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"God of Crude Oil Trading" Goes All In On Crude At $150 Bet

Tyler Durden's picture




 

Andy Hall - known as the God of Crude Oil Trading to some of his peers - has, according to Bloomberg, built his success on a simple creed: Everyone who disagrees with him is wrong. He was one of the few traders who anticipated both the run-up in and the eventual crash of oil prices in 2008. Hall has made billions for the companies for which he’s traded by placing one aggressive bet after another; and now, he is all-in again. Hall is going all in on a bet that the shale-oil boom will play out far sooner than many analysts expect, resulting in a steady increase in prices to as much as $150 a barrel in five years or less. As one industry CEO warned, "anybody who bets against Andy Hall might be making a poor bet."

As Bloomberg reports,

“When you believe something, facts become inconvenient obstacles,” Hall wrote in April, taking issue with an analyst who predicted a shale renaissance could result in $75-a-barrel oil over the next five years.

 

Hall is going all in on a bet that the shale-oil boom will play out far sooner than many analysts expect, resulting in a steady increase in prices to as much as $150 a barrel in five years or less.

 

Investing ever-larger sums of his own money, he’s buying contracts for so-called long-dated oil, to be delivered as far out as 2019, according to interviews with two dozen current and former employees and advisers who are familiar with Hall’s trading but aren’t authorized to speak on the record. To attract buyers, the sellers of these long-dated contracts -- typically shale companies that have financed the boom with mounds of debt -- need to offer them at a discount to existing prices.

Hall's reasoning...

...he digs deep, delving into the minutiae of how Texas discloses oil production, the tendency of some shale wells to play out quickly and the degree to which the boom has relied on debt. The simplest of his reasons, though, is that producers have already drilled in many of the best areas, or sweet spots. Hall predicts that growth in shale output will begin to moderate this year and U.S. production will peak as soon as 2016.

 

“Once those areas have been drilled out, operators will have to move to more-marginal locations and well productivity will fall,” Hall wrote in March. “Far from continuing to grow, production will start to decline.”

How Andy Long does it...

But not everyone agrees...

“We haven’t scratched the surface,” Hall’s former mentor O’Malley says. “There are massive additional shale fields in the United States. Technology does tend to move forward.”

 

...

 

Predictions of $75 oil, espoused by Citigroup oil analyst Edward Morse in a Barron’s story in March, really bug him, according to those who know his thinking.

 

“We are not sure what supports his conviction,” Hall wrote of the analyst’s theories in his June newsletter, although he didn’t identify Morse by name. “It is apparently not facts or analysis.”

 

The shale revolution faces political, environmental and technical hurdles in other parts of the world that will stall its rollout, Hall wrote. Morse, who also correctly predicted the sharp rise in crude prices in the past decade, says Hall has let his admiration of peak oil theorists cloud his judgment.

 

“It took a long time for believers in the Cold War to admit it was dead. So, too, is it taking a long time for peak oil believers to admit that it is dead,” Morse says.

So far this year, he appears to be getting confirmation...

So far this year, there are signs that he may be on the right track. In North Dakota’s Bakken and Texas’ Eagle Ford formations, which have accounted for almost all of the jump in U.S. output, the combined year-over-year growth in production in July fell below 30 percent for the first time since February 2010.

 

Two central questions about technology and shale will likely determine the outcome for Hall: how many wells producers will be able to drill in a finite amount of land that sits atop oil-bearing layers of rock and whether the U.S. renaissance will be repeatable abroad. Hall is betting no on both counts. Morse, and many in the energy world, are betting yes.

Timing is everything...

“He’s a phenomenal trader,” says David Neuhauser, a money manager at Livermore Partners who has followed Hall’s progress as an Occidental shareholder. “I believe he’s right about long-term prices; we’re in the same camp. What I don’t know is how long it will take for the market to catch up.”

*  *  *

Russia would sure be happy itf Andy Long is right... USA not so much... perhaps that is the crucial factor in this manipulated market that overpowers everything?

 

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Wed, 09/03/2014 - 21:16 | 5177980 himaroid
himaroid's picture

Lucifer was in Heaven before he went to Hell.

Wed, 09/03/2014 - 21:20 | 5177996 El Oregonian
El Oregonian's picture

Well, "Let's Make a Deal!".... oh, that's Monty Hall?.... so sorry....

Wed, 09/03/2014 - 21:42 | 5178090 Publicus
Publicus's picture

ISIS/Kurds is selling oil for cheap, driving down global oil price.

Wed, 09/03/2014 - 22:03 | 5178159 MeMadMax
MeMadMax's picture

Oh yea???

 

Not everyone is right 100% the fuckin time...

 

I'm willing to bet that this fucker is using his sway in trying to "goose" the market into bull terratory so he can make some quick bucks off some suckers...

Wed, 09/03/2014 - 22:08 | 5178181 Publicus
Publicus's picture

Israel and USA are both buying fire-sale Kurdish oil right now.

Thu, 09/04/2014 - 00:01 | 5178498 0b1knob
0b1knob's picture

God of crude oil trading??????

Any man described as a God, even in jest, is destined for a figurative or even real crucifiction/

Thu, 09/04/2014 - 02:09 | 5178702 outamyeffinway
outamyeffinway's picture

Figuratively, god was never crucified. At least 66% of him.

Thu, 09/04/2014 - 07:16 | 5178935 markmotive
markmotive's picture

What's your god saying about rising rates?

http://www.planbeconomics.com/2014/09/rising-rates-a-sure-bet/

Wed, 09/03/2014 - 22:47 | 5178281 Vint Slugs
Vint Slugs's picture

The price structure is in deep backwardation.  The distants are starting to narrow the "back".  That's where Hall's bet is.  What is it about markets that you and a lot of armchair traders here at ZH don't understand?

Wed, 09/03/2014 - 23:16 | 5178384 Raynja
Raynja's picture

With the situations in MENA, Russia, and Venezuala, LNG about to start flowing out of the US, oil (distillates?) flowing out of the US, Canada exporting west, printing presses gone wild, and interest rates as low as they are how could Hall be wrong?

