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Page added on December 31, 2014

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Oil at $14 a barrel? Here’s how it could happen

No one really saw 2014’s dramatic plunge in oil price coming, so it’s probably fair to say that any predictions about where it’s going from here fall somewhere between educated guesses and picking a number out of a hat.

In that light, it’s less than shocking to see one analyst making a case—albeit in a pure outlier sense—for a drop all the way below $14 a barrel.

Abigail Doolittle, who does business under the name Peak Theories Research, posits that current chart trends point to the possibility that crude has three downside target areas where it could find support—$44, $35 and the nightmare scenario of, yes, $13.65.

Make no mistake, she thinks that’s an extreme case. Her target for the more likely move is the $35 range, which in itself is quite a call considering light crude had been just above $100 a barrel this summer and the move would represent a 33 percent or so plunge just from current levels.

But Doolittle makes room for an even more extreme scenario, in which technical support gives way as part of what she describes as a triangular pattern forming in an “ascending trend channel” that brings about the extreme case.

“There is a wild case scenario for a massive fall in oil and it is made by both the triangle and the possibility that oil’s true trading path will turn out to be sideways on a potential false initial reaction of epic proportions,” Doolittle explained in a report she distributed Wednesday morning. “This possibility cannot be ignored or discounted because it is simply too strong from a technical standpoint.”

(Doolittle diagrams the pattern in her post, which can be accessed here.)

She acknowledges that the scenario “may sound outrageous” but cautions “odds appear fairly strongly” that the move could be triggered by “a false initial reaction or basically a massive head fake caused by a variety of factors.”

Before consumers get too giddy about the cost of even lower fuel prices at the pump, Doolittle offers a word of caution.

“Clearly this would seem to be a tail wind for consumers, but the various shocks and possible financial market crashes that could be triggered by such a collapse in oil would not be, and thus this seems a very dangerous scenario indeed,” she said.

Doolittle is known for making some of the more extreme calls to be found on Wall Street. She predicted, for instance, that the mid-October market tumult would continue as part of a 60 percent drop in the S&P 500, a move that has not materialized.

CNBC



30 Comments on "Oil at $14 a barrel? Here’s how it could happen"

  1. penury on Wed, 31st Dec 2014 3:35 pm 

    She predicted, for instance, that the mid-October market tumult would continue as part of a 60 percent drop in the S&P 500, a move that has not materialized.

    Yet. Early days.

  2. FarQ3 on Wed, 31st Dec 2014 4:18 pm 

    Sales of vehicles such as the Volt, Leaf and Tesla must be suffering with the low oil prices. How long before these cars get kicked?

  3. Speculawyer on Wed, 31st Dec 2014 5:25 pm 

    LOL. $14/barrel. Gotta be near the bottom now that people are saying such stupid things.

    FarQ3, hybrid sales have weakened. PHEV sales are also probably hurting a little. But pure EV sales are doing fine . . . a lot of those buyers are not buying because of gas prices, they just want to drive electric for various reasons. It is not like the $100K Tesla Model S buyer is fretting of whether gas costs $2 or $3 per gallon.

  4. Nony on Wed, 31st Dec 2014 5:37 pm 

    Technical analyst. That stuff is junk.

    http://www.thesimpledollar.com/review-a-random-walk-down-wall-street/

  5. Industrial on Wed, 31st Dec 2014 5:46 pm 

    I am CrAzY compared to you…that’s a fact:) but im not stupid and i literally do nothing but prepare for peak oil all day everyday…i just moved around about 70 quarts of motor oil then used a gieger counter to make sure that the background radiation levels were within normal,near my oil..

    From my research the reason why global oil prices are dropping is due to the limits of debt generation being met globally…

    Richard heinberg is predicting the peak of unconventional oil production in 2015–that’s what he claims he heard years ago from some people…

    I used to have a “Sane” friend,we talked about peak oil frequently and he was like so so…2020s ect i was like no…this is now…people are going to freak out and speed up the collapse…that was almost 7 years ago…

    Im predicting that oil prices are going to slowly increase from current levels,as demand grows and production begins to slow from the collapse in “tight” oil production.I think in 2015 we are going to see some kind of event..probably economic…the system will restabilize…I think mike ruppert was right..one day the price of oil will hit a level so high that everything will shut down? or economic collapse will happen?…watching the events of the world unfold iv become totally convinced this situation will “climax” in a major event,it’s not going to be a slow gentle decline there will be moments of total epic fail on a grand scale as the world basically ends…

    When i got online yesterday and saw the airasia crash it was like witnessing the explosion of the Hindenburg,a mighty industry of cheap affordable flights was failing epically.

