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$20 Oil? Goldman Says It's Possible

Tyler Durden's picture




 

We’ve long framed collapsing crude prices as a battle between the Saudis and the Fed. 

When Saudi Arabia killed the petrodollar late last year in a bid to bankrupt the US shale space and secure a bit of leverage over the Russians, the kingdom may or may not have fully understood the power of ZIRP and the implications that power had for struggling US producers. Thanks to the fact that ultra accommodative Fed policy has left capital markets wide open, the US shale space has managed to stay in business far longer than would otherwise have been possible in the face of slumping crude. That’s bad news for the Saudis who, after burning through tens of billions in FX reserves to help plug a yawning budget gap, have now resorted to tapping the very same accommodative debt markets that are keeping their competition in business as a fiscal deficit on the order of 20% of GDP looms large.

But even with a gaping hole in the budget and an expensive proxy war raging in Yemen, it’s not all bad news for Saudi Arabia as evidenced by King Salman’s lavish Mercedes procession upon arrival in DC last week and as evidenced by the fact that, as The Telegraph reports, non-cartel output is beginning to fold under the pressure of low prices. Here’s more: 

Oil produced outside the Orgainsation of the Petroleum Exporting Countries (Opec) is slowing at its fastest rate in 20 years as lower prices hit higher cost producers such as the North Sea and US shale drillers, a leading energy think tank has warned.

 

The Paris-based International Energy Agency (IEA) has said that lower production in the US, Russia and the North Sea would result in output outside Opec dropping to 57.7m barrels per day (bpd) in 2016. The majority of the declines would come from US light crude, which is expected to decline by 400,000 bpd.

 

"The steep declines in US crude oil production seen since the end of June has created some optimism that we are now finally seeing that start of a steep decline," said Bjarne Schieldrop, chief commodities analyst at SEB.

 

Oil prices have plunged 50pc this year with Brent crude trading well below $50 per barrel, a level which makes it uneconomical for many producers. Opec, under pressure from Saudi Arabia, has allowed oil prices to fall in an effort to protect its shrinking market share especially from the rise of shale oil drillers in the US.

So mission (partially) accomplished we suppose, and with banks set to reevaluate credit lines to US producers next month (i.e. the revolver raids are coming), it likely won’t be long before the competition starts to dry up. The only remaining question then, is how low will oil go in the near- and medium-term and on that point we go to Goldman for more:

Oil prices have declined sharply over the past month to our $45/bbl WTI Fall forecast. While this decline was precipitated by macro concerns, it was warranted in our view by weak fundamentals. In fact, the oil market is even more oversupplied than we had expected and we now forecast this surplus to persist in 2016 on further OPEC production growth, resilient non-OPEC supply and slowing demand growth, with risks skewed to even weaker demand given China’s slowdown and its negative EM feedback loop. 

 


So a persistent global deflationary supply glut driven by lackluster demand. Nothing new there, and in fact, that exact confluence of factors was tipped to send oil to $25 in these very pages more than nine months ago. Now back to Goldman:

Given our updated forecast for a more oversupplied oil market in 2016, we are lowering our oil price forecast once again. Our new 1-, 3-, 6- and 12-mo WTI oil price forecast are $38/bbl, $42/bbl, $40/bbl and $45/bbl. Our 2016 forecast is $45/bbl vs. $57/bbl previously and forwards at $51/bbl. As we continue to view US shale as the likely near-term source of supply adjustment given the short cycle nature of shale production, we forecast that US Lower 48 crude & NGL production will decline by 585 kb/d in 2016 with other non-OPEC supply down 220 kb/d to end the oversupply by 4Q16.

 


Got it. And just how low, in a worst case scenario, could crude go? 

This creates the risk that a slowdown in US production takes place too late or not at all, forcing oil markets to balance elsewhere or as they have historically cleared, through a collapse to production costs once the surplus breaches logistical and storage capacity. Net, while we are increasingly convinced that the market needs to see lower oil prices for longer to achieve a production cut, the source of this production decline and its forcing mechanism is growing more uncertain, raising the possibility that we may ultimately clear at a sharply lower price with cash costs around $20/bbl Brent prices, on our estimates. While such a drop would prove transient and help to immediately rebalance the supply and demand for barrels, it would likely do little for the longer-term capital imbalance in the market with only lower prices for longer rebalancing the capital markets for energy. 

So there you have it, a collapse to $20 Brent, but while the Saudis may have won the battle, the war is not yet over:

The levers to force HY producers into lower production, such as borrowing basis redeterminations, debt maturities and hedge coverage, are significantly less binding for IG E&Ps. It is instead management’s focus on balancing capex and cash flow and investors’ willingness to finance funding gaps that are the levers of adjustments for this cohort of companies. And while HY debt markets may be once again shutting, tentative signs of greater discipline by US IG E&Ps have so far only translated in stabilizing production guidance rather than pointing to the decline that our global oil balance requires.

 

As a result, the sharp intensification in producer financial stress observed recently – with forward oil prices and energy equity share prices at multi-year lows (and credit spreads at highs) – is unlikely to yield sufficient financial stress in the short-term. So while this deterioration in financial conditions is finally reflecting the markets’ decreasing confidence in a quick rebound in prices and a recognition that the rebalancing of supply and demand will likely prove to be far more difficult than previously expected, we now believe that such stress needs to remain in place well into 2016 and up until evidence emerges that US shale production growth is actually required.

 

And speaking of war, the obvious risk to any forecast that calls for sharply lower crude is that some mid-air "accident" in Syria takes the "proxy" out of "proxy war", in which case crude soars as Russia and Iran square off against a US coalition that would swiftly include Saudi Arabia in what would very likely be the precursor to a wider conflict the scope of which we haven't seen since 1939. 

Oh, and for all the muppets out there, Goldman has upgraded European oil producers:

Dividends may be cut, but with over coverage now yielding 6% on average this is becoming priced in. We expect returns and FCF to trough in 2016, and improve in 2017/18 driven by higher oil prices and falling costs. Even with this, valuations do not yet look compelling, but we move to a Neutral Coverage View from Cautious.

 

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Fri, 09/11/2015 - 07:47 | 6535047 waterwitch
waterwitch's picture

Makes perfect sense with Iran and Russia massing in Syria.  Fuck GS!