If oil drops much further it is going to be because of a huge contraction in economic activity.  If that happens you can rest assured the fed will print enough money that the futures contracts should have had an extra zero.

Wed, 09/03/2014 - 23:59 | 5178492 Squid-puppets a...
Squid-puppets a-go-go's picture

with the undisputed oil/gold correlation, $150 oil implies gold at back to $1900

Thu, 09/04/2014 - 00:06 | 5178504 wee-weed up
wee-weed up's picture

a steady increase in prices to as much as $150 a barrel in five years or less

$150 a barrel easily... if not more. And probably in much less than five years. Hell, Obozo's still got 2 years to fuck things up even more than he already has in the Middle East. (And yes, gold will be more than $1900)

Thu, 09/04/2014 - 00:58 | 5178602 Freddie
Freddie's picture

I pretty much figured out Ukriane/Syria.  This is all about looting Ukraine and shutting of those pipelines.  Plus taking over Syria for the Saudi pipeline.  Hopefully Syria can hold the line.  

The IMF/USA grabbed 50% of the Ukie pipelines and Biden's kid is a director.  They stole the gold, will steal the land for GMO. They also stuck the Ukraine with $18 billion in IMF debt.  This is how they destroy countries.

So Putin pivots to South Stream.  Bulgaria puts it on hold.  Then starts back up and on hold again via USSA/EUSSR pressure.

http://www.informationclearinghouse.info/article39446.htm

Then I read the above saying that Iran may have stabbed Putin in the back.  The plan appears to be to block Putin any access to Europe via Ukraine and South Stream pipelines.  This is also very much about the USSA and USSA corps wanting a cut of Putin's action. Like Biden's kid and all the other parasites and US energy companies. 

Everything is about theft and looting.  Looting treasuries of countries and natural resources, stealing minerals and oil/gas plus the trillion narcotics trade.  This is all these people do.

So Russia cannot get gas and oil to Europe except Nord Stream which might get attacked some way in the future.

The west is banking on Nabucco line which supposedly is billions and years away or vapor ware.

Supposedly based on comments in the article (good comments too) that Iran is mad because Russia reneged on S300s after pressure from Washington and Israel.  I think Syria may have finally got their S300s but I am not sure.  

Iran and Russia need to stay tight along with Syria and China because the people against them are psychopaths.

So can the West block Russia from sending energy to Europe?  The Europeans are toast and insane if they think Nabucco will save them.

Thu, 09/04/2014 - 09:34 | 5179450 A82EBA
A82EBA's picture

That's good stuff right there..thanks

Thu, 09/04/2014 - 06:07 | 5178863 MalteseFalcon
MalteseFalcon's picture

"LNG about to start flowing out of the US"

How does this happen in any kind of meaningful amounts?

Thu, 09/04/2014 - 08:50 | 5179259 Keyser
Keyser's picture

It doesn't, at least in a cost effective and timely manner... It's the hook, line and sinker to draw the EU into WWIII... Sure, the US can supply your LNG needs to offset Russian exports... Yeah, right, and the check is in the mail too... 

 

Thu, 09/04/2014 - 07:09 | 5178927 chistletoe
chistletoe's picture

How could Hall be wrong?

 

Well I will only mention one possibility, out of thousands....

 

Just think about the implications to the oil markets if Ebola makes the jump  to North America and Europe ..

Wed, 09/03/2014 - 22:14 | 5178190 Mr. Magoo
Thu, 09/04/2014 - 02:59 | 5178741 Ratscam
Ratscam's picture

Lyndsey Williams predicted the same thing right as well.
After the rise and the fall he was wrong all the time.

Wed, 09/03/2014 - 21:20 | 5178000 nmewn
nmewn's picture

Thats somewhere around Detroit isn't it? ;-)

Wed, 09/03/2014 - 21:32 | 5178061 himaroid
himaroid's picture

Detroit is just past the seventh circle.

Wed, 09/03/2014 - 22:36 | 5178248 junction
junction's picture

Andy Hall knows as well as anyone else that the oil benchmark price is rigged, just as LIBOR was rigged and just as gold and silver ETFs are still "fixed" by the big boys.  So, what will Andy do if oil never goes above $100 in the next five years.  He'll do nothing, he'll forget his prediction.  The shale natural gas boom will be over within two years, but not before those fracking waste disposal injection wells contaminate the Ogallala aquifer and force the building of a new Keystone XL water pipeline to provide irrigation water to the Midwest.  With crooks in charge, led by a Kenyan with a CIA legend, the USA is fu*ked.

Wed, 09/03/2014 - 22:59 | 5178321 tempo
tempo's picture

Obama won the lottery w fracing. Created a lot of jobs and kept the deficit under control for a few years. But The decline rate for frac wells (some 50% the 1st year) is so fast that 100,000 bbl/day of production has to added to get 50,000. It will take far too many wells that the debt burden and environmental issues will soon become apparent. Fracing will be essentially over within 5 years and US will be so sorry not to have the keystone pipeline.

Wed, 09/03/2014 - 21:15 | 5177981 syntaxterror
syntaxterror's picture

Master of the Universe! Zzzzzzzzz

Wed, 09/03/2014 - 21:41 | 5178087 gjp
gjp's picture

God's work, trading god, megalomania is directly proportional to proximity to a printing press

Wed, 09/03/2014 - 21:19 | 5177993 Yen Cross
Yen Cross's picture

    Those Greeks>>>>

  The next "Bond" movie must be soon?

Wed, 09/03/2014 - 22:14 | 5178191 Carpenter1
Carpenter1's picture

He may be the god of oil trading,  but he's not the god of predicting demand from the US economy,  which will falter by 2016.

 

Less demand = Lower prices

Wed, 09/03/2014 - 22:31 | 5178232 NotApplicable
NotApplicable's picture

Or he's factoring in WWII.

