Long term OIL

[Evildrum]

https://www.bloomberg.com/news/articles/2016-05-30/opec-s-cheap-oil-strategy-lures-drivers-back-into-gas-guzzlers

From China to the U.S., drivers are buying bigger vehicles, while sales of fuel-efficient hybrids struggle.

For Saudi Arabia, Iran and other members of the Organization of Petroleum Exporting Countries, due to meet on Thursday, the sharp increase in sales of gas guzzlers is good news: It means stronger demand for gasoline and diesel for years to come.

Perversely, their behavior could mean that oil prices rise sooner rather than later, as fuel-thirsty vehicles help demand catch up with supply. For OPEC ministers in Vienna, the sight of four-wheel-drive vehicles on the perfectly smooth streets of the Austrian capital is good news.

You combine this news with people getting loans through car dealers more often now then their banks and we have a continued rise in consumption. Lot of these car dealers actually loan people 10K on a new car sale,so they are just putting off paying one debt by taking on a bigger debt.

[STT]

I'd love to own a gas guzzler, a good V8 sounds better then some horrible neat refined hybrid type utility vehicle.    Its not that terrible a choice as you can always convert petrol to LPG and more then anything else USA has a ton of propane gas from fracking, enough for 50 years of supply apparently.    The main difficulty being transportation is harder then oil as its a less compact energy source.   Coal is actually the most calorific energy type to transport believe it or not.
Anyway the V8 fuel thirsty vehicle will run off LPG, the fumes it outputs are mostly steam not the deadly type that petrol needs a CAT to neutralise.    Its really wrong that we dont just go that direction already so maybe a black swan event would be a positive eventually, I dont believe in subsidies etc for this reason.   Face is there is oversupply in alot fuel and its not oil in USA, there is still not a net export

You simply can't just take and plug an oil well and unplug it later, see what happened in the Gulf of Mexico in 2010

Excessive methane content caused that and if they had respected that variation in the supply it would be controlled.  After it blows up and so deep of course it was a disaster to stop

[deisik]

You simply can't just take and plug an oil well and unplug it later, see what happened in the Gulf of Mexico in 2010

Excessive methane content caused that and if they had respected that variation in the supply it would be controlled.  After it blows up and so deep of course it was a disaster to stop

But the rig that had blown up was a mile above the safety valves that were assumed to cut the flow of oil in case of emergency. I think after you drill into an oil reservoir under the sea bed thus deep, you can no longer stop pumping oil until the pressure drops substantially...

That's the truth they don't want to tell us, lol

[bryant.coleman]

I guess exactly the same what actually makes the producers produce at a loss. That is, costs involved with freezing the production, and, what is more important, with the consequent restarting of production (including indirect costs due to lost market share and delayed consequences of higher orders, whatever they might be)...

You simply can't just take and plug an oil well and unplug it later, see what happened in the Gulf of Mexico in 2010

That may be one of the reasons why some of the producers continue with the crude output, even when their balance sheet is in the red. Another reason might be that the operating costs might be lower, and most of the "cost of production" is composed of the capital costs. However, if the long-term output is bleak, then none of them are going to continue with it.

[jaysabi]

I'd love to own a gas guzzler, a good V8 sounds better then some horrible neat refined hybrid type utility vehicle.    Its not that terrible a choice as you can always convert petrol to LPG and more then anything else USA has a ton of propane gas from fracking, enough for 50 years of supply apparently.    The main difficulty being transportation is harder then oil as its a less compact energy source.   Coal is actually the most calorific energy type to transport believe it or not.
Anyway the V8 fuel thirsty vehicle will run off LPG, the fumes it outputs are mostly steam not the deadly type that petrol needs a CAT to neutralise.    Its really wrong that we dont just go that direction already so maybe a black swan event would be a positive eventually, I dont believe in subsidies etc for this reason.   Face is there is oversupply in alot fuel and its not oil in USA, there is still not a net export

You simply can't just take and plug an oil well and unplug it later, see what happened in the Gulf of Mexico in 2010

Excessive methane content caused that and if they had respected that variation in the supply it would be controlled.  After it blows up and so deep of course it was a disaster to stop

I don't see LPG catching on. It's far more likely to go full electric than LPG on a large scale for consumer vehicles. For the trucking industry, LNG and CNG are making inroads, as even in the cheap oil environment, natural gas is cheaper than diesel and way cleaner on emissions. A company called Clean Energy Fuels even has a process than converts methane from landfills into fuel for the trucking industry, and the use of which has net zero emissions.

[expert4knowledge]

10 dollars in 2016 is not really possible unless its used locally for power production.   It might have been that low 2 decades ago but we had too much inflation and dilution of real dollar value to say thats possible now.
I believe just the cost of transportation would make that level of oil pointless and the market would close down.  They would do better to just store the asset until demand actually requires that resource to be available and profitable.

