OIL PRICES: could stay down thru 2016-19

[drbubb]

OIL PRICE DATA: What if Oil prices stay down thru 2016 ?

OIL CYCLES ... another 1-2 years before ultimate low?

(Tony Caldaro is not so bearish - see post #18)

====
A few years later, I thought I would try to do the same for Oil prices. I studied historical prices, and came up with the notion of a web of interlocking oil price cycles.

I also wrote an article about it. A short one, of about three pages:

1991 article:"Cycling Towards Low Oil Prices"

http://www.greenenergyinvestors.com/index.php?showtopic=611

The article suggested cycles of: 2.4 years, 8.3 years, and 30 years
This projects an Oil Peak in 1980 +30 years = 2010, could that be $2010+/-2 years

.. PB

/ B:

(it was interesting to learn that Harry Dent now uses an Oil price cycle of 30 years !)

 

The article got some attention. For instance, I got a call from an oil trader at P***** Energy, but overall, it got nothing like the attention that my earlier work on shipping cycles had generated, so I used the oil cycles in suggesting hedging strategies to my oil derivatives clients- and they nearly always made money...

 

Some Eiliott Wave analysts have provided some preductions of Oil prices that suggest the major Low will not be in place until sometime in 2016:

UPDATE

Turn : WTI  : Ratio :  USO  : Timing - - -
High: $110?: 2.78E: 39.54 : 06 Sep 2013
High: $100?: 2.54E: 39.44 : 20 Jun 2014
High: 62.58: 2.98E: 21.00 : 05 May 2015
Low : 26.05: 3.396: $7.67 : 11 Feb 2016
High: 51.67: 4.150: 12.45 : 08 Jun 2016
Low : 39.19: 4.246: $9.23 : 03 Aug 2016
High: 55.24: 4.603: 12.00 : 03 Jan 2017
Low : 42.05: 4.861: $8.65 : 21 Jun 2017
High: 76.90: 4.735: 16.24 : 03 Oct 2018
Low : 42.36: 4.589: $9.23 : 26 Dec 2018
High: 66.60: 4.809: 13.85 : 23 Apr 2019
====

USO / US Oil etf ... 10yr: 5yr: 2yr: 1yr:

===

RATIO
Timing : - GLD-: x7.5%: -USO-: WT/u: -WTI-: Gold; wt/Au:
200 5ye: $51.58: 00.00e 00.0%:
2006ye: $63.21: $51.60: 81.6%:
2007ye: $82.46: $75.76: 91.9%:
2008ye: $86.52: $33.10: 38.3%:
2009ye:  107.31: $39.28: 36.6%:
2010ye:  138.72: $39.00: 28.1%: 0.000: $00.00/ 1405.5=
2011ye:  151.99: $38.11: 25.1%: 2.391: $91.12/ 1531.0= 5.95%
2012ye:  162.62: $33.37: 20.5%: 2.721: $90.80/ 1657.5= 5.48%
2013ye:  116.12: $35.32: 30.4%: 2.811: $99.29/ 1204.5= 8.24%
2014ye:  113.58: $20.36: 17.9%: 2.658: $54.12/ 1206.0= 4.49%
2015ye:  101.48: $11.00: 10.8%: 3.370: $37.07/ 1060.5= 3.50%
2016ye:  109.61: $11.72: 10.7%: 4.584: $53.72/ 1151.7= 4.66%
2017ye:  123.65: $12.01: 9.71%: 5.031: $60.42/ 1309.3= 4.61%
2018ye:  121.25: $ 9.66: 7.96%: 4.701: $45.41/ 1281.3= 3.54%
11.4.19: 142.15: $11.81: 8.31%: 4.787: $56.54/ 1511.1= 3.74%

[drbubb]

Glut Feeling - article in Lex-in-depth, FT

 

The oil industry is struggling to cope with lower oil prices so what would happen if there was no rebound

and $50 Oil became the New Normal ?

Which groups would be squeezed, and which would survive?

 

After a drop from $110 to $50 in just a few months...

