So about my ad nauseum comments hoping for $65 oil this year... Halliburton says $60 to $70 is Comfortable

[Tom Kirkman + 8,860]

For lurkers, if you do a quick check of my comments, you will see I have been commenting repeatedly that I've been hoping for an average of $65 oil this year.

That's the general price I currently see as a "Goldilocks" price - not too high to cool down global economies, and not too low to hurt oil producers.

I tend to think of $65 as the current centerpoint on a See Saw - anything significantly higher or lower of that sweet spot throws things out of whack globally, and a significant up or down from $65 will probably result in a roughly equal and opposite backlash in oil price up or down.

Just how I try to view what I think oil prices should be at, to minimize wild boom / bust price fluctuations.

Certainly doesn't mean I'm right.  It's just my own visual image for moving toward a relative stability in prices.

And please note: this is not a price prediction.

So anyway, was surprised to see the Halliburton CEO chime in.  Here's my confirmation bias in action:

Halliburton CEO Says Oil at $70 Is "Good Enough"

Plunging oil prices are rattling the oil markets, but that doesn’t worry Jeff Miller. He’s CEO of Halliburton Company (HAL), one of the world’s largest oil field service companies. Miller feels good with oil prices now trading around $70 a barrel, saying “the industry is healthy in that price range.”

... “Supply and demand look like it’s back in balance,” he explains. “What you see is a little bit of reaction to, at least today, of unrest globally, but the fundamentals are what seem to be in place. And that’s encouraging and gives me a lot of comfort that we trade in this sort of $60 range, $60 to $70.”

[Marina Schwarz + 1,576]

It makes sense: the global economy is being spurred forward by emerging markets mainly and these emerging markets will start to emerge more slowly if oil is expensive, which is not good for anyone, as far as I understand. So yes, a Goldilocks $65 is perfect. Not for all, obviously, but you can't make everyone happy at the same time.

[Guillaume Albasini + 851]

High oil prices are already generating protests in some developing countries :

- social media furor over pump prices in Thailand

- truckers protest over diesel in Brazil

- farmers protest against diesel raising prices in India

- attempt to rollback a tax on petroleum products by Philippine lawmakers

https://www.businesstimes.com.sg/energy-commodities/social-media-furor-hits-oil-giant-as-fuel-costs-squeeze-thailand

https://energy.economictimes.indiatimes.com/news/oil-and-gas/fuel-price-hike-farmers-protesting-diesel-rates-hand-over-tractor-keys-to-officials/64382403

 

[DanilKa + 443]

Would be interesting if you could decipher “OPEC speak” of HE Khalid Al-Falih (~11:30 to 18min)

https://www.forumspb.com/en/programme/56912/#broadcast

Art Berman suggest fair price at $67 - you are in a good company! 

https://twitter.com/aeberman12/status/1002238054256599041?s=21

I still see a springboard there - may be plate tectonics class left a mark - most destructive thunamigenic earthquakes happens when subducted block jumps up along the fault line. Buckle up for the moonshot:) 

 

[Dennis Coyne + 82]

On ‎6‎/‎1‎/‎2018 at 2:52 AM, Tom Kirkman said:

For lurkers, if you do a quick check of my comments, you will see I have been commenting repeatedly that I've been hoping for an average of $65 oil this year.

That's the general price I currently see as a "Goldilocks" price - not too high to cool down global economies, and not too low to hurt oil producers.

I tend to think of $65 as the current centerpoint on a See Saw - anything significantly higher or lower of that sweet spot throws things out of whack globally, and a significant up or down from $65 will probably result in a roughly equal and opposite backlash in oil price up or down.

Just how I try to view what I think oil prices should be at, to minimize wild boom / bust price fluctuations.

Certainly doesn't mean I'm right.  It's just my own visual image for moving toward a relative stability in prices.

And please note: this is not a price prediction.

So anyway, was surprised to see the Halliburton CEO chime in.  Here's my confirmation bias in action:

Halliburton CEO Says Oil at $70 Is "Good Enough"

Plunging oil prices are rattling the oil markets, but that doesn’t worry Jeff Miller. He’s CEO of Halliburton Company (HAL), one of the world’s largest oil field service companies. Miller feels good with oil prices now trading around $70 a barrel, saying “the industry is healthy in that price range.”

... “Supply and demand look like it’s back in balance,” he explains. “What you see is a little bit of reaction to, at least today, of unrest globally, but the fundamentals are what seem to be in place. And that’s encouraging and gives me a lot of comfort that we trade in this sort of $60 range, $60 to $70.”

Tom,

Halliburton says this range works for his company.  It is not clear that supply and demand are back in balance,  IEA sees things differently.  The question is whether US tight oil will increase as much as the IEA expects at a price range of $60 to $70 for Brent Crude, the Permian basin has full pipelines and any higher output will need to go by rail (maybe a capacity of 500 kb/d) and then by truck which is quite expensive.  Wellhead prices for the marginal producers in the Permian basin (no access to pipeline or rail) will be about $15-$20/b below WTI, which is about $10/b below Brent, so about $25-30/b below Brent (or about $45/b currently).

We won't see much further increase in Permian output at a $45/b wellhead price, breakeven for the average Permian well is about $70/b(60 month payout) and a decent profit (36 month payout) requires about $82/b.  Pretty sure Mike Shellman is in rough agreement with those estimates.

[Dennis Coyne + 82]

On ‎6‎/‎1‎/‎2018 at 7:09 AM, DanilKa said:

Would be interesting if you could decipher “OPEC speak” of HE Khalid Al-Falih (~11:30 to 18min)

https://www.forumspb.com/en/programme/56912/#broadcast

Art Berman suggest fair price at $67 - you are in a good company! 

https://twitter.com/aeberman12/status/1002238054256599041?s=21

I still see a springboard there - may be plate tectonics class left a mark - most destructive thunamigenic earthquakes happens when subducted block jumps up along the fault line. Buckle up for the moonshot:) 

 

Will supply and demand match at $67/b?  My opinion is that they will not.

I also agree with William Edwards that OPEC can set prices in the $60 to $90/b range, I think they are likely to choose a higher rather than a lower price.  So my guess is $75 to $85/b matched World supply and demand.

[DanilKa + 443]

11 hours ago, Dennis Coyne said:

Will supply and demand match at $67/b?  My opinion is that they will not.

I also agree with William Edwards that OPEC can set prices in the $60 to $90/b range, I think they are likely to choose a higher rather than a lower price.  So my guess is $75 to $85/b matched World supply and demand.

OPEC may face some difficulties to replace Venezuela's and Iran's oil. Listen to an excellent interview of Pat Hemsworth (commercial oil trader) on MacroVoices (slide deck also there). Btw, best financial podcast atm (especially with untimely death of "Adventures in Finance").