Oil skyrockets 23% in 48 hours, tops $32

39 Comments on "Oil skyrockets 23% in 48 hours, tops $32"

Apneaman on Fri, 22nd Jan 2016 6:46 pm 



Shale BOOM/Miracle/Revolution 2.0

We need graphs for 19 days data?

Boat on Fri, 22nd Jan 2016 7:35 pm 



“The world simply has too much oil, especially given lackluster demand growth due to the slowdown in China”.

Geeze, where do they get their facts when spouting off. After the crash in 2007 the world actually consumes less oil for 2 years. Since then consumption has risen steadily and is still projected to rise 1.4 million per year in 2016. 1.4 million is excellent growth compared to historical charts.

I bet you doomers like having me around to help keep your facts straight.

http://www.indexmundi.com/energy.aspx

apeman

Be sure to scroll over the dots to get the average growth per year. Explain that to GregT. He doesn’t do well with charts.

sean on Fri, 22nd Jan 2016 8:12 pm 



Why no figures for 2014/ 2015?

Plantagenet on Fri, 22nd Jan 2016 8:41 pm 



We’re still in an oil glut, as long as the glut continues there will be downward pressure on the price of oil. Yes we had a big one day move upward, but thats after over a year of downward price moves.

twocats on Fri, 22nd Jan 2016 8:49 pm 



Here’s 14/15, and boat is right, demand continued increasing YOY, just not as fast as supply, and there were like 5 months of surplus before prices started dropping. still, seems like a minor difference for such a huge drop. the best phrasing i’ve heard yet is that supply/demand may have driven oil from $100 to $60, but something non-fundamental drove it from $60 to $30.

http://www.artberman.com/world-oil-demand-surges-a-data-point-for-price-recovery/

twocats on Fri, 22nd Jan 2016 8:58 pm 



sorry, that one was a little old, here’s one from July

http://www.artberman.com/something-solid-world-oil-demand-increases/

specifically the surplus/deficit chart is helpful. so yes it may be expensive oil, but if no one wants to buy it, does it really matter how much it costs to produce? The real action won’t come until production and consumption trend lines kiss again, then we’ll see what’s what.

antaris on Fri, 22nd Jan 2016 9:13 pm 



When the aliens flew past last in 1921 nothing much was going on. In 2064 when they come by it will be pretty much the same. One will ask about the large sign ” boats a fucking tard” , some mention will be made about nuclear levels and it seams to be a lot harder to see the ground.

Boat on Fri, 22nd Jan 2016 10:12 pm 



twocats,

Many people keep trying to make that argument. Go look at world consumption charts for the last 20 years. At this time consumption growth is still healthy.

“the best phrasing i’ve heard yet is that supply/demand may have driven oil from $100 to $60, but something non-fundamental drove it from $60 to $30”

Fact is even with healthy consumption storage tanks around the world are still filling up. They did not start draining at $60. The price of oil will continue to drop until a trend proves that demand outstrips supply. That means the storage tanks begin to empty.

GregT on Fri, 22nd Jan 2016 10:58 pm 



“The greatest shortcoming of the human race is our inability to understand the exponential function.”
-Albert Bartlett

You Boat, are a prime example of the human race’s biggest shortcoming. Lack of intelligence.

Bloomer on Fri, 22nd Jan 2016 11:58 pm 



Got to agree with the Boat here. When oil was at $100 a barrel there was a lot of speculation in that price. Same goes on the downside at $30 a barrel where the short players are making a killing. Somewhere between $30 and #100 is the equilibrium price based on fundamentals. 1 million barrels a day of oversupply is not all that excessive when you consider the world consumes 90 million barrels a day.

One other point: we are starting to see oil production in North American diminish. I find it a bit unnerving when the most unstable regions on earth-supply even a greater portion of crude oil.

GregT on Sat, 23rd Jan 2016 12:57 am 



“Got to agree with the Boat here. When oil was at $100 a barrel there was a lot of speculation in that price. Same goes on the downside at $30 a barrel where the short players are making a killing.”

Not too difficult to understand why you agree with Boat here Bloomer. You both appear unable to see the forest through the trees.

GregT on Sat, 23rd Jan 2016 1:11 am 



“One other point: we are starting to see oil production in North American diminish. I find it a bit unnerving when the most unstable regions on earth-supply even a greater portion of crude oil.”

