$20 Oil?

[What Would Jesus Do?]

Apparently Goldman Sachs is predicting it.

Unless there's a world-wide recession that's killing demand, I don't see it.

I read somewhere recently that US oil production is dropping due to some fields no longer being profitable at these prices.

Do you think GS is right?

 

[tarheelbybirth]

They've been stacking rigs for a while now in the fracking regions. My brother-in-law owns an oil-field service company that does lots of business in TX, LA, and PN. They've had some pretty big layoffs in PN and have cut way back in other areas. The oil industry is getting ready for another bust. China has cut back as their economy slows and the Saudis are determined to drive us - and others - out of the market...and they can still make money on their oil at $20/bbl.

 

[hawkitd]

I assume PN is really PA (Pennsylvania) right? ^^^

It is hard for most (worldwide) producers to be profitable at $20/barrel. That said, the fundamentals are in place for price declines (slowing demand for crude, new/increased supplies (US frackers, Iran, Iraq, Libya, etc). $20 seems a bit low to me (I've traded this market for 20+ years) but under $30 wouldn't be a total surprise barring WWIII, another 9/11, etc.

 

[Tom Paris]

Gas should be a buck a gallon right now, so they oil companies are still making a tidy profit.

 

[tarheelbybirth]

I assume PN is really PA (Pennsylvania) right? ^^^

It is hard for most (worldwide) producers to be profitable at $20/barrel. That said, the fundamentals are in place for price declines (slowing demand for crude, new/increased supplies (US frackers, Iran, Iraq, Libya, etc). $20 seems a bit low to me (I've traded this market for 20+ years) but under $30 wouldn't be a total surprise barring WWIII, another 9/11, etc.

LOL...yeah, my bad. I have no experience in the area but my b-i-l is of the same opinion as you. He's expecting <$30 by early next year. Unfortunately, his wife is still spending like it's over $100.

 

[Pepperman]

The Saudis might "make money" on strictly the extraction and sale of oil at $20, but I'm not sure of that. I do know with certainty they need at least $75-80 to not have to borrow (or net sell investments) with the welfare systems they have in place to keep their people alive.

 

[tarheelbybirth]

The Saudis might "make money" on strictly the extraction and sale of oil at $20, but I'm not sure of that. I do know with certainty they need at least $75-80 to not have to borrow (or net sell investments) with the welfare systems they have in place to keep their people alive.

True...but they do have billions in reserves to tide them over. They can wait us and the Canadians and the Brazilians out. And that's the plan. They value market share more than protecting their OPEC partners.

 

[Pepperman]

True...but they do have billions in reserves to tide them over. They can wait us and the Canadians and the Brazilians out. And that's the plan. They value market share more than protecting their OPEC partners.

That is true, and I agree they are protecting market share. It is really amazing to see the prices required by many of these oil producers to break even on an "all in" basis. Venezuela needs something like $140.

The thing that saddens me is with oil prices as low as they are now, it discourages R&D and investment into alternative energy sources. But as is true with capitalism, the cure for low prices is low prices.

 

[What Would Jesus Do?]

Keep in mind that outside our energy industry, and leaving aside climate concerns, low energy prices are generally excellent for the economy.

 

[What Would Jesus Do?]

IIRC, the last time oil was in the $20 zone was Clinton's 2nd term. Generally considered to be a good economy, although even then there were concerns about poor distribution of the wealth.

Do you think if we had Clinton era taxes and $20 oil we might be talking about balancing budgets and 4% unemployment again?

Would the GOP be willing to restore those tax rates in exchange for seriousness on balancing the budget?

 

[tarheelbybirth]

That is true, and I agree they are protecting market share. It is really amazing to see the prices required by many of these oil producers to break even on an "all in" basis. Venezuela needs something like $140.

The thing that saddens me is with oil prices as low as they are now, it discourages R&D and investment into alternative energy sources. But as is true with capitalism, the cure for low prices is low prices.

Yep...and there don't seem to be any avenues for upward pressure on oil prices in the near future. SA and OPEC will have to get the market share they want and then cut production. I can't imagine anything on the demand side is going to have an effect. On the plus side you can get really good deals on cars like the Volt or the Leaf right now.

