Oil Drops over 30% since summer, now what?

[NoTrespassing]

I haven't seen any of the energy experts address the discrepancy in the drop between West Texas Crude and Brent on Friday. Texas oil dropped a whopping 10% in one day while Brent dropped about 3.3%.

 

[EddieWalker]

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

Steve

They where just repeating what the media was saying on TV. I think the real cause for the rise in oil prices back then was Iran making threats of war and the instability in the middle east. While that is still going on, it's not at the point of affecting delivery or threatening delivery. A big reason is the stability of the US and Canadian markets.

In my opinion, the only way to solve the threat of world terrorism from the middle east is to remove the incentive of those financing it. If they can't afford to pay for it, it will go away. Making oil worth less means there is less money for them to spend on those things.

Eddie

 

[smstonypoint]

They where just repeating what the media was saying on TV. Eddie

Exactly. Speculators are convenient whipping boys/girls for politicians.

Steve

 

[IXLR8]

I think Saudi Arabia can afford to pump oil down to $45/Barrel, but Russia and Iran need oil prices above $95/Bl otherwise their economies aren't funded. Some of the other mid-east oil producers can live with prices in between. The Saudi's are doing more to hurt Russia than our sanctions are. There are some US fracking companies that will be hurting if the prices stay this low, or go lower. A lot of them went way into debt to get running and I read that oil prices need to be above $75/Bl for them to meet their debt requirements.

 

[Sodo]

IMHO there is a huge supply of petroleum in the earth. Oil industries can release more oil to counter "market threats" by causing investment risk. It's just business. They have a commodity that we want and can afford, it's their "job" to get the most money they can. Oil in the ground is money in the bank only if there's is a market. They have to get it out of the ground and sell it.

When I see prices drop like this I think its a move to scuttle some kind of market threat. Such as North American production, alternative energies, or public support for conservation.

It can also effect a change in governments. For example if China were opting towards renewable energies they would need to scuttle that. Flooding the market with cheap oil would increase the number of cars in China for example. And sell a lot of V8s in the USA too ! I just got an F150 with the V8, didn't think twice about it. 10 years ago I wouldn't have.

 

[turnkey4099]

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.

Yep, it came close to the government forcing them to buy the oil they had options on. That came at pretty closeto the end of the rise, may have been a major cause of it.

Harry K

 

[NoTrespassing]

Correct answer.

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

Falling Oil Prices Make Fracking Less Lucrative : NPR

I guess everybody is coming up with different numbers these days.

According to this article "the IEA reports that most production in the Bakken formation, one of the main drivers of shale-oil output, remains profitable at or below $42 a barrel."

I'm sure it also depends on how the well or wells were financed but I'd hope they are taking that into consideration in the IEA report. I would expect consolidation in the shale oil industry.

Lower Oil Prices Are a Free-Market Victory - Larry Kudlow - Townhall Finance Conservative Columnists and Financial Commentary - Page 1

I like Larry Kudlow, his opinions seem reasonable to me most of the time.

 

[mjarrels]

Starting next year, Virginia gas tax goes up. Price per gallon will remain about the same.

mark

 

[300UGUY]

I know that some oil service companies, like Seadrill, are really losing out, because offshore drilling is shutting down. They eliminated their dividend, and the stock dropped 20%.

The speculators are going to make money, up or down in the market.

Kudlow has zero credibility with me. Everything begins and ends with politics for him. I'd rather watch Bloomberg or MSNBC for business news.

 

[300UGUY]

I haven't seen any of the energy experts address the discrepancy in the drop between West Texas Crude and Brent on Friday. Texas oil dropped a whopping 10% in one day while Brent dropped about 3.3%.

I think Brent has 2 things going for it: 1) it is euro based, so more of a international market. And 2) I think (?) Brent is considered a lighter crude, easier to refine.

One interesting player is Norway. They have set up a huge fund from their oil income. This is available to cushion all manner of economic shocks.