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Uncle Bill
06-14-2012, 05:17 PM
...as opposed to some rants by the Oracle of IHOP, and the equally hard to believe statements from the Louisiana Linguini Lover. (BTW, Franco, your rants against Bush NEVER mention the fact that 3,00 AMERICANS perished at the hands of those muslims we have been fighting, and you continue to defend by calling it "Bush's war". Your view of the USA is astounding...what I should expect from someone never willing to fight for his country.)

UB



What’s the Deal With Oil Prices?







http://www.agorafinancial.com/temp/DR/email/template/ByronKing.jpg


Byron King


What the heck is happening with oil prices?

West Texas Intermediate (WTI) oil is selling in the $82 ranger per barrel — way down from recent postings near $110. Overseas, the Brent price for oil is about $97 per barrel — way down from $125 per barrel as recently as early May.

What’s going on? How low can oil prices go? Are we looking at the beginning of a major price slide? Is the oil and oil service investment space under a pricing assault?

I doubt it. Here’s why: 40% of global oil production comes from places where the national governments cannot afford oil prices to go much lower than they are currently.

The nearby chart tells the tale.



http://dailyreckoning.com/wp-content/blogs.dir/5/files/2012/06/DRUS06-13-12-1.gif



This chart, courtesy of Pierre Sigonney, chief economist of the French oil giant Total SA, describes the oil price level that a series of major producers require in order to balance their national budgets.

The red-shaded region at the bottom is the “breakeven cost” for producers (as estimated by Total). That is, the red shading reflects how much it costs to lift barrels of crude oil out of the ground.

As you can see from the chart, many producers lift oil at an overall cost of $10-20 per barrel. Even the major international players (the red bar on the far right) are in the $40 per barrel average for production.

But take a look at that yellow “budget break-even” line. That’s the price at which the major petro-players have to sell oil in order to fund their national spending. Keep in mind that all of the countries on the list — from Qatar to Venezuela — rely on oil sales for the vast majority of their national income.

Specifically, Libya, Saudi Arabia, Algeria, Iraq, Angola, Nigeria, Ecuador, Iran, Russia and Venezuela all require oil prices of at least $80-100 (or more) just to have sufficient income to run their national budgets. Without a strong oil price, these countries will have bread lines and riots. West Texas Intermediate at $82 a barrel and Brent hovering under $100 is the threshold of pain for the world’s largest oil-producing nations.

Now consider that the 10 countries I just named account for about 35 million barrels of global oil output every day — over 40% of total world crude oil output. (Add in natural gas and gas liquids, and it’s even more.) That’s 40% of world crude output coming from places where the national governments cannot tolerate a price drop for long. So no... the oil price shouldn’t go down much from here.

Still, let’s do some devil’s advocacy and think it all through. The European economy is on the ropes. Chinese economic activity is decelerating. Japan is in a bizarre, permanent recession. The US economy appears to be stalling, and is possibly slipping back into Recession II.

So yes... there are problems all over the place. We could see precipitous drops in energy demand from many quarters. But if oil prices fall too far, they probably won’t stay down for long. The world’s largest oil producers cannot afford it, in any sense of the word.

Indeed, an oil price drop will present another re-entry opportunity for investors to pick up more shares of great oil production and/or oil service companies at a relative bargain. Keep in mind that a pullback in share price could also make the dividend yield even more attractive for many oil players.

Between now and the end of the year, I expect to see oil prices firm up gradually, perhaps even violently. We could also see another sharp, upward spike based on all manner of political and technical events.

The consulting firm KPMG recently predicted that oil prices will remain volatile for the rest of the year. There’s a chance we could see over $140 per barrel, according to a wide-ranging poll of energy executives by KPMG. The underlying issues are economic uncertainty, geopolitical risk, rising operational costs and regulatory concerns.

Libya is back online, for example. But according to what I’ve been told, the wartime damage from earlier this year was not properly repaired. Thus Libyan production facilities, pipelines, pumps, etc., are more jury-rigged than not. We could see a sudden drop in Libyan output based on mechanical and engineering issues. And Libya is just one of the ten countries on that chart above.

There is plenty of risk of supply disruptions from the other nine as well.

Buy the dips!

Regards,

Byron King
for The Daily Reckoning

Joel’s Note: Incredibly, Byron doesn’t see doom and gloom on the horizon, as many analysts do. Despite his outlook for significantly higher energy prices, Byron is predicting a new age of prosperity for the USA. As the old players price themselves out of the energy game, Byron is expecting the “greatest explosion of wealth, industry and prosperity to hit our nation in a century!”

Buzz
06-14-2012, 10:38 PM
Japan is in a bizarre, permanent recession. The US economy appears to be stalling, and is possibly slipping back into Recession II.







Japan is in a liquidity trap, as is the US economy. Nothing we are doing or contemplating doing will lift us out of it. Barring political unrest, I don't think the world economy will support a long stretch of high oil prices for awhile.

Gerry Clinchy
06-15-2012, 08:31 AM
If Byron's analysis is accurate (see the word "if") ... then it would be in the interest of those present major oil producers to have the US continue its policies of constricting US its production.

If the US exploited the potential of the oil resources recently discussed (like the trilliions of barrels mentioned the other day) ... and world prices were to drop, the repressive govts of Russia, Venezuela, Iran, etc. would have a tough time continuing their control of their populace as their economies crashed for lack of funding.

