Crude Oil Is Rolling Over

In late morning trade, West Texas Intermediate crude oil futures were giving up earlier gains and were down more than 1% on the day. WTI futures were down near $56 a barrel on Thursday, after briefly touching $59 a barrel earlier.

On Wednesday, crude oil had a wild ride, spiking ahead of the Federal Reserve's announcement before giving up those gains.

I thought yesterday we were hitting bottom sanity but NOOOOO... I need to quit looking at this. I have too much wear and tear on myself to stack on more of this again. I’ve lost track of the times I’ve hung on the spot price, the futures prices, the news and all looking for a turn, a glimmer of hope that things were getting better. Why? I’ve had to let too many good people go. I’ve seen too many hopes and dreams shattered and too many happy times end. Good work and progress are my reasons for living... both make me feel purpose, service and doing the best I can to take care of my folks.

I’ll share some of what I think is relevant analysis. It is a shame to think the world is turned on its head over KSA hard ball but I think you are right. I just wonder who else is involved in this? Several CEO and other are saying it the US.

I am probably OC on this subject but, after all, it is but one of my obsessions.

I have found these fellows especially rational. The supply / demand / price relationships appear to be well constructed and reminiscent of my agricultural economics course... surely nothing like Harvard but certainly very much in keeping with my hard knocks education.

The suggestion of a bloody ‘15 and a recovering ‘16 echo my own assessment for differing reasons and what I’ve been told some large corporation planning departments are forecasting.

First, this interesting fellow. We have some interesting people in our business. I am often impressed by their credentials and candor and dedication to the business... sometimes altruistically and / or strongly motivated by curiosity.

http://euanmearns.com/about-euan-mearns/

Next, his basis for forecasting, The crash explained:

http://euanmearns.com/the-2014-oil-price-crash-explained/

One respondent to this analysis suggests “we are in uncharted territory”. Yes, I think so. This new tight production does not follow the old supply elasticity “rules”. It is fragile and our growing population of OLD wells that are very sensitive to lifting cost and price are also very fragile sources of supply.

Next, some forecasting with three scenarios. All three end up with the same conclusion, $100 oil again by the end of ‘16.

http://euanmearns.com/oil-price-scenarios-for-2015-and-2016/#comment-5594

Another fellow who arrives at similar conclusions but from an engineer’s perspective is this guy at Missouri School of Mines.

This one of the more balanced views I have seen since this all started. Not because it is “hopeful” but because it appears balanced.

http://oilprice.com/Energy/Oil-Prices/Dont-Expect-Low-Oil-Prices-To-Last-For-Long.html

Somewhere between wishful thinking and panic is the most likely outcome.

Then there are conspiracy theories.

Russia is the wildest card of all and I think the crash is an orchestration led by oil / Saudi. I don’t think KSA did this on their own though. I think they were put up to it by this administration, Crazy? Maybe, but they are just this stupid and idealistic... remember Putin dissed obozo, this is his quid pro quo. What does not compute though in that thesis is how the lizard queen (Jarrett) allowed this to happen to Iran. What I am afraid of is that this plot has over shot the mark. That they have let the genie out of the bottle. Like bad wishes, you have to be careful one does not float back to you. We have a world economy and if Russia hurts and reduces consumption we must hope that they will also have crippled production... I think they will but they may not. Putin is ruthless but he is also smart and knows better than to produce into a hole.

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

Based on old wells becoming a larger part of production and enhanced early time recovery, a cohort of mine and I forecast back in ‘98 that the amplitude and frequency of price swings would both increase as time went by. I have said for years that the hydrocarbon era will end with large resources left that can’t economically be converted to reserves and that we will run out of production rate instead of oil... it will just take more energy to get it out of the ground than it provides. Owing to the nature of man... greed and stupidity, the necessary work to build the alternatives to hydrocarbon delivery rate, and they are available, will only be done when the situation becomes dire and the world lapses into a deep energy driven general funk. Until then, oil will be a good investment with a general price rising at a rate exceeding inflation but punctuated by “jump out of window” crashes. I suspect that consolidation will continue fed by foolish investments gone bust that can’t repay their debts.

Meanwhile, back a the ranch, another profit opportunity crisis is being created in gas fired generation if this economy ever recovers and electricity demand goes up. It is being fueled by the general condemnation of coal fired generating capacity. “Under my plan the price of electricity will necessarily skyrocket.” Yahoo.

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