US Growth

Graham_Devon

It's surged ahead of it's estimates....

Gross domestic product (GDP), the broadest measure of goods and services produced across the economy, expanded at a 3.7% seasonally adjusted annual rate in the second quarter of 2015, the Commerce Department said on Thursday, up from the initial estimate of 2.3% growth. Economists had forecast a 3.3% rate.

“Consumer are spending, businesses are investing, the housing market is recovering, state and local governments are boosting outlays, and the federal government is no longer a drag on growth,” said Stu Hoffman, chief economist at PNC Financial. “Trade will remain a weak spot with slow global growth and the strong dollar, but solid domestic fundamentals will be more than enough to overcome this.”

Another conundrum for interest rates then.

Noteworthy is that brent crude is up a staggering 10+% on the back of this.

http://www.theguardian.com/business/2015/aug/27/us-economic-growth-strong-revised

[Deleted User]

its what happens to an economy when the govt doesn't plunge it into austerity

Graham_Devon

Seems some are questioning the DOW though. Dropped 300 points in literally minutes.

The the numbers came out right after the drop and it surged up again.

Have to admit, it does look weird as the DOW was steady all day and then a massive drop before the good news comes out? 300 points regained within minutes again.

HAMISH_MCTAVISH

Graham_Devon wrote: »

Noteworthy is that brent crude is up a staggering 10+% on the back of this.

Oil is in an interesting position at the moment.

Due to a lack of growth in North American shale production and increased decline in mature fields, a Brent price as low as $50 per barrel is not sustainable beyond 2016, according to research from Rystad Energy.

Rystad claimed that around 10,000 shale wells would need to be drilled each year in order to keep North American production flat, and drilling costs would need to decrease by 20 per cent in 2015, compared to 2014, at an oil price of $50, for firms to break even.

The oil and gas consultancy firm also said that, while $70 per barrel is “likely too high an average price for 2016, it is too low an average price beyond 2017 as the additional effect of non-sanctioning of projects reduces the global supply potential longer term”

http://www.cityam.com/223168/oil-analysts-predict-price-spikes-brent-crude-early-2016

As always, it is all about supply and demand, and the current decrease in exploration activity because of low prices just ensures prices rise due to a lack of supply in the future.

Graham_Devon

HAMISH_MCTAVISH wrote: »

Oil is in an interesting position at the moment.


http://www.cityam.com/223168/oil-analysts-predict-price-spikes-brent-crude-early-2016

As always, it is all about supply and demand, and the current decrease in exploration activity because of low prices just ensures prices rise due to a lack of supply in the future.

I agree with all of that.

But I doubt anyone 2 years ago would have suggested the oil price would be where it is now. It would seem utter madness if anyone suggested it.

But here we are. Very difficult I would think to suggest the price of oil will always rise. As no doubt 2 years ago people were saying the very same thing.

The thing with shale is that yes, the price being low endangers current projects. But if the price rises again, to say >$100 a barrel, shale becomes valuable again...

Thrugelmir

woodbine wrote: »

its what happens to an economy when the govt doesn't plunge it into austerity

What's wrong with the UK's growth figures?

US economic data has been revised recently. With growth for 2011 to 2014 being downgraded from 2.3% to 2%. Seems austerity has bitten.

HAMISH_MCTAVISH

Graham_Devon wrote: »

Very difficult I would think to suggest the price of oil will always rise. As no doubt 2 years ago people were saying the very same thing.

The thing with shale is that yes, the price being low endangers current projects. But if the price rises again, to say >$100 a barrel, shale becomes valuable again...

Not saying it will always rise at all, but it does seem that sub $50 oil is unsustainably low and supply falls off until prices rise, and $100 plus oil seems to trigger a lot of supply coming online until eventually prices fall again.

It's just supply and demand chasing equilibrium, albeit with a rather big lag, due to the length of time it takes for production to increase and decrease.

cells

Graham_Devon wrote: »

I agree with all of that.

But I doubt anyone 2 years ago would have suggested the oil price would be where it is now. It would seem utter madness if anyone suggested it.

But here we are. Very difficult I would think to suggest the price of oil will always rise. As no doubt 2 years ago people were saying the very same thing.

The thing with shale is that yes, the price being low endangers current projects. But if the price rises again, to say >$100 a barrel, shale becomes valuable again...

shale tech is amazing in virtually every way and viable at todays prices. Production is still over 5 mbpd and nat gas it a massive 40bcf/d

a low price quick return investment

<$5m and 2 months to drill a hole which returns ~100% of investment in the first year and expected $30m in its lifetime (@$3 nat gas) and its getting better all the time

cells

HAMISH_MCTAVISH wrote: »

Not saying it will always rise at all, but it does seem that sub $50 oil is unsustainably low and supply falls off until prices rise, and $100 plus oil seems to trigger a lot of supply coming online until eventually prices fall again.

It's just supply and demand chasing equilibrium, albeit with a rather big lag, due to the length of time it takes for production to increase and decrease.

yep $50 looks a bit low and $100 looks far too high, not only does supply increase rapidly at $100 oil but conversion tech starts to kick in. The USA was planning on building the worlds biggest gas to liquids plant when oil was at $100 and once built such a plant will keep churning out oil for 40 years no matter the price. And companies like UPS were beginning to convert their vans to run on nat gas instead of diesel and households convert from fuel oil to nat gas (or even electricity)

Thrugelmir

Hasn't stopped the Saudi's from pumping 10 million barrels a day the highest rates since 2002. Nor the Russians who are also pumping at record levels to maintain their level of income. The losers could well be in the North Sea where platforms will become financially unviable over time.

Generali

HAMISH_MCTAVISH wrote: »

Not saying it will always rise at all, but it does seem that sub $50 oil is unsustainably low and supply falls off until prices rise, and $100 plus oil seems to trigger a lot of supply coming online until eventually prices fall again.

It's just supply and demand chasing equilibrium, albeit with a rather big lag, due to the length of time it takes for production to increase and decrease.

The cost of getting oil out of the ground in the US is only going one way and companies are already working out better was to use capital equipment. The rig count is falling but production isn't falling with it.

My best guess is that as the $500bn of debt comes up to be repaid, companies are going to seek Chapter 11 protection and someone is going to end up with some very cheap oil assets. I suspect that $45 oil is here to stay.