Peak Oil is You
Donate Bitcoins ;-) or Paypal :-)
Page added on October 3, 2014
Oil Prices Continue Decline, Pressured by Saudi Action to Defend Market Share
Crude oil prices continued their decline on Thursday, with the American benchmark dropping below $90 a barrel during the day and its main international equivalent falling as well.
Now at their lowest levels since 2012, crude prices have been under pressure in recent months. The increase in global demand for oil this year is turning out to be slower because of weaker-than-anticipated growth in China and Europe, while oil supplies remain strong, leading to growing inventories.
But the sudden drop on Thursday was seen as a response to Saudi Arabia’s signaling on Wednesday to the markets that it was more interested in maintaining market share than in defending prices. Saudi Aramco, the national oil company, stunned markets by announcing that it was cutting prices by about $1 a barrel to Asia, the crucial growth market for the Persian Gulf producers, as well as by 40 cents a barrel to the United States.
With oil prices already under pressure, “there has been a widespread perception or hope that the Saudis would pull back on production,” said Richard Mallinson, an analyst at Energy Aspects, a research firm based in London.
Instead, he said, the Saudis are “pricing aggressively to retain buyers,” potentially at the expense of their rivals in the Organization of the Petroleum Exporting Countries, like Iran and Iraq.
Brent crude, the main international benchmark, closed at $93.42, down 74 cents, on Thursday. West Texas Intermediate, its American counterpart, was around $88.60 a barrel in early trading, dropping below $90 for the first time since April 2013, before recovering to close at $91.01, up 28 cents.
Some analysts expect downward pressure on prices to continue. Citigroup last week cut its forecast for 2015 prices for West Texas Intermediate by $10 a barrel, to $89.50 per barrel.
Falling crude prices are bringing down gasoline prices for motorists. Prices fell to a national average of $3.33 a gallon for regular unleaded — the lowest since February — in the United States on Thursday, according to the AAA Daily Fuel Gauge Report.
“Barring any major disruptions in demand, drivers are expected to see some of the lowest prices since 2010,” the group said in a commentary.
The main source of supply growth continues to be the United States, which, as a result of the shale oil boom, now rivals Russia and Saudi Arabia in oil output.
The International Energy Agency, the energy consumers organization based in Paris, says the United States produced about 8.5 million barrels a day of crude oil in August, as well as roughly three million barrels a day in liquids from natural gas. By comparison, the agency says, Russia produced about 10.9 million barrels per day in liquids. Saudi Arabia is producing an estimated 9.8 million barrels a day of crude.
Exports of crude from the United States have risen to about 400,000 barrels a day, and analysts say that ConocoPhillips’s recent sale of a cargo of Alaskan crude to South Korea, a crucial market for gulf producers, could be a breakthrough.
“What we are seeing is pressure starting to mount on the Saudis as it hasn’t before,” said Seth Kleinman, an analyst at Citigroup in London.
While the United States remains a modest oil exporter, its surging output pushes other oil, particularly from West Africa, out of the American market, helping to lower prices. Net oil imports to the United States have fallen since 2007 by 8.7 million barrels a day, “roughly equivalent to total Saudi and Nigerian exports,” according to a recent Citigroup report.
The production surge in the United States has enabled the oil markets to shrug off potential disruptions in supply. The confrontation with Russia over Ukraine, political instability in countries like Syria and Iraq and even the Ebola outbreak in West Africa all have the potential to disrupt supply, but instead, oil prices have softened.
Another source of unexpected crude has been Libya, where production has bounced back sharply to around 800,000 barrels a day from around 240,000 barrels a day in June.
At times of falling prices, other producers look to the Saudis to throttle supply. But this time, OPEC leaders appear reluctant to do so.
What they may be doing is jockeying ahead of a scheduled meeting in November to force countries like Iraq and Iran to share in the pain of any production cutbacks.
“The Saudis are frustrated by the expectations of Iraq and Iran that it is all on the Saudis to balance the market,” Mr. Mallinson of Energy Aspects said.
