sharetrader
Page 2 of 2 FirstFirst 12
Results 16 to 22 of 22

Thread: Oil

  1. #16
    Senior Member upside_umop's Avatar
    Join Date
    Jun 2007
    Location
    London, United Kingdom
    Posts
    1,181

    Default

    A lot of assumptions and a lot of questions:

    1. The first assumption was that the USA would now be the worlds swing producer. We now know that's not true given the infrastructure shortfalls in the US and OPEC being firmly in control. US unlikely to get pipeline capacity until 2020 by which stage any marginal production gets swallowed up by demand.
    2. OPEC will increase production to protect consumers. OPEC have agreed to increase production back to their original quotas, resulting in a theoretical increase of 1m bopd. Because this increase is spread across all members, the actual increase is likely to be c. 600k bopd. It's also going to be spread over 6 months. Demand growth is at 1.8m bopd, so on this metric, the recently accnounced OPEC increase won't keep up with demand. Some members might cheat though? But who really can given the lack of spare capacity?
    3. Saudi Arabia has 12.5m bopd capacity, apparently. I don't believe this and they may be able to pump this for maybe 1 month at best....have a look at SA past production performance and at best they have ever only pumped 10.5 m bopd.
    4. Underinvestment cliff. This is fast approaching. 2020 we will start to see some serious effects of underinvestment over the 2014/2015 downturn from mega/deepwater projects being delayed and cancelled. This is scary stuff and could result in historically low spare capacity.
    5. Given point 4 above, and potentially historically low spare capacity, we could be at a very real risk of a "black swan event". Imagine if a Houithi missile actually hits Riyadh? Imagine if Saudis go into civil war with the current "reforms". Very scary.
    5. There is some upside though - Venuzeula could surprise to the upside? The US may sort out their infrastructure problems?
    6. Electric vehicles will not save the day. Saw an article the other day suggesting electric vehicles will "seriously impact demand"....to the tune of 2.6m bopd by 2030! How is 2% of global demand when production is declining "serious"?

    In any case, I do think $50 oil over the long term is simply not sustainable. We could see it happen but it wouldn't be indicative of marginal supply / demand in the oil market but rather something else short term.

    I think $70 oil feels about right but a spike could very easily happen. I wouldn't be surprised if Brent averages $80 - $100 over the next couple of years with a spike that will push the world back into recession.
    By the way - it's upside_down, not upside_umop

  2. #17
    FEAR n GREED JBmurc's Avatar
    Join Date
    Sep 2002
    Location
    Central Otago
    Posts
    6,668

    Default

    Yes I fully agree with you there UU >> I think there is so much hot air in new tech taking over Crude oils role is just utter BS outside the minor reductions which will just be soaked up by emerging ecomonies anyway ...IMHO Oil will continue to trend higher from here on the back of the next major commodity bull market
    People don't have ideas, ideas have people

  3. #18
    Senior Member Valuegrowth's Avatar
    Join Date
    Jun 2013
    Posts
    1,082

    Default

    I have been following the commodity market for a considerable period and there are lots of factors involved in the commodity market trend. Currently, there are some theories as well as predictions for the commodity market as well. I am eagerly waiting for their outcome toward end of this year and during next two years to compare with my study and target.

    In the future, instead of striving to be right at a high cost, it will be more appropriate to be flexible and plural at a lower cost. If you cannot accurately predict the future, then you must flexibly be prepared to deal with various possible futures.” – Dr. Edward de Bono (Psychologist)

  4. #19
    Senior Member upside_umop's Avatar
    Join Date
    Jun 2007
    Location
    London, United Kingdom
    Posts
    1,181

    Default

    Cheers JBMurc - it is amazing how many people have been (and still are) calling the downfall of oil and that there will be stranded fields. For me, it's really hard to imagine that. I have been investing heavily in oil and gas over the last 2 years concentrating on strong EV/EBITDA, EV/Flowing BOE and EV/2P or 2C with development potential. Once markets start to realise oil is around for good then they will be repriced accordingly. Especially assets with cashflow of oil and development of gas.

    Valuegrowth, definitely a number of factors involved in the commodity market trends. Without turning this into a full blown commodity discussion, what do you predict? Why do you predict $50 - $60 oil?

