Oil Prices - Stock Futures Drop



Oil prices were down over the last week with WTI futures at $30.23 per barrel and Brent at $31.97 barrel. A year ago, WTI was at $56, and Brent was at $66 - so oil prices are down about 50% year-over-year.

Saudis fixed 8 vl’s ag- usg today. That is more than they have done in years. This seems a concerted effort to slow down US production. At these levels shale oil become un-economic. It will pump for a bit as producers evaluate how long they think Saudis and Russians can sustain this price level. But if they believe this has some legs, US production will be effected.

Good bye Oil Field

The gulf never even made it back to retard levels of pay this time. The hits keep coming for those guys but hopefully this won’t last too long.

If that is the case perhaps it is a good thing? Maybe the majority is still in sink or swim survival mode & they haven’t grew too much fat to cut?

May not have an additional effect on existing offshore production. Incremental economics offshore are very different than fracking. Incremental economics should still support pumping offshore where there are large costs associated with shutting down and re starting, as well as very large production and development costs to buy down - existing wells offshore are not nearly as price sensitive as onshore fracking.

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I assumed the Saudi move was to bury Iran. The oil patch is collateral damage

If fracking production is the target, it will take a while. Most production is insulated, particularly in West Texas, through hedging strategies. What investors still had an investment risk appetite were still smart enough to require precursory insurances. This does not account for forecasted Capex, and so decline and losses will hit later in the year through exponential decay rates (the biggest drawback to “oil now” from fracking is the steep decline curve).
Saudi decided to prove to Russia that what was gained over the last few years in terms cooperation can be easily reversed. Russia did not want to cut and rather make up for ~3% revenue losses through higher production. Now, they’re loosing ~150million per day in futures. No way to make that one up.
It will be ugly until June, the next regular OPEC meeting. Just my opinion. If this strategy goes on further, it’s just a pissing match and not business based decisions. They’ll hurt themselves more than impacting the US as a whole. Fracking will reduce, but it will be at great cost to Saudi/Russia. Once prices get better, fracking comes back just as fast. It’s a losing battle. Big oil has a greater presents in fracking than last time around, and with that, more resources to withstand a protracted downturn.
Biggest Overall Loser: Offshore Oil and Gas, no doubt. We’ve seen this movie before.


This has been reported by several news outlets.