Hmmm, sounds oddly familiar... "$70 Oil Could Be Right Around The Corner"

Heh heh, Happy New Year everyone.  Amusing to see my ad nauseum comments last year about $70 oil for 2019 are apparently suddenly matching media's views now.

$70 Oil Could Be Right Around The Corner

Oil markets have always been cyclical, and now even more so with advanced electronic trading, more speculation (which often results in wider oil price swings) and more producers, including the resurgence of U.S. oil production, now reaching over 11 million barrels per day. Added to the cocktail of uncertainty are also a myriad of geopolitical and economic factors, including ongoing U.S.-China trade tensions, angst of U.S. Federal Reserve policy, and wars in Syria, Yemen and elsewhere, which make it increasingly difficult to forecast the direction for future oil prices.

This dynamic has proven true over the past two-and-a-half months as market pundits have watched (often in amazement) how global oil prices reached multi-year highs in October, only to quickly plunge by 40 percent to date. Prices for global oil benchmark, London-traded Brent crude futures were trading in the mid-$80’s range in early October, while U.S. oil benchmark, NYMEX-traded West Texas Intermediate (WTI) crude futures were hovering in the mid $70’s-range, a comfortable price point for U.S. shale oil producers, and around $25per barrel above the average oil production break-even point for shale producers.

 

==============================

Aaaaaand, just a reminder of some of my earlier ad nauseum comments ...

"... Meanwhile, I'll gently remind that I already warned repeatedly this year that $80 is simply not sustainable, and that the higher that oil goes above $70 then the harder the eventual crash would likely be.

And over to the news, would everyone kindly lay off guzzling the pots of coffee and stop artificially panicking.  Near as I can tell, $70 - ish oil for 2019 still seems about the right balance between the global economy and oil producers.  I hope the current over-reaction on the oil price See Saw will settle back to around $70 by end of this year or early next year.  Just my opinion; as always, you are free to disagree."

 

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2 minutes ago, mthebold said:

Maybe we should just start linking people to Adam Smith's "The Wealth of Nations" and let them work it out for themselves. 

Alternatively, if irrational fear & enthusiasm are so easy to spot, could one not earn a killing betting against them? 

I've already humorously suggested that oil traders may want to consider doing the exact opposite of what Gartman says, as it might improve their odds.  This is the genius who said in 2016 that oil won't trade back above $44 in his lifetime.   Bwahahahahaha

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If it only costs $40 to pump a barrel of oil, any profit margin above 10% will trigger a stampede of investors into the market. Where else does anyone make 57% margins?

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On 1/2/2019 at 6:39 AM, Tom Kirkman said:

Heh heh, Happy New Year everyone.  Amusing to see my ad nauseum comments last year about $70 oil for 2019 are apparently suddenly matching media's views now.

$70 Oil Could Be Right Around The Corner

I'm shockedShocked I tell you !

Oil Markets Move From ‘Undecided’ To ‘Bullish’

The growing optimism in the oil market in recent weeks has resulted in tangible evidence that traders expect an increasingly tighter crude market going forward this year.

... Over the past two weeks, the sentiment on the oil market has been increasingly bullish. 

 

 

 

@TomTom @CMOP

 

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22 minutes ago, Tom Kirkman said:

I'm shockedShocked I tell you !

Oil Markets Move From ‘Undecided’ To ‘Bullish’

The growing optimism in the oil market in recent weeks has resulted in tangible evidence that traders expect an increasingly tighter crude market going forward this year.

... Over the past two weeks, the sentiment on the oil market has been increasingly bullish. 

 

 

 

@TomTom @CMOP

 

How bullish is it going to get Tom, and will it affect the shale plays as well?  Predictions?  I’ve got some financial goals and need the transport of frac sand to increase considerably.

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23 minutes ago, Tom Kirkman said:

I'm shockedShocked I tell you !

Oil Markets Move From ‘Undecided’ To ‘Bullish’

The growing optimism in the oil market in recent weeks has resulted in tangible evidence that traders expect an increasingly tighter crude market going forward this year.

... Over the past two weeks, the sentiment on the oil market has been increasingly bullish. 

 

 

 

@TomTom @CMOP

 

Ok Tom:

 

Call them up and tell them to stop.

I do not want $70 oil...   

Tell them to put it back down to $45...  9_9

 

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1 minute ago, Illurion said:

Ok Tom:

 

Call them up and tell them to stop.

I do not want $70 oil...   

Tell them to put it back down to $45...  9_9

 

Illurion, can we please continue this SocialCapitalism wealth redistribution a little longer please?  $60 plus a barrel would be just awesome for my business interests.  It likely will cost you and others only pennies per gallon.  Can we please continue leveling  the playing field a bit longer?

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2 hours ago, TXPower said:

How bullish is it going to get Tom, and will it affect the shale plays as well?  Predictions?  I’ve got some financial goals and need the transport of frac sand to increase considerably.

Unable to answer that.  It's like asking the weatherman on TV news to control the weather, rather than simply forecasting the weather based on similar, observable phenomena.