55 Comments on "Oil Prices Continue Decline, Pressured by Saudi Action to Defend Market Share"
Nony on Fri, 3rd Oct 2014 8:12 am
🙂
paulo1 on Fri, 3rd Oct 2014 8:19 am
re: “While the United States remains a modest oil exporter, its surging output pushes other oil, particularly from West Africa, out of the American market, helping to lower prices.”
hmm….import what now, 40% of consumption and call it ‘modest exporter’!! More bullshit for a dumb public in denial.
Wake me up when the US becomes a net exporter, please.
Paulo
Nony on Fri, 3rd Oct 2014 8:35 am
It is not a NET exporter. But it is AN exporter. Duh.
Read two sentences later and than the article says the US is a NET importer.
I think the NYT reporters know how to write and think.
Davy on Fri, 3rd Oct 2014 8:46 am
Noo, give it a rest son. You corns play double talk and circle jerks. Noo, and, you complain about my world salad bullets. Paulo is spot on.
bobinget on Fri, 3rd Oct 2014 9:00 am
Shale won’t turn a profit @$89.
Most exporters, Russia in particular, need $100 to
meet budget requirements.
Having said all of above, think gas. Europe will need additional gas as will the NE US if that evil ‘Polar Vortex’ returns as many meteorologists are predicting.
How much longer will Russia hold out before acting against KSA ? Maybe, the Saudis have no experience dealing with Russian mendacity.
IMO, since the Mideast is already a war zone, there
will be repercussions aplenty if the Saudis do not cut
production, someone else will do it for them.
At the end of day Russia will head up a new cartel along with Venezuela, Iran and Iraq as majors.
paulo1 on Fri, 3rd Oct 2014 9:19 am
What Nony really means to say:
“It says it plain….it’s in the fine print. Don’t bother with the theme of the article….delve into the fine print.”
So, your average Corny is going to read just above my offending point:
“Exports of crude from the United States have risen to about 400,000 barrels a day, and analysts say that ConocoPhillips’s recent sale of a cargo of Alaskan crude to South Korea, a crucial market for gulf producers, could be a breakthrough.
“What we are seeing is pressure starting to mount on the Saudis as it hasn’t before,” said Seth Kleinman, an analyst at Citigroup in London.”
And then, Cornies are supposed to read this at the bottom
“Net oil imports to the United States have fallen since 2007 by 8.7 million barrels a day, “roughly equivalent to total Saudi and Nigerian exports,” according to a recent Citigroup report.
and understand that US still is importing oil. Certainly the word ‘net’ indicates this, but the paragraph goes on to hint that it is inconsequential…in fact, it is so confusing one would actually have to reasearch that imports are finally less than domestic production but barely. In fact, the American experiment would probably die in about 1 day if imports stopped. Joe Sixpack and Mr. Investor probably will never understand that not only will the us NOT ever be self-sufficient in energy production, they had better get cracking (excuse the pun) before the whole shitaree falls apart.
Paulo
Davy on Fri, 3rd Oct 2014 9:25 am
Noo and Marm, you copy Paulo? Roger that?
Danlxyz on Fri, 3rd Oct 2014 10:25 am
The KSA might be trying to bankrupt the high cost suppliers. We know that the LTO companies are taking on a lot of debt. http://www.eia.gov/todayinenergy/detail.cfm?id=17311
If prices stay low for awhile they wont be able to pay back the hundreds of billions that they owe. Much less keep on drilling 120+/- holes a month @ $8 million each in the Baaken.
Didn’t they drive the price down to $10 in the ’70s or early ’80s?
BTW does anyone have a link to the daily price of ND Sweet?
Perk Earl on Fri, 3rd Oct 2014 10:52 am
How far is price from making tar sands unprofitable?
marmico on Fri, 3rd Oct 2014 11:23 am
Roger. Copy. Is the issue price or volume?
The EIA says that by volume the net petroleum deficit has declined from 12.764 mb/d in May 2007 to 4.994 mb/d in July 2014 (call it 7.8 mb/d from maxima to minima). The Census says that the August 2014 petroleum deficit of $13.1 billion was the lowest since July 2004.