Fri, 09/11/2015 - 08:03 | 6535089 TongueStun
TongueStun's picture

Is Obama a kenyan Oilman? That would explain why heating oil is still $3.59 a gallon, higher than under Bush.....

 

Why doesn't the socialist jew media blame Obama for the price of oil, like they did with Bush?

Fri, 09/11/2015 - 08:17 | 6535112 Dubaibanker
Dubaibanker's picture

I dont know what blah blah blah is Goldman taling about...

But I had predicted oil price to be below $30 on Dec 23rd 2014 that I published as a comment on Dec 26, 2014 here on ZH.

http://www.zerohedge.com/news/2014-12-26/saudi-arabia-ready-20-30-40-oil...

Rest as they say, is history. Oil will remain down and keep going down. We shall see $20 before we will see $60 on the WTI.

Lot of people had debated with me and I am happy to continue that debate with anyone....with regard to Saudi or oil or ....

It began wih the Saudis and OPEC bringing price down that has now backfired. Now, US has the upperhand being insulated from imports of oil from other nations. Last few months, US has been driving the price down.

Whether it is Saudi vs USA or USA Vs Saudi, it still remains one against the other! And, when the titans fight/fall, it hurts EVERBODY else.

Fri, 09/11/2015 - 08:29 | 6535179 greenskeeper carl
greenskeeper carl's picture

Ha ya I said 25 way back then too. Still wouldn't be surprised. Sure the Middle East is increasingly unstable, but demand is dropping since the depression is starting to reveal itself.

Fri, 09/11/2015 - 09:27 | 6535430 mtl4
mtl4's picture

Exactly, these momentum swings are starting to increase volatility but you simply can't override the current deflationary forces at work worldwide right now........oil will certainly bottom at some point but that may be alot lower than most people think.  When oil looks like it's headed back to $10 and everyone is all in shorting it is when you'll likely see the bottom but at current pace that could be a while.

Fri, 09/11/2015 - 14:49 | 6537066 Bokkenrijder
Bokkenrijder's picture

Well, GS also predicted $200 oil in 2008: http://www.nytimes.com/2008/05/21/business/21oil.html?_r=0

Sat, 09/12/2015 - 07:32 | 6539084 HowdyDoody
HowdyDoody's picture

A funny aside. At the 2012(?) Herzliya Israel Security conference, there was an invitiation-only closed session about oil pricing, attended by oil majors, certainly BP. The topic was: "If oil goes to $250 / barrel, should Israel sell or keep its reserves?"

It's good to see some blowback for the Zionist ambitions.

Fri, 09/11/2015 - 08:32 | 6535186 MSimon
MSimon's picture

when the titans fight/fall, it hurts EVERBODY else.

 

Russia?

Fri, 09/11/2015 - 08:43 | 6535218 Dubaibanker
Dubaibanker's picture

Yes them too.

But they have friends in Syria, Iran, Pakistan, Kazakhstan, Tajakistan and China who support them with billions of dollars in deals. Saudi too has become friends with Russia and has given them a cheque of USD 10bn plus 16 nuclear reactor to make in Saudi and talking oil in yuan with Moscow and Beijing.

And ....who are friends of your country?

Fri, 09/11/2015 - 08:56 | 6535279 Handful of Dust
Handful of Dust's picture

I don't need oil or gas anymore; I simply maintain my bicycle tires in good shape. Keeps me in shape at the same time!

Fri, 09/11/2015 - 10:10 | 6535648 troubledasset
troubledasset's picture

that might be one of the most idiotic things I have seen all month...

 

YOUR FUCKING BICYCLE TIRES ARE MADE FROM OIL YOU STUPID FUCK

Fri, 09/11/2015 - 10:19 | 6535708 sun tzu
sun tzu's picture

Your smartphone and computer need oil to make the PCB and plastic case. If you buy your food from the market, that food was transported there by trucks that run on diesel.

Fri, 09/11/2015 - 10:38 | 6535815 troubledasset
troubledasset's picture

Sun, you're assuming this guy has a clue in hell. Not only was the food transported there by diesel but it was likely harvested and moved by diesel as well. Of course, at some point it was likely cooled by electricity which was likely sourced from hydrocarbons. But, let's not get in front of ourselves, Bernie Sanders, I mean, Handful of Dust probably doesn't even know what the difference between oil and gas is. He probably thinks that gas is what you put in your car and oil is for **crickets**. If he understood that "gas" represented a gaseous natural gas (like ethane and methane) then he wouldn't have been so retarded as to say that by riding a bike he can avoid "gas".. which makes no sense. My bet is that he has a gas stove but just has never though about it that hard and, quite clearly, has no job involving financial anything.

Fri, 09/11/2015 - 11:02 | 6535971 NidStyles
NidStyles's picture

We just know it's satire. 

Sat, 09/12/2015 - 07:33 | 6539085 HowdyDoody
HowdyDoody's picture

Nah, he's just a prepper.

Fri, 09/11/2015 - 15:07 | 6537159 undertow1141
undertow1141's picture

or his gas home heater or the natural gas power plant his electricity comes from or.........................etc etc

Fri, 09/11/2015 - 09:01 | 6535299 Zwelgje
Zwelgje's picture

ISIS

Fri, 09/11/2015 - 09:05 | 6535322 Handful of Dust
Handful of Dust's picture
Cameron to cut Houston jobs

 

http://www.bizjournals.com/houston/news/2015/09/08/cameron-to-cut-housto...

 

Moar joblessness is very bullish in Econ 101, 2015-style.

Fri, 09/11/2015 - 08:50 | 6535249 ThanksChump
ThanksChump's picture

Wrong. $20/bbl isn't possible.

 

At $34/bbl, it costs $1 to produce oil at the cheapest wellheads.

Meanwhile, producers have stopped nearly all E&P operations. Any wells being drilled are pre-drop contracts where there is a penalty for not drilling, and over half of all current production is the result of contractual production quotas. The rest is byproduct from NG production.

At $33 production will cease abruptly and contractual quotas will be barred from enforcement by bankruptcy courts.

The price will continue to drop - inertia - to around $30, then it wil start rising. Production will lag, so the price will swing past the $150/bbl mark, and thrash wildly until production again meets demand.

