Middle East and OPEC worried by the falling oil price

Discussion in 'Commodities Forum' started by WaveWage, Sep 19, 2015.

  1. WaveWage

    WaveWage Well-Known Member

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    Meanwhile it is profitable for importing countries, exporting countries are doing a frowning face currently. Middle East and OPEC currently feels that the gas price isn't likely to go up after awhile. Some experts said that it will stay low at least for the whole 2016 year, and it may rise really in 2017 at the earliest. But there's no guarantee, in fact.
    The problem? They are already planning of stopping some drills for this very reason, because of the falling oil price. They delay the work involved in improving and getting higher oil production.
    And meanwhile some Middle East countries has reserve, some just faced revolution and wars and would really need the money of oil. The problem is by selling now, they will even get things harder for the whole oil economy, by making oil price falling even more. Oversupply.
    What's your take on this? What if Middle East slow down the production? Will the oil price rise in 2017?
     
  2. Rainman

    Rainman Senior Investor

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    They shouldn't have started a war they weren't certain they would win. The only way for them to get the oil prices to up is by cutting production. But since it's unlikely that they'll agree on that the best they can hope for is all oil-producing countries gradually cutting production and as they do so oil prices will start edging up.
     
  3. WaveWage

    WaveWage Well-Known Member

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    I exactly read an article about the fact OPEC may try to make the price rising by cutting production, and I agree with them: they can't try to cut the production, either. Because if they do, US production could quickly ramp up to keep the price of oil low in United States, even if OPEC is keeping prices high, and this for years. Okay, this couldn't hold forever, but US is trying since years to stay in the competition of oil and not only rely on the Middle East oil.


    About the wars, well, you're never certain to win a war, I think. Sure, there's more "winnable" wars than others, but usually there's no certainty. The thing is, the cost of wars is tremendous and when the revenue is getting lower, it is more complicated for countries who couldn't or wasn't smart enough to keep some cash on the reserve and diversify the economy.
     
  4. My401K

    My401K Well-Known Member

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    A commodity only has value if there is demand. At some point the Middle East should have figured that technology could change this demand. As they say "It was a good ride while it lasted" perhaps the peak of what they can expect has been made. Competition has been underway for some time now trying to dethrone the oil industry and the automotive industry. Eventually someone will hit on a new idea that will change things for good. I am not so certain this will be electric cars. one thing I have heard more and more about in this region is the numbers of people changing their furnaces and automobiles to accept different fuel sources. One of the things is used vegetable oils from restaurants.
     
  5. crimsonghost747

    crimsonghost747 Senior Investor

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    It's them that caused these low prices by refusing to cut production. It's not an ideal situation for them but they are still profiting while some of the bigger western companies are forced to do major cuts to capital expenditure and smaller players are even being put out of business. The situation will not last forever but I think we are still a bit away from a point where the Saudi's will cut production.
     
  6. Rainman

    Rainman Senior Investor

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    The game-changer in all this was the U.S shale oil industry. They've been hit hard by the low prices but that won't force them out of business. So though they've lost much so far, since OPEC no longer is the one dominant force in the oil market, the prices when they do go up won't go as high as they used to be back in the day when OPEC was in total control.
     
  7. turt

    turt Guest

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    I still think this is all done on purpose so when demand does rise, the supply won't be there. Gas will probably hit $5 in 2018 (just a guess).
     
  8. WaveWage

    WaveWage Well-Known Member

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    Well, I am hopeful for renewables, but finding a solution to stop or cut much the use of oil in the next 3 or 5 years won't be that easy. Even if a final solutions develops and changes the mindset, it will still have the deploy time and meanwhile the oil can still do loopings.
    The thing is, even if they cut productions, I think US and other Western countries can mobilize to resist for awhile. If they cutted before, what would have happened? I don't know.
    I think as you, US policies changed somehow, so much that they succeeded to get oil from another sources (doesn't matter how, in fact, the fact they can sustain it for awhile or not and the cost of producing it is what matters). They picked up on production so monopolistic approach stops and the concurrence starts to play. And concurrence always drive price down. US just tried to regain power on an important resource for them.
     
  9. Rainman

    Rainman Senior Investor

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    The Saudis [the people] are starting to feel the effects of low oil prices and they think that a regime change would save Saudi Arabia [from collapsing]. While that obviously isn't going to happen, this [threat] might force the leaders to work with others who are very much interested in seeing the oil prices go up. So these political intrigues are what might give OPEC what they seek — higher oil prices.
     
  10. baudwalk

    baudwalk Senior Investor

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    My limited understanding of the OPEC strategy to maintain dependence was to drive the marginal oil producers out of business by pricing OPEC oil below than the USA BOE production cost. But fractures within OPEC are surfacing, given the burgeoning IS fighting, the forthcoming Iraqi supply, the slowdown of oil imports into China and the USA drillers" ability to constrain their BOE cost. No one yet has cried "uncle" and consumers are enjoying the benefits of the economic law of supply-and-demand.

    Tangential effects mainfest themselves in less interest in all-electric, hybrid and smaller cars -- the Pope's Fiat 500 not withstanding -- with larger nuumbers of SUVs and trucks being sold. Vehicle manufacturers must manage NHTSA CAFE requirements.

    Further, oil storage reserves are filled to capacity to the point of using offshore tankers to hold product. I doubt we'll ever see the gas price wars of the early 1970s agsin; that odd-even plate number business was terrible. I had a 5,000 lb 1974 Ford Torino that would get 9 mpg if you pushed it off a cliff with a tail wind helping it on the way down.

    And the game continues.
     
    Last edited: Sep 29, 2015

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