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

'Thylacine-2' pid='52513' datel Wrote: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.

Thy -

You are correct, but that is my point.  Their gross margin at $85 might be $75 but their net is near $0.  That is why this supply glut will only be temporary.  Although temporary, the glut is a cautionary tale for those who would invest in new facilities as if $110/bbl were a floor.   IOC with its prolific conventional wells is certainly not in that position.  Many of its potential competitors are.

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

Perhaps this fall in oil won't last all that long...

Morgan Stanley said the over-supply in the market is “vastly overstated”. Much of the immediate glut is due to a supply surge of 800,000 barrels a day in Libya after export terminals were reopened over the early summer following a truce by tribal militias. This truce is already unravelling. Output has dropped by 400,000 barrels a day since September.

Oil drop is big boon for global stock markets, if it lasts - Telegraph

RE: OPEC, for some quiet moments.. - admin - 12-01-2014

Couple of notable quotes from Jeremy Grantham on the shale revolution and its impact:

Grantham writes that these companies, "have drilled, as always, the best parts of the best fields first, and because the first two years of flow are basically all we get in fracking, we should have expected considerably better financial results by now. The aggregate financial results allow for the possibility that fracking costs have been underestimated by corporations and understated in the press."

Jeremy Grantham On Fracking Boom - Business Insider

"The current fall in price does nothing to offset the squeeze on the total economy from rising costs," Grantham writes. "It merely transfers massive amounts of income from one subgroup (oil producers) to another (oil consumers), in a largely zero-sum game. FRED Gas prices have plunged, helping consumers in the short-term, but potentially hampering producers longer-term. "Oil consumers tend to spend more and save less than oil companies so short-term impacts are favorable. But we should not be carried away with enthusiasm because the declining investment from the oil industry will lower future growth.

Jeremy Grantham On Fracking Boom - Business Insider

RE: OPEC, for some quiet moments.. - admin - 12-01-2014

But that's just Jeremy Grantham, not everybody agrees..

There is no question that the US has entirely changed the global energy landscape and poses an existential threat to Opec. America has cut its net oil imports by 8.7m bpd since 2006, equal to the combined oil exports of Saudi Arabia and Nigeria. The country had a trade deficit of $354bn in oil and gas as recently as 2011. Citigroup said this will return to balance by 2018, one of the most extraordinary turnarounds in modern economic history. “When it comes to crude and other hydrocarbons, the US is bursting at the seams,” said Edward Morse, Citigroup’s commodities chief. “This situation is unlikely to stop, even if prevailing prices for oil fall significantly. The US should become a net exporter of crude oil and petroleum products combined by 2019, if not 2018.”

Saudis risk playing with fire in shale-price showdown as crude crashes - Telegraph

RE: OPEC, for some quiet moments.. - admin - 12-01-2014

And there is more from there:

Opec has misjudged the threat. As late as last year, it was dismissing US shale as a flash in the pan. Abdalla El-Badri, the group’s secretary-general, still insists that half of all US shale output is vulnerable below $85. This is bravado. US producers have locked in higher prices through derivatives contracts. Noble Energy and Devon Energy have both hedged over three-quarters of their output for 2015. Pioneer Natural Resources said it has options through 2016 covering two- thirds of its likely production. “We can produce down to $50 a barrel,” said Harold Hamm, from Continental Resources. The International Energy Agency said most of North Dakota’s vast Bakken field “remains profitable at or below $42 per barrel. The break-even price in McKenzie County, the most productive county in the state, is only $28 per barrel.”

Saudis risk playing with fire in shale-price showdown as crude crashes - Telegraph

Efficiency is improving and drillers are switching to lower-cost spots, confronting Opec with a moving target. “The (price) floor is falling and may not be nearly as firm as the Saudi view assumes,” said Citigroup. Mr Morse says the “full cycle” cost for shale production is $70 to $80, but this includes the original land grab and infrastructure. “The remaining capex required to bring on an additional well is far lower, and could be as low as the high-$30s range,” he said. Critics of US shale may have misunderstood its economics. There is a fast decline in output from new wells but this is offset by a “long-tail phase” for a growing number of legacy wells. The Bakken field has already reached 1.1m bpd, and this is expected to double again over the next five years.

