Register

Peak Oil is You


Donate Bitcoins ;-) or Paypal :-)

Donate Bitcoin



Donate Paypal

Page added on April 29, 2016

Bookmark and Share

Oil’s Magic Number Becomes $50 a Barrel for Promise of Recovery

Consumption

The new magic number in the oil industry is $50.

BP Plc, rig-owner Nabors Industries Ltd. and explorer Pioneer Natural Resources Co. all said in the past 24 hours that prices above $50 will encourage more drilling or provide the needed boost to cash flow. With oil bouncing close to $45 a barrel, an industry that has been shaving costs to stay competitive is ready for signs of stability at a price level less than half of 2014’s average.

At an average price of $53 per barrel of oil means the world’s 50 biggest publicly traded companies in the industry can stop bleeding cash, according to oilfield consultant Wood Mackenzie Ltd. Nabors, which owns the world’s largest fleet of onshore drilling rigs, said it has already been talking with several large customers about plans to boost work in the second half of the year if prices rise “comfortably” above $50.

“It’s not just about touching $50,” Fraser McKay, vice president of corporate analysis at Wood Mackenzie in Houston, said Tuesday in a phone interview. “It’s about touching, maintaining and having the perception of future prices above $50 a barrel before you start sanctioning projects that are economic at $50 a barrel.”

Spending Cuts

The global oil industry slashed more than $100 billion in spending last year and is in the midst of further cuts this year to survive what Schlumberger Ltd. has called the industry’s worst-ever financial crisis. In North America alone, spending is expected to drop by half from last year.

Prices have rebounded by about two-thirds from a 12-year low, with Brent, the international crude benchmark, trading above $45 a barrel Tuesday. The rally has explorers from BP to Pioneer looking ahead to an eventual recovery as they release first quarter earnings this week. Next year, BP will be able to balance cash flow with shareholder payouts and capital spending at an oil price of $50 to $55 a barrel, down from a previous estimate of $60, the London-based explorer said. Pioneer expects to add as many as 10 horizontal drilling rigs when oil reaches $50 and the outlook for supply and demand of crude is positive, the company said Monday in its earnings statement.

For every $5 that oil prices climb, above a baseline of $37, Continental Resources Inc. adds another roughly $200 million in revenue, Chief Operating Officer Jack Stark said last month in an interview in New Orleans. By the time oil prices reach $52, the Oklahoma City-based explorer would probably look at adding more rigs, he said.

“We won’t chase price spikes,” Stark said. “We’re committed to being patient.”

Failed Rally

Yet even talk of ramping up again is bringing a stinging reminder of last year’s failed attempt to restart activity too quickly after oil prices rose.

“We got out ahead of ourselves — bit of a head fake there,” Tony Petrello, chief executive at Nabors, told analysts and investors Tuesday on a conference call. “We’re going to be a little more guarded here.”

Exactly when oil prices hit that level and how long they need to stay there is a question no one can say for sure. Nabors said the activity could start up in the middle of the third quarter or into the final three months of this year. Continental estimated that supply and demand could be nearing balance later this year and be “absolutely in balance” or in need of more oil next year.

“The absolute timing may be off a bit,” Stark said, “but ultimately it’s going to happen.”

RIGZONE



81 Comments on "Oil’s Magic Number Becomes $50 a Barrel for Promise of Recovery"

  1. rockman on Fri, 29th Apr 2016 6:06 am 

    Conflicted statements: the title says “$50 a barrel” yet in the article it says ‘above $50 a barrel.”

    IOW another waste of printed space used to state the obvious.

  2. Davy on Fri, 29th Apr 2016 6:25 am 

    Markets are not normal now. Normal price discovery is gone. We have financial repression driving speculation. We see some ominous things happening in China now with credit creation, commodities, and the bond market. The oil market is intricately tied to what goes on in the global economy. We are in no way in a healthy place price wise for oil. We also must acknowledge supply, demand, and prices are a process with frequencies, cycles, and waves. We can have rising oil demand and prices that are nothing more than a general decline disguised by manipulation and distortions.

