Ive heard some commentators saying that $70 is a medium term limit for oil, and we can expect it to stay this low potentially for 2 years. However we are already pretty close to this mark and fuel prices and evidently rising to keep in tune with the market moves. Do you think that $70 is the msot we can expect for 2 years? I think $80 is a more reasonable limit, especially with North Sea platforms reducing production.
Everyone is just speculating. The unrest in Yemen, the fears that maybe militias would cross over to Saudi Arabia might have been one of the reasons why the prices of oil have been going up lately. That they'll not go beyond $70 for 2 or so years hinges solely on how the conflict gets resolved. Should Iran and Saudi Arabia openly start fighting each other then oil could go well beyond $80 in less than 2 years.
If Iran and Saudi start openly fighting each other I wonder what the US plans to do. Also how will they prevent the oil wells from being destroyed. The reality is no one really knows what will happen. If the fighting spreading into Saudi the price of oil will go back to its old levels.
You can disregard anything these analysts say. Do NOT, even for a second, look at their price estimates. You can read what they have to say and see their reasons for changes in the price, but the estimates themselves you can completely ignore. I'm quite happy with the current price but I still expect it to keep rising slowly, of course downward corrections along the way are necessary. Stable levels would be between $75 and $80, this is where the OPEC countries would still get good income but the North American shale producers wouldn't be too inclined to start new wells.
Asian demand is perhaps what gave the most significant boost to crude. I would reckon that all other indices point to the rest of the month remaining stable as well. The Chinese economy is expecting strong growth the next two quarters.
I think that is exactly the game Saudi Arabia is trying to play. I do think one misconception is that there is some magic price at which US shale producers will start expanding... the truth is that it is a gradient and different locations will have different price points where they are worth opening up. I think Saudi helped tank the prices of oil to get US shale producers out of the market, now they are letting prices drift higher to see where the shale producers come back in and will once again lower prices once they do come back in. It is a dangerous game for the Saudis because they really only control their own production rates at this point. OPEC is basically an organization in name only and it doesn´t seem like anyone is going to walk in step with the production levels OPEC decides.
There is no magic price, but there certainly is a magic price range. While there might still be areas where the cost per barrel is $10 lower than the average, those areas are going to be used up fast. And they won't probably make any difference in the long term supply of oil from north America. I also see this as a big play against the financing of the north american shale companies. It was easy for them to get money from banks as oil was at $130 and their production cost per barrel was under $100. And oil had been getting more and more expensive for a long time. Now that the banks have seen what the Saudis can do, I think they will be much less inclined to offer huge leverage for smalltime shale oil producers. Also as you have seen many of the big western oil companies have significantly cut down on exploration and other capital spending. These companies are owned by private investors, they need their EPS and dividend. The Saudi companies are owned by the government, a government which has the funds to survive for a few years even with lower oil prices.
Forecasts tell your nothing about the future and everything about the forecaster...Or something like that... Everyone is throwing in their best guesses at the moment but I wouldn't be too tied to any numbers that they come out with. If you are going to look at anything then maybe look at crude futures prices - at least you know that proper money is changing hands based on certain assumptions, even if those assumptions are potentially wildly wrong. It wasn't so long ago that we were told that we were in the midst of an oil price "super cycle" where prices would stay higher for longer. Things change, geopolitical risks go up and down and we all adapt.
That's all that these figures are though, just forecasts and opinions. Nobody truly knows what effect on the price of oil, the problems in the middle east will have. When it comes to investing in things like this, I think it's always better to keep a close eye on the markets yourself, and not be persuaded by the so called expert's.
I think a lot of people on the outside think that the experts have a crystal ball with investments. In a previous life I was an "expert" of sorts in certain market areas and I can hand on heart say a lot of the time I was working on guesstimates and creating the best "story" for investors.
