OIL PRICES: could stay down thru 2016-19

[Van]

Into the $26's. Practically giving the stuff away. Not being funny, but there can't be anyone who can pump it this cheaply?

[leviathan]

Some of the smaller players are going to default on their debts at these prices. That should put a floor under the oil price but cause problems elsewhere IMO. Bigger players with low gearing and plenty of cash on the balance sheet should be in a better position once the oil price stops falling

[Van]

Oil trying to reclaim $30. Seems a bit churlish to try picking a bottom, but you have to wonder if we have just seen it? Wildly violent swings are often the sign of exhaustion and can mark long term bottoms.

[leviathan]

Van - I think we may have seen it (with the announcement that Iran's oil was back on the international market from a fundamental perspective), although from a technical perspective I would have liked to have seen oil bounce off support at $25. BP is making higher lows ATM but there is no price acceleration yet. Short covering I expect is the short term price driver as the small investors who have been shorting get stopped out while betting on $10 a barrel oil.

 

However, I tend to buy into the idea that stocks are now in a bear market as the market has probably discounted the effects of lower commodity prices on a number of affected shares.

 

How the dynamics play out between any commodities rebound and any stocks bear market should be interesting - maybe we will see a bottom for many commodities this year and the start of some inflationary pressure building albeit from a lower base?

 

Lev

[Van]

The rubber band has been stretched so far that the snap-back will be violent, but whether it can reclaim $40, $50 or more is very much unknown. Personally I would just like it to get back to break-even lol, and I only started buying in November.. imagine if you were buying back when the price was much higher :-o

 

The supply/demand is actually not that out of whack, and future supply is now severely compromised.

 

People pulling downside targets out of thin air "$20", "$10" as you say is the sign of the herd running off the cliff. If you can ignore the daily fluctuations, which is difficult admittedly, it's a great time to buy - Oil has NEVER been this cheap compared to many other assets. There will be small (and large) fortunes made riding the next bull market up, and I fully intend to be in amongst them.

[drbubb]

OIL Shares catch a bid

----------------------------------------% Change Volume

====

MRO Marathon Oil Corp 10.19 +15.93% 492,723

DVN Devon Energy Corp 26.44 + 9.35% 33,793

KSU Kansas City Southern... 70.24 + 8.83% 7,399

KMI Kinder Morgan Inc 14.95 + 7.71% 262,237

CHK Chesapeake Energy Co. 3.81 + 7.32% 376,243

Data as of Jan 22

> http://money.cnn.com/data/premarket/

[Van]

Effect of low oil price on BP:

http://www.bbc.co.uk/news/business-35469380

 

"Underlying fourth-quarter profits fell to $196m, compared with $2.2bn for the same period in the previous year."

 

"In the final three months of 2014, the cost of a barrel of Brent crude was $77. In the final three months of 2015, it was $44."

 

 

****

 

So with oil currently in the low-30s, you have to think that this operation is losing money, and if that is true for BP it is true for everyone.

Clearly unsustainably low prices, and supply side changes are happening.

[drbubb]

Effect of low oil price on BP:

http://www.bbc.co.uk/news/business-35469380

 

"Underlying fourth-quarter profits fell to $196m, compared with $2.2bn for the same period in the previous year."

 

"In the final three months of 2014, the cost of a barrel of Brent crude was $77. In the final three months of 2015, it was $44."

 

So with oil currently in the low-30s, you have to think that this operation is losing money, and if that is true for BP it is true for everyone.

Clearly unsustainably low prices, and supply side changes are happening.

 

BUFFET is Buying

 

On Friday, in regulatory filings, Berkshire Hathaway announced that it bought 2.54 million shares of one of the world’s biggest oil refining companies. Phillips 66 has a market cap of $42.36 billion. According to media reports, Berkshire now owns 13.7% of the company, increasing its position from 10.8% in August. Phillips 66 is the sixth largest position in Berkshire’s portfolio.

 

 

The release of Buffet’s increased position in the oil refinery company came on the same day Phillips 66 reported a 43% drop in profits and a 38% decline in revenue.

Some analysts have noted that Buffet’s expanded role in Phillips 66 is a bet on oil prices, which comes as prices remain under significant pressure. West Texas Intermediate (WTI) crude oil has struggled to hold gains above $30 a barrel, settling Monday’s session at $31.62 a barrel down, around 6% on the day. So far this year, WTI crude has fallen more than 16%.