Saudis risk playing with fire in shale-price showdown as crude crashes - Telegraph

RE: OPEC, for some quiet moments.. - admin - 12-01-2014

And of course it's not all about OPEC or US shale, look what happened to other commodities and why..

Opinion over the state of the world’s second-largest economy is typically divided between whether it is merely undergoing a rebalancing or a more painful slowdown after years of excessive credit growth. But if the industrial commodities that have fed China’s prodigious economic rise are taken as a guide, there is little need for debate: There has already been a hard landing, as all the prices of these resources have collapsed to multi-year lows.

China plays big role in oil’s slide - MarketWatch

RE: OPEC, for some quiet moments.. - admin - 12-16-2014

OPEC will stand by its decision not to cut output even if oil prices fall as low as $40/bbl and will wait at least three months before considering an emergency meeting, the United Arab Emirates’ energy minister said.

U.A.E. sees OPEC output unchanged even if oil drops to $40/bbl

U.S. producers battling OPEC for market share may increase output further from the highest rate in more than three decades as costs decline almost as fast as oil prices, according to Goldman Sachs Group Inc. The slump in benchmark U.S. crude futures, which are down more than 40% this year, is driving producers to move rigs to lower-cost fields, the bank said in an emailed report on Dec. 15. While there’s evidence of some rebalancing starting to occur in the market, that isn’t sufficient, it said.

Goldman sees U.S. oil production steady as costs sink with price

The ruble continued its rout on Tuesday, after the Russian central bank’s surprise interest-rate rise to 17% failed to halt the steep slide in the currency. The ruble initially rallied after the rate-hike announcement early Tuesday. However, as worries grew that the increase wouldn’t be enough to end the pressure, the Russian currency fell back to trade around an all-time low against the dollar. In midday European trade, the dollar bought 73.0020 rubles, compared with 65.6020 late on Monday.

Ruble plunges to record low after rate hike fails to halt slide - MarketWatch

Mexico is getting ready to welcome the U.S. shale revolution into its borders after 75 years of state monopoly. The timing couldn’t be worse. As a flood of supplies from Texas to North Dakota sends oil into a nosedive, U.S. producers are reducing investment budgets for 2015. The cuts dim the chances they’ll take their fracing and horizontal drilling capabilities down south anytime soon.

Mexico shale boom outlook dims as U.S. drillers struggle at home

RE: OPEC, for some quiet moments.. - admin - 12-16-2014

As Gavyn Davies writes, it’s true that there is a serious potential downside, but it is largely a geopolitical story about the destabilising impact on oil-exporting countries. For the developed world’s economies, the decline is overwhelmingly good news

The oddly subdued optimism about falling oil prices | FT Alphaville

The string of solid US economic news continued with industrial production advancing 1.3% in November. Year-over-year growth (5.2%) is now comparable to the late-90's: Meanwhile, the international fallout from the oil price drop continues. Russia is a classic emerging market crisis story. The decline in energy prices reveals a currency mismatch between assets and liabilities. The decline in oil dries up the dollars needed to support those liabilities, so the value of the ruble is bid down as market participants scramble for dollars. One suspects that capital flight from Russia only aggravates the problem; those oligarchs are seeing their fortunes whither.

IP, Russia - Tim Duy's Fed Watch

There isn’t much your central bank can do to engineer a sustainable Russian economic and financial recovery; instead, it falls to President Putin. Russia is caught in what economists call an unfavorable “multiple equilibria” – that is, instead of mean reverting, a bad outcome increases the probability of a worse outcome down the road.

El-Erian On Russia Central Bank Rate Hike - Business Insider

With oil hovering around $57/barrel (for WTI) as of late Monday afternoon, now might be a good time for a quick look at the state of Canada’s enormous and expensive tar sands projects, and at the Keystone XL pipeline intended to help move what they produce. First have a look at this chart of production costs — for tar sands oil, at the far right, they are some of the highest in the world

How cheaper oil changes the calculus for Keystone XL | FT Alphaville

But perhaps some relief from the relentless price decline are in stall:

Libya, the holder of Africa’s largest crude reserves, halted exports from two of its biggest oil ports as rival forces battled to control the nation’s main revenue source. National Oil Corp, the state-run oil company, declared force majeure at Es Sider and Ras Lanuf, Libya’s largest and third-largest oil ports, with a combined capacity of 560,000 bpd. Force majeure is a legal status that protects a company from liability when it can’t fulfill a contract for reasons beyond its control.