Wed, 09/03/2014 - 22:49 | 5178287 bidaskspread
bidaskspread's picture

That is if the dollar still buys the same amount of crude in 5 years. Hyperinflation play.

Thu, 09/04/2014 - 01:27 | 5178646 rbianco3
rbianco3's picture

Bingo. If we have (roughly) 15 times more dollars in circulation now than we did just five years ago then it doesn't take a rocket scientest to guess that the price of everything (commodidites) will be going up exponentially in relation to green toilet paper, I mean fiat, or dollars rather.

Thu, 09/04/2014 - 03:13 | 5178754 darteaus
darteaus's picture

Exactly-maybe he just betting against the dollar.

Thu, 09/04/2014 - 06:58 | 5178919 ParkAveFlasher
ParkAveFlasher's picture

Inflation is guaranteed...especially when there is deflation.  

Wed, 09/03/2014 - 23:34 | 5178432 Seer
Seer's picture

"Less demand = Lower prices"

Are you not considering margins?

At some point the margins will be so hammered that prices cannot be pushed lower.  Of course, the problem here is that pushing prices back up only further erodes volume.  ALL of this is perfectly described by my "economies of scale in reverse."

Demand will never come back around.

Thu, 09/04/2014 - 00:47 | 5178594 disabledvet
disabledvet's picture

Hard to speak in terms of "the goo" but without a doubt cheap natural gas has fueled the huge rally in energy plays in the USA...not oil. This has to a large extent fueled a booming economy in certain parts of the USA...just not the USA as a whole.

The oil market has pretty much collapsed near as I can tell...and is slowly but surely being priced out of existence. The technology upon which it's reign was secured has collapsed (the internal combustion engine), gasoline demand peaked in 2007...it will never recover. Oil still has use as a heating fuel...but so does coal...who's price has also collapsed.

Sales of SUV's and pickup trucks have boomed again...so that's good for the long thesis. But China is picking up their production game now too while going all in on battery powered vehicles.

What very bullish case is the use of privately owned cars as public transportation. "We've got an app for that" as they say.

Wed, 09/03/2014 - 21:18 | 5177994 Seasmoke
Seasmoke's picture

Bullish Bicycles Bitchez !!!

Wed, 09/03/2014 - 23:37 | 5178434 Seer
Seer's picture

Make sure that it's a sturdy bicycle, as road maintenance is going to become increasingly spotty...

Wed, 09/03/2014 - 21:19 | 5177995 Bangalore Equit...
Bangalore Equity Trader's picture

Are the Americans at Peak Shale?

Prediction: 5 years until you are ruled by the Golden Indians.

Wed, 09/03/2014 - 21:20 | 5177999 Capitalist
Capitalist's picture

lol maybe Chris Martenson will finally be right.

Wed, 09/03/2014 - 21:21 | 5178006 Yen Cross
Yen Cross's picture

  Edward Morse? WTF name is that?

 

 

“It took a long time for believers in the Cold War to admit it was dead. So, too, is it taking a long time for peak oil believers to admit that it is dead,” Morse says.

So far this year, he appears to be getting confirmation...  ROTFLMFAO!   UUhhh Yaa. Zero demand!

Wed, 09/03/2014 - 21:25 | 5178009 FreeMktFisherMN
FreeMktFisherMN's picture

There is actually a lot more oil available than people realize, and would be economically feasible to extract were there free market forces. But thanks to QE and regulations, supply will be artificially reduced to prop up oligarchs who quid pro quo with politicans for favors in return for campaign contributions. QE leads to capital going back into the 'fun' sectors that should have been wiped out clean in many cases, last decade, like into CA and AZ housing, instead of that capital going to where it is merited, like in North Dakota where it is a productivity powerhouse going on there. It fits the mantra of neoliberal politicians and economists, though, as they believe that the laws of scarcity/supply/demand don't exist anymore, as we are in some 'post scarcity' world where it is just up to them to properly redistribute the wealth. Plus the Left wants to do the bidding for the green cultists who want to shove green energy down peoples' throats no matter how many hundreds of thousands is economically destroyed per Volt manufactured, or how many Solyndras there are. Thus they want conventoinal energy sky high priced, and regs and QE will do that.

Additionally, oil should be much higher and will go much higher because it should take a lot more US fiat notes to buy it. Priced in metals it should stay stable, though. This is also why I think a lot of stocks are undervalued in terms of being priced in USD. They should be much higher because it should take more US fiat notes to get equity in solid companies; the ones that have international exposure to markest with emergent middle classes with a thrift/work ethos, and liberalizing economic trends. Companies that make actual quality items that these people will desire abroad, and also the upper wealth classes in America, will do fine and in terms of US fiat, should be much higher. It is no their intrinsic worth going up, so to speak, not nearly so much it is the devaluation of the dollar. Zimbabwe markets were on fire, too, for comparison. 

Thus short hopium/the real American economy not via VIX, SPXU, etc, but via precious metals, agriculture, land, and international companies who make quality products that will sell in the emergent markets where people have the incomes to afford it. 

 

 

Wed, 09/03/2014 - 23:42 | 5178447 Seer
Seer's picture

People are broke.  Doesn't matter what "free market" exists or what allowances for externalizations (i.e. "regulations") are or aren't in place.

"Zimbabwe markets were on fire, too, for comparison."

Comparing a backward country's economic collapse to a global collapse, really?

Resources are declining.  FACT.  Depleting them faster, using "credit" to drive that engine, well, we've been there...

Cornucopians will always find something to blame other than their own failed [non-existent] logic.

