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Page added on December 3, 2014
T. Boone Pickens predicts $100 a barrel
Prominent oil investor and sometime-renewable-energy booster T. Boone Pickens predicted Tuesday that the plunging oil price would rebound to $100 a barrel in the next 12 to 18 months.
Pickens also said he expects the Organization of the Petroleum Exporting Countries will eventually move to slash oil production, possibly in the first half of 2015.
“They didn’t say they wouldn’t cut, but OPEC will have to cut, and that is what’s going to happen. The Saudis are the ones that make the cut. They can take $70 oil and take it out 10 years — they have the cash reserves that allow them to do that. But they can’t do that to the rest of OPEC,” Pickens said.
The 86-year-old Pickens, who chairs the energy hedge fund BP Capital Management, offered his forecast in an interview on CNBC’s “Mad Money” with Jim Cramer late Tuesday.
Oil price prognostication has become a new parlor game on Wall Street and in shale-oil pockets across the U.S. Pickens, in backing his own call, alluded to his roughly 50-year tenure in the oil industry, saying: “You can’t imagine how many of these cycles I have seen and endured.”
Pickens’s call came as oil swooned from its worst drubbing in years, hitting five-year lows after OPEC decided to keep its production quota unchanged late last week.
London-traded January Brent crude oil was off nearly 3% Tuesday at $70.54, while West Texas Intermediate (CLF5) was down by about the same percentage at $66.88 on the New York Mercantile Exchange.
Nymex crude last traded around $100 dollar a barrel on July 25, when it settled at $102.09, while Brent last closed at $100 on Sept. 5, according to FactSet. Predictions for oil have been all over the map. Some dire forecasters, like oil entrepreneur Murra Edwards, see oil prices hitting a $30-barrel nadir, while others are predicting oil will average around $80 a barrel
Where Pickens’s view differs from many analysts is his call that Saudi Arabia, the producer holding the most sway among the 12-member OPEC bloc, weill be willing to cut oil output significantly. Many have viewed OPEC’s decision to stand pat on its output as an attempt to apply pressure on U.S. shale-oil producers. And as oil prices continue to deflate, shale producers — which tend to use a lot of debt to finance their hydraulic fracturing and oil drilling operations — may be buffeted. Read: These U.S. oil producers have the most to lose.
Any move to reduce output by the Saudi producers, however, would also risk their market share.
22 Comments on "T. Boone Pickens predicts $100 a barrel"
Makati1 on Wed, 3rd Dec 2014 10:21 pm
Another guesser … nothing to put money, or your life, on.
Perk Earl on Thu, 4th Dec 2014 1:14 am
MSM seems to have faith in certain people to help them understand what’s going on with oil and one of those is T. Boone, probably because people seem so enamored with funny sounding names. Twitter, Hashtag, Facebook, Kardashian, Twerking, apps, Google, T. Boone, anything stupid sounding really seems to get their attention.
Whether or not his guess on price is right, who knows.
We now live in a world of people hooked on anti-depressants, tattoos, stupid sounding names, tabloid news, super hero & transformer movies, sex without romance, with pizza, popcorn and soda as diet staples.
Maybe collapse wouldn’t be such a bad thing.
rockman on Thu, 4th Dec 2014 7:02 am
First, I haven’t reached a conclusion as to whether this is a short term price bump in the road or a major (and long term) price correction driven more by demand destruction. I won’t waste the time digging thru old achieve: but when prices were sliding down sharply from the spike in 1980 virtually every oil patch leader was spouting the same: “Don’t panic…recovery is just around the corner”. And at the same time they were approving the termination of many tens of thousands of employees.
In 1981 I was working for one of the biggest failures of the recent oil boom: spent $550 million to find $60 million of oil/NG. I stood in the atrium and listed to El Presidente explain to the entire staff that while it was painful to have just let 200 office folks go that day it was necessary to maintain the financial health of the company. But I knew something the remaining 600 employees didn’t know: he already had compiled the list of the next 550 employees he was planning to lay off. I knew because I was romantically involved with one of the executive floor secretaries…a nice side benefit. LOL. So I bailed as soon as I could find another hole to hide in. And no…I wasn’t one of the 550 but it was just a matter of time before the entire company went into bankruptcy and was liquidated.
I got the word spread around but there were still folks drinking to Kool-Aid months later when they cut the 550 loose. I went to our local pub to hang with some of them. I vividly recall talking to one of the old geologists who couldn’t believe what had just happened. He had heard the scuttlebutt about the pending layoffs. But I could tell why he hung on to the “Things will get better soon” BS: He was old and, IMHO, not a very good geologist. He had to ignore the obvious because between his age and lack of skill he would probably never get another job before he eventually passed.
