Is $10 Oil On The Horizon?

Oilprice ^ | Mar 16, 2020 | Andreas De Vries

[nickcarraway]

According to a number of cognitive scientists, mankind uses its unique ability to reason primarily for justifying pre-held convictions, rather than for forming convictions. It is of critical importance for strategists to understand and acknowledge this human tendency, as it causes one to easily fall prey to a number of cognitive biases, which prevent one from seeing things how they really are, and more important for the strategist, how they are likely to become.

One of the most famous cognitive biases is confirmation bias. As we prefer to be proven correct, we naturally incline towards information that confirms our views and try to ignore or reason away information that does not.

This tendency was on full display before, during and after the 2008 Global Financial Crisis. At that time most analysts were continuously behind the facts, consequently underestimating what would happen next, because reality went against ideas and conviction that had become loved in the financial community, such as the perfect market theory and the idea that through derivates risks could be managed away. For most financial strategists, it was simply too painful for many to acknowledge these ideas were incorrect (or at a minimum: contained serious flaws), even though the evidence was there, which would eventually lead Queen Elizabeth to ask them “Why did no one see this coming?”. Of course, not everyone didn’t see it coming. Those who were able to manage their confirmation bias either made a lot of money or became famous…

Now that the world is battling another unprecedented crisis in the coronavirus, the biggest risk for energy strategists is to fall prey to cognitive biases, in which case their forecasts would be about what they would like to see happen, rather than about what is likely to happen. This article is an attempt at

[lurk]

The oil exploitation and delivery system cannot operate on $10. There has to be a threshold.

[Zhang Fei]

[The first half of my life was in the oilfields. I know Bull Sh-t in relationship to the oilfield when I read it.]

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What has sustained fracking so far is the dissolution of financially-shaky companies and the transfer, at fire sale prices, of their assets to the survivors. Will the financial markets be willing to finance an infinite number of these fund-raising cycles, where investment dollars are vaporized and new money comes in thinking that the next cycle will be different? Are we at the point that enough investors will shy away, making the maintenance of current US oil production levels an impossibility, i.e. it goes back down to the mid-single digit millions of barrels per day?

Another issue is virtue-signaling by fund managers. Some say they won’t invest in oil companies any more. Is this principally because they’re now cud-chewing environuts, or because they’re tired of losing money in a sector that’s been burning cash even as US oil production hits record levels?

[babble-on]

We don’t have the oxygenates available to allow us to get the ethanol out.

[SecondAmendment]

> They’re already stacking rigs out in the Permian Basin. If oil drops below $20 per barrel that whole region will be deserted.

This will only last while there is "relative peace" in the Middle East ....

[Balding_Eagle]

“Checkat ole”

Help me out, I don’t remember that one.

[Oscar in Batangas]

As soon as the stock markets entered the Ponzi-Scheme mode, and brick & mortar/ physical MANUFACTURED inventory got replaced with hope and hype, I bailed...could not find a logical metric with which to gauge my investment possibilities. Too many companies being held afloat by another bunch of suckers blowing into more and more straws.

I didn’t lose a penny in 2008, and I haven’t lost anything this time around either

FTA: “” before, during and after the 2008 Global Financial Crisis. At that time most analysts were continuously behind the facts, consequently underestimating what would happen next, because reality went against ideas and conviction that had become loved in the financial community, such as the perfect market theory and the idea that through derivates risks could be managed away. For most financial strategists, it was simply too painful for many to acknowledge these ideas were incorrect (or at a minimum: contained serious flaws), even though the evidence was there, which would eventually lead Queen Elizabeth to ask them “Why did no one see this coming?”.””

[Oil Object Insp]

It would.

Depending on the producers that benchmark is 23-27.

I was in Texas last week before heading back north, my client was double checking their number, looked likes they were planning on shutting down some to all of their activities in Permian, Anadarko and Baken fields.

The stuff in AK has alot more complicated benchmarks, as they have to keep the pipeline full and moving.