re: OT: Let's talk about oil/gas prices

Welp.... Hope we can down Florida next, whew again!

Yes, I've heard some stories that would make your stomach churn....

I'll tell one....this isn't from South America though.

A person(20's something male) was caught stealing from a certain group. A friend of mine was there for a meeting. They had unclothed the man, sat him in a chair on top of a fire ain't mound and tied him up.

Not good.

Also, this same friend was held for ransom 15-20 years ago. Not just him, but an entire drilling operation. The rebels didn't use guns, but merely large sticks. They were held for 3 days before they were released. The ransom was paid.

I am starting to see individual lay-offs here around Lafayette. Many in the service companies and some in the production side of things. I think it's going to get much worse before it gets better.

Good Day today

Oil up nearly 8%

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My problem with this is that at some point we need to separate ourselves from the Saudi's and control our own market.

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Interdasting. Since most free market folk had no qualms destroying the US manufacturing base by shipping jobs overseas because they could save a few nickels. They gave ZERO fricks about those thrown into unemployment over it. It was just the free market weeding out the inferiors.

To your point... The US is now obviously energy independent capable from Saudi Arabia. If they want to pump out their finite resource for half price, let them. It's not like the US fracked oil is going anywhere. Big Oil will have their day in the sun again when the Saudi oil is gone and the US has done nothing to wean themselves off the stuff now for the umpteenth time.

All I know is when oil prices have been lower and stable, the economy hums like a machine and when oil is high the economy suffers.

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If you're only refining to produce gasoline and diesel, then sure you won't get as far with bitumens. But refineries are built to extract value from crude in its entirety. To maximize revenue refineries want to run maximum capacity for every unit at the plant. This requires blending. Heavy crudes, like your sub 10 API bitumens, will be blended with lighter stocks to maximize throughput for all units at the refinery. Moreover, refineries use various forms of cracking to turn long carbon chains into shorter chains, which can then be used for gasoline and diesel blending.

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I didn't see this when you posted....my apologies...

What you posted just proves my point, it's a junk oil.

Refineries trying to use Alberta oil for fuels is going to cost more, which means their break even point is going to be higher, which means Rev is mad because he's having to pay more at the pump so they can get their money back.

Oil in West Texas, even oil in South Arkansas is much better to refine for fuels. Canadian oil will be great to use for asphalt, making of plastics, etc.

The following refineries went on strike at 12:01 am local time Sunday:

LyondellBasell in Houston, TX;
Marathon Galveston Bay Refinery in Texas City, TX;
Marathon Houston Green Cogeneration facility, Texas City, TX;
Marathon Refinery, Catlettsburg, Ky;
Shell Deer Park Refinery, Deer Park, TX;
Shell Deer Park Chemical Plant, Deer Park, TX;
Tesoro Anacortes Refinery, Anacortes, Wash.;
Tesoro Martinez Refinery, Martinez, Calif.; and
Tesoro Carson Refinery, Carson, Calif.
“We told Shell that we were willing to continue bargaining for a fair agreement that would benefit the workers and the industry, but they just refused to return to the table,” said USW International Vice President Gary Beevers, who heads the union’s National Oil Bargaining Program.

“This work stoppage is about onerous overtime; unsafe staffing levels; dangerous conditions the industry continues to ignore; the daily occurrences of fires, emissions, leaks and explosions that threaten local communities without the industry doing much about it; the industry’s refusal to make opportunities for workers in the trade crafts; the flagrant contracting out that impacts health and safety on the job; and the erosion of our workplace, where qualified and experienced union workers are replaced by contractors when they leave or retire,” Beevers added.

Because the oil industry is perfectly safe and has an unblemished safety and environmental record, amirite?

OPEC Sees Oil Prices Exploding to $200 a Barrel
By Matt DiLallo | More Articles
January 31, 2015 | Comments (84)

Right now the oil market is totally focused on finding a bottom for oil prices. However, according to OPEC's Secretary-General Abdulla al-Badri we've already hit bottom. Not only that, but he sees a real possibility that oil prices could explode higher to upwards of $200 per barrel in the future. He's far from the only one that sees a return of triple-digit oil prices.



Finding a bottom
According to the Secretary-General, the oil market doesn't need to look for oil prices to bottom as the market has already bottomed. Instead, he offered quite bullish comments by saying, "Now the prices are around $45-$55, and I think maybe they [have] reached the bottom and we [will] see some rebound very soon." Now, normally that type of remark would be just another layer of noise, but this is coming from OPEC's Secretary-General so it comes with a lot of weight behind it.

That said, he's not saying that OPEC will come in and rescue the oil market by reversing its previous decision to hold steady on production. Instead, he sees the signs that the oil market is self-correcting as oil companies have made deep cuts to spending, which will eventually lead to lower production growth. Further, the rig count in the U.S. is plunging, which is usually a key to a bottom in oil prices. However, in the midst of cutting back as the industry works through the current oversupply the Secretary-General is now warning that the industry is putting future oil supplies at risk by under investing today.

Underinvestment leads to a shortage
The Secretary-General said that, "if you don't invest in oil and gas, you will see more than $200" when it comes to future oil prices. While he didn't give a timeframe, he did note the correlation between investment and future production. This is because oil production naturally declines and oil companies need to invest in new production to not only replace this decline in production from legacy oil fields but to add new production to meet growing demand. However, oil companies are reluctant to invest in new production as their cash flows decline.

Over time this could become a problem as oil fields around the world naturally decline by an average of about 5% per year. As we see in this chart from a Chevron Corporation (NYSE: CVX ) investor presentation, in order to overcome this decline oil companies need to develop about 200 billion barrels of oil supplies over the next decade and a half just to meet demand.

These supplies will require the industry to invest $7-$10 trillion. However, with the big capital budget reductions oil companies have announced this year it could make it harder for the industry to meet future supply needs. In fact, the industry might defer up to $150 billion oil projects this year due to the collapse in crude prices. Many of these investments, however, wouldn't have yielded actual production for a couple of years due to the long lead time of major projects.

As an example, Chevron delivered first oil on two of its Gulf of Mexico projects late last year after beginning construction on the fields in 2011. Meanwhile, another $6 billion project it just sanctioned at the end of last year won't produce any oil until 2018. It's these long lead time projects that are being delayed, which is setting the world up for higher oil prices in the future as an under investment today has the potential to lead to a constriction in future supplies.

Investor takeaway
OPEC's Secretary-General is calling the bottom in oil prices. While he's not the first to call a bottom, he does lead the organization that currently controls the oil market so his comments do have a lot of weight. Further, he's also suggesting that the cuts that oil companies are making could have a dramatic impact on future oil prices as the under investment has the potential to cause oil prices to rocket higher if demand grows faster than future supplies. That, however, would all be part of OPEC's plan as it purposely pushed for lower oil prices now so it could control market share once oil prices surged in the future. It's willing to endure short-term pain for the potential of a big long-term gain.

How to invest in the technology fueling the U.S. energy boom
As the price of oil plummets, savvy investors are looking for a way to invest in this new energy dynamic. And there's one high-caliber company in the oil-services sector using advanced technology to profit from the U.S. oil boom. Given the country's ongoing quest to extract more and more oil, I strongly urge you to claim your copy of our brand-new investigative report on this company helping fuel its boom.Simply click here for access.

So much for the Rally.

Wish my e-broker let me trade after hours. Bet tomorrow's a rough one