Oil Prices

[Boon]

Bank of America sees $50 oil as Opec dies

"Our biggest worry is the end of the liquidity cycle. The Fed is done. The reach for yield that we have seen since 2009 is going into reverse”, said Bank of America.

By Ambrose Evans-Pritchard
09 Dec 2014

http://www.telegraph.co.uk/finance/oilpr...-dies.html

_______________________________________________________________________________________________________________

December 10, 2014 8:19 am

Oil price plunge means survival of fittest

Anjli Raval, Oil and Gas Correspondent

Crude at $70 puts at least 1.5m b/d of projects for 2016 at risk

http://www.ft.com/intl/cms/s/0/51cc00ba-...z3LPjUiNbc

[greengiraffe]

OPEC sees less demand for oil
DOW JONES NEWSWIRES DECEMBER 11, 2014 12:15AM

OPEC cut its collective oil output to just above the producer group's targeted production ceiling last month, but said it expects demand for its oil to be further below the level at which it is currently pumping next year.

In its latest monthly report, the Organisation of the Petroleum Exporting Countries said its collective crude-oil production declined by 390,100 barrels a day to 30.05 million barrels a day in November, compared with October. That is just a touch above OPEC's output ceiling of 30 million barrels a day--a level the cartel agreed to stick to at a meeting in Vienna last month, despite calls from some of its members for more dramatic production cuts to counter the sharp fall in oil prices since the summer.

OPEC also forecast that demand for its oil would drop to 28.9 million barrels a day next year, compared with 29.4 million barrels a day in 2014.

The drop in OPEC's November production was driven largely by lower Libya crude output, which OPEC said fell by about 248,300 barrels a day to 638,000 barrels a day. Saudi Arabia's November output fell by 60,100 barrels a day to 9.59 million barrels a day, while Kuwait output dropped by 59,400 barrels a day to 2.69 million barrels a day, the report said.

OPEC bases its output figures estimates on secondary sources, such as shipping trackers and energy consultancies.

Brent crude was down around 1.5 per cent to $65.8 per barrel on Wednesday morning before the OPEC report's release.

[HitandRun]

Beginning of the End?

Extracts:

"Several large oil producers, including ConocoPhillips and Apache Corp, have set lower capital spending budgets for 2015, rattled by a near 40 percent drop in global crude prices since June.

Goodrich lowered its capital spending budget for 2015 to $150 million-$200 million. The company has budgeted spending of $325-$375 million for 2014, but said spending would likely be at the lower end of that range.

Oasis Petroleum said it expects to spend $750 million-$850 million in 2015. It expects to spend about $1.43 billion in 2014."


So why are companies cutting capex budget when they can still produce profitably at $40 per barrel? Most manufacturers would have died for a 30% margin ($60 minus $40).

[HitandRun]

Shale Cost at 25 Bucks???

And here we have someone claiming that shale is profitable at 25 bucks! Really? So how many wellls are we talking about? So who are those chickens cutting their capex?

If I take my timing for the 100m sprint and project it to 42km, I will be the marathon world record holder!

[BlueKelah]

Oil back down to historical prices $30 - $40 looking more possible now?? This could be the deflationary trigger / black swan event no one expected.. now that qe been stopped, some deflationary effects should start showing.

Panic and fear not here yet though.


via Galaxy Tab S with Tapatalk

[greengiraffe]

Only Fed has stopped QE operations. However, other nations such as Japan and China in full swing while Euroland continue to keep their powder dry...

Fed is still monitoring as to when they will unwind and most Central Bankers are monitoring the health of their economies...

The global O&G industry is unwinding its excesses from the last decade and the cyclical nature of the industry will exaggerate the ups and the downs...

Lower energy prices will give the world an easier time. Black Swans are emerging within the global oil industry and are already providing opportunities for PEs that are starved for bargains...

http://www.smh.com.au/business/mining-an...20qgy.html

I m half full...