There is some ongoing improvement in efficiency and lowering cost of production

There are many indigenous and exogenous variables in price of oil, for example technology of production improves from one side and technology helps other green energies extraction improves too.

[romero121]

10 dollars in 2016 is not really possible unless its used locally for power production.   It might have been that low 2 decades ago but we had too much inflation and dilution of real dollar value to say thats possible now.
I believe just the cost of transportation would make that level of oil pointless and the market would close down.  They would do better to just store the asset until demand actually requires that resource to be available and profitable.

There is some ongoing improvement in efficiency and lowering cost of production

There are many indigenous and exogenous variables in price of oil, for example technology of production improves from one side and technology helps other green energies extraction improves too.

Yeah now with the advancement in technology production has been increased, at the same due to the periodic fluctuations in the price alternate power generation has got importance.

[botany]

I guess exactly the same what actually makes the producers produce at a loss. That is, costs involved with freezing the production, and, what is more important, with the consequent restarting of production (including indirect costs due to lost market share and delayed consequences of higher orders, whatever they might be)...

You simply can't just take and plug an oil well and unplug it later, see what happened in the Gulf of Mexico in 2010

That may be one of the reasons why some of the producers continue with the crude output, even when their balance sheet is in the red. Another reason might be that the operating costs might be lower, and most of the "cost of production" is composed of the capital costs. However, if the long-term output is bleak, then none of them are going to continue with it.

Some of the CEOs may have a contrarian view and make bets on crude price rising.
http://www.bloomberg.com/news/articles/2016-05-11/how-oil-s-most-boring-ceo-found-himself-atop-10-billion-barrels
This CEO is investing in capex even while crude prices down. Such a bet will work if crude price increases rapidly.

[eaLiTy]

crude prices will indeed rise from this slump no matter what.that is for sure certain.investing in crude as a long term investment is a wise move.OPEC countries are storing crude oil in different parts of the world in very huge quantities to use when the price reaches a certain level.

[bryant.coleman]

crude prices will indeed rise from this slump no matter what.that is for sure certain.investing in crude as a long term investment is a wise move.OPEC countries are storing crude oil in different parts of the world in very huge quantities to use when the price reaches a certain level.

There is not much of a chance for crude prices climbing back to the pre-2014 levels, unless all the major producers agree on systematic cuts to the output (which is not possible as some of the major producers are in the US and Canada). Shale oil is being pumped out with a production cost of just $30 to $40 per barrel, and hundreds of billions of barrels worth of new crude oil deposits have been discovered.

[STT]

I don't see LPG catching on. It's far more likely to go full electric than LPG on a large scale for consumer vehicles.

Its already here.  Every petrol car ever made can be used with LPG and its quite a minor cost vs the cost of a vehicle.    With such a large resource of fuel its quite silly they dont use it but with trucking I guess the benefits are more obvious and a business cant afford to ignore a worthwhile investment.    The downside I know of is that LPG contains about 80% the energy of petrol so MPG is altered but this also can be countered with tuning as the knock or grading of LPG is the same as race fuel

This is why I believe in free capital economics not big government, if we relied on politics some things would never occur and just be wasted.   If we do see upset in oil such that USA does not import anymore for whatever reason, consumers will be on LPG I think as oil is used for plastic goods and LPG is simpler cleaner fuel that should be used in cities where people end up breathing it

[expert4knowledge]

crude prices will indeed rise from this slump no matter what.that is for sure certain.investing in crude as a long term investment is a wise move.OPEC countries are storing crude oil in different parts of the world in very huge quantities to use when the price reaches a certain level.

There is not much of a chance for crude prices climbing back to the pre-2014 levels, unless all the major producers agree on systematic cuts to the output (which is not possible as some of the major producers are in the US and Canada). Shale oil is being pumped out with a production cost of just $30 to $40 per barrel, and hundreds of billions of barrels worth of new crude oil deposits have been discovered.

Yes, prices of oil may not increase  simply like this but since oil reserves are limited and crude oil can be used in industries more than fuel, such as petrochemical industries it can increase the price in long term.

[jaysabi]

I don't see LPG catching on. It's far more likely to go full electric than LPG on a large scale for consumer vehicles.

Its already here.  Every petrol car ever made can be used with LPG and its quite a minor cost vs the cost of a vehicle.    With such a large resource of fuel its quite silly they dont use it but with trucking I guess the benefits are more obvious and a business cant afford to ignore a worthwhile investment.    The downside I know of is that LPG contains about 80% the energy of petrol so MPG is altered but this also can be countered with tuning as the knock or grading of LPG is the same as race fuel

This is why I believe in free capital economics not big government, if we relied on politics some things would never occur and just be wasted.   If we do see upset in oil such that USA does not import anymore for whatever reason, consumers will be on LPG I think as oil is used for plastic goods and LPG is simpler cleaner fuel that should be used in cities where people end up breathing it

I'm not disputing the technology, I'm disputing its likelihood of being used in the consumer car market in any meaningful way. I don't see it catching on with consumers the same way LNG and CNG vehicles didn't catch on with consumers, even though it has all the same benefits as LPG; cleaner, cheaper, etc. These fuels have appeal to large trucking companies, but not consumers. My point is that electric vehicles will render LPG obsolete before it ever has a chance to make a dent in oil's market share of the vehicle market.

