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pandy
11-04-2014, 08:05 AM
Oil plunging to $76. Time to buy, I can't see this lasting.

badcompany
11-04-2014, 08:42 AM
“The market can stay irrational longer than you can stay solvent.”

John Maynard Keynes

_______
11-04-2014, 12:22 PM
The Saudis announced today they will cut prices for refined gasoline sold in the U.S. while raising the price ex U.S..

It's as clear a signal as you could want that they will defend market share against domestic frackers. I was already overweight energy in my portfolio but wouldn't recommend anyone does more than market weight unless you are willing to wait 3+ years to see outperformance.

If you don't have exposure to energy, by all means add something now. But you may see oil in the $75-$90 range for an extended period.

badcompany
11-04-2014, 12:39 PM
The Saudis announced today they will cut prices for refined gasoline sold in the U.S. while raising the price ex U.S..

It's as clear a signal as you could want that they will defend market share against domestic frackers. I was already overweight energy in my portfolio but wouldn't recommend anyone does more than market weight unless you are willing to wait 3+ years to see outperformance.

If you don't have exposure to energy, by all means add something now. But you may see oil in the $75-$90 range for an extended period.

I've read that the Saudis need $90-$95 oil to pay their bills. There's something going on behind the scenes that we're not seeing.

davew
11-04-2014, 01:16 PM
I've read that the Saudis need $90-$95 oil to pay their bills. There's something going on behind the scenes that we're not seeing.

dumping in US to hamper US production and exploration?

Robert Goren
11-04-2014, 01:21 PM
I've read that the Saudis need $90-$95 oil to pay their bills. There's something going on behind the scenes that we're not seeing.They would like to crush the "oil from shale" industry while they still can. They would also like to keep "alternatives fuels" from being developed. This is not Rocket Science 615. It is Econ 101.

_______
11-04-2014, 03:10 PM
Conspiracy theories abound but it isn't as if U.S. oil reserves disappear because the Saudi's accept a lower price to protect share. Stuff that isn't profitable at $80 sits in the ground waiting for the day that it makes economic sense to extract it.

The market perception today seems to be that domestic frackers are in deep trouble. Most aren't.

Those with excessive debt may wind up selling themselves at a discount to bigger operators. That describes a distinct minority of companies involved in E and P.

I can't predict what prices will be in the future but I can say that the demand curve will continue generally up from left to right into the foreseeable future. Absent an end to civilization (which would make any problems with my portfolio moot) even drops in demand due to economic contraction will be temporary.

I heard on CNBC that there are rumors of a possible nuclear deal with Iran which would put their production back on the world market.

The "problem" with oil right now is the jump in production. Overall, this is great news for everyone who isn't looking for a new job in drilling.

_______
11-04-2014, 03:53 PM
One more thought: the price of finding oil continues to decline.

What is unprofitable at $80 today could be profitable at $70 in a few years.

Bakken oil is already below $70. The production decline on fracked wells remains fairly high (dropping about 50% on average after 100 days) but even that has been improving.

You could see $60 WTI next year.

reckless
11-04-2014, 05:35 PM
One more thought: the price of finding oil continues to decline.

What is unprofitable at $80 today could be profitable at $70 in a few years.

Bakken oil is already below $70. The production decline on fracked wells remains fairly high (dropping about 50% on average after 100 days) but even that has been improving.

You could see $60 WTI next year.

The Saudis' comments on producing more oil may in fact have a stock market and headline affect, but the bottom line in all this -- it no longer matters what OPEC or the Saudis do.

True, there will disruptions in the oil parch, especially if a company came somewhat late to this game and paid higher lease and land prices. But in toto, the great USA oil companies and engineers are making this country the oil capital of the world.

Once the stock market itself shakes out the hedge fund slugs and speculators, lower oil costs and retail oil and gas prices will lead to the following: a vibrant and booming economy, a 20-25,000 DJIA, true full employment, a non-stop, prolific manufacturing juggernaut, and more.

This won't happen today or tomorrow, obviously, but my scenario is a helluva lot closer to coming to fruition than it is not. This is really a lot closer than you'd think.

Robert Goren
11-04-2014, 05:57 PM
One more thought: the price of finding oil continues to decline.

What is unprofitable at $80 today could be profitable at $70 in a few years.

Bakken oil is already below $70. The production decline on fracked wells remains fairly high (dropping about 50% on average after 100 days) but even that has been improving.

You could see $60 WTI next year.$60 a barrel was generally agreed on as the price the "shale miners" needed to profitable in 2009 when oil was in the $40s. It is probably higher today. I would think there is a fair high cost for the "Shale and Tar" producers to shut down and to start back up again. I would think they would keep producing if they thought the price would come back up. My daddy use to say " Things are never as rosy as they seem, but they are often even bleaker than they seem." If I was an oil producer, I'd be worried. Things for them can get a lot worse.

lamboguy
11-04-2014, 06:06 PM
wholesale unleaded is now 2.07 per gallon.

production cost and price per barrel is about the same as price right now for West Texas. however production cost for Saudi Arabia is much less so oil can come way down. this could be a mind blower one day when you go to fill up and gasoline is something like $1.75 per gallon, could happen.

Greyfox
11-04-2014, 08:13 PM
The Saudis are putting the boots to Iran and Putin's Russia.