• Gold Money
    05/26/2016 - 14:27
    Here’s a question that might have you pondering: Is gold a commodity? More importantly, are we doing a disservice to the gold industry by calling gold a commodity? These may sound like silly...

Forget $20 Oil: StanChart Says "Prices Could Fall As Low As $10 A Barrel"

Tyler Durden's picture




 

A little over a year ago, Paul Hodges was roundly mocked when in December 2014 he made a drastic call that "Oil May Drop To $25 On Chinese Demand Plunge, Supply Glut, Ageing Boomers." After oil got as close as 40 cents away from the dreaded 2-handle, Paul had the last laugh.

But the bigger point is that not only is $20 oil not a shocker any more, it is largely expected and could be indeed welcomed, as first Goldman, then practically everyone else has now admitted it is just a matter of time before oil trades to levels not seen since the 20th century.

So, perhaps to make a name for himself, the head of commodity research at Standard Chartered, Paul Horsnell decided to lower the bar into even more dramatic territory, and overnight suggested that oil prices could drop as low as $10 a barrel.

"Given that no fundamental relationship is currently driving the oil market towards any equilibrium, prices are being moved almost entirely by financial flows caused by fluctuations in other asset prices, including the USD and equity markets,” Horsnell said. "We think prices could fall as low as $10/bbl before most of the money managers in the market conceded that matters had gone too far."

When does he see oil bottoming? "in extreme case, price floor may be set when entire market believes oil has undershot."

So with a new, and even lower bogey, that means that an upper, or even lower $20-print in oil will be the shocker so many bottom hunters are looking for, but instead after this expectations reset, oil may have to indeed drop another $10 before the BTFD algos can finally make some money.

So with a $10 oil bogey now in the books, here is what others are predicting, courtesy of Bloomberg. Spoiler alert: everyone is bearish.

Energy Aspects

  • Even oil in $20s won’t speed market rebalancing
  • Cost of halting and then restarting production makes output curbs unlikely, even at prices below $30/bbl
  • Risk of further price declines “still on the cards”

ADIA head of research Christof Ruhl

  • Conventional oil producers “can’t win” in battle to drive U.S. shale producers out of market
  • U.S. oil shale showing relentless efficiency gains

Natixis

  • Natixis cuts 2016 Brent forecast by $8.30 to $39.50/bbl
  • “We expect a very slow recovery in oil prices, thanks to the continued resilience of U.S. oil output”

Barclays

  • Strong demand may lead to gasoline shortage in summer
  • Cites new refinery additions less tailored toward light products, increasing demand for petrol in Asia
  • Cut Brent, WTI 2016 fcasts to $37/bbl on “marked deterioration” of mkt fundamentals
  • Represents $23 cut to Brent fcast, $19 reduction on WTI

In short, peak pessimism is here. The only missing link is one major high-cost oil producer (like Venezuela for example) blowing up. It shouldn't be too long.

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Tue, 01/12/2016 - 09:18 | 7034154 the not so migh...
the not so mighty maximiza's picture

Time to store oil in bunker

Tue, 01/12/2016 - 09:27 | 7034180 Ghost of PartysOver
Ghost of PartysOver's picture

But, but, but...  What about peak oil?

Tue, 01/12/2016 - 09:36 | 7034216 SoilMyselfRotten
SoilMyselfRotten's picture

https://www.youtube.com/watch?v=pIbbEQweJMw

 

Must confess i pooh-pooh'd Mike Maloney when he made his $10/barrel prediction 5 yrs ago.

Tue, 01/12/2016 - 09:51 | 7034248 new game
new game's picture

with gas getting to 1.50 a gaqllon, EXPECT  government wanks to take the opportunity to raise the tax on it. they never miss an opp to nickel and dime the average joe. watch, remeber, the fuckers will creep up this tax too. we are conditioned to 3/gallon, so a 10-20 cent hike is nothing to average idiot...

Tue, 01/12/2016 - 09:52 | 7034252 847328_3527
847328_3527's picture

Gas is too cheap to drive anywhere these days.

 

It's one of those paradoxes I know but there you have it.

