Oil price crash

[casanovawa]

Isn't the price also down because all of that charlantan, group think cough about peak oil and the insatiable ever expanding demand of China and all the other props to keep the price going up and up have now come to be seen for what they are???

And like all bubbles where a few people profit mightly and then all the wind goes out of the balloon it starts descending rather rapidly... The confidence and crazy notions that took decades or so to build up all collapse in about 6-12 months...

 

[Happy Trails]

The apocryphal oilman's prayer comes to mind:

"Lord give us one more boom and we promise not to piss it away this time."

 

[Tortuga]

I feel like even the majors want to see more carnage in the near term. It does seem like a war on the shale producers. Nations and the big boys can ride this downturn out without issues (Venezuela hasn't got a shred of power) and clean up some cheap assets when the over leveraged and new boys go belly up or shaky at the knees. It's hard not to think this way when you keep hearing CEO's saying the worst is around the corner which convinces the market things are going down. Small drop off in supply today needs to continue for some price stabilisation. The volatility is on another level - future traders/speculators must be going cross eyed. Volatility has turned into the normal. The worst the crash the bigger upside when things turn around. I will be dead in my grave before we ever see a stable oil price over a sustained period of time.

 

[vetrade]

US Crude presently at $26.33 and gold has bounced to $1238 after being around $1110 only about 2 weeks ago.
Plenty of ppl will be getting nervous.........

 

[Abdul_A350]

Such a blindingly contempt ignorant statement to make about a former leader of a nation, who unlike other nations in the Middle East, is an elected member of a democratic parliament, and not part of a potentially corrupt member of some elitist ruling family or oligarch. Wtf?

I can understand most of your attempt at English. If you are happy to be equated to Tony Abbott then I am sorry. If you are angry at my family for something, there is not much I can do.

 

[marki]

Did we not just have peak oil .....? .....

 

[Abdul_A350]

Abdul_A350 did seem acknowledge the failings of those other countries.

That was my intent. In a country where resistance is punished, it seems particularly cruel to criticise those outside the government for their ways.

 

[marki]

Off Topic already

 

[Abdul_A350]

I hope you have a chance to travel more. Cheap oil might help.

 

[medhead]

Did we not just have peak oil .....? .....

May have. But IIRC the poster making the comment about peak oil, in the past has seemed to have been confused between reserves/resources and the rate that those are extracted. Producing something at a faster rate, doesn't necessarily mean there is more of it. Just that it's being used faster.

 

[Abdul_A350]

God may allow, but I think we are supposed to write in English here.

In any case, I depart from your unwarranted anger.

 

[BAM1748]

Did we not just have peak oil .....? .....

I don't know that we did. If you look at the previous 60 years we ahave always had about 30 years supply, as when supply is decreasing the oil industry goes out looking for more then slow up exploration for a while. Again, another cycle of oil.

 

[drron]

Bit harsh to be entirely blaming the Saudis for the oil price.
The USA is now the largest producer of oil.
Russia and Venezuela pumping furiously to try and keep their budgets intact.
Iran expected to increase production after the thawing of relations with the US.
Demand from China unlikely to start rising again for some time.

But their may be some medium term prospects-
According to the Bank of International settlements the US issued $5 trillion in energy related debt 2009-2014.
From Bloomberg 60 US oil producers have already filed for bankruptcy protection,another 150 at risk of doing the same.

Then of course if Saudi Arabia decides to do something to protect Syrian sunnis from Bashad's and Iranian shiites the price may take off.

 

[Happy Trails]

Well, it's not all bad news.

On account of the exceptional circumstances the Islamic State is facing, it has been decided to reduce the salaries that are paid to all mujahideen by half.

Isis fighters' pay halved 'because of low oil prices' | Business News | News | The Independent

 

[medhead]

Who says the Saudis are doing nothing to fight I S?

Well, it's not all bad news.

On account of the exceptional circumstances the Islamic State is facing, it has been decided to reduce the salaries that are paid to all mujahideen by half.

Isis fighters' pay halved 'because of low oil prices' | Business News | News | The Independent

 

[vetrade]

Bit harsh to be entirely blaming the Saudis for the oil price.
The USA is now the largest producer of oil.
Russia and Venezuela pumping furiously to try and keep their budgets intact.
Iran expected to increase production after the thawing of relations with the US.
Demand from China unlikely to start rising again for some time.