Fri, 09/11/2015 - 08:55 | 6535276 Dubaibanker
Dubaibanker's picture

Keynes: Markets can remain irrational longer than you can remain solvent.

Fri, 09/11/2015 - 10:58 | 6535946 ThanksChump
ThanksChump's picture

Producers aren't solvent at $44/bbl.

 

They're operating on credit.

Fri, 09/11/2015 - 11:45 | 6536187 sun tzu
sun tzu's picture

As long as the credit line is open, they will continue to produce and sell oil unless you think the roughnecks will start doing lapdances for money

Fri, 09/11/2015 - 12:29 | 6536412 Deathrips
Deathrips's picture

THey get to make money out of nothing, you get to trade your life for it.

 

Back to work CHUMP.

 

RIPS

Fri, 09/11/2015 - 11:46 | 6536198 robertocarlos
robertocarlos's picture

But even I can borrow money at .5% per annum. This could go on forever.

Fri, 09/11/2015 - 16:52 | 6537609 Tall Tom
Tall Tom's picture

Tell that story to the Gold Miners.

 

LMAO.

 

You do not understand Futures Markets.

 

Nobody wrote that it will remain at $20 for any long term  time frame.

 

2016 will turn out to be a HYPERINFLATIONARY INFERNO. The US Dollar will be abandoned after the loss of WRC. The USD held in Foreign Vaults will flood our shores.

 

Don't be too concerned. I forecast $1000 Oil...that is right...ONE THOUSAND Oil, oh... by late summer 2016.

 

But it will see $20 first.

 

But when Oil is at $1000 then good luck paying $50/Gallon on Gasoline.

Fri, 09/11/2015 - 17:05 | 6537654 Nostradumbass
Nostradumbass's picture

If oil goes to $1000/bbl as you predict, would you expect to see a concurrent rise in gold/silver and any other commodities pricing? At such a point, I presume that holding cigarettes, liquor, ammo, food and other base necessities will be the wise thing to be doing.

Fri, 09/11/2015 - 20:49 | 6538225 Md4
Md4's picture

"Hyper inflationary inferno..."

Wow...them some words.

I do believe we'll see hyperinflation, I'm just not sure when. We also do seem to be itching for a diversionary war, and probably, a big one. Helluva lot of pent up anger and hostility in a lot of places. Could suck half the planet (again) or more into it too. The difference this time, is that it'll be very hard to sign up the doughboys to do the fighting. Few are up for that anymore. That's why it may stay satellite, air, and maybe nuclear somewhere. Conventional is all but out.

But this oil business, like other commodities, MAY see an upswing as demand decline cancels excess supply to a point where demand actually is. I doubt, though, it'll stay up long. Demand decline is huge. Much bigger than the T. Boone Pickens' on this rock understand.

Talk about your falling knife.

This is a falling, razor-sharp, samurai sword...

But, the "inferno" you mention draws a macabre chuckle, I must admit.

m

Sat, 09/12/2015 - 10:23 | 6539308 Nostradumbass
Nostradumbass's picture

This is an interesting MAYBE:

"But this oil business, like other commodities, MAY see an upswing as demand decline cancels excess supply to a point where demand actually is."

Could be a good crapshoot to sell stawks that were purchased dirt cheap during the decline...

Sun, 09/13/2015 - 01:12 | 6541317 SixIsNinE
SixIsNinE's picture

frackers are said to be breaking even in the $75-78 range ....

it's gotta be hurting that line of credit - but maybe there is a direct line to the free money the banksters are getting  and they're passing along @ no to little interest ?

 

Fri, 09/11/2015 - 10:24 | 6535716 divingengineer
divingengineer's picture

Oil can go below cost of production, it happens all the time in all sorts of products. Just because you start losing money doesn't mean you are instatntly out of business.  Oil you are selling still provides operating revenue and cash flow, it is at the end of the year when you do your accounting that you realize you came out in the red. Small or overleveraged companies, and a whole lot of speculators will be hit instantly, perhaps. 

So I guess you are right, cannot be below $33/bbl, for a long time. 

Oil companies will simply carry a operating loss and get subsidized by the USGOV. 

No biggie. 

Fri, 09/11/2015 - 10:51 | 6535901 ThanksChump
ThanksChump's picture

Oil companies are already seeking subsidies now that their credit is drying up.

 

All of the little guys who were already in debt are folding, and the big players (who own transport infrastructure) are slapping the other producers with over-production fees.

It could go lower than my estimate, but it will never go to $20. $200 maybe.

Fri, 09/11/2015 - 11:47 | 6536204 sun tzu
sun tzu's picture

Funny how people still think oil could go to $200. The global economy is on the brink of depression and gas will be at $8? LMAO!!! There's more chance of beef at $50

Fri, 09/11/2015 - 16:04 | 6537413 DOT
DOT's picture

14 oz. Kobi steak in Vegas is $ 140.

Now I know that I am emphsizing price over value on the beef side, but with oil the value is fully distributed. All segments of our economic world are joined by the demand. The lure of price controls or nationalization will be strong should production take a dive. As the Venezuelans have learned it is no benefit to be able to buy toilet paper at a low price if there is none to be had.

Fri, 09/11/2015 - 10:53 | 6535913 db51
db51's picture

Exactly...I'm a farmer, and we're there now...producing below COP.....but there is a limit to how long you can do it before the gavel comes down...just saying.

Fri, 09/11/2015 - 16:30 | 6537518 greenskeeper carl
greenskeeper carl's picture

speaking of us gov, never forget that both gas and food would be cheaper if it wasn;t for the govt meddling in the market. Ethanol bullshit makes gas more expensive and also has less energy, and using corn to make moonshine to mix with our gas makes all food more expensive.

Sat, 09/12/2015 - 03:08 | 6538967 Uber Vandal
Uber Vandal's picture

Refer to prior depression:

http://www.bloombergview.com/articles/2013-05-06/when-the-great-depressi...

Several American states mandated reduced pumping, and some operators' associations agreed to scale back. Other independent producers ignored restrictions, and in states where these producers were politically powerful, governments refused to act. Some oilfield producers pumped more to sustain their revenue, but they only triggered price collapses.

In 1932, U.S. heavy crude oil averaged 87 cents per barrel (about $12 today), and light crude averaged 82 cents. By spring 1933, heavy crude had fallen to 44 cents and light crude to 66 cents. Then the bottom fell out.

