Oil: how low can it go?

[JungleJim]

Mr Sandman said:

There is a st sight more than 24,000 people in BP's upstream BU globally, though.

How many do they have?

[NRS]

fido said:

Surely that's 99% priced in already - I think everyone is expecting it to go ahead.

Yes, but it will still most likely cause a dip due to the news coming out. Plus potentially more at a later date when it becomes more clear how much they might be able to produce.

[jshell]

There is more stored oil now than at any time in history, approx 3 months global use. That's not good for prices...

[Du1point8]

jshell said:

There is more stored oil now than at any time in history, approx 3 months global use. That's not good for prices...

Is it worth just waiting until it hits $18 a barrel and buying, surely it must go back up?

[Axionknight]

It will, but when and how much by are questions not easily answered at a time like this - as I said before, this seems different to previous slumps, far more external factors are taking their toll this time around.

[NRS]

Du1point8 said:

jshell said:

There is more stored oil now than at any time in history, approx 3 months global use. That's not good for prices...

Is it worth just waiting until it hits $18 a barrel and buying, surely it must go back up?

The thing is the longer it is down at those (and the current) levels the quicker and harder the jump back up will be. I think in a year we will be nearer $40-50 which is a more realistic level. The average for the last 40 years is $57 I believe. I don't think this time it is that different, despite what some people are saying (although I'm young and stupid, ). Reason is we are still in a world with increasing energy demands. Renewables will take over more but they are at such a low level to start with it will take far more years to really affect oil pricing for the next decade or longer. Just look at all the changes in the last few decades and what has happened to oil. Energy efficiency will improve, but there is such a big demand for new energy we will still need more. Also it's pretty stable militarily in a lot of the important parts of the world for hydrocarbon production. Throw in a few wars (potentially more likely since some of the corrupt leaders won't be able to fund effectively paying off the people to support them) then it can change pretty quickly.

Now there is just so much negative news out there everyone is ignoring stuff that would normally be "good" news for oil prices and thinking this is the end.

[jshell]

Du1point8 said:

jshell said:

There is more stored oil now than at any time in history, approx 3 months global use. That's not good for prices...

Is it worth just waiting until it hits $18 a barrel and buying, surely it must go back up?

It will certainly 'ramp', but just when is the question! Not soon I wouldn't think, but it will be a bonanza sometime. It can't do anything else as there are so many products that rely on crude as a feedstock, forget petrol, we'd burn it or dump it if we could get away with it.

[emicen]

BBC reporting Brent hit the $27 region before recovering to low 28s. Cant see the dip below $28 on the tracker myself but going to be an interesting day I think.

[NRS]

emicen said:

BBC reporting Brent hit the $27 region before recovering to low 28s. Cant see the dip below $28 on the tracker myself but going to be an interesting day I think.

It was around 11:30pm yesterday in the UK I think - shows up as 12:30 this morning here in Norway when it went down to $27.69. Now up to $28.5. Market is down, but not as much as I thought it might be.

[RDMcG]

One different thing from the past is US production technology continues to improve dramatically and their marginal cost continues to decline which will put an upper limit on pricing. They can ramp up production quickly in any recovery and no longer have exporting forbidden. Reserves are huge. I think we are heading for $20

[Axionknight]

As reserves are extracted from deeper places though, a point may come where extraction costs ramp up or become unviable.

We're qualifying valves to 10,000psi working pressure and 350f/-20f at the moment and hyperbaric testing them to over 3000m depths. So design, production and qualification costs are pretty massive so that may mean some fields remains unviable/too costly to harness for quite some time.

[NRS]

RDMcG said:

One different thing from the past is US production technology continues to improve dramatically and their marginal cost continues to decline which will put an upper limit on pricing. They can ramp up production quickly in any recovery and no longer have exporting forbidden. Reserves are huge. I think we are heading for $20

Thing is how much quality is there in those large reserves? What companies in shale oil/gas have been doing is concentrating on the most productive parts of their system and forgetting about the areas which are poorer in production (whether due to HC concentration or how good the rock is for fracking). Once those good spots are produced there is a limit to what benefits technology can give. There will be a ceiling to increasing production at some point due to their flexibility, but it's above where we are now. If nothing else they don't want it too low either. Remember it's a high risk industry so you need quite large profits to make it worthwhile taking those risks for new wells etc. The main issue we have now is Iran's production and how much they are willing (and able) to produce.