Thu, 09/04/2014 - 00:07 | 5178513 Squid-puppets a...
Squid-puppets a-go-go's picture

and even if there is easy oil to exploit if only .gov got outta the way, debt saturation needs to be resolved before this 'free market' can utilise that oil. Derivative and shodow banking needs to be removed before this 'free market' can utilise that oil. Sound money needs to be restored before this 'free market' can utilise that oil. And all that has to happen without the oligarchy opting for war as an avoidance tactic for dealing honestly with any of those issues

and war sucks up a lot of oil in destructive activities, exponentially limiting the impact of creatively used oil

Thu, 09/04/2014 - 01:09 | 5178628 FreeMktFisherMN
FreeMktFisherMN's picture

Bottom line is as usual, .govt intervening makes everyone but a few poorer. With .govt it is zero sum, whereas in free market, trade is always by definition mutually beneficial. 

Thu, 09/04/2014 - 08:10 | 5179063 tonyw
tonyw's picture

"would be economically feasible to extract were there free market forces."

so yes if oil companies could just drill wherever they wanted and without regard to the environment or spills then it would be a little cheaper.

Just look at any country that has alowed this and you will see environmental problems.

For example chevron in south america.

Imagine that an oil company would not be held responsible for pollution in the GOM, oil would probably still be spilling today and no compensation would have been paid.

The oil sands tailing ponds are not a pretty sight.

Thu, 09/04/2014 - 02:38 | 5178731 medium giraffe
medium giraffe's picture

"supply will be artificially reduced to prop up oligarchs"

THIS^^

Thu, 09/04/2014 - 07:02 | 5178874 MalteseFalcon
MalteseFalcon's picture

Which leads to a generalization.  The manipulation of all important markets is done solely to prop up the oligarchs.  And

"the oligarchy opting for war as an avoidance tactic for dealing honestly with any of those issues".

War to distract.  War to shift blame.  War to silence you "for the duration" and maybe for good.

Wed, 09/03/2014 - 21:21 | 5178013 techstrategy
techstrategy's picture

Yes.  The divergence between what should be happening to commodity prices (especially oil, copper and gold) is due to extreme invervention for policitcal outcomes.

Wed, 09/03/2014 - 21:22 | 5178018 El Vaquero
El Vaquero's picture

Those shale plays are being run on a lot of debt.  It cannot go on forever.

Thu, 09/04/2014 - 00:15 | 5178521 phaedrus1952
phaedrus1952's picture

No, el Vaq, just NO.

When these E&P boys encounter a rare situation like the Bakken, the Eagle Ford, there is a crushing demand for upfront capital ... Handing out big checks to umpteen landowners to procure mineral rights, racing like mad to drill and produce within 36 months or so to KEEP those rights, building new infrastructure from scratch like roads, pipelines,warehouses and much more.

At a now average cost of 7/8 million bucks per well, companies like EOG will not even drill/develop an area without a return of at least 60%/year.

I have been intensively following this 'shale revolution' for several years now and it absolutely dumbfounds me that supposed professionals see an imminent slackening in production.

The North Dakota DMR has a great PDF titled "update" (I think) dated August 6.

If anyone wanted to spend about two minutes or so looking at the data  concisely presented therein, I think projections of oil/gas scarcity would be firmly allayed.

Thu, 09/04/2014 - 03:34 | 5178775 IrritableBowels
IrritableBowels's picture

Did they mention the graph found on page 10 of THIS DMR release?

Thu, 09/04/2014 - 07:25 | 5178951 john.smith
john.smith's picture

"At a now average cost of 7/8 million bucks per well, companies like EOG will not even drill/develop an area without a return of at least 60%/year."

 

Just because it has to be profitable doesn't mean it will. Someone will make lots of money on shale oil, but most will probably lose if scarcity becomes reality.

Thu, 09/04/2014 - 09:00 | 5179317 Oliver Klozoff
Oliver Klozoff's picture

 

Those shale plays are being run on a lot of debt.  It cannot go on forever.

 

Those shale plays are being run on a lot of CHEAP debt. FIFY

Without the feds' printing press, drilling rates crash, regardless of production.

Wed, 09/03/2014 - 21:24 | 5178028 logicalman
logicalman's picture

The world will look different with oil at 150

Canadian oil sands is the real game.

Let's destroy the planet as fast as we can!

Fracking looks almost friendly next to the aforementioned sands.

 

Wed, 09/03/2014 - 21:49 | 5178120 Hysterai
Hysterai's picture

True to an extent - the sand mining ops. are dreadful - the tailings ponds look like ground zero of a tactical nuke.

SAGD however has a pretty small footprint

 

Anyway - what difference does it make....

Wed, 09/03/2014 - 23:03 | 5178334 barre-de-rire
barre-de-rire's picture

world will never go 150$ oil.

 

get used to this. you cannot make world functionning over 110$ stable.

 

the rising price of transport would overkill total world wide economy. you have to kill by a war to make price go lower by reducing demand. on actuals situation this 150$ senario is just impossible.

 

anyone  not agreeing with me is hallucinating shit hard.

Wed, 09/03/2014 - 23:17 | 5178387 nathan1234
nathan1234's picture

 

Really !I would'nt hallucinate or be a laughing stock

Crude Oil touched US$145 in July 2008.

Overkill! Not so.

The world is a strange place What it has in store will always surprise you

Thu, 09/04/2014 - 02:23 | 5178716 rbianco3
rbianco3's picture

You can find a direct correlation between recent fracking and "shaking ground", "sulpher water", "shaking windows", "dead animals" by using the freely available (for now) Google Trends. You'd be surprised what you can learn from Trends-- interestingly guess which two cities have seen a dramatic rise in the search term "global ecomonic reset"... New York, and London with New York getting about 85% of the searches and London about 15% but I digress.

Thu, 09/04/2014 - 07:55 | 5178952 Hobo Sapien
Hobo Sapien's picture

@logicalman

I have a cousin  who works for that french firm, just bought by GE- they do CO2 scrubbers for coal power plants, things like that. He was passing through a year ago, paid us a visit - he's been up to the the Alberta tar sands for work, told us how great it was. Now I love this guy, he's always been my favorite relative, but I couldn't help but say, "I've seen photos of that. It looks like total destruction of the environment." He said well yeah, they have to go about 50 ft down to get the oil. To be clear, if you haven't seen it, this isn't drilling, it is open pit excavation. I didn't ask any more about the toxic wastewater from processing the sands to get the "oil" out or anything, trying to be polite (I must be getting old) but he did change the subject to the football field sized pyramids of sulfur they're leaving behind, extracted from the oil to make it marketable. Seems 4 workers walked out on to one to take some readings. Too soon. They broke through the crust, fell into molten sulfur. I also didn't ask him how many barrels of oil it takes to extract and process one barrel of oil from the sands.

