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OPEC, for some quiet moments.. - admin - 11-29-2014

At the Vienna meeting yesterday, OPEC made it clear that it would tolerate budgetary pain to maintain market share, so “prices could trade lower until evidence of a pull-back from US E&Ps, when they announce their 2015 capex guidance in January-February.” In other words, OPEC is telling U.S. to stop pumping out shale gas and we may see a sustained slump till next January.

OPEC Tells US To Pull Back. Airlines Cheer, Energies Tear - Asia Stocks to Watch - Barrons.com

Russia will sink into recession at a Urals price of $80 a barrel, seven years after its economy grew 8.5 percent when its chief export oil blend averaged near $70, according to a Bloomberg survey of analysts.

Russian Recession Risk Seen at Record as Oil Saps Economy - Bloomberg

The Canadian oil-sands frenzy that led to $265 billion of investments in less than a decade won’t immediately stop with $75 crude. Two years from now is another matter. Oil-sands projects are multibillion-dollar investments made upfront to allow many years of output, unlike competing U.S. shale wells that require constant injections of capital. It’s future expansion that’s at risk. “Once you start a project it’s like a freight train: you can’t stop it,” said Laura Lau, a Toronto-based portfolio manager at Brompton Funds. Current oil prices will have producers considering “whether they want to sanction a new one.”

Canadian oil-sands industry’s expansion wavers with $75/bbl crude

Oil at $75/bbl won’t affect U.S. output from shale much because investments in wells and production have already been made, said Andrew Liveris, chairman and CEO of Dow Chemical Co. Some U.S. shale producers are already hurt by the drop in oil prices, though Dow, based in Midland, Michigan, sells enough different products that it can withstand lower crude, Liveris, the head of the largest U.S. chemical maker, said at a conference in Dubai.

Oil at $75/bbl won’t shut in much U.S. shale, Dow’s Liveris says

New York-traded crude oil will probably drop another $30 in the next two years as long-term cycles in commodities and currencies converge, no matter what happens at this week’s OPEC meeting and Iran nuclear talks, according to brokerage United-ICAP.

Oil seen dropping another $30 by ICAP on commodity, dollar cycle

OPEC's contentious decision to keep its production target, leaving the market with a supply glut, could trigger a wave of debt defaults by U.S. shale oil producers, warn analysts.

Will OPEC bankrupt US shale producers?

Russia will sink into recession at a Urals price of $80 a barrel, seven years after its economy grew 8.5 percent when its chief export oil blend averaged near $70, according to a Bloomberg survey of analysts.

Russian Recession Risk at Record as Oil Price Saps Economy - Bloomberg

Producers including Suncor Energy Inc. (SU) and Canadian Natural Resources Ltd. (CNQ), which each fell the most in at least three years yesterday, operate in one of the most expensive places on earth to produce oil. If crude prices continue sinking following OPEC’s decision not to cut global oil supplies, Canada’s producers big and small will have to tighten their belts to prepare for declining profits.

Alberta Producers With World’s Cheapest Oil Face Cascading Woes - Bloomberg

And buying TNK-BP has left Sechin, Rosneft’s chief executive officer and a long-time ally of Russian President Vladimir Putin, with a lot of debt to repay. State-controlled Rosneft owes about $60 billion to banks and bondholders, making it more indebted relative to earnings than any large oil producer apart from Brazil’s Petroleo Brasileiro SA.

Russia’s Oil Giant Battles Debt After $55 Billion Deal - Bloomberg




RE: OPEC, for some quiet moments.. - admin - 11-29-2014

While IOC is selling off on the OPEC decision, I'm not sure is actually warranted all that much. Yes, LNG prices are linked, but IOC is years from producing, and the longer oil stays low, the more production capacity in the industry will be decimated and the cycle will inevitably turn.


RE: OPEC, for some quiet moments.. - admin - 11-29-2014

The boardroom of Petrobras, already plagued by corruption scandals, must look like a warzone right now with the economics of their deep sea fields, requiring tens of billions of investment, wiped out..