Oil back down to historical prices $30 - $40 looking more possible now?? This could be the deflationary trigger / black swan event no one expected.. now that qe been stopped, some deflationary effects should start showing.

Panic and fear not here yet though.


via Galaxy Tab S with Tapatalk

[greengiraffe]

Texas drilling frenzy made oil crash inevitable: Kemp
By REUTERS

PUBLISHED: 01:23 AEST, 10 December 2014 | UPDATED: 01:23 AEST, 10 December 2014

By John Kemp

LONDON, Dec 9 (Reuters) - If prices had not crashed over the past five months, the oil market would have moved into a substantial surplus in the first half of 2015, according to a review of drilling and production statistics from major shale plays in the United States.

The pace of drilling and production growth in the Eagle Ford and Permian Basin shale plays in Texas, which together with North Dakota's Bakken account for most of the increase in U.S. output since 2008, was accelerating in the first eight months of 2014.

The combined crude output from the Eagle Ford and Permian Basin surged by 400,000 barrels per day (b/d) in the eight months, compared with an increase of 288,000 b/d in the previous eight-month period, according to records published by the Railroad Commission of Texas, which regulates the industry.

In August 2014, total production of crude and condensates from the two plays topped 2.5 million b/d, up from 1.1 million just three years earlier. Combined output was higher than some members of OPEC.

And the industry was preparing to increase output even further. Exploration and production companies were adding more drilling rigs, especially in the Permian Basin, where the number of rigs in operation exceeded 460 throughout the summer, up from less than 400 in 2013, according to Baker Hughes, the oilfield services company.

Record numbers of applications for permission to drill new wells were being filed with the Railroad Commission. In September 2014, regulators issued almost 2,000 new permits for oil or combined oil and gas wells, up from less than 1,000 in the same month a year earlier.

A Reuters' chartbook "Spotlight on Eagle Ford and Permian Basin" can be downloaded here: http://link.reuters.com/xeh63w

In explaining the sudden drop in prices, analysts have tended to focus on the resumption of Libyan oil exports, which added an extra 700,000 b/d to the crude market between June and September.

But the acceleration in output from the Texas fields played a critical role too in pushing the market toward incipient oversupply.

With so much extra oil hitting the market, a sharp drop in prices had become inevitable as the only way to enforce a slowdown in drilling. (editing by Jane Baird)

[greengiraffe]

This is a Golden Swan... for every loser, there may be plenty more winners... economics is a excellent see-saw...

Iata forecasts record profits for airlines as fuel costs dive
US carriers are expected to fare the best in 2014, and Asia-Pacific airlines next best, with oil prices 20% down from 2013

By
Nisha Ramchandaninishar@sph.com.sg@Nisha_BT
BT_20141211_NRIATA11_1407399.jpg Putting the expected record profit in perspective, Mr Tyler says that airlines will make US$6.02 per passenger - less than the price of a Starbucks coffee in Switzerland.
11 Dec5:50 AM
Geneva

LIFTED by slumping oil prices and stronger global GDP growth, the world's airlines are expected to chalk up a record net profit of US$19.9 billion this year, up from an earlier estimate of US$18 billion. In its latest industry forecast, the International Air Transport Association delivered a rosy outlook for 2015, with a projected bottom line of US$25 billion and a profit margin of 3.2 per cent.

This year, revenues will total US$751 billion, nearly 5 per cent more than a year ago, and translating to a still-slim net profit margin of 2.7 per cent. Iata chief Tony Tyler, speaking at the Iata Global Media Day, said that airlines will make US$6.02 per passenger - less than the price of a Starbucks coffee in Switzerland.

Following a period of consolidation, US carriers are by far expected to turn in the strongest report card this year, with a net profit of US$11.9 billion. Asia-Pacific airlines will be the second-best performers by region, with US$3.5 billion.

Oil prices, once a major expense headache for the industry, have come down some 20 per cent from last year, bringing some cheer. Brent crude is expected to fall to an average of US$85 per barrel next year, marking the first time since 2010 that the average price has slipped below US$100/bbl; this year's average was US$101.40/bbl.

