Crude Curve Collapses - Market Sees Sub-$50 Oil Through 2021
The crude curve has just collapsed, especially since the rebound after China’s Golden Week reprieve ended around October 15. As Alhambra's Jeff Snider notes, the entire futures curve is under $50, an upsetting commentary on everything from US "demand" to long-term implications and especially those that are derived from economists’ somehow continued insistence that this is all just "transitory."
Transitory just died.
(4 votes)
»
- Login or register to post comments
- Printer-friendly version
- Send to friend
- advertisements -
Black gold ehhh?
snake oil ?
And green energy will take a big ole obama right up the arse. Solar and wind are set to bend over.
http://www.cnbc.com/2016/01/11/half-of-us-shale-drillers-may-go-bankrupt...
Q: Half of US shale drillers may go bankrupt: Oppenheimer's Gheit
A: the too big to fail will be bailed out continuously
Is this the same 'market' that saw $200 oil in 2008?
Predictions such as this are ludicrous. There is a good chance that in this interim - the Petro Dollar will collapse as the primary trade vehicle for oil and thus, any forecasted price denominated in this funny money is moot.
Gasoline in Southern California is $3.00 a gallon now. What gives?
Refiniers are suppressing production. That's why they call it the USSA.
Gasoline in CA is higher than national average due to ridiculously high state taxes at every link in the supply chain and wacko enviromental mandates like "designer" gasoline additives making fuel production more expensive for the refiners.
Back in the 90's I had a diesel powered car when the state mandated sulphur reduction in diesel fuel. Problem was it destroyed diesel fuel pumps ( that needed the sulphur as a lubricant) by the thousands all around the state. The state ended up reimbursing me for the repair costs but cost the state millions statewide, which of course helped justify another fuel tax increase. This kind of insanity will never end in the Peoples Republic of California so get ready for even higher prices. The comrades in Sacramento will use the drop in oil prices to disguise more tax increases.
http://www.marketwatch.com/investing/stock/sune
Sune broke their 52 week low moments ago $2.52 Down 25% from open and dropping
Texas Tea.
Don't get all celebratory yet. This is all part of Peak Oil. There is no more Cheap Oil to find, extract, refine and transport. And the low price now is because the world economy is tanking into the second leg of the Longest Depression and the Oil War of Saudi Arabia.
Shale oil is going to die off for the most part. So why will oil be low going out so far......if this pans out. Demand destruction. If the American Economy because of the China economy and thus the World economy tanks......demand for energy dries up. Demand destruction = price destruction.
However.....if the economies of the world heat up again.....bet your bottom dollar that oil goes up again. But that may never happen again in my lifetime because of the Biggest Peak of all.......Peak Debt.
"Demand destruction."
That's it in a nutshell. Long ago, I tried explaining to a buddy why the price would become extremely volatile near the end of availability. He argued that the price would syrocket beyond affordability. I win.
The one I'm waiting for now is low prices AND lack of supply: eg widespread rationing of $2.00 gas.
Nothing would surprise me anymore. . .
Peak Debt.
Agree with that. Just not sure how that will get resolved. Inflated away? Bankruptcy? Renegotiated to 1000 year maturity? Bullets and bombs?
Cheap Oil to find, extract, refine and transport.
Technology begs to differ. They will finds ways to get it no matter where it is. And do so at an affordable cost. Never underestimated to resolve of the engineers / geeks to accomplish the impossible if given the chance. They might even make a app for that. Only when the last drop is sucked out of the ground will there be no chance for the engineers / geeks.
Technology can never get around Mother Nature and Thermodynamics forever. We had Waaaaaay more technology than we did in the 1950's when in 2008 oil peaked in global production while at the same time we've never had a higher price, either in real dollar terms and adjusted for inflation.
So where was all the cheap oil when we had so much technology and different ways to extract oil?
Why can't Shale Oil survive much less thrive on less than 60$ oil. I mean....they use some really High Technology to get at that encrusted keragen out of shale rock...right? That technology should be cheap. Then why are the Shale oil companies so levered up the wazoo just to equip themselves and pump that shit out of the ground?