  6. Makati1 on Wed, 31st Dec 2014 7:10 pm 

    All I can say is … if oil drops to $14 the SHTF moment will be here. Even a temporary drop to that level will likely send the rats scurrying off the financial ship, causing a financial Titanic event. If it were to last, it would end all alternate sources of oil outside current producing wells. Ditto for NG and fraking.

    Would be interesting to experience and good for the planet and the future of the human species.

    Go for it!

  7. jedrider on Wed, 31st Dec 2014 7:31 pm 

    Yeah, right. Time to keep it in the ground, then.

  8. rockman on Wed, 31st Dec 2014 9:22 pm 

    $14/bbl? Who knows but why not? It was only 16 years ago that the average yearly nominal price of oil was $11.91/bbl ($17.26 adjusted for inflation). That was a 51% decrease from just 8 years earlier. Memories fade but I don’t recall much talk of catastrophes at the time. Excluding for the oil patch, of course. And in 1986 oil averaged $14.44/bbl which was a 61% decrease from the record high just 6 years earlier.

    Not that it’s a valid prediction method but lets look at those price collapse over the last 25 years in a row: 1) a price max followed by a 61% drop 6 years later, 2) a price max followed by a 51% decrease 6 years later; 3) and a price max in 2008 followed by a 60% decrease 6 years later.

    So a max followed by a collapse 6 years later in all three major cycles. A coincidence, of course. But lets look at both the ramp ups as well as the collapses.

    Starting 4 decades ago in 1974:

    In 6 years prices increase 380%
    In 6 years prices decrease 61%
    In 2 years prices increase 156%
    In 8 years prices decrease 51%
    In

  9. rockman on Wed, 31st Dec 2014 9:39 pm 

    Hit the damn button by accident:

    Starting 4 decades ago in 1974:

    In 6 years prices increase 380%
    In 6 years prices decrease 61%
    In 2 years prices increase 156%
    In 8 years prices decrease 51%
    In 2 years prices increase 230%
    In 2 years prices decrease 16%
    In 6 years prices increase 400%
    In 1 year prices decrease 42%
    In 4 years prices increase 170%
    In 1 year prices decrease 40%…so far.

    Not exactly a perfect straight line plot but I sense a certain rhythm. Volatile pricing cycles during the entire 4 decades. But cycles do seem to be getting a tad shorter.

    Pricing came from:http://inflationdata.com/Inflation/Inflation_Rate/Historical_Oil_Prices_Table.asp

  10. Nony on Wed, 31st Dec 2014 10:50 pm 

    Let’s put the pedal to the metal and really get those a-rabs fighting with each other, quota cheating, pumping like madmen.

    drill the ANWAR, approve KXL, get rid of export restrictions, allow offshore drilling. Every bit helps. Doesn’t even matter if it isn’t immediate production…still affects the competitive dynamic.

    I want sub-30!!!!

  11. Perk Earl on Thu, 1st Jan 2015 12:19 am 

    $14 a barrel is pure hyperbole. There’s always someone that gets too carried away with a trend and that’s usually a clue the current price is close to it’s limit.

    Since oil went to 147 in 08, followed by a low in the 30’s, it’s been between those two price points and will remain for the forseeable future. Thank you and goodnight.

  12. Perk Earl on Thu, 1st Jan 2015 3:37 am 

    http://www.maxkeiser.com/

    Highly recommend watching latest Max Kaiser video at the link above. Good summary of current world economic situation to end 2014 with 7 predictions for 2015 at the close.

  13. bobinget on Thu, 1st Jan 2015 8:42 am 

    “In January 2015, the U.S. is expected to experience a birth every eight seconds and one death every 12 seconds. Meanwhile, net international migration is expected to add one person to the U.S. population every 33 seconds. The combination of births, deaths and net international migration increases the U.S. population by one person every 16 seconds,” the Census Bureau reported.