Texas oil companies led the price decrease, with some resorting to "dime-a-barrel" deals. Four gallons of crude cost a penny.

The big corporations sought to force prices so low that independent companies with smaller reserves would incur heavy losses unless they shut down. By May, prices had increased to a quarter a barrel, still a losing proposition for smaller companies. Twenty-six companies in the Oklahoma City area refused to pump at that price. The market was a mess.

 

Fri, 09/11/2015 - 10:07 | 6535630 DC3
DC3's picture

Damn, you nailed it!

Fri, 09/11/2015 - 16:43 | 6537573 Tall Tom
Tall Tom's picture

Yeah. I know, DubaiBanker. I have called for $20 Oil and forecast for that price in November many times on these pages.

 

I guess that Goldman Sachs may actually read Zerohedge?

 

A planned circumstance as in a hot war with Iran and Yemen, which will close off the chokepoints of the Persian Gulf and the Red Sea, will alter my forecast. Other than that I can see no mechanism for anything else to change the trend.

 

But Market Collapses have a way of depressing demand and thus corresponding prices. Both the Saudi Welfare State and the USSA will be damaged by this.

 

Obama should NOT BREAK TREATIES. Fracking needed NOT to have been allowed as it violated the King Faisal/Kissinger Agreement which created the Petrodollar in the first place.

 

As a result of the violation the USSA will lose World Reserve Currency status. Of course the Rule of Law is abandoned for expedience's sake. Treaties are on the same tier as US Constitutional Law...They are supprosed to be superior...supreme.

 

But nobody thinks long term and everybody in the USSA wanted cheap fuel prices to continue. This is the result.

Fri, 09/11/2015 - 08:19 | 6535141 Zirpedge
Zirpedge's picture

The is a false idea going around that the prices of crude oil and other refined energy sources are correlated. One must remeber that gasoline and kerosine use must be made more expensive to promote alternative energy products.

Nobody wants a world where gas goes below a dollar, just a hand full of American exceptionalists who want to go back to a day when they could drive their big block hemis and blow all their fuel rich excess out their tailpipes. Sorry folks, that day is long gone.

Fri, 09/11/2015 - 08:35 | 6535198 MSimon
MSimon's picture

Well I do agree. Alternative energy products are uneconomical and only survive when Government steals from users and producers  of oil, coal, and natural gas.

Fri, 09/11/2015 - 16:28 | 6537511 greenskeeper carl
greenskeeper carl's picture

thats actually exactly what I want. I don't have a hemi, but I do have a V8, and I get 14 mpg. fuck off.

Fri, 09/11/2015 - 08:45 | 6535224 sleigher
sleigher's picture

Whatever, I hide behind my guns, religion, and my hemi.

Fri, 09/11/2015 - 08:48 | 6535240 unrulian
unrulian's picture

only one of those is going to protect you and it ain't the dodge

Fri, 09/11/2015 - 16:09 | 6537437 Arnold
Arnold's picture

https://en.wikipedia.org/wiki/Fuel_taxes_in_the_United_States

 

The fuel is free you just pay the tax.

Fri, 09/11/2015 - 17:10 | 6537682 Nostradumbass
Nostradumbass's picture

I choose door #1 Bob.

What do I win?

Fri, 09/11/2015 - 10:29 | 6535767 divingengineer
divingengineer's picture

Correct Sir,

Different markets. Diesel fuel had been running higher than gas the last few years, now it is quite a bit lower. As gas jumps up lately I notice diesel is a much slower moving market, it eventually folows, but much more slowly.

I should think it is cheaper than gas now because of the hidden recession and its deflationary effects.

I never really understood that gas and diesel were two separate markets until I owned a Passat TDI, but they are quite separate. 

Fri, 09/11/2015 - 11:33 | 6536134 NidStyles
NidStyles's picture

Fuck the rest of the world. They didn't build the US. 

Fri, 09/11/2015 - 11:48 | 6536210 sun tzu
sun tzu's picture

I've been seeing more SUVs and big trucks out there the past year. People are more stupid than you think. 

Fri, 09/11/2015 - 12:09 | 6536308 divingengineer
divingengineer's picture

I've thought that too, I'm in the SF Bay Area and the second gas prices dropped more people hit the roads in V-8 Trucks and SUVs.

The increase was noticeable. 

Fri, 09/11/2015 - 08:24 | 6535158 Brewer55
Brewer55's picture

No, but his handlers are.

Fri, 09/11/2015 - 08:21 | 6535148 SethDealer
SethDealer's picture

goldman has no fuckin idea where oil is going. they were predicting $200 oil two years ago

Fri, 09/11/2015 - 08:44 | 6535221 Dubaibanker
Dubaibanker's picture

They missed a zero actually! Ahem! :)

They are good in fucking people too! :)

Fri, 09/11/2015 - 10:31 | 6535781 divingengineer
divingengineer's picture

They naturally want it to go where their futures will be in the money. 

They are delusional sociopaths, what else would you expect?

Fri, 09/11/2015 - 08:46 | 6535228 post turtle saver
post turtle saver's picture

yeah, they were, when they had an iron fist grip on the supply chain in Europe and could take advantage of the Brent peak to drive prices to... the... moon...

that little play at ICE got its back broken July of last year... this is the result...

Fri, 09/11/2015 - 09:22 | 6535403 Plunge Protection
Plunge Protection's picture

If Oil gets to $20 I'm buying a virtual oil well

Fri, 09/11/2015 - 10:33 | 6535796 divingengineer
divingengineer's picture

If you can write code, I'd be willing to develop  BitOil with you. 

We just need some rube to front us the money....

Fri, 09/11/2015 - 11:52 | 6536228 RmcAZ
RmcAZ's picture

Can't wait to buy a car that takes BitGas

Fri, 09/11/2015 - 07:53 | 6535052 buzzsaw99
buzzsaw99's picture

we have moar billionaires than ever. they should be well pleased. disaster crapitalism. pump and dump. thanks to ben and janet the econOme SUCKS AND THEY STILL get richer.

Fri, 09/11/2015 - 08:03 | 6535085 CheapBastard
CheapBastard's picture

If Geitner would have allowed me to convert to a "Bank" and get endless free money from the Fed window for years I could have become a Billionaire also. But he and Hank only chose their close buddies at GS and a handful of other places.

