[ennui2]

What is it about low gasoline prices that makes liberals frantic to raise gas taxes? Is it some sort of mental illness? How about leaving the American people alone for a bit to enjoy a bit of break in their life?

A statement only someone who denies AGW and brandishes a confederate flag could say.

[Cog]

So lets destroy the American economy to save it? Wow Vietnam all over again.

If I am doomed to die due to AGW, I want to do so with a full tank of gas in my truck, my air conditioning running full blast, and a cold beer in my hand.

[Pops]

I guessed $20 in the game but may lower it.

OPEC tensions spilled into the cartel's meeting last week when the group failed to agree a production target for the first time in decades, with Iran saying it would steeply increase supply after Western sanctions are lifted next year and Iraq saying it would boost exports too.

"Some member countries produce as much as they wish," Iranian oil minister Bijan Zangeneh told reporters after the meeting in a clear reference to Saudi Arabia. "Iran will need no one's permission to raise its output."

One executive from a major oil company said that while Naimi's tactics against U.S. shale were working and the low oil price was beginning to depress rivals' output, the Iranian comeback has complicated the picture: "Sometimes it feels that the Saudis have miscalculated how quickly Iran could clinch the nuclear deal and return to the markets".


Read more at Reutershttp://www.reuters.com/article/u ... hr68yCi.99

[ralfy]

For what it's worth just met with my very wealthy owner yesterday. He's connected to some of the top analysts in the world. The consensus at the moment is that $30/bbl is a real possibility but from there a gradual increase over years. Bad for our revenue stream. OTOH he's almost giddy at the prospect of cannibalizing crippled companies in the coming months. Recessions can be tough...unless you sitting on the sideline flush with cash. LOL.

The catch is that the industry has to deal with debt repayments:

http://www.bloomberg.com/news/articles/ ... to-survive

and that should be coupled with other issues, such as lack of credit, a global economy that weakens in the long run, etc.

[ROCKMAN]

"The catch is that the industry has to deal with debt repayments" True but that only affects new drilling. None of the existing oil wells are going to disappear. Companies might go bankrupt and disappear forever. But their wells remain. Which, again, is the potential my company anxiously awaits. Just like the basic stock market strategy: buy low...sell high. The lower oil prices fall the better for us potential buyers. And the more the crippled service companies suffer the cheaper it is to drill. Last year my wells in Mississippi cost a total of $1.3 million. After 1 Jan 2016 I'm estimating $850,000. I'll sell the oil from these wells for less then I did a year ago but the lower investment makes it easier to handle. No debt and flush with cash: good times ahead for us...hopefully.

[Pops]

From OilPrice

With average monthly costs of around $2,000, that means that a stripper has to pump at least 2.33 barrels per well per day just to break even. And that does not include the cost of capital or the cost of employees (these are more than 150,000 jobs in the stripper business across the US according to the industry association). At current prices, essentially all U.S. stripper wells are at best break-even and the majority are probably losing money.

The supply of oil may already be more constrained than many market participants realize as a result of stripper shutdowns. Once a stripper well is closed, it is often a permanent decision as reopening wells makes little economic sense given their miniscule production. At the same time, because there are over 400,000 wells across the U.S. and they are often operated by very tiny firms, there is no good way to track production from this market segment.

http://oilprice.com/Energy/Energy-Gener ... rices.html

[ralfy]

"The catch is that the industry has to deal with debt repayments" True but that only affects new drilling. None of the existing oil wells are going to disappear. Companies might go bankrupt and disappear forever. But their wells remain. Which, again, is the potential my company anxiously awaits. Just like the basic stock market strategy: buy low...sell high. The lower oil prices fall the better for us potential buyers. And the more the crippled service companies suffer the cheaper it is to drill. Last year my wells in Mississippi cost a total of $1.3 million. After 1 Jan 2016 I'm estimating $850,000. I'll sell the oil from these wells for less then I did a year ago but the lower investment makes it easier to handle. No debt and flush with cash: good times ahead for us...hopefully.

According to the article, the debt repayments involve loans made and bonds issued. The repayments go up each year during the next five years, for a total of half-a-trillion dollars. What several companies have done so far is to leverage low-cost assets, but lower profit margins have led to credit rating downgrades.