"it is not obvious what oil will do next"

Some believe the price could stay at $45-65 for five years

 

+ REFINING may become favored over E&P... which may steadily dwindle,

+ There will be a strategic shift from growth to capital preservation (the balance sheet will be favored)

+ This decline may be most like the 1980's-90's fall, the longest lasting of the last three

+ Some believed that the emergence of China may be enough to hold prices up... It was not

+ In prior drops, there were many mergers

+ From 2008 -2014, oil related debts doubled.

+ Goldman 2014 study showed that less than 1/3 of Oil projects breakeven at $70 (!)

+ Many projects have complex ownership, making restructuring more difficult

 

LOSERS:

Those that cannot breakeven will seek fresh capital, or mergers.

Petrobras has huge debts, but also low production costs, so should "struggle on"

Santos will struggle with its debts

Governments have been big beneficiaries thru taxes, these will be lower

Oil service companies may be the biggest losers of all

Deep oil drillers like Transocean will be hard-hit

 

WINNERS: (and relative winners)

The major integrated oil co's, like Exxon and Shell (and Chevron)

They have strong balance sheets, and had started cutting costs

Higher dividend payout rates had been achieved, and divs may now suffer

[drbubb]

 

zerohedge @zerohedge · 2h2 hours ago

It Begins: Energy Giant Chevron Suspends Stock Buyback, Blames "Cash Flow Squeeze"

http://www.zerohedge.com/news/2015-01-30/it-begins-energy-giant-chevron-suspends-stock-buyback-blames-cash-flow-

 

It was less than 24 hours after we posted that either oil will double from here allowing energy companies to grow into a normal P/E multiple, or energy stocks will have to crash by over 40% for the ridiculous 23x to return to its normal, long-term average of 13.6x. Moments ago energy giant Chevron admitted that not only does it not see oil doubling any time soon, but that energy prices are almost certain to go far lower from here, and as a result the company decided that after buying back $5 billion of its shares in 2014, i.e., buying high and higher before the stock crashes may not be the best use of dwindling cash flow, and as a result has just suspended its stock buyback program of the rest of 2015. Yes, energy giant Chevron just ended its buyback!

 

 

Also did we mention Chevron's "dwindling cash flow"? Good: here's why:

• DRILLING RIG RATES HAVE FALLEN AS MUCH AS 50%: CHEVRON CEO
• CHEVRON SAYS DROP IN GLOBAL OIL PRICES SQUEEZE CASH FLOW

It's not just buybacks that are out of the window. So is CapEx..

• CHEVRON SIGNIFICANTLY REDUCING EXPLORATION, DESIGN SPENDING
• THIS YEAR'S CAPEX CUTS WILL IMPACT OIL OUTPUT POST-2017: CVX

... and SG&A:

• CHEVRON REVIEWING STAFF LEVELS AROUND THE WORLD, CEO SAYS

Finally, all those who are so sure a surge in oil prices and energy stocks is just around the corner, here is a little more cold water:

• WORLD ENERGY DEMAND FAIRLY MATCHES WORLD ECONOMIC GROWTH
• CVX DOESN'T SEE MUCH CHANGE IN WORLD ENERGY DEMAND ON GROWTH

But the financial comedy TeeVee said it was all an "excess-OPEC supply" problem?

* * *

And for everyone who missed it yesterday, here again is "Either Oil Soars Back To $88, Or Energy Stocks Have To Tumble By Over 40%"

Several days ago we showed something remarkable: "current forward 12-month P/E ratio for the Energy sector is now well above the three most recent historical averages: 5-year (12.0), 10-year (11.9), and 15-year (13.6).

 

[drbubb]

XLE / Select Sector SPDR-Energy (ETF) ... update

 

CVX / Chevron ... update

 

LUKOY / Lukoil ... update

[drbubb]

Yet Another Warning from the IMF – This Time on “Shadow Banking

 

http://lonestarwhitehouse.blogspot.com/2015/02/yet-another-warning-from-imf-this-time.html

Excerpt:

Non-financial corporations have raised $1.3 trillion (£860bn) through shadow banking in the US alone,” he told the Telegraph.”

“The IMF estimates that contingent liabilities of these shadow forms of lending have reached $15 trillion in the US, using a “broad” measure of activities that captures new forms of risk. This is higher than in China. It is roughly 180pc of banking assets and is rising rapidly towards its pre-Lehman peak. It is particularly worrying since it was a “run” on the interlinked world of structured finance that caused the global crisis to metastasise in 2008.”