Plantagenet on Fri, 3rd Oct 2014 11:58 am
When oil prices drop too low oilcos stop drilling and oil supply becomes tight. Higher oil prices are definitely coming, so enjoy these low prices while they last.
Davy on Fri, 3rd Oct 2014 12:18 pm
Planter, how many folks have predicted oil prices like the weather. We know the weather gets hot and cold. Oil prices are all over the board for multiple reasons. Who knows what is coming.
paulo1 on Fri, 3rd Oct 2014 1:14 pm
Perk,
It depends on the project and when it was built, etc. Some are profitable at $35.bbl and the newer ones with recent expensive capex are said to need $60-$85. However, even the marginal ones will sell at a loss for a good while as it is cheaper than shutting down with no cash flow at all.
This is what I have been told. Plus, as these are such long-term projects with such huge reserves they are looking far down the road as opposed to short-term profits.
Paulo
Davy on Fri, 3rd Oct 2014 1:21 pm
Well put Paulo. Rock has commented on your above points in his many oil patch posts.
Plantagenet on Fri, 3rd Oct 2014 1:30 pm
Davi, when global oil production peaks, oil prices will go higher. The current low prices reflect a temporary oil glut.
CHEERS!
Feemer on Fri, 3rd Oct 2014 1:37 pm
Can’t help but think the US has pressured Saudi Arabia to lower oil prices in order to hurt Russia (which im fine with).
Northwest Resident on Fri, 3rd Oct 2014 1:57 pm
Plant — There you go with the “oil glut” thing again. I’ve been googling on my lunch break, trying to find out just how much oil actually comprises that “oil glut”. But wherever I find the term “oil glut” being used, it is by articles that claim American energy independence, America overtaking Saudi Arabia and Russia as the world’s leading oil producer, blah blah blah. In other words, “oil glut” is closely tied to pure B.S. articles, and they never say how big the glut is, they just tell us there is an oil glut and we’re supposed to believe it. Well, obviously you DO believe it, and that also explains why you believe the “oil glut” is responsible for the drop in price per barrel of oil, because that’s the other “fact” those same articles are pushing.
I won’t hold you responsible for being suckered into believing that current drops in oil price are due to an “oil glut”. Everybody else is getting suckered into believing that B.S. lie too — except of course for the really smart, informed and aware folks out there, of which there aren’t a lot.
If you know how much oil is in that “oil glut”, please, let us all know.
shortonoil on Fri, 3rd Oct 2014 1:59 pm
“BTW does anyone have a link to the daily price of ND Sweet?”
Plains All American is probably about the best. Its the one we use most often.
http://www.paalp.com/fw/main/default.asp?DocID=1363
Flint Hills Resources quotes condensate, they are part of the Koch.
It is still early to tell, but what could be happening is that we are very close to the maximum price of petroleum that the economy can tolerate. Our analysis indicates that is $117/barrel. If that is what is happening we are witnessing the last stage of the oil age. The Etp model tells us that petroleum’s ability to power the economy is in decline. As it declines the economy declines, and demand goes down. The highest cost production will be abandoned first. We should know one way, or the other in a few months.
http://www.thehillsgroup.org/
Plantagenet on Fri, 3rd Oct 2014 2:30 pm
@NWR There is enough oil in the “oil glut” to drive the price of oil down to ca. $90/bbl. The facts are clear—the price of oil is FALLING. KSA just cut the price they are selling oil to Asia at in order to keep their market share. Oil is down about 20% in just the last three months. CHeck it out:
http://www.infomine.com/investment/metal-prices/crude-oil/1-year/
Northwest Resident on Fri, 3rd Oct 2014 2:44 pm
Plant — I don’t see that the “facts are clear”. We are told there is an “oil glut”, but define “oil glut”. What is it? More oil than the world can use? Or is it more oil than the world can pay for? If we don’t know the size of the “oil glut” then we really can’t be sure there IS an “oil glut”, can we? You’re willing to take their word for it, looks like, but I tend to interpret most of the “oil glut” news as pure lies and propaganda. If they (or you, or somebody) could quantify and define “oil glut”, then you might make me a believer, but I doubt it.