[yellowcanoe]

So lets destroy the American economy to save it? Wow Vietnam all over again.

If I am doomed to die due to AGW, I want to do so with a full tank of gas in my truck, my air conditioning running full blast, and a cold beer in my hand.

I'm guessing you don't have any kids.

[ROCKMAN]

Ralfy - During the oil price bust of the early 80's thousands of companies disappeared from the oil patch forever. Including Big Oils like Mobil Oil, Texaco, Gulf Oil, etc. I knew of 2 geologists that committed suicide back then.

I haven’t heard of any suicides yet but I’m pretty sure this bust is going to be much worse and much faster than the 80’s bust. Just sit back and watch for the next few years. The public hasn’t begun to see the real damage going on inside the oil patch as I have.

[ralfy]

Indeed. I think funds needed for new drilling will be separate from loans that were already made.

[ROCKMAN]

ralfy - Something few of you "civilians" are aware of: public drilling funds. An example: Company A is a DRF. In 2014 they raised (meaning investors gave them) $500 million to invest in oil development projects since those looked sweet in early 2014. A common carrot used in raising such capital: Company A will pay the investors 8% per year with quarterly checks. So that a return plus whatever profit the fund eventually makes. And the fund manages only get those big commission checks if they PARTICIPATE IN DRILLING PROJECTS that work. So right now many of those funds are choking to death on capex they haven't been able to invest due to the slump. And still have to pay interest...although some have suspended such payments just as many pubco have suspended dividends. My owner has PDF's begging him to let them into any of our drilling project that make anything close to economic sense with current oil/NG process.

The bad news for them: we don't need their stink'n money. LOL. But there are other companies desperate for those monies and they are trying to convince those PDF's that their projects make sense. And given that PDF managers don't keep drawing those salaries with hopes of big commissions down the road desperately want to spend those monies you can imagine how poor oil/NG investments can still be made today. I can’t guess how many $BILLION in PDF capital is looking for homes. But here's just one small piece from last January:

"Three weeks after Chairman Steve Schwarzman said it’s going to be the best time in years to invest in energy, Blackstone Group LP is putting money to work. Blackstone’s $70 billion credit arm, GSO Capital Partners, committed as much as $500 million to fund oil and natural gas development for Linn Energy LLC, according to a statement today. The Houston-based energy producer rose as much as 18 percent after the announcement, after losing almost 70 percent of its value in six months as crude prices plummeted. Private equity firms, while taking steps to shore up energy companies in their portfolios, are hunting for investments in oil and gas producers after Brent tumbled more than 50 percent since June. Energy presents the best opportunity for Blackstone in many years, especially for the New York-based firm’s credit unit, Schwarzman said at a Dec. 11 conference. “There are a lot of people who borrowed a lot of money based on higher price levels, and they’re going to need more capital,” he said at the conference in New York. “There are going to be restructurings to do. There’s going to be a fallout. It’s going to be one of the best opportunities we’ve had in many, many years.” Under the five-year agreement with Linn, Blackstone would fund drilling programs at locations selected by Linn for an 85 percent working interest in the wells, according to the statement. If the projects produce a 15 percent annualized return for Blackstone, its stake will drop to 5 percent.”

And how has Linn Energy faired in the last 11 months: in 9 Feb: $14.25/share…7 Dec: $1.42/share. A 90% decrease in stock value. Current earnings/share: LOST $7.09/share. From one analyst: “Dec 1 2015 - Linn Energy is maintained with an Underperform rating and its stock price target is cut to $1.50 from $2 at FBR Capital, which says Linn’s proved reserve value remains well below its debt. FBR does not expect Linn to reinstate a distribution in the near term, and thus foresees minimal residual value for unitholders without a meaningful recovery in commodity prices. Linn recently closed a series of note exchanges as it seeks to lower leverage and position for continued weak oil and gas prices, which FBR believes are steps in the right direction but still sees substantial macro headwinds for the company, which are likely to prevent additional material progress.”

You can see why PDF’s are panicked looking for good operators with viable prospects to drill. Rockman’s company is one of those operators. But with no debt and flush with cash we don’t need a PDF. But we are sitting back waiting for the opportunity to buy out some of them for pennies on the dollar. We still have to cope with low oil/NG prices. But as has been said: a one-eyed man is King in the land of the blind. LOL.