    Will we have a healthy $50 oil price? I would say no because the economic fundamentals are not there. A price stabilization would be good for the global economy. We need to get closer to what once was a goldilocks range of financial stability for the economy and oil. That is gone but we can get to less turbulence instead of more. Don’t forget we are at the point of no winners with oil demand, supply, and price. This is because it is a foundational commodity the global system relies on for health. There are individual nations, communities, and individuals that benefit in the short term but longer term it is a matter of all our survival. What is so horrible is that survival because of stable oil is also our demise because of abrupt climate change. Really it is just a stabilization of a damned if you do damned if you don’t scenario.

  3. Davy on Fri, 29th Apr 2016 6:58 am 

    “Unmasking the Men Behind Zero Hedge, Wall Street’s Renegade Blog”
    http://www.bloomberg.com/news/articles/2016-04-29/unmasking-the-men-behind-zero-hedge-wall-street-s-renegade-blog

    By April 2—the day Lokey left Zero Hedge—their relationship had deteriorated significantly, according to the messages provided by Ivandjiiski.
    “I can’t be a 24-hour cheerleader for Hezbollah, Moscow, Tehran, Beijing, and Trump anymore. It’ s wrong. Period. I know it gets you views now, but it will kill your brand over the long run,” Lokey texted Ivandjiiski. “This isn’t a revolution. It’s a joke.”

    I have been here a long time and find it interesting how over this time I have been criticized for introducing ZH articles for reference. Many here started by saying this was propaganda from the US ministry of propaganda when in fact it is one of the most anti-American and anti-establishment of news amalgamator of worth. I have always like it because it has been a perma-bear and anti-status quo narrative. I like the anti-American topics too because it is important to know these issues. I find the site too anti-American though like this one but that goes with the territory of being an “ex-evil empire”. It has been a rich source of collapse information for me. It is amusing how Makati Bill regularly references the site now when in the past he shunned it as ministry of propaganda. Other anti-mericants likewise reference it. Other anti-mericants don’t like it because they are pro-economic status quo.

  4. onlooker on Fri, 29th Apr 2016 7:04 am 

    I do not think consumers can handle $50 or above Oil. And 50 or less is weakening the bottom line for Oil producers. Oh and yes the Ultimate Catch 22 is our reliance on a energy source that is destroying the life support systems for much of current life on Earth.

  5. shortonoil on Fri, 29th Apr 2016 7:49 am 

    Prices fell because of excess inventory growth. That inventory is still growing. Prices are only improving for front contracts, the long end has gone flat:

    http://www.zerohedge.com/news/2016-04-28/focused-wrong-end-oil

    Whomever, with their propensity for irrational exuberance, will be surprised as oil approaches the maximum affordability curve:

    http://www.thehillsgroup.org/depletion2_022.htm

    It was most likely Central Bank policies that made the drop in prices as precarious as it was; the price fell $30 more than it should have at this stage of the depletion cycle. Prices are now rising faster than they should based on the fundamentals of inventory growth. If someone believes that they can control depletion with a printing press they are delusional, and in for one nasty surprise!

  6. marmico on Fri, 29th Apr 2016 8:01 am 

    will be surprised as oil approaches the maximum affordability curve

    The only one surprised will be the quart shy of oil. Then he will need to reinvent his bull shit.

    The first quarter of 2016 was the lowest quarterly ratio of household gasoline spending to total spending in the data set.

    https://research.stlouisfed.org/fred2/graph/?g=4kwr

    Affordability my ass.

  7. ghung on Fri, 29th Apr 2016 8:03 am 

    “…prices above $50 will encourage more drilling …”

    …increasing production and pushing prices back below $50? Just askin’….

  8. PracticalMaina on Fri, 29th Apr 2016 8:28 am 

    That is also the magic number where gas gets around 2.50 in my neck of the US, and people start to think about fewer extra trips, and maybe not buying the oversized vehicle-house. If only we had added a reasonable tax while fuel was cheap, or years ago… But nope people are gonna be stuck paying off pickups and suvs while shelling out 20 bucks just to get around town.

  9. Cloud9 on Fri, 29th Apr 2016 8:30 am 

    Marmico great graph.

