You better not. At $49.85 last night, the options market was pricing 3:1. I would have dumped my school tuition on you.
Oil prices may be going higher, but oil company stocks really aren't. There's a lot of short-covering going on. U.S. is a marginal producer now, somewhat cheaper than our Canadian neighbors, but much higher than OPEC. Electric car displacement of gasoline a residual concern as there are so many other uses for oil over the next 20 years, where demand keeps growing. That said, $50 oil triggers a U.S. supply response - you can see this in 2015 - and the economics have just gotten better. Recent deal takes close to two million barrels of oil off the market, although there's nothing that stops that from coming back on if oil gets to $60-$70 barrel. It's a unique cat and mouse game over the next 18 to 24 months until demand catches up, but it's trading heaven. If U.S. economy actually does start to grow at 3-4% (or higher) over the next few years, sentiment could take prices much higher... Never quite appreciated the market as a discounting mechanism until I turned to trading...
Marginal by cost effectiveness, which invariably impacts production. Your chart as of the first 3 months of 2016. If you look at the more recent data, U.S. now at 8.7MM, most of the OPEC names higher with Russia, Saudi Arabia, Iran and Iraq profitable between $8 and $25 per barrel. Some U.S. basins profitable in low $30s, but most need $50 to $60 to fully turn back on. Here's the information I've culled from the EIA (u.s. energy information agency) for lower 48 and Alaskan production. For OPEC production, you can refer to their monthly bulletin, or the IEA (International Energy Agency). Domestic oil production dropped this year when oil fell from $50, but started to rebound as prices moved out of the $30s towards $50. $64K question is how many U.S. producers come back if prices stay where they are and OPEC actually does reduce production - they've been known to cheat. If the market discounts that u.s. production will come back at current prices, the price recovery won't last long. If it doesn't then prices will go higher.
My apologies. You stated explicitly in the original thread that you meant cost of production. There are a lot of marginal players financed by the junk bond market. The resilience of junk funds is very telling that they are going to survive and bring goods to the market. So, my bullish enthusiasm is contained. However, the OPEC agreement is a major shift. And with the support of the largest non-OPEC player, nonetheless. More to follow?
My guess is that the worst is over. Not sure whether you're trading the futures contracts or E&P companies. By now, the winners and losers (company-wise) have been sorted out by who's credit facilities remained intact during the annual bank reviews. Those who were cut are providing headroom to those who weren't, so there are definite winners and losers. You're correct, junk funds are indicating a trough, but like anything else we'll see. I believe the simple math is oil consumption will grow 1.2MM-1.4MM bbls/d annually for the next 20 years before topping out, so there's some time for volatility. The one potential catalyst are the deepwater drillers since their wells can take four to five years to bring online and many of these projects have been postponed since 2014. Think this is 1/3 of global production. So it could be possible for a scenario to unfold where prices do make a run at triple digits again until this sorts itself out, especially if world economic growth starts to accelerate after being stuck in neutral for several years. The other variable to consider is that if you go back to the financial crisis of 08-09, the entire energy industry put their feet on the brakes help commodity prices recover, and to keep the smart people employed (geologists, drillers, etc.) so there was a fraction of the layoffs that occurred this time around. This time around it probably won't be that easy to rehire qualified personnel, while newbies may lose a finger or two while learning drilling 101. I'm bullish up to $60, but at that price, a lot of oil starts to get turned on as producers hedge their output.... You can monitor drilling activity with the baker hughes rig count that comes out on Fridays at 1 p.m..
Just CL options. I have read about the existence of a lot of hedges in the high 50's to 60, but don't have any official data to corroborate.
The CFTC publishes net long / net short positions from companies, funds and speculators. Individual company disclosures will impart hedges place to ensure their production is economic. I make guesstimates around oil prices, but I follow a handful of companies to gauge industry - here's an example from California Resources Corporation (CRC)