Oil Prices

[yewkim]

Actually, oil at this level, no doubt near bottom, but in % wise it is still far, and as it closes to bottom, it is easier to play the ride up.

I still think all OnG which soar recently will fall hard later. Be careful.

[Boon]

The Cure For Low Oil Prices Is Low Oil Prices

By Dmitry Orlov
Posted on Mon, 26 January 2015
http://oilprice.com/Energy/Oil-Prices/Th...rices.html
...........................................................................................The fix for low oil prices is... low oil prices. Past some point high-priced producers will naturally stop producing, the excess inventory will get burned up, and the price will recover. Not only will it recover, but it will probably spike, because a country littered with the corpses of bankrupt oil companies is not one that is likely to jump right back into producing lots of oil while, on the other hand, beyond a few uses of fossil fuels that are discretionary, demand is quite inelastic. And an oil price spike will cause another round of demand destruction, because the consumers, devastated by the bankruptcies and the job losses from the collapse of the oil patch, will soon be bankrupted by the higher price. And that will cause the price of oil to collapse again.

Because, you see, free (and even not-so-free) markets develop some pernicious characteristics when key resources, such as crude oil, start running short. Wild price swings are just one example. The pattern of investing in production when prices are high and failing to invest when they are low is another. (“Buy high, sell low” rarely makes a sound business strategy). Yet another is the blithe disregard we are witnessing for environmental concerns when attempting to get oil out of hydrocarbon dregs such as shale and tar sands. One almost wishes for a bit of central planning, to help oil producers and oil consumers slide down the slippery slope of production decline holding hands rather than fighting it out in the financial markets, or using it to fire up geopolitical conflicts.

We are in a post-peak conventional oil world (it peaked in 2005), but by no means are we running out of oil. At $100,000/bbl no doubt someone would find it profitable to synthesize a bit of it out of seawater using sunlight; not much of it, mind you, but then you wouldn't be able to afford even that. So, we will never run out of oil, but we have already run out of cheap oil, no matter what the price is at the moment. Also, we have already run out of the money we need to continue consuming more and more of it. We are now running out of the money we need to keep producing more and more of it as well. But we will never run out of people telling us that market mechanisms guarantee efficiency and that, given a sufficiently loose monetary policy, healthy economic growth will resume. That's because fools, madmen and economists—unlike oil—are a renewable resource.
______________________________________________________________________________________________________________

Increasing Demand For Refined Products Will Increase Oil Prices

By Dan Steffens
Posted on Tue, 27 January 2015

http://oilprice.com/Energy/Oil-Prices/In...rices.html

[BlueKelah]

Crude at $49: The New Reality for Big Oil Companies

(Bloomberg) -- The world’s biggest oil producers, historically resilient with their mix of energy exploration, refining and chemical manufacturing, are about to reveal how they are weathering the great oil crash.

Financial results will start trickling in Thursday for Exxon Mobil Corp., Royal Dutch Shell Plc, Chevron Corp., Total SA and BP Plc from a fourth quarter that saw the price of oil drop from $115 a barrel in June to below $50 a barrel.

This could be the oil bust that breaks the pattern that integration always leaves you with one or two legs to stand on.

“The issue for this group of companies is they don’t have bulletproof business models,” said Brian Hennessey, who helps manage $1.4 billion at Alpine Woods Capital Investors LLC in Purchase, New York. A 57 percent plunge in the price of oil since June “really tests your convictions.”

The industry’s stark change in fortune set off panic from corporate board rooms to drill-rig floors as companies that pump almost one-tenth of the world’s crude scramble to tighten budgets and preserve cash for dividends, buybacks and capital projects too far along to abandon.

BP froze wages, Chevron delayed its 2015 drilling budget and Shell canceled a $6.5 billion Persian Gulf investment; layoffs industrywide have topped 30,000, enough to fill almost every seat in Madison Square Garden twice.

In an early peek at what’s to come, New York-based Hess Corp., which sold its refineries and gasoline stations to focus on oil production, today reported a fourth-quarter net loss of $8 million because of lower crude prices. Adjusted earnings fell 5 cents a share short of analysts’ estimates.

Read more here

[yewkim]

http://www.cnbc.com/id/102377233

http://www.marketwatch.com/story/us-oil-...2015-01-22


On top of the 2 articles, we have OPEC o/p at 450,000 barrel excess per day, together with US, total abt 2m per day. This will go on till June next OPEC meeting. Well, where can oil head, except lower.


Soon, we are going to hear form OnG counter announcing cancellation of order.

[BlueKelah]

Cheap Oil Burns $390 Billion Hole in Investors' Pockets

(Bloomberg) -- Investors have a message for suffering U.S. oil drillers: We feel your pain.

They’ve pumped more than $1.4 trillion into the oil and gas industry the past five years as oil prices averaged more than $91 a barrel. The cash infusion helped push U.S. crude production to the highest in more than 30 years, according to data compiled by Bloomberg.

Now that oil prices have fallen below $45, any euphoria over cheaper energy will be tempered by losses that are starting to show up in investment funds, retirement accounts and bank balance sheets. The bear market has wiped out a total of $393 billion since June -- $353 billion from the shares of 76 companies in the Bloomberg Intelligence North America Exploration & Production index, and almost $40 billion from high-yield energy bonds, issued by many shale drillers, according to a Bloomberg index.

“The only thing people are noticing now is that gas prices are dropping,” said Sean Wheeler, the Houston-based co-chairman of the oil and gas industry team for law firm Latham & Watkins LLP. “People haven’t noticed yet that it’s also hitting their portfolios.”

