Oil: how low can it go?

[NRS]

GT03ROB said:

Only need Saudi & Iran to continue their current fall out & it will rise very rapidly!!

My client here (Kuwait Oil Company) are reckoning on $20!

The oil price in the near future depends on how they settle their agreement. It's most likely to be done in a price war, which will push oil down into the $20s IMO. However if it does turn into a war (or proxy war across a lot of countries) then it could be that the oil price climbs quickly.

[twinturboz]

R8Steve said:

I'm going against the trend then with a long from $33.50! I don't think we'll see much lower.

With you on that one reckon we get a violent rally soon.

[NRS]

twinturboz said:

R8Steve said:

I'm going against the trend then with a long from $33.50! I don't think we'll see much lower.

With you on that one reckon we get a violent rally soon.

What's the reason for that though? It is very volatile so could jump quickly, but I don't think it will be sustained. We still don't have proper production from Iran, and are very soon running out of oil storage space worldwide. Unless Saudi and Iran go into a military war I don't see a reason to suggest we're not at the bottom yet?

[emicen]

Interesting Saudi's petroleum minister was quoted in an article on the BBC news site as saying they want to reduce production to shore up prices but it's the other main players in OPEC who aren't in to it.

http://www.bbc.co.uk/news/business-35120408

Seems in direct contradiction of the understanding in every previous piece I've seen, where the consensus was Saudi was happy to sit back on its fat capital reserves to try and burst US shale.

Now an immediate drop in production wouldn't lead to an immediate price rally, falling demand from China and the sheer amount in storage, but it would cause a rise in the next quarter. Kind of sounds like it's proven a little tougher than they thought it would to break the US shale side and now they actually are having to hit the cash reserves, it's not so appetising.

[twinturboz]

NRS said:

What's the reason for that though? It is very volatile so could jump quickly, but I don't think it will be sustained. We still don't have proper production from Iran, and are very soon running out of oil storage space worldwide. Unless Saudi and Iran go into a military war I don't see a reason to suggest we're not at the bottom yet?

Can't disagree with anything you've stated purely a range based play. The particular trade I was looking for is 33.95 to about 37.50 at minimum. Longer term might well hit 30ish.

Edited by twinturboz on Thursday 7th January 17:58

[Tasmindevil]

Smollet said:

number 46 said:

I'm calling $25 !!! there you go!

I reckon we'll see $20

Jan last year I predicted $25, of course my predictions were regarded as idiotic but yes we are now heading towards the $20s. At the current levels and forecasted levels the industry is entering the dark ages, I don't believe you need an economic degree to see the pending issues in Aberdeen, the surrounding areas and across the UK with people directly in the industry and also those who rely on those peoples business.

[NRS]

emicen said:

Interesting Saudi's petroleum minister was quoted in an article on the BBC news site as saying they want to reduce production to shore up prices but it's the other main players in OPEC who aren't in to it.

http://www.bbc.co.uk/news/business-35120408

Seems in direct contradiction of the understanding in every previous piece I've seen, where the consensus was Saudi was happy to sit back on its fat capital reserves to try and burst US shale.

Now an immediate drop in production wouldn't lead to an immediate price rally, falling demand from China and the sheer amount in storage, but it would cause a rise in the next quarter. Kind of sounds like it's proven a little tougher than they thought it would to break the US shale side and now they actually are having to hit the cash reserves, it's not so appetising.

I think by "other OPEC members" read Iran. I think too many people are still trotting out the US shale oil line, when it's now changed to a price war with Iran and is lower than Saudi were wanting to go. I mentioned it previously on here, but Iran wants market share and money coming in, and with a very low break even price to produce they can afford to pump at these prices and lower. Of course they'd like higher prices but any extra money is more money than before since they don't lose out too much due to the limited production previously. Saudi don't want them to take that share from them, so have to continue playing the game they started and not budge. Probably what will happen is Iran will increase production to a certain point, and then potentially OPEC will agree to production limits and move the price slowly upwards (in combination with IOCs dropping production in the future due to lack of spending now).

You know it's a lot, but when looking at simple numbers today it is still insane. My company produces 2 million barrels a day. With a fall from $140 down to the $35 we have now it is approximately £100 million a DAY reduction. Obviously a lot of that would normally go into paying tax and investing in new facilities/ exploration etc, but it is a crazy amount when you see it like that and just shows why companies have to do such big cuts despite knowing it will be bad in the long term (getting rid of experience etc).

[mondeoman]

$100 million a DAY buys a lot of warm bodies....

[2fast748]

turbobloke said:

2fast748 said:

skyrover said:

perhaps it will give the north sea a bit of time to refill again

http://www.rense.com/general63/refil.htm

I read that article and thought it was quite interesting, then I went to the sites homepage......

Take a break from shooting the messenger! If you found the concept of deep / abiotic oil to be of interest there are several other sources.

http://www.gasresources.net/

http://principia-scientific.org/the-true-origin-of...