[Van]

IMO these 5% daily swings indicate a clear long term turning point. The market is only this volatile at the point of maximum fear/greed.

[notanewmember]

BP. Down 9% today on awful results. BUT they are maintaining the dividend.

 

Sharephrophets are dipping a toe into BP.

 

http://www.shareprophets.com/views/18443/tom-winnifrith-bearcast-2-feb-why-we-are-buying-bp-today-at-335p

[mSparks]

Effect of low oil price on BP:

http://www.bbc.co.uk/news/business-35469380

 

"Underlying fourth-quarter profits fell to $196m, compared with $2.2bn for the same period in the previous year."

 

"In the final three months of 2014, the cost of a barrel of Brent crude was $77. In the final three months of 2015, it was $44."

 

 

****

 

So with oil currently in the low-30s, you have to think that this operation is losing money, and if that is true for BP it is true for everyone.

Clearly unsustainably low prices, and supply side changes are happening.

Erm..

http://www.bbc.com/news/business-35469380

http://www.reuters.com/article/us-bp-results-idUSKCN0VB0JB

 

And in RNS....

 

And FT

http://www.ft.com/fastft/2016/02/02/bp-suffers-2-2bn-fourth-quarter-loss/

 

And finally the regulatory filing

http://www.lse.co.uk/share-regulatory-news.asp?shareprice=BP.&ArticleCode=8ckhcpv9&ArticleHeadline=4Q15_Part_1_of_1

 

 

Reuters for the win.

It was a $6.5Billion loss

 

funnily enough the Beeb story has now been edited to say both their profit halved and they made the biggest loss in two decades.

 

->

The oil giant said its profits had fallen by 51% to $5.9bn (£4.1bn), compared with $12.1bn in 2014 following a dramatic slide in oil prices.

BP was the biggest faller on the FTSE 100, falling 35.9p to 331p after announcing its biggest loss for more than two decades.

ROFL, fuxing retards

[drbubb]

Triggering a Crash, creates opportunity for TPTB

 

http://www.zerohedge...xt-global-crash

 

The Secret Behind The Next Global Crash

 

Selected Persian Gulf traders, and that includes Westerners working in the Gulf confirm that Saudi Arabia is unloading at least $1 trillion in securities and crashing global markets under orders from the Masters of the Universe – those above the lame presidency of Barack Obama.

 

Moscow and Tehran are very much on it. The logic behind crashing markets, creating a recession and a depression – from the point of view of the Masters of the Universe above the lame duck President of the United States — is to engineer a major slow down, cripple buying patterns, decrease oil and natural gas consumption, and point Russia on a road to ruin. Besides, the ultra low oil price also translates into a sort of ersatz sanction on Iran.

Still, Iranian oil about to reach the market will be around an extra 500,000 barrels a day by mid-year, plus a surplus stored in tankers in the Persian Gulf. This oil can and will be absorbed, as demand is rising (in the US, for instance, by 1.9 million barrels a day in 2015) while supply is falling.

Surging demand and falling production will reverse the oil crash by July. Moreover, China’s oil imports recently surged 9.3% at 7.85 million barrels a day, discrediting the hegemonic narrative of a collapse of China's economy – or of China being responsible for the current market blues.

So, as I outlined here, oil should turn around soon. Goldman Sachs concurs. That gives the Masters of the Universe a short window of opportunity enabling the Saudis to dump massive amounts of securities in the markets.

The House of Saud may need the money badly, considering their budget on red alert. But dumping their securities is also clearly self-destructive. They simply cannot sell $8 trillion. The House of Saud is actually destroying the balance of their wealth.

[Van]

A great article on the ways to invest in Oil:

https://www.hedgewise.com/blog/investmentstrategy/how-invest-oil-long-term-avoid-contango-tracking-costs.php

 

(hint: avoid USO - had I know this, I would have shorted the f**ker a year ago). Amazing that anyone would use monthly rolling ETFs when you have to make 5-10% a month just to break even.

[Van]

The spotprice Gold:Oil ratio is now at a nosebleed 46.4.

 

 

 

 

And the DJIA:Oil ratio is now at 597.

