Posted on 08/10/2015 7:10:36 AM PDT by thackney
The oil market is signaling that prices could stay lower for longer, delivering a fresh blow to hard-hit energy exploration-and-production companies.
Benchmark U.S. oil futures for September delivery are nearing the six-year low hit in March. But contracts for delivery in later years have taken an even bigger hit, with prices for 2016 and 2017 already trading below their March lows.
That indicates that investors, traders and oil companies see the global glut of crude oil persisting beyond this year.
Companies making long-term investment decisions rely on the prices of futures contracts one or more years in advance. Producers trade futures and options contracts for coming years to lock in prices for the oil they plan to sell in those years.
A number of U.S. shale-oil producers say they can profitably increase production if prices rise above $65 a barrel. On Friday, front-month oil prices fell 79 cents, or 1.8%, to $43.87 a barrel, while futures for delivery in December 2016 settled at $51.88 a barrel. The most expensive benchmark oil-futures contracts, which were dated for delivery in 2022 and 2023, settled at $63.26 a barrel.
For many producers, such as Diamondback Energy Inc. and Marathon Oil Corp., later-dated contracts are now too cheap to justify locking in prices. That means producers are likely to enter 2016 with fewer price hedges on the books than usual, if they have any at all.
Companies without price protection in 2016 could be forced to cut back further on new drilling if prices remain below their break-even costs.
“I think it’s a fair assessment that just about nobody is putting on hedges at this point,” said Jason Wangler, an analyst at Wunderlich Securities. “Why lock in the bottom?”
(Excerpt) Read more at wsj.com ...
1.97 per gallon for #2 here in upstate NY 60 miles north of DeBlasio City.
Just reading about E/P company PostRock in Oklahoma.
Stock and holdings values going negative...
Political economists can ruminate as long as they wish, government officials can fudge data and statistics all day long and stock traders will do what they do regardless. However the true measure of the economy is the price and demand for commodities. If people are actually making things then there will be a demand for the oil, aluminum, steel, lumber, copper and other materials that are needed. The price will be steady or rising largely based on demand. If demand is low then there is less mining, cutting, and refining. Commodity demand and prices are weak. Currently there is a worldwide economic contraction.
The world economy grew over the last twenty five years. When Russia ,China and India largely ditched socialism, hundreds of millions of people entered the middle classes and created a demand for the production of real goods. The innovations in electronics (computers, cell phones and other telecommunications technology) greatly stimulated growth. Yet these vast social changes may have stalled,and the innovations have run their course. Excessive debt in the West, political turmoil in the Mideast, economic stagnation and regression in Africa, have staled not only growth but have spawned economic contractions.
The real story of the economy is told in commodity prices.
I’ve read about more than one where they owe more than the assets are currently worth.
Oil demand continues to grow. The demand growth rate has slowed.
The price drop started as the supply grew faster than the demand but both were growing.
Does that chart exist with the price per barrel overlay?
Thanks!!
I’ve seen not a penny decrease in my electric bill, why is that?
You’ll have to ask your state’s public service commission. They approve rate hikes.
I agree with you to some extent. However, based on my 30 years experience as a lumber broker, I can tell you that mills almost always increase production to meet demand. Eventually, they always out produce demand and then the price goes down.
This is why most commodities go up and down. When prices goes up, manufactures increase production to meet demand because they are making money. How do you make more money with a fixed cost plant? Increase production if possible. When everyone increases production they always out produce the demand for that commodity eventually. I have seen it happen over and over.
you have oil fired electric plants in FL???
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