 

That's why it's crazy seeing these rioters burn down their own neighborhoods...they vent their rage at the wrong people and wrong places.

Fri, 09/11/2015 - 08:19 | 6535131 buzzsaw99
buzzsaw99's picture

if you want to be a billionaire don't bother trying to produce anything. use leverage, push crap paper, speculate, rob, steal, defraud, exploit, destroy shit. that's the road to the big money bitchez.

Fri, 09/11/2015 - 08:35 | 6535199 Mayer Amschel R...
Mayer Amschel Rothschild's picture

Never been an empire (state or individual) that wasn't built on the backs of stolen labor.

Fri, 09/11/2015 - 10:37 | 6535814 divingengineer
divingengineer's picture

Can you imagine how long and hard a road it would be to actually build a fortune on production, sales, profit and capex?

You're talking like.....a lifetime, man!

Who has time for that?

Wanna buy some carbon credits? I can set you up with a margin loan!

Fri, 09/11/2015 - 07:50 | 6535054 Latitude25
Latitude25's picture

Whatever the fuck Goldmann says you should always take the other side of that trade.

Fri, 09/11/2015 - 07:55 | 6535064 Money Counterfeiter
Money Counterfeiter's picture

What he said^^^^^^

Fri, 09/11/2015 - 08:16 | 6535128 TongueStun
TongueStun's picture

Any mans, feins, bergs, or itzes.....for that matter

Fri, 09/11/2015 - 08:37 | 6535205 MSimon
MSimon's picture

You leave on the on? I feel slighted.

Fri, 09/11/2015 - 07:56 | 6535057 JustObserving
JustObserving's picture

$20 oil will be a lot cheaper than the $10 oil in 1986 (inflation-adjusted)  that broke up the Soviet Union. The fall in oil prices from $115 last year to $47.50 today has all the hallmarks of an oil slam engineered by the US in collusion with Saudi Arabia as it was in the mid 1980s.

There is always an economic war going on.

Think about how the Obama administration sees the state of the world. It wants Tehran to come to heel over its nuclear programme. It wants Vladimir Putin to back off in eastern Ukraine. But after recent experiences in Iraq and Afghanistan, the White House has no desire to put American boots on the ground. Instead, with the help of its Saudi ally, Washington is trying to drive down the oil price by flooding an already weak market with crude. As the Russians and the Iranians are heavily dependent on oil exports, the assumption is that they will become easier to deal with.

John Kerry, the US secretary of state, allegedly struck a deal with King Abdullah in September under which the Saudis would sell crude at below the prevailing market price. That would help explain why the price has been falling at a time when, given the turmoil in Iraq and Syria caused by Islamic State, it would normally have been rising.

http://www.theguardian.com/business/economics-blog/2014/nov/09/us-iran-r...

Did the U.S. and the Saudis Conspire to Push Down Oil Prices?

http://www.globalresearch.ca/did-the-u-s-and-the-saudis-conspire-to-push...

Fri, 09/11/2015 - 08:08 | 6535098 negative rates
negative rates's picture

One which the west can not win, but never stops trying or convincing themselves that they can.

Fri, 09/11/2015 - 08:33 | 6535193 soniii
soniii's picture

thanks, indeed america + Saudi makes much more sense than america vs saudi 

 

Fri, 09/11/2015 - 08:53 | 6535264 Dubaibanker
Dubaibanker's picture

If Saudi was still in bed with America, they would not give USD 10 bn cheque to Putin. http://www.bloombergview.com/articles/2015-07-07/the-saudis-are-cozying-...

Nor would they sign 16 nuclear reactor deal with Putin. http://www.timesofisrael.com/saudis-said-set-to-build-16-nuclear-reactor...

And they would not be in Moscow talking Syria and talking of oil trading in yuan. http://www.worldbulletin.net/haber/163345/moscow-to-host-top-level-talks...

That's not what friends do!

Just sayin'

Fri, 09/11/2015 - 08:54 | 6535271 datura
datura's picture

you don't see the entire picture here. Very recently, Saudi Arabia officially asked Russia to join OPEC and to decide the prices together. Russia politely refused. This means that Russia thinks it can take it (and win this war of lower prices). Another Putin's move: it was announced that Russia will once more increase its oil sales to China. And since China does not need so much oil due to the recent economic troubles, it is very logical that China will offset this "help to Russia" by decreasing its purchase of oil from Saudi Arabia, who is not such a good friend as Russia after all. 

This will be a wild ride, but much more for Saudis than for Russia. 

 

Fri, 09/11/2015 - 09:17 | 6535373 Dubaibanker
Dubaibanker's picture

You are completely right. I did not factor in, that if China buys more oil from Russia, that who will be the loser? Saudi becomes the biggest loser.

Here are some links to understand this trend:

Russia Pips Saudi Arabia in Race to Grab China Oil Market Share

http://www.bloomberg.com/news/articles/2015-06-23/russia-pips-saudi-arab...

Just in 2014, Russia incerased dramatically while Saudi stagnated and shold be lower again in 2015.

The following table shows the latest data for Chinese crude oil imports by country:

http://topforeignstocks.com/2015/02/18/chinese-crude-oil-imports-by-coun...

This is a great overview: 

WITH CHINA CRASH, SAUDI ARABIA HEMORRHAGING CASH

 http://www.breitbart.com/big-government/2015/08/14/with-china-crash-saud...

 

Fri, 09/11/2015 - 09:31 | 6535449 BarkingCat
BarkingCat's picture

Just wait until Russia starts playing the "insurgency game" in the house of Saud. They can easily finance some revolutionary group that will start taking out the kingdom's oil infrastructure.
That would me oil markets very interesting to watch.
..and very painful at the pump

Fri, 09/11/2015 - 09:33 | 6535459 COL Jackson
COL Jackson's picture

Great Post, and dont forget the collateral benefit to the Obama Administration.  It gets a big win for its environmentalist base by crushing the US fracking industry.  Much easier to crush them with low prices then stir up the politics with tougher regulations or changing laws.  Its been a win/win all around punish the Russians, roll back the fracking industry, and cause chaos in the emerging market oil states Venezuela, Brazil etc.

Fri, 09/11/2015 - 07:54 | 6535062 pndr4495
pndr4495's picture

Major General Smedley Darlington Butler.