Oil production in North America started to diminish over 4 decades ago Bloomer. “The most unstable regions on earth” were purposefully destabilized by the west because they had the resource that North America needed the most, OIL.

makati1 on Sat, 23rd Jan 2016 1:45 am 



GregT, Boat is lost. Reality is not even in his dictionary. Obviously he is so deep in some oily investments that he cannot look at anything real for fear that he may realize that he is broke. Or, his career depends on the oily business continuing forever. There is going to be a lot of people who find out that their career, investments and knowledge are worthless in the post oil future.

What will an economist do when there is no economy? A geologist when no one cares what the geology is? A historian? Psychiatrist? Archaeologist? Actuary? Nuclear physicist? Or any scientist?

I hope they are thinking about that and preparing for that eventuality. All of those ‘careers’ are a product of excess, cheap energy and will disappear when that excess,cheap energy goes away.

GregT on Sat, 23rd Jan 2016 2:06 am 



BillT,

Do you remember a couple of years back when you invited me to come visit you?

GregT on Sat, 23rd Jan 2016 2:21 am 



My apologies for attempting to be the intermediary. You have been right all along.

twocats on Sat, 23rd Jan 2016 2:31 am 



Every now and again Boat will stumble upon a half-decent assertion. His grammar blows and his overall understanding of how economics and the world works barely ranks with either a 14yr old or a star-athlete turned investor ala Lenny Dykstra. Do we know if English is his first or 2nd language? I’m not knocking him, I just don’t want to make too much fun of him if he’s ESL.

GregT on Sat, 23rd Jan 2016 2:37 am 



Boat is an all American boy twocats, 58 years worth.

Davy on Sat, 23rd Jan 2016 5:47 am 



“At this time consumption growth is still healthy.” I presume that is why the global financial system is running on all cylinders…WTF. Come on, we have obvious growth issues now. There is not enough growth where it matters (Main Street) and too much where it just makes things worse (bubbles). This current consumption rate of oil and growth rate for the economy is obviously not healthy. It may be considered growth but I consider a significant portion of it growing bad debt.

Much of the oil consumption growth does not reflect beneficial investment of that resource in productive activities that support real growth. It is apparent to most here that a significant amount of the expensive oil produced over the last 10 years was not economically beneficial. It was “bubble” oil just like many other commodities and development. This bubble “stuff” is now turning out to be associated with bad debt “anti-growth”.

The minimum operating level of the economy is nearby and the oil demand/supply dynamics is way out of kilter. We are approaching a break point of the global system in its growth dynamics. We must grow but we cannot grow properly to sustain a growing growth rate which is vital to our economic system and growing population. The break will take us to a lower activity level with significant infrastructure loss and likely population growth pressures. Population growth pressures is a nice word for excess deaths over births. It also could be worse there is no reason why we cannot crash and burn especially considering all the poor decisions and all the blame and complain war mongering we see on all sides.

makati1 on Sat, 23rd Jan 2016 7:53 am 



GregT, the offer is still open, but if it is not this year, you will have to visit me in the jungle, at the farm. Do you get along with cobras? We have a few of those wandering around there. About five years ago, they killed one over 12 foot long near the spring. I have a three foot section of it’s skeleton on my book shelf. They do try to avoid humans and they keep the rodents down. One did kill one of the dogs there two years ago. I was told that she was protecting her pups when it happened. But then, I had copper heads and rattlesnakes back in PA. Nothing new, just different. You just watch where you walk.

Boat on Sat, 23rd Jan 2016 7:58 am 



Davy,
Go look at the historical year by year world oil consumption charts. Then tell me the projected 1.4 million growth projected for 2016 is so bad.
Facts are facts. Your playing games in your mind. Bubble oil? lol

Boat on Sat, 23rd Jan 2016 8:16 am 



Davy,

The oil glut if you want to call it that and the problems it is causing to some countries is simply the result of about 1.5 mbpd. Less than 2% of the market. Producers are causing this self inflicted rout in prices. With a minimal amount of cooperation they could have cut back that amount but instead went for market share.

shortonoil on Sat, 23rd Jan 2016 8:43 am 



“the best phrasing i’ve heard yet is that supply/demand may have driven oil from $100 to $60, but something non-fundamental drove it from $60 to $30.”

Non fundamental; the CBs dropped $14 trillion in funny money onto the world’s FX markets. The Chinese got 37 billion square feet of unused commercial space, and the US got 3.5 mb/d of camel pea. Its hard to tell who won?

onlooker on Sat, 23rd Jan 2016 9:01 am 



“There is not enough growth where it matters (Main Street) and too much where it just makes things worse (bubbles)”
Absolutely and this threatening a deep deflation amid monetary inflation as all this funny money circulating will be seen as pretty worthless. So deflation in fixed assets and currency/commodity inflation.