And now at age 63 I may be facing a major collapse. But I figured out how to survive the 80’s bust and I wasn’t nearly was marketable then as I am now. And that’s probably why I’m at least open to the prospect of a long term collapse of the oil patch. I’m able to avoid the “wishing” phase of a major down turn. That and my basic attitude: “F*ck ‘em…they can kill me but they can’t eat me. That’s against the law” LOL.
But if you’re the leader of a pubco who has just seen the stock drop 30% – 40% you are going to tell the “Things will get better soon” story right up to the day he has to pack up his office.
Davy on Thu, 4th Dec 2014 7:16 am
Damn, folks, if Rock gets skiddish run for the hills!!
Rock, great real life view, this time may or may not be different but some thing don’t change like hiring and firing.
Kenz300 on Thu, 4th Dec 2014 8:11 am
KSA will eventually cut production…. but they can’t and will not do it alone………..
They are trying to slow the growth of shale, tar sands and deep water plays……. and reduce future production increases……. Investment will slow in a lower price environment.
They also want shared cuts from other producers……. after some pain other producers will be more interested in making some cuts…..
Once shale, tar sands and deep water investment has slowed and other producers are willing to cut production there will be an OPEC agreement on cutting production. KSA will not do it alone.
westexas on Thu, 4th Dec 2014 8:21 am
I think that the recent 2008/2009 price decline is more relevant.
The annual price of Brent fell from $97 in 2008 to $62 in 2009. The monthly price fell by $91, from $134 in July, 2008 to $43 in February, 2009.
westexas on Thu, 4th Dec 2014 8:26 am
Regarding Saudi Arabia, I suspect that they have been waiting for a downturn in global demand that would allow them to maintain their production and net exports (especially during their low domestic demand winter season), as a way to drive down oil prices, which would hurt the high cost tight/shale producers.
But an important point to remember is that the Saudis have so far been unable, or unwilling (take your pick), to exceed their 2005 annual net export rate of 9.1 mbpd (total petroleum liquids + other liquids, EIA).
This post-2005 decline in net exports is in marked contrast to the large increase that they showed from 2002 to 2005, as their net exports increased from 7.1 mbpd in 2002 to 9.1 mbpd in 2005, as annual Brent crude oil prices rose from $25 in 2002 to $55 in 2005. Based on EIA data, their 2013 net exports were 8.7 mbpd (total petroleum liquids + other liquids).
As annual Brent crude oil prices rose from $55 in 2005 to the $110 range for 2011 to 2013 inclusive, Saudi net oil exports have been below their 2005 annual rate for eight straight years.
A second, and almost totally ignored, point is that CNE (Cumulative Net Exports) depletion marches on. By definition, it’s not whether Saudi Arabia has depleted their remaining volume of post-2005 CNE. It’s a question of by what percentage.
The following chart shows normalized values for Saudi production, net exports, ECI Ratio (ratio of production to consumption) and remaining estimated post-2005 CNE by year (with 2005 values = 100%). The estimate for post-2005 CNE is based on the rate of decline in the Saudi ECI Ratio (at an ECI Ratio of 1.0, net exports = zero). I estimate that in only eight years, through 2013, Saudi Arabia shipped roughly 40% of their post-2005 CNE. In 2013, I estimate that they shipped about 8% of their remaining post-2005 CNE.
http://i1095.photobucket.com/albums/i475/westexas/Slide21_zps74c9ebac.jpg
Incidentally, we know what happened from 1995 to 1999 for the Six Country Case History*, as their production rose slightly and as their ECI Ratio fell, they shipped more than half of post-1995 CNE from just 1996 to 1999 inclusive:
http://i1095.photobucket.com/albums/i475/westexas/Slide2_zps55d9efa7.jpg
One other interesting point is that the Six Country Case History showed an accelerating, year by year, rate of depletion in their post-1995 CNE, and I estimate that Saudi Arabia (and the 2005 Top 33 net exporters in general) are showing similar accelerating rates of depletion in post-2005 CNE.
The Six Country Case History, from 1995 to 1999, illustrates the profound difference between production and CNE depletion. As their production increased slightly from 1995 to 1999, and as their net exports and as their ECI Ratio both declined, they showed an accelerating rate of decline in their remaining post-1995 CNE.
Saudi Arabia, and the (2005) Top 33 net oil exporters overall, have shown an increase in production relative to 2005, with post-2005 declining net exports and declining ECI Ratios. As noted above, these mathematical characteristics correlated to an accelerating rate of decline in their remaining post-1995 CNE for the Six Country Case History.
