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Why Oil Could Be Facing A 20-Year Bear Market

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16 Comments on "Why Oil Could Be Facing A 20-Year Bear Market"

  1. penury on Sat, 28th Mar 2015 9:21 am 

    I am a little slow sometimes, but this article makes even less sense than the last one from Forbes which was posted here.

  2. rockman on Sat, 28th Mar 2015 9:48 am 

    So much bullsh*t to respond to:

    “Oil production, after prices have fallen over 60%, is at a new high.” No…oil production is high because we’ve just had several years of oil prices several times higher than the historical average.

    “As we predicted late last year, oil producers are making up for plummeting income by pumping even more.” Operators always produce at the maximum efficient rate. They are implying that when oil prices were high companies were restricting production because they were making too much money so they’ve opened the taps to increase cash flow. Yeah…right…the Rockman cut his wells back when oil hit $100/bbl. Just felt so guilty making that much money. LOL.

    “Rig counts in production are plunging, but these are from the low production wells.” Partially correct because drilling is typically based upon potential. But that’s not a perfect culling process. There have been many EFS wells drilled that would never recover 100% of their costs. Needless to say companies didn’t expect those results and drilled those wells anyway. And then there’s still the pressure on pubcos to drill any well that would increase their proved reserve count regardless of ultimate profitability. We’ll have to wait to see if there’s any significant improvement of initial production rates of future wells.

    “The high producers are still pumping away.” As are the poorer producers. Not sure exactly what they are trying to spin here.

    “In fact, the latest rig count even shows that there is little additional reduction in producing rigs.” First, if they don’t even understand the vernacular it doesn’t help their cred: “rigs” don’t produce oil…wells do. Second, everyone one should understand the lag factor by now. Let’s see how true this statement reads by the end of 2015 when at least 4,500 new shale wells WON’T be drilled as result of the rig count decrease.

    “The bulls say a bottom in oil prices is in place. That means the oil market isn’t even close to the final plunge. The eagerness to call a bottom is not what you see at a true bottom.” That’s a valid point. But the price of oil in the future won’t be based upon the opinions of bulls or bears.

    “For a short period, this also keeps the supply companies working.” Obvious these fools must have missed the reports of many tens of thousands of “supply companies” being laid off.

    “That is, of course, until the production companies have to shut down.” There have been many operations that have shut down and the count grows weekly.

    “Eventually, the defaults will cause a “credit event” in this sector of the financial markets. And that’s when oil production will diminish.” No, production will diminish as result of a decrease in new wells being drilled. And that dynamic kicked in two months ago so there’s no “Eventually” about it.

    “The storage tanks are filling, and when they are full, there will be massive dumping.” As discussed in detail storage won’t be completely filled…not even close. Despite the stat that storage is at an 80 year high there’s still more than 150 millions bbls of capacity available. Plus we are on the verge of the typical annual swing from net gains to net withdrawals from storage as refiners start building inventories for the summer driver season increase in demand. An increase in demand which already started last December thanks to falling prices. Even their statement makes no sense: if the refiners have all the oil thy need and storage is completely full where exactly is that oil going to be “dumped”?

    It’s no wonder with the public being inundated with crap like this they never develop a clear understanding of the energy situation.

  3. Davy on Sat, 28th Mar 2015 9:54 am 

    Let’s see what these delusional corns say when supply falls AND price falls. Let’s see what these deluded corns say when the market halves and long term rates are up dangerously. Will these thieves be flustered explaining a blast of deflation and inflation at different levels simultaneous? What will these robbers think about shortages and rationing? What will these assholes say when the little guys are gathering around their gated communities and private estates shouting, throwing things, and burning their Mercedes? What econ 101 nonsense will we hear then? We know there will never be an admission of the end of their faux world so what will be the excuses and explanations? How will their hopium and exceptionalism of progress be enunciated in their last moments before the lights go out. I am just curious.