Tue, 01/12/2016 - 09:55 | 7034272 StackShinyStuff
StackShinyStuff's picture

Why not zero?  As soon as we get that Cold Fusion thing down that's exactly what the price will be. /s

Tue, 01/12/2016 - 11:09 | 7034618 Joe Trader
Joe Trader's picture

Trump in 2012:

Oil would be $25 a barrel if our government would let us drill. Our country would be rich again--who needs OPEC.

https://twitter.com/realdonaldtrump/status/248453332493012992

2013: Oil should not cost more than $40 a barrel. Ideally it should be $25. Cheap to produce and we protect the OPEC countries.

https://twitter.com/realdonaldtrump/status/329700217513451522

Tue, 01/12/2016 - 11:22 | 7034664 Ghost of PartysOver
Ghost of PartysOver's picture

He is so friggin politically incorrect.   What a breathe of fresh air.

Tue, 01/12/2016 - 11:35 | 7034734 troubledasset
troubledasset's picture

You said $10/ounce in your video. Holy shit, that is some EXPENSIVE oil, $53,760/bbl. Wait, wait. Later on in the video you said that oil was trading at $68/gallon. Wow, that brings the price down to $2,856/bbl.

Oh, what the fuck, you clearly have no idea what you're talking about, or you're drunk, and no-one should ever listen to you. 

Tue, 01/12/2016 - 10:14 | 7034365 Cloud9.5
Cloud9.5's picture

It never ceases to amaze me that people don’t grasp that peak oil is precisely the reason we have the ongoing collapse and resulting oil glut.  Hundred and forty seven dollar oil drove a stake into the heart of the economy.  

Understand that during the famine of the great depression, farmers were pouring out their milk because consumers could not afford to buy it producing a milk glut at the dairy farm.  That milk glut was not the result of limitless supplies of milk.  It was the result of the collapse of the consumer’s credit. 

 

What we are seeing now is a replay of that same event in oil production.  Google retail gasoline sales over the last ten years.  Google HARPEX and look at the ten year chart.  What we are seeing is the full force of demand destruction.

Tue, 01/12/2016 - 10:31 | 7034436 StychoKiller
StychoKiller's picture

"Give me a nickel, brotha can you spare me a dime? 

Munny will drive some people out of their minds!"

Enter Nigeria's new improved devaluation, 'cause they ain't gettin' 50+ $/bbl!

 

Making Money, i.e., the movement of goods and services is grinding to a halt (see the BDI plummet

to record lows!)

Tue, 01/12/2016 - 10:51 | 7034515 Gordon Freeman
Gordon Freeman's picture

@cloud,

It never ceases to amaze me that idiots like you keep bleating about an utterly discredited theory...

Tue, 01/12/2016 - 13:32 | 7035419 Cloud9.5
Cloud9.5's picture

So, we are now producing more oil now than we were in the 1970's.  Have you talked to anybody in Alaska lately about their production trend?  What about the North Sea?  Believe what you will.

Tue, 01/12/2016 - 12:03 | 7034688 Wulfkind
Wulfkind's picture

"But, but, but...  What about peak oil?"


Sigh.....it's gets tiresome trying to educate you dumbasses.  This is actually PART and PARCEL of Peak Oil. 

#1:  Peak Oil is NOT about running out of oil.  It's about running out of CHEAP oil.  Cheap to find, cheap to acquire access, cheap to drill, cheap to refine, cheap to transport.  We have run out of that stuff. 

#2:  What we have today is a desperation move by the Saudis to shore up market share while they can still get it and maintain it.  They know the future.  Their cheap mega fields are drying up.  Water cut is getting worse and worse.  They have offshore mega projects.....but they are HELLA expensive compared to sticking a soda straw in the sand and getting light sweet crude.  They saw us taking away market share with our heavily leveraged Wall Street Tulip Mania style Shale Oil and they are going to kill it if they can.

#3:  The world economy is tanking.  Less demand, lower prices.  Couple this with the Oil War perpetrated by Saudi Arabia and prices go down even faster and lower.  And you dumbfucks think that Peak Oil just went bye bye.......

Here's a simple test for yourself to know whether or not Peak Oil is real.   In the good 'ol days of cheap oil, particularly in America you only had to do this......and the sky was black with them.

http://aoghs.org/states/postcards-from-the-texas-oil-patch/

Now......in order for America to meet its energy needs we have to rely on our #1 import source.....CANADA......to do this........

https://williammclennan.wordpress.com/tag/tar-sand/

 

In order to get this.

http://www.desmogblog.com/tar-sands-united-states-what-you-need-know

And that's BEFORE refining and transport.

