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WTI Crashes To $57 Handle; 80% Of Shale Production Non-Economic
WTI Crude just burst below $58 and is now over 46% below the peak in June. Since the initial leaks of no production cuts at OPEC, WTI is down 25% (gold and silver are up 2-4%). At these levels only 4 of the US 18 Shale Oil regions remain economic...
61...60...59...58...57...
Down 25% from the initial OPEC leaks...
Which leaves only 20% of US Shale regions economic...
* * *
Unequivocally good!!
Charts: Bloomberg
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RIP IT's DICK OFF!!!!!!
COME ON! LET"S DO THIS!!!!!!
Rip the motherfucking bandaid off, shit the bed and then let's clean up. Sick of this shit show.
edit: sorry....I got a little excited. My patience is thin. There is no saving us so we may as well destroy and rebuild.
Mr. Yellen's Depends are filling quickly today.
Shorting the ma and pop oil companies in my state (Texas) is making some good money. I learned everythting there is about being a vulture from the squid.
This is going to be very bullish for the natgas curve; a big chunk of supply is associated gas, and Natgas liquids prices have all been cut in at least half too. The life support for gas drilling via higher liquids and oil is now gone. Decline in output coming in 2015, right as demand projects start coming online.....
I can tell you that pre-Christmas layoff armageddon is in full swing in Alberta Canada right now where I am. Pink slips in stockings everywhere.
Why dont any of these charts include the Marcellus in their analysis?
A few I've seen include the Utica (not this one). Since the Utica is pretty shallow, the costs to produce are much lower than others.
This chart is crap. Utica B/E is under $40 as is most of Eagle Ford. Even a good portion of the Bakken B/E at $40.
I would bet they are throwing in EVERYTHING, from the sweet spots all the way to the fringe with the lower EUR's, and just averaging.....
Probably. Also, a large part of the breakeven calculation is the infrastructure to take the oil to the refinery, not to get it out of the ground. A few projects underway right now will permanently lower the B/E for several plays.
"pre-Christmas layoff armageddon is in full swing in Alberta Canada"
I'm working downtown AB at big oil and haven't heard of anything signifigant yet. Of course I expect it to change in the next 90 days if it stays below 80. Here's a good place to get a sense of what's happening day to day in terms of Calgary related layoffs:
http://forum.calgarypuck.com/showthread.php?t=66963&page=128
The standard cycle of layoff are that the big guys lay off around 2nd or 3rd. I am in Edmonton, which is closer to the production, manufacturing and servicing lives and the EPC's and Design Co's are getting smoked. Statoil and Total are leaving or shelving stuff "for unrelated reasons" but the writing is on the wall. Canadian Oil Sands dividend got creamed recently. Rumor has it that Suncor is smart enough to go counter-cyclical on this one, maybe Exxon too, but as usual Syncrude will get nuked because it is a JV and the majors need to milk that cow when the chips are down.
I don't believe those break even price charts. Those junk bonds didn't spring up overnight. Some of them were sold to unsavvy investors when oil was $100/bbl. Enron style mark to unicorn style accounting is in play here.
Can you provide any other chart undermining the above one ?
http://energypolicy.columbia.edu/sites/default/files/energy/Kopits%20-%2...
Page 45.
But it is the debt loads that tell you that no chart will truly capture what is actually happening. If shale is so good and profitable, why have the been going into debt just to stay afloat?
Also, since most of the capital/fixed cost is sunk, are not they more interested in any revenue that covers their variable plus financing cost? Hence we can expect they will reduce controllable/non-sunk costs quickly and agressively (layoffs and investment costs). As long as they can have some postive cash flow that covers out of pocket expenses, why would they stop producing?
The only reason I can see is they want to wait until the price goes back up, or lost opportunity cost.
schu
You are on target....what happens first is new wells don't get drilled. One difference to 1986 is that there was virtually no hedging back then, much now. Still will be ugly as for oil service sector first, producers later.
careful there. my mom and aunt have started talking about how petrol prices are going to drop 10pc more (beacause everyone is saying so). so im thinking that maybe this is about it for crude.
they were talking similar stuff in 2011 when silver was at its highs.
Mr. Yellen's Depends are filling quickly today.
This is bullish for gold!
In a market yes but maybe not in a rigged market.
If I were a large oil producer, I would like a cheaper gold to buy with my cheaper oil.
If I were a large oil producer, my wishes would be something close to an order.
Every market seems to be saying the same thing, except stocks. hmm. Everyone else must be wrong right? http://alchemyfinancials.blogspot.com/2014/12/jingle-bells.html
Every market seems to be saying the same thing, except stocks. hmm. Everyone else must be wrong right? http://alchemyfinancials.blogspot.com/2014/12/jingle-bells.html
"Non-economic" --- Please, the "rules" of eCONomics and accounting keep changing to benefit the fewer and fewer.
"Mark to fantasy" has been in play for quite some time.
Please, the "rules" of eCONomics and accounting keep changing to benefit the fewer and fewer.
