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View Full Version : How Low Can Gas Go?


barn32
11-28-2014, 08:33 AM
With gasoline below $3.00 a gallon (in Las Vegas), I have to start asking myself the question: How low can it go?

Over the years I've always had a good "feel" for when gasoline was nearing a top or bottom. I never try to pick tops or bottoms, but when it comes to gasoline you just get this sense of when it starts to get cheap or expensive.

That being said, gasoline hasn't been this low in about five years. How low can it go? You know at some point it's going to shoot back up again...it always does.

How far wrong can you be to start building up a position right about now?

http://oi57.tinypic.com/f2n1oy.jpg


http://oi58.tinypic.com/2cokmk6.jpg

lamboguy
11-28-2014, 09:01 AM
looks like its going a lot lower from here. wholesale unleaded is now under $2.00 for contract. there are plenty of ships that have been off the coast for over a month now.

badcompany
11-28-2014, 10:54 AM
The "How much lower can it go?" Theory has sunk many a Battleship.

badcompany
11-28-2014, 11:33 AM
The biggest player in the Bakken. That ain't no correction, folks. That's a bottom falling out.

http://i95.photobucket.com/albums/l142/thinlizzy21/CC939C2A-D9C1-427D-A950-24BABF0FE4BD_zpslnvcojcj.png (http://s95.photobucket.com/user/thinlizzy21/media/CC939C2A-D9C1-427D-A950-24BABF0FE4BD_zpslnvcojcj.png.html)

I'm short OIL. Got in a bit above 18. I'm wondering whether to add to the position.

barn32
11-28-2014, 11:46 AM
The "How much lower can it go?" Theory has sunk many a Battleship.I'm not trying to pick a bottom. I'm trying to pick a point to start "building" a position.

Cost of production is X. Oil shale production is X.

At some point "the powers that be" are going to step in before it gets too low.

OPEC is super friendly right now...ISIS??? Who knows.

It's never going to go to zero, like a stock could. So if you start a position now, small, and it goes lower, you add some more, lower add some more, etc., getting ready for the eventual spike up.

All I really know about gasoline is the price I see everyday when I drive by the pumps. It can go lower, yes, but I think we are nearing equilibrium.

JustRalph
11-28-2014, 11:52 AM
2.42 in Dallas this morning.

Several operations in the Lubbock area already planning for layoffs in the spring. Saudia Arabia is going to get its wish. Shutting down fracking in West Texas and in the Dakota territory.

Heard an analyst say oil might go to as low as 45 a barrell within 24 months

Robert Goren
11-28-2014, 12:14 PM
2.42 in Dallas this morning.

Several operations in the Lubbock area already planning for layoffs in the spring. Saudia Arabia is going to get its wish. Shutting down fracking in West Texas and in the Dakota territory.

Heard an analyst say oil might go to as low as 45 a barrell within 24 monthsWe had $45 a barrel in 2009, but it did not stay there long. With Japan in recession, China's GDP growth down to 5% and Europe on the edge of recession, oil price will go down some more. But as the world's economy comes back, likely in the middle of next year, oil prices will go back up. The Arabs have us by the nuts no matter how much domestic crude we produce. All they have to is drive down the price low enough to break the local boys when ever there is an economic downturn. This a cycle that is going to repeat its self several times over the few decades until we get viable alternatives to crude.

barn32
11-28-2014, 12:22 PM
2.42 in Dallas this morning.

Several operations in the Lubbock area already planning
for layoffs in the spring. Saudia Arabia is going to get its
wish. Shutting down fracking in West Texas and in the
Dakota territory.

Heard an analyst say oil might go to as low as 45 a barrell
within 24 monthsIt's just under $3.00 in Las Vegas.
I've seen $2.85.

As a kid there were gas wars. Union 76 gave away their
antenna balls. Chevron game away glassware and dishes.
Someone would come out and check your oil and wash
your windshield while someone else would gas up your car.

At one point I can remember 19 a gallon.

Does anyone know the breakeven price for the cost of
production? Or for the Saudis, is there even such a thing?
(There must be I know, but is it very, very low?)

_______
11-28-2014, 12:33 PM
Look for reductions in capex from shale producers. I think once you see those announced the Saudis will allow OPEC to begin some production cuts and prices will stabilize.

By their inaction on production, they are telling North American shale producers that they have to share in any cuts. The Saudis are not going to protect the price by themselves.

This is somewhat similar to what happened in 1986 though the scale of production now is much larger in North America.

Spring would be the earliest I could see this playing out if you see capex cuts announced in January.

_______
11-28-2014, 01:28 PM
It's just under $3.00 in Las Vegas.
I've seen $2.85.

As a kid there were gas wars. Union 76 gave away their
antenna balls. Chevron game away glassware and dishes.
Someone would come out and check your oil and wash
your windshield while someone else would gas up your car.

At one point I can remember 19 a gallon.

Does anyone know the breakeven price for the cost of
production? Or for the Saudis, is there even such a thing?
(There must be I know, but is it very, very low?)

Depending on the field, it's just over $10 to just under $40 to extract Saudi oil. I have heard different numbers for what they need to balance their national budget but they have built up a large surplus with $100 oil and seem willing to spend some of that down.

badcompany
11-28-2014, 02:28 PM
Look for reductions in capex from shale producers. I think once you see those announced the Saudis will allow OPEC to begin some production cuts and prices will stabilize.

By their inaction on production, they are telling North American shale producers that they have to share in any cuts. The Saudis are not going to protect the price by themselves.

This is somewhat similar to what happened in 1986 though the scale of production now is much larger in North America.

Spring would be the earliest I could see this playing out if you see capex cuts announced in January.

Many of the producers in the Bakken and Permian had shaky balance sheets going in. This drop is gonna put a nail in many coffins.

badcompany
11-28-2014, 04:19 PM
Some serious selling into the close. Usually when a stock or commodity opens down big, it tends to flatline or even go up in order to trap the weak shorts.

I wouldn't be surprised if Oil opens down big again on Monday.

http://i95.photobucket.com/albums/l142/thinlizzy21/8CC9839D-E70C-4133-98D1-E80592F1A0CE_zpstz7qlf7e.png (http://s95.photobucket.com/user/thinlizzy21/media/8CC9839D-E70C-4133-98D1-E80592F1A0CE_zpstz7qlf7e.png.html)

badcompany
11-30-2014, 08:28 PM
It does look like a big down open. In this case, I'd be surprised if Oil closes lower than it opens. Too many late to the dance shorts.

Moreover, the media has become super bearish, talking about $40 oil. Makes me think we're close to a short term bottom.

http://i95.photobucket.com/albums/l142/thinlizzy21/0235ED24-6B82-4A26-95D6-5468FE4DBE7B_zpsahesaee8.png (http://s95.photobucket.com/user/thinlizzy21/media/0235ED24-6B82-4A26-95D6-5468FE4DBE7B_zpsahesaee8.png.html)