Meanwhile, jet fuel prices are expected to hover at just under that US$100/bbl threshold, by averaging US$99.90/bbl in 2015, down from this year's average of US$116.60/bbl. The industrywide jet fuel bill for next year is expected to be US$192 billion, making up 26 per cent of total costs.

While the current operating environment will eventually spell good news for travellers in the form of lower fares, fuel hedging means that it will take some time for lower fuel prices to filter down to the bottom line. Singapore Airlines (SIA), for instance, has hedged 65.3 per cent of its fuel needs at about US$116/bbl for the six months to March 2015.

Analysts have said that some Asian carriers could find themselves getting burnt by the lower fuel prices as a result of wrong-way hedging.

Average airfares are expected to dip by 5.1 per cent next year; cargo rates will decline by a sharper 5.8 per cent. The good news for the industry's investors takes the form of an anticipated rise in the return on invested capital to 6.1 per cent this year and 7 per cent next year, up from just 4.9 per cent last year.

Mr Tyler said: "The industry story is largely positive, but there are a number of risks in today's global environment - political unrest, conflicts and some weak regional economies among them. A 3.2 per cent net profit margin does not leave much room for a deterioration in the external environment before profits are hit."

Although all regions are expected to record fatter profits next year, performance will vary by region. North American carriers will remain the strongest performers with US$13.2 billion; the Asia-Pacific's airlines, the backbone of the cargo industry, will net some US$5 billion, driven by a pick-up in the cargo market and easing fuel expenses. Africa will remain the weakest region, as it has been for the last two years, with profits of a mere US$200 million.

Global passenger traffic will expand by 7 per cent next year, surging above the 5.5 per cent level that has trended over the last two decades. However, capacity will outstrip demand slightly, with growth of 7.3 per cent, nudging the passenger load factor down to 79.6 per cent.

The cargo market, which has suffered tepid demand and struggled with intense competition since 2011, can expect cargo volumes to expand 4.5 per cent next year.

And in the year where aviation celebrated its 100th year of commercial service, the industry witnessed two tragedies - the disappearance of Malaysia Airlines MH370 and the downing of MH17 - which have had far-reaching consequences.

A cross-industry task force spearheaded by Iata submitted its report to the International Civil Aviation Organization (ICAO) at the start of this week. The recommendations will be considered as ICAO works to develop a global aeronautical distress and safety system (GADSS); the report, which drew up performance criteria for aircraft tracking, recommends airlines compare their existing tracking capabilities against the benchmark and close any gaps within a year.

In the wake of MH17, United Nations (UN) aviation body ICAO is helming a taskforce to enhance the sharing of safety information, especially for flights over conflict zones.

Mr Tyler said: "The system works today, but clearly, there are gaps that must be filled. We are also calling on ICAO to work within the UN framework to implement the responsible design, manufacture and deployment of weapons with anti-aircraft capabilities into international law."

This has already been done for other forms of weaponry, including chemical weapons, land mines and biological weapons.

[Life is a game]

The drop in oil prices should be a boost to economy rather than harm. This is the first step to deflation since most industries still rely on oil for their production. Alternative energy is still a long way to replace oil imo. In addition, the economy cannot inflate anymore otherwise there is no more capitalism to speak of. It's basically credit and credit to boost the economy where in the end a super major write off will throw the whole economy into chaos and possible starvation and war. Money is only useful if the counter party acknowledges its worth otherwise paper which is reprinted for no true value and purpose.

[BlueKelah]

Nobel Laureate and Former US Secretary of Energy, Dr Steven Chu addresses the National Press Club in Canberra on energy policy
Watch video here
Very interesting and informational recent speech. Wonder why he quit the Obama administration. He does mention that energy providers are moving to increase renewables from 25% up to 50% of energy mix without energy disruptions and that renewables like wind and solar are getting 20 year profitable contracts. However he does admit that fully depreciated older coal and oil/gas power plants are still profitable and will continued to be run.