Thu, 09/04/2014 - 10:32 | 5179697 robertocarlos
robertocarlos's picture

The workers were severely injured? I didn't read about it in the papers.

Wed, 09/03/2014 - 21:24 | 5178029 firstdivision
firstdivision's picture

I would have to agree with Andy Hall's position, except that the oil market is subject to heavy manipulation from the Fed/ECB to keep prices low so the plebs spend.  With consumer spending really in the shitter right now, expect oil to hit high 80's before EOY.

Wed, 09/03/2014 - 21:37 | 5178073 Bunghole
Bunghole's picture

With Putin not behaving (in the eyes of the MSM and gullible american public), expect oil hit high 80's before EOY.

Wed, 09/03/2014 - 21:26 | 5178040 magnetosphere
magnetosphere's picture

ed morse is a mother focker and a pedophile

Wed, 09/03/2014 - 21:26 | 5178043 Yen Cross
Yen Cross's picture

 So, let me get this straight. This "Andy Hal"l person thinks that costs are going to decline because of demand?

 WTFD> Where's the fucking demand?

  PBoC is printing. Japan is waffling/ corporate tax increase/ ECB , sterilization masters are going to break their covenant?

  Where's the demand? Where's the next fabulous nexus of discovery?

Wed, 09/03/2014 - 22:33 | 5178242 Vint Slugs
Vint Slugs's picture

Hey, Dip,

Have you actually looked at the numbers?  Here, have a look

http://www.indexmundi.com/energy.aspx?product=oil&graph=production+consumption

Wed, 09/03/2014 - 23:07 | 5178358 KansasCrude
KansasCrude's picture

YC some of your posts make me think you are a pretty savvy guy.  But your posts on the Oil/Petroleum/Energy complex are really lame I will go with DENIAL .   No doubt the demand curve is not pulsatingly moving up matter of fact it is embarassingly flacid.  A person that understands CHEAP supply and strong demand can connect the dots and understand why expensive supply and declining demand tell the other story. IMO what he is saying is the market price is dictating a cost structure in order to survive.  So we rationalize supply, skin some fleas and bunk up 4 to a room at the Fleastone Hotel.  So can they reduce costs? Probably   For some time now the market price is NOT covering that whole oil/gas nut.  Nothing new there thats the way it always works in the shortrun.  So quit pissing your pants about demand,  demand is always in excess of supply in the energy reality until you understand Its about $PRICE$.   We have already been seeing demand being rationalized by price.  Its  really about what it costs to get it to the point of demand.  That this douche is connecting the dots is taking a cheap ride on alot of Peak Oilers....kudos to SRSROCCO for a great learning crusade.  Take a trip up his analysis he is true crusader.

I understand the desperate need to claim cheap energy 4ever is an innate right for the Merkin Sheep but its not reality.    Bottom line is look at Steves work and understand the economics are terrible for marginal production at $100 a barrell.  Its a terrible reality nail in the hopium bubble but thats the deep cavern of reality....sucks don't it

Thu, 09/04/2014 - 04:07 | 5178805 hedgiex
hedgiex's picture

Yes. Where's the demand? Is the unprecedented global debt fueled liquidity going to fill the crevice of the Oil futures ? That's the contrarian line.

Wed, 09/03/2014 - 21:28 | 5178044 Yancey Ward
Yancey Ward's picture

I think Hall will eventually be proven right in the general case, but he could lose big before then.  I am not sure 2019 is far enough in the future.  I hope he got a big discount on the options.

Wed, 09/03/2014 - 21:34 | 5178068 Yen Cross
Yen Cross's picture

 Place you're out of the money "calls" Yancey. No one's holding you back?

Wed, 09/03/2014 - 21:38 | 5178079 gjp
gjp's picture

Yeah, and good luck with a financial contract for deliveryin 2019.  If oil hits $150 we'll be fighting for firewood in the streets before honoring contracts written in the 'good times'

Wed, 09/03/2014 - 21:44 | 5178102 ebworthen
ebworthen's picture

It could be this Fall or spring/Summer.  I don't see things in Ukraine or the Middle East breaking out in peace anytime soon.

More than likely us "folks" will get punished with higher gas prices sooner rather than later.

Wed, 09/03/2014 - 21:52 | 5178132 JohnG
JohnG's picture

 

 

Gas here went up 12 cents overnight from yesterday,  Rural GA.

 

Wed, 09/03/2014 - 22:38 | 5178256 TulsaTime
TulsaTime's picture

Saw a jump like that last week in Tulsa, it had drifted down to 3.11 and then popped to 3.19. This just a day after articles about high inventories, soft prices, and low demand.

Thu, 09/04/2014 - 06:29 | 5178880 MalteseFalcon
MalteseFalcon's picture

These price jumps probably say more about manipulation at the state level than anything else.  You don't think that just the big boys get to ride the gas manipulation train, do you?

Wed, 09/03/2014 - 21:35 | 5178066 palmereldritch
palmereldritch's picture

Unless of course there's a 9-11 attack on ME oil infrastructure and then the oil-shale bet is overshadowed by the casino winnings...

Wed, 09/03/2014 - 21:39 | 5178082 Bunga Bunga
Bunga Bunga's picture

Then I'll go long Vodka.

Wed, 09/03/2014 - 21:45 | 5178086 ebworthen
ebworthen's picture

Probably the next step in crushing individuals and families against the mill stone to make bankster bread.

TPTB are utilizing debt, fiat currencies, and cotton candy equity markets to milk assets.