[jaysabi]

crude prices will indeed rise from this slump no matter what.that is for sure certain.investing in crude as a long term investment is a wise move.OPEC countries are storing crude oil in different parts of the world in very huge quantities to use when the price reaches a certain level.

There is not much of a chance for crude prices climbing back to the pre-2014 levels, unless all the major producers agree on systematic cuts to the output (which is not possible as some of the major producers are in the US and Canada). Shale oil is being pumped out with a production cost of just $30 to $40 per barrel, and hundreds of billions of barrels worth of new crude oil deposits have been discovered.

At the same time, prior to 2014, everyone believed there wasn't much chance for oil to fall back to pre-2005 levels. There's a tendency to always believe that the current price and the current outlook is a permanent change, and that's never been the case. Shale producers could continue to go under, and Saudi Arabia could cut production to staunch their deficits. (Could, not will.)

[bryant.coleman]

crude prices will indeed rise from this slump no matter what.that is for sure certain.investing in crude as a long term investment is a wise move.OPEC countries are storing crude oil in different parts of the world in very huge quantities to use when the price reaches a certain level.

There is not much of a chance for crude prices climbing back to the pre-2014 levels, unless all the major producers agree on systematic cuts to the output (which is not possible as some of the major producers are in the US and Canada). Shale oil is being pumped out with a production cost of just $30 to $40 per barrel, and hundreds of billions of barrels worth of new crude oil deposits have been discovered.

At the same time, prior to 2014, everyone believed there wasn't much chance for oil to fall back to pre-2005 levels. There's a tendency to always believe that the current price and the current outlook is a permanent change, and that's never been the case. Shale producers could continue to go under, and Saudi Arabia could cut production to staunch their deficits. (Could, not will.)

There is a major difference though. A majority of the shale oil producers will be profitable at crude prices of $45 to $50 per barrel. Two or three years ago, that was not the case. And this means that the prices will never go back to the pre-2014 levels. Because the extra demand will be met by the shale oil producers in no time.

[deisik]

There is a major difference though. A majority of the shale oil producers will be profitable at crude prices of $45 to $50 per barrel. Two or three years ago, that was not the case. And this means that the prices will never go back to the pre-2014 levels. Because the extra demand will be met by the shale oil producers in no time.

A major conflict in the Middle East (say, Iran bombing the KSA oil fields with the US leveling off Tehran soon thereafter in the paroxysm of retaliation), and only sky is the limit, shale oil or no shale oil...

So, never say never

[bryant.coleman]

A major conflict in the Middle East (say, Iran bombing the KSA oil fields with the US leveling off Tehran soon thereafter in the paroxysm of retaliation), and only sky is the limit, shale oil or no shale oil...

So, never say never

The probability of something like that happening is very very low.... May be 0.001% (can increase to 0.002% if Hitlery Clinton becomes the president of the United States later this year).

Meanwhile, here is good news for y'all:

http://www.bloomberg.com/news/articles/2016-06-03/u-s-shale-drillers-restart-oil-rigs-as-market-begins-to-balance

U.S. Shale Drillers Restart Oil Rigs as Market Improves

Oil explorers put drilling rigs back to work in U.S. fields for only the second time this year as supply and demand come closer into balance. Rigs targeting crude in the U.S. rose by 9 to 325 this week, Baker Hughes Inc. said Friday. Explorers have idled more than 1,000 oil rigs since the start of last year. Natural gas rigs were trimmed by 5 to 82 this week, bringing the total for oil and gas up by 4 to 408.

This is exactly what I was talking about!

[deisik]

A major conflict in the Middle East (say, Iran bombing the KSA oil fields with the US leveling off Tehran soon thereafter in the paroxysm of retaliation), and only sky is the limit, shale oil or no shale oil...

So, never say never

The probability of something like that happening is very very low.... May be 0.001% (can increase to 0.002% if Hitlery Clinton becomes the president of the United States later this year)

Hell hath no fury like a woman scorned

[botany]

Demand side concerns still exist for the oil price.
Weakness of the dollar is one reason why crude prices are rising (in dollar terms).

[bryant.coleman]

Rosneft OJSC just released its report for Q1 2016. Crude oil extraction costs fell to just 155 Rubles per barrel (equivalent to $2.42 per bl). That means that Rosneft is now having the lowest cost of crude oil production in the world. In Aramco, the production costs average around $3 per barrel.  (Average prices for brent crude was $34.52 per barrel in Q1 2016).

http://www.bloomberg.com/news/articles/2016-06-08/rosneft-first-quarter-profit-falls-75-as-crude-oil-falls-to-low