The Technology narrative given by the Techno-Utopians is like the lie fed to us by politicians about the "American Dream". You have to be asleep to believe it.
My last month paycheck was for 11000 dollars... All i did was simple online work from comfort at home for 3-4 hours/day that I got from this agency I discovered over the internet and they paid me for it 95 bucks every hour... Try it yourself... www.wallstreet34.com
If you had posted a link to www.uberforhousehookers.com I would give you a high hearty fuck off.
But by including Wall Street in your link, then I will add......burn in hell......as well.
$95 an hour? That's a lot of BJ's at .25 cents per. I admire your industriousness.
She's smart enough to know that what you can't make on margin, you have to make up on volume.
My car loves it!!
Permatransitory
If that's true (and it may be), the petroleum industry will be dead in 2021.
US petroleum is in ICU now.
It costs $35/bbl to get it out of the ground here. It sells for $33/bbl. All the producers are running on minimum staff, sharing accountants, etc. Gas is sold at or below cost, depending on the stupidity of the investment contract.
Watch how interesting things get when the heat in NYC shuts off due to low pressure. The mayor will call DoE, DoE calls Consol or Dominion, Dominion checks the pressure gauge, then calls GasCo and gets "the number you have dialed is no longer in service. please check the listing".
Interesting times.
Global depression and deflationary forces are a bitch. Moar empty cities please.
Right, because in world with 7+ billion people and growing there is no value in reduced hydrocarbons and consumable calories...
Fuck me, once again, greed and politics will bring about world war.
same as it ever was...
IMHO:
1. The case for peak oil has not been made.
2. Diversification of energy resources and delivery of renewables such as wind and solar are improving.
3. There is still plenty of coal to figure out how to utilize more cleanly and efficiently.
4. A combination of Liquid Salt Throium reactors and Fischer-Tropsch fuel synthesis plants can in theory provide ample high gigawatt electrical output and generate liquid fuels suitable for combustion engines. This process for generating liquid fuels is also nearly if not 100% carbon neutral and does not entail traditional problems associated with nuclear waste or the generation of weapons materials.
5. The problem may not be with oil at all.
The problem might be that governments and fiat central/commercial banking control of the money supply and the movements of debt/capital/leverage associated witht fiat/commercial banking hedgemony has created all manner of counter-productive incentives and rents contrary to the health of the industrialized and financialized economy.
Valuations are phantoms in a time of phony currency and counterfeiting and accounting horseshit.
IMHO: Oil is as lost as the rest of the World's assets ( and people ) are in this nightmare valuation fog of phony statistics, lies, counterfeiting, fraud and thievery.
Civil war in Saudi Arabia could help.
This is next......
http://beforeitsnews.com/global-unrest/2016/01/the-lion-is-it-time-to-fi...
no reliable predictions can be made about prices in the fiat printed at will
Well.. money is borrowed into existance, not printed.. so you might be able to do predictions on demand for loans..
'Demand' has nothing to do with artificially created scarcity and/or oppression.
The system of allocation is dysfunctional.
You and/or I can be real estate moguls just as easily as Trump if You and/or I are granted access to hundreds of millions in counterfeited fiat with which to purchase and improve real assets for resale and/or rental at profit.
If this is true then quite a few oil major regions are going to be dead in a just a few years time.
For example, when the crash in oil prices first started 80% of projects in the north sea required prices of over 70 dollars a barrel, now I do not think a single project is profitable based on those projected prices.
Something does not add up here, we have mega projects costing billions, unconventional and aging oil provinces requiring 80 dollars a barrel and prices low for 5 or more years. It is almost as the current ZIRP regime is causing everyone to consume all their capital rather than invest it...
Buy!, wait no sell, wait but again...fuck this racket, this is the " Obama speaks " legacy pump and dump.
50$ oil through 2021 is a way of keeping the dollar alive.
Its like caping gold in box for the same time.
How about 50 of "todays" dollars till 2021. All fixed.
