Why Oil could hit $100

[0R0 + 6,251]

That figure includes $15-25 royalties which I am certain will be much reduced going forwards.

Owned land breakevens in the Permian are cash costs of $40, and about 1/2 have cash costs at $30

We will see soon enough at what price rig counts start rising significantly

[Rocketman72 + 6]

Plus >= 30% severance taxes and royalty payments for a grand total of $49 barrel WTI. $75 Brent quote.

 

Edited July 14, 2020 by Rocketman72

[Rocketman72 + 6]

Sorry 0R0 I didn’t see your post on the new page.

[cbrasher1 + 272]

On 7/7/2020 at 3:40 PM, Old-Ruffneck said:

About the only thing to spike oil short term 100$ is an all out war. Still holding my estimate at 60 by end of September. Thinking i might be little over, but it will inch slowly back up. Patience!!!

Rigs are coming out at end of the month and start of August, how many and how fast I do not know, I'm sure that will depend on how stable the price is and if it goes up some...I have managed to work thru this downturn, although those 50+ hrs of ot are few and far between..I just hope and pray there is some restraint and we don't drill off a cliff...be the turtle, nice and slow....

[Rob Kramer + 696]

Primary vision has an article on their twitter about using one frac spread on 2 fracks at the same time. Says 90% success rate and shaves 500k + time . They mention it in the article as the best kept secret.  I'd say Canadian  fracking needs 57$ wti and 2.50$ gas . Pipelines are more costly and gassier plays than texas so 55$+2$ gas(?) For USA break even (as in hold production + net debt doesnt rise) . So at 94% of the cost that makes all in break even at 51.7$ ... if they all wernt doing it before now already and it's just news to me. The article mentioned one frac speed could do 180bbl/ stage and lowest per proper frac was 60bbl... so they said they could do 3 fracs at once at 60 or 2 at 90. I dont know the insides and outs of fracing but it would be nice to have an estimate on the % of double fracs happening in 2019 ... mabey they only need 220 frac spreads if there all doubled up. (Vs 315) . I wonder if fine tuning of this and gas + oil price spike 2022 on is the unseen recovery story for shale .

[Jan van Eck + 7,558]

On 7/2/2020 at 4:11 PM, Dan Clemmensen said:

2 billion gloves will take less than 66,000 bbl. 

One VLCC tanker holds two million barrels of crude oil. That 66,000 bbl is thus only 3% of one cargo of one VLCC tanker.  And there are 810 VLCC's built and operating in world oil trade.   There are 9,320 oil tankers out there in the world fleet.  

Your 66,000 bbls translates to less than 9,000 tons of oil.  A 9.000-tonner is a smallish coastal tanker. It would not even be a blip on the world radar.   Totally insignificant.  People fail to grasp just how vast the oil trade is. 

[Jan van Eck + 7,558]

1 hour ago, Rob Kramer said:

I wonder if fine tuning of this and gas + oil price spike 2022 on is the unseen recovery story for shale .

It probably is.  

[Old-Ruffneck + 1,237]

On 7/7/2020 at 3:40 PM, Old-Ruffneck said:

About the only thing to spike oil short term 100$ is an all out war. Still holding my estimate at 60 by end of September. Thinking i might be little over, but it will inch slowly back up. Patience!!!

And it is now inching upward 42.00$ wti.................

[Dave Gilmour + 20]

The current trend in my trading model shows that we will hit $50 in august for oil. Now is the time to buy cheap oil stocks like Shell and cheap gas like Gazprom.

[Timothy Williams 0]

Good Day,

I don’t see oil going above $50 for some time as the rocovery is not working out as plan, the US is in Crisis. The Middle East is also in Crisis. The World will have a new Norm!

[Dave Gilmour + 20]

2 hours ago, Timothy Williams said:

Good Day,

I don’t see oil going above $50 for some time as the rocovery is not working out as plan, the US is in Crisis. The Middle East is also in Crisis. The World will have a new Norm!

There were people who said that oil would be -minus $40 two months in a row, and they were wrong too. Oilprice will go up, the world economy is recovering everywhere now.

[Dan Clemmensen + 1,011]

8 hours ago, Dave Gilmour said:

The current trend in my trading model shows that we will hit $50 in august for oil. Now is the time to buy cheap oil stocks like Shell and cheap gas like Gazprom.

China has slowed its purchases of crude since it's storage is basically full, and there are VLCCs waiting to unload and threfore acting as floating storage. China's purchases at the low-price point were a big reason the price did not go lower.

