Oil Prices

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(24-07-2015, 07:47 AM)greengiraffe Wrote: 4. Oil supply will Drop: Uh-oh
In theory: With strong demand for oil and less money for drilling and exploration, the global oil glut should diminish. Let the recovery commence.

In practice: The opposite has happened. While US production has levelled off since June, OPEC has taken up the role of market spoiler.

US production could also rise again.

I will agree readily with the 3 points. Point 4 sounds real iffy. All E&Ps are slashing capex and this journalist expects US production to rise? Try to google for SFY, SD or EXXI. P.S. Chesapeake just announced that it will stop paying dividends too. And if one looks at OPEC, without Iraq, the only thing that can be described is that oil production has been flat.....
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Sept Nymex Oil drop further to USD48.70 this morning.
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Iranian Oil Could Hurt Russia and the U.S.

13 JUL 23, 2015 8:33 AM EDT
By Leonid Bershidsky

The U.S. and Russia have taken a big gamble with the Iran nuclear deal: It threatens both countries' oil industries and, in Russia's case, also its economic growth. Much depends now on whether Iran can ramp up oil production as fast as it says, and on whether speculators react to these efforts as they did to news of the deal.

The price of Brent crude rebounded last spring, reaching a peak of almost $68 per barrel on May 6, but then plunged to $56 in early July as the Iran talks showed signs of progress. Analysts mentioned other reasons for the drop -- the uncertainty over how the Greek crisis would affect European demand, the Chinese stock crash -- but any speculative influence these might have had on the oil price is gone by now. When the Iran deal was reached on July 14, Brent remained at $56 per barrel.

This is close to the price that both Russia and the U.S. can tolerate without incurring major losses.

Russia's budget assumes that the country's export oil blend, Urals, will sell for $50 a barrel this year and $60 next year. The current price is about $55. If it drops to $50 or below, Russia may face continued recession in 2016 rather than 2.3 percent growth, as the government predicts. Even the current price will increase the budget deficit and force government spending to contract. In a country dependent on oil and gas for 17 percent to 25 percent of its gross domestic product, an inevitable drop in oil companies' investment is also a considerable worry that won't be outweighed by any increase in nuclear or oil and gas cooperation with Iran.

In the U.S., the fracking industry appears to have stabilized at oil's current price. After a slight drop in May, U.S. output rose to about 9.6 million barrels a day, and it's stayed at that level for the past two months. Rig counts have stopped dropping, though they're not rising, either. "As long as crude oil holds above $50 a barrel, activity levels may not decline further and may remain in a holding pattern," Bloomberg Intelligence analysts Andrew Cosgrove and William Foiles said in a recent report. As it is, the smaller American fracking companies are threatened. They will probably be acquired by bigger ones, so production won't decline. But if the price dips below $50, bigger players will also be in danger.

Low prices, of course, follow in part from weak demand. At the moment, the global oil market is oversupplied by about 800,000 barrels a day, according to Morgan Stanely. The Organization of Petroleum Exporting Countries -- which Morgan Stanley says is responsible for the excess production -- predicts that, in 2016, demand will increase by 1.34 million barrels a day. But this is where the Iran factor comes in: Its production increase after international sanctions against it are lifted could mean the difference between a balanced market and continued oversupply.

Iran's oil minister, Bijan Namdar Zanganeh, would have Americans and Russians alike believe the worst. In June, Iran pumped 2.85 million barrels a day, but Zanganeh says it should be up to 4 million barrels a day within seven months of the sanctions' removal. From there, according to the minister, production could quickly rise to 4.7 million barrels. Iran's goal is to regain its former market share. “Those who are responsible for protecting prices are those who have filled our share before and used it,” Zanganeh said.

If this plan is carried out, Iran would unwittingly help Saudi Arabia, its arch-rival, to squeeze U.S. producers. But are Zanganeh's numbers achievable? Richard Nephew of Columbia University's Center on Global Energy Policy predicts that, six to 12 months after sanctions are lifted, Iran will add only 300,000 to 500,000 barrels of oil a day to the market, because the country's oil fields are suffering from underinvestment. Rejuvenating them will cost more than $50 billion, and that kind of money won't necessarily be available. Nephew wrote:

Certainly, Iran will be able to put its stored oil – estimated at 30-40 million barrels – on the market. But, that is a lot of oil to discharge at once and Iran will take a price hit if it wishes to move it fast. After that, Iran will have to ensure that its new production increases, and it will be fighting for market share it lost three years ago. This would be hard, even in a higher oil price environment. At today’s price levels, it will be a major challenge.