“Zhu Min said the oil price crash is “terrific news” for consumers but warned that its effects are double-edged and raise a whole new set of risks. It may set off a fiscal crisis in producer countries and a debt-repayment crunch for oil companies with $1 trillion of bonds.”

 

“The concerns were echoed by David Rubenstein, head of the Carlyle Group, who said the slide in oil prices to $50 a barrel is likely to set off a chain of defaults by Russian companies that owe $650bn of external debt.”

“They can’t service the debt. And who owns that debt? It is nearly all held by European banks. They are going to be hurt, and I suspect that currency turbulence in Europe is going to hurt them too,” he said.”

[drbubb]

Shell starts 10-year shutdown of Brent oilfield

 

Brent Oil

 

Anglo-Dutch energy group gears up to dismantle the first of four platforms in biggest offshore lift ever

 

+ Dismantling is a multibillion dollar project over 10 years

 

+ There will be a public consultation on the disposal of the "topside" of the Brent Delta platform

 

+ It may involve the lifting of a 23,500 tonne steel platform onto a giant ship, the Pieter Schelte,

in the biggest lift ever attempted

 

+ The second stage, of dealing with the legs, is still under discussion

 

Shell alone has over 30 platforms, and dismantling costs are estimated at GBP 40 billion (?)

There are 470 installations in the North Sea

 

Left alone, the platforms would take thousands of years to erode, if left in place

[drbubb]

Oil Jump and pullback on Tuesday

 

Feb.: -SPY-: Chg : volume/ -GDX : Chg. : -GLD- : Chg : volume: x10.3? : WTI.Cr: -DXY-- -Chg- : --TLT--: -Chg- : Posts= / Views: cum'l

01: 199.45 - sun- : 000.M: 22.29 +0.00 : 123.45 - sun-: 00.0M: 1,283.7 $47.85* 94.846 +0.000 : 138.28 +0.00 : 07 : 007 / 066 : 0,066 /

02: 201.92 +2.47 : 151.M: 22.45 +0.16 : 122.45 - 1.03 : 8.66M: 1,274.4 $49.83* 94.627 - 0.219 : 137.48 - 0.52 : 05 : 012 / 045 : 0,111 /

03: 204.84 +2.92 : 115.M: 21.87 - 0.58 : 121.05 - 1.37 : 8.21M: 1,260.6 $51.57* 93.756 - 0.869 : 134.57 - 2.91 : 05 : 017 / 060 : 0,171 /

 

WTI : high of Day : $54.24 - was up 8.87% from Monday

- Price closed at -: $51.57 + 3.49%

 

USO / US Oil etf ... update : $19.62 +$1.00 : 5.37%

 

 

As Oil Prices Climb, Some Harbor Doubts

Wall Street Journal-1 hour ago

The benchmark U.S. oil price has surged 19% since Wednesday, the largest four-day percentage gain since January 2009. The jump follows a ...

UPDATE 10-Oil jumps as dollar dives, crude up 19 pct in 4 days
Reuters-1 hour ago

[drbubb]

(important in the long term?)

 

OIL DISCOVERIES - Decline to 20-year Low

 

Decline in volumes found last year points to supply challenges in 2020s

 

+ The lowest level since at least 1995

+ May even turn out to be the worst year since 1952

+ The slowdown was particularly pronounced for Oil,

and the actual level of discoveries, was just 16bn barrels

 

+ Interestingly, the number of exploration wells drilled was down just 1%

[callmejoe]

http://www.strategic-culture.org/news/2014/12/20/how-cia-launched-the-financial-pearl-harbor-attacks-russia-venezuela.html

 

How the CIA Launched the «Financial Pearl Harbor» Attacks on Russia and Venezuela

 

Central Intelligence Agency director John Brennan's.... agents inside Saudi Aramco convinced the firm's management and the Saudi Oil Ministry to begin fracking operations in order to stimulate production in Saudi Arabia's oldest oil fields. The Saudis ... agreed to what became an oil pricing catastrophe which would not only affect Saudi Arabia but oil producing nations around the world from Russia and Venezuela to Nigeria and Indonesia.