Not to mention "insurance" (car, health, etc.) and shadow inflation.

Oh...and crushing tangible money (Gold/Silver).

And paying people shit for their labor.

And...

Wed, 09/03/2014 - 22:26 | 5178221 logicalman
logicalman's picture

You forgot taxation.

Wed, 09/03/2014 - 21:42 | 5178089 reader2010
reader2010's picture

He's betting the farm on  a major European war and all the inconveniences for the price of oil. 

Wed, 09/03/2014 - 21:44 | 5178096 Lumberjack
Lumberjack's picture

I would gladly bet against this prick because the greenies are pushing the agenda once again. Who is financing the greenies? Now you know not just him but a few other key players.

Thu, 09/04/2014 - 06:38 | 5178884 MalteseFalcon
MalteseFalcon's picture

With $billions at stake it's easy to throw a few $million at easily owned "green" advocates and "peak oil" scientists.  With "climate change" in the doldrums these whores have to do something to keep their "cocaine buckets" full.

Wed, 09/03/2014 - 21:46 | 5178113 Stanley Lord
Stanley Lord's picture

My favorite "oil guy" is Vaclav Smil, wrote a book called Oil-he says it is simple, when there is trouble in the Middle East the price goes up, it is that simple, probably in five years, maybe sooner, there is likely to be major trouble in the Middle East.

Wed, 09/03/2014 - 21:52 | 5178131 Hysterai
Hysterai's picture

"probably in five years, maybe sooner, there is likely to be major trouble in the Middle East"

And today's issues are what - a minor inconveniance?

Wed, 09/03/2014 - 22:07 | 5178177 Atomizer
Atomizer's picture

Funny how we never hear about OPEC like we did when Bush was President. Our oil dipped colored negro in chief gets a free comrade pass by the Jewlander Media. 

http://www.opec.org/opec_web/en/about_us/25.htm

Wed, 09/03/2014 - 23:44 | 5178451 daveO
daveO's picture

Of course, he gets a free pass! Geppetto loved Pinocchio, too.

Wed, 09/03/2014 - 23:42 | 5178446 daveO
daveO's picture

When the oil co. shareholders' dividends get cut, a call will be made to DC. War will ensue. If the FED doesn't start QE-ing before.

Wed, 09/03/2014 - 21:50 | 5178125 Atomizer
Atomizer's picture

Andy Hall must of slept through the 2008 screeching crash of 2008. Nobody could afford to drive. Roadways were a paradise for me, no traffic.

Retail transportation carriers missed scheduled deliveries over mis-managed shipping costs to deliver products at quoted diesel costs. 

Bring it on Andy, the comedy never stops on Zerohedge. You will have your ass handed to you. When you go on TV to apologize, you will be cunt punted off the stage. Fair warning. 

Wed, 09/03/2014 - 23:11 | 5178367 techstrategy
techstrategy's picture

The shape of the supply curve is much different now... but facts obviously aren't convenient for you.  What is the marginal cost to produce a barrel of oil in the shale plays?  What are the depletion rates?  What is the all-in breakeven price per barrel on the next well drilled?  

 

On the demand side, we've already dramatically reduced gasoline consumption.  Further cuts get non-linearly harder.  Good luck with that...

 

Fair warning...  You have misplaced confidence.  

Thu, 09/04/2014 - 00:34 | 5178571 phaedrus1952
phaedrus1952's picture

Hey, tech, I wholeheartedly agree that facts are of paramount importance.

The answers to those questions you just posed are readily available throughout the year at all the exploration/production companies quarterly reports and conference calls.

They are publicly  accessible and a treasure trove of relevant operational as well as financial information.

Thu, 09/04/2014 - 03:37 | 5178780 Winston Churchill
Winston Churchill's picture

Without detailed overhead reclaimation data for each oil field, we don't have the data at all.

At best we have trend analysis,which is not analysis at all, its inferrence.

Thu, 09/04/2014 - 06:51 | 5178907 MalteseFalcon
MalteseFalcon's picture

"On the demand side, we've already dramatically reduced gasoline consumption.  Further cuts get non-linearly harder."

Simply not so. 

The electric car couldn't be built.  Then it couldn't be built for under $100K.  And on and on.  The Nissan Leaf is here.  100% electric for under $35K. 

Yeah it's still subsidized, but that is just to jump start the market and get production up to a critical mass.  Economics 101.

Then there's "stack and pack" re-urbanizing America.

The situation is dynamic, but you quote accounting figures.

A bean counter's analysis will earn you a bean counter's reward.

Wed, 09/03/2014 - 21:56 | 5178142 I Write Code
I Write Code's picture

If the dollar stops being the reserve currency and war shuts the straits of hormuz then oil will go above $150/barrel and maybe a lot more.  Compared to that the odds of shale running out so fast is almost secondary.

Thu, 09/04/2014 - 06:53 | 5178912 MalteseFalcon
MalteseFalcon's picture

Wonder what oil will cost in rubles?

Wed, 09/03/2014 - 22:01 | 5178155 pragmatic hobo
pragmatic hobo's picture

there is only one reason for someone to talk his trade ...

Wed, 09/03/2014 - 22:15 | 5178196 Atomizer
Atomizer's picture

Answer: Janet Yellen, Federal Reserve Chair leg. The Petrodollar recycling scam is under scrutiny. Grab your popcorn. 

Wed, 09/03/2014 - 22:04 | 5178162 falga
falga's picture

Whenever a trader advertises his position, he is setting up the deck to promote a failing or weak position. Hall is not stupid and he is probably short the front of the curve against the back-end. Not flat long. You would have no financing to do that. Alternatively, he may be about to short the market against the reading crowd... Anyway, better not believe everything you read and especially a trader that advertises his position so widely

Wed, 09/03/2014 - 23:05 | 5178343 nathan1234
nathan1234's picture

 

Hall may actually be playing for a shorter period with a view to WW3 beaking out soon. He wouldnt have to wait 5 years. It could be less than 5 months or 5 weeks too.

