Re: The problem with oil
I have a tendency to agree with a potential disruption in Middle East production. There are sooo many new and unresolved issues around the World right now that it is impossible to predict future oil price. Five years ago, if all that is happening in the Middle East today, there would be at least a $30 premium placed on oil price. Today, squat. Potential scenarios range from an all out war resulting in huge production losses to a bunch more rhetoric and things continue to smolder for a while.
The Saudi's have played their hand and do not want a bunch of new oil coming online now or in the future. There is still a lot of oil behind pipe or waiting for completions to bring on new production. Some companies, with low debt and prudent management will be able to turn on a dime an crank things up when prices rebound. Many won't as they will have lost any chance of ever getting financing again. Will other OPEC countries as well as Russia be willing to cut production to prop up prices and if they do will it open the flood gates for more oil from all corners of the World that are now at a stand still?
The way I see it is most of these countries have no idea how to be honorable, so what they say and what they do are two very different things. Will lower prices mean more consumption? There is a very big movement to reduce O&G consumption around the World. As long as any of us are still alive, the World will need oil. How much will be required vs. how much will be produced should determine the price. The trouble is that huge investment funds etc. can and do manipulate the price of oil among other things, so fundamentals don't always dictate prices. As a result, I would not want to guess what the price of oil will be at the end of 2015 or 2016 but will estimate for 2015, anywhere from $20 to $100 and for 2016. anywhere from $20 to $200. LOL