Look at the LONGER TERM bigger picture of international oil & gas. Ignore temporary hiccups.

[Tom Kirkman + 8,860]

Here's what I posted yesterday morning (Friday around 6am) in a huff over on Linkedin (different audience than here, about half of my connections on LinkedIn are in Malaysia or Southeast Asia, while Oil Price seems more Western-centric.)

I fully expected after a sudden steep drop in oil prices, many pundits would freak out and fret that oil was ZOMG dangerously approaching bear territory and other such reactionary absurdity.

Now that its 3pm on Saturday, its amusing seeing news about oil prices "rebounding" from yesterday.  

Anyway, here's my blatherings from yesterday, which I expect will go in one ear and out the other of many lurkers, but what the heck.  Bear in mind the immensely annoying character limit on LinkedIn, which precludes going into any depth:

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

https://www.linkedin.com/feed/update/urn:li:activity:6537464060097720320

Ignore the short term oil price drop.
Random oil price fluctuations will randomly fluctuate.

Look at the LONGER TERM bigger picture.  I still see an overall annual average of $70 Brent this year.  Beginning of this year, Brent was sub-$70.  Lately around $70.  By Summer probably $80-ish.  By Fall this year drop back down again to $70-ish.

Look what happened last year.   I commented endlessly on Oil Price forum last year that I saw an average of $65 Brent for 2018 - and Brent turned out to be $71 average for 2018.

I've been commenting endlessly on Oil Price forum last year and this year that I see an average of $70 Brent for 2019.  So far, my opinion has not changed.  Since the middle of 2018, I've been commenting that I see an average of $70 Brent for 2019.

> Look at the LONGER TERM bigger picture. 

> Ignore short term spikes and plummets.

> News media are gonna news media, fretting about and hyping up the latest shiny object distractions in order to generate clicks.

> I *still* see an overall annual average of $70 Brent this year.  And I've been saying this for 12 months now.

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

Oil posts biggest one-day loss of the year to settle at 2-month low

[Douglas Buckland + 6,308]

Watching the price of oil on a daily basis is a waste of time. The volatility is not based on supply and demand but on politics, traders strategy and inaccurate surplus/draw information. I feel it is more constructive and less painful to study the trends.

I have no idea where the price will level out at once Venezuala, Libya, Algeria and so forth calm down and when the Sino-Yankee trade war is resolved. My question is at what price will the small and mid cap operators start drilling again?

I am not interested in the multinationals, they are process driven, do not appreciate thinking on your feet, thinking out of the box and are not capable of making a decision unless it is by committee.

Just my preference to work with the smaller players.

[ceo_energemsier + 1,818]

10 hours ago, Tom Kirkman said:

Here's what I posted yesterday morning (Friday around 6am) in a huff over on Linkedin (different audience than here, about half of my connections on LinkedIn are in Malaysia or Southeast Asia, while Oil Price seems more Western-centric.)

I fully expected after a sudden steep drop in oil prices, many pundits would freak out and fret that oil was ZOMG dangerously approaching bear territory and other such reactionary absurdity.

Now that its 3pm on Saturday, its amusing seeing news about oil prices "rebounding" from yesterday.  

Anyway, here's my blatherings from yesterday, which I expect will go in one ear and out the other of many lurkers, but what the heck.  Bear in mind the immensely annoying character limit on LinkedIn, which precludes going into any depth:

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

https://www.linkedin.com/feed/update/urn:li:activity:6537464060097720320

Ignore the short term oil price drop.
Random oil price fluctuations will randomly fluctuate.

Look at the LONGER TERM bigger picture.  I still see an overall annual average of $70 Brent this year.  Beginning of this year, Brent was sub-$70.  Lately around $70.  By Summer probably $80-ish.  By Fall this year drop back down again to $70-ish.

Look what happened last year.   I commented endlessly on Oil Price forum last year that I saw an average of $65 Brent for 2018 - and Brent turned out to be $71 average for 2018.

I've been commenting endlessly on Oil Price forum last year and this year that I see an average of $70 Brent for 2019.  So far, my opinion has not changed.  Since the middle of 2018, I've been commenting that I see an average of $70 Brent for 2019.

> Look at the LONGER TERM bigger picture. 

> Ignore short term spikes and plummets.

> News media are gonna news media, fretting about and hyping up the latest shiny object distractions in order to generate clicks.

> I *still* see an overall annual average of $70 Brent this year.  And I've been saying this for 12 months now.

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

Oil posts biggest one-day loss of the year to settle at 2-month low

Daily oil price or any commodity(ies) prices are not for long term investors/operators to hang their hats onto.

I agree with you  the prices for the rest of the year will be in the 60-70$ Brent range and 50-60$ WTI range and we may see 80s and 70s as we get into the summer, driven by the Mid-East tensions and what other drama unfolds. I dont expect a major escalation, perhaps small scale events that may be just reminders that "hey look what we can do and could do" and perhaps small scale skirmishes across some regional borders in the Mid-East, enough to keep the threat of something bigger could happen.

News media will hype up anything for their ratings and grabbing the share of the audience for however brief a moment possible. Media (majority) have been fully exposed to be the centres of disinformation and ambiguity. Its a minnow becomes a great white.

At some point we may even see any deep decline in prices along with the stock market for some "corrections" based on the events yet to come or happen.

If the trade between the US and China is even 35% resolved, expect a demand boost, if we get to 50% resolution even a much greater demand boost. I dont think Venezuela and Libya are going to be any serious contributors to the world's crude output anytime this year. Even if the political situation in Venezuela stabilizes somewhat, PDVSA is dead, it is a skeleton of what it used to be. It will take billions of $$$$ and highly skilled, trained and experienced people back to work there and a lot of time  , to bring it back upto speed.

