Price of Oil hits new low

just printed a new low at $51.06 and with the threats of greece wrecking the euro and the dollar stronger than atlas it may make new lows around $50 yet today. maybe in a few minutes.

edited: took an hour to reach $50.67

edit2: finally got to $50.55, still weak.
 
new low at $47.74 just printed and the rebound back over $48 is very weak.

layoffs are now accelerating rapidly now as more and more rigs are laid down. for many rigs this will be cold storage and eventually scrapped so those jobs are not coming back ever.

there was news that the iranian minister attempted to talk the russians into considering cuts but that has not resulted in any commitment to cut back production yet.

all the US production is on such a headlong climb from 2014 through this year that production in the US will continue to increase in 2015 even as the drilling fleet drops about 40% over the next year. the current high of 9.3 mmbopd may climb 700,000 bopd to 10 mmbopd before the production begins to fall at the end of the 2015.

the 40% reduction may be low estimate too since it is possible up to 80-90% of the US drilling fleet could be stacked by the end of the year if these worldwide production levels continue. this would be about 400k jobs lost.

this is the end of production increases or even sustaining on many offshore, especially UK and norwegian offshore.
 
It's difficult to tell where the break even point is for production, but the estimate for US shale producers is around $50 per barrel. Certainly this is going to shake up the drillers. It will be difficult to justify any new exploration with pricing where it is. Producers are going to have to decide whether to keep pumping or shut down.

A client of mine works as a contractor in the Elk Hills field in Kern County. He told me the owner (Occidental Petroleum) stopped all drilling operations and laid off 3000 workers when prices started tanking in October. And that was when prices were at about $85/bbl. Of course they are still pumping, but no new exploration.
 
yep, on the board where i hang out with the guys who do drill and operate wells and produce in the bakken they talk about the empty restaurants. hundreds of people everywhere already laid off and everyone else knows the hammer is coming for them too.

these are guys who went to the bakken because it was the only place to find work, living in man camps and sleeping in campers to get a job. all of them outa work within the year. all those man camps and mom and pop restaurants and motels all will go under too because they have all invested in expansion recently.

this will ruin west texas and new mexico. because there is no expectation of slowing production growth until the end of the year the price of oil has just cratered because it is clear their is gonna be way too much production for a long time and no place to store it all.

if you look at the gas price thread, it started when the US produced only about 4.5-5mmbopd and now we produce 9.3mmbopd and will hit 10mmbopd by the end of this surge before it drops late in the year.

so oil can go lower from here. $47.54 i think was the low print today
 
dnmun said:
these are guys who went to the bakken because it was the only place to find work, living in man camps and sleeping in campers to get a job. all of them outa work within the year. all those man camps and mom and pop restaurants and motels all will go under too because they have all invested in expansion recently.

this will ruin west texas and new mexico. because there is no expectation of slowing production growth until the end of the year the price of oil has just cratered because it is clear their is gonna be way too much production for a long time and no place to store it all.
Click to expand...


All petroleum-for-fuel related jobs were inherently doomed before they started working them. The first people to lose there jobs are the lucky ones, as the job market isn't nearly as filled with surplus petro-chemical industry folks looking for work as it will be soon.

If you were a pony-express rider, or a steam-engine mechanic, or a VCR repair-man or a vacuum-tube specialist, a desktop PC designer, or a now a petro-chem industry worker, it's time to move forward.
 
You get out when the paychecks stop or when they get so low that they can't support you or your family. Good luck getting a better paying job though. Roughneck oil workers pay just may go down form $100,000 per year to $45,000.

It is a low bubble anyway. Could take a while to pop. Oil will go up one day, and it won't be all that long. A year or two.

On the other hand, with people fooled by low gas prices electric vehicle sales will stall for a while. The price of lipo batteries of all types will fall due to lack of demand. Time to stock up on battery sales toward the end of 2015?

@LPF....not all that is old is obsolete. Just try to get an old guitar tube amplifier repaired and/or ,and see what the specialized tube amp repair guy charges you. :oops:

I just got a 1967 Gibson Skylark (three tube amp) going a couple of months ago. Bad capacitors replaced. Death cap removed. Sounds great now! Knew enough to do it myself.

