Question: Why are oil futures so low through 2020?

[Tomasz + 1,608]

It seems to me that oil prices below $ 60 will not last too long.

We have just started the 7th year of a very large drop in investment in conventional oil other than shale oil.

The average period of introducing a new conventional oil deposit is about 7 years.

This year, we are implementing the latest investments and projects started before the collapse of oil prices in 2014.

About roughly from next year, and for the next few years, there will be few such deposits.

In recent years, we also have a record low level of exploring new oil fields - as long as I remember the lowest level since the end of World War II.

Shale is a great technological achievement, but shale oil will never be as cheap as conventional oil. Various sources estimate the total breakeven price of  shale oil  at around $ 60 a barrel.

Demand for oil, I think  in next 20 years will still grow because people in developing Africa and Asia also want to heat the house on cooler evenings, use the car and electricity. A combustion engine cars  because they can't afford electric  or hybrid.

Personally, I think this year is already lost because of the coronavirus and the fact that there are presidential elections in America before which oil producers will try to keep the oil price around $ 60 to help Trump. The oil industry has always supported the Republicans and even more now looking at the ideas of Democrats towards the hydrocarbon sector.

But 2021 and the following years are a new reality - shale will slow down, projects abandoned after 2014 will be missing. The price of oil must be such that these investments resume so I think that about $ 75 per barrel Brent is the minimum.

Edited February 17, 2020 by Tomasz

[wrs + 893]

1 hour ago, BLA said:

Did you get your bounce today ?

Houthis shooting at a KSA jet set the world on fire.  Better call for a special session of the U.N. Security Council

 

Market really wasn't open today, when I made that comment I forgot today is a federal holiday.  Let's see how it goes tomorrow.

[wrs + 893]

1 hour ago, BLA said:

 

You believe the Saudis .  LOL

It's human nature  .  .  .  People believe what they want to believe.

We all have our own bias

You are really good about assuming facts not in evidence. 

 

[D Coyne + 305]

4 hours ago, Bob D said:

Douglas

I've long thought a tax should be levied on the population of any state that does not use its resources to contribute to the total national energy supply.  For instance, an energy import tax should be levied on any state with energy resources, that does not produce those resources, but instead imports energy into the state.  The tax would be an energy surcharge on gasoline, diesel, heating oil, propane, electricity, natural gas unless the state allows for wind, solar, nuclear and oil & gas development.  If a state blocks production of oil, gas, wind, solar to the greatest extent of economical project development then the tax is applied.  

For example:  Massachusetts blocks wind farms off Cape Cod despite ardent support for alternative and renewable energy and a voracious anti-fossil fuel mentality.  New York blocks pipelines and NG production in the dry gas Marcellus as the resource doesn't stop at the Pennsylvania border.  Liberals are the kings of "Do as I say not as I do" mantra also known as NIMBY (Not In My Back Yard).  My favorite is NJ which has no oil or gas activity due to lack of resource has banned fracking.  Hilarious.

Hmm,

Have you guys heard of States rights?  Seems what you are proposing would contradict that bedrock conservative principle.

[wrs + 893]

44 minutes ago, Gerry Maddoux said:

So here I am, somewhere in between, with a lust for oil but half the brain for it--a perfect grandson. After such a declaration of mediocrity, my advice is to back off wrs. His grandfather was either lucky or smart, but probably a little of each. Do you realize how many people inherit land that is about half-assed and sell it off, along with the minerals? Quite a few. At least old wrs held onto it. And hell, that's about half the battle. I had a cousin who sold off, for the price of a new Chevy, enough minerals to yield 4.5million. Now that's something to laugh at.

Think about it: wrs doesn't need war. He has already won the battle: he didn't sell his land and he didn't sell his minerals. I'd be asking for his advice; that's what I'm going to do.

Indeed, it's not just me, it's my mother and grandmother as well.  We have paid the taxes on that land for over 100 years and while there are a few Delaware strippers out there nodding, it's never really made much for us until these last few years.  We hold the land if we can afford to and fortunately we have a lot of good pine forests in East Texas that we lease to deer hunters.  It's amazing what people pay for hunting, it covers the taxes on all of our properties. 

So over the years, the taxes haven't been a real burden but it's something that has to be done and proper records maintained.  The bigger issue is inheritance taxes which we were lucky enough to dodge the bullet on this time because my father hung on until 2010.  I am pretty sure he did that just to screw the tax man.  He died on Jan 17 2010 just four days after his 91st birthday.  My mother had to sell a couple of the East Texas properties to pay the inheritance from my grandmother.