  10. Kenz300 on Fri, 29th Apr 2016 8:32 am 

    The oil companies and the auto companies need to get their collective heads out of the sand and realize that the world is changing with or without them. Climate Change is real….. it will impact all of us…

    It is time to move away from fossil fuels and embrace alternative energy sources like wind, solar, wave energy, geothermal and second generation biofuels made from algae, cellulose and waste. They need to change their business models and move from being OIL companies to ENERGY companies. The auto industry needs to move from just building compliance vehicles to embracing electric vehicles and start putting development and advertising behind them..

    The world is moving to embrace alternative energy sources…….. the fossil fuel companies can transform themselves into “energy” companies or they can die a slow death.

    As Climate Change impacts more people there will be a bigger backlash against fossil fuels.

  11. Dave Thompson on Fri, 29th Apr 2016 9:11 am 

    “We are a species too clever for our own good and too foolish to realize it.” http://questioneverything.typepad.com/question_everything/2016/03/happy-spring-equinox-2016.html

  12. shortonoil on Fri, 29th Apr 2016 9:12 am 

    “The first quarter of 2016 was the lowest quarterly ratio of household gasoline spending to total spending in the data set.”

    Affordability my ass

    That’s the best that you can do??

    Fortunately, your ass will only play a part for those who are inadvertently caught down wind!

    ““…prices above $50 will encourage more drilling …”
    …increasing production and pushing prices back below $50? Just askin’….”

    During the last 33 weeks inventories have grown for all but 5 of those. That is what crashed prices to begin with. It has most likely been Central Bank policies of ZIRP, and excess liquidity injections which have kept zombie producers in business that contributed to the steep, and rapid decline in prices. Since the fundamental reason that prices fell to begin with, excess inventory, have not changed the recent price jump will probably be met with considerable skepticism by most producers, and their financial backers. The increase in drilling activity may not be as great as those who engineered the present price increase fiasco would like to see! The world is becoming increasing aware of the shenanigans orchestrated by the financial industry, and their cohorts!

  13. JuanP on Fri, 29th Apr 2016 9:17 am 

    Dave T ““We are a species too clever for our own good and too foolish to realize it.”

    “Playing smart and not being clever” Bob Marley

  14. GregT on Fri, 29th Apr 2016 9:19 am 

    “Marmico great graph.”

    Yes, great graph for the ignorant. As if gasoline is the only thing that oil does for us in modern industrial society. Take a look around you, and name one item that hasn’t had any inputs from oil in it’s extraction, refinement, manufacture, production, or distribution. I would be willing to bet that you can’t find a single one…….

  15. PracticalMaina on Fri, 29th Apr 2016 9:21 am 

    Also I see long term unemployed and people who telecommute or run a home based business skewing that graph. Just because people are trying to be frugal and spend less on gas when they can, does not mean it is as much of a boost to ones personal economy as you would think. If gasoline purchases are a significant part of an American familys budget, they do not have much discretionary spending to put back into the economy in the first place.

  16. GregT on Fri, 29th Apr 2016 9:26 am 

    With one caveat. Unless that item occurs naturally.

  17. Dave Thompson on Fri, 29th Apr 2016 9:38 am 

    “The concerns about energy and the economy are still at play. In this interview Cris was interested in my work on the relation between money and energy and Biophysical Economics.” http://www.financialsensenewshour.com/broadcast/insider/fsn2016-0415-mobus-u4t7x9w.mp3

  18. Dredd on Fri, 29th Apr 2016 9:51 am 

    Oil’s magic number is 1.

    I silver bullet between Oil-Qaeda’s ghostly eyes (The Ghost-Water Constant – 7).

  19. marmico on Fri, 29th Apr 2016 10:04 am 

    As if gasoline is the only thing that oil does for us in modern industrial society

    Well gasoline does 45% of the petroleum work in the U.S. Why don’t you use your tiny brain, GreggieTee, and show us the percentages of work for distillates and jet fuel?