Fri, 09/11/2015 - 08:13 | 6535120 Wahooo
Wahooo's picture

That book is on my gift list this Christmas. Probably the best way to reveal the MIC to friends and family.

Fri, 09/11/2015 - 07:54 | 6535063 SelfGov
SelfGov's picture

HA!

The oil may cost $20 per barrel to purchase but most will cost way more than that to produce.

Fri, 09/11/2015 - 08:11 | 6535110 negative rates
negative rates's picture

You don't mind spinning the wheel and coming up green now do ya?

Fri, 09/11/2015 - 07:56 | 6535067 Bro of the Sorr...
Bro of the Sorrowful Figure's picture

does this mean the bottom is in?

 

ive heard it argued that a lot of the shale producers had hedges in at $80-$100 and that the banks had taken the other side of the bet and that the fed has been doing stealth QE to cover the banks massive losses. 

with escalation in yemen and the syrian proxy war and with iran now coming into the syrian mix dont we have a perfect storm for skyrocketing oil? are the cocksuckers at GS trying to fleece the muppets once more?

Fri, 09/11/2015 - 08:08 | 6535081 Bro of the Sorr...
Bro of the Sorrowful Figure's picture

.

Fri, 09/11/2015 - 08:16 | 6535127 Groundhog Day
Groundhog Day's picture

But...But we got that terrorist osama bin ladin..  I saw videos of him and his men in the mountains running drills in full robes...running over small fires, and through old tires and swinging from ropes.  Then...i saw him shoot a rifle!  if that isn't proof of his guilt then surely the movie that hollywood made about him and our brave and smart soldiers GOT HIM must convince you of the FACTS!  

Fri, 09/11/2015 - 08:56 | 6535280 Bro of the Sorr...
Bro of the Sorrowful Figure's picture

man i was editing my comment and managed to delete it. in summary, fuck the neocons/pnac cocksuckers and remember to honor those who died 14 years ago this day by reminding our fellow sheeple the uncomfortable truth that the official story is horseshit. dont let their collective cognative dissonance and open hostility deter you, one day we'll get a majority out of plato's cave and the real perpaTraitors will be held responsible. 

Fri, 09/11/2015 - 08:12 | 6535114 Wahooo
Wahooo's picture

From my read of it, they're saying the bottom is in 2016.

Fri, 09/11/2015 - 07:56 | 6535068 Jack Oliver
Jack Oliver's picture

As oil is the worlds largest traded commodity it's only a matter of time before the 'addicted' US folds up completely - the 'easy' oil is drying up rapidly otherwise they wouldn't be fracking !! 99.2 % of hydraulic 'fracturing' is water - it's the .08 % of lethal chemicals you should be worried about - ONE drop of plutonium in a bucket of water will kill you - You do the MATH !

Fri, 09/11/2015 - 08:07 | 6535097 TongueStun
TongueStun's picture

What lethal chemicals? You sound like a liar for leaving that part out. Do you have a source other than the socialist ZioJew media?

Fri, 09/11/2015 - 08:13 | 6535119 Bunghole
Bunghole's picture

Comparing the 0.8% to plutonium proves what an uninformned assclown you are.

Like TongueStun said, proof or it didnt happen.

Fri, 09/11/2015 - 10:04 | 6535610 Jack Oliver
Jack Oliver's picture

If you can find out what is in the .08% Dickhead ! Then tell me !! Because THAT information has remained CLASSIFIED ! Rumors are that it contains radioactive waste - Just like your SMOKE ALARM ! But i obviously have to FUCKING tell you everything !

Fri, 09/11/2015 - 10:11 | 6535652 sun tzu
sun tzu's picture

Rumors are you're from Mars. They use plenty of dangerous chemicals, but to use radioactive waste, you would see people walking around in bright rubber and lead suits. The DOE doesn't just let anyone get a hold of radioactive waste and transport it around the country. Why would the frackers go through that extra expense? How would radioactive waste help them extract more oil?

Fri, 09/11/2015 - 21:39 | 6538421 Jack Oliver
Jack Oliver's picture

I didn't say radio active waste was used to EXTRACT oil ! - Halliburton uses fracking to get rid of radio active waste - they have been doing it since the 60s - So drink up Dickhead ! Cheers !

Sat, 09/12/2015 - 00:23 | 6538788 Dakota Kid
Dakota Kid's picture

sun tzu

Filter socks are the nets that strain liquids in the oil production process.

The radioactivity is naturally occurring and concentrates on such items as filters, pipes and tank sludge.

http://fuelfix.com/blog/2015/03/12/improperly-disposed-radioactive-oil-f...

http://drcinfo.org/2015/03/03/oil-prices-collapse-north-dakota-considers...

http://bismarcktribune.com/bakken/state-aims-to-lift-ban-on-radioactive-...



Fri, 09/11/2015 - 08:19 | 6535140 negative rates
negative rates's picture

You know if you are wrong about that it's do onto others as you would have others do onto you, right, me thinky you did'nt.

Fri, 09/11/2015 - 08:54 | 6535229 MSimon
MSimon's picture

oil is the worlds largest traded commodity

 

Nope. It is illegal dope.

Fri, 09/11/2015 - 07:56 | 6535069 Charles Nelson ...
Charles Nelson Reilly's picture

I foresee a ZH post in the next week w/ a picture of Kermit gutted and oil ripping higher

Fri, 09/11/2015 - 07:57 | 6535072 Seasmoke
Seasmoke's picture

So $200 it is. ....... Got it. 

Fri, 09/11/2015 - 08:22 | 6535149 negative rates
negative rates's picture

Yeah we booked it, hope you did'nt miss it.

Fri, 09/11/2015 - 10:12 | 6535664 sun tzu
sun tzu's picture

No, it's $2000 and gas will be $200/gal. People will continue to use the same amount when prices increase because the fairy godmother will put money into their bank account.

Fri, 09/11/2015 - 07:58 | 6535078 q99x2
q99x2's picture

My car might need a quart today.

Fri, 09/11/2015 - 08:08 | 6535103 QuickFrozen
QuickFrozen's picture

I set my alarm for $10.

Fri, 09/11/2015 - 08:16 | 6535129 44_shooter
44_shooter's picture

Oil at $20 and silver at $500 - uh huh.......I'm done waiting.

