Good News : Get ready for $10 oil

[Chinese-Dragon]

Saudi Arabia decided that they have enough currency reserves to outlast any other major oil producer in a price war. And they are right.

 

[About.to.be.banned]

Means lot of unemployment as lot of people are coming back from middle east..

Maybe it would be the required kick on Kerala's gonads and mallu politician would start focussing on economy rather than acting like a leech sucking up their extortionist share from remittances of gulfi slave labour.

 

[Tameem]

Saudi Arabia decided that they have enough currency reserves to outlast any other major oil producer in a price war. And they are right.

You mean the possibility of $10 oil isn't Utopian.

 

[Chinese-Dragon]

You mean the possibility of $10 oil isn't Utopian.

Maybe not that low, but Saudi already said that they won't cut oil production even if the prices fall to $20 a barrel:

BBC News - Opec oil output will not be cut even if price hits $20

 

[The enlightened]

Maybe not that low, but Saudi already said that they won't cut oil production even if the prices fall to $20 a barrel:

BBC News - Opec oil output will not be cut even if price hits $20

That would kill Iran, Russia and Shale in one go.

 

[Tameem]

Maybe not that low, but Saudi already said that they won't cut oil production even if the prices fall to $20 a barrel:

BBC News - Opec oil output will not be cut even if price hits $20

KSA seems right here, Why to loose share to cheaters and newbies by decreasing out put.
Another major reason is most of the big economies are slowing down...what you say about it.

 

[anant_s]

The eroding power of the OPEC cartel

That tells the story. US cannot allow OPEC and more importantly Russia to dominate world matters and crude prices are a sure fire method of controlling that clout. I don't think prices will dip to USD 10 but yes 40-45 is a possible range, more so if china doesn't keep up with the demand.

Hey!I got a question,,,,crude ki keemat toh bohot kum ho gayi ha,,,,toh petrol diesel ka daam kyu kanjooso ki tarah kum ho rahe hai,,,petrol still Rs. 58-59 here in ghy.

Dada that credit goes to the government
But yes by increasing the excise duty (& keeping net prices same), they have actually created a cushion (it stands at about Rs. 6-7 a liter) which can be removed if crude (or dollar again escalates). So while out monthly fuel bills might not be down, if a future shock comes, govt. has some ammunition to fight inflation. Here in Maharashtra one liter costs 65-66, so you guys are lucky in Assam, on one count atleast

 

[Levina]

At about $50 a barrel, crude oil prices are down by more than half from their June 2014 peak of $107. They may fall more, perhaps even as low as $10 to $20. Here’s why.

U.S. economic growth has averaged 2.3 percent a year since the recovery started in mid-2009. That's about half the rate you might expect in a rebound from the deepest recession since the 1930s. Meanwhile, growth in China is slowing, is minimal in the euro zone and is negative in Japan. Throw in the large increase in U.S. vehicle gas mileage and other conservation measures and it’s clear why global oil demand is weak and might even decline.

At the same time, output is climbing, thanks in large part to increased U.S. production from hydraulic fracking and horizontal drilling. U.S. output rose by 15 percent in the 12 months through November from a year earlier, based on the latest data, while imports declined 4 percent.

Something else figures in the mix: The eroding power of the OPEC cartel. Like all cartels, the Organization of Petroleum Exporting Countries is designed to ensure stable and above-market crude prices. But those high prices encourage cheating, as cartel members exceed their quotas. For the cartel to function, its leader -- in this case, Saudi Arabia -- must accommodate the cheaters by cutting its own output to keep prices from falling. But the Saudis have seen their past cutbacks result in market-share losses.

So the Saudis, backed by other Persian Gulf oil producers with sizable financial resources -- Kuwait, Qatar and the United Arab Emirates -- embarked on a game of chicken with the cheaters. On Nov. 27, OPECsaid that it wouldn't cut output, sending oil prices off a cliff. The Saudis figure they can withstand low prices for longer than their financially weaker competitors, who will have to cut production first as pumping becomes uneconomical.

What is the price at which major producers chicken out and slash output? Whatever that price is, it is much lower than the $125 a barrel Venezuela needs to support its mismanaged economy. The same goes for Ecuador, Algeria, Nigeria, Iraq, Iran and Angola.

Saudi Arabia requires a price of more than $90 to fund its budget. But it has $726 billion in foreign currency reserves and is betting it can survive for two years with prices of less than $40 a barrel.

Furthermore, the price when producers chicken out isn’t necessarily the average cost of production, which for 80 percent of new U.S. shale oil production this year will be $50 to $69 a barrel, according to Daniel Yergin of energy consultant IHS Cambridge Energy Research Associates. Instead, the chicken-out point is the marginal cost of production, or the additional costs after the wells are drilled and the pipes are laid. Another way to think of it: It's the price at which cash flow for an additional barrel falls to zero.

Last month, Wood Mackenzie, an energy research organization, foundthat of 2,222 oil fields surveyed worldwide, only 1.6 percent would have negative cash flow at $40 a barrel. That suggests there won't be a lot of chickening out at $40. Keep in mind that the marginal cost for efficient U.S. shale-oil producers is about $10 to $20 a barrel in the Permian Basin in Texas and about the same for oil produced in the Persian Gulf.

