Any thoughts on oil prices?

[Lotusguy]

Not sure if its entirely because of anti Russian policies because of the Ukraine or its a result of the Sino-Russo plan agreed to start selling and buying oil between them in currency that is not the USD. Probably both. The really desired result is the same. Cripple the Russian economy.

It's not as simple either way, Europe needs Russian energy. Russia can stumble on even with turning off the taps to the EU and get a result that they want.

Whatever international chess game is being played Putin is dozens of moves ahead of the western players. I'm not sure the Western leaders even know what game they are playing.

Dozens of moves? Have you looked at the Ruble lately?

[bradbrennan]

Doesn't appear anyone believes it's an oversupply issue?

[MIKA27]

$1.12 / liter here. Still too fracking high!

But better than the $1.49 we had in the summer...

Firstly, apologies to all of you BOTL who trade or have shares in oil.

For me, a father of 2, living in Melbourne where fuel has been $1.50 per litre, I am over the moon oil prices have gone down! Our fuel is now around $1.15 per litre, meaning I can take my kids out and about more without spending all that money filling someone else's pockets such as the Saudis.

It's still far too high BUT I'll take whatever I can get. It's a HUGE change in price and additional to this, I don't believe this is the end for oil. Still a lot to be found.

[headstand]

Paid 88.9/l today!

Argh! Damn you Petter.

I'll be bringing some jerry cans when I come to Calgary on the weekend...

[headstand]

Doesn't appear anyone believes it's an oversupply issue?

I'm definitely with the short/near term oversupply camp. It's a slim amount for sure at 2-3% of world daily consumption, but once all the storage is at capacity and the ships are full there is nowhere else for it go. The barrel left over will be dirt cheap. I live in a farming community now where you see supply/demand dynamics at work every summer. First to market does well. Pity having produce at the height of harvest though. Also, I don't buy that the US has that much pull with the Saudis so as to use them for foreign policy - next I'll be hearing that the lunar landing was faked! I'll take the Saudis at their word on this one: it's about market share in an oversupplied market. As I'm invested in oil, I'm just hoping that lower energy costs is a boost to the global economy.

[FCUBUCK]

$2.20 / gallon yesterday!

[Lotusguy]

Unfortunately, this will reverse the already weak trend to more reasonable fuel economy vehicles - gas guzzlers are cheap to run again and the crying will be huge once the gas prices go up, eventually. $5/gallon gas finally made people conserve gasoline. No more.

[Lotusguy]

Unfortunately, this will reverse the already weak trend to more reasonable fuel economy vehicles - gas guzzlers are cheap to run again and the crying will be huge once the gas prices go up, eventually. $5/gallon gas finally made people conserve gasoline. No more.

[shlomo]

You all know the difference between 1.15 a liter and 1.50 a liter is like $1200-1500/year....a good sized saving, yes, but not exactly going to give anybody incentive to buy an obnoxious Hummer/Escalade/QX96/Durango etc...over a more practical car!

[malba2366]

Russia has built up pretty good reserves from the good times(high oil prices) so their economy won't crash anytime soon and also they don't import much so their economy will hurt bad but not as much as Venezuela, brazil or the Ukraine for example who is in need of 15Billion in emergency funds and i don't think the EU will be providing that...

Here's the funny part, after putting sanctions on Russia, the EU is asking them not to call on Ukraine's debt!!! Arrogance too much!!!?

Russia is hurting and will hurt more! Russia basically has no economy besides oil exporting, and they have become addicted to $100/bl oil. All the oil producing nations, except industrialized ones and Saudi/Kuwait/UAE are going to be in a world of hurt if oil prices stay down...they have all spent like crazy and need $100/bl oil. I strongly believe oil will come up and settle in the $70-80/bl range because this is where the Saudis want it.

At these prices all the high cost producers (shale, arctic drilling, tar sands etc) will be shaken out over the next few years. I would not be wanting to invest any of my money in speculative oil plays, or any companies that are heavily involved in high cost oil extraction.

[bradbrennan]

would think if the US is producing almost as much oil as Saudi Arabia they wouldn't have that much impact?

[malba2366]

would think if the US is producing almost as much oil as Saudi Arabia they wouldn't have that much impact?

Their impact is because they are the lowest cost producer in the world with the largest proven reserves, and they can decrease and increase output whenever they want. Their oil fields are paid for, they are not dependent on high oil prices to run their country, the govt owns their oil fields and 100% of the production apparatus, and their location allows for easy exportation of the oil.