  4. Kenz300 on Sat, 28th Mar 2015 10:02 am 

    Forbes — spokesman for the fossil fuel industry and the top 1%…….

    Consider the sources and know their agenda……

  5. Nony on Sat, 28th Mar 2015 10:52 am 

    The storage filling meme is silly. You won’t have oil running down the streets. The price of storage has already gone from a dime a barrel (per month) to a dollar. You’re already OUT of “cheap storage”. Further filling of Cushing (and refineries, etc.) will just have a very small effect that is completely gradual and anticipated (not a shock, not a surprise). Storage is responding to oil futures curve much more than storage causing the shape of the oil price.

    Yes, the desire for storage is pretty intense. But that’s more just affecting people who want to take a tank out of service for maintenance and now decide not to. Or who have run their refinery for low working capital and now run it for high. It’s a minor pain in the ass for some managers in the mid/downstream. And it’s a minor windfall for some owners of mid/downstream assets. But it’s really not that big a deal. Way overplayed.

  6. Plantagenet on Sat, 28th Mar 2015 11:18 am 

    We’re in a serious oil glut, but I don’t think its likely it will continue for 20 years, as this article suggests. In a few years we’ll see peaks in oil production from KSA, Kuwait, etc.and that will mark the global peak in oil production. Even before then we may see some production in the ME taken offline by the regional sunni-shim religious war that seems to be on the verge of firing up now.

  7. Plantagenet on Sat, 28th Mar 2015 11:20 am 

    Shia—not shim.

    Darn these automatic spelling correctors—more often then not THEY make a mistake.

  8. dave thompson on Sat, 28th Mar 2015 11:28 am 

    Yes we are in an exceptional over supply of crude that is equivalent to about 7-8 days of consumption. What makes our current situation “serious” is that the over supply can turn into an under supply within a few days worth of oversupply loss of market share.

  9. Turning Point Sustainability on Sat, 28th Mar 2015 11:38 am 

    If oil is just another commodity, what difference does it make if it goes bull or bear?

  10. tk on Sat, 28th Mar 2015 12:09 pm 

    “We” don’t even have a functioning “market” since the crash 07/08.
    There won’t be a 20 year bear market.
    My gut feeling tells me there won’t be any “market” left in less than 2 years.
    And oil is not “another” commodity, oil is EVERYTHING!
    Money makes the world go ’round, nope, oil does!
    Money is a social construct, a fictional invention, a belief.
    And a belief is not based on a reality governed by natural laws.

  11. BobInget on Sat, 28th Mar 2015 1:46 pm 

    Islamists Begin Their Own Thirty Year War

    The Thirty Years’ War was a series of wars in Central Europe between 1618 and 1648 lasting for thirty years [15] It was one of the longest, most destructive conflicts in European history.

    Initially a war between Protestant and Catholic states in the fragmenting Holy Roman Empire, it gradually developed into a more general conflict involving most of the great powers of Europe,[16] becoming less about religion and more a continuation of the France–Habsburg rivalry for European political pre-eminence.[17]

    The Thirty Years’ War saw the devastation of entire regions, with famine and disease significantly decreasing the population of the German and Italian states, the Kingdom of Bohemia, and the Low Countries. The war also bankrupted most of the combatant powers. Both mercenaries and soldiers in armies were expected to fund themselves by looting or extorting tribute, which imposed severe hardships on the inhabitants of occupied territories.

    More on Wikipedia “Thirty Year War”.

    Posters note:

    I don’t believe it’s unfair to draw parallels between an early Christian war and today’s Islamic disputes dating back to 16th century.

    Read that Wikipedia article keeping in mind ‘oil wars’ in Yemen, Syria, Iraq, Nigeria, Libya, South Sudan, Mali, Algeria, now Saudi Arabia vs. Iran, soon, Egypt, Lebanon, Israel, Gulf States, United States.

    Not to put to fine a point on it… Most of the above conflict states above are export oil producers.

