Oil: how low can it go?
Discussion
Berw said:
How much of the problem is just investors talking things down?
Yesterday I was told that current oil production is only 1% above usage, and the slightest upturn would rectify the price drop.I was skeptical so I checked.
Current world consumption 94.14 million B/Day, Production 95.07, so roughly 1 % oversupply.
If you look at historic oil prices long term 30 $/B is not unusual, and fits with my memory from the 80's in the North Sea, Troll was declared commercial at 11 8$/B and Balder which had a very fragmented reservoir was commercial at 22 $/B.
So supply is within 1% of demand, China announces it economy advanced 7% (approx). What is reported is that China slows down and we don't believe the figures for the economy.
I accept I've ignored stocks, inflation, new investments, enhanced recovery, etc and if you want with 40 years in oil industry I can expand on this, but I keep coming back to the opinion that most of the problem is driven by bear investors and financial journalist who don't even know the questions to ask.
Things like the BBC business report never mention anything about P/E ratios, dividend cover, return on investment, or any of he things I was lectured to look for in making investments when I was studying.
When you see the barrels per day consumption I struggle to get my head round that figure. It's a staggering amount to comprehend.Yesterday I was told that current oil production is only 1% above usage, and the slightest upturn would rectify the price drop.I was skeptical so I checked.
Current world consumption 94.14 million B/Day, Production 95.07, so roughly 1 % oversupply.
If you look at historic oil prices long term 30 $/B is not unusual, and fits with my memory from the 80's in the North Sea, Troll was declared commercial at 11 8$/B and Balder which had a very fragmented reservoir was commercial at 22 $/B.
So supply is within 1% of demand, China announces it economy advanced 7% (approx). What is reported is that China slows down and we don't believe the figures for the economy.
I accept I've ignored stocks, inflation, new investments, enhanced recovery, etc and if you want with 40 years in oil industry I can expand on this, but I keep coming back to the opinion that most of the problem is driven by bear investors and financial journalist who don't even know the questions to ask.
Things like the BBC business report never mention anything about P/E ratios, dividend cover, return on investment, or any of he things I was lectured to look for in making investments when I was studying.
Pennyroyal Tea said:
RDMcG said:
$10 anyone?
Much as I hate to say it. I think we'll see a lower bottom than we've had and I think it's coming once China's economy s
ts itself properly (i.e. Q3/Q4 this year).I'm sure Iran will help them with more cheap oil, they already buying a lot from Russia, Venezuela and Angola.
jshell said:
BP are predicting an early rise in prices. Just proves that no-one knows!
define early?there is so much oil washing around in storage, even if Saudi stopped pumping oil today, it would take several months for world stocks to make a significant decline.
the only problem comes when the banks/hedge funds smell it coming and start taking up massive positions again, forcing the market up again.
Pennyroyal Tea said:
RDMcG said:
$10 anyone?
Much as I hate to say it. I think we'll see a lower bottom than we've had and I think it's coming once China's economy s
ts itself properly (i.e. Q3/Q4 this year).ts itself properly".The Chinese economy grew by 6.9 % last year. The UK economy has only ever surpassed that once in it's modern history. There comes a point in any economy where growth slows as you can't keep expanding rapidly forever , but I very much doubt that it will "s
t itself" any time soon.My view is that we are probably near the bottom already - if not there. I doubt we will ever see a $10 barrel because the oil industry would simply collapse very quickly at that price.
Edited by jcremonini on Friday 12th February 12:59
I should have sold BP at 350-360. Still got half of it left. Sigh - the market ain't bottomed out yet.
twinturboz said:
Just a question, what further bad news do you think Oil has yet to price in.
Excess capacity in BRICS / emerging markets - China got more to go. Deutsche bank. Saudi deficit.Db is not going bankrupt at least they won't let them go.
Oil may not have bottomed by any means but again just a question, assuming most in this thread want to invest in oil what are you looking for to get you invested how are you going to determine the bottom and at what point are you going to decide I may have missed the bottom and it's time to get in.
Just some stats that I'm sure most of you are aware of:
Oil's biggest declines in history
14-16 73%
08-09 68%
90-93 65%
85-86 63%
96-98 54%
Oil may not have bottomed by any means but again just a question, assuming most in this thread want to invest in oil what are you looking for to get you invested how are you going to determine the bottom and at what point are you going to decide I may have missed the bottom and it's time to get in.
Just some stats that I'm sure most of you are aware of:
Oil's biggest declines in history
14-16 73%
08-09 68%
90-93 65%
85-86 63%
96-98 54%
Ruskie said:
When you see the barrels per day consumption I struggle to get my head round that figure. It's a staggering amount to comprehend.
My apartment overlooks the loading jetties & buoys for around 3% of the worlds production. Whats actually surprising is how small an amount it really is!! Storage on ships is yet to really get going but it probably won't be long. Record levels at Cushing (the main storage area for u.s.) The stock levels there are now 64.7 million barrels and is considered full at 73 mb. International Petroleum week just finished in London here is what people had to say.
http://www.bloomberg.com/news/articles/2016-02-12/...
http://www.bloomberg.com/news/articles/2016-02-12/...
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