FYI: The price of oil continues to crash today as WTI is trading down over 4% to levels not seen since July 2009. While a 4% move sounds pretty big, in the context of the recent trading environment, moves like this have been common. The culprit for today's move is a report from OPEC saying that demand for its oil in 2015 will be the lowest in more than a decade. Based on its current output, that will translate to a daily surplus of more than 1 million barrels per day.
Regards,
Ted
http://www.bespokeinvest.com/thinkbig/2014/12/10/nothing-going-right-for-crude-oil.html?printerFriendly=true
Comments
It's Nuts. How can they market gasoline for $2 (less taxes)? Ever hear of corporate taxes, insurance, overhead, labor costs?
I blame Dex. This is the deflation he's been talking up.
And Yep - Russia's gotta be feeling the heat - if that's what's behind this.
Absolutely right on. Oil has been, and still is, the preferred Saudi WMD. I firmly believe that the Sunni vs Shiite aspect is the prime mover here.
• Assad & followers: Alawite (Shiite)
• Political orientation: Head of Syrian Ba'ath Party
• The new "IS Caliphate": Sunni.
• Being attacked by the new Sunni "IS Caliphate": Assad and Iraq: Shiite.
• Former head of Iraqi Ba'ath Party, nominal Sunni, and supressor of Iraqi Shiites: Saddam Hussein.
• Coming to aid of now-Shiite Iraq: Shiite Iran
• Ancient cultural and religious enemies: Saudia Arabia (Hard-core Sunni) and Iran: Hard-core Shiite.
Saudi Arabia is killing multiple ducks with one stone:
• Iran is already reeling financially because of the sanctions; almost their only income is from diminished oil sales to China, this just turns the screws a lot tighter.
• Russia and Iran get along pretty well- Russia has helped Iran with atomic energy and research. The Saudi's don't particularly like Russia (surprise!)- this screws over them also.
• If the Saudi's can drive Iran to give up atomic weapons research via financial pressure, so much the better. You can bet that Israel is really laughing right about now. China isn't crying, either.
• The Saudi's don't appreciate the recent competition from the US- this takes care of that too.
There are such complex and irrational motives in all of this that almost anything can happen from here. Good luck to us!
It's a price war for sure. And things get irrational during wars.
I've seen some (otherwise sane & rational) media commentators express fears Putin or another distressed dictator might precipitate some sort of global crisis to either drive up oil prices or take public attention off the sinking economy at home.
Regards,
Ted
Regards,
Ted
http://www.eia.gov/tools/faqs/faq.cfm?id=367&t=6
I still remember 30 cent a gallon gas. Wouldn't that be wonderful!
@MikeM- Nice thought... we need more like you in the gov't! Wouldn't be the least surprised if you're right.
I recall the "cheap" gas, with $.22/gal the cheapest I remember; and at this price, at the time, folks noted how "cheap" it was. 'Course, at the time; a part time job at the local grocery store for a high school student paid $.35/hour and union auto workers in Michigan made $3.08/hour.
Many things are relative only to their time, eh?
Take care,
Catch
Well, if they can fly 737s on recycled cooking oil from fast food outlets (and they can) I guess anything's possible.
From $114 to $60 in 6 months. Umm ... if it goes to $50 I'll dive in head first.
So true. I can still remember ads for brand new cars that were way less than $5000 if I am not mistaken.
Not really looking to add anything to anything oil-related from the standpoint of the outsized effect that the oil move has had not only on the oil companies, but anything related, including rail and something like ECL (Ecolab; http://seekingalpha.com/article/2725225-dividend-aristocrats-in-focus-part-48-ecolab)
I guess if I were going to add to something, I'd consider IPPLF, EPD or ETE, all of which are pipelines and all three of those offer a discount on reinvested shares (which is nice), but I'm hesitant even on that. The interesting thing is how hard the pipeline shares have been sold and yet, the news from them has been good. As I noted in October, when ETE got into the mid-40's there was an enormous insider buy. I added as well when it was in the mid $40's.
Oct 14, 2014 WARREN KELCY L
Director
200,000 Indirect Purchase at $47.91 - $50.61 per share. 9,852,0002
Oct 13, 2014 WARREN KELCY L
Director
352,662 Indirect Purchase at $47.13 - $50.93 per share. 17,291,0002
Oct 10, 2014 WARREN KELCY L
Director
323,669 Indirect Purchase at $51.81 - $54.38 per share. 17,185,0002
Oct 9, 2014 WARREN KELCY L
Director
323,669 Indirect Purchase at $53.21 - $54.29 per share. 17,397,000
IPPLF also reported a very good quarter and raised the dividend again. Still, stock gets obliterated.
I've thought about SDRL which is practically at the 2008 low, but haven't acted on it - I do own "sister" company MHG (Marine Harvest.)
As much as the oil companies have declined, the rig companies have really gone down - look at Transocean, which is less than half of its 2008 low price and is about 90% down from its 2008 high. Diamond Offshore (DO) also below its 2008 low. Given the move in DO, I'm surprised that parent company Loews (L) hasn't done even worse.
I don't really feel a strong need to add to anything right now, oil or otherwise. Healthcare is higher on the list, but even that I'm not rushing to add to. Not really interested in selling anything, either.
If it's accurate, maybe the offshore drillers will come back once the rig oversupply ends, even if ol stays around $60-65. Or is that a simplistic interpretation? I don't pretend to understand how this market works.
@Scott: See my doctoral dissertation, above, for a lot of "whys".