So.....when the booze and the pot wear off.....and you can think clearly... do yourself a favor and educate yourself before making a smart assed comment about Peak Oil. 

Tue, 01/12/2016 - 12:22 | 7034941 BlindMonkey
BlindMonkey's picture

It is amazing to me the leaps of logic people will make to hang onto their pet theories.   Evolution, global warming, peak oil, magic-dirt immigration theory, etc.   Keep hanging tough.   We love you anyway.

Tue, 01/12/2016 - 13:17 | 7035298 Gordon Freeman
Gordon Freeman's picture

@Wolf,

 #1:  Peak Oil is NOT about running out of oil.  It's about running out of CHEAP oil.

Bullshit--your moronic "theory" was that the world was running out of oil, period.  Just like Global Warming morphing into Climate Change when it was found to be fraudulent, you are now applying the same dissembling to your crap, and hoping no one notices. Fuck you.

.

Tue, 01/12/2016 - 13:55 | 7035546 Apply Force
Apply Force's picture

So is Gordon Freeman's theory that we are now entering the age of MOAR...?!?

We are entering the age of LESS - that will have varying causes and correlations, but LESS is what it will be.  Who cares about the semantics - no use "understanding" if you aren't prepared.

Tue, 01/12/2016 - 15:11 | 7035983 Wulfkind
Wulfkind's picture

Oh boy....here we go.  Watch out folks.  We have a Rush Limbaugh educated Ayn Rand-tard here.  Probably believes in Abiotic oil too. 

First of all, junior, Peak Oil is not MY theory.  It happens to be one that I agree with. 

Number two.....I did NOT mention at all in my post about Global Warming and/or Climate Change did I you lying cock gobbler.   No, I didn't .  Nor do I believe in it.  The data is not there unlike Peak Oil.

Number three.....I do hope......I mean I SINCERELY hope that when you finally pull your finger out of your ass and take a sniff, you won't be so fucking ignorant to be surprised that you find out you're full of shit.

Tue, 01/12/2016 - 09:19 | 7034155 kuro_neko
kuro_neko's picture

when you start reading that, you know its time to go LONG OIL at current prices for a BIG BIG RALLY

Tue, 01/12/2016 - 09:21 | 7034162 mandalou
mandalou's picture

I dont even need to read the article.  MSM is hopping aboard the low oil. I am thinking too the bottom is here. And if oil bottom is here so has equities. I want to be 100% wrong with my comment.

Tue, 01/12/2016 - 09:27 | 7034179 NoWayJose
NoWayJose's picture

Even the ZH Frontrunning is full of 'collapse' robo stories. Once the algorithms see enough shorts in any type of market, they will flip that around and use the shorts as fuel to send the market higher. That's been the pattern for years.

Tue, 01/12/2016 - 09:32 | 7034190 mandalou
mandalou's picture

That is exactly how this will work. CNBC and Bloomturd are talking about lower oil. I want lower oil but it will be shocking if we break $30 for a while. Plus consider crude is fueling the ramps in equities at times, along with equities very close to those August lows. So, we can guess some rebound will happen. How high just depends.

Tue, 01/12/2016 - 09:42 | 7034227 Life of Illusion
Life of Illusion's picture

 

 

Oil pruducing countries reserve funds will be deleted, creates crisis, country takes on debt, oil bottoms, assets change hands, price ramps.

 

 

Tue, 01/12/2016 - 09:45 | 7034237 mandalou
mandalou's picture

I don't disagree with you but would like to ask a question. Lets say this happens to the USA. When the price ramps, what currency is pegged to oil?

Tue, 01/12/2016 - 09:56 | 7034278 new game
new game's picture

the petro dolla backed by neocons in dc. moar wars of course. brown people liberated from their own foolishness of being born with oil under sand...

Tue, 01/12/2016 - 10:13 | 7034357 Life of Illusion
Life of Illusion's picture

 

We basically went off the gold standard and on a military standard supporting dollar as reserve status.