There ARE OTHER REASONS for why the price of oil is falling, as mentioned above by shortonoil, and that’s not even the only possible real reason, but probably the most likely.
Some folks just want to believe there is an oil glut and that is why prices are falling. But as long as we just have to take it on faith that there is an “oil glut”, then I think I’ll remain extremely pessimistic about any supposed “oil glut”.
Plantagenet on Fri, 3rd Oct 2014 3:14 pm
An “oil glut” is when the market is oversupplied with oil to the point that oil prices drop by 20% in only three months.
How hard is that to understand?
Davy on Fri, 3rd Oct 2014 3:24 pm
NR, your spot on why argue with a brick wall?
Plantagenet on Fri, 3rd Oct 2014 3:51 pm
Why argue at all? The facts are clear. The oil markets are oversupplied so the price of oil is falling. Its down 20% in three months. That is reality.
What in heck is there to argue about?
Northwest Resident on Fri, 3rd Oct 2014 4:02 pm
Plant — Now I see why you’re wrong so often. What seems like “clear facts” to you is obviously “pure B.S.” to most everybody else. You’re taking the investment/financial “oil glut” bait — hook, line and sinker.
Just like my dad, the preacher, when he says it is “obvious that evolution is a lie and that the earth is only 2000 years old” — yeah, obvious, except to people who actually think.
Have fun with your obvious oil glut — snicker snicker…
Plantagenet on Fri, 3rd Oct 2014 4:25 pm
NWR: Your dad was preacher? No wonder you have daddy issues!
Meanwhile, Have fun driving your gas guzzler around on the cheaper gas resulting from the temporary oil glut.
CHEERS!
Northwest Resident on Fri, 3rd Oct 2014 4:37 pm
Still is… He says he’s going to preach until he drops!
Fortunately for me I don’t have a gas guzzler, nor do I have “daddy issues” (anymore). I dealt with those a long time ago.
BTW, there may be an “oil glut” — meaning more oil for sale than the world is willing or able to buy.
But that’s the question, isn’t it? Is there REALLY an oil glut? Are tankers of oil sitting around out there just waiting for a buyer? And if nobody is buying, is it because they don’t need or want that oil (oh, please, don’t make me laugh) — or is it because they can’t or don’t want to pay that much for the oil? OR… Is it because they don’t want the oil because there isn’t anything they can do with it to make a profit — in other words, it is still too damn expensive?
Plantagenet on Fri, 3rd Oct 2014 5:10 pm
Yes, there is really an oil glut. You can tell by the way the price of oil is dropping. Since global oil consumption is higher then it has ever been in history, your suggestion that the oil glut reflects a lack of oil buyers and oil consumers doesn’t make any sense.
PS: You clearly still have daddy issues or you wouldn’t be posting and complaining about your daddy. My advice to you is let it go. Your father did the best he could to raise you. Thats really all that matters.
Welch on Fri, 3rd Oct 2014 5:39 pm
Jeezus you guys carry on like a bunch of my students. Grade 2 students.
steve on Fri, 3rd Oct 2014 5:58 pm
yEAH what she said!!! but seriously How can the Saudi’s cut supply it is like Rock has said that they have to produce all out or they will lose money…maybe the short term gamble will pay off and maybe it won’t
Plantagenet on Fri, 3rd Oct 2014 5:59 pm
Your grade 2 students talk about peak oil and economics and current oil prices? Thats great. What do they have to say about it?
Plantagenet on Fri, 3rd Oct 2014 6:04 pm
Its easy for the saudis to cut supply. They just turn these very large wheels that activate valves that shut in the oil wells.
The Saudis are NOT currently producing all out. Look at the data
https://ycharts.com/indicators/saudi_arabia_crude_oil_production
shortonoil on Fri, 3rd Oct 2014 6:15 pm
@NR
A lot of the surplus liquid hydrocarbons in inventory are feedstock. The Gulf Coast storage facilities are over flowing with the stuff. Feedstock material only participates in the economy by acting as a raw material for other products. If the economy begins to decline, like the present one, demand for the products that are produced from feedstock will also decline.