Fri, 09/11/2015 - 08:19 | 6535136 Mayer Amschel R...
Mayer Amschel Rothschild's picture

ZH crude oil articles are one of my favorite topics because of the awesome rationalizations those articles elicit, e.g., fracking took place because "fossil fuels" are getting harder to extract, or extracting oil from mature wells with long since paided-back capital equipment is expensive.  Don't even get me started on the "proof" of fermenting sauces of Mesozoic life.  More fun than a barrel of monkeys on a Saturday night!

 

<$10/barrel, <20 years

Fri, 09/11/2015 - 08:36 | 6535204 I AM SULLY
I AM SULLY's picture

Your delusions are entertaining.

Fri, 09/11/2015 - 09:03 | 6535315 Mayer Amschel R...
Mayer Amschel Rothschild's picture

If you like your matrix, you can keep your matrix.

Fri, 09/11/2015 - 08:19 | 6535142 Dre4dwolf
Dre4dwolf's picture

How many times has Goldman given people "good" advice?

Fri, 09/11/2015 - 08:27 | 6535173 XAU XAG
XAU XAG's picture

How many times has Goldman given people "good" advice?

 

 

good for who............................

Fri, 09/11/2015 - 08:20 | 6535147 billybobtx
billybobtx's picture

Here ya go Mr. Algo:

 

Kuwait discovers huge oil reserves

 

https://www.middleeastmonitor.com/news/middle-east/20949-kuwait-discover...

Fri, 09/11/2015 - 08:36 | 6535202 I AM SULLY
I AM SULLY's picture

Peak worldwide discovery was reached in the 1960's - this is just more "feel good" happy-driving propaganda.

Fri, 09/11/2015 - 08:50 | 6535246 post turtle saver
post turtle saver's picture

people like you were saying shit like that in the 1940s... and the '20s... and... well, you get the idea...

science - it works bitchez

Fri, 09/11/2015 - 08:50 | 6535250 MSimon
MSimon's picture

Yes. We have entered the decline phase of oil with increasing production. If it declines any faster we will have more oil than we know what to do with.

Fri, 09/11/2015 - 10:16 | 6535685 sun tzu
sun tzu's picture

Peaked over 50 years ago but we still produce 300% more oil than we did when it peaked. They are still fnding new oil fields in the ME and have barely touched Central Asia and haven't even started in the Arctic yet. 

Fri, 09/11/2015 - 08:52 | 6535258 post turtle saver
post turtle saver's picture

don't forget the recent natural gas find in Egypt, too... this stuff is everywhere and we get better at finding it all the time... people talk about oil at $20 USD/bbl, try natural gas at a dollar...

Fri, 09/11/2015 - 08:24 | 6535157 foodstampbarry
foodstampbarry's picture

So long Canada, we hardly knew ye.

Fri, 09/11/2015 - 08:31 | 6535183 I AM SULLY
I AM SULLY's picture

I know ... right? You don't boil tar sands at less than $80/barrel, let alone 20. And frankly, the "fracking industry" will pancake further. This is Hubbert's "Rocky Plateau" and this is the World Depression the central banks want us to pretend isn't there.

Fri, 09/11/2015 - 11:28 | 6536106 RaceToTheBottom
RaceToTheBottom's picture

Since printed money has no cost, could not the US effectively nationalize the US Fracking industry through free money and turn the US oil industry into an arm of it foreign policy machine? 

Hasn't it done so already?

Fri, 09/11/2015 - 08:25 | 6535167 peterk
peterk's picture

The US will keep Oil at record lows for as long as possible.

Its a quasi-QE programme basically, helping out the  retared US economy.

It also is killing Russian influence as the Rouble gets hammered every time oil plunges. . seems  no one told the russians their influence is waining though!

Also it keeps iran in check to a degree.

But  after all that i think that  US shale will become  leaner and meaner overall. it will learn to survive imo. I think "LOW OIL" ( contrary to PEAK OIL a few years ago) will be around for  some time yet. It will make a complicated bottom.

Fri, 09/11/2015 - 08:28 | 6535175 madcows
madcows's picture

I trust thee not.

Fri, 09/11/2015 - 08:29 | 6535176 Jack Daniels Esq
Jack Daniels Esq's picture

OPEC says crude up - world is in recession - why crude is down

Fri, 09/11/2015 - 08:32 | 6535185 I AM SULLY
I AM SULLY's picture

(Hubbert's Rocky Plateau)

Fri, 09/11/2015 - 08:55 | 6535273 post turtle saver
post turtle saver's picture

fuck Hubbert and the horse he rode in on... he didn't account for tech improvements increasing both finds and levels of recovery... you may as well be spouting "Newton's limits" when we live in a world of quantum physics...

Fri, 09/11/2015 - 11:00 | 6535957 magnetosphere
magnetosphere's picture

not sure if you know this, but you are very stupid

Fri, 09/11/2015 - 08:37 | 6535206 kotfare17
kotfare17's picture

Oil is sold in the black market also. Isis, Iran sell oil in the black market.

GS can do the same with the excess oil it has collaterized.

 

Fade Goldman

Fri, 09/11/2015 - 08:49 | 6535242 roadhazard
roadhazard's picture

Butt, butt TROUBE IN THE MID EAST.

Fri, 09/11/2015 - 08:59 | 6535289 lds1965
lds1965's picture

Didn't Mike Maloney predict about 4 years ago $10 oil...? https://youtu.be/uzef43gdupk

Fri, 09/11/2015 - 09:07 | 6535335 LawsofPhysics
LawsofPhysics's picture

LOL!  "Officially", anything is possible, taking delivery at the "official" price is another thing altogether...

Fri, 09/11/2015 - 09:29 | 6535440 MFL8240
MFL8240's picture

Anything is possible with manipulation.

Fri, 09/11/2015 - 10:06 | 6535624 Youri Carma
Youri Carma's picture
Bottoms Up Line: We've got us these factors keeping oil low for the foreseeable future (That's to say at least the next 2-5 years but maybe even 10):

- Demand simply underperforming supply, the world economy is collapsing, mind you!