[ROCKMAN]

Ralfy - Here’s an example of how debt and low oil prices are inflicting severe pain on some of the biggest global players:

Reuters - Brazil's state-run oil company Petrobras is offering up to a quarter of its 40 percent stake in the huge Libra offshore oil prospect as its seeks to reduce the largest debt in the global oil industry, two industry sources said on Tuesday. The stake could fetch up to $1.5 billion and is likely to attract international oil companies keen to expand in one of the world's fastest-developing oil basins. Petrobras is targeting $15.1 billion in disposals by the end of next year but has struggled to sell assets in less attractive prospects off Brazil and in the Gulf of Mexico. The CEO has told Brazil's congress that the company will not be able to meet repayment obligations on its debt of more than $130 billion and maintain a $19 billion investment plan next year unless it hits the disposal target.

The company is now offering sought-after oil prospects in the so-called sub-salt areas in the Santos basin. Petrobras finally realized the assets they were offering were not as attractive as they thought and has decided to offer opportunities that are more likely to fetch a higher price. In 2013 Petrobras made an upfront payment of nearly $7 billion for its 40 percent stake in the Libra development. First oil from the Libra field is expected to flow in the first quarter of 2017. The government estimates that Libra has between 8 billion and 12 billion recoverable barrels of oil and gas equivalent. Analysts at Macquarie, who have an underperform valuation on Petrobras, cautioned over its ability to keep to its asset sales plans. "We maintain our concerns regarding the Petrobras' ability to deliver its short-term ($15.1 billion) and medium-term ($42.6 billion) divestment plan," they said.

[ennui2]

If I am doomed to die due to AGW, I want to do so with a full tank of gas in my truck, my air conditioning running full blast, and a cold beer in my hand.

And this is exactly why you're an AGW denier. It's not an intellectual argument at all. It's simple fear that "big government" will take away your toys and impinge on your creature comforts. It's a selfish an infantile attitude.

[ennui2]

So lets destroy the American economy to save it? Wow Vietnam all over again.

If I am doomed to die due to AGW, I want to do so with a full tank of gas in my truck, my air conditioning running full blast, and a cold beer in my hand.

I'm guessing you don't have any kids.

I can only HOPE he doesn't have any kids.

[ROCKMAN]

ennui - I suspect you and canoe are missing the point being made. It may not be the exact position but are just putting the names on a reality that Cog et al (including the Rockman) accept: it doesn't matter if the entire global population accepted the reality of AGW. Given a choice between voluntarily changing BAU and mitigating climate change the great majority of the population will FORCE the political systems to stay the course.

I do appreciate that this might be a tough pill to swallow but denying the potential truth of what I just said isn't going to help the world deal with what is likely our inevitable climate change fate.

As has been said: don't hate the messenger just because you hate the message. It really doesn't matter one way or the another how Cog really feels about the subject: neither him, you or canoe have any ability to change the course we're on IMHO.

[ralfy]

The catch is that we face multiple threats, i.e., peak oil and generally lack of resources, the effects of not only AGW but pollution, and fallout from increasing debt:

http://www.theguardian.com/commentisfre ... g-collapse

[Pops]

Lets keep it to oil prices here.

Several stories on my G News page about oil prices this morning, mostly along this line from Reuters.

Brent crude tumbled 3.4 percent to trade as low as $36.62 a barrel, its lowest since December 2008. A fall below $36.20 will take oil prices down to levels not seen since 2004.

http://www.reuters.com/article/us-globa ... 1D20151214

Others talking about the poor showing in the junk bond market - junk bonds aren't junk, just riskier, which of course include lots of oil cos. I've read that half of oil cos could default on bonds... here is one

Standard & Poor's Ratings Service recently warning that a stunning 50% of energy junk bonds are "distressed," meaning they are at risk of default.

Not that I;d believe S&P if they said it was raining but ...
http://money.cnn.com/2015/12/10/investi ... -defaults/

Pretty hard to square the booming stock market with a tanking commodities market. Then there is the Fed dithering while around the world other central bankers are printing flat out.