Since feedstock material is lumped in with crude there could be a glut, and to some extend there is. That glut is of liquid hydrocarbons, not crude that can be used to produce fuels. Once the storage costs exceed the expected value of the feedstock buyers will stop purchasing it. As we have been saying for some time, LTO and condensate have a limited market. They only contribute to the economy indirectly, and are not energy sources for it. Unlike conventional crude they do not drive their own demand, they only fulfill a demand that is already there. That demand is produced by the higher quality oils, and those are rapidly disappearing! There is not a crude glut, there is a liquid hydrocarbon glut. They are a different kettle of fish, and it is necessary to differentiate between the two to have a realistic view of the world’s petroleum situation.
http://www.thehillsgroup.org/
rockman on Fri, 3rd Oct 2014 6:49 pm
“…its surging output pushes other oil, particularly from West Africa, out of the American market, helping to lower prices.” Yes. Nigeria in particular loss a big chunk of it’s US and Canadian east markets. Lost it to surging Bakken and EFS production. Production that increased as a result of the increase in oil prices. So yes: West Africa oil exporters lost market share due to oil prices being higher then they were receiving 10 years ago.
Poor little Nigeria… lost market share… while their revenue from their oil production increased from $30 BILLION/yr to over $80 BILLION/yr. Just like poor little KSA that has to suffer from their efforts to maintain market share…while their revenue has increased around 300%. Which, obviously, is due to the increase in oil prices. Can’t deny the obvious correlation here: loss of market share due to increased US oil production has significantly increased the revenue of the oil exporters. Logical to every cornie in the land…right? LOL.
Nony on Fri, 3rd Oct 2014 7:41 pm
It all depends on your start and end points, Rock. If you compare now to 10 years ago, sure Nigeria is better off. If you compare it to 2 years ago, they are worse. A corny who denies the former is being a sophist. You ignoring the latter is also deceptive.
Lather, rinse, repeat.
Now how about some more stories about the old Austin Chalk? Maybe we can call Halliburton and impress them with your comments that shale drilling hasn’t advanced at all and that you know it better than them.
🙂
JuanP on Fri, 3rd Oct 2014 7:45 pm
Bobinget “Most exporters, Russia in particular, need $100 to meet budget requirements.”
IIRC, last year Russia proyected a minimum price of $90 per barrel for this year, and built this year’s balance based on that minimum price as they do every year. There is no doubt though that this is costing Russia many billions in lost profit, though. And next year’s budget will prove extremely challenging for them.
Russia’s economy is only growing at an annual 0.5% according to the latest World Bank report, and, IMO, they are facing an economic war and peak oil at the same time.
Nony on Fri, 3rd Oct 2014 7:45 pm
I still haven’t drilled any rigs, either. Did some arduous PowerPoint this week, though. Man my fingers got tired from the typing and scrolling…
https://www.youtube.com/watch?v=9yXzZTYjUl0
Northwest Resident on Fri, 3rd Oct 2014 8:24 pm
shortonoil — Thanks for the professional scoop on what is being called an “oil glut”. I suspected that was the case, but just didn’t know how to say it in “oil man terminology”. Over on another thread I stated that the “oil glut” was probably composed of fracked liquids, some of which was oil, to which the cornie poster known as marmico assured me that it was “mostly” oil. I’m sure that you are much closer to the truth of the matter than our friend marmico.
marmico on Fri, 3rd Oct 2014 8:28 pm
while their revenue from their oil production increased from $30 BILLION/yr to over $80 BILLION/yr.
Is that before or after the production sharing and joint ventures payments to Shell, ExxonMobil, Chevron, Total, and Eni?
Northwest Resident on Fri, 3rd Oct 2014 8:34 pm
Plant — This mistake you’re making is trying to apply basic economic principles to oil. Oil defies basic economic theory — maybe not when there is plenty of oil to go around, but as we enter crunch time and shortages of oil are upon us and looming ever larger, you can toss out all those basic principles of supply and demand when talking about oil.