    I see short term volatility and already see talk of the US needing to release some of their Strategic Petroleum Reserves. The Saudi's look to be ramping up production full throttle in anticipation of the Trump administrations November cutoff for purchasing Iranian oil. I'm looking forward to seeing what the Saudi's can deliver....with reported Ghawar water cuts c. 50%, they won't want to stress those fields too much!!
    Last edited by upside_umop; 28-06-2018 at 01:17 AM.
    By the way - it's upside_down, not upside_umop

  5. #20
    Guru
    Join Date
    Jan 2002
    Location
    auckland, , New Zealand.
    Posts
    3,478

    Default

    oil new highs coming me thinks
    bull

  6. #21
    Gnawing on Bones Beagle's Avatar
    Join Date
    Jul 2010
    Location
    Auckland
    Posts
    10,573

    Default

    Quote Originally Posted by upside_umop View Post
    Cheers JBMurc - it is amazing how many people have been (and still are) calling the downfall of oil and that there will be stranded fields. For me, it's really hard to imagine that. I have been investing heavily in oil and gas over the last 2 years concentrating on strong EV/EBITDA, EV/Flowing BOE and EV/2P or 2C with development potential. Once markets start to realise oil is around for good then they will be repriced accordingly. Especially assets with cashflow of oil and development of gas.

    Valuegrowth, definitely a number of factors involved in the commodity market trends. Without turning this into a full blown commodity discussion, what do you predict? Why do you predict $50 - $60 oil?

    I see short term volatility and already see talk of the US needing to release some of their Strategic Petroleum Reserves. The Saudi's look to be ramping up production full throttle in anticipation of the Trump administrations November cutoff for purchasing Iranian oil. I'm looking forward to seeing what the Saudi's can deliver....with reported Ghawar water cuts c. 50%, they won't want to stress those fields too much!!
    Many thanks for your posts. I do get the sense that the supply demand situation is considerably tighter than it was just a few months ago and seriously doubt Opec's recent announcement of 600K extra bbl's per day will provide meaningful relief.

    We could easily see a quite dramatic spike on any exogenous event or further geopolitical tension. Even without this the natural growth in demand every year makes me wonder if we're not headed materially higher from here in the medium term, perhaps towards $100 barrel for Brent ?

    Curious what your three best oil stocks are and where you see oil prices 2-3 years from now ?
    No butts, hold no mutts, (unless they're the furry variety).

  7. #22
    Senior Member Valuegrowth's Avatar
    Join Date
    Jun 2013
    Posts
    1,082

    Default

    Quote Originally Posted by upside_umop View Post
    Cheers JBMurc - it is amazing how many people have been (and still are) calling the downfall of oil and that there will be stranded fields. For me, it's really hard to imagine that. I have been investing heavily in oil and gas over the last 2 years concentrating on strong EV/EBITDA, EV/Flowing BOE and EV/2P or 2C with development potential. Once markets start to realise oil is around for good then they will be repriced accordingly. Especially assets with cashflow of oil and development of gas.

    Valuegrowth, definitely a number of factors involved in the commodity market trends. Without turning this into a full blown commodity discussion, what do you predict? Why do you predict $50 - $60 oil?

    I see short term volatility and already see talk of the US needing to release some of their Strategic Petroleum Reserves. The Saudi's look to be ramping up production full throttle in anticipation of the Trump administrations November cutoff for purchasing Iranian oil. I'm looking forward to seeing what the Saudi's can deliver....with reported Ghawar water cuts c. 50%, they won't want to stress those fields too much!!
    Upside_umop Thank you for the post. I really like it. Price action was building for certain consumer staples (food) and certain energy stocks. Some investors will take them as defensive play as well. After all shakeout in the commodity market is also not a bad thing. It is helping our portfolio and certain industries. Currently, there are factors favoring both bulls and bears for the short term. Going forward oil will have a range bound market. Year to-date, oil was one of the best-performing commodities. It also was the one of the top sectors in the S&P 500. Commodity market has become more unpredictable than stock market.

    Factors for bears
    Growth in oil consumption looks weaker than anticipated as a result of less than expected economic growth in China, Europe, Latin America and the Middle East.
    The USA, Russia and Saudi Arabia want to produce more oil
    Supply from outside OPEC is forecast to rise by 2.2 million barrels a day. Russia pumps about 11 million barrels a day.
    Oil should return to pre-2017 production levels due to ease of OPEC and Russian deal
    Other factors (I am learning lot of new things. As I said correlation also has broken)

    Factors for bulls
    Geopolitical tensions (may or may not happen)
    Speculation on less than expected oil supply after OPEC oil deal
    Other factors (I am learning lot of new things. As I said correlation also has broken)

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •