"Not changing production" comes off as "we won't cut production to level the spot prices." OPEC usually keeps their supplies in check to maintain their desired level of profitability. I've never attempted to quantitatively distill their pricing mechanism but I know that they do try to maintain a balance where they can produce the minimal amount at the highest possible per unit price without causing the customers to leave and go elsewhere. Since they are the market and pretty much collude with one another, they can do so. But now the customers can go elsewhere - we are entering an era of abundant energy - energy extracted from shale, corn, sugar, biomass, algae and pretty much any organic compound with a carbon composition (biochemists will tell you that's pretty much every and any natural resource on earth). Refineries and other crude oil purchasers have been investing in capital equipments that can refine and utilize these other sources of energy (albeit they have not economically scaled these operations yet). These capex investments have, by and large, encouraged borrowing and, in turn, investing in the shale boom (I suggest looking into the high yield markets). To echo Landis82, the crude supply shock forces the CAPEX to be cut (or under the threat of being) - so Landis82, do you see dividends being threatened as well? I do believe in the bird in the hand theory and that, for the diversified energy companies at least, their dividend discontinuations are only temporary while the smart money temporarily rotate to higher dividend yields (think GM in 09').
1600 rigs running last month....now under 1550...rig count could easily drop below 1000 if oil falls under $50
The spread chart will tell in the final analysis but does anyone have an opinion which will out perform when a recovery is underway, WTI or Brent? Why I ask is that high volatility could be expected when the recovery begins, as in 2008, and a spread of the two could be a method to participate.
I think the price of oil will go up as fast as it dropped. Time to start looking at a bottom, me thinks. May buy STL tomorrow. Dripped below major support yesterday, but snapped back up. Strong 4% close today.
And up 5,5% after two hours of trading today. On fucking steroids. Pity I wasn't more agile at 120 NOK. Trying to get filled at 130 NOK today. May not even get a pullback, but not interested in chasing either.
Filled at 130,50 NOK today. 1000 shares STL. MAE = 1,30 NOK. Closed @ 132,20. Up 4,25% for the day. Let's go!
If you are thinking of getting in (Oil is on sale, and everybody loves a sale don't they?), be very very careful. There are lots of theories being banded about regarding why oil has sold off but just realise something, picking the bottom here is a low odds trade and I suggest that you position with that in mind.
I feel the effects of the supply shock hasn't actually happened yet, but rather systemic unhedging causing prices to go down
There is always lots of theories and opinions at market extremes. Who here dared buying the bottom the last time around? Everyone thought it was the end of the world. Anyway, I'm not picking a bottom on oil per se, but an oil stock of a solid company that I believe to be oversold. I would however not be surprised to see oil starting to pick up soon either. And as always, I think it can happen a lot faster than people thinkg. Then again, I'm no expert and this is merely my humble opinion and I'm always interested in listening to what others have to say.
Strong buying on the 'fake' break of major support at 120. I wouldn't be surprised to see a pullback to take care of that air pocket below around 125, but it could very well happen that this stock picks up momentum from here and I didn't want to risk missing the ride.