CDZ The new Oil Bounds @ $20-40/bbl

[william the wie]

The title of this thread is based on two things:

At $40/bbl the majority of transport can and will start converting to Natural Gas or LNG to run trains, trucks boats and pipelines and will mostly not convert back to oil when prices go down. Since Natural Gas is a byproduct of oil exploration but not vice versa and known NG reserves continue to exceed demand at effectively all price points for oil.

At $20/bbl very few oil fields can afford to keep pumping but NG fields can.

This sounds like ME instability will increase exponentially. Does that sound right to you?

 

[saveliberty]

Oil was $90 or more and no one flocked to NG. I'd say that is the biggest hole in your theory.

 

[william the wie]

Oil was $90 or more and no one flocked to NG. I'd say that is the biggest hole in your theory.

I would agree with you normally but notice the sound of silence of Iran reentering the world market? That is a fairly ironclad guarantee that $90/bbl can't come back because for the most part breaking $40 or more likely less than that will at least double US rig count.

 

[alpine]

The reasoning is; oil prices dictate the stability in ME?

 

[saveliberty]

Cheap gas means no incentive.

 

[william the wie]

The reasoning is; oil prices dictate the stability in ME?

At this point you can argue causality either way as part of a vicious cycle.

 

[waltky]

Is already back up to $2.19/gal. here...

... don't look like it goin' back down from there.

 

[william the wie]

Cheap gas means no incentive.

Either type of gas reduces ME weapons budgets. As they go down and other than US, China, Israel or Russia there is no where else to go for effective weapons that give any chance for survival the need to keep prices down to hurt opponents goes up. Russia and China cannot afford to practically give away weapons. The US and to a much lesser extent Israel can.

What is not being advertised is that with LNG plants coming online on the US reduce marginal costs for existing oil fields as by product revenues rise. Also there are a lot of synergies in buying bankrupt fields so contribution margins are sinking.

 

[william the wie]

Is already back up to $2.19/gal. here...

... don't look like it goin' back down from there.

Certainly not until the next shake out.

 

[william the wie]

And now news from the twilightzone:

uncompleted wells that can be in production within 10 days are in a very long table at MarketWatch today.

LNG US plant construction rates and breakeven points for wells can be found at Bloomberg.

The expected bankruptcy shakeout will reduce breakeven points by state and county taxtime.

Sounds like $30/bbl maximum sometime in 2017.