I have tried to figure out why my GGF bought this land in the first place.  It's 700 miles from where he lived and he used an agent to buy it for him.  There were several other prominent families from the same county that bought sections out there too.  The only thing I can think is that the railroad was close by and he hoped that would help with the land value in the future. 

My hope is that the money we have earned from this land will enable us to keep all of our East Texas lands long into the future and that my descendants will benefit from them in some heretofore unseen way as I have with the West Texas sections.

[cbrasher1 + 272]

 

My hope is that the money we have earned from this land will enable us to keep all of our East Texas lands long into the future and that my descendants will benefit from them in some heretofore unseen way as I have with the West Texas sections.

Where do ya have land at in East Texas wrs?

[Wombat + 1,028]

17 hours ago, Douglas Buckland said:

I don’t read all the drivel on this forum.

So one article says we are over-supplied by 2mmb/d and you think this makes it a fact? Where did the author get his numbers from? Nobody else can get definitive, global data, what makes you think this guy/gal is accurate?

Honestly Doug, I appreciate ur point of view, on the face of it, would appear that corona virus just a bump in the road then oil markets should go "back to normal". I just think this particular virus is gonna cause a far larger and more persistent bump than any before. There are 8 LNG tankers sitting along coast of Qatar and 30-40 VLCC's anchored throughout Asia. That is 60-80 mmbl and problem only beginning. Once virus spreads thru SE Asia, things get even worse. That is my theory and I'm stickin to it :)

[Gerry Maddoux + 3,627]

^

Something doesn't add up. 70,000 cases, <2,000 deaths, quarantine 780 million workers. 

Yeah, I think it's safe to say this one is different.

[Osama + 248]

On ‎2‎/‎11‎/‎2020 at 10:32 PM, nathan_john said:

Many things indicate that oil prices should increase in 2020: Many of the points listed below were already trending this direction through Q4 2019 which, in my opinion, is why WTI went back over $60.

• Rig count is down to 790 from 1050 a year ago.
• Frac spreads are down to 310 from 450 a year ago.
• Crude oil inventories are down from 1.09 B to 1.07 B.
• Completions decreased each month September through December 2019.
• US DUC Inventory is down from ~8000 to ~7500.
• OPEC still has production cut (so they say).
• Year over year growth rate for US production has decreased from 19% to 7%, Nov. 2018 to Nov. 2019 (December through today is just estimates)

WTI is ~$50 when a year ago it was ~$52 and on the rise. So why is oil at $50? Everything I read says coronavirus because it has decreased global crude oil demand by 1 MBOPD. So that means crude oil demand is ~81 MBOPD rather than ~82 MBOPD (not including other petroleum liquids here). Really? A little over 1% decrease in demand causes oil price to drop 20%? So this means that WTI should rebound to $60 when this virus clears up given all the other factors listed above, right? So then why are WTI futures through 2020 all around $50? 

Here are the only conclusions that I can come to:

• Traders think that China is downplaying the coronavirus and it is actually a much bigger deal that will keep demand suppressed through 2020.
• Traders (and oil companies) are worried that one of these presidential candidates promising an oil export ban will win and keep their promise thus causing WTI to tank due to US oversupply.

Am I missing something here? These two things outweigh everything else? How much of the suppression is due to the first bullet point vs. the second? I think it's 80% because of the second. The risk of an oil export ban killing WTI outweighs any gains that can be made from going long, even after coronavirus clears up. I also think it will force US operators to coast this year as opposed to investing hundreds of millions in a product that could be worthless based on who wins the election. On the other hand, this could lead to an price spike in November if Trump wins.

Thoughts?

Disclaimer: I have no skin in oil trading.

Here is what traders ware thinking: "

Glencore, Trafigura, Mercuria, and the oil trading unit of France’s Total have rented a total of nearly 15 million barrels of oil storage tanks from Korea National Oil Corporation (KNOC), the sources told Reuters.

KNOC currently has nine stockpiling bases with a capacity of 136 million barrels, plus another 10 million barrels of underground storage under construction, according to the state-held South Korean company". Link: https://oilprice.com/Energy/Energy-General/Why-Oil-Traders-Are-Stockpiling-Crude.html

But I don't think we will see prices rising too high - unless or until there is a geopolitical shock--- sans one, I see prices range bound. Rather we shall see how trade war restarts later this year!

[0R0 + 6,251]

6 hours ago, Gerry Maddoux said:

^

Something doesn't add up. 70,000 cases, <2,000 deaths, quarantine 780 million workers. 

Yeah, I think it's safe to say this one is different.

We know that the deaths are understated since only those that got diagnosed and died in the hospital are counted. The folks who died at home or on the street are not counted. The only estimate for them is from crematorium runs. Specifically in Wuhan. We just need to get an estimate from the satellite imaging or more info on how busy they are from leaks from the locals. 

