Price Of Oil At Five Year Low

[FuNsTeR]

It is all to do with Russia make no mistake about it... All the contractors in Aberdeen will be getting the heave ho,, thats what they get paid the big bucks for,,, its risky with no job security

originally that was America's strategy .... but now OPEC is refusing to cut oil production because it wants to destroy the US fracking production because of it's high costs it requires a break even price of $80 a barrel and several big fracking players have went bust already in the USA and BP has laid off and is intending to lay off thousands from their US workforce and the whole Oil war has had a opposite effect on Russia the Rubble's value has fallen deeply compared to the dollar thus Russia is now making more from oil sales as it stands and Russian exports are booming on the back of a lower valued Rubble and with Massive deals with China , India and Turkey .... America and the EU's strategy has backfired as Russia is looking eastwards instead

[phart]

originally that was America's strategy .... but now OPEC is refusing to cut oil production because it wants to destroy the US fracking production because of it's high costs it requires a break even price of $80 a barrel and several big fracking players have went bust already in the USA and BP has laid off and is intending to lay off thousands from their US workforce and the whole Oil war has had a opposite effect on Russia the Rubble's value has fallen deeply compared to the dollar thus Russia is now making more from oil sales as it stands and Russian exports are booming on the back of a lower valued Rubble and with Massive deals with China , India and Turkey .... America and the EU's strategy has backfired as Russia is looking eastwards instead

Yeah but they're attacking Russia EXTERNAL debt which is affected much more, converting rubles into dollars to pay interest payments will soon become very proscriptive.

Rubles have fell in line as oil drops. It's totally myopic from the Western Governments, all their doing is making Russia change their economy into a self sufficient one and as you say pack all trade east. India and Putin just met and re-affirmed their joint security needs, china and Russia are Strengthening ties.

and as Putin just said yesterday

[FuNsTeR]

Russia doesn't have much in the way of debt around 13% of its GDP and has assets of $500 billion in reserve .... Putin is a very clever politician he keeps out foxing O'Bampot with ease

[phart]

Russia doesn't have much in the way of debt around 13% of its GDP and has assets of $500 billion in reserve .... Putin is a very clever politician he keeps out foxing O'Bampot with ease

Foreign debt is 600 billion and getting more expensive every day. Putin is running rings round the west, see who got the nomination for defense secretary now? (Ashton carter) , none of this will work though as you indicate the Economy is too strong but they think it will.

Here is an interesting Lavrov interview (Russian foreign secretary)

http://sputniknews.com/interviews/20141209/1015650233.html

[Larky Masher]

http://www.quora.com/Why-is-Russias-debt-to-GDP-ratio-so-low

[phart]

http://www.quora.com/Why-is-Russias-debt-to-GDP-ratio-so-low

interesting, so would you say there is potential to crippling their corporations with the low ruble?

[Larky Masher]

interesting, so would you say there is potential to crippling their corporations with the low ruble?

To be honest (and I'd emphasise this isn't a dig) given my general lack of interest in conspiracy theories this something I haven't given much thought to. If you look at this from purely business perspective predatory pricing only benefits those who can supply at the lowest price so the Arabs win hands on this though to win in the long term they'd need to keep prices below the level at which other countries can extract and sell at a profit. Given that part of the US drive for fracking was a desire to self-sufficient I can't see how the government would then collude with others to destroy the industry that's made them self-sufficient and raises billions of dollars in tax revenue at national and state level. The Russians are mental and the country is run by a kleptocracy and I argue it difficult to assess what (if any) agenda Putin has.

http://www.businessweek.com/articles/2014-12-01/can-the-us-fracking-boom-survive-with-oil-65-per-barrel

[phart]

To be honest (and I'd emphasise this isn't a dig) given my general lack of interest in conspiracy theories this something I haven't given much thought to. If you look at this from purely business perspective predatory pricing only benefits those who can supply at the lowest price so the Arabs win hands on this though to win in the long term they'd need to keep prices below the level at which other countries can extract and sell at a profit. Given that part of the US drive for fracking was a desire to self-sufficient I can't see how the government would then collude with others to destroy the industry that's made them self-sufficient and raises billions of dollars in tax revenue at national and state level. The Russians are mental and the country is run by a kleptocracy and I argue it difficult to assess what (if any) agenda Putin has.

http://www.businessweek.com/articles/2014-12-01/can-the-us-fracking-boom-survive-with-oil-65-per-barrel

I don't think the price is about fracking companies but rather geopolitical pressure on Russia and it's economy. Mainly by the Saudi's at US behest. Your article shows that other countries are suffering at the increased production.

I agree with your reasoning on the self sufficient plans of the US and the implications.

