Oil Prices

HAMISH_MCTAVISH

Crashy_Time wrote: »

I hear they found some in Iran, no real need to spend years probing about in the North Sea now is there?

They found some in Iran many decades ago. And Saudi. And Venezuela. And the USA.

They still 'probed around in the North Sea"...;)

Generali

HAMISH_MCTAVISH wrote: »

They found some in Iran many decades ago. And Saudi. And Venezuela. And the USA.

They still 'probed around in the North Sea"...;)

The problem the North Sea is likely to face in future is that these US unconventional producers seem able to ramp up and down production with unprecedented speed.

Under normal circumstances I would expect to see production decline as a result of the current price not as wells are shut down but as they are not replaced at the end of their productive life. Setting up an oilfield is, AIUI, generally more expensive than running it.

The problem North Sea producers now face is that unconventional producers can beat them to the punch if prices rise: the frackers will be pumping oil before the North Sea producers can even get a rig onsite. IMHO the oil market is going to look a lot more like a soft commodities market (corn, potatoes) than a hard commodities market in future. Any strength in prices is going to be short lived as production can now be ramped up (comparatively) cheaply and easily.

cells

Generali wrote: »

The problem the North Sea is likely to face in future is that these US unconventional producers seem able to ramp up and down production with unprecedented speed.

Under normal circumstances I would expect to see production decline as a result of the current price not as wells are shut down but as they are not replaced at the end of their productive life. Setting up an oilfield is, AIUI, generally more expensive than running it.

The problem North Sea producers now face is that unconventional producers can beat them to the punch if prices rise: the frackers will be pumping oil before the North Sea producers can even get a rig onsite. IMHO the oil market is going to look a lot more like a soft commodities market (corn, potatoes) than a hard commodities market in future. Any strength in prices is going to be short lived as production can now be ramped up (comparatively) cheaply and easily.

good points, i would also add that the shale guys production is mostly upfront so they can not only get a well fracked and producing in 2 months buts its oil and gas payback is massive in the few months so the price and risk is far more clear

Also the shale guys can probably get financing for a $4 million drill and buy oil hedges out 3 months to 3 years and almost totally reduce their risk to nil. Their costs and income can be fixed and known

you cant really quantify and hedge your risks in the same way for a $4 billion oil project expected to be completed in 5 years and producing oil over 30 year period and if everything goes to plan and budget which is a lot less likely

Generali

cells wrote: »

good points, i would also add that the shale guys production is mostly upfront so they can not only get a well fracked and producing in 2 months buts its oil and gas payback is massive in the few months so the price and risk is far more clear

Also the shale guys can probably get financing for a $4 million drill and buy oil hedges out 3 months to 3 years and almost totally reduce their risk to nil. Their costs and income can be fixed and known

you cant really quantify and hedge your risks in the same way for a $4 billion oil project expected to be completed in 5 years and producing oil over 30 year period and if everything goes to plan and budget which is a lot less likely

It really is amazing. These unconventional producers have completely revolutionised the oil industry in less than a decade.

There is a truism in farming: prices are never high for more than 2 years. If the price of wheat or corn is high for 2 years then so much extra production comes on the market that prices collapse. That is exactly the model I now expect for the oil market.

wotsthat

Graham_Devon wrote: »

This article lists all the reasons as to why oil being low may not be as beneficial as many (on here at least) seem to claim...

Not my words, clearly. But plenty to munch on. All based on real figures and facts. Not simply theory.

http://www.theguardian.com/business/2016/jan/17/why-falling-oil-price-not-mean-global-economic-boom

No it's arguing the low oil price won't lead to a global economic boom and I don't think that is being claimed by anyone on here.

You were pretty bearish when prices were rising and are playing down the effects of $30 oil now. You're either a perma bear or feeding a bias.

fun4everyone

Generali your posts are very interesting thanks. Never considered what you are saying before.

Hamish,

The question today is whether or not the Shale boom will cap that process at lower levels than historically has been the case. Shale comes on-stream much faster when price justifies it so may well temper rises much above $60 a barrel.

On a selfish note I think $60 like you say would be OK for Aberdeen and see employment go back up significantly. Boom times would not come back but everything would be OK. Crude prices surely must recover from what we see today to some degree, the question is just when. I fear it may be a while.

Generali

wotsthat wrote: »

No it's arguing the low oil price won't lead to a global economic boom and I don't think that is being claimed by anyone on here.

You were pretty bearish when prices were rising and are playing down the effects of $30 oil now. You're either a perma bear or feeding a bias.

Graham_Devon manages to find the cloud in every silver lining.

The oil price falling because of increased supply is good news for the vast majority of people in the world. Heck, it's even good news for most people working in the oil industry although some individuals have lost out as quite a few in Aberdeen have unfortunately found out.

chewmylegoff

Graham_Devon wrote: »

This article lists all the reasons as to why oil being low may not be as beneficial as many (on here at least) seem to claim...

Not my words, clearly. But plenty to munch on. All based on real figures and facts. Not simply theory.

http://www.theguardian.com/business/2016/jan/17/why-falling-oil-price-not-mean-global-economic-boom

You've spent the last god knows how many years going on about how cripplingly expensive petrol is and how it is terrible for our economy and yet when oil prices fall you're now going on about how cheap oil will wreck the economy.

Is there any price at which oil can be traded which would be positive for our economy in your view? If so, could you let George Osborne know so he can get together with the rest of the shape shifting lizard people and arrange for prices to adjust accordingly? Or are we just all doomed whether oil is free, $1billion a barrel or anywhere in between?

Graham_Devon

chewmylegoff wrote: »

You've spent the last god knows how many years going on about how cripplingly expensive petrol is and how it is terrible for our economy and yet when oil prices fall you're now going on about how cheap oil will wreck the economy.

Is there any price at which oil can be traded which would be positive for our economy in your view? If so, could you let George Osborne know so he can get together with the rest of the shape shifting lizard people and arrange for prices to adjust accordingly? Or are we just all doomed whether oil is free, $1billion a barrel or anywhere in between?

I'm not saying it's going to cripple the economy.

What I am suggesting is that it won't lead to economic boom times as some posters are suggesting.

I've posted up an article explaining why this is the case.

As per usual, a load of names have been hurled and not a single person has even attempted to look at any of the reasons put forward in the article.

Generali

fun4everyone wrote: »

Generali your posts are very interesting thanks. Never considered what you are saying before.

Hamish,

On a selfish note I think $60 like you say would be OK for Aberdeen and see employment go back up significantly. Boom times would not come back but everything would be OK. Crude prices surely must recover from what we see today to some degree, the question is just when. I fear it may be a while.

Our oil analyst at work, and Reuters too, reckon that at present unconventional oil in the US can come out of the ground at costs of between $40 and $70 and that cost seems to be on a one-way trip. The only thing I can see putting those costs up are taxes (definitely a possibility) and environmental regulations.