  20. shortonoil on Fri, 29th Apr 2016 10:35 am 

    “Well gasoline does 45% of the petroleum work in the U.S. Why don’t you use your tiny brain, GreggieTee, and show us the percentages of work for distillates and jet fuel?”

    Gasoline sales accounts for about 1.5% of US GDP. By itself, a 50% increase, or decrease in price has a very small impact on the overall economic health of the nation.

    “The concerns about energy and the economy are still at play.”

    The Ponzi scheme goes on. Pension funds are now the big buyers of distressed energy bonds and equities. The banks are attempting to unload their distressed assets to clean up their balance sheets. The pension funds buy them, and buy a derivative from the bank that sold them! The pension fund is covered if they collapse, and the banks get to move them off their ledgers sheets to an SPV. Out of site, out of mind? And of course, if all goes south the banks have the FED to print them up some emergency funds.

    Now — what could possibly go wrong?

  21. marmico on Fri, 29th Apr 2016 10:57 am 

    Gasoline sales accounts for about 1.5% of US GDP. By itself, a 50% increase, or decrease in price has a very small impact on the overall economic health of the nation.

    Ceteris paribus, a 50% increase (decrease) in the price of oil products has an equally “very small impact”.

    I breathlessly wait for maximum affordable $12 oil in 2020, fuctard.

  22. shortonoil on Fri, 29th Apr 2016 11:24 am 

    “I breathlessly wait for maximum affordable $12 oil in 2020, fuctard.”

    Why don’t you do the world a favor and hold your breath until we get there.

  23. HARM on Fri, 29th Apr 2016 11:30 am 

    “Unmasking the Men Behind Zero Hedge, Wall Street’s Renegade Blog”
    http://www.bloomberg.com/news/articles/2016-04-29/unmasking-the-men-behind”

    Thanks, Davy. Very interesting. I often visit ZH and have always liked their contrarian anti-BAU editorial bent, but also noticed a rather pro-Russian bias (though not as extreme as AutomaticEarth’s). Fun to see what is happening behind the curtain sometimes.

  24. Davy on Fri, 29th Apr 2016 11:36 am 

    Here is ZH response to Bloomberg outing:
    “The Full Story Behind Bloomberg’s Attempt To “Unmask” Zero Hedge “
    http://www.zerohedge.com/news/2016-04-29/full-story-behind-bloombergs-attempt-unmask-zero-hedge

  25. marmico on Fri, 29th Apr 2016 11:52 am 

    Why don’t you do the world a favor and hold your breath until we get there.

    I will predict that on or before the 2017 summer solstice you will have fallen on your latest and greatest gummy bear sword.

    http://www.theoildrum.com/node/7798/796620

    Fuctard!

  26. apneaman on Fri, 29th Apr 2016 12:23 pm 

    I read zerohedge because I “know” Austrian economics has every single solution for all of mankind’s problems. Which don’t include AGW or resource depletion or any other environmental hoaxes btw. They NWO conspiracies. I know this because my our lord and savior Jesus Ludwig Von Mises told me in a vision.

  27. apneaman on Fri, 29th Apr 2016 12:36 pm 

    I read zerohedge, because the commenters are so enlightened.

  28. peakyeast on Fri, 29th Apr 2016 12:58 pm 

    I never expect the truth – that is something oneself must determine from a number of sources and over time.

    But its obvious that you will get more truth about the US from Russia than from the US and vice versa.

    And from experience we can conclude both nations are habitual liars, warmongers and has just plain evil whores parading as cheer-leadership.

  29. Boat on Fri, 29th Apr 2016 1:47 pm 

    short,

    Your story sure has changed from 5 years ago.

    “Since we have already passed Peak, the point where it takes 1 BTU to produce a BTU from oil, intervention is irrelevant. With the largest consumer of the energy that comes from oil now the oil producers themselves, the system has now entered a negative feedback loop that will soon destroy itself. Prices over the next decade will be dominated by the same driving forces that have have controlled them for the last 49 years (which is all we have reliable records of). Price will move to stratospheric levels that will crush modern economies.”

    Now you claim prices will never recover and the world is collapsed by 2019.

    Can you explain this total reversal?