Meanwhile here in the US, hospitalizations due to Covid-19 have now gone back up to the record levels we reached in April, and lockdowns are now inevitable. Not NY this time, but FL, AZ, TX, and southern CA.

I do not understand how the stock market works, but the underlying physical reality does not look too good.

[Dave Gilmour + 20]

39 minutes ago, Dan Clemmensen said:

China has slowed its purchases of crude since it's storage is basically full, and there are VLCCs waiting to unload and threfore acting as floating storage. China's purchases at the low-price point were a big reason the price did not go lower.

Meanwhile here in the US, hospitalizations due to Covid-19 have now gone back up to the record levels we reached in April, and lockdowns are now inevitable. Not NY this time, but FL, AZ, TX, and southern CA.

I do not understand how the stock market works, but the underlying physical reality does not look too good.

The virus will go away soon, only 0,2% of the people die. The economy will boost soon. Now is the time to buy cheap!

[Rob Kramer + 696]

24 minutes ago, Dave Gilmour said:

The virus will go away soon, only 0,2% of the people die. The economy will boost soon. Now is the time to buy cheap!

I've already been holding as the first buy was at -40$ oil area. But depending on how long you want to wait. Now is ok I think instant action for gains in oil is buying in 2 weeks and gas just before sept 20th (when LNG should return to 6BCF vs 3.8BCF now and oct is sofar at 8BCF) with production at least 1.5BCF lower at that time. But like I said earlier Canada has 800k offline and USA has 2.1M barrels offline and Colombia like 200k (estimate) Peru almost all their oil . So considering demand is 80% of normal and production closer to 25% below normal... I'm seeing a 5% Americas deficit.  Probably able to resolve the glut just past year end if the states with higher cases and still low death per case dont re lock .

[Dave Gilmour + 20]

All signals look that we are now at the bottom of the stock prices from oil and gas companies. These stocks are very cheap to buy for huge profits and high dividends in 2 years time, especially Shell and Gazprom!

[Old-Ruffneck + 1,237]

As we sit here on a Wed. morning awaiting markets to open i see oil now at 43.11. Of course when official EIA puts its numbers out at 11am markets will react, but at least we got off the stuck at 40$ 🙂

[Tomasz + 1,608]

Breakeven cost of marginal barrel is nowadays IMHO about 60 $ per barrel. 20 years ago it was rather about 30 $ per barrel. 

Shale oil production has lowered global oil prices from above $ 100, but this does not change the simple fact that each passing year the world must slowly reach for deposits that are more difficult to extract - shale oil, deep water oil, oil sands and Arctic oil.

There are of course, some reserves unused for political reasons and sanctions in Iran, Venezeuela or Iraq, but every year the overall cost of oil production increases not decreases  even in countries such as Saudi Arabia or other Gulf Countries and Russia.

Peak oil will not mean the fact that there is global shortage of oil, but that if the world does not depart from this raw material, it will have to extract  more and more difficult deposits and shale oil is an example of this.

IMHO America would  have never extracted  shale oil and shale gas if it had not exhausted its oil and conventional gas resources in previous 150 years.

Edited August 5, 2020 by Tomasz

[Old-Ruffneck + 1,237]

3 hours ago, Tomasz said:

Breakeven cost of marginal barrel is nowadays IMHO about 60 $ per barrel. 20 years ago it was rather about 30 $ per barrel. 

Please explain how you arrived at the 60$ figure break-even. IMHO break-even is much lower than the infant shale start ups. Tech by the end of 2018 from spudding in to completion per hole was less than 30 days per pad. Leases got more economical in the western Permian and fracking materials were halved as they open pit mined the sands instead of importing. There are still many thousands DUCS to keep production up but at this moment there be enough "cheap" mid-east and Russian oil so no need for more production. By the end of 2019 IMHO break-evens probably 33-35 a bbl. 

[Tomasz + 1,608]

18 hours ago, Old-Ruffneck said:

Please explain how you arrived at the 60$ figure break-even. IMHO break-even is much lower than the infant shale start ups. Tech by the end of 2018 from spudding in to completion per hole was less than 30 days per pad. Leases got more economical in the western Permian and fracking materials were halved as they open pit mined the sands instead of importing. There are still many thousands DUCS to keep production up but at this moment there be enough "cheap" mid-east and Russian oil so no need for more production. By the end of 2019 IMHO break-evens probably 33-35 a bbl. 