Triffin explains in last book

"ims international monetary system or scandal"

see page 409,412

http://ojs.uniroma1.it/index.php/PSLQuarterlyReview/article/view/10514/1...

Tue, 01/12/2016 - 09:33 | 7034192 Ghost of PartysOver
Ghost of PartysOver's picture

Yes it is.  But so few understand it or want to admit it.  After all HFT is providing liquidity to all markets,  God save the HFT's.

Tue, 01/12/2016 - 09:34 | 7034203 Winston Churchill
Winston Churchill's picture

I'd agree if this was a supply and demand issue.

It isn't anymore, its economic warfare, and we all know what tyoe of war comes after

the economic variety.

Tue, 01/12/2016 - 09:35 | 7034204 Winston Churchill
Winston Churchill's picture

I'd agree if this was a supply and demand issue.

It isn't anymore, its economic warfare, and we all know what tyoe of war comes after

the economic variety.

Tue, 01/12/2016 - 09:59 | 7034294 new game
new game's picture

spot on. the fucking neoconic backed fed/banker consortum of power thirst wars and dominance.

what better media than oil, ha...

Tue, 01/12/2016 - 10:01 | 7034300 new game
new game's picture

waiting for the "official" response from russia and china...

Tue, 01/12/2016 - 09:35 | 7034186 jamochavez
jamochavez's picture

Cl is 70 percent off its 2 year highs. Es is off 8 percent of its two years highs. Not seeing the relationship

Tue, 01/12/2016 - 09:37 | 7034219 mandalou
mandalou's picture

You won't like that. You got to zoom in to see how they nickel and dime crude and equities. It is that little momentum. I have been trading CL and watching NQ in futures. Take a peak on say 5 minute chart. When crude is ready to move higher or lower NQ follows. When crude has been stalling is when NQ consolidates. If you have a renko chart it is clear. Try a 5 brick renko. Go back and look at some of my comments. I have been posting times. One I remember from yesterday is 203pm est with crude and all equities. Crude ramps and so did equities. Check it out.

Tue, 01/12/2016 - 09:51 | 7034240 jamochavez
jamochavez's picture

Not arguing withyou how it has been trading. Just find it funny that people have accepted that relationship Cl is rallying a few dollars lets go buy a tech heavy index.

Tue, 01/12/2016 - 09:53 | 7034255 mandalou
mandalou's picture

Oh I know, It isn't my deciding factor as I sit on my hands with equities. I trade commodites like yourself. Just noticed it and shared. The PPT will use anything needed to keep the casino open.

 

Good luck today as game time approaches.

Tue, 01/12/2016 - 09:55 | 7034271 jamochavez
jamochavez's picture

What baffles me is how there is no real fear in the equity market. Is every commodity lying. And when a communist country like China cannot keep their market fr falling shouldn't people here be scared shitless

Tue, 01/12/2016 - 10:01 | 7034302 mandalou
mandalou's picture

I would say wall street is fearless because it knows it can not lose. The tax payer will bail them out. It is already proven. Thats why there is no fear. Banks can't lose in the game they created. Maybe I am wrong but it is how I see it.

Tue, 01/12/2016 - 11:19 | 7034657 greenskeeper carl
greenskeeper carl's picture

I don't think you are wrong, I just think there is a limit to your hypothesis about "the banks can't lose". Its hard to imagine then getting away with it over and over again. I just don't think they can keep pulling that shit over and over again without spawning a "pitchforks and torches" type moment.

Tue, 01/12/2016 - 12:58 | 7035164 mandalou
mandalou's picture

I been thinking the same thing for years yet here we are. We all joke around about free Corzine because nothing changes. I want you to be 100% correct that it changes in our lifetime but we have seen nothing stoping this train

Tue, 01/12/2016 - 10:02 | 7034297 CPL
CPL's picture

Got nothing to do with price action.  This is how power is applied with a firm hand that's hard and heavy as stone to get a big dog leashed and muzzled.  Either they comply or get crushed under the constant pressure of energy they so deseperately need.

How they are doing that?  OPEC is creating domestic markets for their own oil again which means the private sector is about to get kicked out of the oil industry.  It's been priced for too long at a cheap level where it's too expensive to ship cheap oil.  For places like Canada and Mexico it's a good thing because smaller populations, lower energy consumption rates and local energy resources.  Very bad for the USA, large population, no backup plan to offer an energy alternative, overly complex and crumbling infrastructure and a complete lack of delivery that isn't in someone else's yard.