 

 

 

With Crude @ $32 and gold @ $1100, I make it that we are seeing a historical extreme in the Gold:oil ratio:

 

1100/32 = 34.3

 

http://www.macrotrends.net/1380/gold-to-oil-ratio-historical-chart

 

= 0.03 Oil/Gold ratio

 

Is this cheap?

http://www.financialsense.com/contributors/dominic-frisby/is-oil-cheap-compared-to-stocks

[drbubb]

"I might consider buying some type of Oil security today.

But probably options related, and not a huge position"

 

Here's the sort of thing I might buy: a Feb $7 Call on USO - there's not much time value in it

 

Feb.$7 Call vs. USO (US Oil, crude) ...update : Feb.$7 : Mar.$7 : USO

 

Thursday's action:

 

=====: Open : -Low- : -High- : Close : change : Pct.
WTIC : 27.34 : 26.05 : 27.48 : 27.30 : -$0.03 : - 0.11% / v. 719.0k
USO- : $7.99 : $7.67 : $8.03 : $7.99 : +$0.03 : +0.41% / v. 94.43 mn
F.$7C : $0.96 : $0.95 : $1.19 : $1.19 : +$0.07 : +6.25% / v. 0,215 (bid/offer : $1.14 - 1.21)
M$7C : $1.33 : $1.33 : $1.33 : $1.33 : -$0.33 : - 2.21% / v. 0,020 (bid/offer : $1.28 - 1.43)
OIH--- : 21.64 : 21.64 : 22.12 : 21.92 : -$0.18 : - 0.81% / v. 7.37 mn
Mr20c : ------- : ------- : ------- : $2.78 : -$0.20 : - 6.71% / V. 0000 (bid/offer : $2.69 - 2.90)

[drbubb]

Here's an oil share (MUR / Murphy Oil) that mostly correlates well with WTI Crude prices

 

Ratio: MUR -to-WTI Crude

 

It has not shown the same Loss of value (relative to WTIC Crude), that USO has shown in 2016

 

 

The ratio dropped from 0.4027 early in 2015 to 0.2608 recently - that's a fall of - 35.2% in about 12 months

 

That happens, because of the Contango, that presently looks like this:

 

Mon : WTI Cr. : Chg.- : percent: Bbls/$1k : -Chg.- :
Feb'16 28.45 : Spot . :
Mar - : 29.44 : $ 0.00 : + 0.00 % : 33.97B : - 0.00 % :
Apr - : 31.24 : $ 1.80 : + 6.11 % : 32.01B : - 5.77 % :
May - : 32.52 : $ 3.08 : + 10.5 % : 30.75B : - 9.48 % :
Jun - : 33.54 : $ 4.10 : + 13.9 % : 29.82B : - 12.2 % :
July - : 34.36 : $ 4.92 : + 16.7 % : 29.10B : - 14.3 % :
Aug - : 35.03 : $ 5.59 : + 19.0 % : 28.55B : - 16.0 % :
Sep - : 35.74 : $ 6.30 : + 21.4 % : 27.98B : - 17.6 % :
Oct - : 36.32 : $ 6.88 : + 23.4 % : 27.53B : - 18.9 % :
Nov - : 36.86 : $ 7.38 : + 25.1 % : 27.13B : - 20.1 % :
Dec - : 37.41 : $ 7.97 : + 27.1 % : 26.73B : - 21.4 % :
Jan'17: 37.91 : $ 8.47 : + 28.8 % : 26.38B : - 22.3 % :
Feb. - : 38.34 : $ 8.90 : + 30.2 % : 26.08B : - 23.2 % :
Mar. - : 38.80 : $ 9.36 : + 31.8 % : 25.77B : - 24.1 % :
=====

 

When USO rolls contracts in a contango market, it sells the cheaper nearby oil, and buys the more expensive, further-out oil

Thus, every roll in a contango market reduces the number of barrels that back every share of USO.

If prices stayed the same, and we move from March 2016 to March 2017, the barrel backing for USO would fall by -24.1%.

That's less than the price of USO fell over the last year.

 

If you buy oil forward one year, there's no way around suffering that loss.

But if you buy MUR shares, then you need not suffer that discount.