- Iranian oil coming online and later more Iraqi, Libyan and new oil wells elsewhere even from the North Sea

- U.S. shale still pumping under hedges some till 2017

- Natural gas steadily used more and more and dirt cheap because it can be found anywhere around the globe

- Coal is still widely used and still very cheap and reliable energy source

- More sun-energy sources used despite the low oil prices

- Several Canadian oil sands projects coming online by 2017

Fri, 09/11/2015 - 10:19 | 6535712 arbwhore
arbwhore's picture

I wonder if it will be like their $200 prediction back in 2008.

Fri, 09/11/2015 - 10:44 | 6535857 Bunga Bunga
Bunga Bunga's picture

$10 oil, Bunga Bunga says it's a done deal.

Fri, 09/11/2015 - 10:50 | 6535891 cornflakesdisease
cornflakesdisease's picture

The Saudis did what they were told by Dollar, Inc..  This has nothing to do about US shale production, and eveything to do with putting the hurt on Russia and Iran.  1986 all over again.

Fri, 09/11/2015 - 14:31 | 6536975 SmittyinLA
SmittyinLA's picture

$20 oil makes 100% of America's green energy debt ($Billions)........bad debt.

Wind and Solar weren't compete  @ $140/ barrel oil, they get insane @ $20/ barrel oil.

Fri, 09/11/2015 - 14:57 | 6537114 Charles Offdensen
Charles Offdensen's picture

Could we even see $10 oil like mike maloney predicted? It's taken a little longer with the manipulation of the CB's but still on track for deflation followed by inflation.

https://m.youtube.com/watch?v=uzef43gdupk

Fri, 09/11/2015 - 15:51 | 6537366 scatha
scatha's picture

The barrel oil could  reach $10 or $20 even if  all fracking collapses causing epidemic of apoplexy amongst empty talking heads. For one good reason since very few acknowledge the true reason for oil price collapse. I mean the true reason, which was repeatedly stated by Saudis, Russians and Chinese.

 

All of them say this is the demand collapse stupid. And demand collapses because of rampant inequality in societies throughout the world since people are loosing income, paying off the ever-increasing debt and cut the investments and expenses to the bone or desperately engage in gambling on stocks and loose big time.

 

That's why Saudis are trying to suppress fracking and tar sands not to completely lose influence on the US and World market and their benchmarks after they lost Chinese and Indian market to Russians and Iran as a part of trade dedollarization efforts which is exemplified by opening the first Chinese oil market denominated in Yuan just now and that includes Saudis’ participation and further collapse of petrodollar.

 

After next step, which would be development of Chinese investment banks to provide margin loans for oil contracts and we will kiss petrodollar dominance bye bye.

 

As far as fracking itself is concerned, the industry is extremely over-leveraged, massively loosing money as we speak regardless of any technological improvements. We see this desperation with unsound mining practices technically maximizing production over existing rigs, shortening their longevity to pay bondholders and survive another day.

 

As soon as interest rates normalize (if ever) or banks will not be able to sell their junk bonds (it’s already happens), they all will go bankrupt if Saudis keep the price low and they will for their own survival. We are just waiting for all the $90 hedges to expire and that’s will be it or another massive FED bailout, this time it would be junk bond holders since their market is dead now.

 

As a result of geopolitical tension between US and Russia, Saudis are step by step moving towards accommodation with the eastern powers to balance Iran support by Russia and China. 

 

Just recently the number two sheik, defense minister of Saudi Arabia is in S. Petersburg, Russia talking about energy and military cooperation and perhaps purchasing weapons. It is clear political shift indicating much more independent new monarch who rebuked Obama just few weeks ago and without clearance from Washington attacked Iranian interests in Yemen.

 

Saudis even substantially reduced purchasing of US treasuries while China is selling en mass, a historical development challenging of petrodollar. Saudis even started selling bonds to cover budget deficit due to their currency peg which will break soon as in China mostly due to war spending and invasion of Yemen, since one cannot wage a war without freely printing money.

 

One way or another with big oil companies abandonment of the projects, the future of the shale industry is bleak and probably will be with marginal importance in the US. Already fracking has been almost abandoned in Europe since nobody want to challenge Saudis.

 

 

On the real economy not Boomberg BS:

 

https://contrarianopinion.wordpress.com/economy-update/

 

 

Controversial but interesting take on the so-called shale revolution poster 8 months ago that nailed it  I found at:

 

https://sostratusworks.wordpress.com/2015/01/15/the-shale-game/

Fri, 09/11/2015 - 16:08 | 6537435 LawsofPhysics
LawsofPhysics's picture

"demand collapse" -- and yet 'merica is still consuming greater than 18 million barrels per day.  Perspective is important asshat.

Fri, 09/11/2015 - 16:35 | 6537542 JamaicaJim
JamaicaJim's picture

Goldman SUCKS..those fuckers....fuck them up their bloated asses with a red hot poker....just MOAR manipulation from The Squid....dump and pump....

watch...war will break out, and these fuckknocks will profit from it....no matter what.

 

cunts...

Fri, 09/11/2015 - 16:58 | 6537633 johmack2
johmack2's picture

i have been buying low debt oil stocks those bad boys are down over 50 to 70%, already production amounts has dropped and rig counts have also dropped...when the oil supply crunch happens it will be epic.

 

 

 

Fri, 09/11/2015 - 20:19 | 6538171 Jackprong
Jackprong's picture

$20 a barrel oil not gonna happen, Goldmine!  When the price got to upper $30 range, volatility ensued.  This is due to the fact that crude oil reached a peak of $39 a barrel during the previous commodity era around 1979-1980.  The price of oil has a memory.  Accumulation occurs around the $39 a barrel level.  Just because Goldmine says it, doesn't mean $20 will happen.

Fri, 09/11/2015 - 21:17 | 6538324 Gawd
Gawd's picture

ZH...why do you even put anything on the site that is attributed to Goldman? On the one hand you villify them as the enemy, on the other hand you suck Goldman's golden tit. Then, you make a headline, attributable to Goldman, that something might possibly happen in the future. 

I possibly have a lit birthday candle in my ass. Shall we all speculate on that too?

Fri, 09/11/2015 - 21:34 | 6538398 JailBanksters
JailBanksters's picture

If Goldman says it's possible, then Goldman will makei it happen just to fullfil their Prophecy. In other worlds Global Deflation. It's a good thing unless you have any sort of Loan, Credit Card, Shares, Superanuation.

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