    In terms of the global population, which is projected at 7,214,958,996 people as of Jan. 1, 2014, there is expected to be an increase of 77,381,246 people (1.08 percent) by New Year’s Day 2015. In January 2015 there will be about 4.3 births and 1.8 deaths per second around the world.

    The Census Bureau offers a Population Clock that displays population growth in the U.S. and across the globe in real time.

  14. paulo1 on Thu, 1st Jan 2015 9:22 am 

    @ Rockman

    Excellent post. I sent these numbers on. Upward trend pretty much is a kick in the ________, maybe not a straight line but damn visible.

  15. bobinget on Thu, 1st Jan 2015 9:28 am 

    WE all witnessed (although news, soon buried) how
    Libya’s oil exports were extinguished by a simple ‘drive-by’.

    A few dozen raiders from who knows what faction,
    effectively wiped out any alleged ‘oil glut’ last week.

    Elimination of up to a million barrels a day has been removed from the markets by a one hundred dollar,
    shoulder fire rocket.
    (a US fire-fighting firm at a cost of $16,000,000 is on the job today)

    Simply put. In that ‘other world’ of addicted products, (drugs) if attempts to
    horn in on the established territory, bloodshed results. Thugs too have rules.

    If a given nation’s entire economic future is threatened, that (or those) nations will take remedial action.

    If it were just Venezuela at risk with CURRENT oil prices few should be concerned. All of Venezuela’s armaments are defensive in nature.
    When the “great nation of Russia” under current leadership, track record, is threatened internally (from within) because of falling oil prices,
    what should we expect?

    I’ve maintained form the outset, V. Putin intends to
    have a great deal more to do with setting world oil prices then it does today.

    So far it appears Russia is doomed to economic ruin. This IMO is exactly what President Putin expected. Saudi intransigence on production issues represents to Putin, ‘thug-logical’ casus belli. http://en.wikipedia.org/wiki/Casus_belli

    Rather then bore readers further, just expect ‘drive-by’s’ to continue till traders no longer ignore them.

  16. wildbourgman on Thu, 1st Jan 2015 10:07 am 

    When I get to the quote “No one really saw 2014’s dramatic plunge in oil price coming” I normally stop reading.

    That was also said about dotcoms and the housing market fiasco and it was bullshit then as it is now. There were people out there that predicted this price collapse just as a few did predict the other crashes those are the folks that should be writing articles.

    Why do we keep listening to people that say that this couldn’t have been predicted, when it actually was predicted?

  17. Apneaman on Thu, 1st Jan 2015 11:05 am 

    RT does some good reporting and they don’t need to make shit up since our system is so completely corrupt, but they are a one way street.

    Russia battles to contain Black Sea oil spill as city declares a state of emergency

    http://www.rawstory.com/rs/2014/12/russia-battles-to-contain-black-sea-oil-spill-as-city-declares-a-state-of-emergency/

  18. Northwest Resident on Thu, 1st Jan 2015 11:58 am 

    My 2015 “Happy” New Year predictions:

    1) Major stock market drop that will not see a rescue operation from the “plunge protection team”

    2) Increase in propaganda and lies generated from on high with an intensity in direct proportion to the severity of financial ruin suffered by the masses. At some point in time during 2015 I expect we’ll reach a point where the propaganda machine will literally be offering people a shit sandwich while smiling and carrying on about how good it smells.

    3) Continued wild and extreme gyrations in oil price. Up or down, the changes will be frequent and they will happen quickly. The “bumpy plateau” is going to feel like one of those advanced black diamond ski runs where the snow has been shaped into a major mogul field of bumps and narrow icy valleys. The good skiers will navigate those bumps on their fast downward descent successfully, whizzing past the crashed and flopping bodies of the majority who aren’t skillful or strong enough to stay on their feet. But everybody will be heading downhill fast, catching the quick ride up only to hit the even quicker air pocket drop down, with “down” being the key word here — as in down further and further and increasingly faster as the gravity of economic and energy reality sucks us inevitably toward wherever that final bottom is.

    3) More armed conflict. More riots.

    4) More police militarization as TPTB continue to position forces to deal with inevitable social chaos.

    5) Massive unemployment in the oil industry including service and all support sectors. Given the FACT that there is no other source of oil to fuel another boom, the ranks of unemployed taking their pink slips from oil, service and related industry companies are going to become a very disgruntled and impossible-to-ignore group of folks standing in the unemployment line. They will NOT be easily shuffled off stage into the ranks of the “no longer in the job market” category where the U.S. Government has so far successfully hidden the vast numbers of unemployed that they don’t want to count in their unemployment statistics.

