Posted on 10/07/2014 5:38:37 AM PDT by thackney
In March, Barron’s Gene Epstein wrote a cover story arguing that crude oil prices were heading for a 25% decline, to $75 per barrel over the next few years (see Barron’s, “Here Comes $75 Oil,” March 29). It was a bumpy road to start, but it does look as if that prediction is going to be coming true perhaps as soon as next year.
Light, sweet crude, recently near $90 a barrel, suffered a major technical breakdown in August. The next level of major support is in the $75-$79 area on the charts.
Let’s start with a long-term chart to see that $75 is not unreasonable given where oil traded over the past decade (see Chart 1). From a low of $10.65 in 1998 to a high of $147.27 in 2008, the technical support area straddles the exact middle of that range.
There are a few other justifications for the target including a technical retracement from the 2009-2011 rally as well as statistical regression analyses from the 1998 low and 2008 high. However, there is no need to complicate things. The $75-$79 range has been a key attractor for traders for more than a decade, and there is no reason why it will not continue to be.
Conditions are also ripe from a simple fundamental point of view. While I cannot address the economic demand for oil and competition from natural gas and renewable energy sources, it is no surprise that a sharply rising U.S. dollar keeps downward pressure on oil. Oil is priced in dollars, so if all else is held constant, a rising dollar means oil prices will fall. And the dollar enjoyed a long-term upside breakout last month (see Getting Technical, “The Dollar Rally May Have a Long Way to Run,” Sept. 24).
(Excerpt) Read more at online.barrons.com ...
charts at source
$27
You saw it here first. :-D
Yeah, when’s diesel gonna come down?
How will this affect the oil patch? Are we looking at a repeat of the economic desolation of the 80’s in Texas?
Not yet, we might slow down the growth at current prices but it would still keep growing at current prices.
The when/if question is in the title.
Dead economy, dead oil prices. Lower gas prices? In your dreams...
Not that you can tell here in Pennsylvania.
Thanks, Governor Corbett! Enjoy your retirement!
Just as I’ll be enjoying the fistful of new taxes that your successor is gonna cram down my piehole.
Diesel has come down here from a high of about $4 and stable for a long time at $3.80+- to today at $3.34 at murphy oil.
It's all supply versus demand, with some speculative volatility thrown in. We're lucky that fracking has developed in this decade. But, demand has steadily crept upwards.
Before the big recession in 2008, I recall hearing that world oil demand was 84 million barrels per day... and the price was $140 per barrel. During the depths of the recession, demand dropped to 81 million bpd. Now, I remember reading it's up to 91 million bpd.
So, it seems likely that on average, demand will creep up as long as the oil is available and the cost doesn't shoot too high. One of the reasons for cap and trade was to raise the price to suppress demand. It was proposed for green reasons, naturally, and had the added twist that it would bleed money off from the energy industry to provide additional funds for ever-hungry government.
To repeat... absent big changes in oil usage and speculative binges, price swings (and oil patch damage) will be contained, IMHO.
Probably not bad for the on-shore and shallow-water oil business in Texas / Louisiana / Oklahoma, as total costs to the refinery door are $20 to $50 a barrel — even lower for conventional (non-tight) formations. They’ll make plenty of money at $70 selling price, and will be producing, exploring, drilling, fracking, and recompleting full out.
It’s deep-water off-shore, tar sands, and logistically remote projects that have higher costs on a delivered-to-the-refinery basis and will shut in production. Indeed, the oil patch might benefit from a one or two year down turn in pricing, as it will not only shut in production, but turn off a lot of exploration and drilling in higher cost places. When oil prices ramp back up again in a couple of years, it will take another year or two for the expensive production to get fully back on line, and the lower-cost produces will hog the market for a bit.
No way deep-water off-shore would shut in production. The real cost was getting to a point of production. Maintaining production after the platform is installed is likely cheaper per barrel for most production platforms due to the large production rate compared to a typical onshore well. They will stop offshore drilling and stop building new platforms, but not shut down production. Shutting in a well causes problems that limit future production.
I like it for purely selfish reasons. I’ve been working off a great many gallons of gas that I have stored and stabilized (Pri-G rocks!) from when it was ~$2/gal. I’m looking forward to refilling everything and getting back to prime SHTF preparedness.
The economy is bad. Oil goes up as the economy expands but the expansion is very narrow and rising fuel prices cut off the expansion causing a decline which causes the price of oil to drop as less of it is demanded. The economy has short periods of advance within the general stagnation and decline. Oil is on a general trend lower along with the economy. Actually the price of oil now, with inflation figured in, is lower than it was when it was 35 cents a gallon.
You’ve been storing gas since 2009? What size / kind of containers / drums must you have to still be using gas you’ve had stored since 2009?
I guess the dealers around here in CT haven’t read the chart. Hard to find diesel less than $4/gal.
2.98 in Tulsa
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