The money flowing into oil and gas companies around the world in the last five years came from a variety of sources. The industry completed $286 billion in joint ventures, investments and spinoffs, raised $353 billion in initial public offerings and follow-on share sales, and borrowed $786 billion in bonds and loans.
50 Cents

The crash caught investors and lenders by surprise. Eight months ago, Houston-based oil producer Energy XXI Ltd. sold $650 million in bonds. Demand was so high that the company more than doubled the size of the offering, company records show. The debt is now trading for less than 50 cents on the dollar, and the stock has declined 88 percent.

Energy XXI, which has more than $3.8 billion in debt, is one of more than 80 oil and gas companies whose bonds have fallen to distressed levels, meaning their yields are more than 10 percentage points above Treasury debt, as investors bet the obligations won’t be repaid, according to data compiled by Bloomberg.

The stocks and bonds of Energy XXI and other struggling energy firms have been bought up by pension funds, insurance companies and savings plans that are the mainstays of Americans’ retirement accounts. Institutional investors had more than $963 billion tied up in energy stocks as of the end of September, according to Peter Laurelli, a New York-based vice president of research with eVestment, an analytics firm in Marietta, Georgia, that gathers data on about $22 trillion of institutional strategies.

Read more here

[yewkim]

Cheap Oil Burns $390 Billion Hole in Investors' Pockets

(Bloomberg) -- Investors have a message for suffering U.S. oil drillers: We feel your pain.

They’ve pumped more than $1.4 trillion into the oil and gas industry the past five years as oil prices averaged more than $91 a barrel. The cash infusion helped push U.S. crude production to the highest in more than 30 years, according to data compiled by Bloomberg.

Now that oil prices have fallen below $45, any euphoria over cheaper energy will be tempered by losses that are starting to show up in investment funds, retirement accounts and bank balance sheets. The bear market has wiped out a total of $393 billion since June -- $353 billion from the shares of 76 companies in the Bloomberg Intelligence North America Exploration & Production index, and almost $40 billion from high-yield energy bonds, issued by many shale drillers, according to a Bloomberg index.

“The only thing people are noticing now is that gas prices are dropping,” said Sean Wheeler, the Houston-based co-chairman of the oil and gas industry team for law firm Latham & Watkins LLP. “People haven’t noticed yet that it’s also hitting their portfolios.”

The money flowing into oil and gas companies around the world in the last five years came from a variety of sources. The industry completed $286 billion in joint ventures, investments and spinoffs, raised $353 billion in initial public offerings and follow-on share sales, and borrowed $786 billion in bonds and loans.
50 Cents

The crash caught investors and lenders by surprise. Eight months ago, Houston-based oil producer Energy XXI Ltd. sold $650 million in bonds. Demand was so high that the company more than doubled the size of the offering, company records show. The debt is now trading for less than 50 cents on the dollar, and the stock has declined 88 percent.

Energy XXI, which has more than $3.8 billion in debt, is one of more than 80 oil and gas companies whose bonds have fallen to distressed levels, meaning their yields are more than 10 percentage points above Treasury debt, as investors bet the obligations won’t be repaid, according to data compiled by Bloomberg.

The stocks and bonds of Energy XXI and other struggling energy firms have been bought up by pension funds, insurance companies and savings plans that are the mainstays of Americans’ retirement accounts. Institutional investors had more than $963 billion tied up in energy stocks as of the end of September, according to Peter Laurelli, a New York-based vice president of research with eVestment, an analytics firm in Marietta, Georgia, that gathers data on about $22 trillion of institutional strategies.

Read more here

This could cause an earthquake in the stock market. Thanks for the alert.

[BlueKelah]

Yes this could very well lead to next trigger for another GFC, especially if OPEC does not do anything...

via Galaxy Tab S with Tapatalk

[CityFarmer]

The "vulture" funds are waiting ..

Oil companies draw on creative financing to stay afloat after prices tumble

WASHINGTON (Feb 2): North America’s small and mid-sized energy companies are searching for creative ways to stay afloat as investors smell blood in the water from the almost 60 percent fall in the price of oil since June.

Oil and natural gas companies are straining for solutions before cuts in credit lines and increases in lending rates hit home in April, when banks re-price the collateral used to secure revolving credit lines. Some are turning to more creative forms of financing as familiar sources of money dry up.

That financing is coming from hedge funds, private equity shops and mega-wealthy investors like billionaire Carl Icahn who have the cash to weather a prolonged downturn and are on the hunt for deals among the wounded, bankers and analysts say. Oil operators, meanwhile, are laying off staff, freezing salaries and deferring investments to conserve cash.
...
http://www.theedgemarkets.com/sg/article...ces-tumble

[yewkim]

I don't argue with the market. Tonite, oil is showing very strong support at 48$ level, if resistance 50$ is taken( very likely base on tonight showing), I think OnG counter will soar with it. I have sold with small profit.

Look like 50$ will be surpass by end of the day. I am glad that happy time are here for OnG counter again, i think so.


I think time to load OnG counters for now. Market situation has change very fast.


No doubt, oil fundamentally is still bad, but market is forward looking. Whatever data we heard are already history, like China manufacturing slow and so on. Market are pricing into the future of stimulus, and QE by CB.


I think I will be looking to buy Ezion, Kepcorp, and Mermaid.


Lastly, I hope moderator do not mind my non related post on oil which are mostly base on my personnel opinion. Thanks you for your kindness.

[Boon]

Slump in Oil Prices Brings Pressure, and Investment Opportunity
By Michael Corkery and Peter Eavis
February 2, 2015

http://dealbook.nytimes.com/2015/02/02/s...nity/?_r=0