The Saudis are currently benefiting from low cost oil by bleeding Russia and Iran, and discouraging further investments in shale oil and deep sea drilling. The US and Russia both produce almost as much as or slightly more (depending on source) than Saudi Arabia, but their production costs are much higher. The high investment costs of shale oil, and Russia's extreme dependence on petrodollars prevent ramping of production to control prices.

Their attempts have backfired a little because it does appear as if they lost control a bit of oil prices...I doubt they wanted them to slide so far down, but they can live with prices of $40 according to their statements. The activities of commodity traders also contribute to the wild swings in oil prices both at the low and high end. It also looks like most of the other OPEC members don't want to go along with a production cut because they need the $$$, and the Saudis don't want to cut alone so for now we have cheap oil!

[JohnLeupp]

This is a global commodity. The notion of one country trying to bleed one or two other countries is a bit of a stretch. The impacts are global. All producer countries are getting hammered with a drop like this, and consuming countries are benefitting. The reverberations in to multiple emerging market countries are significant and not limited to one or two specific places. I think the Saudis are more concerned long term about the shale evolution reducing their market share and relevance, and they no longer feel the need to cut their own production so that their competitors/OPEC partners don't have to. The U.S. Explosion in production has occurred amid rising prices, which is unsustainable long term and now self correcting, aided by supply disrupted procucers in aforementioned areas of Libya, Iraq, etc. coming on line.

[JohnLeupp]

And as previously stated, the U.S., Russia and other countries have higher cost barrels that have to be the first to come off line when prices fall. It's much more of a fundamental situation than prior to the shale boom over the past 10 years.

[DoubleDD]

Has anyone played the market and purchased shares of energy stocks like Exxon, Chevron, etc? Some of these are looking pretty interesting considering they are solid performers and offer nice dividends.

[earthson]

Has anyone played the market and purchased shares of energy stocks like Exxon, Chevron, etc? Some of these are looking pretty interesting considering they are solid performers and offer nice dividends.

They HAVE been reliable performers, but that was when the peak of oil production was considered a conspiracy theory and everybody assumed we'd have positive economic growth forever. Now that we're beginning to see that eternal growth is impossible on a planet with finite resources, everything is a lot more up in the air.

[MIKA27]

North Sea oil industry 'close to collapse'

Source: Go F**K yourself Smallclub

The UK's oil industry is in "crisis" as prices drop, a senior industry leader has told the BBC.

Oil companies and service providers are cutting staff and investment to save money.

Robin Allan, chairman of the independent explorers' association Brindex, told the BBC that the industry was "close to collapse".

Almost no new projects in the North Sea are profitable with oil below $60 a barrel, he claims.

'Everyone is retreating'

"It's almost impossible to make money at these oil prices", Mr Allan, who is a director of Premier Oil in addition to chairing Brindex, told the BBC. "It's a huge crisis."

"This has happened before, and the industry adapts, but the adaptation is one of slashing people, slashing projects and reducing costs wherever possible, and that's painful for our staff, painful for companies and painful for the country.

"It's close to collapse. In terms of new investments - there will be none, everyone is retreating, people are being laid off at most companies this week and in the coming weeks. Budgets for 2015 are being cut by everyone."

Mr Allan said many of the job cuts across the industry would not have been publicly announced. Oil workers are often employed as contractors, which are easier for employers to cut.

His remarks echo comments made by the veteran oil man and government adviser Sir Ian Wood, who last week predicted a wave of job losses in the North Sea over the next 18 months.

Decline

The US-based oil giant ConocoPhillips is cutting 230 out of 1,650 jobs in the UK.

This month it announced a 20% reduction in its worldwide capital expenditure budget, in response to falling oil prices.

Other big oil firms are expected to make similar cuts to their drilling and exploration budgets. Research from the investment bank Goldman Sachs predicted that they would need to cut capital expenditure by 30% to restore their profitability at current prices.

Service providers to the industry have also been hit. Texas-based oilfield services company Schlumberger cut back its UK-based fleet of geological survey ships in December, taking an $800m loss and cutting an unspecified number of jobs.

On Wednesday Aberdeen-based Wood Group announced a pay freeze for staff, and cut rates for its contractors.

Apache, one of the North Sea's biggest producers, has followed suit and will impose a 10 percent reduction on its contractors' wages from January 1st.