When all of this over even fewer will know who to blame for their lot.
Truely a shame of epic proportions.
Gee, it almost feels like September 10th again...
LMAO
Yeah, MI-6, CIA, Mossad, get to work!
Gee ... Ya mean 5% junk bonds were mispriced ? ... say it ain't so !
boy this oil price came off fast
economically retarded politicans are all high fiving each other right now telling themselves "we did it". Wait until unemployment goes up & the trade deficit goes back over $1trillion. All so they could fuck with Putin and prove their point. What a bunch of despicable human beings...
Your ignorance is boundless and your precious russian empire is not in the cards Ivan.
yeah you fucking dipshit, I really give a fuck about Putin & Russia?! If you can't see that crude has been slammed down for geopolitial reasons by the US Oligarchy, then you should probably mozy over to Bloomberg or Marketwatch.
Mining costs must be plunging. I guess that $1200 cost-of-production "floor" price just got lower. We certainly aren't allowed to see the miners' benefiting from this.
When Gold was much lower, some miners were still mining. So I generally don't listen to that. Cost of production is based on those producing, and low prices are one way to weed out the inefficient and high cost miners.
As well as ones who fucked up and leveraged their soul to the banksters. Jim Sinclair has been discussing this for years under the topic of recourse vs. non-recourse loans.
In addition to the fact that they don't have to sell more than enough to cover costs of low production. Stockpile and sell into the frenzy with the rest...
Well, the only issue with that is they need to sell more to recoup those costs. If it takes $10 to produce an ounce of gold and they can sell it for $20, then they only need to sell one ounce of gold to cover the costs of production for two onces. Likewise, if they can sell one ounce for $11, then they need to sell a total of ten ounces to cover the costs of producing eleven.
Same is really true with why it is so hard to stop a large slide in oil for these producers. They can't simply cut production even if they have reserves to fall back on, because not everyone will do that and you need to sell more oil to turn a similar profit.
Eventually when enough of the fat has been cut and enough producers go out of business or are hit hard enough, demand usually cycles up. Wash, rinse, repeat.
Don't worry about the miners, I understand they've all got billionaires lined up to acquire them in private deals once the shareprices drop to 0. And I've heard most of the mining executives have lined up work as jizz monkeys and cock greasers for Rothschild private orgies, so they'll be alright too.
That sounds jsut about right.
+1 Geeezzzzzus Al!
In-derp-endence.
Well, none of this matters anyway. The powerful, broad-based recovery in the US means we don't need the Shale sector to prop up the economy any more. And with oil demand down significantly (due to INCREASED EFFICIENCY, NOT DECREASED DEMAND) we really don't need much oil anyway. And in any case, for an oil-driven economy like ours, a low oil price is a good thing - cheaper gas! And don't worry about the FIs - with their prudent investment strategies and high-quality risk management models, they'll be fully hedged for any lending arrangements that might go south as a result of this.
All is well, don't panic, don't panic, don't panic.
You forgot to mention "9/11",
its all good just remember "9/11", and go shopping!!!!!!!
Interest rates have never been lower, borrow money and buy some stuff, don't let the terrorists win. This country was founded on the ideal of endless, mindless consumerism. Remember the values of our forefathers.
Those shale boys will start capturing that ng instead of just burning it.
I'm assuming it's still a non-economic proposition, else they'd be doing that already.
Damn you Drupal!
Can't they just make it up on volume?
This is going to be one hell of a ride in if this keeps up given the current black hole we are entering into.
pods
SNL skit First Citiwide Change Bank...remember that one?
Fantastic
Just happened to think about how this affects Japan. Won't this massive reduction in cost buy some breathing room for them? Japan looks like the only non-loser in this oil price free fall.
Your logic seems sound, which is why it is flawed. They want deflation less than anyone. They are already in a recession. This may put them into a depression. So, they'll really need to print Yen like a bunch of crazy motherfuckers now.
Meanwhile the top story on CNBC reads: "French court decides not to ban Uber service"
Ha ha ha ha!!! "Uber"! That is so funny. Like anybody will give a fuck in a couple of days. "Disrupting technology" bullshit.
The future: "Hitchhiker" not Uber....
$30 /bbl, here we come.
Jed: "The man wants to pay me in some kinda new dollars."
Ma: "New dollars?"
Jed: "Yep. He wants to pay in 'million dollars'."
Well the next thing you know ole Jed's in bed,
fucking the hell out of old red head
and Granny comes in with a hickory stick,
beatin'the hell out of old Jeds'dick.
" OUCH! he said, that hurt/.......
he he heeeeeee
OPEC should increase production to finish off the rest of US Shale.
And USD-RUB at 58.247
Whoaaaaaa!!!
https://www.youtube.com/watch?v=Uh7tgX_Uaqs
didn't stanley fischer (second in command at FR) - just a week or two ago - say low oil good?
dope
Ziofisher
he meant good for his homeland, because bad for Iran and Putin
Canadian tar sand exploration needs $75 a barrel to be profitable. Looks like that is going to go bust too. Cue the layoffs, and trigger the long awaited housing correction (implosion).
