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If oil prices stabilize at an intermediate price level, say $50 to $60 for the long-term, will the prices of energy companies' shares also reach an intermediate level, or will they eventually approach their all-time highs from 2014?
If oil prices stabilize at an intermediate price level, say $50 to $60 for the long-term, will the prices of energy companies' shares also reach an intermediate level, or will they eventually approach their all-time highs from 2014?
It depends on the company how much they will "approach."
If the cost of getting your oil to the surface and on a truck or train or pipe is $25/bbl then $100 oil provides that producer 3x the profit for their oil production than $50 oil. $100 was the 2014 price that gave you those all-time highs.
If the company makes 20% of their profit from oil production then going from today's $30 to $50 might not effect them much.
If the company sells services then that extra $20 might enable their customers to afford more services, but certainly not as much as at $100.
I'd say your initial statement "reach an intermediate level" is a pretty good bet, but for 2014 highs, you would need 2014 prices, wouldn't you say?
If oil prices stabilize at an intermediate price level, say $50 to $60 for the long-term, will the prices of energy companies' shares also reach an intermediate level, or will they eventually approach their all-time highs from 2014?
What would make oil stabilize at those levels? Surely not the current effect of supply and demand.
What would make oil stabilize at those levels? Surely not the current effect of supply and demand.
Last week there were rumors of Saudi Arabia & Russia making an agreement to curtail production a little bit. That would do it.
$50-60 oil won't turn ( back ) on any offshore drilling or arctic drilling projects and would only turn on a little shale production.
The oversupply of oil is said to be about 1 M bbls/day ( give or take ). If it was really that high, the oil in storage would be increasing more than it is. With Saudi Arabia & Russia both producing about 10 M bbls/day and US production on its way down, it wouldn't take much of a production adjustment to get the price from $30 to $40 which would pretty-much double Russian profits and increase Saudi Arabia's profits by 50% ( per bbl ). A little more tweaking could get it to $50, but $60 seems out there.
If OPEC can't do this thing ( in their best interest ) then they might as well dissolve it.
Last week there were rumors of Saudi Arabia & Russia making an agreement to curtail production a little bit. That would do it.
$50-60 oil won't turn ( back ) on any offshore drilling or arctic drilling projects and would only turn on a little shale production.
The oversupply of oil is said to be about 1 M bbls/day ( give or take ). If it was really that high, the oil in storage would be increasing more than it is. With Saudi Arabia & Russia both producing about 10 M bbls/day and US production on its way down, it wouldn't take much of a production adjustment to get the price from $30 to $40 which would pretty-much double Russian profits and increase Saudi Arabia's profits by 50% ( per bbl ). A little more tweaking could get it to $50, but $60 seems out there.
If OPEC can't do this thing ( in their best interest ) then they might as well dissolve it.
This market still has serious problems. $20 before $40 looks very possible. I took some profits into this BOJ pump & (most likely) bogus rumor on cutbacks.
Last week there were rumors of Saudi Arabia & Russia making an agreement to curtail production a little bit. That would do it.
$50-60 oil won't turn ( back ) on any offshore drilling or arctic drilling projects and would only turn on a little shale production.
The oversupply of oil is said to be about 1 M bbls/day ( give or take ). If it was really that high, the oil in storage would be increasing more than it is. With Saudi Arabia & Russia both producing about 10 M bbls/day and US production on its way down, it wouldn't take much of a production adjustment to get the price from $30 to $40 which would pretty-much double Russian profits and increase Saudi Arabia's profits by 50% ( per bbl ). A little more tweaking could get it to $50, but $60 seems out there.
If OPEC can't do this thing ( in their best interest ) then they might as well dissolve it.
I would not hold my breath waiting for this to happen. Both Saudi Arabia and Russia are in serious financial trouble and both are facing domestic unrest. They may make an agreement, but they will both cheat each other.
In addition, with Iran adding their production and scheduled to hit 3.6 M bbls/day they will gladly take any market share the Saudi's or Russia will give them.
Add to that the ever decreasing demand in China and India, due to their economic troubles, and you have a very difficult situation.
The energy sector is comprised of refineries, exploration, drilling, transportation, and actual oil production. Of all those sub-sectors the ones that are hurting the most are the producers, exploration, and the drillers. The refineries are still making just as much gasoline and the stuff is still be transported and sold, so that part of the energy sector is not affected so much by the oil glut. If you buy an energy mutual fund or ETF, it will likely be composed of businesses from all parts of the sector.
Part of the reason the energy sector had a big run-up is that there was a perception that demand would continue to outpace supply so a lot of the run-up was in the exploration and drilling (particularly fracking) part of the sector. Regardless of where the price stabilizes, unless there is a perceived need for new wells, it is not likely the sector will heat up again. In other words, it is less a matter of the actual price of oil and more about whether the industry is growing due to unmet demand. Given that the reason oil demand is off is due to a slow down by China's economy, I would say a lot of this hinges on what China does.
Thanks for the comments. I've got about $20K in energy ETFs and stocks, about half of that being pipeline companies. I'm kind of regretting buying them last year when I thought oil had bottomed. I'm waiting to get back to break-even so I can sell at least $10K and invest in something else.
It really helps if you include the x-axis when putting out numbers. 2 billion - what - over how long?
Just to take a slice from your cite ( thank you for that ),
The number was 2,000,146,000 bbls at the end of Nov-2015
- and then it was 2,007,691,000 bbls at the end of Jan-2016
That's an increase of 7,545,000 which is 123,689 bbls per day.
I don't know what point you were actually making since you didn't make a point, you just posted some stuff. Here; don't bother - I'll make a point; 124k extra oil per day isn't really very significant. Over the next three months, US daily production is likely to decline by much more than that.
You made a prediction of $20 before $40, however. This may be right and would more than likely make it even more possible to see an agreement. Iran's bluster is made for outside consumption. People posting here act like they are the only ones that know that if they start dumping too much oil, it will crater the price. Oil stockpiles can't climb infinitely high because if there is no tank to put it in, it has to stay in the well. Initially, you could make a case for someone only taking oil for $5 or $10/bbl, but that, like $20/bbl can only be transitory.
OPEC is known for cheating on their allocations, but they've never been at a point where they could conceivably produce less for more total dollars, not just more dollars per barrel.
Cheating at $60/bbl is way different than cheating at $30. Anyone not understanding why this is so or why going from $30 to $40 doubles profits for most producers simply can't do math.
I'm waiting to get back to break-even so I can sell at least $10K and invest in something else.
Hence the concept of resistance is proven once again.
Why are you waiting to break-even to sell them?
The rule is ( or should be ) that if you wouldn't buy them today, then you should sell them today.
If it climbs back to your break-even, why wouldn't it continue to go up from there?
Finally, you said you were "investing," and not "trading," so I'm confused as to your goals.
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