Great post Bitumen Bill I will add my thoughts in bold
Anyone have a good feel where prices are going. the current price does not make sense for the short term based on current fundamentals.
1) World production is about 3 million b/d less than 2008. But actual consumption is a few million b/d less (meaning almost 5 million b/d less than 2008). So the world has been stock piling. So when does the storage get full?I think most of the stockpiling is going on in China and India, from what I understand they are going from almost nothing to huge users, small incremnts per capita will provide stagering numbers on the consumption side from the two most populos countries on the planet
2) The world is in a recession, 14 Trillion dollars evaporated , which means you and me have a lot less to spend on consuming everything. Lower demand for everything but oil still at what $72/b I feel the pain as do many others, but with the fall in Natgas, exploration and drilling for gas has come to a screaming halt , existing production is being shut in to await the better prices which are inevitable, when the lag comes we will see natgas at higher levels than it has ever been, for now SAGD projects can enjoy the benefit of these low prices to enjoy the lowest prices they will ever see, steam those reservoirs at the lowest cost times ever. As for the price of oil, to much GEO/political risk ie: Nigeria, Venezuala, Iraq, Iran etc. The last two weeks Us inventories of crude and distillate have dropped although Natgas has increased. In my opinion some of those Trillions will return as the markets normalize Oil 80/ Natgas 8 or above/ Copper 3.00(key indicator) or above
3) Every country in the world is approaching or exceeding double digit un- employment rates even less money avaialble to spend and consume. yup
4) KYOTO - and now the world will attempt to rewrite something green this Fall with the US sort of leading the pack with an aim to less green house gas emissions. Even though coal is the #1 contributor world wide. Oil gets a bad rap for it, but we will see this Nov. I my opinion some of this will fuel the price increase of Natgas and get some stability back into the market on the other hand Kyoto is a question mark for developed countries, the most populos countries are the largest offenders of Kyoto and if they conintue to be the highest consumers of coal without any regards for minimal pollution standards they just burn it and breath it. It was good to see the large deal signed by exxon for the supply of liquified Natgas to china, should help save some coal consumption
5) Saudi Arabia has proved it is still capable of being the world safety valve for oil prices when , many educated and let alone me thought they could never produce more than 10 Million b/d again. I think in 2008 when Non Opec producers dropped off by 2 Million b/d the Saudi's picked the load up by just cranking a few valves open. Impressive
Yes it is impressive, but back to the political risk associated with the middle east being able to throttle the pace of development of other projects oilsands, or alternative energy around the world to make sure they are in control, just what I need Osama asking if I would like regular or premium
6) Economic recovery will not happen too soon with a $72/b price tag, the world needs a breather so the economy world wide shakes out all the defaltionary pressures and starts to build , we are not in a growth mode yet. Or are we?? I suppose that depends what financial post you read some say recession ended others hmmmm. I think we are on a very sippery slope to the upside, very very low slope , and very fragile from week to week,
7) The oil explorer's are not going out and drilling like they used too, even though $/b is $72. which should be dam good net returns on per bbl basis. When the drilling stops the lag begins similiar to a sling shot the longer the drilling and developement lags the faster the increase when the upswing is confirmed
I am probably missing a few facts maybe that's why Goldman Sach's never hired me as thier Oil Analyst
Your Comments are great and add much food for thought, as you can tell I am not an analyst either just a frustrated Connacher shareholder