Oil prices going down

[Osama + 248]

Oil prices, as I have maintained, have started to fall. How low can they go? Well that is not easy to answer. Nor should we ignore the fact that we might see oil prices rising once again. But the question is how sustainable will it be? Please read my latest to find answers to some of these questions.

https://oilprice.com/Energy/Energy-General/Dont-Take-Higher-Oil-Prices-For-Granted.html

 

[William Edwards + 708]

Osama's reasoning is sound. I might suggest some additional guidance regarding the potential price range going forward. Since there is absolutely no correlation between price and demand, inventories, spare capacity, the weather, Trump's latest tweet or anything else, we conclude that the actual price level will be a random trading number. The only guidance that I can rely on is the historical record. Therefore I can easily see a price as low as $20 over the next few years, since that has been a historical comfort low.

[TomTom + 183]

1 hour ago, William Edwards said:

Therefore I can easily see a price as low as $20 over the next few years

Can you be a bit more specific William? When do you expect WTI to hit these levels?

[Pilgrim1620 + 3]

As a layman living in southern Arizona I can only pass on the views of the man-in-the-street.  The switch to EV's will change dramatically with the introduction of self-driving vehicles.  Exactly when that will happen is up for grabs but it will happen.  Our country has been built upon the availability of cheap energy, a distinct advantage over out European counterparts.  The con game of Anthropogenic Global Warming is an attempt to get us to give up our unfair advantage.

[JunoTen + 118]

I liked your article and the analysis from CNBC that you linked. If the claims that OPEC will announce raising production by 1 million on June 22nd are true then you should be right.

Edited June 5, 2018 by JunoTen

[TomTom + 183]

11 minutes ago, JunoTen said:

I liked your article and the analysis from CNBC that you linked. If the claims that OPEC will announce raising production by 1 million on June 22nd then you should be right.

OPEC adding 1 million bpd would just about bring their production to 33 million bpd - in the light of recent demand strength, this shouldn't send oil prices much lower than $60.

[William Edwards + 708]

42 minutes ago, TomTom said:

Can you be a bit more specific William? When do you expect WTI to hit these levels?

One of the most foolhardy activities for me is guessing the timing of random numbers. So usually I decline such folly. In this case, however, we have an event that may suggest a higher than normal probability. That is the abrupt change in the international bunker spec that will suddenly dump 2 million barrels a day of undesirable high sulfur oil on the market around January 1, 2020. I suspect that the producers of heavy high sulfur oil will engage in a price war around that time. So my "guess" is the early 2020's.

[William Edwards + 708]

11 minutes ago, TomTom said:

OPEC adding 1 million bpd would just about bring their production to 33 million bpd - in the light of recent demand strength, this shouldn't send oil prices much lower than $60.

Please do us all a favor and show us the data that support your production level vs price correlation. For the life of me, I cannot find historical data that reveal such a correlation. Thanks!

[Rodent + 1,424]

9 minutes ago, TomTom said:

OPEC adding 1 million bpd would just about bring their production to 33 million bpd - in the light of recent demand strength, this shouldn't send oil prices much lower than $60.

Iraq is already throwing shade on the OPEC deal, suggesting that it intends to export oil willy nilly, and that it is dissatisfied with its role in the production cap. On the other side of the equation, Venezuela told receivers today that it is unable to meet its contractual obligations--in a big way. This will keep oil prices from falling too much, I would think, at least short term.

[JunoTen + 118]

4 minutes ago, William Edwards said:

Please do us all a favor and show us the data that support your production level vs price correlation. For the life of me, I cannot find historical data that reveal such a correlation. Thanks!

I just assume that the more production there is versus demand the lower the prices of oil would be. That was the logic behind the oil rally of OPEC and friends.

Of course I don't claim to be an oil specialist at all...

Edited June 5, 2018 by JunoTen

[TomTom + 183]

plunging output in Venezuela, unstable Libya, structural declines in Angola, falling Chinese oil output, structurally declining Mexican oil output, falling output in Algeria - looks like these million barrels per day aren't gonna kill the market William.

[William Edwards + 708]

2 minutes ago, JunoTen said:

I just assume that the more production there is versus demand the less oil there would be. That was the logic behind the oil rally of OPEC and friends.

Of course I don't claim to be an oil specialist at all...

