There was a fascinating report from Bloomberg this morning. Globally, there are now more than $1 trillion in oil and gas assets which are unrecoverable thanks to the decline in crude, excluding US shale.
Deep water, Arctic locations, tar sands, ridiculous topography…all add up to more than $1 trillion stranded. And these numbers are not inclusive of the US shale which is supposedly the heart of this story.
If you were looking for a smoking gun, pointing to this whole debate of Saudi Arabia and market share being sordid nonsense, that would be it.
But at most that proves American financial journalists are idiots. Which beckons the question: then why is crude trading below $60?
If you have the answer to that question, I’ll show you a rich man.
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My breakdown on why crude is below 60:
1. Strong dollar explains $10 of the drop
2. Seasonality good for another $10
3. Overproduction thanks to Saudi unwillingness to be the “swing producer”-$10
4. Weak demand outlook for Europe and Asia next year-$10
My prediction on where crude will be 6 months from now: $75-80… mostly based on #2 and #3 reversing. I wouldn’t be surprised if the dollar started to retrace soon, either. It has had a hell of a run.
Reasonable analysis. I would add the
increase of renewables as alternatives
takes off some of the sting when the
producers try and create shortages. Don’t know how much that would be worth.
Nice piece, I would add the obvious points of availability of cheap technology, and availability of financing, brought in a ton of interest to fracking
Oil is a commodity that can be pushed around by traders. That is why it is low. These firms whose business is getting killed are hedged short. Simple.
Who’s got that bas
Would have been great if you could have held on to 100% of that BAS – incredible move
How high can BAS go now. Every time I think about selling, it goes higher.
Don’t want to lose a profit but hate to sell too early too … you have a s/t target?
Hah, too late to get in bas now haha
http://ibankcoin.com/mr_cain_thaler/2014/12/17/put-25-cash-to-work/
…? BAS is at $8. If the demise of oil is over, it’s going back to $20. Hardly too late. But caution is warranted.
Just how fast is china *really* slowing down?
China is a con game .It’s the U.S where
all the action is.