When you stop to think about it, wouldn't it be easier to ramp up US/Canada oil production and sap the world power of Russia & others in that way, rather than waging wars and arms races? In truth, some of the brightest spots historically have been when the US economic strength showed the flaws in the communistic & socialistic models. People risked their lives to escape from East Germany to West Germany; not the other way around. We don't need a fence on the US/Mexico border to keep Americans from fleeing to Mexico.

The US has always won the war of economic prosperity ... much more beneficial in so many ways than trying to win with guns and precious lives. Would we rather risk finding the solutions to safely use fracking v. sending young men to die on foreign soil?

menmon
06-15-2012, 09:50 AM
I lost friends that day! You just jumped on the band wagon because it was the cool thing to do. Muslims did not kill those people...bad people killed those people. So fighting two wars and killing many more american so you can run around saying "support our troops," "remember what happened that day" and have a flag in your yard discuss me.

Muslims died in those towers too. So do you think everytime some person pretending to be a christian kills someone we should start a war angainst christians?

Gerry Clinchy
06-15-2012, 09:59 AM
Sambo, I believe that Bill said "those Muslims we have been fighting" ... that would NOT include ALL Muslims. However, I think this discussion is about oil.

Franco
06-15-2012, 10:25 AM
UB, another attempt at revisonist history?

Iraq didn't attack us on 9/11, the Bin Ladin goons did. Most of the attackers were Saudis and the money was Saudi money. From the same family of the Saudi king that Bush hugged and kissed after 9/11. Bush and Cheney had no idea of what they were getting us into. Heck, Bush thought the mission was accomplished! Then, when they realized they were knee deep in alligators they decided that we need to be a nation builder. Does anyone think that Bush/Cheney would do it all over again? Of course NOT! You may not feel bad for those that lost their lives and their families in Bush's folly but, I do. Not to mention those that have been disabled for life and for what? Thousands of American lives, a few hundred thousand civilians because we couldn't find any WMD's! Had Obama made this tragic mistake, you would want him crucified. But because Bush is a Republican, he gets a free pass! Some Patriot you are!

menmon
06-15-2012, 10:29 AM
He began it with a shot at mine and Franco's charactor.

There is not enough equipment and experienced labor to drill anymore wells than are currently being drilled. So this tired story of not allowing drilling in the US is just politics.

Less need clearly has something to do with price and more supply has something to do with price. Supply and Demand its ECON 101.

All this is someone putting a spin on it to try and get votes and obviously he has a listener.

Franco
06-15-2012, 10:57 AM
He began it with a shot at mine and Franco's charactor.

There is not enough equipment and experienced labor to drill anymore wells than are currently being drilled. So this tired story of not allowing drilling in the US is just politics.

Less need clearly has something to do with price and more supply has something to do with price. Supply and Demand its ECON 101.

All this is someone putting a spin on it to try and get votes and obviously he has a listener.

That is what people do when they can't defend thier opinion!

huntinman
06-15-2012, 04:10 PM
I lost friends that day! You just jumped on the band wagon because it was the cool thing to do. Muslims did not kill those people...bad people killed those people. So fighting two wars and killing many more american so you can run around saying "support our troops," "remember what happened that day" and have a flag in your yard discuss me.

Muslims died in those towers too. So do you think everytime some person pretending to be a christian kills someone we should start a war angainst christians?



Wow... but all those on the planes that did the killing WERE Muslims. People like you are what have got the country in the poor shape it's in right now with that mindset.

luvmylabs23139
06-15-2012, 04:37 PM
Those planes flew in the towers all on their own???? Muslims were the ones that flew the planes into the towers, that is a fact!

Uncle Bill
06-16-2012, 12:01 PM
That is what people do when they can't defend thier opinion!


Actually I have no problem whatsoever defending my 'opinion', since I do have 'principles' unlike a neo-con such as yourself. That avatar of Goldwater is a hoot. Especially after backing a Libertarian like Ron Paul...a complete opposite to what Goldwater believed. When Barry ran for president, everyone fleed from his fierce views, thinking he was the next dude to drop the H-bomb. Then in his later years, he slid on over to socialism, much like what you do whenever you side with the Oracle of IHOP.

Just because you slam everyone with bluster, we should cow to your way of thinking. Sorry, I'm not buying.

UB

menmon
06-16-2012, 12:05 PM
And a christian stot that guy last night so now all christians are bad. These wars are ending so we need a new war, so lets pick a christian nation and start bombing away and lets send 100,000 boys over there to get their asses shot off. Sounds like a plan. Bad men...their religion has nothing to do with it.

Uncle Bill
06-16-2012, 12:36 PM
And a christian stot that guy last night so now all christians are bad. These wars are ending so we need a new war, so lets pick a christian nation and start bombing away and lets send 100,000 boys over there to get their asses shot off. Sounds like a plan. Bad men...their religion has nothing to do with it.

You actually "edited" this post? And it still sounds like the rants of an airhead? You could have used some military discipline, and mebbe your views of this nation might have become important. Certainly your education in American history is lacking, but your excuses for the muslim population are right on target for a socialistic apologist you are doing well to illustrate.

UB

huntinman
06-16-2012, 02:27 PM
And a christian stot that guy last night so now all christians are bad. These wars are ending so we need a new war, so lets pick a christian nation and start bombing away and lets send 100,000 boys over there to get their asses shot off. Sounds like a plan. Bad men...their religion has nothing to do with it.

what did he Stoot him with?

Their perverted view of their religion has everything to do with it. Ever hear of all the virgins awaiting them?? Wake up man!

You sure your last name isn't Pelosi? Sambo Pelosi... fits pretty good and the crap you spout certainly fits.