US oil settles at $63.05, lowest since July 2009

[NobleSavage]

http://www.cnbc.com/id/102246693

Let's start conjecture and speculation (conspiracy theories are fun too). I love oil talk, I have to deal with real life right now, but I'll be back. I'll start with one question, you think this will affect Obama's approval rating?

 

[ksen]

Yes.

Democrats will be happier with the president and republicans will be madder at the president.

 

[Nice Squirrel]

Obama!

 

[Axulus]

Halliburton's stock is down almost 50% in the last 6 months. Does this mean they are going to start another middle east war?

 

[Jayjay]

The Obama blaming will start next year when OPEC decides to clamp down production and prices go up again, just in time for the election.

 

[dismal]

It's teh fracking.

 

[Sarpedon]

Or OPEC's trying to put frakking out of business by sinking the prices.

Or OPEC's trying to fuck Russia (Big producer, non OPEC member), while they are already under sanctions, and have imposed their own stupid food embargo. (More likely)

 

[Trausti]

Doesn't this validate those voices who said drill, baby, drill?

 

[Horatio Parker]

Or OPEC's trying to put frakking out of business by sinking the prices.

Or OPEC's trying to fuck Russia (Big producer, non OPEC member), while they are already under sanctions, and have imposed their own stupid food embargo. (More likely)

And shale.

Most fracking is NG. And oil prices are usually locked in a year in advance, so it'll take a while before having any effect, IIUC. The vulnerable companies will go down...

I've head the Russia argument, but it's not clear to me what the Saudis get out of that. Killing off shale and alternative energies, that I can see.

 

[dismal]

Or OPEC's trying to put frakking out of business by sinking the prices.

Or OPEC's trying to fuck Russia (Big producer, non OPEC member), while they are already under sanctions, and have imposed their own stupid food embargo. (More likely)

And shale.

Most fracking is NG.

Nah, it's teh oil too.

 

[TV and credit cards]

I believe $45 is Saudi Arabia's break even point to sustain their social services. Below that and they have to start curbing the handouts and the natives get restless. Civil unrest ensues. The US has to support the Saudis and Halliburton's stock goes back up.

Hopefully they have a rainy day fund.

 

[Ford]

Doesn't this validate those voices who said drill, baby, drill?

Nah, those people wanted the drilling, baby, drilling to be done in pristine wilderness, national wildlife refuges, or in aquatic habitats.

Fracking over North Dakota isn't anti-environmentalist enough.

 

[NobleSavage]

I believe $45 is Saudi Arabia's break even point to sustain their social services. Below that and they have to start curbing the handouts and the natives get restless. Civil unrest ensues. The US has to support the Saudis and Halliburton's stock goes back up.

Hopefully they have a rainy day fund.

Bloomberg say's Saudi's break even is $91. Saudi and OPEC are losing money and could change the price if they wanted. My guess is they are trying to feel out the break even point of US fracking.

 

[NobleSavage]

The Obama blaming will start next year when OPEC decides to clamp down production and prices go up again, just in time for the election.

That would be my guess.

 

[Derec]

Bloomberg say's Saudi's break even is $91. Saudi and OPEC are losing money and could change the price if they wanted. My guess is they are trying to feel out the break even point of US fracking.

It could also be that the Saudis want to damage both Iran and Russia. Russia supports the Assad regime in Syria as does KSA's big enemy Iran. Both Russia and Iran need a much higher price to balance their budgets so KSA hopes to be able to outlast them.

I think the lower oil prices will be temporary, so don't get used to them. Don't go out trading your hybrid for a Lincoln Navigator. The low prices will not affect current projects so much (as the big capital expenditures have been made already) as it will affect projects in the pipeline. What happens is the classic pendulum swing - projects get cancelled, people buy more gas guzzlers, and eventually you have prices shoot through the roof as it takes time to start those cancelled projects anew.

- - - Updated - - -

The Obama blaming will start next year when OPEC decides to clamp down production and prices go up again, just in time for the election.

There is still plenty of time until the 2016 election.

 

[Bronzeage]

Doesn't this validate those voices who said drill, baby, drill?

Maybe, but those voices wanted to drill in ANWAR, a place which now can't pay the costs of exploration. If we had drilled then, the investment would be lost.

 

[barbos]

I believe $45 is Saudi Arabia's break even point to sustain their social services. Below that and they have to start curbing the handouts and the natives get restless. Civil unrest ensues. The US has to support the Saudis and Halliburton's stock goes back up.

Hopefully they have a rainy day fund.

Bloomberg say's Saudi's break even is $91. Saudi and OPEC are losing money and could change the price if they wanted.

Interesting, seems kinda high to me.
In any case, I would like to know true break even price (cost of extraction), my understanding it is pretty low like $10.

 

[NobleSavage]

Bloomberg say's Saudi's break even is $91. Saudi and OPEC are losing money and could change the price if they wanted.

Interesting, seems kinda high to me.
In any case, I would like to know true break even price (cost of extraction), my understanding it is pretty low like $10.

From what I understand plays in the Bakken are $50-100/bbl for extraction. For crude it depends on a lot of factors. ($10 for Middle East oil, maybe, if the rate of extraction is low) Granted the entire industry plays games of informational asymmetry.

 

[Jimmy Higgins]

Doesn't this validate those voices who said drill, baby, drill?

Actually those voices didn't actually know we were already doing that.

 

[Horatio Parker]

Some here seem to think the price fall is supply driven, but others say that it's demand driven. In short, China is using less oil.

There are also doomsayers saying that oil fracking in the US is too heavily leveraged for this price war. The banks have a lot of loans out and there are a lot of CDOs backed by those loans. 2008 take two?