*The major net oil exporters, excluding China, that hit or approached zero net oil exports from 1980 to 2010
Nony on Thu, 4th Dec 2014 9:11 am
(up scope)
Rock, it’s pretty hard to make the argument that the price drop is demand driven if volume has not declined. I think it’s a supply story. (1) You’ve had a rapid US shale growth (not small, not what the peakers dismissed in 2008). (2) Libya is back. [Yeah, there could be some change in the long term perception of growth affecting price, but that’s more in the nature of lower projections than a contraction of volume. Bottom line: volume is flat to up and price is down…that spells SUPPLY, not demand. The market waited to see if OPEC would cut or not and when they didn’t, it responded.]
And…you seem to want to blame supply when price is high “POD” (i.e. depletion). But not consider it on the flip side. And, I even agree there has been some “POD” (erosion of cheap oil). But there ALSO has been a pretty phenomenal demand growth (China, total volume up) behind the 1995-2010 price change.
bobinget on Thu, 4th Dec 2014 9:34 am
Incidentally, we did hit 20 million Bpd as I predicted.
Summary of Weekly Petroleum Data for the Week Ending November 28, 2014
U.S. crude oil refinery inputs averaged about 16.4 million barrels per day during the week ending November 28, 2014, 399,000 barrels per day more than the previous week’s average. Refineries operated at 93.4% of their operable capacity last week. Gasoline production decreased slightly last week, averaging 9.6 million barrels per day. Distillate fuel production increased last week, averaging over 5.0 million barrels per day.
U.S. crude oil imports averaged 7.3 million barrels per day last week, down by 170,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged over 7.3 million barrels per day, 6.2% below the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 724,000 barrels per day. Distillate fuel imports averaged 122,000 barrels per day last week.
U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 3.7 million barrels from the previous week. At 379.3 million barrels, U.S. crude oil inventories are in the upper half of the average range for this time of year. Total motor gasoline inventories increased by 2.1 million barrels last week, but are well below the lower limit of the average range. Finished gasoline inventories decreased while blending components inventories increased last week. Distillate fuel inventories increased by 3.0 million barrels last week but are near the lower limit of the average range for this time of year. Propane/propylene inventories rose 0.2 million barrels last week and are well above the upper limit of the average range. Total commercial petroleum inventories decreased by 1.1 million barrels last week.
Total products supplied over the last four-week period averaged about 20.0 million barrels per day, down by 0.6% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged over 9.2 million barrels per day, up by 3.2% from the same period last year. Distillate fuel product supplied averaged about 3.9 million barrels per day over the last four weeks, down by 1.5% from the same period last year. Jet fuel product supplied is down 0.1% compared to the same four-week period last year.
bobinget on Thu, 4th Dec 2014 9:48 am
Gasoline consumption, up 3.2%
Distillates in storage a lower levels.
somehow, in this glut, rotten Thanksgiving travel weather, we managed to use up 20 million barrels of oil every 24/7
Hundreds of flights were cancelled.
3.7 FEWER million “extra” barrels then expected.
This… despite 93.4% refinery utilization.
We are still persistently importing over 7 million
barrels PD, most from Canada, Mexico and Venezuela.. not from KSA or Nigeria
get the complete breakdown here 1:00 Eastern
http://www.eia.gov/petroleum/supply/weekly/
Northwest Resident on Thu, 4th Dec 2014 9:49 am
Nony — It’s a question of which came first, the chicken or the egg. Isn’t it? Did oil production suddenly jump ahead of economic growth (oil demand) resulting in a “glut”, or did economic slowdown (or contraction, more likely) result in a retreat from demand?
All of the information I read from different news sources indicates that there has been a dramatic slowdown in economic activity and therefore a significant decrease in demand for oil.
I recall rosy scenario articles from not that long ago, predicting that the world would NEED “X” amount of oil production increase by 2030 just to meet anticipated demand, and the question was, where was all that production to meet constantly growing demand going to come from.
Then, as we all knew it would, China’s debt-fueled growth slowed. Consumers, buried deep in debt with increasing numbers out of jobs, simply didn’t have the money or the credit cards needed to go forth and be happy consumers — demand decrease.
We went from “needing X-amount of new production to meet demand” to a supply “glut” in a rather short period of time.
I know you and other Cornucopians want to spin this situation as the shale producers, magnificent over-achievers that they are, simply flooded the market with excessive amounts of oil.
But the logical and I believe factual view of the situation is that the world economy choked on too-high oil prices and far too much debt taken on to compensate for those too-high oil prices, leading to significant demand decrease FIRST. But the rigs keep pumping and the drillers keep drilling, so we have a “glut”.
Plant — If you choose to refute what I’ve written here, that’s fine, let’s discuss it reasonably and leave out the insulting and derogatory comments, please.