 

.... The CIA's oil industry implants knew what would occur when the fracking operations began. Due to the dangerously high water pressure, the Saudis were forced continuously pump oil until the pressure became equalized. That process is continuing. If the Saudis ceased pumping oil, they would permanently lose the wells to salt water contamination. In the current "pump it or lose it" situation, the Saudis are forced to pump at a rate that may take up to five years before they can slow down production rates to pre-glut levels.

 

The net result of the CIA-inspired fracking operations, which the Saudis were warned not to pursue by petroleum engineers working for some foreign-based firms like Schlumberger, is that there will be an oil supply glut for the next 5 years.

 

Oil industry sources have revealed that similar fracking caused over production problems in Kuwait and Iraq.

 

The result of the sudden decline in oil prices has resulted in heavy damage to the economies of the CIA-targeted countries of Russia, Iran, and Venezuela. Brennan and his economic warfare operatives absolutely banked on the Saudi over-production to harm the economies of all three countries and the CIA has not been disappointed. The CIA figures that «regime change» would bring to power pro-U.S. governments in Russia, Venezuela, and Iran.

 

Brennan's and the CIA's industrial sabotage of the Saudi industry will continue to have far-reaching effects on the world economy. Oil industry insiders fear that the CIA has unleashed something that may deal a devastating blow to the global economy from which it will be difficult to recover.

[drbubb]

Global shale revolution dismissed and demand for OPEC Oil forecast to rise

 

BP forecasts dramatic shift in crude trade patterns followed by Middle East recovery

 

+ BP forecasts rapid growth of "tight" oil supplies, or shale, particularly in the US until 2020

+ But the pace of growth in shale production will slow, and focus will shift back to M.E. oil

+ The US is likely to become self-sufficient in oil by the 2030's

+ Over time, the oil market will grow out of its present weakness, and

Global Demand is projected to rise by 37 per cent from 2013 to 2035, that's 1.4% a year

 

+ By 2030, demand for OPEC crude should exceed the historical high of 32m b/d from 2007

 

2030??

That's a long, long time. I expect many surprises before then

[jerpy]

(important in the long term?)

 

OIL DISCOVERIES - Decline to 20-year Low

 

+ Interestingly, the number of exploration wells drilled was down just 1%

Interested to hear your take on the importance drill rig figures. Keep seeing it mentioned that U.S figures are out x date and keep your eye on them blah,blah on various investment boards.

 

The simplistic view I get ie lower number of drills less oil discovered. But does it really affect the markets immediate future? Surely there is plenty of stuff in the can already proven to ride out yearly blips?

 

Any thoughts?

[drbubb]

OIL : Riyadh's Gamble

Lower oil prices are like a club to beat the competition

 

"For decades, the Saudis acted as a safety net in the oil market. But as prices plummeted last year,

Ali al-Naimi, the most powerful man in energy, changed tack. Was he playing politics or a different game?" - FT, pg 7

 

When the Oil price first dropped below $100 (in August), the Saudis did not think it would last.

But when oil stayed down, the Saudis realized they could not solve the excess-supply problem alone.

 

In October, with oil near $85:

"everyone wanted to know when Saudi Arabia would take charge and stem the price."

At a dinner for oil ministers on October 7th, one of the guests stated, "Of course you're going to cut production."

"What makes you think we're going to cut?", the Saudi official replied.

In November, with prices sliding below $80:

"The Saudi oil minister is said to have told the Russians that with both countries producing roughly 10m b/d,

and potential cuts should be equal. The Russians refused

 

USD-in Rubles ... update

[drbubb]

US Oil Production is up... Way up, but it will not last

 

Optimistic forecasts for end of 2015 may not happen

 

 

Shale Oil production may not "work" economically, with Oil Prices at $50.

So the days of "Saudi America" producing more oil than Saudi Arabia may be numbered

 

[colonelmustard]

I saw an interview with Goldman Sachs earlier that said there may be a glut of oil in the US this summer and nowhere left to store it creating a fall in the oil price to $30 but then :

 

http://www.zerohedge.com/news/2015-03-11/everyone-guessing-when-it-comes-oil-prices

 

Everyone Is Guessing When It Comes To Oil Prices

 

Predicting and diagnosing the trajectory of oil prices has become something of a cottage industry in the past year. But along with all of the excess crude flowing from the oil patch, there is also an abundance of market indicators that while important, tend to produce a lot of noise that makes any accurate estimate nearly impossible.