Could end up selling part of the futures , recovering capital and obtaining some profits and then riding the balance to his fortune.

 

Wed, 09/03/2014 - 22:12 | 5178186 Yen Cross
Yen Cross's picture

 The long CL players are starting to squirm under the $ strength.  The $ is starting to weaken, and so is demand.

 Fucking CL traders are scum!

Wed, 09/03/2014 - 22:24 | 5178214 alexcojones
alexcojones's picture

$150 in five years? Okay. . .

As long as AU is $5,000 an oz and AG is $100+

My bicycle and I can deal with $6-7 gasoline

Thu, 09/04/2014 - 03:46 | 5178786 Jano
Jano's picture

1. Ag $100 corresponds to Au $1500

2.  My bicycle and I make every day 40 miles (to the office and back home) every day already now. And it is a pleasurre.

Wed, 09/03/2014 - 22:28 | 5178219 alexcojones
alexcojones's picture

WOW- !!!!  Not One Single

Kate Upton Boob pic on "trending Now." ZH has gone to the dogs

And her main squeeze, Justin Verlander, got rocked again tonight.

 

Wed, 09/03/2014 - 22:30 | 5178230 Wahooo
Wahooo's picture

Go Tribe!

Wed, 09/03/2014 - 23:05 | 5178339 robertocarlos
robertocarlos's picture

That double entendre is so wrong.

Wed, 09/03/2014 - 23:01 | 5178327 nathan1234
nathan1234's picture

Shale Oil companies have been borrowing heavily and most still find it difficult to even repay. They come back asking for more money.

Crude needs to be kept around $95 per barrel at a minimum for shale to break even. That has been my considered opinion as far back as 3 months ago.

Would welcome inputs from the experts to improve my knowledge

 

Thu, 09/04/2014 - 00:01 | 5178493 Hysterai
Hysterai's picture

That has been my considered opinion as far back as 3 months ago

3 months? Whoop di doo !

Thu, 09/04/2014 - 06:51 | 5178908 nathan1234
nathan1234's picture

LOL

Would that be a plus or a minus?

No issues- I live and learn each day

 

Thu, 09/04/2014 - 00:50 | 5178599 phaedrus1952
phaedrus1952's picture

 

Nathan, with the possible exception of Chesapeake - everybody's favorite whipping boy -virtually all the exploration and production companies are throwing off a tremendous amount of operational cash at the moment.

Both the Eagle Ford and- in particular  - the Bakken came out of nowhere as far as producing oil fields. The Niobrara in Colorado much the same way and certainly the Tuscaloosa marine shale. These fields required enormous amounts of upfront capital expenditures to develop.  

In both the Eagle Ford in the Bakken those days are behind those companies now for the most part.The rate of return in both the Eagle Ford and the Bakken range from 50 to 100 just about every well drilled the last year.

Thu, 09/04/2014 - 01:09 | 5178629 disabledvet
disabledvet's picture

Again "not just oil but far more valuable natural gas." These folks are drilling so deep they're also having a problem of "steam" too...which has brought up an interesting discussion as to whether or not it's more economical to put a steam turbine at these locations and produce electricity!

The world is swimming in product and the only marginal demand is coming from the crazy a-holes of Wall Street. If the price of the Dow starts to correct so will oil. I'd be long a "whale oil problem" not "oil at 150."

Lest we forget the value of oil was considered in lighting not in heating or "moving things." JP Morgan, George Westinghouse and Nicolas Tesla solved that problem.

From a market cap perspective would appear Nissan and Elon Musk have solved the transportation dilemma as well. "For a price" of course. You also have OSK for commercial transportation...although Maxwell has been struggling this year.

The only thing left is the heating bill. If propane starts flooding into the US from Canada those prices could drop in a big way.

This is so not the seventies. It's only by a miracle the USA isn't Japan right now...and yes, 2 percent economic growth is worth voting both parties out of office for.

Thu, 09/04/2014 - 06:46 | 5178902 nathan1234
nathan1234's picture

Thank you phaedrus & disabledvet for your inputs.

Truly appreciated.

I do agree that the world will be swamped in the short term but to me the downside risk appears minimal as the break even for shale IMHO is around US$95.

The upside of course is possible if the war materializes.

And of course during war time the Govt ( Fed printed/digitally released ) will pay the Oil companies their price. So the Dow in my opinion may affect oil price only for a brief period.

I also note that pump prices have been maintained by the oil lobby to ensure profits, especially in the US due to restricted refining capacity ( through pollution laws which are an irony when permission is given for shale oil/gas).

http://www.eia.gov/tools/faqs/faq.cfm?id=29&t=6

Year Built First Operated Location Original Owner Original Capacity Bbl/cd Current Owner 2014 Capacity Bbl/cd Type 2008 2008 Douglas, WY Interline Resources 3,000 Antelope Refining  3,800 Simple 1998 1998 Atmore, AL Goodway 4,100 Goodway 4,100 Simple 1993 1993 Valdez, AK Petro Star 26,300 Petro Star 55,000 Simple 1991 1992 Ely, NV  Petro Source 7,000 Foreland 2,000 Simple 1986 1987 North Pole, AK Petro Star 6,700 Petro Star 19,700 Simple 1985 1986 Prudhoe Bay, AK  ARCO 12,000 ConocoPhillips 15,000 Simple 1981 1982 Thomas, OK OK Refining 10,700 Ventura 12,000 Simple 1979 1980 Wilmington, CA Huntway 5,400 Valero 6,300 Simple 1978 1979 Vicksburg, MS Ergon 10,000 Ergon 23,000 Simple 1978 1979 North Slope, AK ARCO 13,000 BP Exp AK 10,500 Simple 1978 1978 North Pole, AK Earth Resources 22,600 Flint Hills 126,535 Simple 1977 1978 Lake Charles, LA Calcasieu 6,500 Calcasieu 78,000 Simple 1976 1977 Garyville, LA Marathon 200,000 Marathon 522,000  Complex 1976 1977 Krotz Springs, LA Gold King 5,000 Alon 80,000 Complex 1975 1975 Corpus Christi, TX Saber 15,000 Valero 200,000  Complex

 

Thu, 09/04/2014 - 09:15 | 5179374 Not My Real Name
Not My Real Name's picture

"I also note that pump prices have been maintained by the oil lobby to ensure profits ..."