    While Venezuela is not at this time in Civil strife, Venezuela borrowed over sixty billion$ from China. Pledging
    future oil production that once went to the US.

    this from 2011:
    an additional eleven billion borrowed in 2014.

    Yet, the US public is being told simply ‘oversupply’ are reasons for low oil prices, “the oil glut”.
    Not to worry, the US can contain Islamists
    so called “Terrorists” (with proxies and military air power) never-mind air power alone
    has never worked.

    I won’t beat around. The US is in the process of losing a million barrels p/d from Ecuador and Venezuela.
    The US no longer imports from troubled Nigeria.
    Mexican production in steep decline, no secret.

    Saudi Arabia, the world’s biggest arms importer and Pakistani nuclear financier will be preoccupied fighting off Iranian influence. If the Saudis or Egypt invade Yemen they will need to import food, power, and most of all water for 150,000 troops. All high energy consumers, as we know. The Saudis already support Egyptian military regime and well as Pakistani Military regime. Doubtless these leaders will be called on to supply fodder in the ‘new Syria’ , Yemen.
    Bottom line: KSA will no longer be capable of flooding US oil markets.

    Canada is becoming energy self sufficient
    by dint of shipping Western Canadian oil East.

    If only half of everything above comes to pass, the US will need to rush to natural gas and other alternatives yesterday.

  12. BobInget on Sat, 28th Mar 2015 2:03 pm 

    “Bottom line: KSA will no longer be capable of flooding US oil markets”.

    If you find fault with that closer, try this one on; “The Saudis, intent on suppressing Yemen, are being drawn away from
    fighting in Syria”. Thus giving Iran the space
    needed to keep Assad in Power.

    Syrian fighters will in turn descend on Yemen and Libya and God only knows.

    If you don’t believe that scenario viable,
    how about …..

    When (or if) determined KSA can talk Egypt
    and Pakistan into sending boots, their entire
    governments, dependent on Saudi oil and cash as they are, will collapse.

    History may not repeat but it does rime.

    When we figure out how to fool poor folks into giving rich countries all their oil, I’ll get back.

  13. shortonoil on Sat, 28th Mar 2015 5:22 pm 

    Oil is definitely in a 20 year bear market. That is because 20 years is the first part of 10,000! The oil age is ending, and that sort of indicates that there is going to be a long term bear market? We are very pleased that Forbes is at least making an attempt to identify a truism.

  14. Keith_McClary on Sat, 28th Mar 2015 11:45 pm 

    rockman on Sat, 28th Mar 2015 9:48 am :

    “So much bullsh*t to respond to”

    I think you mean “bearsh*t”.

  15. rockman on Sun, 29th Mar 2015 7:02 am 

    Keith – Actually I’m a bit confused about the distinction between bear and pull markets at least with respect to ?oil/NG. Is it based upon the price of oil/NG? The rig count…IOW the amount of capex invested? I’ve been doing this for 40 years and for the vast amount of that time oil/NG were as low (and often lower) then they are today. Yet during those same periods $trillions of capex was invested and many billions of bbls of oil were developed. Or is the distinction based upon the level of desire of industry to develop these resources? To that point I can assure you that desire is extreme today with every company trying to justify as much drilling as possible under current economic conditions.

    When oil was selling for less than $40/bbl in the 90’s and companies spend capex big time horizontally drilling the fractured Austin Chalk carbonate shale, the hottest oil play on the planet then…was that also a bear market? Or when the play was drilled up at the same time oil dropped to less than $20/bbl was that a bear market? A bear market that preceded by a few years the beginning of the highest growth rate of US oil production in history?

    Perhaps understanding my history in the oil patch you can see where my confusion is coming from.

  16. Amvet on Sun, 29th Mar 2015 3:20 pm 

    Most oil is shipped from the Bakken field by rail. Reuters reports that rail shipments this month are DOWN 25%. (Twenty-five percent)

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