Oil is looking pretty weak to me. What interests me more though is that there are a number of big projects reaching decision points over the next few months here in Alberta. It'll be quite interesting to see how many projects (if any) are deferred. Oil companies are facing high material and labour costs in Alberta right now, I don't think that oil prices would need to drop by all that much in order for some of the projects to become uneconomical.
We are going to run out of oxygen, earth will be 100% water, oil will be $100 barrel, ElectricSavant will post his 20000 post, Santa Claus will turn out to have been black one day and pigs will fly. Could somebody please choose the odd one out. P.S. Was there any mention of the time frame involved old chap?
Seems like oil all of the sudden is dropping out of no where. Maybe it heads down to 20 bucks a barrel and the national avg price of gas drops down to affordable $1.30, hahahah. NOT GOING TO HAPPEN. Too many people think oil is headed way down. Read an article this past week saying by the end of 2006 we could be paying close to $2.00 a gallon.
http://www.bbc.co.uk/radio4/drivenbyoil/pip/krpen/ Might intrest you guys. Listened to it yesterday in the car and quite enjoyed it. Seems well researched. The link is episode one which gets the 'experts' opinions on peak oil. Next week (monday) will be looking at the efect of Chinas arival on the scene. Not sure how long the series is. Cheers, Nick.
Oil closed at 66.37 Sept 8, 2006. I think we are due for a bit of an upwards retracement, but the chart sure isn't looking very pretty...
I think most oil companies use $35-$40/bbl for pro forma purposes in deciding on future projects... Had lunch with a person who buys production...his observation is that gas is at $6 and oil historically has stayed around 6 times which puts oil at $36!!! His take is that is the more moderate scenario as natural gas does not have a "risk premium" that oil has since all of our gas is home based, more or less. Or does gas double to $12 putting it in line with $72 oil???? SteveD
Don't we all wish trading is this simple. Just jump on the bandwagon. The oil drop going from near $78 to $66 brought out all the bears and now it seems like the easy trade is to short oil. I wouldn't be surprised if oil makes a run back to $70-$71 in a week and a half or so just to kill a bit of the shorters after they just killed some of the speculative oil bulls. Whichever it goes, be quick with the trigger and don't let your opinion get in the way of making money (or staying alive!).
I agree that they are likely using that price range when calculating NPV, I actually think it would be extremely interesting to take a look at the modeling they must do. The above said, I do feel that a drop in oil prices could very easily make some forthcoming oilsands projects uneconomical in the short-term, due to the current high costs for labour and materials in Alberta. Oil companies have been able to take on some very expensive projects due to the big bucks rolling in, I suspect that they will all grow more cautious if oil prices dip. I also think that the recent Gulf of Mexico find was a very, very big deal. If I remember correctly, that test well cost something like $100 million? That is peanuts compared to the multi-billion dollar oilsands capital costs, not to mention the higher input costs per barrel in terms of work that needs to be done on the mined material. I suspect that this find might change the thinking of some of the oil majors a bit, i.e. seriously looking into deeper water exploration.
Speculation on oil prices by talking heads is absurd unless the time frame is included. I could say oil is going to $120 and most certainly be correct so long as i don't state when. Currently oil is dropping because storage facilities around the world are about 90% full. Production has been in excess of demand for some time, and the excess is being stored on speculation that it will be worth more later. When and if storage facilities are full, prices should moderate. The market is currently discounting that event. Another possibility is that demand will pick up enough in the winter heating season to absorb more of the excess production and thus delay a further drop in price. The expert opinions right now seem to come down on the side of storage being full in 2-6 months and the price dropping to somewhere under $60, most likely high 50's. This is most likely the event that the market is currently discounting.