The biggest pump price profiteer is the government. Especially in Mexifornia and the Northeast.

Thu, 09/04/2014 - 06:57 | 5178914 MalteseFalcon
MalteseFalcon's picture

"Shale Oil companies" = hopium = TBTF

Thu, 09/04/2014 - 17:11 | 5181829 bid the soldier...
bid the soldiers shoot's picture

The first thing you should do is discover the difference between the formations of 'shale oil' and 'oil shale'.  They are apples and oranges.

The shale production we're getting today is from 'shale oil', whose production is both simpler and cheaper than is 'oil shale'

If you look at Wikipedia you will know what to expect from shale production down the road.

Wed, 09/03/2014 - 23:03 | 5178337 robertocarlos
robertocarlos's picture

Andy is going to get burned. What part of "we gots no money" doesn't he get?

Wed, 09/03/2014 - 23:36 | 5178433 daveO
daveO's picture

But, the FED has an infinite amount. That's essentially what he's betting on.

Wed, 09/03/2014 - 23:32 | 5178425 bid the soldier...
bid the soldiers shoot's picture

DEJA VU

It seems like only yesterday the boys floated a rumor of $150 oil.

it was at the end of 2007 and sure enough oil started marching North like Robert E Lee.   Month after month it persevered and when it finally cut through $140, every one in the North loaded their possessions in covered wagons and fled.

But something peculiar happened in June or July 2008.  At $145 -- just $5 short of the rumored price, heavy selling suddenly appeared.  (Most likely by the gentlemen who started the rumor in the first place.)

A lengthy battle occurred between those who started the rumor and those who believed it.

Pickett charged.  Chamberlain wheeled across Little Round Top.  

And Oil retreated back to $40 a barrel by the end of the year.

The phony markets were preserved and the black Obama was elected  president. 

And you were there.

Thu, 09/04/2014 - 00:14 | 5178525 Captain Kurtz
Captain Kurtz's picture

This site used to mean something.  You're a dying breed around these parts.

Thu, 09/04/2014 - 23:13 | 5183127 bid the soldier...
bid the soldiers shoot's picture

you're somewhat of a mystery yourself.

Thu, 09/04/2014 - 03:43 | 5178785 Jano
Jano's picture

soldier, u r the only one, who casted a vote on your comment.

If u start a comment in italics font, the votes are disabled. this means, that the upvote came from you.

change the font of your first word to noitalics, if you wish  votes also from other people.

Thu, 09/04/2014 - 10:20 | 5179607 robertocarlos
robertocarlos's picture

I up voted soldier.

Wed, 09/03/2014 - 23:38 | 5178438 magne13
magne13's picture

I think Andy is betting on a large war, that is coming and that is the real reason he has decided to go mad max beyond thunderdome...

Thu, 09/04/2014 - 00:43 | 5178589 joego1
joego1's picture

I think Andy is missing something here. If oil is $150 a barrel the shale companies have the money they need to drill more holes.

Thu, 09/04/2014 - 01:37 | 5178660 Victor999
Victor999's picture

No, it is you who is missing something.  Oil will got to $150 BECAUSE the best shale wells have already been drilled by that time...production is falling off...prices rise.

Thu, 09/04/2014 - 03:15 | 5178757 CHX
CHX's picture

His reasoning is, it'll be up there because of the ever increasing costs of production. It's not "peak oil" (for now, I agree, some day it will be though), it's "peak cheap oil", and I guess it's hard to argue with that. Will it rise this high, I have no clue. Last time we had 140 we had - coincidence (?) or rather not -the onset of the financial crisis (depression). High oil price kills the economy, low oil price kills the producers... My best guess is that oil will wiggle on in the 80-120 range as a compromise between these two fundamental factors, bar a financial catastrophe and/or some big war. We'll see. 

Thu, 09/04/2014 - 01:00 | 5178618 Notsobadwlad
Notsobadwlad's picture

Nice of ZH to provide him the "pump and dump" mo ... I mean really, could it be more obvious?

Willing co-conspirator or dupe?

Thu, 09/04/2014 - 01:10 | 5178631 jonjon831983
jonjon831983's picture

Big bets... with other peoples' money ;) That's the key.

Thu, 09/04/2014 - 02:17 | 5178710 pitz
pitz's picture

Most of the shale companies aren't even generating enough full-cycle profit to cover their capital costs.  So as interest rates inevitably rise, insolvency in the sector will be exposed further. 

Thu, 09/04/2014 - 06:37 | 5178891 Wahooo
Wahooo's picture

I would not bet against O'Malley on the shale oil question. Unless you're the sort who bet against Steve Jobs on the iPad.

Thu, 09/04/2014 - 08:59 | 5179139 falak pema
falak pema's picture

This guy is going against the Texas Oligarchs and the Koch Brothers who are all behind the Shale oil revolution.

Its interesting to note that the Big Oil players are DIVIDED on this issue of Shale Oil/Gas BOTH in the USA as abroad.

One gets the feeling that Shell for instance find shale risky and a lot of others, included the smaller ones in the US O&G lobby, including big daddy Exxon, still believe Shale is the way to go in the US as abroad.

The statistics on shale well productivity and individual well life time have improved. But have they improved enuff to make shale a respectable cost/Btu bet and horizontal fracking as reliable as conventional methods?...time will tell ! 

I hope this guy is no relation of Annie Hall !

Tue, 10/14/2014 - 11:48 | 5328874 Salsipuedes
Salsipuedes's picture

Crude oil trading has no God. Just a bunch of Little Caesars.

Do NOT follow this link or you will be banned from the site!