Oil Prices

[CityFarmer]

It will still be very economically viable with EOR. My point is that the largest OPEC producers + Russia aren't losing money producing oil at current prices, but we can't say the same thing about the smaller players, or the non-conventional drillers.

Iran's oil production will return to its pre-sanction peak easily (+1m barrels from current levels), they need the money and there is money to be made at $40 USD per barrel, don't forget that the Iranian Rial, like the Russian Ruble, has crashed vs the dollar in recent years.

The big boys might still find oil production economically viable, but I suspect it isn't going to be fiscally viable for some of them. A lot of these folks (eg. Venezuela) are addicted to the good times of 100usd/barrel oil and something bad will happen to a sovereign nation, creating new ripples that possibly morph into black swans. This is similar to the general consensus of VB, ie. It is going to get worst, before it gets better.

The current oil price, is highly influenced by OPEC strategy. It is just a matter of change-of-mind among key players in OPEC, to make a likely turnaround in oil price.

Most market players are anticipating a prolong low oil price, but conditional on OPEC keeping its current strategy.

[weijian]

The current oil price, is highly influenced by OPEC strategy. It is just a matter of change-of-mind among key players in OPEC, to make a likely turnaround in oil price.

Most market players are anticipating a prolong low oil price, but conditional on OPEC keeping its current strategy.

OPEC, reminds me of the EU which had the same monetary policy, but different fiscal policy.   NO surprises they gave up all quotas in the last meeting last week!

[BlueKelah]

Now that Iran is going to contribute increased OPEC production, it is unlikely that Saudis or any other member nations would think of holding back anytime soon whilst Iran is ramping up production which will be occuring over the next 12 months. 

Besides, even though rig count has crashed this year from 1500+ to 500+ in the USA, USA oil production is still around 9mil+bpd compared with their usual 5mil+bpd pre 2012.

Hybrid car and electric car use is also starting to become more popular, it may still take a while for them to replace conventional engines, but the trend is pretty evident now. And since much of oil use in transportation, it is not a long stretch to predict that global reliance on oil at some point is either going to remain stable or drop.

so despite the arabs saying they just want market share and making it sound like a business decision, in actual fact, it may be that they are realising that their oil won't be in much demand anymore in the future and the clock is ticking for them to extract and sell as much as they can. If they think that oil will be worth $10 in the near future, what's to stop them from producing as much as possible now and selling as much as possible now. the way I see it, it's almost like a "free for all" buffet lunch, down in OPEC land.

very likely we are just into year one of a commodity supercycle bust that will last a couple years at least if not five


-----Oil $30 baby lai liao!!!-----

[crabcrab]

The more they continue pumping, the more maintenance services for their oil rig or plants... Upstream oil and gas sector may be in the play in the very near future irregardless of oil price....

[piggo]

The more they continue pumping, the more maintenance services for their oil rig or plants... Upstream oil and gas sector may be in the play in the very near future irregardless of oil price....

There'll still be significant efficiency gains to be made among the service providers... So far it's really just retrenchment, closing offices etc. which are the low hanging fruits of cutting costs. Eventually it'll reach the M&A or liquidation stage, that should be when things are really going down.

[Behappyalways]

Opec faces a mortal threat from electric cars
http://www.telegraph.co.uk/finance/econo...-cars.html

Jim Chanos has a dark warning for OPEC members
http://news.yahoo.com/jim-chanos-dark-wa...50587.html

[BlueKelah]

Oil Bankruptcies Reach Highest Quarterly Level Since Recession

Bankruptcies among oil and gas companies have reached quarterly levels last seen in the Great Recession, according to the Federal Reserve Bank of Dallas.
At least nine U.S. oil and gas companies that accounted for more than $2 billion in debt have filed for bankruptcy in the fourth quarter, the bank said Wednesday in its energy economic update for the final three months of the year.

"Lower oil prices have taken a significant financial toll on U.S. oil and gas producers, in part because many face higher costs of production than their international counterparts do," according to the note written by Navi Dhaliwal, a research assistant, and Martin Stuermer, a research economist. "If bankruptcies continue at this rate, more may follow in 2016."

