04-05-2015, 11:12 PM
It is not that I think that oil is going to again breach the low $40s in price. There is a market theory of a crude 'clearing price', where oil finds buyers and less traditional routes to move out of glutted areas no matter what the fundamentals of supply and storage might say. I think that is right and the idea of low $30s targets on oil, or low $20s as Citibank has called for to be downright ridiculous. But it is the thought that oil can again rally into the profit zone above $60 that I find equally ridiculous now. Production does matter, and we are at the limits of traditional storage. Further, if the E+Ps haven't collectively lied in their recently quarterly presentations, production is definitely going up this year. Finally, there are literally dozens of oil companies who could buy themselves another year or two of life should they be able to sell financial futures anywhere near $65 a barrel. That means a wall of real commercial selling should oil rally. I don't think it will.
Lenders are preparing to cut the credit lines to a group of junk-rated shale oil companies by as much as 30 percent in the coming days, dealing another blow as they struggle with a slump in crude prices, according to people familiar with the matter.
Reckoning Arrives for Cash-Strapped Oil Firms Amid Bank Squeeze - Bloomberg Business
The breakthrough in nuclear talks with Iran on Thursday has the potential to cause a seismic shift in global energy markets over the long term, but energy experts said any appreciable impact on an already glutted global oil market was highly doubtful for at least six months and probably more than a year.
Iran deal may be slow to affect oil sector
The onus for restoring the oil price back to an equilibrium lies squarely on the shoulders of countries like the U.S. and not on the Organization of the Petroleum Exporting Countries (OPEC), a top Goldman Sachs analyst told CNBC.
Goldman Sachs on oil: US needs to cut, not OPEC
As concerns about the glut of oil in the world continues to weigh, questions have been raised over why the price of the crucial commodity hasn't fallen even further. For one analyst, the answer comes down to "phenomenal" demand.