In 7 easy steps, you too can predict the price of oil.
Step 1. How much oil is the world consuming? Let’s say the world is consuming 30 bbls a day. Move on to Step 2.
Step 2. The world is producing 49 bbls a day. Hmm… looks like there’s more oil than market to buy oil. Let’s move on to Step 3
Step 3. Most major E&P’s have drilled on debt, making oil production and lift cost, forcing them to produce every drop but cut out talent and services.
Step 4. What’s OPEC saying today? Is American media just making things up? Or is Saudi Arabia really teaching American oil a hard-learned lesson?
Step 5. Research which companies are cutting production. After all, if the oil isn’t sold, it’s not entirely worthless. Wait, no American companies are cutting production. Maybe because of before mentioned drilling on debt.
Step 6. Realize that you should have been a doctor instead of an oil man or woman, and all that work you did to produce oil is now worth $12.00 a bbl of oil that has nowhere to go.
Step 7. Post pictures of when you did have a job you loved and enjoyed.
Every day more stories out of New York or L.A. pour out spelling the doom and disaster of oil. When prices go up, the know-it-alls say, ‘The good times are coming.’ When prices drop, well, they all quickly change their stories.
API and the EIA can’t accurately give an inventory report to save their lives. So where do you look for the most accurate oil and gas forecast and news? I say pipe yards and tubular inventories (but what do I know?)
Look to histories, such as 1986 — the Reagan administration and Saudi Arabia’s way of bankrupting the Soviet Union. Flood the market, kill the profit, end up with Russia.
Now Saudi Arabia is dealing with Iran, Russia, and USA (who mixed debt with oil).
They know how to play hardball. And they know how to teach lessons.
Oil isn’t being replaced at the rate we consume. Production is in a steady decline, inventories and stock are mixed, to say the least.
Money isn’t being lent to new exploration. Forecasting the futures are a fool’s game at this point. If my generation learns anything from all of this, I’d hope they learned that robbing Peter to pay Paul catches up to you eventually — commodities boom and bust.
Bust comes when everyone but the wise least expects them. The general public has no sympathy for an industry that has been painted as a bunch of dumb-backwoods-muscle doing manual labor who can’t read or write (I dictated this to my wife because I am right there with them). There’ll be no government bailouts to O&G. We are in it all alone. We did it to ourselves, and we deserve what we have coming.
The boom will come back— there’ll be a land rush, pipe and equipment will be scarce. But willing men and women will be ready to run back out and do it all over again. So don’t sell your work boots just yet.
God Bless Midland Texas