[SMcoolJ]

You can just imagine all the headlines right now had we voted Yes. "Salmond's Oil Dream Down the Pan"... ha ha ha blah blah blah on and on and on...bbc wankdom. But the funny thing is this oil crash is a political move and the big money oil No voters of Aberdeen hugely endorsed it. A Yes was a chance to throw a big spanner in this war machine. A No was like a pint of petrol onto the fire. Aberdeen's destiny is to economically level with her sister city Dundee.

I very much doubt a yes vote would have given Scotland chips at this table.

As for Aberdeen being doomed, maybe not quiet yet. The issue right now is that reserves are too high, shale success hasn't helped and the price has dropped. Simple supply and demand. This is cyclical, we've bounced back many times before. People will continue to need oil, current reserves will be used, prices will go up as supply goes down and new investment will be made. I hope this doesn't burst your anti-Aberdeen bubble.

[Larky Masher]

I don't think the price is about fracking companies but rather geopolitical pressure on Russia and it's economy. Mainly by the Saudi's at US behest. Your article shows that other countries are suffering at the increased production.

I agree with your reasoning on the self sufficient plans of the US and the implications.

Predatory pricing is a blunt instrument, it's about taking out all the opposition for a commodity product it couldn't be used to attack just one competitors.

[Khana Lagur]

Speculators have been driving this market down since Mar 2012 and underlined their intent to force it further down In Feb 2013, It was pretty clear in June this year that the price wasn't going anywhere other than to around the $70 level.

There might be a little settling and then a wee kick back if we hit $60 but I won't be surprised if we're between $40-$50 before we stop the fall we're seeing just now.

This is a game in which 9 out of 10 players have no interest in what price oil is - as long as they are on the correct side of it.

[Larky Masher]

Speculators have been driving this market down since Mar 2012 and underlined their intent to force it further down In Feb 2013, It was pretty clear in June this year that the price wasn't going anywhere other than to around the $70 level.

There might be a little settling and then a wee kick back if we hit $60 but I won't be surprised if we're between $40-$50 before we stop the fall we're seeing just now.

This is a game in which 9 out of 10 players have no interest in what price oil is - as long as they are on the correct side of it.

There's little empirical evidence that speculation is the primary driver of oil prices.

[Khana Lagur]

Speculators have been driving this market down since Mar 2012 and underlined their intent to force it further down In Feb 2013, It was pretty clear in June this year that the price wasn't going anywhere other than to around the $70 level.

There might be a little settling and then a wee kick back if we hit $60 but I won't be surprised if we're between $40-$50 before we stop the fall we're seeing just now.

This is a game in which 9 out of 10 players have no interest in what price oil is - as long as they are on the correct side of it.

There's little empirical evidence that speculation is the primary driver of oil prices.

I actually understated the number - it's closer to about 95% of oil contract futures that are in play speculatively. Unless you can see 'behind the board' (the order flow in the exchanges) there's no way to know who is placing contract orders. And there's only one way anyone will be able to see that. You don't need to take my word for it but it's a market I know very well.

[Larky Masher]

I actually understated the number - it's closer to about 95% of oil contract futures that are in play speculatively. Unless you can see 'behind the board' (the order flow in the exchanges) there's no way to know who is placing contract orders. And there's only one way anyone will be able to see that. You don't need to take my word for it but it's a market I know very well.

I thought it was 97% but that still not to say that this situation means that it had a significant influence on the price most products don't go from the supplier to the end user directly.

However, I would be interested as to what % of the overall price you think is due to speculation?

[Khana Lagur]

I thought it was 97% but that still not to say that this situation means that it had a significant influence on the price most products don't go from the supplier to the end user directly.

However, I would be interested as to what % of the overall price you think is due to speculation?

All commodity markets are speculative by nature and the longer out a contract is only adds to the difficulty of attempting to price it correctly. Oil is slightly easier than the likes of wheat or coffee because it's not a commodity where a year's crop can be ruined by weather or disease etc. That makes oil a reasonably decent indicator of the health of the wider global economy. But because oil is traded in some pretty far-forward contracts (two years is not uncommon in strong economic eras, not to mention varying political frameworks) you have to look backwards to see what tomorrow's going to bring. Hence what I was saying about the price indicators starting to point south from Feb 2012 onwards.

Because the indicators are usually pretty clear, it's a fairly straightforward market for speculators to operate in. Plus, like gold, it's a very technically-traded market and they tend to pull in and lock in the specs.. What you're seeing over the past six month is covering by those who called it wrong initially, plus further speculation by people who are just riding coat tails and following the money. Prices will now be driven to points where buying interest is renewed, which if not $60, looks good for about the $45 level.

So, I'm of the view that the bulk of the price is speculative. That's not to say supply and demand doesn't affect prices - it clearly does. As does 'news', but usually only in the form of rumour. The difference is that while the actual 'market' is the total supply and demand in physical terms, the 'market' in reality is the outcome of price perception and direction. Perfect ground for specs.

