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THE Price of Crude pt 14

General discussions of the systemic, societal and civilisational effects of depletion.

Re: THE Price of Crude pt 14

Unread postby Pops » Thu 27 Dec 2018, 12:54:10

Yeah, end of the world, lowest price since...
Last year.

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The legitimate object of government, is to do for a community of people, whatever they need to have done, but can not do, at all, or can not, so well do, for themselves -- in their separate, and individual capacities.
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Re: THE Price of Crude pt 14

Unread postby Outcast_Searcher » Thu 27 Dec 2018, 19:28:04

dolanbaker wrote:It's going south again, looks like the correction isn't complete yet.
Will be interesting to see where it levels out, will it remain above the lows of the last GFC for example.
Will there be another round of QE to save the day.

Aside from the panickers who like to run around and proclaim the world is ending with every economic blip, where are there any signs there are any days that need saving, much less any significant problem?

News flash. Stock markets are volatile -- that means they go up, AND DOWN. Same as it ever was.

The great recession mess got to be a significant problem in the fall of 2008, because it looked like various large institutions failing could cause a cascade effect, so there was a confidence problem.

Why does the market falling a percent or three on a given day in a nice orderly process come remotely close to that.

As of 12/20/18, the forward S&P 500 ratio had fallen to a relatively moderate 14.5.

https://www.yardeni.com/pub/mktbriefsppesecind.pdf

Don't like forward estimates? The S&P 500 ratio (based on the past year's earnings) has fallen from over 24 at the highs in '17 and '18 to a little over 19 now. Still higher than average, but much more reasonable.

https://www.macrotrends.net/2577/sp-500 ... ings-chart

http://www.multpl.com/

Only in the land of nearly constant spreading of false economic doom would that constitute the need to panic or save the day.

At some point, if prices go low enough, this will represent a good buying opportunity.

Looking at a 5 year chart and a 10 year chart for the major US indexes, I'm inclined to be patient, but definitely feel better about the relative value of the stock market than I have in years.
Last edited by Outcast_Searcher on Thu 27 Dec 2018, 19:39:03, edited 1 time in total.
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: THE Price of Crude pt 14

Unread postby Cog » Thu 27 Dec 2018, 19:38:28

If the economy is in serious trouble you would have seen it in unemployment numbers by now. Unemployment is stable. This correction is fear based on what might happen, not what has happened. We do not know about China and how that trade negotiation will work out or what this new Democrat House has in mind. We will have some 4th quarter GDP numbers in a month, so we will see if there is anything untoward happening with the real economy.
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Re: THE Price of Crude pt 14

Unread postby Outcast_Searcher » Thu 27 Dec 2018, 19:46:23

Cog wrote:If the economy is in serious trouble you would have seen it in unemployment numbers by now. Unemployment is stable. This correction is fear based on what might happen, not what has happened. We do not know about China and how that trade negotiation will work out or what this new Democrat House has in mind. We will have some 4th quarter GDP numbers in a month, so we will see if there is anything untoward happening with the real economy.

Sounds perfectly reasonable, and I agree completely re the fear aspect. The good news there is that if actual bad things don't materialize, historically such pullbacks have been relatively brief.

The other good news is if this pullback turns out to be long and deep, then eventually I should be able to buy some good stock indexes relatively cheaply. I was buying QQQ (proxy for NASDAQ 100) hand over fist in the low 20's when it bottomed in 2002, by ramping my monthly DCA amount way up. My rationale was that computers and related tech were NOT going away, no matter how much investors panicked so the question was how long a recovery in the stocks as a group would take -- not whether it would happen.

But then, I don't get up each day believing "this is the end of the financial world", so I guess I'm biased. :roll:
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: THE Price of Crude pt 14

Unread postby GoghGoner » Thu 21 Mar 2019, 08:23:02

Time to stop panicking over low prices and worry incessantly about high prices :P

Oil prices almost up $20 since the middle of December. Another $20 and maybe this site starts getting a little busy again.
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Re: THE Price of Crude pt 14

Unread postby vtsnowedin » Thu 21 Mar 2019, 08:33:27

"What? Me worry?" 8)
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Re: THE Price of Crude pt 14

Unread postby GoghGoner » Sat 01 Jun 2019, 09:27:14

Oil prices down $10 the past two weeks. Financial markets are down the past month. I haven't been following supply news too much but from what I know this may be caused by demand issues. We will see what happens but if the demand weakness is temporary, we will probably see a recovery by the fall. With rig counts in NA down significantly yoy, this sudden drop in price will cause further disparities in counts.

