Oil Prices

[CY09]

This is why i realize the flaw of my analysis when I did coverage on Penguin. I was basing earnings on environment where oil prices were at $80+. However, the truth has not been farther and that Oil is going to be depressed for years to come, simply because there is an oversupply. Again IMO, the situation of supply being more than demand will continue until 2017. From 2018-2019, countries will only start to work out their excess inventory that has been built over the past 3 years. And only after 2020, will we see oil hitting above $60; at that time US will turn back on its shale production and countries will eat up into their own petroleum reserves built up in 2016. This means prices are going to be capped at prices of $80.

So what's going to happen over the next 4 years(short term)? I think there will be massive defaults. Countries like Saudi Arabia are taking their time to pay contractors for infra projects. I will not rule out that even Hyflux will struggle with cash flow issues due to Middle East. Similar offshore support industry here will be in the doldrums and companies will be liquidated not judicial managed - think Swiber, Ezra, Swissco. And if you trace who is the main principal banker who is backing these names, the answer is DBS. NPL for DBS is likely to be going high.

In the medium term, we will still not see a heavy uptick in CAPEX expenditure. It will still be tepid, until oil breaks above $80. As such, it will be hard for our country to returns to its heydays due to the oil rally from 2004 to 2011.

[BlueKelah]

@Cy09 another thing is the electric vehicles coming soon. This could be potentially very disruptive to oil markets as around 80% oil is for transportation use.

If this happens within the next five years, we could see low oil demand as the new norm very very soon. Well as least for the value investor five years is pretty soon
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[Jacmar]

@Cy09 another thing is the electric vehicles coming soon. This could be potentially very disruptive to oil markets as around 80% oil is for transportation use.

If this happens within the next five years, we could see low oil demand as the new norm very very soon. Well as least for the value investor five years is pretty soon
...

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You know that you need to burn O&G to generate electricity,right? We can go into a lengthy discussion on alternatives but each one of them has limitations and that's why the world is still very carbon base in generating power. Nuclear(after fukushima, some countries is dropping while some are still considering), hydro(world is not building more big dams), solar(actually this is not economically viable without govt subs), wind(not predictable/reliable with changing climate), and others.     
If countries are truly committed to combating climate change and limiting carbon emission then they should be phasing out coal mining/burning. This would benefit O&G and in particular gas.

[CityFarmer]

@Cy09 another thing is the electric vehicles coming soon. This could be potentially very disruptive to oil markets as around 80% oil is for transportation use.

If this happens within the next five years, we could see low oil demand as the new norm very very soon. Well as least for the value investor five years is pretty soon
...

Sent from my MotoG3 using Tapatalk

You know that you need to burn O&G to generate electricity,right? We can go into a lengthy discussion on alternatives but each one of them has limitations and that's why the world is still very carbon base in generating power. Nuclear(after fukushima, some countries is dropping while some are still considering), hydro(world is not building more big dams), solar(actually this is not economically viable without govt subs), wind(not predictable/reliable with changing climate), and others.     
If countries are truly committed to combating climate change and limiting carbon emission then they should be phasing out coal mining/burning. This would benefit O&G and in particular gas.

I concur. O&G is still the main energy source in near future. LNG should be getting more popular, once the logistic cost is reduced with technologies. Alternative sources of energy still far from becoming main stream, at least in near future.

[Behappyalways]

Mounting oil stockpiles set to keep prices lower
http://www.bbc.com/news/business-37033621

[CityFarmer]

We are almost sure, a massive supply shortfall ahead, but nobody sure on the timing...

Oil discoveries at a 70-year low signal a supply shortfall ahead
30 Aug 2016 07:58

OSLO] Explorers in 2015 discovered only about a tenth as much oil as they have??annually??on average since 1960. This year, they'll probably find even less, spurring new fears about their ability to meet future demand.

With oil prices down by more than half since the price collapse two years ago, drillers have cut their exploration budgets to the bone.

The result: Just 2.7 billion barrels of new supply was discovered in 2015, the smallest amount since 1947, according to figures from Edinburgh-based consulting firm Wood Mackenzie Ltd. This year, drillers found just 736 million barrels of conventional crude as of the end of last month.

That's a concern for the industry at a time when the US Energy Information Administration estimates that global oil demand will grow from 94.8 million barrels a day this year to 105.3 million barrels in 2026. While the US shale boom could potentially make up the difference, prices locked in below US$50 a barrel have undercut any substantial growth there.

New discoveries from conventional drilling, meanwhile, are "at rock bottom", said??Nils-Henrik Bjurstroem, a senior project manager at Oslo-based consultant Rystad Energy AS.
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BLOOMBERG

Source: Business Times Breaking News

[brattzz]

really?

nothing wrong with cheap oil wat...everyone start planning based on cheap oil lah... aiyoh, besides, demand is not as high too...

[fundamentalman]

really?

nothing wrong with cheap oil wat...everyone start planning based on cheap oil lah... aiyoh, besides, demand is not as high too...

partly to help oil price stay low too is shale oil revolution in usa

I read in the past, that cost of retrieving shale oil is going down and down, due to technological improvement. So there is now effectively a 'shale oil price band' that would cap near-term upside in conventional oil price. With more tech improvement, the band could get lower and lower.

Not to mention that, the current reserve for oil lasted quite a long time, about 40-50 years of current annual production, afaik. So the current oil price should be in a 40-60 dollars band for at least a few more years, despite low conventional oil discovery.

The wonder of technology

[corydorus]

really?

nothing wrong with cheap oil wat...everyone start planning based on cheap oil lah... aiyoh, besides, demand is not as high too...

partly to help oil price stay low too is shale oil revolution in usa

I read in the past, that cost of retrieving shale oil is going down and down, due to technological improvement. So there is now effectively a 'shale oil price band' that would cap near-term upside in conventional oil price. With more tech improvement, the band could get lower and lower.

Not to mention that, the current reserve for oil lasted quite a long time, about 40-50 years of current annual production, afaik. So the current oil price should be in a 40-60 dollars band for at least a few more years, despite low conventional oil discovery.

The wonder of technology

That's one of my concern with Oil and Gas Industries due to Shale Oil capping the price. Is going to be a Long Winter based on current information.
The cost structure locally make it worst. Basically Industry need to find new green field.

[BlueKelah]

Looks like Arabs will have to find some way to push oil price below $30 to kill of the shale revolution. Either that or wait for interest rates to rise which will drive many drillers to the brink..

Oil prices fall as U.S. drillers add new rigs, speculators cut long positions