If Nephew is right, does it mean the price of oil will rise? It's hard to say, because the price isn't determined by supply and demand alone. A steady stream of news from Iran about increasing oil exports and deals with global oil players could still prompt speculators to bid oil down.

For now, both the U.S. fracking industry and the Russian economy, which is dependent on a largely state-controlled energy industry, are destined to walk a tightrope that Iran, or news from Iran, can easily yank. The balance is fragile, and would have been less so without the nuclear deal. Yet Moscow and Washington alike must have seen advantages in the deal that outweigh the oil risk. One of these could be a political trade-off between them: cooperation in the Middle East in return for a chance to freeze the conflict in Ukraine. Alternatively, both Russia and the U.S. could simply be betting on the benefits of economic expansion into Iran. In either case, the cost -- expressed as another oil price collapse -- could turn out to be higher than expected.

http://www.bloombergview.com/articles/20...nd-the-u-s-
Research, research and research - Please do your own due diligence (DYODD) before you invest - Any reliance on my analysis is SOLELY at your own risk.
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WSJ - Sudden drop in Crude Oil Prices Roil US Rebound

According to the article, US energy firms raised USD21 billion in equity and USD73billion in new debt, no wonder the chickens have not come home to roost yet.
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(27-07-2015, 08:30 AM)HitandRun Wrote: WSJ - Sudden drop in Crude Oil Prices Roil US Rebound

According to the article, US energy firms raised USD21 billion in equity and USD73billion in new debt, no wonder the chickens have not come home to roost yet.

The support of equity and debt market, can U-turn, overnight. Let's see... Big Grin
“夏则资皮,冬则资纱,旱则资船,水则资车” - 范蠡
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(27-07-2015, 10:15 AM)CityFarmer Wrote:
(27-07-2015, 08:30 AM)HitandRun Wrote: WSJ - Sudden drop in Crude Oil Prices Roil US Rebound

According to the article, US energy firms raised USD21 billion in equity and USD73billion in new debt, no wonder the chickens have not come home to roost yet.

The support of equity and debt market, can U-turn, overnight. Let's see... Big Grin

Haha if really u-turn might be possible to see $30 oil Big Grin
Virtual currencies are worth virtually nothing.
http://thebluefund.blogspot.com
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The sickening thing is even with the prices of oil and my O&G stock portfolio dropping, every time I go to the petrol station to pump, my petrol cost is same or more than when oil price was $100 or more. Cheng Hu Angry
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(27-07-2015, 06:04 PM)sgpunter Wrote: The sickening thing is even with the prices of oil and my O&G stock portfolio dropping, every time I go to the petrol station to pump, my petrol cost is same or more than when oil price was $100 or more. Cheng Hu Angry

The cost of petrol to the retailer is around $0.50, with petrol duty for Ron 98 at $0.64. GST is probably $0.14 for 2 bucks petrol. So Cheng Hu is only part of the problem ..... Whatever the oil companies are losing on the upstream, they are making back from us at the downstream. Cheng Hu should threaten to drop 3/4 tank rule to 1/2 tank rule to shake things up a bit lah....Big Grin
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(27-07-2015, 06:04 PM)sgpunter Wrote: The sickening thing is even with the prices of oil and my O&G stock portfolio dropping, every time I go to the petrol station to pump, my petrol cost is same or more than when oil price was $100 or more. Cheng Hu Angry

dun worry lah, the price will adjust downwards one, they are still selling the old stock leftover expensive oil. just need a more sustained few months of low crude oil price to filter down.
Virtual currencies are worth virtually nothing.
http://thebluefund.blogspot.com
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(27-07-2015, 05:59 PM)BlueKelah Wrote:
(27-07-2015, 10:15 AM)CityFarmer Wrote:
(27-07-2015, 08:30 AM)HitandRun Wrote: WSJ - Sudden drop in Crude Oil Prices Roil US Rebound

According to the article, US energy firms raised USD21 billion in equity and USD73billion in new debt, no wonder the chickens have not come home to roost yet.

The support of equity and debt market, can U-turn, overnight. Let's see... Big Grin

Haha if really u-turn might be possible to see $30 oil Big Grin

Hmm... I thought the U-turn, will bring more US "energy firms" down, and oil supply will go down, thus oil price will go up???
“夏则资皮,冬则资纱,旱则资船,水则资车” - 范蠡
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