I like the cheaper gasoline prices but I wanted to test my theory that $100 oil wouldn't be matched with an increase in US rig counts. Oh well, enjoy it will it lasts -- the time will come to test my theory soon enough.
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Re: THE Price of Crude pt 14

Unread postby Outcast_Searcher » Tue 04 Jun 2019, 03:15:27

GoghGoner wrote:Oil prices down $10 the past two weeks. Financial markets are down the past month. I haven't been following supply news too much but from what I know this may be caused by demand issues. We will see what happens but if the demand weakness is temporary, we will probably see a recovery by the fall. With rig counts in NA down significantly yoy, this sudden drop in price will cause further disparities in counts.

I like the cheaper gasoline prices but I wanted to test my theory that $100 oil wouldn't be matched with an increase in US rig counts. Oh well, enjoy it will it lasts -- the time will come to test my theory soon enough.

Sigh. If you would read this thing called "the news", it's not difficult to see that there's a broad consensus (among economists who look at data instead of just making things up), that this is largely CONCERN about a weaker global economy due to the likely looking trade wars brewing (courtesy of Trump ratcheting things up recently) -- and what that could do to global oil demand.

And those same economists and other stock market watchers are assigning much of the down move in stocks to the same concerns.

With a possible war with Iran seeming less likely with Trump apparently backing off on the rhetoric there, that might also be contributing to downward pressure on oil prices, IMO.

There isn't some big, overall "supply issue" or "demand weakness" that seems to be causing this. It's concerns about the future, at least for now.
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: THE Price of Crude pt 14

Unread postby GoghGoner » Tue 04 Jun 2019, 06:03:16

There isn't some big, overall "supply issue" or "demand weakness" that seems to be causing this. It's concerns about the future, at least for now.


I disagree. This move is based partly on the fundamentals and coincides with some counter-seasonal builds in inventories. This is the classic weak demand price crash that we have witnessed many times in the past. The only question is how long the weakness lasts.
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Re: THE Price of Crude pt 14

Unread postby GoghGoner » Thu 06 Jun 2019, 05:39:08

My gosh that was a massive build in US total stocks yesterday -- 22 mb.

Brent briefly went below $60 and WTI went below $51.

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Re: THE Price of Crude pt 14

Unread postby rockdoc123 » Thu 06 Jun 2019, 10:20:54

This move is based partly on the fundamentals and coincides with some counter-seasonal builds in inventories. This is the classic weak demand price crash that we have witnessed many times in the past


It is not a demand issue but one of over-supply as has been pointed out by a number of articles:

U.S. crude, gasoline and distillate stocks rose last week, the Energy Information Administration said on Wednesday. Crude inventories USOILC=ECI rose 6.8 million barrels in the week to May 31, compared with analyst expectations for a decrease of 849,000 barrels. across-the-board inventory builds makes for a very bearish report," said John Kilduff, a partner at Again Capital. A surge in imports and a increase in domestic production boosted inventories, he said. "The inventory gains came despite strong demand for crude oil from refiners and gasoline from drivers," he said.

The rise in refinery runs has paled in comparison to the jump in imports, particularly waterborne imports to the Gulf and West Coasts, said Matt Smith, director of commodity research at ClipperData


US crude oil production as estimated by the Energy Information Administration showed that production for the week ending May 24 rose to 12.3 million bpd, resuming its all-time high that was originally hit the week of April 26.


Higher production, rise in refinery outputs and increased imports have all conspired to raise the amount of oil available for this time of year. Demand is as strong as it has been, just not strong enough to make up for the increased supply.
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Re: THE Price of Crude pt 14

Unread postby GoghGoner » Fri 07 Jun 2019, 06:14:07

No. Globally supply has barely increased. Definitely demand when looking at the bigger picture in commodities.
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Re: THE Price of Crude pt 14

Unread postby Yoshua » Fri 07 Jun 2019, 06:16:54

The WTI price hasn't made any new highs since 2008, only new lower highs. And it hasn't made any new lows either after 2016, only new higher lows. At some point this trend will break down, as the WTI price is getting squeezed between lower highs and higher lows.

So what happens then? I don't know. Some kind of a breakdown?
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Re: THE Price of Crude pt 14

Unread postby rockdoc123 » Fri 07 Jun 2019, 09:08:10

No. Globally supply has barely increased. Definitely demand when looking at the bigger picture in commodities.


yeah, right. Contrary to anything written by economists at IEA or by oil analysts that regularly publish on Oilprice.com, Bloomberg, CNBC etc.

Please provide us with the source of your "analysis".

The WTI price hasn't made any new highs since 2008, only new lower highs. And it hasn't made any new lows either after 2016, only new higher lows. At some point this trend will break down, as the WTI price is getting squeezed between lower highs and higher lows.