I smell something burning...
Poloz will just assume ownership of all Canadian banks shitty commercial and residential mortgages. Just like Janet did/does. Just like Ben did. Then the rate suppresison in Canada will really begin - and the cursmudging of the $CDN - that party will then just be getting started.
what is the price of gold and silver now ???
only a few will get this one
Gold has a boner..
http://www.kitco.com/
Getting a little soft...
http://finviz.com/futures_charts.ashx?t=GC
This is actually bearish for gold because it would drive production cost down, but it's bullish for gold miners because it drives production cost down.
Ya never know. We might see $1000 gold. With oil at 1/2 price, the producrtion cost drops through the floor. We're looking at a fire sale of everything. Cheap oil, cheap gold, cheap stocks, cheap bonds (higher yields).
http://www.kitco.com/gold_currency/index.html?currency=RUB
http://www.kitco.com/gold_currency/index.html?currency=BRL
The only two in positive territory.
Alot of the oil production is hedged though throughout 2015 and 2016.
So even though the current market price would be unprofitable, that doesn't mean these operations will be shut down. They can be still be profitable via hedging.
Oil would have to stay low for a long time to shut down the shale operators.
We have nothing but time on our hands.
Eastern Sun And John Kelley - Days Gone By
I wonder who is on the other side of those hedges????
I typed the below comment before I read yours ;-)
But who is on the otherside of those hedges? I imagine the FDIC.
only if hedges have enough money
Something is going on that seems serious. The closer something comes the more serious it seems to be and the faster it approaches. Time to check inventories.
q99 I have to agree and I know that the ZHers are accused of being doomers but it really has seemed that can kicking has been coming to a head, the naked king has no robes, and TPTB think "if we can just make it ppast xmas and new years...." but the sword is being hoisted ever higher.
and the price of petrol in the UK has only gone down 12% from all time high!
The paper price is arranged. I doubt they are going to arrange more job losses. They will change the rules. We will fill the SPR, like Bush did all the way up to 140. Or we will announce some sanctions against ISIS, which is now an oil producer, or we will cut off nigeria due to Ebola, or they will just intervene, or some other crap. One thing I have learned is that governments can and do set prices, without ever considereing the cost to the real economy, which is always massive.
What of the Marcellus Shale areas? Why are they not on the list?
Yea I don't understand this:
WTI is down 25% (gold and silver are up 2-4%)
Gold should be going down. I don't get it. Yea, I am a gold bug and hold all kind of gold (I don't Want it to go down) but still, oil down, dollar up, gold SHOULD be down big time.
What's broken in this corellation?
Well you have been to ZH for a year+ so maybe you are unfamiliar with the premise here of "Funderrrrrrmentals".
That's what happens when Au and Ag are relentlessly shorted month after month after month....eventually it has to defy logic in the completely opposite direction.
Gold/oil now over 21. Just about near the 24 peaks of the last 15 years.
Yea and all those central bankers, economists that said gold was in a bubble...if they'd only held onto it so they could now use it for all that oil.
Anybody know where to get a price on Canadian Heavy? Basically the same question I asked yesterday (ie. where did ZH get that Canadian Heavy Crude chart that was posted?) I'm on my second day of trying to find these numbers now.
Then there's this: http://www.psac.ca/business/firstenergy/
Note that they say Western Canada Select is at ($C/bbl) 49.25. That's $42.66 US. So you're telling me that it went up ~1.2% since yesterday in the same timeframe that WTI crashed that much further. I think everybody just quotes Bloomberg's numbers, and those guys just pull the numbers out of their ass.
The numbers are all based on an assumed 20% rate of return. If you want the honest to God real breakeven you must subtract 20% from all the numbers.
Average breakeven is really $57 a barrel!
WE'RE GOOD!!!
Icarus
Yep these stories are BS
Gee, some businesses may have to break even, some businesses may have to operate at a loss, some businesses may have to sell out, some business may have to consolidate, some businesses may have to liquidate. IT'S THE END OF THE WORLD!
What you guys are forgetting is that when these companies are looking at their 2014 budgets, they are still well in the black because of the high oil prices earlier in the year.
It will take sustained low prices for about the first 3-6 months of 2015 to start having an impact.
The current belief in the oil patch is that in 3-6 months, oil will back above $80 at least.
With the price of oil plunging, and the price of gold remaining relatively stable (even w/ a slight uptick), why aren't gold mining stocks going up... seeing as how the crash in oil should be increasing their margins? Oh that's right... I forgot that those are fundamentals, but it's all about the fun derrr mentals now. My bad, carry on...
We dominoed some folks.
https://www.youtube.com/watch?v=lOGqZAMHS-M
The price of oil has to stay down or shale oil will just start producing again. I love $2. a gal. gas.
Oil coated black swan (it does not matter the color prior).
If someone lights it up...it will be a flaming black swan.
Swan dive.
Oil coated swans can only drop and crash.
(many oil spills at sea later)