 

If that were true, then let's take into account the level of WTI oil prices over the last few years. It was in the order of $ 60. If the actual cost of shale oil production is in the order of $ 30, this would be a very profitable activity. However, somehow I do not see the high level of profitability of this industry from the data I have looked at about shale companies, and there is a lot of material on the web about it. The decline in drilling activity as prices drop to around $ 50 is also clearly visible when you compare the price level and drilling activity after a few weeks.

[Rob Kramer + 696]

18 minutes ago, Tomasz said:

 

If that were true, then let's take into account the level of WTI oil prices over the last few years. It was in the order of $ 60. If the actual cost of shale oil production is in the order of $ 30, this would be a very profitable activity. However, somehow I do not see the high level of profitability of this industry from the data I have looked at about shale companies, and there is a lot of material on the web about it. The decline in drilling activity as prices drop to around $ 50 is also clearly visible when you compare the price level and drilling activity after a few weeks.

I agree with what your saying however some (not all) have shown small/no declines on small capex ... enforcing growth capex is exponentially more expensive than maintaining capex. Especially in gas production.  So I feel there is another layer on the "break even" onion. Is the company in grow mode or hold mode. But needless to say why is fracking and drilling at all time lows (month average) if oil is 43$ 4 weeks in a row. 

[Old-Ruffneck + 1,237]

9 hours ago, Rob Kramer said:

But needless to say why is fracking and drilling at all time lows (month average) if oil is 43$ 4 weeks in a row.

Economics of supply/demand dictates drilling. World consumption 1 year ago 101mbd consumed. Today 83mbd consumed. Oil reserves are full and idling down refineries in last week. So hence the stacking of rigs. This is nothing new.

[dukeNukem + 80]

On 8/6/2020 at 10:13 AM, Old-Ruffneck said:

Please explain how you arrived at the 60$ figure break-even. IMHO break-even is much lower than the infant shale start ups. Tech by the end of 2018 from spudding in to completion per hole was less than 30 days per pad. Leases got more economical in the western Permian and fracking materials were halved as they open pit mined the sands instead of importing. There are still many thousands DUCS to keep production up but at this moment there be enough "cheap" mid-east and Russian oil so no need for more production. By the end of 2019 IMHO break-evens probably 33-35 a bbl. 

33-35$ is way too optimistic. For break even I mean full cost to produce barrel of oil (with all taxes, royalty, service debt e.t.c). The best proof for break-even about 55-60$ is cash flow and level of shale industry debt...Debt was only going up for the last 10 years 

Edited August 7, 2020 by dukeNukem

[John Snyder + 4]

On 6/22/2020 at 9:50 AM, Rob Kramer said:

I agree with the availability of the resource and possibility of fuel switching gasoline to NG/propane.  I'm saying in my veiw we have a shortage (nat gas bull market) at hand after next winter and the process of swapping millions of cars globally and replacing global gas supply or even just American is not instantaneous.  So if it takes a year to get rig count up , cars swapped to NG, more bio or coal gas (because we will be short like 4BCF /day ) convert all flairing to piped gas ect that's when the oil prices will pass 100$ . And in California BC and Ontario gasoline is very expensive already and I've never even seen an shop advertise swapping vehicles or kits for gas or propane.  Mostly just some airport,  taxi, and delivery vehicles are gas or propane here . Yesterday 1.04$/L . So again I agree it's possible but a time delay to make reality. 

While traveling from El Paso to Midland TX, every working well was venting/burning gas, it seems it's cheaper to burn it than to capture it and ship it via pipelines.

[Rob Kramer + 696]

On 8/7/2020 at 11:21 AM, John Snyder said:

While traveling from El Paso to Midland TX, every working well was venting/burning gas, it seems it's cheaper to burn it than to capture it and ship it via pipelines.

Texas rrc has a news article about a 79% drop in flairing vs last year. From 2bcf to .4bcf would be the ammount estimate.  But your correct it was at a 25 year low at 1.49$ few months ago. What are you saying by your observation? That theres too much or market prices are too low ? 

[Rob Kramer + 696]

On 8/7/2020 at 12:51 AM, Old-Ruffneck said:

Economics of supply/demand dictates drilling. World consumption 1 year ago 101mbd consumed. Today 83mbd consumed. Oil reserves are full and idling down refineries in last week. So hence the stacking of rigs. This is nothing new.

Eia had a draw (oil and gasoline) prices rise and % of refining rise . So your theory says rigs should rise. Mine says until a well is profitable they'll go down. Gas is helping this tho so well see  at 2.50 and 48$ some could come back .