Davy on Thu, 4th Dec 2014 9:59 am
NOoster, are you telling me demand is having no impact on prices? That’s what your 1st sentence indicates. I see a marginally supplied market that was at high prices with stagnating demand. Now the taper is on, markets nervous, and China slowing.
It is going to be interesting if prices come back with an economy more ill than before. This price swing is doing widespread damage no matter the corn porn pitch that low prices are a tax break. Look at the dud called Black Friday.
Consumer confidence is lack luster. Most economic indicators are weak. The market is up which actually indicates these days bad news. The markets know bad news leads to a morphine drip from the fed.
NOo, I am willing to acknowledge supply is playing a role but you are corn porning me with “demand is fine”.
Northwest Resident on Thu, 4th Dec 2014 10:27 am
Davy — The cornies MUST believe that “demand is fine”, because if they acknowledge that demand is decreasing then they must also acknowledge that the “supply glut” is due to demand destruction, NOT from spectacular shale production increases flooding the market.
And as we all know, the corny POV is built on the “shale revolution” foundation. To acknowledge that the “shale revolution” foundation is crumbling is to have to admit that all those years of fighting the corny cause were a fruitless effort — they would have to admit they are wrong. Like I’ve said before, most of the original Cornucopians have long ago silently converted to the “doomer” POV, leaving only the hardcore stragglers like Nony, Plantagenet and Marmico to carry on the struggle against the doomer hoards. They’re like those Japanese soldiers they found still hiding in the Philippine jungles years after the war ended — they’ll never give up, they’ll never admit that they are and have always been flat out WRONG.
marmico on Thu, 4th Dec 2014 11:44 am
Nony, there is a combination of four possibilities. Outward shift in the supply curve, inward shift in the demand curve or a movement up on the supply curve and a movement down on the demand curve.
My cracked crystal ball* says, I don’t have a clue which shift/movement predominates but there is a lot of conspiracy chatter amongst the peaker tribe.
*Slope of the supply curve is my best guesstimate; where are the econometricians when you need them 🙂
Davy on Thu, 4th Dec 2014 11:52 am
Marm, good job showing some humility in the face of a confusing market. I am still leaning demand destruction from multiple POD’s convergences. That sounds like mighty fancy peaker talk hum Marm?
Kenz300 on Thu, 4th Dec 2014 1:04 pm
Every country that subsides oil prices to consumers should take this opportunity to reduce or end their subsidies.
They could shore up their budgets and consumers will not even notice the reduced subsidies with falling crude prices.
marmico on Thu, 4th Dec 2014 1:05 pm
Davy-boy, if you want to beef up your cattle herd before the next recession, you have lotsa time. You need to see more red, less green on this chart before you run out of time. The U.S. is the cleanest of the developed economy dirty shirts.
Davy on Thu, 4th Dec 2014 1:52 pm
Marm, like I keep telling the corns when they porn me “I hope you are right”! I just want everyone to be happy and live a wonderful life into the sunsets of their ending days. I want to be able to look at your linked graph and say “it is all better now”. Everything is fine no problems. Drink and be merry. Yeee haaa. Thanks Marm!
GregT on Thu, 4th Dec 2014 2:23 pm
“It is difficult to get a man to understand something, when his salary depends upon his not understanding it!”
Some things never change.
GregT on Thu, 4th Dec 2014 2:53 pm
“Rock, it’s pretty hard to make the argument that the price drop is demand driven if volume has not declined.”
Not when one considers that the world’s population is growing by 200,000 people per day, the global economy continues to grow at 2.5% per annum, and China, with close to one fifth of the world’s population, has an economy that continues to grow at 7% per year. When all of these factors are taken into consideration, demand for oil should be growing faster than global oil production has been able to keep up with. This is not the case, therefore other factors must be at play.
Either economic growth is not what we are being lead to believe, the economy cannot afford higher oil prices ( obviously), and/or the latest price pullback is due to manipulation or global geopolitics.
It is not an oversupply problem, unless price is taken into consideration.
shortonoil on Thu, 4th Dec 2014 3:52 pm
This is not the case, therefore other factors must be at play.
Those other factors are that the value of a barrel of oil is going down. In 2015 that will be about $76/barrel.
http://www.thehillsgroup.org/depletion2_022.htm
T. Boone is going to have a rough time finding enough suckers to pay $100 for a product that is only worth $76.
synapsid on Thu, 4th Dec 2014 6:21 pm
Nony, ANYbody,
“Libya is back”
Does anyone have any numbers on how much Libyan production reaches markets outside Libya? We keep seeing production numbers but I have yet to see any export numbers.
Why believe the production numbers coming from a failed state?