BBC on Oil - are low prices here to stay

IveSeenTheLight

Thrugelmir wrote: »

Saudi no longer has control that's whats changed. Saudi production costs are around $6 a barrel. So whatever the selling price they've more money flowing in than they know what to do with.

Exactly, hence they are looking to recapture their market share

IveSeenTheLight

Thrugelmir wrote: »

Plenty of fat to be cut away first. Oil was at this level not so many years ago. So what's changed in cost base.

Interesting perception.

If I can spin this, when will the government cut their fat from the taxation imposed on investment?

antrobus

IveSeenTheLight wrote: »

What about factoring in compound interest to evaluate it's long term value.....

How does that work?

All I know is that $50 today is worth more than $50 tommorrow.:)

IveSeenTheLight wrote: »

...Of course, were not factoring in the supply and demand.

Isn't price determined by supply and demand?

IveSeenTheLight wrote: »

....Certainly the big issue we have is control over our costs to produce, which there is a large industry incentive to cut.

Cost depends on where the oil is to be found. I think Saudi oil only cost a $2 per barrel to get out of the ground.

Scrubber

Thrugelmir wrote: »

Saudi no longer has control that's whats changed. Saudi production costs are around $6 a barrel. So whatever the selling price they've more money flowing in than they know what to do with.

Agree with the first parts, but not so much the bolded part. Having opened a super expensive refinery (as I understand it with banking partners), and they still have expensive public spending costs. No doubt they elites won't go without but wouldn't be surprised to see restructuring and cut-backs.

Seems unlikely they alone will cut production else they will be selling fewer barrels, when Iraq's output has just hit record levels.

Nearly 800,000 b/d of Saudi refinery capacity is expected online in the next year in the form of the 400,000 b/d Yasref refinery in Yanbu, in addition to the 400,000 b/d Satorp refinery in Jubail.

"Those who think Saudi Arabia can stabilize the market alone seem misguided," energy economist Philip K. Verleger said in his Petroleum Economics Monthly published Tuesday. The economic slowdown, "the decline in global demand, and the surge in crude production seem to require" a large cut in production, he said.

But that would mean Saudi exports "must decline from around 6.5 million b/d to less than 2 million b/d if Saudi Arabia acts alone," Verleger said.

"Recent statements by Saudi officials suggest they understand the problem. The reduced price differentials announced in September underscored their words, making it clear that the kingdom has no intention of acting alone," he said.

Brewer Dolphin trainee investment manager was, alarmingly, very daring to look at possible 'unthinkable' consequences if prices were fall much further. Not good for BTL empires up that way, where rising prices are the 'best' for taking on ever more mortgage debt and wonderful property acquisition.

One thing we do know is that it would take a bold economist to predict the bottom of this pricing crisis with any certainty. The only known truth is that should oil prices fall further as many analysts predict, there are likely to be more job losses and potentially a cessation of UK North Sea oil production.

antrobus

Scrubber wrote: »

Agree with the first parts, but not so much the bolded part. Having opened a super expensive refinery (as I understand it with banking partners), and they still have expensive public spending costs. No doubt they elites won't go without but wouldn't be surprised to see restructuring and cut-backs. ....

I believe that the fiscal breakeven point for Saudi is about $100 a barrel.

IveSeenTheLight

antrobus wrote: »

How does that work?

In the context that $20 in 1946 is not worth $20 today

antrobus wrote: »

All I know is that $50 today is worth more than $50 tommorrow.:)

Really?

$50 would get you £30 in August last year but £32 today.
all depends on the exchange rate and inflation rate.

antrobus wrote: »

Isn't price determined by supply and demand?

Yes?????????
My point was in relation to understanding the supply demand fluctuation between 1946 and today. That is what the post was responding to

antrobus wrote: »

Cost depends on where the oil is to be found. I think Saudi oil only cost a $2 per barrel to get out of the ground.

I'm referring to the costs of supply in the UK.

Each operator have differing production costs.

BP are paying off 300 people.
They also announced their Q4 profits reduced by 20% from £1.8 Billion to £1.5 Billion (That's just for a quarter) with their full year profits being reduced to £8.25 Billion.

"Cutting the FAT" as referenced earlier, means cutting the investment and cutting jobs to try and maintain profit margins from when the oil price was higher

antrobus

IveSeenTheLight wrote: »

In the context that $20 in 1946 is not worth $20 today...

I know, that's why I quoted real prices.

IveSeenTheLight wrote: »

... Really?.....

Yes.

IveSeenTheLight wrote: »

..$50 would get you £30 in August last year but £32 today. all depends on the exchange rate and inflation rate......

What does that have to do with "factoring in compound interest to evaluate it's long term value".

IveSeenTheLight wrote: »

...Yes?????????
My point was in relation to understanding the supply demand fluctuation between 1946 and today. That is what the post was responding to....

Well, no doubt if you looked at the oil price history chart I linked you could make an attempt at "understanding the supply demand fluctuation between 1946 and today".

IveSeenTheLight wrote: »

....I'm referring to the costs of supply in the UK.

Each operator have differing production costs.

BP are paying off 300 people.
They also announced their Q4 profits reduced by 20% from £1.8 Billion to £1.5 Billion (That's just for a quarter) with their full year profits being reduced to £8.25 Billion.

"Cutting the FAT" as referenced earlier, means cutting the investment and cutting jobs to try and maintain profit margins from when the oil price was higher

I don't think UK North Sea oil production is that big a deal in the global context. These days, I don't think that UK North Sea oil production is even that big a deal in the UK fiscal context; less than £5bn of revenues in 2013-14. If the oil price remains at $50 some of it may well be left where it is, but that's the way it goes.

IveSeenTheLight

antrobus wrote: »

I don't think UK North Sea oil production is that big a deal in the global context. These days, I don't think that UK North Sea oil production is even that big a deal in the UK fiscal context; less than £5bn of revenues in 2013-14. If the oil price remains at $50 some of it may well be left where it is, but that's the way it goes.

Interesting.
If we "leave it where it is", your suggesting we'll import more.

P.S., Hands up, I didn't look at your previous graph to realise you referenced real prices

Thrugelmir

IveSeenTheLight wrote: »

I
"Cutting the FAT" as referenced earlier, means cutting the investment and cutting jobs to try and maintain profit margins from when the oil price was higher

Not at all. I was listening to a guy from the Wood Group speaking. Said that employment costs in particular had risen dramatically in recent years .

Thrugelmir

IveSeenTheLight wrote: »

BP are paying off 300 people.

I recently witnessed 189 take VE from the Civil Service. Happening everyday in many organisations. As they become bloated and inefficient.