If chart analysis actually meant anything maybe. In the real world what has happened is there was a period where supply from US unconventional, Russia and Saudi Arabia outpaced demand growth. That drove down prices for some time until many of the companies in the US reduced activity and OPEC/Russia responded with production decreases resulting in decreased supply which became aligned with demand. That, in turn, resulted in prices rising but not for long since the US companies had substantial frack backlog and the turn around time from a rise in price to production in the unconventionals is extremely short (days or weeks versus months and sometimes years in the conventional side of things). The price is being driven by US production and OPEC/Russia cuts (at least threat of cuts) and to a lesser extent by worries about a contracting economy in 2020.
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Re: THE Price of Crude pt 14

Unread postby wildbourgman » Fri 07 Jun 2019, 13:32:08

GoghGoner wrote:No. Globally supply has barely increased. Definitely demand when looking at the bigger picture in commodities.


I think you have to define supply. If the perception is that oil is available at a moments notice, then the supply cuts make no difference to the market unless some refinery doesn't get a shipment when they need it.

In the view of the market what difference does it make if the oil is being choked back at the well head and being stored in the reservoir, being held in tanks or even tankers just as long as I can fill up my car when I pull up to the station? I have not waited in a line for fuel, I have not been rationed on the amount of fuel I purchase and I have not been concerned about either of the two prior events happening for some time.

So OPEC's decisions seems to have had had a minuscule effect at this point.
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Re: THE Price of Crude pt 14

Unread postby AdamB » Fri 07 Jun 2019, 13:47:04

Yoshua wrote:The WTI price hasn't made any new highs since 2008, only new lower highs. And it hasn't made any new lows either after 2016, only new higher lows. At some point this trend will break down, as the WTI price is getting squeezed between lower highs and higher lows.

So what happens then? I don't know. Some kind of a breakdown?


Sounds like a completely illogical thought. Express it with supply demand curves and perhaps normal folks can discuss its value? There is certainly no requirement across a completely arbitrary time frame that normal ups and downs become a breakdown.
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Re: THE Price of Crude pt 14

Unread postby AdamB » Fri 07 Jun 2019, 13:50:53

GoghGoner wrote:No. Globally supply has barely increased. Definitely demand when looking at the bigger picture in commodities.


Peak oilers called peak back around the 72 million barrel a day level. We sit nearly 10 million barrels a day higher now. Of COURSE global supply has increased, hence no rapture event.

I've got no problem examining demand instead, Amy Jaffe was discussing peak demand in like 2015, Barclays is laying out 3 peak demand scenarios by 2030, and the Center for Strategic Studies was discussing a deceleration in structural demand like 2 months ago.

Watching a tree blow in the wind and drawing conclusions from it is quite inferior to learning some basic weather forecasting for the local forest.
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Re: THE Price of Crude pt 14

Unread postby Yoshua » Fri 07 Jun 2019, 14:58:06

It was just an observation of a trend in the WTI price.

The last high was USD 66 and the low was USD 51. If this trend continues, then it will reach its end this year as it forms its last triangle of doom...the mother of all triangles of doom.
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Re: THE Price of Crude pt 14

Unread postby wildbourgman » Fri 07 Jun 2019, 14:59:45

AdamB, one thing that isn't apparent to greater market yet is the fact that 90% of the companies producing in shale (which accounts for 6 mbpd of the 10 mbpd production increase that you speak of) can't make a profit in shale.

And oil price isn't even much of a concern due to the added operating cost they incur as the commodity price goes up. So once the investors and eventually the consumer see the writing on the wall things could change quickly. Then as opposed to what I said earlier, if the perception of abundance changes so could the price. Easy money and an investment mania allowed the shale to be something more than pure profit margins would have and that misallocation has to find its balance at some point.
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Re: THE Price of Crude pt 14

Unread postby rockdoc123 » Fri 07 Jun 2019, 16:06:31

AdamB, one thing that isn't apparent to greater market yet is the fact that 90% of the companies producing in shale (which accounts for 6 mbpd of the 10 mbpd production increase that you speak of) can't make a profit in shale.


either you are a sock puppet for shortonoil or you haven't bothered to read the various posts here. The idea that companies involved in the tight oil/gas market aren't making a profit is basically incorrect. All one has to do is go and read the quarterly and/or annual reports or look at some of the industry analyses such as Ernst & Young. The blog posts (where you no doubt get your info) use accounting numbers reported by companies that include DD&A as well as invested cash for new acreage, acquisitions or new wells. DD&A is an accounting exercise that although important from the accounting side of things is not important when it comes to determining how well a company is doing. Those are paper entries and do not impact cash into the organization. When you look at cash in vs cash out based on their balance sheets not only are most of the companies making considerable money but they are able to fund all of their programs through reinvestment of the cash. Oil and gas companies are expected both by the market and their shareholders to not show much excess cash on hand other than operating cash at the end of a given reporting cycle. The reason is these are growth companies and to grow they need to reinvest all profits into the business unless they are dividending some of it back to shareholders. This is why a number of oil and gas companies last year bought back shares. They were expected to do something with their cash in order to improve company metrics and the obvious way to do that was buying back shares versus other activities such as more wells, acquisitions etc.
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