The "centers of gravity" that seem most likely to me this year are around $70 for Brent and $50 for WTI.  Just my observation.  Obviously, your mileage may vary, depending on how many pots of coffee that oil traders guzzle, and how many news cold wars erupt in the carefree, sunny vacation spots of the Middle East, Venezuela, Russia and elsewhere.  West Texas is its own herd of wild cats, they they seem to have set their own arbitrary psychological breakeven point at around $50.  Nothing to do with me...

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2 hours ago, Illurion said:

Ok Tom:

 

Call them up and tell them to stop.

I do not want $70 oil...   

Tell them to put it back down to $45...  9_9

 

Um, okey dokey, lemme pick up my Bat Phone to the Oil Traders cartel and put a stop order on that increase for you....   ; )

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(edited)

5 hours ago, TXPower said:

Illurion, can we please continue this SocialCapitalism wealth redistribution a little longer please?  $60 plus a barrel would be just awesome for my business interests.  It likely will cost you and others only pennies per gallon.  Can we please continue leveling  the playing field a bit longer?

I am old, tired, and on Social Security.

The price of gasoline just went from $2.05 to $2.31 per gallon where i live..

That isn't pennies per gallon...

That was an extra $5.20 that i spent to fill my tank today.

That $5.20 would have paid for my Wife and I to have a nice breakfast at our favorite restaurant,  or ,  it would have bought a gallon of ice-cream for my Grandkids.....

 

The last time the cost per barrel was $70,    the price of gasoline per gallon was $3.85 per gallon.........

 

That is $1.54 cents per gallon HIGHER THAN WHAT IT IS NOW...

 

That tank fill up i did today,  would cost an additional $30.80.....

 on top of the extra $5.20 that i paid today........

 

Gasoline costing an additional $36.00 per tank full IS WAY MORE THAN I CAN AFFORD TO PAY....

 

THAT IS $36.00 MORE PER WEEK,  FOR 4 WEEKS,  MEANS I WILL HAVE TO PAY AN ADDITIONAL $144.00 A MONTH FOR GASOLINE THAN I ALREADY PAY NOW.....

 

I was paying approximately $164.00 per month for gasoline...

 

Now you want me to pay $308.00 per month for gasoline in order for you to make money...

 

No thanks........

 

If the price reaches $60,  $70 will not be far behind...........

Edited by Illurion
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I have been struggling with this issue wading through SA stories and comments for a few days now, unable to reach any viable theories. In the 2H of this year 1.5mbbl per day of oil will be taken out of the Permian Basis through new pipelines placed in service, followed by another 1.5mbbl/day in 2020. 3bmcf/day of natural gas will also be taken out of the Permian in 2H 2019, followed by another 3bmcf/day added in 2020. For natural gas the impact seems like it will be absorbed into the network of pipelines and storage and prices will likely go down overall. Yes, there will still be regional differentials, but less so as the "network" seems to be able to absorb the new output more fluidly (no pun intended). For oil though, the bottleneck seems more physical in nature. The bottleneck will just be moved to the shipping channels and storage, which is already full.  Most of this additional oil will be exported. My question is, how long before the shipping channels can take away (or store) all the additional capacity coming on-line through the pipelines. If immediate, won't an additional 3mbbl/day in the next year and a half serve to drive the price down, potentially back into the 30's and 40's until demand can catch up? I'd welcome comments on NG, but my question really relates to oil prices and how they might be impacted by the new capacity coming on-line out of the Permian 2H 2019 and 2020. Do you think we should expect a sudden drop? Uncompleted wells are stacking up in the Permian in anticipation of these pipelines coming on-line.  

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2 hours ago, nebbia said:

my question really relates to oil prices and how they might be impacted by the new capacity coming on-line out of the Permian 2H 2019 and 2020. Do you think we should expect a sudden drop? Uncompleted wells are stacking up in the Permian in anticipation of these pipelines coming on-line.  

I don't see a sudden drop.  And not any time soon.  WTI can act like a financial pressure relief valve, scaling back production if WTI prices get too low.

The price differential between Brent and WTI will likely widen, if U.S. Shale Oil overproduces again.  And the more WTI drops, the faster WTI production will get scaled back, and take pressure off Brent.

You might want to pay attention to actual barrels of oil from U.S. and not the accounting skullduggery of BOE (Barrels of Oil Equivalent).

BOE is not the same as actual oil, regardless of how much the MSM seems to hype BOE.

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Thanks. I'm not concerned about BOE vs Barrels of oil. My concern is the barrels of oil added to US production because it will no longer be trapped in the Permian basin. Permian DUCs continue to balloon, currently 4170. For 5 consecutive months now, only about 2/3 of wells drilled in the Permian have been completed. Yet since November, only 20 rigs have been dropped in the in this mother-of-all-basins. Something has got to give. My gut tells me that operators are stockpiling DUCs to be completed later in the year when pipeline capacity opens up. Despite the low completion rate, over the last 6 months Permian production has grown at about 89,000 b/d per month. If 100% of DUCs are completed and drilling stays constant then production could explode to 235,000 b/d per month. The new pipelines will be used as export. There are currently 12 empty tankers headed for the Houston/Gulf coast ship channels which will take some slack off the new production, but not all of it. Doesn't that translate to a price drop? The pipelines won't go unused. 