:D
 
e-beach said:
@LPF....not all that is old is obsolete. Just try to get an old guitar tube amplifier repaired and/or ,and see what the specialized tube amp repair guy charges you. :oops:

I just got a 1967 Gibson Skylark (three tube amp) going a couple of months ago. Bad capacitors replaced. Death cap removed. Sounds great now! Knew enough to do it myself.

:D
Click to expand...
I had a Gibson tube amp in the late 60s, don't remember the exact model but it had a 15" JBL and 2 channels. I ran my Gibson ES335 through a Fender Blender fuzz tone and a Cry Baby wah wah pedal. The amp had an excellent clean reverb sound and plenty of volume (enough to bring the Sheriff's car around) :lol:
 
Tubes are the industry standard gamma ray source and high speed ultra high voltage switching kings as well.

Petrochemicals will still be used for plastics and fertilizers and aviation fuel and lubrication for likely many more decades.

You can still buy a desktop PC now as well, new CRT based TV's, and new vacuum tubes (I have a tube headphone amp). They just represent a comparatively insignificant <1% of the market they once dominated. Not because they didn't still function as well as they ever have, but because the market moved on.
 
just found out they have closed the two strip clubs in Dickinson,ND. that should tell you something.

kansas sour and oklahoma sour both dropped below $29 to the $28.7x range.
 
i think the fact that the oil sands are not economic at all anymore means that canada will suffer greatly.

already the lay down of rigs in canada exceeds the US 2-3X. this is the time we usually see rigs moving into drilling pads over frozen tundra when it will support their weight.

so there may no longer be the economic justification to build the northern leg of the transcanada pipeline down to Cushing.
 
dnmun said:
i think the fact that the oil sands are not economic at all anymore means that canada will suffer greatly.......
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Also, IMO another reason OPEC is not budging on output. They would be very happy to put all North American oil company's out of business. They want to control oil production / petrodollar as much as possible. Their wells are in, their oil easy to extract.

Why not kill more then a few birds with one stone.
 
Sounds like a perfect time to push for a pipeline to bring all of that oil from Canada to the Gulf ports.
 
some think that the reason the saudis decided to act now is because of the huge amount of oil arriving at the USGC usgulfcoast ports from the new and reversed pipelines from Cushing to the gul. this has push another 1mmbopd into the USGC and it cannot be exported so it is sold to the refineries on the gulf and that has 'backed out' the same amount of saudi crude called Manafa and the mexican Maya and Venezuelan heavy crudes which in the past have had their best market in the gulf refineries which have specialized cokers on the front end of the refinery to be able to hydrolyze and break down the heavy crude so it can be handled in the refinery. the saudis just spent billions building refinery on the gulf so they could ship their own crude there so it would have a market and now they have had to deal with even more light crude arriving from the Bakken and eagle ford. and permian production has soared also.

i think this stalemate between the saudi guvment and emperor putin is based on the saudi wanting to force other countries into cutting back production since the world market is now oversupplied to about 1-1.4mmbopd and until that is reduced or demand increases to meet it then the price of crude is gonna abe stuck in this spot for the duration until the russians and iran finally say uncle in the form of reducing production, signing off on the nuclear nonproliferation talks with the G5+ parties, and forcing assad to leave and let a new unity guvment be established in syria. this is big for the saudis. jamming us was just icing on the cake imo. but if this goes on for 9 months then i expect the oil sands companies will just not be able to continue financing the build out of the upgraders.

>>>>>>>>>

Oil's plunge threatens Suncor's Fort Hills development
Collapsing oil prices could force Suncor Energy Inc. and its partners to defer spending at the $13.5-billion Fort Hills oil sands development, a project that has already been delayed for years due to fears over high costs.

Today’s crude prices under $50 a barrel (U.S.) are well below the break-even level required for the northern Alberta project, where production is still two years off but spending is slated to be at its peak this year and next, analysts say. One possibility, they suggest, is a slowdown in expenditures as oil markets remain in a deep trough.

Suncor, Total SA and Teck Resources Ltd. sanctioned the development in late 2013 after years of intense study into how to reduce costs to a level that made it viable, given long-term expectations for crude prices and expenses for labour and materials. The mining and bitumen-extraction project had been shelved five years earlier amid the financial crisis.

The profitability of Fort Hills was questionable when the companies gave the project a green light, says Samir Kayande, analyst at ITG Investment Research in Calgary.