I don't know about that there could be plenty of war and infrastructure damage between here and there. It's possible in the light that China completely collapsing but Continental is red queening it to keep production high enough to keep the cash flow going in light of the declines in their legacy wells. The 2012 wells weren't bad but the sweet spots were drilled early and the first companies there got the best acreage. So shale is a flash in the pan joke created by loose money that loves losing projects.
A huge portion of the planet is just coming out of giving it everything they have to increase production. This can make things looky more rosey than they will be long term. The fact that the Sauds are talking IPO and the west seems hell bent on cornering Russia are huge red flags as well.
Looks to me like it's nearly time to start writing oil puts around the mid-$20s...
Tesla shares are up today. Cheap oil is apparently a good reason to buy electric vehicles.
They'd be giving the stuff away if we hadn't hit peak oil a few decades ago
Fuck the crude curve.. its all just bollocks!
Everything is arranged, everything is planned..
China and russia starts oil trade in CNY, so the west got desperate to keep people buying it in USD. Best way? Make it shit cheap. Maybe they can knock out some disbelievers as venezuela at the same time. Norway will be fine, bankzters will take care of ze american producers.
Which way for gold? Does gold go down with oil?
James Kunstler will conclude that is another confirmation of Peak Oil!
High volatility was actually one of the predications of what would occur when the plateau was reached. Looks like that started around 2005-2006. Peak production means that there are rapid changes from oversupply to undersupply and back. That's exactly what we are seeing right now.
A lot of this is due to the Fed and the strong dollar collusion going on right now between the ECB, FED and OPEC. It's to force the Russians out of Syria/Ukraine and keep the Iranians in check.
Which is worse for the global economy?
An undeniable declaration of 'peak oil' or the continuation of this pathetic "recovery"?
When 'peak oil' promotes a slowdown of economic growth and the continued falling demand of a pathetic recovery will negate 'peak oil'?
Not a chance, barring a massive worldwide deflationary collapse. Rig counts are down. Drawdown of inventories have begun. I see 50+ oil by summer. The hysteria always peaks right around the bottom/top.
If your company or country was dependent on $60 oil to pay your debts, what would you do?
If it was your company you would default on your debts, sooner rather than later IMO. The idea that you can "hold-on" for a few months is ludicrous.
If you are a country, you are facing the Nigerian scenario, hyper inflation as your USD reserves dwindle.
Will oil producers take anything but dollars for oil right now? Would you take Yuan or Yen or Euros over $$$? Probably not.
This is the hangover from juicing the commodity complex, thanks Bennie and the China CB.
schu
The problem with the futures market is that the banksters are doing all they can to make sure we don't have a future.
Well duh... the futures contango slope is determined in large part by the costs of storage, because those are knowable now (whereas future prices, extraction rates and demand are not knowable without significant uncertainty). All expected value calculations have a time subscript.
The current expected future spot price is the outcome of the current price plus storage costs (because in equilibrium, arbitrage ensures this is true) - so all this is saying is that filling a ship with crude and parking it offshore still has a positive expected value (more accurately: the distribution of payoffs has most of its mass above zero and is also skewed above zero).
Go back and look at what the contango looked like in Nov07 - then, the world was expecting above-$150 in perpetuity. A year later, they were expecting sub-$50 in perpetuity.
Futures prices are a very poor predictor of future spot prices - and the longer out you go, the worse the prediction.
EDIT: for the high-future-in-perpetuity scenario I meant Jun-July 08, not Nov07... I shoulda looked it up properly before I wrote: I just glanced at the chart and dropped a line (with my shit eyesight) to the x-axis, and parallaxed the fuck out of it. It didn't seem right on reflection, so I looked it up properly just now. The point stands though: contango/backwardation is not a useful predictor of future spot prices if your horizon is more than 1 quarter (even then it's pretty shit), and anyone who pretends that it's useful is revealing that they don't understand it properly.
Contango charts are good in one specific instance, and one only: when sentiment is at an extreme, they can be a useful adjunct tool - by which I mean, if the dumb money is all positioned on one side AND the contango slope is near (or above) the top of historically normal ranges... that's an ideal time to buy spot and sell the far end of the curve (or vice versa, when it's in steep backwardation) and wait for that shit to normalise.