    6) Radicalization on all levels will increase in all countries, with violence and serious consequences that can’t be ignored.

    7) Energy shortfalls. Here, there, somewhere. For a short time or for a long time, depending on the place and situation. There isn’t going to be enough energy.

    8) BAU will “survive” (as a dead zombie stumbling ever forward trudge by screeching trudge) until this time in 2016, but by that time, the illusion of “BAU forever” will be an even bigger and wider-known joke than it is today. Final and total collapse of confidence in “they system” will be reaching critical mass.

    But hey, I’m an optimist. It could be a lot worse than that. I guess we’ll find out soon enough.

  19. shortonoil on Thu, 1st Jan 2015 12:28 pm 

    No one really saw 2014’s dramatic plunge in oil price coming, so it’s probably fair to say that any predictions about where it’s going from here fall somewhere between educated guesses and picking a number out of a hat.

    We put this page up, with this graph, in September (the date is shown on the bottom graph), and have been talking about what was coming since May:

    http://www.thehillsgroup.org/depletion2_022.htm

    But, everyone wants to insist that NO ONE saw it coming!

    Prices will start to move up into the high $60 and low $70s as soon as the shorts are squeezed out. Oil futures are a two way street; someone has to buy oil at the present price, and someone has to sell it. There are probably plenty of buyers at $53 dollars; how many are willing to commit to sell at that price is an all together different subject. Someone will take physical delivery of that contract, and someone has to physically deliver it. Unless some of the Robber Barons have figured out how to sell naked shorts in crude, the market is soon going to run out of sellers.

    $14 oil: that is called the end of the oil age. Its coming, but not this year!

    Happy New Year

    http://www.thehillsgroup.org/

  20. GregT on Thu, 1st Jan 2015 12:37 pm 

    Perk,

    Thanks for the link. Worth repeating for those who haven’t already watched it.

    http://www.maxkeiser.com/

    A couple of takeaways:

    “We’ve gone from bubbles to bizarro.”

    “The end of USD world hegemony.”

  21. Northwest Resident on Thu, 1st Jan 2015 1:16 pm 

    GregT — Good link there. I just watched/listened to it.

    We’re in a finite world with a massive population growing exponentially, each individual needing/demanding a cut of the ever-shrinking pie of natural resources. The pressure has been building for a long time and is now entering a critical stage. At some point, maybe 2015, maybe a little later, the system will just break down. “THEY” will probably triage off chunks of the world one piece at a time, depriving those pieces of access to the resources they need to survive while at the same time continuing to extract whatever resources remain FROM that piece. This strategy will “work”, for a while, but a good point made in the linked presentation is that the global economy is now so interconnected that we can’t just start cutting off failing chunks of the economy (Venezuela for example) without that pain being felt around the world.

    2015 is going to be a wild ride, that is ONE prediction that is certain to be proven true.

  22. Perk Earl on Thu, 1st Jan 2015 3:15 pm 

    Glad you liked it, GregT & NR. That segment is just chalk full of no holds barred dismay over current fiscal situation. They talk about debt in the UK getting to the point where austerity will soon have to kick into a much higher gear and there are already lots of people that have shifted into poverty, all the while cranes in the background are building like crazy due to equity increase in property valuation as the rich get richer.

    They also talked about Switzerland printing money, which I was previously unaware of. After blowing bubbles to symbolize debt bubbles getting out of hand in the UK, US and Japan. They reiterated something Gail has said and many on these boards and that is; once interest rates go up the whole shebang is going to implode. Their guest I liked – he just laid the situation bare, unlike MSM which is still pushing positive news to people.

    My lovely cornucopian wife thinks things are doing great cause all she watches to get news is CNN. I laugh when we debate stuff because she just doesn’t have a clue. Yet, she agrees to all my plans regarding solar, EV, storing food and other supplies, silver coins, etc., so what does that say about even corns, that they are still aware s will hit t f? It tells us they put up a good front but deep down they know trouble is afoot. How could they not, it’s almost palpable even from just a geopolitical perspective as things get more squirrelly every day.

  23. Speculawyer on Thu, 1st Jan 2015 3:59 pm 

    How’s Max Keiser’s “Everyone needs to buy silver!” army doing? LOL. Perpetual doomers don’t get the story right except for the crashes.

  24. GregT on Thu, 1st Jan 2015 4:21 pm 

    Specu,

    Infinite exponential growth in a finite environment, is a mathematical and physical impossibility.

    Our entire financial system requires exponential growth, or it will collapse. Perpetual cornucopians don’t even get the theme, never mind the story. The crash will come, as sure as the sun sets in the west. Silver is a physical asset in limited quantities, unlike paper certificates that can be printed at will. Silver has been a store of wealth for over 5000 years, and has maintained value over the ages. Every single fiat currency during that time period has eventually collapsed.

    History repeats itself, and those who ignore history are destined to repeat it. LOL to your heart’s content. It will not make reality go away.

  25. Perk Earl on Thu, 1st Jan 2015 4:43 pm 

    Spec, you must have been considering the possibility of a crash to have set yourself up with an EV and solar? Or was that based simply on a back of the envelope calc. to save $’s in the long run?

    One thing that could happen when shtf, is currency could become near worthless – then a switch to a new currency takes place and guess what spec, people with silver and gold have something to trade to get the new currency. Otherwise it’s sell your stuff at huge discounts because everybody else is selling too. Always good to store away a bucket of one ounce silver coins. Call it insurance, one of those things people will definitely need – add it to the list right next to seeds and peanut butter, lol.

  26. Industrial on Thu, 1st Jan 2015 6:43 pm 

    I had a religious experience a few months ago,like i almost died or something and started talking to people that werent there,god/evil people,aliens ect..they showed me my future and it was epic…i didn’t want to be too righteous so i started working for evil and i just quit today..but im still not planning on being too righteous…im sure they hate me but thats evil so ? owell.I had a CAT scan a few months ago and they couldn’t find anything wrong with me….

    I watch tv now and see evil people…i go to the store and see people just surrounded by red…i talked to this godly chick at the dollar store today about peak oil:) she was wearing blue and she was acually listening to me?….

    When i look at the symbol for (MOBIL) motor oil now…it says this to me

    The cosmos is mostly filled with “godly” aliens but there are some bad apples of pure evil…the tall blue letters represent the godly landscape of the universe..the red circle represents evil in the universe…
    The red circle also says stop…you are not allowed into the mostly godly universe…only by the approval of the forces of evil can you enter the ring and travel the “regions” or stars ?….thats just what it says to me????

    The CrAzY thing is that people have been saying that the government has a stargate for years…
    i was reading online today and googled OIL COMPANIES STARGATES and there are like multiple companies using the word stargate…? im seriously questioning my atheism these days…

  27. Perk Earl on Thu, 1st Jan 2015 7:09 pm 

    Industrial, a cat scan may not have picked up anything but you do need to seek out help.

  28. MSN Fanboy on Thu, 1st Jan 2015 7:59 pm 

    INDUSTRIAL, HOW DO YOU KNOW ABOUT THE STARGATES?????

  29. rockman on Thu, 1st Jan 2015 8:36 pm 

    “When i look at the symbol for (MOBIL) motor oil now…it says this to me”. I started with Mobil Oil in New Orleans in 1975: I’ve starred into the face of evil. So I left Mobil Oil and moved to Texas ASAP. Now I’m safe in the arms of angels.

    LOL.

  30. Speculawyer on Fri, 2nd Jan 2015 1:02 am 

    “Spec, you must have been considering the possibility of a crash to have set yourself up with an EV and solar? Or was that based simply on a back of the envelope calc. to save $’s in the long run?”

    Indeed. I took the oil situation into consideration. And I have no regrets at all for both my PV and EV. However, I pride myself on being able to change my views based on the changing data. Right now, oil is cheap. And it will remain cheap at least for a few months. Perhaps a few years. I expect oil prices to eventually rise back up.

    But I keep my views based on the most recent data instead of selecting a narrative and sticking it to it no matter what the data says.

    Oil prices are cheap right now. People should enjoy it. But I do think the price will rise in due time. And since cars last a long time, people that buy gas guzzlers may be making a very foolish mistake. If you buy an efficient vehicle, what do you lose? . . . a few extra inches of headroom? Seems like a no-brainer to be efficient.

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