another shout out from me at the end of an eventful 2014.

30 dollas baby !!!

via Galaxy Tab S with Tapatalk

[CityFarmer]

More supply from U.S and Canada?

Obama move on U.S. oil exports paves way for Canadian crude, too

NEW YORK - As the Obama administration issued landmark guidelines expected to open the door for selling more domestic shale oil abroad, it also likely smoothed the way for more Canadian crude to be shipped through U.S. ports.

Unlike crude produced domestically, oil from Canada is not limited by the longstanding U.S. ban on exports, and licenses to re-export foreign crude are granted routinely. However, many companies have been wary of such trade due to rules that prohibit mixing non-exportable domestic oil with foreign grades.

The risk of contaminating Canadian oil with a few drops of restricted U.S. crude, which accounts for most of what flows through U.S. oil pipelines and terminals, had deterred energy traders from attempting re-exports, they have said.

On Tuesday, the Commerce Department's Bureau of Industry and Security clarified for the first time that the prohibition on co-mingling was not absolute, issuing guidelines that allow "incidental" contact for foreign oil using the same infrastructure as domestic grades.

The agency said that "a minimal amount of mixing may occur due to incidental contact in pipelines and/or storage tanks when foreign and U.S. origin-oil is sequentially transported or stored in the same pipeline or tank."

The bureau said it encouraged applicants for re-export licenses to explain the precautions they are taking to ensure that U.S. oil is not mixed with the foreign-origin crude, other than incidental contact.
...
http://www.todayonline.com/business/obam...-crude-too

[specuvestor]

^^ Policy changes are still on track even when environment has changed.

Looks like oil will be marked at year low. We should see newsflow of distressed shale companies in 1H15. Let's see if their talk can boost credit assessment

Shale itself is probably only 2% of world supply currently, "projected" to increase

EIA Estimates

Well, if you look at the excel file after Figure 1, EIA is estimating that tight oil in USA is contributing ~ 4 million barrels per day for 2014, which translates to > 4% of world supply. If one includes contribution from Canada, I suspect the number is probably closer to 5%.

Thanks for the link, I stand corrected on the %. In the same article we can only see how coal firing is declining with rise of NG power plants in previous 5 years when shale was emerging.

[yewkim]

People think world market can be play by some powerful individual. I think they may effect market for a time, not even for a day. We are talking about the world market, not another ABL,( even Asiasons, Liongold and Bluemont give way some how), these are small penny stocks that can be play by BB. But in the world market, how long can they keeping buying and selling to control the price? the world market is a black hole, it does care how deep is one pocket, it can suck you in all the same. It is play base on the law of supply and demand. Russia and Iran know this too. That is why they are not pointing finger at US, save for the sanction. And to think of conspiracy is even more ridiculous. How can US conspire to bring down Russia and Iran by manipulating oil price? They are kicking their own backside, as shale oil producer work force is some 1/6 of the total US work force. And not forgeting the huge loan they took from big bank, may cause a panic in the market if many of them go bust.

And to say CB control the market is out too. In fact, it is the market that control the CB. Look economic data lousy, market got whack, CB faster come out to say good thing and do stimulus and reduce rate and so on. So it is the market that control CB, and not the other way around.

And tonite i expect SCO to open above 80$, I believe we never see 55$ for a long time, 50$ will be the new ceiling, and at worse 20/30$. You say this is ridiculously too low, but market is like that, always stretch to the highest in extreme bullishness, and lowest as in extreme bearishness. You Singaporean call that "chin kiasu " and "chin kiasi." LOL

[kikababoo]

i am of the "oil price is almost impossible to forecast" camp.

highly recommend anyone with an interest in oil to read "the prize".