Last year, Mr. Kayande calculated that the project breaks even with West Texas intermediate crude at $90 a barrel. Suncor had said it expected a 13-per-cent after-tax rate of return assuming West Texas intermediate oil prices of $95.

“Given that the original decision to proceed was not economic, I don’t know what would make you stop,” he said.

“Now it’s really uneconomic so maybe it’s worth stopping.”

Other analysts said it is more likely that the partners decide to cut back on immediate spending and push the startup date back. First oil is currently scheduled for the first quarter of 2017. Output is expected to hit 90 per cent of its planned production capacity of 180,000 barrels of bitumen a day within 12 months.

When Suncor announced its 2015 budget in mid-November, executives gave no indication that Fort Hills could be slowed, even as oil prices weakened. At the time U.S. crude was still above $74 a barrel. A Suncor spokeswoman said the company is assessing the impact of falling prices on planned expenditures, but offered no hint that it would slow spending.

“Our strong balance sheet is designed to enable long-life strategic projects, like Fort Hills, to continue through volatile periods such as we are experiencing now,” Suncor’s Sneh Seetal said.

The company has a projected operating life of 50 years, and oil markets will go through numerous cycles through that period, she added.

“It will be interesting to see. Three or six months from now, if oil prices stay at this level, I’d be shocked if they hadn’t slowed down the pace [at Fort Hills],” said Michael Dunn, analyst at First Energy Capital Corp.

Suncor has shown in the past it will shut down major projects if the economics no longer work. In 2009, with the global credit crisis in full swing, the company shut down construction of its $11.6-billion Voyageur upgrading plant, and cancelled it altogether four years later.

Mr. Dunn said he does not expect the development to meet the same fate of Voyageur, unless crude prices stay at depressed levels for another two years.

Chris Cox, analyst at Raymond James, said he, too, believes that Fort Hills stands the highest risk among major oil sands projects under construction of being hit with some deferral.

“There’s just such a large amount of capital that they still need to spend and the economics are pretty marginal at best, even if you assume a decent [oil] price recovery,” Mr. Cox said.

http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/sinking-crude-prices-could-put-suncors-fort-hills-project-on-hold/article22321243/
 
Could be a couple of years of low oil prices.......depends on who blinks first. The Saudi's seem determined this time. Which also brings up a gallows investment thought. What publicly traded oil companies will loose enough value to consider buying into......providing they do not go under, while at the same time ride an ebike the whole time and not purchase a drop of gasoline. :twisted:

http://www.forbes.com/sites/nathanv...-billion-bet-drives-brent-oil-below-54/print/

Saudi Arabia's $750 Billion Bet Drives Brent Oil Below $54

With Brent crude oil falling on Monday below $54 a barrel for the first time in more than five years, it is clear that Saudi Arabia is making a massive $750 billion bet in 2015 that the oil kingdom can endure lower oil prices longer than other major oil producing countries both within and outside OPEC, even including American shale.

A flood of new oil from U.S. shale producers and Canadian tar sands companies coupled with softening demand from China may have set the stage, but Saudi Arabia is now firmly driving the process that has seen oil prices plunge in a matter of months. Starting in October, Saudi Arabia indicated to global markets that it would not materially cut production alone and would restrain itself from cutting production unless other major oil producing countries also joined in such an effort.

“The most important thing for the Saudis is market share,” says Prof. F. Gregory Gause, a Saudi expert at Texas A&M University. “They are not going to sacrifice it, they will play chicken with other producers, whether Iranian or American shale producers, in order not to lose market share and the only way they will cut production is if they get an agreement with a broad array of OPEC and non-OPEC producers to take a fair amount of oil off the market.”

Saudi Arabia’s move is inflicting pain on the energy-based economics of countries like Iran and Russia, and big national oil companies ranging from Russia’s Rosneft to Brazil’s Petrobras, which saw its shares fall another 8.4% on Monday. Big U.S. shale producers saw their shares take another hit on Monday. Shares of Continental Resources, for example, fell by 12%. Companies engaged in offshore drilling also got hit, like Transocean, whose stock fell by another 7% on Monday. Transocean’s stock has plunged by 65% in the last year.

The decision by Saudi Arabia, the world’s biggest oil exporter, not to cut oil production and play the role of swing producer to stabilize oil prices is also costing the oil kingdom. Saudi Arabia recently released a 2015 budget showing a $38.6 billion deficit, its largest ever, projecting a significant decrease in oil-generated revenue. But Saudi Arabia has accumulated $750 billion in foreign currency reserves and has signaled it is willing to spend its cash hoard and put it on the line in this global oil battle.

