Tom Kirkman

Oil Prices Heading Higher, Maybe $80-ish Before Autumn?

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On 7/1/2018 at 11:38 AM, Refman said:

Fair point let me rephrase and omit the hard production numbers and just say the Saudis are not going to do anything to dramatically lower oil prices. 

Many people think that increasing production is simply a matter of opening the taps and that is incorrect.Oil wells are precisely balanced mechanisms (artificially lifted using pumps) that are set up for optimal production from inception so any increase in production relies on storage until new wells are drilled,completed and brought online.

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On 6/27/2018 at 8:41 PM, Tom Kirkman said:

Some of you may be tired of my ad nauseum comments about my hope for an average of $65 oil for this year.

As a reminder, my preference for a balanced oil price doesn't tend to get changed very often.  About 6 months ago, I finally upped my preferred hoped-for range from $50 to $65, after staying around $50 since 2015.

Paying attention to global events, particularly the last few weeks, leads me to reconsider the realities of oil supply & demand, oil prices and the global economy. Looks like the possibility of an oil supply shortfall is increasing. 

Venezuela in a tailspin, and looming reductions from Iran mean oil supplies are likely to tighten.

The risk of hiccups to global oil supply seem to be increasing, and it seems fairly inevitable that something will happen eventually to affect an oil producer somewhere.  With the global oil supply glut drawn down during the last 18 months or so, the upcoming oil production increase planned primarily by Saudi Arabia and Russia may not be sufficient to offset the drops in production by Venezuela and a few other producers.  And if Iran's total output gets successfully cut off completely by sanctions, then the increase by Russia + Saudi Arabia will not be sufficient.

I'm not an oil trader.  I'm not an oil price forecaster.

But from what I can see going on lately in the global oil & gas industry + the global politics intertwined with the O&G biz, it seems increasingly likely that we may see $80-ish oil this Summer, and even more likely by this Fall.

Do you own reading of what's going on, and draw your own conclusions about what is happening.

Just my opinion; as always, you are free to disagree.

Tom people dont seem to take into account the lack of new supply from offshore (usually 100-1 compared to land wells) or the down draw on old wells throughout the US and rest of the world.Land wells have huge decline rates in their first year and large offshore work takes several years in preparation.Many of Transocean's billion dollar rigs are now razor blades and oil companies are going after low hanging fruit buying each others fields.I believe $100 oil is inevitable in the near future.

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22 minutes ago, davidsaudi said:

Tom people dont seem to take into account the lack of new supply from offshore (usually 100-1 compared to land wells) or the down draw on old wells throughout the US and rest of the world.Land wells have huge decline rates in their first year and large offshore work takes several years in preparation.Many of Transocean's billion dollar rigs are now razor blades and oil companies are going after low hanging fruit buying each others fields.I believe $100 oil is inevitable in the near future.

I agree - Investment in exploration has been very low for a number of years, especially offshore. It will eventually come back to bite us.

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(edited)

https://www.bloombergquint.com/business/2018/07/06/oil-spike-above-150-feared-as-investors-demand-cash-over-growth

 

(Bloomberg) -- Oil investors may regret urging companies to cough up cash now instead of investing in growth for later as the dearth of exploration is setting the stage for an unprecedented crude price spike, according to Sanford C. Bernstein & Co.

Edited by Refman
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8 hours ago, Refman said:

https://www.bloombergquint.com/business/2018/07/06/oil-spike-above-150-feared-as-investors-demand-cash-over-growth

 

(Bloomberg) -- Oil investors may regret urging companies to cough up cash now instead of investing in growth for later as the dearth of exploration is setting the stage for an unprecedented crude price spike, according to Sanford C. Bernstein & Co.

Uh... wait... if oil hits $150 it's the shareholders fault?

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(edited)

Well $150 would be good for oil companies, for a short while, then it would be back to another crash as world economies slow down. We really do not need a viscous price cycle, steady prices are much more beneficial. Another drawback for the oil companies is that if oil did hit $150 there are a lot of hybrids, plugin hybrids and electric cars for people to buy this time around. They might never get those customers back again if they lose them to electric vehicles.

 

Here is a better article on the pace of oil exploration investment over the past few years. It paints a pretty bleak picture and shows why we could be heading for a price spike in the future.

https://www.bloomberg.com/news/articles/2018-06-26/oil-discoveries-recover-but-still-far-from-replacing-output

 

Edited by Refman
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(edited)

Ide like to see a return to 5 yr average before price collapse of 2014 (approx 105)
to spur some cap ex for new projects in the GOM.. And hope that work doesn't get offshored to India and China..
All I need is one more oil boom to last 10-15 yrs.. Now if only Trump would stop jawing down the price..

Edited by Structural Master
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On ‎6‎/‎29‎/‎2018 at 1:56 AM, Tom Kirkman said:

Yes.  Oil prices going too high will crash the global economy.

No sure that a higher price can crash the economy. Price has been very high several times and did not cause crash by itself. However, if the US economy goes into recession (which may be overdue), plus the ongoing trade restrictions which could affect many economies around the world, then the combination of these can cause a crash and this should not ber under estimated.

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On 6/28/2018 at 6:56 PM, Tom Kirkman said:

Yes.  Oil prices going too high will crash the global economy.

I think it's going to be oil prices and the trade war (if it continues escalating) that crash the stock market:

Trump was correct when he said the stock market was a bubble propped up by the Fed's low rates when he was running. P/E ratios are too high and the yield curve is flat: https://www.marketplace.org/2018/06/28/economy/yield-curve-talking-us

I'm trying to tinker with my finances and hold cash for a stock market crash.

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Update, I reluctantly agree with Goldman Sachs assessment:

Goldman Sachs Expects “Very, Very Tight” Oil Market

Goldman Sachs—which has been bullish on oil for most of this year— said in mid-July that it continues to expect that Brent Crude prices could retest the $80 a barrel threshold this year, but probably only late in 2018, not this summer, as uncertainties mount over the timing and magnitude of global supply disruptions.

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