It's quite some time since researchers at the Royal Institute of Technology (KTH) in Stockholm proved that fossils from animals and plants are not necessary for crude oil and natural gas to be present, but the topic remains highly controversial.

No shooting from me, it just struck me as a fairly scientific article on a deeply unscientific, designed in the early 90's website!

I'm glad you mentioned the theory of dinosaurs being unnecessary for oil to form as I remember reading something about it a long time ago but thought maybe I'd misremembered or I'd been reading a conspiracy theory without realising it.

[NRS]

mondeoman said:

$100 million a DAY buys a lot of warm bodies....

It's difficult to work out the numbers properly due to the company working in different countries and so different tax regimes etc., but assuming it was all in Norway it would be 78% tax, which would mean "only" £22 million a day (£8 billion a year). Then you obviously have to pay for exploration, development of new fields, production wells etc. So not quite as good as it looks from the original number.

Looking at salaries it would probably cost the company around £100 million a year (20 000 employees and average salary of £46 200 for this example which is pretty low but has been affected a lot by the conversion rate). You would also have to add pension contributions and other benefits onto that too.

[FredClogs]

Fella said on the radio the other day in relation to this "They didn't end the stone age because of a lack of stones"

The reality is we've talked ourselves into ending the dependency on oil, maybe a bit prematurely, and there's probably no going back from this point.

[halo34]

Tasmindevil said:

Jan last year I predicted $25, of course my predictions were regarded as idiotic but yes we are now heading towards the $20s. At the current levels and forecasted levels the industry is entering the dark ages, I don't believe you need an economic degree to see the pending issues in Aberdeen, the surrounding areas and across the UK with people directly in the industry and also those who rely on those peoples business.

It's dire - I work in the industry and frankly we count days and hours I am employed rather than months or weeks and have to be thankful.

[R8Steve]

I think the fact the Saudis are considering listing their state-owned oil producer hints towards them wanting/needing to push the oil price up soon. I believe they will cut output to increase the oil price a lot sooner than most think.

On top of that, if tensions rise further and the Strait of Hormuz is blocked off access wise the price will rise dramatically.

I know i'm going against the tide but i still see a significant rise coming.

[NRS]

turbobloke said:

RDMcG said:

Well...looks like $30 is approaching. I then it will go lower.

Quite possible.

http://www.bloomberg.com/news/articles/2016-01-06/...

Link said:

Brent oil will slump to $30 in the next 10 days, according to Nomura Holdings Inc., while UBS Group AG sees an oversupply pushing prices even lower.

Still another 5 days and we're almost there. I guess we'll make it tomorrow?

If nothing else it's now a bit of a self-fulfilling prophecy now, with lots of people selling out as they think it will drop even more. I wonder if we'll even see the teens at some point? Iran hasn't come in properly yet, albeit some of the price drop now may be the market adjusting for that.

[jshell]

RBS reckoning $16/bbl this year....

[Blackpuddin]

http://www.telegraph.co.uk/finance/economics/12093...

[R8Steve]

jshell said:

RBS reckoning $16/bbl this year....

Not a chance imo.

OPEC members already calling for an emergency meeting.

Everyone just jumping on the sentiment bandwagon calling it to go lower now (most likely to support their ever increasing shorts).

[Oakey]

R8Steve said:

Not a chance imo.

OPEC members already calling for an emergency meeting.

Everyone just jumping on the sentiment bandwagon calling it to go lower now (most likely to support their ever increasing shorts).

You would say that, you've gone long!

[R8Steve]

Oakey said:

R8Steve said:

Not a chance imo.

OPEC members already calling for an emergency meeting.

Everyone just jumping on the sentiment bandwagon calling it to go lower now (most likely to support their ever increasing shorts).

You would say that, you've gone long!

I know, which just backs up my opinion that it will be nowhere near as bad as the media and analysts are making out.

Saudis are already starting to feel the pain, they can't last at these sustained prices either, they will burn through their reserves by 2020 and then what? It's not like they have much else apart from oil. OPEC members are requesting an emergency meeting but no guarantee that will change anything for now.

Iran i don't believe have the infrastructure to ramp up production to anywhere near the amount they say they will, not without substantial investment at least - Investment they are unlikely to secure due to, ironically, the current Oil Price.

As i'm sure we've discussed on other threads, it's all a gamble at the end of the day, I've made a load of money on it on the way down, i now feel the tide is turning and, as you say, i am now long on oil. You pays yer money, you take yer chances

Oil now in positive terms intraday as i type this.

[fido]

I have the same feeling. Made a killing on a short position but my BP shares are floundering (bought them around 375p). Would take some balls to add to that position, which I seem to be lacking .. but I still can't see where the extra demand is going to coming from - not the BRICS or Europe for sure.

Edited by fido on Tuesday 12th January 10:57