Since peaking in October 2014, U.S. oil and gas employment has fallen by 70,000 jobs, the analysts wrote in the report.

============

Likely many more to come as the hedging contracts that have been keeping them afloat starts to end. IIRC a lot are expiring this quarter.

Trigger for market downturn as billions in listed O&G companies get wiped out?

[greengiraffe]

This is the beauty of cyclical industries and being an essential commodity, the strikes back will create a lot of wealth as well...

Oil prices to stay down but supply shock looms: OPEC report

• THE AUSTRALIAN
  
  
• DECEMBER 26, 2015 12:00AM
  
• Stephen Bartholomeusz
  [Image: stephen_bartholomeusz.png]
  Business Spectator columnist
  Melbourne
  https://plus.google.com/102835625564126925526
  

[*]
There are two core conclusions that can be drawn from OPEC’s latest World Oil Outlook.

One is that it doesn’t expect any big rebound in oil prices in the near term. The other is that, without a bounce-back in prices in the next couple of years, there is going to be a major supply-side shock.
The oil price is now around $US37 a barrel and at levels not seen even during the financial crisis, after a year in which prices plummeted from above $US100 a barrel as OPEC waged a still-ongoing market-share war on US shale oil producers.
Despite the implosion in the price, US onshore oil production has so far held up: hence OPEC’s decision to maintain production even though there is surplus supply.
The severity and speed of the fall in prices has had a dramatic impact on the sector and particularly on investment, with hundreds of billions of dollars of planned new production abandoned and more than a trillion dollars of market capitalisation lost.
According to the OPEC report, the future investment needed to cover future demand for oil between 2015 and 2020 is estimated at about $US10 trillion, or about $US400 billion ($550bn) a year for the next 25 years. Absent a quick bounce-back in the price, however, investment in the sector isn’t going to restart any time soon.
While the OPEC outlook does assume a long-term recovery in the price — it envisages the price of its basket of crudes rising from current levels to about $US70 a barrel in 2020 and then steadily to $US95 a barrel by 2040 — there is no near-term relief in sight, with OPEC (or, more particularly, the Saudis) appearing committed to maintaining production regardless of the impact on prices.
Despite the excitement about battery-powered cars and renewable energy sources, OPEC remains convinced oil will remain the fuel with the largest share of global energy use.
Indeed, it says fossil fuels will still dominate global energy in 2040, with 78 per cent market share. Oil’s share will fall from more than 30 per cent to about 25 per cent, but gas will account for nearly 28 per cent of global energy demand, compared with about 23 per cent today. That’s in an overall market for energy that it expects to grow at an annual rate of about 1.5 per cent.
The scale of the investment OPEC says is required to meet demand for oil over the next 25 years indicates that the current prices are an aberration. For that level of investment to occur, a lot of higher-cost production would need to be brought into the market, putting a rising floor under prices.
It is of interest that OPEC sees its own production falling by about a million barrels a day by 2019, despite demand being expected to rise from 92.8 million barrels a day this year to 97.4 million barrels a day. That would appear to be a recognition that US onshore oil is more resilient and adaptive that it once thought — it expects North American supply to rise by 2.5 million barrels a day by 2020.
Over the longer term, it sees production from outside OPEC rising over the next decade before beginning to slide, while OPEC production would rise by about 10 million barrels a day by 2020. That presumably relates to a view on the rate of depletion in US shale oil reserves.
Non-OPEC production has plateaued in response to the plunge in prices and, while there is the prospect of Iranian oil re-entering the market, it would appear that (with considerable pain to its own members) the strategy of driving prices down to drive unconventional oil out may be belatedly starting to bite. Recent data showed an unexpectedly large fall in US oil inventories.
With OPEC members cashing out their reserves and having to implement their own spending cuts because of the fall in prices, OPEC’s commitment to maintaining an oversupply of crude in 2016 will be tested.

[greengiraffe]

Saudi Arabia to hike petrol prices after oil price slide hits budget

• AFP
  
  
• DECEMBER 29, 2015 7:17AM
  

A Saudi man fills up at a petrol station in the city of Jeddah. Pic: AFP

[*]

Saudi Arabia is to raise petrol prices by more than 50 per cent for some products as it cuts a range of subsidies after posting a record budget deficit.