But their may be some medium term prospects-
According to the Bank of International settlements the US issued $5 trillion in energy related debt 2009-2014.
From Bloomberg 60 US oil producers have already filed for bankruptcy protection,another 150 at risk of doing the same.

Then of course if Saudi Arabia decides to do something to protect Syrian sunnis from Bashad's and Iranian shiites the price may take off.

Bit slow to reply but I’ve been touring Tasmania (that’s a week of my life gone without much to show for it – but that’s another story………)

Not harsh at all to blame the Saudis (the dominant OPEC country) because they have driven the big falls in oil prices from over $100 to $30 a barrel since mid 2014, Ron. They didn’t like the fact that their major market (the US) became self-sufficient over a very short period of time because of new technologies to extract shale oil deposits that had previously been uncommercial. It’s no secret that the Saudis set about increasing production above demand in retaliation using their big advantages of huge foreign currency reserves and much lower costs of production than the US producers. The other factors you mentioned are either too recent to be relevant (to present prices) or haven’t had a significant impact.

The strategy is working as evidenced by the number of US producers going bust – and they won’t be keen to start-up again as long as they think the Saudis can undercut them on price again. The US wants to be self-sufficient, it didn’t want a price war but the one it got was a consequence of that self-sufficiency and buying less from OPEC.

Russia and Venezuela haven’t been “furiously pumping” at all – production in both has actually fallen since before prices started falling – Russia has faced sanctions and falling demand since it screwed Ukraine and Venezuela has a basket case economy where the government keeps prices down with subsidies to stop the plebs from booting them out of office.

Iran is the new kid on the block – obviously they haven’t been in any position to affect oil prices before now but they will be keen to pick up market share and that might mean they put more pressure on the Russians by courting the Europeans. It will be interesting to see what effect Iran has on prices from now on but it may well be that they do not see any point in forcing them significantly below present levels.

 

[drron]

But the USA has been the big driver of overproduction.So again cant put all the blame on the Saudis.

And here's the proof from the US Government-
https://www.eia.gov/dnav/pet/pet_crd_crpdn_adc_mbbl_a.htm

And no major change in monthly Saudi production since 2011-
https://ycharts.com/indicators/saudi_arabia_crude_oil_production

 

[amaroo]

LOL Obama lectures all and sundry at his UQ speech whilst pumping the Texas Tea 24/7

 

[Milefest]

"Oil is now so cheap even pirates aren’t stealing it any more"

http://finance.yahoo.com/news/oil-now-cheap-even-pirates-120218185.html

 

[vetrade]

Production levels taken in isolation don’t tell the whole story so far as oil prices are concerned over the past couple of years. You need to dig down to the underlying forces and motives involved to come to meaningful conclusions. The OPEC countries traditionally dictated prices (and kept them artificially high) because they had little in the way of competitors (such as Russia) that the US was interested in trading with.

As the world’s leading power the US had long been uneasy about being reliant on foreign countries for topping up its oil needs and it certainly didn’t like also being dictated to on prices. You only need to look at the conflicts the US engaged in such as Kuwait to appreciate their sensitivity to reliable oil supplies and the significance they placed on them. Marked cultural differences and sensitivities between Western and Arab countries also make maintaining trading relations tenuous. When shale oil became commercially viable the US took to it with gusto – they had an abundant supply meaning self-reliance was feasible and could no longer be dictated to on price.

Sure the US is the largest producer now but that is in keeping with it being the biggest consumer. Its motivation was self-sufficiency more so than cheaper prices – producing enough for all its own needs - which would also help create price stability, but it would be incomprehensible to think that they would want prices forced down to below their production costs which, as we are seeing now, would force many of its producers out of business. You have to look to who had the means and motivation to force oil prices down to present levels if you want to identify the real culprits.

This brings us back to the Saudis. As a low cost producer they could easily put price pressure on US producers and they did not need to increase production by a large amount to do it. Their huge foreign reserves (built up by many years of being able to dictate high prices) would allow them to sustain very low prices for an extended period of time – certainly far longer than US producers could absorb producing at a loss. In the face of decreased demand when they would be expected to reduce production somewhat they increased it (by about 10% over the past 2 years) AND they started aggressively marking down the price. This was all they needed to do. It was a calculated move and they alone deserve the “credit” for devising the huge drop in oil prices.

FWIW it's probably a similar "game" BHP and RIO are now playing with iron ore. Watch them buy up small competitors who can't match their comparatively low production costs.