It's a situation if looking long term you really have to ignore economic pricing models, those are pretty much garbage to begin with.  The simple idea of who's burned off their resources sooner is the primary issue.  This could escalate, but with the majority of all armed forces deployed, the USA is a sitting duck.  They focused so intently on a single target, their ambush will come from three sides by way of resource management and that previously mentioned complexity/lack of backup plan.  Tunnel vision is hardly a way to run an empire.

Tue, 01/12/2016 - 10:22 | 7034393 Chad_the_short_...
Chad_the_short_seller's picture

Yea, but if you believe the whole crash is an orchestrated one by the us trying to smash russia then this will continue. I happen to believe this theory. 

Tue, 01/12/2016 - 09:19 | 7034157 Early Retirement
Early Retirement's picture

Horsnell is just trying to cover his ass. He has been the most wildly bullish analyst at any bank. He is a mindless hack who has been revealed to have been a wind-up toy for Industry. He was fired by Barclays for this reason.

Tue, 01/12/2016 - 09:20 | 7034161 Mick Shrimpton
Mick Shrimpton's picture

Just when our economy hits bottom and we need cheap oil the most, it will be $100+ a barrel.

Tue, 01/12/2016 - 09:23 | 7034166 stant
stant's picture

Much lower than 30 and somebody will cook something off somewhere IMHO

Tue, 01/12/2016 - 09:24 | 7034167 trader1
trader1's picture

Zero

Tue, 01/12/2016 - 09:25 | 7034169 mayhem_korner
mayhem_korner's picture

We expect a very slow recovery in oil prices, thanks to the continued resilience of U.S. oil output

 

Who's going to bailout the defaults to maintain "resilience"?  Inquiring minds want to know...

Tue, 01/12/2016 - 09:25 | 7034172 FrankieGoesToHo...
FrankieGoesToHollywood's picture

I say $5. Because fuck it. I can guess too.

Tue, 01/12/2016 - 23:20 | 7038565 DeadCatBouncer
DeadCatBouncer's picture

$5 at some point between now and end of 2017.

Tue, 01/12/2016 - 09:26 | 7034174 JustObserving
JustObserving's picture

Saudis screwing Russia at the behest of the Nobel Prize Winner.

The USSR collapsed when the Saudis reduced the price of oil to under $10 a barrel in the mid-1980s.

Now Russia is losing nearly $1 billion a day in revenue due to lower oil prices

The Oil Coup US-Saudi Subterfuge Send Stocks and Credit Reeling

 

U.S. powerbrokers have put the country at risk of another financial crisis to intensify their economic war on Moscow and to move ahead with their plan to “pivot to Asia”.

Here’s what’s happening: Washington has persuaded the Saudis to flood the market with oil to push down prices, decimate Russia’s economy, and reduce Moscow’s resistance to further NATO encirclement and the spreading of US military bases across Central Asia. The US-Saudi scheme has slashed oil prices by nearly a half since they hit their peak in June. The sharp decline in prices has burst the bubble in high-yield debt which has increased the turbulence in the credit markets while pushing global equities into a tailspin. Even so, the roiled markets and spreading contagion have not deterred Washington from pursuing its reckless plan, a plan which uses Riyadh’s stooge-regime to prosecute Washington’s global resource war. 

http://www.globalresearch.ca/the-oil-coup/5420293

Falling oil prices and the plunging ruble are not some kind of free market accident brought on by oversupply and weak demand. That’s baloney. They’re part of a broader geopolitical strategy to strangle the Russian economy, topple Putin, and establish US hegemony across the Asian landmass. It’s all part of Washington’s plan to maintain its top-spot as the world’s only superpower even though its economy is in irreversible decline.

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

Tue, 01/12/2016 - 09:52 | 7034196 Element
Element's picture

Haven't you noticed that they are trying to undercut US and Canadian producers too doing that?

It ain't about Russia, it's about the Arabs having budgets if they don't take out a good chunk of the competition.

You keep pretending there is a formal USA Saudi military alliance - there isn't.

http://www.zerohedge.com/news/2016-01-07/saudi-devaluation-odds-highest-...

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