Oil Drops over 30% since summer, now what?

[NoTrespassing]

Opec holds the line on output. I suspect trying to damage long term oil production in the US. There may be collusion with US gov. to hurt Russia but I don't think this admin. could pull that off.

What will these lower prices mean for the world economy....or....are they a signal of something that's already happening?

In the near term, I'm enjoying the lower gas prices.

Kevin

 

[Tomtint]

I believe OPEC is pushing the prices down to put as much pressure on domestic production as possable. I believe the number is 45.00 per barrel and they are break even. Domestic is 65.00 at break even.at some point OPEC will slow investment in the US operation if the margins are eroded.

 

[MikePA]

Fracking = more Supply worldwide
More supply = lower Prices worldwide

OPEC could have increased production to lower prices even faster, they could have also cut production in an attempt to reduce Supply and cause Price to increase. They chose to do nothing.

 

[TCJatko]

I believe OPEC is pushing the prices down to put as much pressure on domestic production as possable. I believe the number is 45.00 per barrel and they are break even. Domestic is 65.00 at break even.at some point OPEC will slow investment in the US operation if the margins are eroded.

This. ^^^^

 

[MikePA]

OPEC doesn't control prices, they control 40% of the world's oil supply. They decided not to reduce production below 30,000,000 barrels/day.

The current world price is $69/barrel.

 

[EddieWalker]

Really proves that there is a lot more oil out there then we are being told and that US production has made a huge difference in the world market. With so much more oil here that the government has kept off limits from drilling, there is no telling what the price could go down to. Cheaper oil will mean lower costs to manufacture, transport and operate just about everything.

Is there any other industry that works harder to lower the price of their product then the oil industry? They spend billions finding it and getting it out of the ground, employ millions of people and constantly invent new ways to do this the most cost effective way possible. It boggles the mind why so many think of the oil industry as some thing bad when it should be admired.

Eddie

 

[sseelhoff]

I believe OPEC is pushing the prices down to put as much pressure on domestic production as possable. I believe the number is 45.00 per barrel and they are break even. Domestic is 65.00 at break even.at some point OPEC will slow investment in the US operation if the margins are eroded.

Correct answer.

OPEC decision means 'pain train' for U.S. oil industry

Falling Oil Prices Make Fracking Less Lucrative : NPR

Most of the world's oil is selling for about $80 to $85 a barrel now. But not all oil is created equal. In the Middle East, it's cheaper to produce, at a cost of less than $30 a barrel on average, according to the Norwegian firm Rystad Energy.

But in the Arctic, producing a barrel costs $78 on average. From Canada's oil sands, it's an average of $74 a barrel. And because those are averages, some companies have costs that are higher — which means there could be drillers currently producing crude at a loss.

Here in the U.S., the oil drilling boom is due largely to technologies like hydraulic fracturing, or fracking, used to force oil from shale formations deep underground. Producing this oil, Rystad figures, costs an average of $62 a barrel.

"What is really interesting for the U.S. drillers and producers is how long they are going to continue the high activity levels that they have, now that prices are going down," says Per Magnus Nysveen, head of analysis at Rystad.

Already, some companies are rethinking their plans.

 

[smstonypoint]

In a thread from several years ago, several TBN members blamed speculators for rising oil prices. Will those members now praise speculators?

Steve

 

[Tomtint]

In a thread from several years ago, several TBN members blamed speculators for rising oil prices. Will those members now praise speculators?

Steve

Speculators did push oil to stupid numbers. Mainly because they were buying options and never intended to take delivery. They pumped the price to a point where it would hedge a portfolio and liquidated the option before expiration. "Pump and dump " At that time the stock market was in free fall from the housing crash and traders were exploiting whatever could be manipulated at the time. That just happened to be oil.

 

[smstonypoint]

Speculators did push oil to stupid numbers. Mainly because they were buying options and never intended to take delivery. They pumped the price to a point where it would hedge a portfolio and liquidated the option before expiration. "Pump and dump " At that time the stock market was in free fall from the housing crash and traders were exploiting whatever could be manipulated at the time. That just happened to be oil.

So, rising oil demand, especially in China, had nothing to do with it?

I think you are confusing futures and options on futures. Only a small percentage of futures of any type (e.g., corn, soybeans, live cattle, oil, gold, etc.) are ever settled by delivery. In-the-money options near expiration can be exercised or liquidated on the options exchange. If market fundamentals were not at work, we would expect to see inventories increase dramatically if the physical market was not clearing at the market price.

Steve