[Morningside]

I think the title should read:

Oil: how low can it go? Before the government slaps a load of duty on it.

[skyrover]

Sad but true.

We have the highest rate of fuel tax in the world, why not extend our lead eh?

Edited by skyrover on Monday 18th January 11:22

[Captain Benzo]

Axionknight said:

As reserves are extracted from deeper places though, a point may come where extraction costs ramp up or become unviable.

We're qualifying valves to 10,000psi working pressure and 350f/-20f at the moment and hyperbaric testing them to over 3000m depths. So design, production and qualification costs are pretty massive so that may mean some fields remains unviable/too costly to harness for quite some time.

in a similar boat. wellheads are looking at 20,000psi, -50C to 150C and 3,000m depth. really hostile environments.

while the price is low, these qualifications are taking a back seat. wait and see i guess.

[NRS]

skyrover said:

Sad but true.

We have the highest rate of fuel tax in the world, why not extend our lead eh?

Edited by skyrover on Monday 18th January 11:22

Not completely true. That chart shows diesel. For petrol the Netherlands is ahead on tax, with Denmark being higher on total cost. It's covering what it calls "major economies". Norway is not on that chart, but would be the highest in actual rates (albeit perhaps slightly lower when looking at disposable income). Turkey, Finland, Greece and Italy should be higher than the UK too although those might be a little out of date on the statistics. It's certainly up there as one of the highest, but is not the highest.

[GT03ROB]

Captain Benzo said:

Axionknight said:

As reserves are extracted from deeper places though, a point may come where extraction costs ramp up or become unviable.

We're qualifying valves to 10,000psi working pressure and 350f/-20f at the moment and hyperbaric testing them to over 3000m depths. So design, production and qualification costs are pretty massive so that may mean some fields remains unviable/too costly to harness for quite some time.

in a similar boat. wellheads are looking at 20,000psi, -50C to 150C and 3,000m depth. really hostile environments.

while the price is low, these qualifications are taking a back seat. wait and see i guess.

Unfortunately for the North Sea which is what I guess you are talking about, both Kuwait & Iraq are in the middle of very heavy drilling & development programmes to expand capacity. Here in Kuwait in the northern fields alone there are currently around 100 rigs drilling new wells. EOR has not really started on the Burgan field in the south & there is talk of the fields under Joint Operations (Kuwait/Saudi) coming back onstream (been shutdown for a couple of years). Despite the price they are just ploughing on (for now).

[J4CKO]

Pretty desperate times, I work for Amec Foster Wheeler who are heavily involved in Oil and Gas the CEO resigned (Samir Brikho) stepped down today, I will keep turning up whilst I still get paid but now sure how long how stable the company is in this situation.

[bucksmanuk]

Captain Benzo said:

Axionknight said:

As reserves are extracted from deeper places though, a point may come where extraction costs ramp up or become unviable.

We're qualifying valves to 10,000psi working pressure and 350f/-20f at the moment and hyperbaric testing them to over 3000m depths. So design, production and qualification costs are pretty massive so that may mean some fields remains unviable/too costly to harness for quite some time.

in a similar boat. wellheads are looking at 20,000psi, -50C to 150C and 3,000m depth. really hostile environments.

while the price is low, these qualifications are taking a back seat. wait and see i guess.

Same story here, currently testing valves at 1000 bar - as I write in fact! - (15,000 psi as near as dammit), 1250 bar currently going through analysis, 1500 bar in initial design, and 2000 bar being requested. Makes you wonder where we'll stop....
Just need the oil price to go up and then someone will write out some capex’s and start buying them...
Also doing valves for 700 bar of hydrogen – ooo-er!

[Axionknight]

All good fun innit? I like the subsea business, plenty of time to move around though (aged 27), Never been offshore though, but I'd love to see it one day.