RE: OPEC, for some quiet moments.. - mikesioc - 11-29-2014

I'm sure Total is chomping at the bit to write IOC a billion dollar check and race to FID to keep the license after the market finishes imploding. Time for Hession to reveal whatever he has been keeping secret for so long. His time has run out. Chandler has to be ready to force the issue now.


RE: OPEC, for some quiet moments.. - Getitrt2 - 11-29-2014

mikey, haven't you hears that PNG is delighted about how things are going at PRL 15 with IOC and Total and has already said they will be renewing the PRL 15 license in April, or do you not care what the truth is about anything? Total already has 500 people working on the project, and I would say is ready to write the check for whatever it is.


RE: OPEC, for some quiet moments.. - Palm - 11-29-2014

Mike, what happened to the certain buyout by the end of November. Everything was ripe according to your analysis ever since August. Didn't happen.


RE: OPEC, for some quiet moments.. - mikesioc - 11-29-2014

You guys crack me up. Patience grasshoppers. Sooner or later someone will pay for the assets. We should all be so lucky that it's a decent buyout. Hession has been a complete disaster or it might have been done already, the "transformational" deal with Total notwithstanding. Let's just hope he doesn't screw up more drilling and another deal. UBS still restricted.


RE: OPEC, for some quiet moments.. - ArtM72 - 11-30-2014

(11-29-2014, 01:06 AM)admin Wrote: The boardroom of Petrobras, already plagued by corruption scandals, must look like a warzone right now with the economics of their deep sea fields, requiring tens of billions of investment, wiped out..

My initial reaction to this extreme fallback in oil prices (and IOC's unfortunate parallel stock price reaction) was this is just another boom and bust and boom again that has always been part of this industry. But there are only so many oil price boom bust cycles one can go through before the senior discount at the movie theater ticket window brings an awareness of their finite number.  To believe that the Saudis can produce oil for $10/bbl or less would tell me this could be a long, punishing downturn.

Here's a month old BBC article though that tells me something far different.  The Saudi's cost of production...and the cost of production of every other OPEC nation... is in reality far greater.  http://www.bbc.com/news/business-29643612  Here, the BBC writer states the Saudi production breakeven price is really $85/bbl.  The revelation (to me at least ) is that a government oil company has social obligations with substantial budgetary realities.  These national oil companies need a stable and high price for their oil in order that their governments maintain viability.  Interesting here the equivalence of the words viability and profitability.

 I'll rest assured tonight, enjoying the low price of today's gasoline knowing the ultimate cost to IOC of this short downturn will be negligilble.  Such is the nature of THIS roller coaster ride.




RE: OPEC, for some quiet moments.. - Thylacine-2 - 11-30-2014

Art, as I understand the Saudi situation, the $85 dollar number is not the cost of production, the production breakeven price.
It is the price needed to meet the current national budget.


RE: OPEC, for some quiet moments.. - Putncalls - 11-30-2014

Guys,
There is a 500,000 to 1,000,000 BBL per day surplus caused by the US production increase of 5 million barrels per day over the last 5 years. The world oil consumption is 90 million barrels per day. Oil consumption has been increasing at a rate of 1 million barrels per day per year. The higher cost producers will curtail some projects and the US shale gas output will drop off quickly because the shale gas wells need constant fracking. If the Saudis don't increase production this will be a fairly smooth adjustment to the US drilling boom. It's a bit over done when the US NG pipeline companies roll over and investors worry about the effect of US NG on world NG prices.

The only question is:
Will the Saudis have the will and suffer the pain to stop the technology FREIGHT TRAIN in US hydrocarbons. Yes it's a freight train! Once the technology engine in the US rolls it's and awesome sight. OPEC would have to go to 60 or 70 bucks for a couple of years (OMH) to kill this new US technology. The market is acting like OPEC will and can. I don't think so.

Even if they do, the LNG market is not the oil market. It's 90% clean electricity which diesel can't fill.