I look at the deaths vs recoveries to get an idea of the top mortality figure. fell below 15% yesterday.

At least test kits are available now for 1 million. Should help.

[wrs + 893]

11 hours ago, cbrasher1 said:

Where do ya have land at in East Texas wrs?

Walker County, Houston County, Brazos County, Harris County, Leon County and Grimes County.

[BLA + 1,666]

15 hours ago, wrs said:

Market really wasn't open today, when I made that comment I forgot today is a federal holiday.  Let's see how it goes tomorrow.

Market bouncing today . .  .  . bouncing down   .   .  .  down 2% so far. 

Damn those Houthi's. They were supposed to down 3 jets , not just one.  (sarcasm)

China Health Organization said today new cases have declined for 13 straight days .  Those Chinese are doing a great job (sarcasm)

Great news . . . China says Virus disapated along with new Mideast war . . . . Go long oil .  A no brainier.  (sarcasm)

LOL (not sarcasm) 

Edited February 18, 2020 by BLA

[BLA + 1,666]

4 hours ago, 0R0 said:

 

15 hours ago, wrs said:

You are really good about assuming facts not in evidence. 

 

.

.

Edited February 18, 2020 by BLA

[wrs + 893]

17 minutes ago, BLA said:

Market bouncing today . .  .  . bouncing down   .   .  .  down 2% so far. 

China Health Organization said today new cases have declined for 13 straight days 

Great news . . . China says Virus disapated along with new Mideast war . . . . Go long oil .  A no brainier.  

LOL

It's my money, guess I can do with it what I want.  Including wasting money on cars but hey it's my life not yours.  What do you care what I do with it?  Tale care of your own life.  Don't worry about me.  LOLOLOL!!!!!!!!!

Edited February 18, 2020 by wrs

[wrs + 893]

Looks like Libya factions are threatening a long war over the oil they are no longer producing.

https://www.watoday.com.au/world/africa/we-have-ways-to-escalate-rival-factions-threaten-long-war-over-oil-20200218-p541u5.html

 

[BLA + 1,666]

1 hour ago, wrs said:

It's my money, guess I can do with it what I want.  Including wasting money on cars but hey it's my life not yours.  What do you care what I do with it?  Tale care of your own life.  Don't worry about me.  LOLOLOL!!!!!!!!!

Enjoy your car. Enjoy your money. Everyone should be so blessed .

But please don't wish for a Mideast war which would leed to American soldiers deaths so you can buy another car.  Do you really need another car that badly ?

NO LOL.  NOTHING FUNNY ABOUT PUTTING MONEY ABOVE LIVES.

Since you are so flush why don't you make a donation to families that lost a mother or father in Mideast wars.  Or lost a limb or two.

That would be the right thing to do. 

SEE YA

Edited February 18, 2020 by BLA

[wrs + 893]

2 hours ago, BLA said:

Enjoy your car. Enjoy your money. Everyone should be so blessed .

But please don't wish for a Mideast war which would leed to American soldiers deaths so you can buy another car.  Do you really need another car that badly ?

NO LOL.  NOTHING FUNNY ABOUT PUTTING MONEY ABOVE LIVES.

Since you are so flush why don't you make a donation to families that lost a mother or father in Mideast wars.  Or lost a limb or two.

That would be the right thing to do. 

SEE YA

Did you stop beating your wife yet?

[BLA + 1,666]

1 hour ago, wrs said:

Did you stop beating your wife yet?

wrs I was going to ask if you served in the military, but then I realized anyone that served their country in the military would never hope for a war so they can make more money by putting lives at stake. 

Can you put up a few bucks for a good cause ?

 

TEN CHARITIES FOR WOUNDED SOLDIERS

https://semperfifund.org/10-charities-aiding-wounded-soldiers-their-families/ 

 

Highly Rated Wounded Veteran Charities

(1) Semper Fi Fund. ...

(2) Special Operations Warrior Foundation. ...

(3) Fisher House Foundation. ...

(4) Freedom Service Dogs of America. ...

(5) Air Warrior Courage Foundation. ...

(6)Operation Second Chance. ...

(7) Hope for the Warriors.

(8) The Gary Sinise Foundation. 