Boat on Sat, 23rd Jan 2016 9:45 am 



onlooker,

Here in the States we like to think we have our own choice on what to buy or invest in. There are many though who want governments to make those choices for us.
For example if you want to help main street you could jack up the price of anything unhealthy like sugar and salt to make it unaffordable and the population would be healthier. You could tax any fossil fuel to push renewables for a healthier climate. Thing is we don’t vote candidates in with that kind of message. Take guns for instance. Lot of death, murder, accidents in the states. Lots of cost. But the population has resisted any such effort. We want our guns, our sugar and our salt. Even if it makes sense not to have it in huge quantities.
Don’t complain about governments or 1%ers. We all make our own choices on spending and bubbles.

joe on Sat, 23rd Jan 2016 10:01 am 



Hey Boat, it’s called OPEC, and even they can’t seem to get it right. Hey, sticking it to infidels in the west is pointless anyway. Demographically Muslims are growing in the west, so Allah wouldn’t like OPEC to cut too much.

onlooker on Sat, 23rd Jan 2016 10:42 am 



Yeah Boat you got that right. America is the land of anything goes.

rockman on Sat, 23rd Jan 2016 11:18 am 



Just a reminder: oil did not sell for $32/bbl yesterday or $26/bbl Wednesday. Those were the oil future bids probably for 30 day contracts. The price of future contracts when these contracts expire will determine how much money is made/lost on these two sets of contract. When the trucks pick up the Rockmans’s oil at the end of January neither the $32/bbl or the $26/bbl bids will have any effect on the price he gets for that oil.

BTW the price paid for the hundreds of millions of bbls of oil being transported last week has no relationship to those $32/bbl or $26/bbl bids. Those prices were set long ago.

twocats on Sat, 23rd Jan 2016 11:30 am 



Fair enough, but wouldn’t that make the price of oil Rockman is getting a lagging indicator of the economy and all its entrails? I imagine if hedges are involved somehow then perhaps its hardly an indicator at all?

shortonoil on Sat, 23rd Jan 2016 12:06 pm 



“I imagine if hedges are involved somehow then perhaps its hardly an indicator at all?”

Oil has fallen 70% in price, and there has been “maybe” a 3% increase in demand. There is no way that this market can balance. Assuming a 1 mb/d over supply, oil would have to fall to $22.50/ barrel to have that happen. $22.50 is below the average producer’s lifting cost. Essentially the petroleum industry would have to shut down to balance the market. That is exactly what is happening. This isn’t rocket science, its sixth grade math.

rockman on Sat, 23rd Jan 2016 1:14 pm 



Cat – If you’re talking about the prices folks buy oil futures it has zero value as an indicator of anything other then what the futures buyers think oil will be selling for when their contracts expire. When those $32/bbl futures expire oil (actually 30 day future bids on that day) will be $X/bbl. If $X is higher then $32/bbl they’ll make a profit. If it’s less they lose money. What someone pays for a 10,000 bbl future contract today has no effect on what those contracts will be selling for in 30 days.

Boat on Sat, 23rd Jan 2016 3:45 pm 



short,

Is this PHD stuff working? Assuming a 1 m/b oversupply only wells equaling 1 mb/d would have to shut down. Producers would rather go bankrupt rather than cooperate to slow production. That’s how smart humans are.

shortonoil on Sat, 23rd Jan 2016 6:14 pm 



Producers would rather go bankrupt rather than cooperate to slow production.”

There are 48,000 operating oil fields in the world. How are you going to get 48,000 different producers to cooperate? OPEC couldn’t get 12 to cooperate without someone cheating. The only ones who would agree to cooperate would have the name SUCKER tattooed on their forehead. This game is called “the last man standing”; “survival of the fittest”; “the one with the biggest club wins”. The oil age is ending, and they will fight it out down to the last barrel.

Apneaman on Sat, 23rd Jan 2016 6:41 pm 



short, lets not overestimate the psychological “fitness” of the oil players and those backing them. They have had things their way for quite some time and are now in uncharted territory.