[colonelmustard]

http://www.zerohedge.com/news/2015-03-16/what-saudi-arabia-told-bank-england-about-why-oil-crashed-and-where-it-headed-next

 

What Saudi Arabia Told The Bank Of England About Why Oil Crashed And Where It Is Headed Next

 

In June 2014, just nine months ago, the oil price stood at around $115 a barrel. It then fell to just over $45 last January. Nobody anticipated this price fall, or the speed at which it fell. And despite an army of experts and analysts who would like you to think otherwise, no one can accurately predict what the future holds. We all have expectations – but the chance of being wrong is the same as being proved correct. One thing is certain: rapid price movements are not healthy for producers or consumers, or the oil industry, or indeed the banks.

[drbubb]

We might need to see some big bankruptcies in the Shale Oil sector,

before the Saudis decide to take the downwards pressure off the Oil price

[drbubb]

Sinopec / China Petro & Chem. (HK:0386) ... update

 

CNOOC / HK-883 ... update

 

 

Sinopec warns of a tough year ahead

 

Nation's second largest oil and gas producer saw its net profit fall 30pc

to 46.5 bn yuan last years on lower prices, its worst result since 2008

 

+ In 2015. results are being influenced by China's slower growth and low oil prices,

and so the operating environment is still severe

+ A "near breakeven" result is expected in Q1

+ Q4-2014 brought a loss of 5.33 billion yuan, compared with profit of 13.83 bn a year earlier

[drbubb]

Rally done maybe? / WTI : $50.98 - $2.27

 

Apr: SPY- : Chg : vol. / -GDX : +-chg : -GLD- : Chg : volume: x10.? : WTI.Cr: -DXY-- -Chg- : -TLT--: -Chg- : Posts= / Views: cum'l
06: 207.83 +1.40: 96.9M: 19.70 +0.71 : 116.69 +1.41 : 5.77M: 1,214.5 $51.99* 97.056 - 0.007 : 130.00 - 0.73 : 00 : 007 : 000 : 0,124 /
07: 207.28 - 0.55: 67.8M: 19.19 - 0.51 : 116.11 - 0.58 : 2.36M: 1,208.2 $53.25* 97.639 +0.583 : 131.09 +1.09 : 09 : 016 : 069 : 0,193 /

 

WTI Crude

 

 

Oil Slides on ballooning US stockpiles - FT, pg.20

 

Record production levels in Saudi Arabia lead to downwards price pressure

 

10.9mn : increase in US crude stocks, way above 3.4mn bbl. expectation

10.3mn : Bbls per day production from Saudi Arabia in March, a record

 

The biggest gain in 14 years !

A rise in US imports of 869,000 bbls per day.

Stocks in the key Cushing OK delivery hub were up by 1.232mn bbls

 

Why?

Better refining margins prompted crude buying by Europeans

SA raised output to prepare for summer, when energy demand (A/C) is high

 

Saudis may be taking advantage of low costs to do more drilling

Current projections are that they may stay near 10mn bpd

[drbubb]

US Stocks get a shake, as Oil continues to Rally

 

Apr: SPY- : Chg : vol. / -GDX : +-chg : -GLD- : Chg : volume: x10.? : WTI.Cr: -DXY-- -Chg- : --TLT--: -Chg- : Posts= / Views: cum'l
16: 210.37 - 0.06: 62.6M: 19.74 - 0.24 : 115.03 -0.40 : 3.10M: 1,197.9 $56.53* 97.676 - 0.620 : 129.96 - 0.65 : 09 : 059 : 064 : 0,807 /
17: 207.95 - 2.42: 169.M: 19.72 - 0.02 : 115.60 +0.57 : 3.46M: 1,203.8 $56.07* 97.446 - 0.230 : 131.45 +1.49 : 04 : 063: 080 : 0,887 /

 

An oil rally to near $60 may be possible

 

 

The chart on Tony Caldaro's website suggests the Oil drop may be finished (A-B-C ends the correction): update

 

[drbubb]

This chart may also suggest an important Oil Low has been made.