 

[unIowa]

The thought of Iranian oil hitting an already oversupplied market may keep prices heading downward even if Iran take a year or so to ramp up its production.

 

[What Would Jesus Do?]

On the plus side you can get really good deals on cars like the Volt or the Leaf right now.

Really? Or are you jesting or speculating?

What's troubling is that apparently the sales of trucks and SUVs are going wild. I've been reading about manufacturers shuttering some lines and plants and ramping up truck and SUV facilities.

Bad news when SA decides we've capitulated on shale oil and green alternatives, and jacks up the prices again.

And, of course, bad news for the environment and the future for our children and grandchildren. But no good America gives a flip about that.

 

[What Would Jesus Do?]

Questions:

If Saudi Arabia said their oil will cost $50. Period. No market. Just $50. What would happen?

Why are we drilling in the Arctic (planning to drill, that is) under these conditions? If the oil won't come on line for years, is this a good move? Are we giving away our natural resources so that Shell can make a profit? If not, how is this a profitable investment for Shell?

 

[sijoint]

The thought of Iranian oil hitting an already oversupplied market may keep prices heading downward even if Iran take a year or so to ramp up its production.

The US needs to start selling oil on the world market ASAP........before Iran floods the market with theirs........thanks again Obama......helping Iran, hurting the US.
The US oil companies will be hedged for a few years, but hopefully with Obama gone we'll be able to lift the ban on selling oil word-wide.

 

[tarheelbybirth]

The US needs to start selling oil on the world market ASAP.......

To whom would you sell it?

 

[unIowa]

To whom would you sell it?

Ourselves.

 

[pepsicock]

I hope the bastards choke on it ! I hope this goes on the next 10 years .

 

[ChrisVarick]

Goldman Sachs commodity predictions are about as accurate as my fantasy football predictions. Sometimes I'm right and I'm brilliant. Other times I'm wrong and I make new picks the next week.

 

[Hawgk]

Gas should be a buck a gallon right now, so they oil companies are still making a tidy profit.

You're kidding, right? Upstream oil and gas companies, which is where the majority of profits are made in the O&G sector, are getting hammered right now because oil traded by the barrel and right now the price of oil per barrel is very low.

 

[DrVenkman]

Apparently Goldman Sachs is predicting it.

Unless there's a world-wide recession that's killing demand, I don't see it.

I read somewhere recently that US oil production is dropping due to some fields no longer being profitable at these prices.

Do you think GS is right?

I am curious why you don't see it. What is your supply/ demand model telling you? Of course oil could go into the 20's, which is what GS 'Bear' case is. Did you read the entire article? What they are really saying is that it is very likely that over the course of the next few years the price of oil will be considerably higher. The risk is that the global economy slows further and the FED raises rates which will push the Yuan lower and US$ higher in all baskets. OIL can go much lower. Look at the trading range of oil from 1985 to 2000. People forget that oil traded at 11$ in 1999. The new oil range is a function of China.

GS is actually pretty good at predicting the prices of commodities. They have been spot on over the last year or so.

Of course US shale oil is not profitable now. This is why the Saudis have done this. there is no comparison in cost structure in the US and SA. Many many US E&P companies were cash flow negative with oil at 100$- they are in terrible shape now. US production is dropping- its just not dropping near fast enough.

 

[joelbc1]

If other commodities follow the path predicted for oil, woe be the world economy. Investment counselors fear this the most. As will all folks with any type of financial investment. It'll make the bubble of '08 minuscule in comparison.

 

[Run&Blade]

F my retirement accounts are going to tank for a couple of years some $1.50 gas would be a nice constellation prize. Unfortunately gas is still well over $2.20

 

[pepsicock]

$1.82 in SC

 

[joelbc1]

The US needs to start selling oil on the world market ASAP........before Iran floods the market with theirs........thanks again Obama......helping Iran, hurting the US.
The US oil companies will be hedged for a few years, but hopefully with Obama gone we'll be able to lift the ban on selling oil word-wide.

Jeeeebus stjoint...ALL US oil is sold on the world market. All oil produced is sold on the world market.