 

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It appears the President agrees with me... He just sent out a TWEET on twitter:

https://www.breitbart.com/politics/2019/02/25/donald-trump-opec-twitter-10170549/

 

 

Oil prices getting too high. OPEC, please relax and take it easy. World cannot take a price hike - fragile!
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19 minutes ago, Illurion said:

It appears the President agrees with me... He just sent out a TWEET on twitter:

https://www.breitbart.com/politics/2019/02/25/donald-trump-opec-twitter-10170549/

 

 

Oil prices getting too high. OPEC, please relax and take it easy. World cannot take a price hike - fragile!

Why should OPEC pay any attention to him?

Oil is the mainstay of their economies so its reasonable that they set production appropriate to their economic needs.

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8 minutes ago, NickW said:

Why should OPEC pay any attention to him?

Oil is the mainstay of their economies so its reasonable that they set production appropriate to their economic needs.

(A)   because they always have....

(B)   because there can be consequences if they do not...

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Just now, Illurion said:

(A)   because they always have....

(B)   because there can be consequences if they do not...

Invasion?

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3 minutes ago, Illurion said:

(A)   because they always have....

(B)   because there can be consequences if they do not...

They bit once , cant see them doing it twice

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1 minute ago, NickW said:

Invasion?

silly you......

everything is "violence" to you.......

 

no,   we could simply FAIL to do the things that they ASK us to do for them that they consider important....

countries are always asking the USA to do them "favors".......

 

mostly we do what they ask.......

 

but doing  "favors"  is a two-way-street.......

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2 minutes ago, PaulG said:

They bit once , cant see them doing it twice

they have enemies.........

they have needs.......

 

we help them with their needs,  and we protect them from their enemies.........

 

and every once in a while,   we ask for something in return........

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13 minutes ago, NickW said:

Invasion?

Russia, haven’t you heard?

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10 hours ago, nebbia said:

I have been struggling with this issue wading through SA stories and comments for a few days now, unable to reach any viable theories. In the 2H of this year 1.5mbbl per day of oil will be taken out of the Permian Basis through new pipelines placed in service, followed by another 1.5mbbl/day in 2020. 3bmcf/day of natural gas will also be taken out of the Permian in 2H 2019, followed by another 3bmcf/day added in 2020. For natural gas the impact seems like it will be absorbed into the network of pipelines and storage and prices will likely go down overall. Yes, there will still be regional differentials, but less so as the "network" seems to be able to absorb the new output more fluidly (no pun intended). For oil though, the bottleneck seems more physical in nature. The bottleneck will just be moved to the shipping channels and storage, which is already full.  Most of this additional oil will be exported. My question is, how long before the shipping channels can take away (or store) all the additional capacity coming on-line through the pipelines. If immediate, won't an additional 3mbbl/day in the next year and a half serve to drive the price down, potentially back into the 30's and 40's until demand can catch up? I'd welcome comments on NG, but my question really relates to oil prices and how they might be impacted by the new capacity coming on-line out of the Permian 2H 2019 and 2020. Do you think we should expect a sudden drop? Uncompleted wells are stacking up in the Permian in anticipation of these pipelines coming on-line.  

What i have yet to see mentioned anywhere are 'NEW REFINERIES........

Will we not need NEW REFINERIES to come online to handle all of this new oil ?

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6 hours ago, nebbia said:

Thanks. I'm not concerned about BOE vs Barrels of oil. My concern is the barrels of oil added to US production because it will no longer be trapped in the Permian basin. Permian DUCs continue to balloon, currently 4170. For 5 consecutive months now, only about 2/3 of wells drilled in the Permian have been completed. Yet since November, only 20 rigs have been dropped in the in this mother-of-all-basins. Something has got to give. My gut tells me that operators are stockpiling DUCs to be completed later in the year when pipeline capacity opens up. Despite the low completion rate, over the last 6 months Permian production has grown at about 89,000 b/d per month. If 100% of DUCs are completed and drilling stays constant then production could explode to 235,000 b/d per month. The new pipelines will be used as export. There are currently 12 empty tankers headed for the Houston/Gulf coast ship channels which will take some slack off the new production, but not all of it. Doesn't that translate to a price drop? The pipelines won't go unused. 

 

( stockpiling DUC's)  That is the conclusion of several others on this forum........  

( price drop )   If Maduro does fall soon,  Venezuelan oil will start coming back online about this same time as the pipeline completions,  so there may very well be a drop....   

but then what do i know........

 

 

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11 minutes ago, TXPower said:

Russia, haven’t you heard?

Russia isn't in OPEC

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21 minutes ago, Illurion said:

silly you......

everything is "violence" to you.......

 

no,   we could simply FAIL to do the things that they ASK us to do for them that they consider important....

countries are always asking the USA to do them "favors".......

 

mostly we do what they ask.......

 

but doing  "favors"  is a two-way-street.......

Like?

 

 

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