Or maybe one more drop to near $30 is needed

 

OILB - Brent Oil etf ... update

 

[drbubb]

Hedge Funds make Big Bullish Bet on Oil

 

"Hedge funds have placed one of their largest ever bets on a rally in oil prices..." - FT, pg.22

 

Brent Oil

 

OilB / Brent etf ... update

 

+ Accumulated a record number of North Sea Brent futures... equal to almost 265mn bbls of oil

+ At the same time, oil producers have rushed to lock in oil prices

+ "We see the supply side falling away very quickly here," said Paul Horsnell, at Standard Chartered.

Horsnell forecasts the Brent could rise about $80 in Q3-2015

 

Meantime: US Crude inventories stand at the highest level in 80 years, and have risen for 15 consecutive weeks

 

Someone is going to be wrong here.

Do you really want to bet against the Oil producers?

[drbubb]

The Big Shift - from other Commodities into Gold - will be tested very soon

Gold -in CRB:

 

The way this resolves, may tell us something about where Oil is headed

[drbubb]

May: SPY- : Chg : volume/ VIX : GDX: +-chg: -GLD- : Chg: volume: x10.? WTI.Cr: -DXY-- -Chg- : --TLT-: Chg : Posts/Views cum'l

04: 211.32 +0.60 : 64.6M: 12.85 : 20.41 +0.14: 114.10 +1.02: 3.62M: 1,187.3 $59.02* 95.445 +0.231: 122.83 - 1.17: 07: 27/ 075: 0,200

05: 208.90 - 2.42 : 105.M: 14.31 : 20.22 - 0.19: 114.42 +0.32: 3.81M: 1,192.5 $60.67* 94.875 - 0.570: 122.66 - 0.17: 08: 35/ 100: 0,300

===

 

Jump in Oil prices to over $60, as the US Dollar resumes its decline

 

 

But Oil closed right ON a resistance level.

 

Here's OILB / the etf for Brent ... update : 12-mos

[drbubb]

BLAME IT ON OIL, and German Bunds : That's what the FT is doing, to explain the drop in equites

 

Brent Oil is even higher than WTI Crude - it nearly touched $70 yesterday

 

 

OILB / Brent etf ... 2-yrs : 6-mos : 10-days

 

"Typically, such an environment would be described as 'risk-off', and see the dollar performing well. However, given the euro's role as a funding currency, it is the euro and not the dollar, which is benefitting in the current environment."

"The covering short Euro positions continues to support the euro..." - FT, pg.21

 

Meantime, German yields have jumped: 10-yr rates up from 10bp to 50bp

"So much for risk-free assets. In 12 days, owners of German benchmark bonds have seen the plummeting price wipe out more than 60 years worth of income, as the Bund sees the biggest rout in total return terms since 1994." - FT, pg.13

[drbubb]

Dave Skarica... to his Newsletter Readers:

 

Einhorn - on "the Mother Frackers" :

 

Amazing!

"None of the Frackers generated positive cash flow"

"Investing for growth is a fiction."

"Depletion gets ignored (it is not a cash item) ... Capex gets ignored too."

 

David Einhorn is one of the modern day hedge fund titans. In his late twenties he started with about 1 million dollars mostly given him to by his parents and is now a multi billionaire dollar hedge fund manager. He became very famous in 2008 for predicting and profiting from the demise of Lehman Brothers.

Now Einhorn has turned his attention to the Frackers. Many think that the frackers are fine that Oil has increased to $62 a barrel. However, the problem with many of these companies is that they were not even cash flow positive even at $100 a barrel Oil. My first newsletter of the year was devoted to pointing out the flaws in the frackers models.

However, the real danger is that these companies represent 14 percent of the High Yield Junk Market up from just 4 percent 10 years ago. The average fracked well only lasts about 2-3 years. Therefore , in a year or two you are going to start to see mass defaults and bankruptcies in the sector. This could have dire effects for the corporate bond market.

To see Einhorns presentation on the frackers and why these are not economic companies please go to our website www.addictedtoprofits.net and view the video I have posted of his speech.

David Skarica / Gregory Town, Bahamas