 

[Douglas Buckland + 6,308]

How would you determine if trade war is 35 or 50 percent resolved? By the percent of the number of clauses in the original finally agreed to? By the balance of trade getting 35 or 50 per cent more favorable to the US?

I think that this is essentially an 'all or nothing' gambit. China either starts to respect intellectual property rights and opens their markets, unfettered, to the rest of the global community or other countries will just adjust their trading accordingly.

The whole concept of 'globalization' assumes a level playing field where, for example, the cost of labor in universal (will never happen) and governments do not subsidize companies (again, will never happen in a Communist controlled state). Essentially, globalization is a pipe dream.

Whether you like Trump or not, he is the only leader of the 'Free World' to tell China that enough is enough. The Europeans are just as annoyed with China regarding open markets and intellectual property, but they will not stand up for themselves and are essentially 'riding Trump's coat tails.

This trade war has been going on for decades, and the West has been losing badly. To say Trump provoked the war is childish. China provoked it and it finally came to a head.

[ceo_energemsier + 1,818]

2 minutes ago, Douglas Buckland said:

How would you determine if trade war is 35 or 50 percent resolved? By the percent of the number of clauses in the original finally agreed to? By the balance of trade getting 35 or 50 per cent more favorable to the US?

I think that this is essentially an 'all or nothing' gambit. China either starts to respect intellectual property rights and opens their markets, unfettered, to the rest of the global community or other countries will just adjust their trading accordingly.

The whole concept of 'globalization' assumes a level playing field where, for example, the cost of labor in universal (will never happen) and governments do not subsidize companies (again, will never happen in a Communist controlled state). Essentially, globalization is a pipe dream.

Whether you like Trump or not, he is the only leader of the 'Free World' to tell China that enough is enough. The Europeans are just as annoyed with China regarding open markets and intellectual property, but they will not stand up for themselves and are essentially 'riding Trump's coat tails.

This trade war has been going on for decades, and the West has been losing badly. To say Trump provoked the war is childish. China provoked it and it finally came to a head.

The trade issue with China can be resolved in phases, if only the Chinese are willing to go that far and be fair. Fairness again is relative to? yes the currency issue, the IP rights and opening up their markets in various sectors plus the dumping of goods as well as creating a level playing field in terms of comparative costs (this wont happen , they will always be cheaper ..... well always is a long time but they will be cheaper compared to US made products and goods for a long long time).

President Trump is the only President who has taken this head on and has not minced his words in relation to this issue.

He can scale up the trade issue at different levels and phases and each phase would have a range of the issues to be resolved, once the trade agreement has reached say 35% resolution in terms of IP rights, opening of the markets, balancing the volume of goods and products trades, move onto the next phase and level, and go for that goal post, 50% achieved and then scale up.

The EU will just ride the coat tails of President Trump's victories and successes on the trade issue with China as will other nations and engorge themselves on the crumbs scattered around.

China has been exposed and is in the spotlight brought on to their practices by President Trump, they are trying to wiggle their way out but they are like the proverbial deer in the headlight.

They also have lot more to lose than the US, they are completely dependent on foreign energy resources , and food among other things and dependent on trade with the US . Their market losses of $5 trillion is just going to keep growing.

EU is not going to stand up to China, African nations are not going to, Latin American nations are not going to (maybe Brazil as they may still have some leverage and working with the US they maybe able to do so to a certain degree, as they also have a good and large natural resources base and food resources) , other countries in Asia are not going to, Australia may do that now. Canada going into the future change in their gov and with the backing of  trade deal signed with the US, maybe able to as well have some leverage. 

 

 

 

[Falcon + 222]

On 5/25/2019 at 8:59 AM, Douglas Buckland said:

Watching the price of oil on a daily basis is a waste of time. The volatility is not based on supply and demand but on politics, traders strategy and inaccurate surplus/draw information. I feel it is more constructive and less painful to study the trends.

I have no idea where the price will level out at once Venezuala, Libya, Algeria and so forth calm down and when the Sino-Yankee trade war is resolved. My question is at what price will the small and mid cap operators start drilling again?

I am not interested in the multinationals, they are process driven, do not appreciate thinking on your feet, thinking out of the box and are not capable of making a decision unless it is by committee.

Just my preference to work with the smaller players.

I agree with all your points.  As for your question ? I believe that while the small operators started and grew the shape industry it will become increasingly difficult to compete with large operators as breakeven continues to shrink.

[Falcon + 222]

I have to chuckle when I see analyst at the financial firms projecting oil price levels. I would love to ask them " based on what ?" 

Tight markets ? Please spare me.

In a Free Market price is determined by natural laws of supply and demand , plus cost of production

Oil is not a Free Market.(now)

Oil Markets are not transparent.

Oil Industry consists of the haves and the have nots

Recent OPEC supply cuts and Trump sanctions are not enough to keep up with new supply.

Because of Saudi cutting Heavy crude to US, Venezuela sanctions and Iransanctions it has created dislocation, logistics and tanker transport dilema, all of which are being worked out.

Oil will cease trading on rumors, hype and fear when supply increases several million barrels above demand and true Free Market principles will prevail.

When US supply and export facilities are completed.

US shale actual lift costs avg about $50 today. Best producers in $20's. That's where its heading.  Based on free markets and avg breakeven $40 to $45 in 2020 - 2021, Brent/WTI $55 to $60. 

 

 

Edited May 29, 2019 by Falcon