Tom Kirkman

$80 oil is simply not sustainable long term. $100 oil will crash. Iran fears overblown. Traders greedy.

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Title pretty much sums up my outlook for the rest of this year.

Saudi Arabia is getting greedy again, and says it is comfortable with oil over $80.  How soon they forget.

Traders salivating.  The higher the oil prices go, the worse the inevitable backlash and crash.

I still tend to think the global economy cannot support oil over $80 in the long term.

Kudos to Irina Slav for her comments in her article:

Traders Turn Bullish Ahead Of Iran Sanctions

Bloomberg recently reported that the analyst consensus on how much Iranian oil will be shut off was 1.5 million bpd. The agency cited representatives of some of the biggest oil-trading houses globally as expecting Brent to hit US$90 before the end of the year and climb above US$100 soon after. Bank of America Merrill Lynch warned about this scenario in a recent note. However, there’s a caveat: the spike will be short-lived because US$100 a barrel is unsustainable.

This is most certainly true, but there’s more. Even the current price level of Brent crude may well turn out to be unsustainable. Reuters earlier this week reported that some refiners in India were considering a curb in their imports and tapping local inventories in anticipation of higher prices. That should not come as a surprise: earlier this year India’s Petroleum Minister called on OPEC and non-OPEC producers to stop the price rise that had pushed Brent to US$80 a barrel.

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I think you are neglecting the cyclical nature of the O&G industry.

Saying $80/$100 oil is unsustainable or is bad for economy is like saying $1T valuation for AMZN/AAPL is unsustainable/bad.

Question is not what prices should be - but how the market is signaling to attract new investors via prices.

1. Oil, like other high growth stocks, require high capex/r&d.

2. If oil does not hit $100, little to no investment from big players will come in - i.e. no big upside, risk/reward ratio does not make sense.

3. If US releases SPR or Saudi floods market with oil like in 16, that will buy some time and drive prices down. But the same problem remains - no capex from big players.

Conclusion: Oil demand is ever increasing. Supplies are strained/going to be strained if no capex comes in. Big players only put in big money for mega ultra deepwater projects if they are sure of $100 oil.


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Before Trump's crusade against Iran the world had enough oil and prices were low. Since Iran's exports started being cut in preparation for the November sanctions and the collapse in Venezuelan production there is logically fear of a shortage. As for plugging the gap I see Saudi's signal it was happy with oil over $80 a little different from most people I see it as an admission it cannot cover the shortage, it will not admit to it obviously as that would lift the myth that they can control the oil price so we are heading towards higher prices until the balance is restored one way or another. Trump can moan its all OPECs fault but if they dont have the ability to plug the gap caused by his foreign policy decisions he is making a bigger ass of himself than usual. There was a laugh yesterday at the UN when he accused OPEC of causing the high price of oil which proves most people know where the problem lies.

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