Edited February 18, 2020 by BLA

[Mike Shellman + 548]

Buy this bumper sticker for your car or pickup truck on amazon.com; it honors mighty Exxon Mobil, the nations leader in E&P technical know-how and innovation (but not shareholder value), as the operator with the highest volume of wasted associated gas in all of Texas in 2019, just about all of that from the Permian Basin. 

https://www.chron.com/business/energy/article/Railroad-Commissioner-to-list-best-worst-oil-15064833.php?cmpid=ffcp

Edited February 18, 2020 by Mike Shellman

[Tom Kirkman + 8,860]

On 2/17/2020 at 1:37 PM, wrs said:

Again, that is your claim that I am hoping for war.  I am not and I have said I am not but the market should take the possiblity of the conflict expanding into account.  I also think what Gerry was referring to was depletion, not exploitation.  The resource depletes and it's obnoxious to sell it for a price that is based on the fantasies of traders and not what real end users will pay.  Clearly the Chinese think it's a bargain right now as they keep buying even though they have no plans to use it.  

When you continue to repeat this claim that I am rooting for war after being corrected you become an antagonist.  Are you attempting to antagonize me or are you now going to accept that you MISREAD my post since I AM EXPLICITY STATING I AM NOT ROOTING FOR WAR? 

 

4 hours ago, BLA said:

wrs I was going to ask if you served in the military, but then I realized anyone that served their country in the military would never hope for a war so they can make more money by putting lives at stake. 

Can you put up a few bucks for a good cause ?

TEN CHARITIES FOR WOUNDED SOLDIERS

@BLA please dial down the antagonism to wrs about war.

wrs has already stated clearly, explicitly, and repeatedly that he is not rooting for war.

[Mike Shellman + 548]

Perhaps this gentlemen is a veteran himself, Tom Kirkman, and or directly or indirectly sensitive to the implications that war might raise the price of oil.  Lots of idiots actually do wish for such things to occur to their own personal benefit. In any case, asking the man if he "beat his wife," in "retaliation," is stupid, don't you think? Sure it is. Exxon, for instance, is destroying shareholder equity by jumping feet first in Permian shale oil, is the top gas flarer in the State (that flares as much gas now as the KSA) and to my knowledge close to  43,000 jobs have been lost in West Texas in the past  6 months...in some part due to majors, like Exxon, driving service and supply costs into the dirt. Those are men, and women, with families, out of work and struggling. The $300K  car thing thing is offensive as hell to anybody with an ounce of integrity. Your "moderation" is misplaced, sir. 

Edited February 19, 2020 by Mike Shellman

[BLA + 1,666]

1 hour ago, Tom Kirkman said:

 

@BLA please dial down the antagonism to wrs about war.

wrs has already stated clearly, explicitly, and repeatedly that he is not rooting for war.

Please read wrs original post.

There is ONLY one way to read it.

He memorialized it in his post.  Can't take it back. 

HE SAID IT.

IT IS WHAT IT IS.

Rather than trying to rewrite or excuse what he said he could have just let it die or apologize. 

He is not alone.  Unfortunately many think like him .  Mohamad bin Salman comes to mind.  

Defend wrs if you wish.  Ban me if you like.  Hoping a Mideast conflict or war develops so he can get a higher monthly royalty check on his leases is plain wrong. 

Edited February 19, 2020 by BLA

[Selva + 252]

Lets stop this right here. Wrs did explain what he meant with his post. But no matter how we understood his post, I wouldn't go that far comparing him with Mohamad bin Salman. 

Also lets stop using "Did you stop beating your wife yet?" sentence. This is a second thread in last two days that someone is using it. 

[Tom Kirkman + 8,860]

3 hours ago, Selva said:

Lets stop this right here. Wrs did explain what he meant with his post. But no matter how we understood his post, I wouldn't go that far comparing him with Mohamad bin Salman. 

Also lets stop using "Did you stop beating your wife yet?" sentence. This is a second thread in last two days that someone is using it. 

There are 2 moderators in this thread trying to gently restore some civility and to reduce the antagonism.   Please do take note that if the bickering dossn't stop, then the thread will be locked for a while to cool things down.

 

[wrs + 893]

11 hours ago, BLA said:

Please read wrs original post.

There is ONLY one way to read it.

He memorialized it in his post.  Can't take it back. 

HE SAID IT.

IT IS WHAT IT IS.

Rather than trying to rewrite or excuse what he said he could have just let it die or apologize. 

He is not alone.  Unfortunately many think like him .  Mohamad bin Salman comes to mind.  

Defend wrs if you wish.  Ban me if you like.  Hoping a Mideast conflict or war develops so he can get a higher monthly royalty check on his leases is plain wrong. 

I won't apologize for what I didn't do, nor will I rewrite it,  Others have shown that they have the adequate reading comprehension and integrity to read it as it was intended.  Even after you have been corrected you continue to slander me.  You are the antagonist and the one who is in the wrong but you don't have the integrity to admit it.  

You are intentionally misconstruing what was written even though you have been corrected.  You are a liar.

Edited February 19, 2020 by wrs