BTW, Welch is right, you’re trying to drag this down to the level of a 2nd grader. What’s with the false and totally idiotic accusations. Trying to psychoanalyze me over the internet??? Look in the mirror Plant, that’s where the real source of the “issues” are. You get real mean and nasty when you get cornered, don’t you Plant?
Perk Earl on Fri, 3rd Oct 2014 8:35 pm
NWR, good for you for growing up in a situation you could have simply become a follower and accepted what you were told, to instead developing independent viewpoints. I took example from my older (rebellious) Brother to learn to think independently.
The message boards are entertaining for that very fact; mostly independent thinking people ruminating on a fascinating topic.
As for the price of oil, I haven’t found anything to suggest a glut enough to substantiate the recent large drop in oil price. I’ve got to think it’s partly linked to QE ending in the US, the deteriorating fiscal situation in japan and the EU, with China slowing down as the reasons for oil futures to drop. There is I think a fear by oil traders of the stock market correcting (which we’ve already seen hints of that in some big daily drops) and they don’t want to get caught flat-footed like they did in 08 when oil price dropped from 147 to the high 30’s. The smart investors anticipate events to come so I think oil price is descending in anticipation of a market correction. We shall see…
marmico on Fri, 3rd Oct 2014 8:44 pm
I’m sure that you are much closer to the truth of the matter than our friend marmico.
Let’s get Hill on the record. Of the ~3.5 mb/d of LTO produced in the Bakken, Eagle Ford, Niobrara and Permian, what percentage of that production is greater than API 45?
Northwest Resident on Fri, 3rd Oct 2014 9:10 pm
Perk Earl — I soak up a lot of information daily from quite a number of websites devoted to financial and oil related issues. From all I’ve been reading over the last couple of weeks, I would say your suspicions about what is influencing the price of oil are very close to correct, if not entirely correct. We all know this bubble-filled economy is going to blow at some point, and things do seem to be coming to a boiling point. I’ve thought for a long time that 2015 is when we’ll begin to see some major breakage in BAU, and it does seem that things are proceeding right on track for that prediction. We’ll just have to wait and see.
BTW, I remember back in Sunday school when they started teaching us about the “big lie” called the theory of evolution. How old was I then — maybe seven or eight years old. And I distinctly remember thinking to myself that what they were teaching me was stupid. From that point on, I questioned everything about the religion I was being brought up in, and by the time I was fifteen or sixteen I already knew that the whole Christian religion was just one big fairy tale. In college, I did a number of research projects into the history and development of Christianity and Judaism, from which I learned enough to confirm my beliefs that not just Christianity but all religion is based on fairy tales.
Question everything has been my motto ever since.
I agree — this and other forums are great places to learn about the thoughts and POVs of other independent thinkers. There aren’t a lot of us around, as you know. Well met!!
Perk Earl on Sat, 4th Oct 2014 1:47 am
Thanks for the info. in response to my Q, Paulo1. Some of that stuff is more profitable than I would have guessed.
Perk Earl on Sat, 4th Oct 2014 2:12 am
“We all know this bubble-filled economy is going to blow at some point, and things do seem to be coming to a boiling point. I’ve thought for a long time that 2015 is when we’ll begin to see some major breakage in BAU, and it does seem that things are proceeding right on track for that prediction. We’ll just have to wait and see.”
Yeah, it’s coming alright, and 2015 is a good guess. Watching the forest for the trees, it seems as though the big picture is quite disturbing, from fiscal follies to hold BAU together to military and political tensions spawning all sorts of odd events in reaction to economic pressure from the energy predicament of diminishing returns. There is no way to avoid what is coming, so it is just a matter of some threshold event shifting things suddenly. A Lehman event on steroids. I really wonder since TPTB have done all they can think of to force growth in the face of this energy predicament, i.e. avoid facing a contracting world economy via QE, Zirp, etc., if when things fall it is cataclysmic in scale. It at least feels like that could potentially be the case.
“BTW, I remember back in Sunday school when they started teaching us about the “big lie” called the theory of evolution. How old was I then — maybe seven or eight years old. And I distinctly remember thinking to myself that what they were teaching me was stupid.”