SUNK-COST FALLACY
(also known as: concorde fallacy)

Description: Reasoning that further investment is warranted on the fact that the resources already invested will be lost otherwise, not taking into consideration the overall losses involved in the further investment.

http://www.logicallyfallacious.com/index.php/logical-fallacies/174-sunk-cost-fallacy

Davy on Sun, 24th Jan 2016 5:42 am 



“Energy Creditors Lucky To Recover 15 Cents On The Dollar In Bankruptcy”

http://www.zerohedge.com/news/2016-01-23/energy-creditors-lucky-recover-15-cents-dollar-bankruptcy

“we reported that in the latest twist of the energy sector collapse, liquidating oil and gas producers, and specifically their creditors, got a nasty lesson in trough cycle asset values when in one after another bankruptcy “stalking horse” aka 363 auction, they were not only unable to cover the outstanding debt (both secured and unsecured) through asset sales, but barely able to cover a tiny fraction of it.”

“A lot of people got into this business and didn’t really understand the ups and downs of price cycles,”

“The problem as the chart below shows is that these bankruptcy auctions confirm recoveries on existing debt will be paltry, and based on our limited dataset, average to roughly 15 cents on total debt exposure, which includes both secured and unsecured debt.”

“As a reminder, there are currently over 60 companies accounting for $325 billion in debt which are cash flow negative, a number which is about to surge as oil price hedges expire, unless of course oil manages to soar from here. If only 10% of these companies file in 2016, that would mean a doubling of the total amount of defaulted debt in 2015, and a shock to the entire US banking system which despite what it would like you to believe, it very much exposed to the next big default wave. It’s only downhill from there.”

shortonoil on Sun, 24th Jan 2016 7:27 am 



“SUNK-COST FALLACY”

As long as these producers can keep pumping oil for less direct costs than they can sell it they will keep pumping. This has nothing to do with profit, or return of capital. It is a matter of making executive salaries for as long as they can keep the Sheriff at bay. When the power company arrives, and pulls the switch, they will grab their last check and head for the bank. In the mean time they are going to be busy signing the house, and property over to the wife and kids, and moving their cash offshore. They plan on drinking Margaritas on a beach in Aruba as their once duped investors get to eat cat food. It is certainly not the first time this scam has been pulled, but it is probably the first time it has been pulled for a $trillion. Chances are not one of them will see the inside of a jailhouse.

shortonoil on Sun, 24th Jan 2016 7:38 am 



“Energy Creditors Lucky To Recover 15 Cents On The Dollar In Bankruptcy”

In a year that is going to read:

“Energy Creditors Lucky To Recover 5 Cents On The Dollar In Bankruptcy”

The end of the oil age will be witness to the largest destruction of capital in the history of the world. When an economy has moved back to an 1890’s level, it has moved back to an 1890’s level. The wealth that was there previously will not be there anymore!

twocats on Sun, 24th Jan 2016 10:05 am 



“Energy Creditors Lucky To Recover 15 Cents On The Dollar In Bankruptcy”

that article’s charts really clarifies the increasingly hazardous situation in a way the words cannot. If you haven’t viewed this article you should.

short’s comments about the motivations to keep it going are spot on – an article of “where are they now” for some of these already bankrupt companies principal officers would be interesting. But I don’t need an article, I’ve seen it in practice on a smaller scale and that’s just how it is.

makati1 on Sun, 24th Jan 2016 5:24 pm 



Short, there are going to be a lot of very poor people in the near future when all of their paper wealth evaporates. Most of it is dependent on oil energy somewhere along the line, including home values. Mutual funds, 401Ks, savings accounts, etc., all will be reduced to cat food instead of steak.

I look around at the many (6 within 4 blocks of my address, possibly 100+ city wide) condo towers and new office towers going up here in Metro Manila and shake my head. The world economy is going to end long before those who are buying new condos now can pay them off. The city itself may not be livable long before then. Also, no workers, no offices needed.

So many are planning their future based on BAU. Too bad their future is not going to be anything like they expect. The oil people are just among the first to see what is coming, I think.

We can only hope that the decline stops around the 1890s level. It could go all the way to extinction in a worse case scenario. Sometimes being 71 is not such a bad thing.

rockman on Mon, 25th Jan 2016 6:48 am 



Cat – While some of the oil patch management is trying to hang on to their salaries many expected this slump to EVENTUALLY happen and were prepared to “head to the house” permanently (old oil patch saying for leaving your job…voluntarily or otherwise).

But that’s far from the main reason for continuing to sell at the low prices: have to pay what overhead is still there as well as pay the debts. Especially true of the pubcos: they are required by SEC laws to do whatever is necessary to keep a company solvent. And if that means selling reserves below replacement or finding costs the so be it.