So you can use that discount to buy call options on Murphy Oil, and you are better off hedging oil price risk by purchasing Calls

on MUR, rather than buying WTI futures. This will work so long as the Ratio of MUR -to-WTI remains stable. And you will have

a possible windfall if MUR rises faster than Oil prices. For instance, at the end of 2014, there was a huge surge in MUR-to-WTI,

as Oil prices fell faster than MUR did.

 

MUR ($15.97) versus USO, OILB ... 3-years : 5-yr : 10-yr :

xx

 

MUR Call options - at $15.97

Strike - : --- Mar.16--- : --- Apr.16 --- : --- July 16 -- : --- Oct.16-- : 8mo. Premium
$12.50 : $3.30-$4.30 : $3.60-$4.60 : $3.80-$5.20 : $4.20-$5.50 :
mid/bke: $3.80-16.30 : $4.10-16.60 : $4.50-17.00 : $4.85-17.35 : $1.36 : + 8.51 % / 1.06%/mo
$15.00 : $1.75-$2.35 : $2.30-$2.75 : $2.65-$3.60 : $3.20-$4.00 :
mid/bke: $2.05-17.05 : $2.53-17.53 : $3.13-18.13 : $3.60-18.60 : $2.63 : + 16.5 % / 2.06%/mo

[drbubb]

MUR looks like it may be at or near key very long term support : $12-15 ... update

 

 

Earnings were negative, but better than expected

 

Analyzing Murphy Oil’s 4Q15 Earnings Performance

By Nicholas Chapman • Jan 29, 2016 12:16 am EST

Murphy Oil’s 4Q15 earnings beat estimates

Murphy Oil (MUR) announced its 4Q15 earnings on January 27, 2016. MUR reported an adjusted loss of $0.76 per share, $0.55 better than the Wall Street analyst consensus for a loss of $1.31 per share.

MUR’s 4Q15 earnings are lower by $1.15 per share when compared with its 4Q14 profit of $0.39 per share. Even when compared sequentially with 3Q15, MUR’s 4Q15 earnings are lower by $0.04 per share.

 

Enlarge Graph

MUR’s 4Q15 revenue beat estimates

For 4Q15, Murphy Oil’s (MUR) reported adjusted revenues of ~$658 million, ~7% better than Wall Street analyst consensus for revenues of ~$614 million.

The company’s 4Q15 revenues are lower by ~53% when compared with 4Q14 revenues of ~$1,407 million. Even when compared sequentially with 3Q15, MUR’s 4Q15 revenues are lower by ~8%.

Murphy Oil’s earnings trend

As seen in the above chart, Murphy Oil reported negative earnings in 2015 due to lower realized crude oil and natural gas prices. Since 1Q13, MUR has exceeded its earnings expectations ~66% of the time.

Due to the steep downward trend in energy prices, almost all S&P 500 (SPY) upstream companies have been hit. Southwestern Energy (SWN), EOG Resources (EOG), and Consol Energy (CNX) are expected to report ~22%, ~49%, and ~20%, respectively, year-over-year declines in their 4Q15 revenues.

MUR’s 2015 earnings and revenue beat estimates

For 2015, Murphy Oil (MUR) reported an adjusted loss of $3.08 per share, $0.48 better than Wall Street analyst consensus for a loss of $3.56 per share. MUR’s 2015 earnings are lower by $6.45 per share, when compared with a 2014 profit of $3.37 per share.

For 2015, MUR reported adjusted revenues of ~$3 billion, ~3% better than Wall Street analyst consensus for revenues of ~$2.9 billion. MUR’s 2015 revenues are lower by ~33% when compared with 2014 revenues of ~$5.3 billion.

==

> More: http://marketrealist.com/2016/01/analyzing-murphy-oils-4q15-earnings-performance/

 

Update:

Co.- : $Last : chg. : PEGr : Bk.Val : P/BkV: MkValue: $Cash : $Debt : Ebitda : OperCF: 6oc-D+C: MV/?: trP/E : fw.Yld :
8/10/15
MUR: $33.81 +1.51 : -2.10 : $46.10 : 70.0%: $6.02bn : $1.37b : $2.61b : $2.79b : $2.91b : $15.5bn : 100% : 8.23 : 4.20% :

2/11/16

MUR: $15.97 - 0.44 : +0.34: $30.94 : 53.0%: $2.75bn : $457m : $3.06b : $1.35b : $1.36b : $5.56bn : 49.5%: N/A : 5.10% :

[Van]

Crude jumps +9%.