  30. oracle on Fri, 29th Apr 2016 1:56 pm 

    “Recovery” in the oil industry requires some attrition. Only then will fundamentals change to support a higher price.

    And the attrition needs to be fairly significant. Since real gdp is falling, oil production needs to fall even faster in order to solidify prices. Not a pretty picture.

  31. shortonoil on Fri, 29th Apr 2016 2:21 pm 

    “Now you claim prices will never recover and the world is collapsed by 2019.”

    Yes! It was a calculation, backed by strong empirical evidence, that the average waste heat produced from the combustion of a hydrocarbon by the end user was actually 38% as opposed to the theoretical minimum of 29%. Previous calculations had used the 29% value. We put up this page 8 months after arriving at that conclusion:

    http://www.thehillsgroup.org/depletion2_022.htm

    That additional 11% extra waste heat places the beginning of the oil price decline phase before the 2030 average “dead state”, rather than after as we had previously assumed.

    http://www.thehillsgroup.org/

  32. Davy on Fri, 29th Apr 2016 2:22 pm 

    I read zero hedge not because I believe everything or agree with everything. I read ZH for the alternative side of finance mainly. They have been spot on with the failing central bank activity and the Chinese economic implosion. There is plenty of good political news and most is anti-American. We all have our contributions to this board by wading through the swamp of lies and distortions. It is not where you look it is what you glean from the silt and mud.

  33. Davy on Fri, 29th Apr 2016 2:25 pm 

    Boat, instead of trying to discredit Short listen to what he has to say. Their work is profoundly important. You don’t have to commit to it but you should consider it.

  34. shortonoil on Fri, 29th Apr 2016 2:29 pm 

    PS:

    It wasn’t until after we had written the software to analysis a “skewed logistic curve” that the discrepancy became obvious.

    http://www.thehillsgroup.org/depletion2_013.htm

  35. Boat on Fri, 29th Apr 2016 2:37 pm 

    Davy,

    We will see soon enough. 3 years is a short time. Well 5 months has gone by.

  36. onlooker on Fri, 29th Apr 2016 3:36 pm 

    Boat, why do you fight it? Do you not see that our environment and economy together are accelerating on a downward spiral. That our key resources are no longer so abundant and ample to allow anything like the vast civilization and population/consumption patters we have. We are fighting a losing battle and every day it becomes more apparent. Except of course if you have your eyes closed.

  37. Boat on Fri, 29th Apr 2016 3:44 pm 

    The idea the world will collapse due to oil within 3 years is bat shyt crazy. You ask why I fight/respond? Let me repeat. Bat shyt crazy. Lol.

  38. onlooker on Fri, 29th Apr 2016 3:55 pm 

    Boat, notice I said resources. Oil makes available most other resources. And no not bat shit crazy. Oil is the lifeblood of the economy.

  39. GregT on Fri, 29th Apr 2016 4:03 pm 

    @Boat,

    “Price will move to stratospheric levels that will crush modern economies.”

    What would you call a 700% increase in a barrel of oil in 5 years to $147/bbl, and the resulting Global Financial Crisis that we still have not, and will not ever, recover from? What would you call a doubling of all total historic US federal debt combined, in less than 8 years? What would you call one out of every six people in the country with the largest economy in the world, on food assistance programs? What would you call TARP, QE1, QE2, QE3, QE to infinity, ZIRP, and NIRP? What would you call an artificially inflated housing bubble, or an artificially inflated market bubble? We are in uncharted territory here Boat, and the economists and the world’s central banks do not know what to do. The global economy is like an old pig, with so much makeup on that it looks like Megan Fox, and you are so completely in denial that you would probably try your best to fuck it. Wake up!

  40. bug on Fri, 29th Apr 2016 4:05 pm 

    Hate to say it, boat is right. I just read an article in sports illustrated where a guy was explaining what nfl football will be like in 2066, so we obviously have any years.

  41. shortonoil on Fri, 29th Apr 2016 4:10 pm 

    “The global economy is like an old pig, with so much makeup on that it looks like Megan Fox, and you are so completely in denial that you would probably try your best to fuck it. Wake up!”