The move comes as the world’s top oil exporter attempts to cope with a new era of cheap crude oil prices.
After years of spending its massive oil wealth to bolster the local economy and provide subsidised energy and other utilities to its 30 million people, the steep decline in oil prices has forced the kingdom to reassess these plans.
Prices will also increase for electricity, water, diesel and kerosene under the cuts decided by the council of ministers headed by King Salman, the official SPA news agency reported.
The council decided to raise the price of higher-grade unleaded petrol to 0.90 riyals ($US24c) per litre from 0.60 riyals, a hike of 50 per cent, and for lower-grade petrol to 0.75 riyals ($US20c) from 0.45 riyals per litre, a 67 per cent rise.
Petrol prices in the kingdom have been the cheapest in the Gulf and some of the lowest in the world.
The cabinet said the increase was in line with international energy prices. Prices will also rise for other fuels including natural gas, diesel and kerosene and for heavily subsidised electricity and water.
The price increases, the first in several years, took many by surprise. Lines formed at petrol stations and many shut down, according to residents in several Saudi cities.
However, the increase wasn’t surprising to analysts, who said officials have been hinting at this possibility for months.
“This was more detailed than we thought, but it was long overdue,” said Fahad Alturki, chief economist at Riyadh-based Jadwa Investment. “Reform could have been done earlier, but it is still a good time considering the current environment of low oil prices.”
A cut in subsidies risks a backlash in the kingdom as its citizens are accustomed to cheap energy and other utilities.
“The budget deficit has been compensated through the easiest way ... on the shoulders of the poor citizen,” Naif al-Kassim said on Twitter.
Saudi Arabia is following in the footsteps of the neighbouring United Arab Emirates, which became the first Gulf state to liberalise fuel prices earlier this year.
Kuwait lifted subsidies on diesel and kerosene at the start of 2015 and plans other cuts early next year, especially on electricity and petrol.
Other Gulf states are considering similar measures.
The International Monetary Fund has estimated the direct cost of energy subsidies in the Gulf states at $US60 billion. If indirect costs like environmental and road traffic expenses are counted, the expense rises to $US175 billion.
The IMF has said that if Saudi Arabia raised its fuel prices to Gulf levels, it will save around $US17 billion annually.
The move to raise perol prices came after Saudi officials said the government ran a record deficit of nearly 367 billion Saudi riyals ($US98 billion) this year, or about 15 per cent of gross domestic product, pushing it to cut planned spending by 14 per cent in 2016 amid expectations that income from oil sales will remain under pressure.
The kingdom expects to run a deficit of 326.2 billion riyals in 2016, as projected revenue falls to 513.8 billion riyals, down from 608 billion riyals this year, officials said.
“The budget comes in light of lower oil prices and economic and financial challenges on regional and international levels ... our economy, with the help of God, has what it takes to overcome the challenges,” King Salman said on state television, underlining the challenges facing the kingdom.
The budget announcement was the first opportunity for the Saudi government to publicly outline its plans for the economy after state finances were drained by more than a year of cheap oil, pushing Saudi Arabia to delay public projects and to issue bonds for the first time since 2007.
“The kingdom will fill in the budget deficit through the best financing options available, including local and external borrowing and without adversely affecting the liquidity of the domestic banking sector,” said Ibrahim Al-Assaf, the minister of finance.
Despite the decline in prices and the nation’s dependence on oil exports, Saudi Arabia has continued to maintain the same production levels and has chosen not to cut output alone in an effort to push up prices.
The kingdom exports about 7 million barrels of oil a day, and that revenue makes up around 90 per cent of the government’s fiscal revenue and about 40 per cent of the country’s overall GDP.
This budget is the first of King Salman’s reign, drafted under the leadership of his powerful son, Deputy Crown Prince Mohammed bin Salman, the head of the country’s new economic council.
AFP, Dow Jones

[Art or Science]

Ship owners gained from oil price slide..

http://www.bloomberg.com/news/articles/2...sters-rule