Investment record

The industry trade body, Oil and Gas UK, said: "While Oil & Gas UK cannot comment on the commercial decisions, and individual opinions, of its members, the industry trade body recognises that the falling oil price is affecting activity across the UK Continental Shelf and companies are having to take hard decisions in light of this challenging business environment."

UK oil and gas production has been in decline since 1999 - though the rate of decline slowed in 2013, a year which saw the highest level of investment on record.

The industry was hoping to see continued high levels of investment, stemming the inevitable decline of production as North Sea's resources are used up. But falling oil prices have put that in doubt.

However, the Department of Energy and Climate Change said: "The recent sharp reductions in oil prices are very challenging for companies active in the North Sea. We have seen very little evidence of new projects being cancelled or deferred in reaction to lower oil prices."

Analysis

By Douglas Fraser, BBC Scotland Business and Economy Editor

To avoid the oil investment boom turning into a bust by the dramatic fall in the price of Brent crude, firms in the industry are having to go for unusual measures.

While lower energy costs help drivers and most of the UK economy, it is a concern for north-east Scotland and beyond that investment plans are being shelved.

Goldman Sachs has suggested $930bn of projects, worldwide, could fail to get the go-ahead next year. And the North Sea is seen as one of the higher-cost, lower-return regions for investment.

In mature fields, there is the prospect of closure being brought forward.

And as a lot of production ceases to make money below $80 barrel (it's now in the region of $63), North Sea producers and those in their supply chain now face pressure to cut costs sharply.

Those costs have been rising steeply in recent years. And measured per barrel of production, they've been rising at an alarming rate. The oil price fall has only intensified the pressure to get them under control.

The oil industry is more used than most to having to flex in this way. When the oil price is high and investment strong, the cost of assets such as drilling rigs goes up sharply.

And this is also an industry which relies heavily on individual contractor work, giving it flexibility on contracts and on pay, and often works best for those workers too.

[CaptainQuintero]

I bet Scotland is glad it didn't vote Yes

[stigmata]

All this stuff is short term.

Oil will bounce back.. as will Russia.

People are abit premature thinking Russia will fail and Putin will be gone...

This will actually work in Russias favour in the long term and in the future this will be seen as a monumental stuff up by the West.

[malba2366]

Only time will tell is Russia will bounce back, it all depends on how long the Saudis and their allies in OPEC can hold down prices. There is absolutely an oil war going on behind the scenes here. Yes the Saudis would like lower prices to flush out higher priced suppliers but they also want to hurt Russia and Iran for their support of the Asad regime in Syria. The Saudis also want to maintain their position as the power broker in the Middle East, and an Iran powered by oil wealth could challenge that.

[Ginseng]

Only time will tell is Russia will bounce back, it all depends on how long the Saudis and their allies in OPEC can hold down prices. There is absolutely an oil war going on behind the scenes here. Yes the Saudis would like lower prices to flush out higher priced suppliers but they also want to hurt Russia and Iran for their support of the Asad regime in Syria. The Saudis also want to maintain their position as the power broker in the Middle East, and an Iran powered by oil wealth could challenge that.

Malba, your posts in this thread have been both informed and well-reasoned. Keep it coming.

I'm wondering if there's still money to be made in fossil fuel stocks short term, say 1-3 years.

Wilkey

[stigmata]

How hard would it be to get price of oil to be ramped up with a crisis?

Not too hard for Russia and Iran I'm guessing if it needs to come to that.

[bradbrennan]

I've seen a few of these charts, there's a story behind each up and down turn, but it sure appears that oil has been overpriced since the early 2000's with the exception of the fall of 2008 when U.S. big recession hit.

http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=RWTC&f=D

[malba2366]

It's tough to say if this is a good place to make money. Personally for me the risk is a little to high especially considering that one nation basically has the ability to manipulate oil prices at will.

Will you lose your shirt with XOM, RDS, BP, HAL etc., very unlikely but you definitely could while investing in shale oil/deep sea drilling companies especially in the short term. It is pretty clear that OPEC and the Saudis are determined to keep prices at levels below where Shale and deep sea drilling are profitable. They will be able to do so until demand picks up significantly which won't happen in the short term.

[bradbrennan]

Interesting article, "One of the main causes is irresponsible production by some producers from outside the organisation, some of whom are newcomers," Suhail al-Mazrouei told an energy forum in Abu Dhabi.

http://news.yahoo.com/irresponsible-non-opec-output-behind-oil-price-plunge-071948377--finance.html