That’s interesting, because I had a similar experience in Sunday school in which they gave me the 7 day creation bit and although I was four, it seemed absurd. It wasn’t long after that our Father allowed us to discontinue going, much to my Mother’s consternation.
At least people on here like us that are in the know won’t be surprised when SHTF. That’s something I guess. The one’s that run around like their hair’s on fire because they bought the idea of BAU for hundreds of more years will simply suffer the consequences of being blind followers.
Davy on Sat, 4th Oct 2014 6:54 am
The oil complex is complex is the best way to put it. Something the corn giants Plant, Marm, and Noo can’t get their massive minds around. We have all the following at the same time a physical glut, rising demand, economic shortages, and uneconomic price. Does that not sound twisted for the econ 101 giants. Noo, try to explain your theory of oil elasticity when the rubber band snaps. Central bank policy is the only game in town now. Diminishing returns have hit central bank policy. In the old days interest rates mattered but now interest rates are near zero. The central banks gave us a bubble instead and the resulting broader economy has stagnated. The marginal effectiveness of this central bank process has declined significantly with the relative size of the debt bubble. We are at or near the top of a bubble in regards to diminishing returns and we are getting economic turbulence. Try to define turbulence with economics. We have a skew on the risk reward because asset prices are higher and returns lower. Oil is wrapped up intricately with this bubble. The economics of the oil price & production is compressing. The same speculation that hit the other areas of the broader market hit the oil complex. There is serious speculation involved in all the new risky oil sources today. We are seeing the compression of the producer with an uneconomic oil price, declining reserve growth, declining ROI, increasing capex costs, and decreasing capex availability. The QE unwind could be the biggest danger to the oil complex. The whole speculative nature of the current bubble economy could go “risk off” with a bearish mentality drying up the capital needed by the oil complex to produce the remaining risky resources. Interest rates have nowhere to go but up. The consumer cannot afford higher oil prices, higher taxes, higher consumables, and higher interest rates. The consumer is tapped out. How can the broader economy of the taped out consumer afford the higher oil price the producer needs? We are in turbulence and we are near a phase transition. Let’s watch as this process unfolds over the next year as our corn giants use their econ 101 to explain these unnatural market conditions. Let them explain away the fundamentals with bullish cheerleading.
steve on Sat, 4th Oct 2014 9:57 am
Davy….Gail the Actuary does a good analysis of how the oil industry has been funded by easy…cheap money from the FED…there is no way they can raise interest rates without other means…I think back to WW 1 and many economist were saying that war could not go on very long because their was not enough money to fund the war but somehow they found the money….
HalfEmpty on Sat, 4th Oct 2014 12:10 pm
At least people on here like us that are in the know won’t be surprised when SHTF.
————————————————–
Absolutely! Btw, there aren’t any dues are there?
Davy on Sat, 4th Oct 2014 12:43 pm
Steve, I hold Gail in high regards and read all of her blog posts. I have contacted her in the past. She is very approachable and polite. I find she can shape the discussion so the uninformed can get an overview of the deeper meaning we understand here at PO. There are some Corns here who call her a well-intentioned grandma. Naturally she is getting under their skin or they would not comment about her. The thing about the feds debt bubble is it spin off smaller bubbles. This shale bubble is one of them this is conversely true when the feds bubble pops so will the shale bubble.
Nony on Sat, 4th Oct 2014 6:09 pm
Did you ever play fort when you were a kid? You get some boxes or branches or leaves or whatever and create a little castle. Then imagine how strong you are. I think people writing peak oil blogs are like this. No?
GregT on Sat, 4th Oct 2014 6:37 pm
“Did you ever play fort when you were a kid? You get some boxes or branches or leaves or whatever and create a little castle. Then imagine how strong you are.”
That’s right Nony, strong and SECURE.
Most of us passed that stage a long time ago, and we aren’t afraid to look at the real world. You can stay in your little make believe “castle” for as long as you like, but eventually
those imaginary walls are going to disappear, and reality is going to bite you in the ass.