Quote:
Originally Posted by Oildog
I'm thinking oil will drop a bit more after this mini-rally. Maybe back down to 40, as refiners draw down inventories for tax purposes. I will be a buyer then. I dont think it will hit 25 as some have predicted.
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What concerns me is that simple supply and demand seems to have been thrown out the window over the last year. I think that things are going to get bad for the energy sector in the near term. Drilling companies and service companies are probably going to get hit the hardest (i.e., everyone is waiting for drilling, fracing, cementing, coiled tubing prices to drop before they even consider dusting off any recently shelved prospects). There's no reason that the industry can't be profitable with $40 oil, but the services and drillers (EDIT: not to mention mineral owners, whether private or otherwise) need to adjust back down before that can happen.
I really hope that oil stabilizes around $70 at some point in 2010 (totally win-win), but I think the reality is going to be another spike when inventories start drying up and none of the drillbits are wet because oil has been trading at $35/bbl for 11 months. Hold on to your job like a madman in the meantime.