I read that Iran says they produce oil at less than $2 barrel, ME and Russian producers say they won't cut back even at $20.

[JohnDenver]

Under $35 in NY
http://www.bloomberg.com/news/articles/ ... since-2009

[Newfie]

I don't follow this thread but came across this and thought you might enjoy.

http://gcaptain.com/return-to-sender-di ... nCNJUorLV0

Atlantic U-Turn as European Stocks Swell
December 15, 2015 by Reuters

LONDON, Dec 15 (Reuters) – Tankers laden with diesel heading from the U.S. Gulf Coast to Europe are turning around in mid-ocean as European storage is nearly filled to the brim.

At least three 37,000 tonne tankers – Vendome Street, Atlantic Star and Atlantic Titan – have made U-turns in the Atlantic ocean in recent days and are now heading back west, according to Reuters ship tracking.

It is unclear if the tankers will discharge their diesel cargoes in the Gulf Coast or will await new orders, according to traders and shipping brokers.

[Keith_McClary]

Tue Dec 15, 2015
Crude glass half full? Oil prices could rise sooner than expected

Even with a global glut in oil supplies set to last well into 2017, indications are emerging that a recovery in prices could get underway sooner rather than later.

Oil prices have fallen by two-thirds since mid-2014 to trade near 11-year lows below $40 a barrel and most analysts don't expect them to regain the $100 mark until 2017 or later, arguing that producers will continue to pump out more crude than is demanded.

A growing number of traders are, nonetheless, positioning themselves for notably higher prices a year from now through the purchase of bullish call options.

Open interest in Brent crude call options tied to strike prices from $50 to $80 per barrel has climbed steeply in recent weeks, indicating growing confidence that prices will stage a strong recovery from current levels.

Factors supporting a more positive outlook range from higher car sales to heightened security and political risks in some oil producers and debt-laden shale firms on their last legs.

Indeed, some banks are now holding a more bullish view on the crude market.

"Although there are some downside risks for oil prices in the near-term, we believe that oil prices will recover in the course of 2016," ABN Amro said.

Morgan Stanley said that "continued demand growth and less supply mean that the oversupply in oil markets could disappear by year-end" of 2016.

FUELING UP: STRONG CAR SALES FROM EAST TO WEST

The glut is a result of oversupply, yet global gasoline demand has been strong, thanks to rising car sales.

China's November car sales jumped 20 percent from a year earlier, putting the world's biggest automobile market on track for annual sales growth of 5-7 percent.

Almost 25 million new cars will have hit China's roads in 2015, and by 2020 most analysts expect annual sales of 50 million.

Even European car sales are growing, with Western European markets up 5-10 percent, according to monthly industry data.

U.S. car sales are on track for a 2015 increase of 3 percent and are expected by the National Automobile Dealers Association to hit a record next year before dipping slightly in 2017.

India's oil demand, approaching 4 million barrels per day (bpd), is also soaring as its economy grows at more than 7 percent a year and hundreds of thousands buy their first car.

The resulting gasoline demand is expected to spur refiners to produce as much fuel as they can and should bolster 2016 crude demand as long as refining margins remain profitable.
...
FULL THROTTLE

Global oil producers have little spare capacity to raise output to meet demand in the event of a large-scale supply disruption.

While most producers are running flat out, only Saudi Arabia has significant spare production and even it could only plug a gap of 2 percent of global demand at predicted 2016 rates.

Risk consultancy Control Risks said in its RiskMap 2016 outlook that "the security and political risk outlook is worse than at any point in the past decade", citing a mix of terrorism threats, political instability and economic uncertainty.

At the same time, China is expected to build its strategic petroleum reserves further, adding to oil demand that is already more than 10 million bpd.

Because of all this, the International Energy Agency (IEA) expects global oil demand to rise from an average of 94.6 million bpd this year to a record 95.8 million barrels in 2016.

With oversupply estimated between 0.5-2 million bpd, it would only take OPEC pulling back from its current output of more than 31.5 million bpd to its long-standing quota of 30 million bpd to re-balance the market.

"The oil market remains more tightly balanced than is reflected in today's low prices. The oversupply is about 1.5 percent of a 95 million bpd market with limited spare capacity in a risky political setting for weak petro states prone to disruption," Citibank said.