Unfortunately, too many of the self-proclaimed "oil specialists" adopt the same basis for assessments that you honestly admitted. "I just assumed". I recommend that ALL analysis begins with a study of the data rather than beginning with an assumed answer. I think that one of my early postings on Oilprice covered the fact that demand DOES NOT set the price -- with supporting data.

[Jan van Eck + 7,558]

The greatest compliment to a statement in satire is when the audience does not even realize that it was satire.

[William Edwards + 708]

9 minutes ago, Jan van Eck said:

The greatest compliment to a statement in satire is when the audience does not even realize that it was satire.

Nice touch!

[William Edwards + 708]

23 minutes ago, Rodent said:

Iraq is already throwing shade on the OPEC deal, suggesting that it intends to export oil willy nilly, and that it is dissatisfied with its role in the production cap. On the other side of the equation, Venezuela told receivers today that it is unable to meet its contractual obligations--in a big way. This will keep oil prices from falling too much, I would think, at least short term.

We must all keep in mind the irrefutable fact that "Futures Fluctuate".

[Jan van Eck + 7,558]

13 minutes ago, William Edwards said:

We must all keep in mind the irrefutable fact that "Futures Fluctuate".

Not really.  For all anybody knows, "Futures Flatline."   Hey, could be.

[William Edwards + 708]

2 minutes ago, Jan van Eck said:

Not really.  For all anybody knows, "Futures Flatline."   Hey, could be.

Never!

[Jan van Eck + 7,558]

1 minute ago, William Edwards said:

Never!

I conclude you have been hanging around with British expats too long.  That Limey dry humor has a certain distinct tartness to it. Cheers. 

[davidsaudi + 5]

The land wells that we drill today whilst coming on stronger also have significant decline rates within the first year, offshore drilling is truly on the back burner taking several years from planning to production.Other countries (China , Russia,North Africa, UAE )are in levels of dilapidation and decline.

The Saudi's have a few million BBL/day  spare capacity whilst the worlds appetite increase's a million BBL per year.

Although electrification is coming consider what the EV's are made of...most everything is an oil derived product. 

The house of Saud is unstable 

I say we will see oil above 100 and there will be no way to stop it.

[PeterfromCalgary + 60]

We seem to be in an era of energy abundance.  However, I don't see a return to $30 because the world including the Saudi's have learned that you cannot starve the frackers by flooding the market with oil.   At the same time I don't see $100 oil (unless their is a new geopolitical crises) because demand destruction is a real concern for the Saudis and they don't want that to happen.    

Uncertain Factors to watch

1. China's economy and debt

2. Global economic growth

3. Israel - Arab relations

4. Iran's oil production

Factors that the market already knows

1. Valenzuela's production is collapsing.

2. Fracking is getting more efficient.

3. Pipeline constraints mostly in Canada but also in the USA

Edited June 5, 2018 by PeterfromCalgary

[Tom Kirkman + 8,860]

5 hours ago, William Edwards said:

Please do us all a favor and show us the data that support your production level vs price correlation. For the life of me, I cannot find historical data that reveal such a correlation. Thanks!

William, it seems we disagree on a basic premise here.  Please correct me if I am wrong in my understanding of your statement above.

"Correlation" and Causation" are two very separate things.

Example of correlation not equaling causation:

[William Edwards + 708]

24 minutes ago, Tom Kirkman said:

William, it seems we disagree on a basic premise here.  Please correct me if I am wrong in my understanding of your statement above.

"Correlation" and Causation" are two very separate things.

Example of correlation not equaling causation:

I am not even asking for causationhere, Tom. Even a correlation would be of interest. Having looked at the data, however, I know such does not exist.

[Tom Kirkman + 8,860]

7 minutes ago, William Edwards said:

I am not even asking for causation here, Tom. Even a correlation would be of interest. Having looked at the data, however, I know such does not exist.

Ok, we are on the same page then, and I'll withdraw my gentle disagreement.

[William Edwards + 708]

3 hours ago, Tom Kirkman said:

Ok, we are on the same page then, and I'll withdraw my gentle disagreement.

Thanks.

[Rajiv Bahl + 7]

To me the sustainable level of oil price is the one at which both the producers as well as the consumers are comfortable....may be the current levels...  the prices move either way they start pinching every one!