 

Given the current extreme ratios, does anyone else think that Crude is in the same position today as Gold was in 2001?

 

- The world is not going to stop using oil any time soon.

- The market needs a new growth story, and India will overtake China as the world's most populous nation in about 2020.

- Old oil fields such as North Sea oil are unprofitable at these levels and could be closed down for good

- current prices are limiting capex and impinging future capacity

 

I can think of many reasons to be bullish.

[drbubb]

Maybe.

But how to play it?

 

I was too slow to get the USO , or the MUR calls.

Maybe we will get another dip

[drbubb]

Look and read:

 

 

Ding ding! Banks going down

 

 

zerohedge ‏@zerohedge 3h3 hours ago

One Third Of Energy Companies Could Go Bankrupt Deloitte Warns As Credit Risk Hits Record High http://www.zerohedge.com/news/2016-02-16/one-third-energy-companies-could-go-bankrupt-deloitte-warns-credit-risk-hits-record- …

 

 

Yup.

This is the Big (potential) trigger - not Derivatives

 

Derivatives just spread it around unpredictably,

since every derivatives "bet" has a winner and a loser

[drbubb]

 

Hedge fund billionaire David Tepper loaded up on energy stocks

Hedge fund billionaire David Tepper, who runs $20 billion Appaloosa Management...

Business Insider

 

[Van]

Oil trying to reclaim $30. Seems a bit churlish to try picking a bottom, but you have to wonder if we have just seen it? Wildly violent swings are often the sign of exhaustion and can mark long term bottoms.

 

So whisper it quietly, but oil's doing rather well lately, isn't it? Gained $10 since this. Could have called the bottom to the very day.

Now have the rather thorny problem of finding a re-entry point.

 

Just completed a W bottom - all the momentum trading systems will be picking up on this.

[drbubb]

(I started a new thread around this theme):

http://www.greenenergyinvestors.com/index.php?showtopic=20681

 

Will surprise inflation wreck the Stock Market?

 

Oil, Copper, and the CRB have fallen a long way, and maybe have started an important bounce, and even a Bull market

 

"Big Three" Charts (SPY, GLD, DXY) ... 10d-Intraday : 6mos-D : 2yrs-D : 5yrs-D // CUvsGLDvsCRB

 

CRB / Commodity Research Bureau index - on its own

 

CRB- long term - up to 2012 ... & showing the recent Low near 155

 

 

Here's one voice talking "Inflation Ahead"

 

Is Inflation Around the Corner?

The world is awash in worries about deflation, but here in the US it appears that inflation is making a comeback. If this new trend continues, it may catch a lot of investors off guard. Inflation, or the lack thereof, drives financial markets...

. . .

overall inflation took a nose dive lower, nearly crossing the sharp 0% line (which would mark the transition into deflation). We can see that that the collapse in headline inflation pulled core inflation down with it, but to a much lesser extent.

 

Now, over the last few months, inflation has begun to rebound (black arrows). Many people find this phenomenon strange when they consider that oil is still trading close to its recent lows, near $35/barrel. “Doesn’t oil need to rise for inflation to pick up?” they ask.

The answer is no; it doesn’t. It just needs to stop going down.

The reason oil took such a toll on overall inflation is because oil itself was experiencing massive deflation. The price of oil, when compared to its price a year earlier, kept on falling and falling. But now, oil has been sharply suppressed for over a year, and this effect is diminishing.

[drbubb]

U.S. oil and gas rigs fall to 70-year lows

Mar 11 2:37pm:

So much for "drill, baby, drill."

More

[drbubb]

In this interview, Jerome Corsi says:

 

+ Putin did a deal to get the Oil price back over $40, and if it stays there the global economy may not collapse
+ The natural price of oil now is probably about $15-20
+ If it goes down there, you will have a global collapse of epic proportions
+ Stocks prices could fall thousands of points over a few trading sessions, or it could be drawn out longer
.
Establishment Favors Nazi-Style Government to Donald Trump's Patriotism

.
(Remember, the Globalist call anyone they do not like a "Nazi".
And if they fear them, they call them "like Hitler."
Only someone the Globalists fear can bring real change.)