Also consider the conundrum financially troubled countries such as Russia and Venezuela find themselves in: They desperately need the revenue from oil exports to service foreign debts and fund imports. Yet, the lower the price, the more oil they need to produce and export to earn the same number of dollars, the currency used to price and trade oil.

With new discoveries, stability in parts of the Middle East and increasing drilling efficiency, global oil output will no doubt rise in the next several years, adding to pressure on prices. U.S. crude oil production is forecast to rise by 300,000 barrels a day during the next year from 9.1 million now. Sure, the drilling rig count is falling, but it’s the inefficient rigs that are being idled, not the horizontal rigs that are the backbone of the fracking industry. Consider also Iraq’s recent deal with the Kurds, meaning that another 550,000 barrels a day will enter the market.

While supply climbs, demand is weakening. OPEC forecasts demand for its oil at a 14-year low of 28.2 million barrels a day in 2017, 600,000 less than its forecast a year ago and down from current output of 30.7 million. It also cut its 2015 demand forecast to a 12-year low of 29.12 million barrels.

Meanwhile, the International Energy Agency reduced its 2015 global demand forecast for the fourth time in 12 months by 230,000 barrels a day to 93.3 million and sees supply exceeding demand this year by 400,000 barrels a day.

Although the 40 percent decline in U.S. gasoline prices since April 2014 has led consumers to buy more gas-guzzling SUVs and pick-up trucks, consumers during the past few years have bought the most efficient blend of cars and trucks ever. At the same time, slowing growth in China and the shift away from energy-intensive manufactured exports and infrastructure to consumer services is depressing oil demand. China accounted for two-thirds of the growth in demand for oil in the past decade

@levina @DRAY @Skull and Bones @karakoram @Imran Khan @Genesis @C130 @janon @SrNair @Guynextdoor2 @wolfschanzze @Spring Onion @jbgt90 @anant_s and others

You know what?
I've a doubt that the prices 're affecting opec countries already. The share markets 're not performing well (Dubai is as always facing the flak, though its not even an oil producing emirate), the companies 're cutting down their projects and ppl 're loosing their jobs.
God! is there light at the end of this tunnel?

@DRAY
Your views.

Bhabhi will have you thrown in the Niagra Falls !

Take her on a World Cruise instead !

He's not tacophobic like you, so unlike you he likes fast cars.

Saudi Arabia decided that they have enough currency reserves to outlast any other major oil producer in a price war. And they are right.

But what 'll happen to the other opec countries?

 

[wolfschanzze]

On topic ,there will be a lot of Unemployed Gelf Returnees and Mallus.What will they do?Protest Communist style for freebies?

 

[anant_s]

But what 'll happen to the other opec countries?

Right now they are playing a game of who blinks first aren't they.
Saudi have said quite clearly that they will not let go their market share even if means crude breaking $30 mark. & quite clearly what Saudis know for sure is that while they can suffer losses in short duration, several other smaller economies won't survive this over-supply scenario for long. So when demand increases again, they will be calling shots on pricing and not other smaller members of OPEC.

 

[Levina]

Right now they are playing a game of who blinks first aren't they.
Saudi have said quite clearly that they will not let go their market share even if means crude breaking $30 mark. & quite clearly what Saudis know for sure is that while they can suffer losses in short duration, several other smaller economies won't survive this over-supply scenario for long. So when demand increases again, they will be calling shots on pricing and not other smaller members of OPEC.

So why would other OPEC countries support this?

 

[razgriz19]

\Canadian economy will collapse if that happens, so....yeah no it won't happen.

 

[anant_s]

So why would other OPEC countries support this?

Don't think anybody would support. but yes this is strange for a cartel. i mean there could only two things that justify all this harakiri
1. US is playing a much bigger game (obviously Russia is in mind, remember Ukrainian crisis where EU couldn't do much owing to Russia's Gas supply threats) and hence it might be compensating for the losses in some manner.
2. OPEC members (or at least some) have realized that they cannot remain any longer with the pack and someone has to break away. In any case the whole idea of cartel works on the principle that a group dictates a term to create monopoly or scarcity (limited supply perhaps). But this also creates a situation where u make money but that value is limited by red lines the cartel has drawn for itself by limiting volumes. If u recall back in 80s, Iraq had similar problems of payment when Oil prices where quite low and it had blamed Iran and OPEC for not bringing down production to move up prices. It led to wars and prices fluctuating, but more importantly showing that this cartel is actually a very weak group and is equally vulnerable to supply side excess as other world is to supply side shortages. US Shale boom has done exactly that.

History and Analysis -Crude Oil Prices

 

[Skull and Bones]

Bhabhi will have you thrown in the Niagra Falls !

Take her on a World Cruise instead !

I can take that risk.

 

[Echo_419]

I think crude oil is falling because oil producers are impressed with Modi and decided to drop it because of his charisma.

Bakwass karlo tumse bas
On topic
Not happening

Means lot of unemployment as lot of people are coming back from middle east..

Indeed to much Cheap oil will not do world much good