The reality is that when it comes to commodities no-one knows the future. That's what makes it a specs' game.

[Larky Masher]

All commodity markets are speculative by nature and the longer out a contract is only adds to the difficulty of attempting to price it correctly. Oil is slightly easier than the likes of wheat or coffee because it's not a commodity where a year's crop can be ruined by weather or disease etc. That makes oil a reasonably decent indicator of the health of the wider global economy. But because oil is traded in some pretty far-forward contracts (two years is not uncommon in strong economic eras, not to mention varying political frameworks) you have to look backwards to see what tomorrow's going to bring. Hence what I was saying about the price indicators starting to point south from Feb 2012 onwards.

Because the indicators are usually pretty clear, it's a fairly straightforward market for speculators to operate in. Plus, like gold, it's a very technically-traded market and they tend to pull in and lock in the specs.. What you're seeing over the past six month is covering by those who called it wrong initially, plus further speculation by people who are just riding coat tails and following the money. Prices will now be driven to points where buying interest is renewed, which if not $60, looks good for about the $45 level.

So, I'm of the view that the bulk of the price is speculative. That's not to say supply and demand doesn't affect prices - it clearly does. As does 'news', but usually only in the form of rumour. The difference is that while the actual 'market' is the total supply and demand in physical terms, the 'market' in reality is the outcome of price perception and direction. Perfect ground for specs.

The reality is that when it comes to commodities no-one knows the future. That's what makes it a specs' game.

If the extraction costs for offshore, fracked and tar sand oil is in the $60 to $80 a barrel range, how can the bulk of the price of the speculative? e.g. Brent Crude is currently trading around $60 how can the bulk of this be speculation?

[Khana Lagur]

If the extraction costs for offshore, fracked and tar sand oil is in the $60 to $80 a barrel range, how can the bulk of the price of the speculative? e.g. Brent Crude is currently trading around $60 how can the bulk of this be speculation?

Because upwards of 95% of those in the market have no exploration and production costs. They couldn't care less what a company's E&P costs are or what their per barrel break even price is. Speculators' only interest is whether they're on the right side of the price move. If I sell a contract at $60 I only need the price to fall to profit. I don't have any other price concern.

The suppliers/producers will try to protect their per barrel cost through supply flow but they are at the mercy of the people who are trading the contracts. Who knows, they might even trade contracts in the market themselves as a hedge.

[hampden_loon2878]

This has turned into a very interesting thread, my freind has shares in a lot of exploration companies and he is convinsed the oil price will soon rise, hea going to have a hrleart attack when he reads this thread haha

[phart]

If speculators can drop the market like this, then it's going to be weaponised by countries, which suggests it's already been done so. Which puts us back to the reasons for it happening beyond speculators making money.

[thplinth]

If speculators can drop the market like this, then it's going to be weaponised by countries, which suggests it's already been done so. Which puts us back to the reasons for it happening beyond speculators making money.

I am sure it was being manipulated before (especially when it was really high during Bush's reign).

Like 9/11 the 2008 financial crisis was also a highly dubious attack.

One at the start of Bush Jnr's reign and one at the end of it.

I have an extremely bad feeling about the future right now phart I have to say. Hopefully it will pass.

[Larky Masher]

Because upwards of 95% of those in the market have no exploration and production costs. They couldn't care less what a company's E&P costs are or what their per barrel break even price is. Speculators' only interest is whether they're on the right side of the price move. If I sell a contract at $60 I only need the price to fall to profit. I don't have any other price concern.

The suppliers/producers will try to protect their per barrel cost through supply flow but they are at the mercy of the people who are trading the contracts. Who knows, they might even trade contracts in the market themselves as a hedge.

But there's a base price that will be set by the extractor and if it goes below their shutdown price then they stop producing as has been seen in the US recently. There is a cost attached to a physical product in this chain and that has been covered and without that physical product there's nothing to trade.

[phart]

Interest rates get a 6.5% hike from the Russian central bank.

http://www.bbc.co.uk/news/business-30490082

Venezuela in the shit house as well with these prices, a lot more economies are going to crack before the Russian one.

[SMcoolJ]

Interest rates get a 6.5% hike from the Russian central bank.

http://www.bbc.co.uk/news/business-30490082

Venezuela in the shit house as well with these prices, a lot more economies are going to crack before the Russian one.

Think Venezuela has been screwed for a while though. Lots of international operators and service companies left a while back.

[thewelk]

Another article on the Russian problems...It's not going to end well for any of us plebs. http://www.bbc.com/news/business-30492518

I actually had a little lol when I got to the bit where the BBC takes the moral high-ground about the Russian media covering it up...

[thplinth]

http://www.counterpunch.org/2014/12/16/the-oil-coup/