Saudi behavior in the global oil market is informed by the oil kingdom’s experience in the 1980s, when oil prices collapsed below $10 a barrel. At the time, the Saudis kept cutting production and losing market share because other OPEC members continued to pump out as much oil as they could. This time around, the Saudis not only need to get other OPEC members in-line on production cuts, but also non-OPEC members like Russia and Mexico. In the case of American shale, there is no single policy maker, but hundreds of independent oil companies making up a market that Saudi Arabia can try to influence by making future investment seem riskier and unprofitable.

“The Saudis are putting the heat on everybody and you don’t need to parse it out and say they are really putting the heat on Iran or they are really putting the heat on shale or Russia,” says Gause. “They have decided that given the current market situation they are not going to cut until others cut and all sorts of players are going to feel the sting on that.”

Still, the key for the Saudis could be Vladimir Putin and Russia. The Wall Street Journal did some very interesting reporting right before the end of the year, showing the efforts that Saudi Arabia recently made to get non-OPEC producers like Russia to cooperate in oil production cuts. Saudi Oil Minister Ali al-Naimi tried to get Russia to agree to production cuts in late November, but Russia made it clear it was unwilling to do so, The Wall Street Journal reported. “Russia is the hardest nut to crack,” says Gause.

Oil traders say they believe that Russia, which is facing economic pressures stemming from Western sanctions in addition to plunging oil prices, would find it very hard to stomach production cuts at this time, but that maybe the Saudis could force Russia to decrease future investment.

On the surface, it seems lower prices might be around for a while.
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Huuummmm......And then there are the US Dollar Bears......

Opinion: The dollar, on a ‘hurricane path of destruction,’ is set to fall
By Michael Brush
Published: Jan 7, 2015 6:28 p.m. ET

Strategist Lawrence G. McDonald says the Federal Reserve will no longer tolerate a strong U.S. currency

Lawrence G. McDonald, head of U.S. macro strategy at Newedge, says the Federal Reserve will start to talk down the strong dollar, which can hurt the economy.
The U.S. dollar, at its highest level in nine years, is about to fall off its perch.
The decline will catch most investors by surprise and create sudden reversals in oil, coal and emerging market stocks. You can profit from this if you act now and buy those sectors — and bet against dollar.
That’s the outlook, at least, of Lawrence G. McDonald, a market strategist who has a knack for spotting trouble ahead in markets. McDonald says in his New York Times best-seller, “A Colossal Failure of Common Sense,” that he warned colleagues at Lehman Brothers of the coming subprime storm and how it might hurt the investment bank.
To profit from those moves, consider these exchange traded funds. Get long the euro via CurrencyShares Euro FXE, -0.57% as a bet against the dollar. Get exposure to oil and coal via United States Oil ETF USO, +1.77% United States Brent Oil BNO, +0.25% and Market Vectors Coal KOL, +0.78% And buy emerging markets via iShares MSCI Emerging Markets EEM, +2.16% All of these ETFs should do well as the dollar weakens, says McDonald, who is now the head of U.S. macro strategy at Newedge.
Why is the dollar about to fall? Because that’s what the Federal Reserve wants since the strong dollar is starting to create problems in debt markets that hurt U.S. growth, McDonald maintains. The euro has fallen more than 14% versus the dollar since March.
We’re having a difficult time finding any strategists who aren’t dollar bulls. When everyone is piled into one side of a trade, run, don’t walk, to the other side. Lawrence G. McDonald
The underlying problem: Six years of cheap money, thanks to the Fed’s long-lasting zero-interest-rate policy, has put too much debt in the wrong hands. “When you leave interest rates at zero for six years, there is a price to pay,” McDonald says. Unless the Fed takes action and talks down the dollar, we may soon be paying the price, he argues.
That’s because the strong dollar is pushing a lot of that debt closer to default, which is creating systemic risk. Widespread defaults would ultimately harm the U.S. economy by making investors overly cautious. “The Fed is extremely concerned about the dollar,” McDonald says. “The Fed has to do something to calm things down. The Dow could drop a thousand points if this gets out of hand. I think the Fed is going to have to talk the dollar down.”
Where might things get out of hand? The energy sector, for starters. Back when oil seemed like it would stay in the $100-a-barrel range for a long time, companies borrowed heavily to produce oil from U.S. shale and elsewhere. Energy companies took out $1.6 trillion worth of debt since 2009, much of it high-yield, McDonald estimates. Now with oil in sharp decline, a lot of that high-yield debt is starting to look questionable.
Oil is down in part because the dollar is so strong, and by talking down the dollar, the Fed could put a bid under oil and help solve the problem, McDonald says.
You see the same thing in emerging markets. With money so cheap — thanks again to the Fed’s zero-interest-rate policy — developing countries, and companies in those countries, naturally took out a lot of debt.
The catch here is that they often borrowed in dollars. Now, bond investors are worried that the strong dollar makes it harder for those borrowers to pay back that dollar-denominated debt. That has investors getting out of this debt on worries about potential defaults. The selling has driven up yields to troubling levels, flashing a warning sign.