Libya stops loading crude at two ports amid fighting for oil

Nigeria’s two oil unions began an indefinite strike that they say will curb exports from the West African nation responsible for pumping more than a quarter of the continent’s crude. “You will soon begin to see shutdowns of our oil flow,” Emmanuel Ojugbana, a spokesman of the Petroleum and Natural Gas Senior Staff Association of Nigeria, said by phone. Ohi Alegbe, an Abuja-based spokesman for the Nigerian National Petroleum Corp. and the Oil Ministry, declined to comment on exports.

Nigeria’s oil unions start strike they say will curb exports

RE: OPEC, for some quiet moments.. - admin - 12-16-2014

A lot of pundits have speculated that the price of oil collapsed because supply exceeds demand. As the Guinness beer commercials tell us, that is “brilliant!” Heck, I told folks in June oil prices were going to drop hard. So, while noticing supply and demand is a great Econ 101 observation, it doesn't answer the important question of why supply exceeds demand right now. We’ll delve into that in a moment, but perhaps an even bigger question is under what scenarios do we see a rebound in oil.

Three scenarios that result in a rebound for oil - MarketWatch

Billionaire investor Carl Icahn says high-yield corporate debt may be in bubble territory and that a recent hiccup in the market, as a result of plunging oil prices, support his suspicions. In an interview with Bloomberg published Monday, Icahn said high-yield bonds “are still at way too low an interest rate. In other words you can borrow money too cheaply if you’re a risky company.”

Carl Icahn says oil’s woes may be proof of a junk-bond bubble - MarketWatch

The real damage, however, is yet to come. By some estimates the wreckage, particularly for the oil-services companies, may add up to a stunning $1.6 trillion annual loss, at oil’s current $57 low, predicts Eric Lascelles, RBC Global Asset Management chief economist. Since it’s a zero-sum game, that translates into a big windfall for everyone else outside of oil players.

Crashing crude may blow a $1.6 trillion hole in the global oil sector, annually - MarketWatch

RE: OPEC, for some quiet moments.. - admin - 12-17-2014

Guess what Qatar's export mostly consist off..

Dubai's Financial Market General Index is now down 40% since the peak in oil prices in June this year. For now, only Qatar is clinging to gains year-to-date as the rest of the Middle Eastern equity markets give up 30-60% gains from mid-year and tumble to negative. Dubai and Abu Dhabi alone are down over 8% since Friday - the biggest drop in 6 years.

It's Not Just Russian Stocks: Middle East In Freefall, Plunge Most In 6 Years | Zero Hedge

"Raising rates up to 17% — that's the end of the banking system," an "emotional" senior manager of a mid-size bank told Vedomosti on Tuesday.

Russian Currency Crisis Rates Vedomosti - Business Insider

INVESTORS in emerging markets know how quickly things can turn sour. In the mid 1990s fast-growing Thailand and Indonesia became known as the “Asian Tigers”. By 1997 they were suffering currency crises and had to be bailed out by the IMF. Nearly 20 years on two members of the “BRICs” (Brazil, Russia, India and China) lionised for propping up global growth in 2010, are close to recession. The mixture Brazil and Russia face—falling currencies, high inflation and slow growth—could make 2015 a very bad year.

Emerging markets: The dodgiest duo in the suspect six | The Economist

And like many bust-hardened veterans in this region -- which has made and broken the fortunes of thousands -- he’s talking about it like a gathering storm. The ups and downs of oil are a way of life in Midland and Odessa, Texas, dating all the way back to the Great Depression. It’s as much a part of the culture as Gulf Coast hurricanes, and residents often prepare accordingly.

Oil Storm Has Texas Wildcat Veterans Warning Bakken Rookies to Take Cover - Bloomberg