    Pagans – 1
    Christians – 0

  42. Survivalist on Fri, 29th Apr 2016 4:30 pm 

    It’ll be interesting to see what Saudi Arabia can do this summer! 10.5 million barrels a day?

    http://www.aljazeera.com/news/2016/04/saudi-arabia-pump-oil-meet-domestic-demand-160429063726235.html

  43. apneaman on Fri, 29th Apr 2016 4:33 pm 

    “….like an old pig, with so much makeup on that it looks like Megan Fox, and you are so completely in denial that you would probably try your best to fuck it. Wake up!”

    Don’t feel too embarrassed boat. I’ve fucked that pig before…..and her sister. Except, I wasn’t in denial.
    Poor lighting and a belly full of Bacardi white.

  44. Survivalist on Fri, 29th Apr 2016 4:34 pm 

    https://www.chathamhouse.org/expert/comment/saudi-arabia-faces-its-future-vision-2030-reform-plan

  45. geopressure on Fri, 29th Apr 2016 5:35 pm 

    Apneaman: “I read zerohedge, because the commenters are so enlightened.”

    That’s funny… That is exactly what I think about Zero Hedge… I do not have a high opinion of their viewership (no offense meant to anyone here who are big on ZeroHedge).

    With that said, I still read ZH on a daily basis, but mainly only the headlines… For those of you who do not know, our internet has been taken over by Google & the Federal Government. We ONLY see the news that they want us to see.

    — None of Obama’s foreign policy blunders are ever detailed, anywhere…
    — Actually, we get very little foreign news at all relative to the way it was 10 years ago…
    — The Media tell us how to think, what opinions to have, what to believe & most Americans have no idea – NONE… (We have turned into Russia, It’s Sad, we only think that we have a free press)…

    It requires a mind that is trained for filtering out all the BS, but Zero Hedge is often the closest thing there is to information that has not been filtered by the US Government…

    I’ve posted this video a lot of late, but I think it is very enlightening…

    https://www.youtube.com/watch?v=-bYAQ-ZZtEU

    99% of the information that we intake is manufactured or filtered by Washington… This new form of Media Manipulation is so powerful that not only can it control the stock market, but it can control the prices of commodities…

    They control the price of oil by overwhelming interested parties with so much negative information regarding oil that the interested party will feel like they are in the majority if they believe that there is an oil shortage, or want to take a long position on oil…

    It is too powerful, really… but there is nothing that can be done about it… not right now, anyway…

  46. apneaman on Fri, 29th Apr 2016 5:57 pm 

    geo, how do you know Obama made any foreign policy blunders if “None of Obama’s foreign policy blunders are ever detailed, anywhere…”?

    Do you have a contact in the state dept filling you in?

  47. apneaman on Fri, 29th Apr 2016 6:06 pm 

    geo, if only there was some way to get alternative and unfiltered viewpoints and information damn it! Wouldn’t it be great if someone, someday were to invent some type of globally connected information sharing machine that we could all connect to?

    Alas.

  48. Boat on Fri, 29th Apr 2016 6:18 pm 

    geo,

    There are hundreds of anti Obama websites all over. Heard of conservative, tea party, Gop. 30 percent of the US voting public is anti Obama. Fox news, Glen Beck and Rush Limbaugh are among hundreds of radio and tv stations. Keyword, conservative newspapers. Sometimes you say the wildest things.

  49. shortonoil on Fri, 29th Apr 2016 6:26 pm 

    “99% of the information that we intake is manufactured or filtered by Washington… “

    I don’t think there can much doubt about that; it is all highly filtered and has been for a long, long time. That is why you read Pravda, Al Jazeera, The Asian Times, and a lot of books. With some time and effort, you can put a lot of it together. The TPTB don’t control the whole world, just much of this little piece of it.

  50. Boat on Fri, 29th Apr 2016 7:07 pm 

    ape,

    ” if only there was some way to get alternative and unfiltered viewpoints and information damn it!”

    North Korea is the best at it. Lol

1 2

Leave a Reply

Your email address will not be published. Required fields are marked *