Yields on Russian and Greek government debt, for example, have risen into the 6%-14% range, compared with around 2% or less on U.S., European government and Japanese debt. “What we’re seeing in Russia and Greece is disturbing,” McDonald says. Overall, we’re talking about a lot of debt. Since 2012, emerging market governments and companies have taken out around $2 trillion worth of debt.
Another sign of the problem here: The cost of insuring against emerging market debt, or credit default swaps, has risen sharply.
All of this is putting pressure on the Fed to talk the dollar down by suggesting publicly it’s concerned about dollar strength, and also that it might be more willing to delay scheduled rate hikes, which are partly responsible for dollar strength. “They must talk the dollar down. It’s on a hurricane path of destruction,” McDonald says.
When might the Fed do this? As soon as this week. Hints of Fed concerns about the dollar may appear in any of the following forums.
• Wednesday’s 2 p.m. release of the Federal Open Market Committee (FOMC) minutes from its December meeting
• A Wednesday speech by Federal Reserve Bank of Chicago President Charles Evans
• Thursday speeches by Boston Fed President Eric Rosengren or Federal Reserve Bank of Minneapolis President Narayana Kocherlakota
• A Friday speech by Richmond Federal Reserve President Jeffrey Lacker
If we hear Fed concerns about the strong dollar in any of those events, the dollar will tank and commodities like oil will “rip higher,” McDonald says. Here’s how to position for this.
Buy the euro via the CurrencyShares Euro ETF. This ETF will go up if the Fed starts talking down the dollar. A bet against the dollar also makes sense since it’s such a crowded trade, it seems destined to reverse. “We’re having a difficult time finding any strategists who aren’t dollar bulls,” McDonald says. “When everyone is piled into one side of a trade, run, don’t walk, to the other side.”
Buy energy via the United States Oil ETF, United States Brent Oil ETF and Market Vectors Coal ETF. McDonald uses a multi-factor “capitulation model” to gauge when asset classes look so washed out they are about to reverse. McDonald is not always right, but I’ve seen him make several good market calls in the two years I’ve been following his research. “We don’t know where the bottom is in oil, but USO and BNO are scoring very well in our capitulation model,” he says.
Both USO and BNO are trading over 90% below their 200-day moving averages, an extremely rare move for a major asset class. “It is unsustainable. The capitulation model is showing really powerful signs of selling fatigue,” he says. “My trading instincts tell me we are very close to a bear market bounce.” Fed commentary on the dollar might be the catalyst.
Buy emerging markets via iShares MSCI Emerging Markets. Likewise, Fed attempts to talk down the dollar should help emerging market stocks, since it would ease concerns about problems that emerging market countries and companies might have paying back debt in strong dollars. A signal that the Fed is delaying rate hikes would have the same effect. “Although we may be early, we feel the Fed will have to reverse their position, and this should help the emerging markets rally,” McDonald says.
At the time of publication, Michael Brush had no positions in any securities mentioned in this column. Brush is a Manhattan-based financial writer who publishes the stock newsletter Brush Up on Stocks. Brush has covered business for the New York Times and the Economist group, and he attended Columbia Business School in the Knight-Bagehot program.
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Funny. Obama's all over putting sanctions on North Korea, but sidestepping this as it concerns the Saudi's.

Press Conference on Resolution to Declassify Joint Inquiry into Intelligence Activities Before and After the Terrorist Attacks of September 2001

[youtube]sy97uKT6hjE[/youtube]
 
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