Posted on 12/01/2014 7:01:18 AM PST by Citizen Zed
Remember way back in June, when oil was $115 a barrel? Now it's trading at around $67.90 a barrel for Brent crude and some analysts are predicting, given the right conditions, it could tumble to as low as $40 a barrel.
Weak demand, a strong U.S. dollar and booming U.S. oil production are the three main reasons behind the fall, according to the International Energy Agency (IEA), which warned of a "new chapter" for oil markets, which could even affect the social stability of some countries. Russia is already feeling some pain: the ruble tumbled about 4 percent on Monday, on course for its biggest daily drop since the 1998 financial crisis.
(Excerpt) Read more at nbcnews.com ...
More or less correct. That includes their entire budget, which adds some amount.
The numbers do not include what would be called a royalty in the USA or taxation, which is about 58% of the cost of a barrel of oil in the USA.
So, take a $45 bbl* in Saudi and multiply by 1.58 and you get $71.10 oil, which leaves no room for profit from the actual oil company producing the oil.
Obviously, no one will drill new at $71.10.
* This is the real cost of mechanically producing and transporting the oil in Saudi, bullshit they publish notwithstanding.
I didn’t say it was.
see #36
Then what number were you referring to when you said:
“The oft-quoted “price of production” numbers for Saudi “
Not good for the oil industry and cities depending on it.
Smart leadership would use this as an opportunity to cripple Iran and Russia by enforcing energy sanctions against the two countries. Russia should be declared a terrorist state by the incoming US Congress, and have sanctions strapped on it as such. The Chinese should also be made to feel the pain for supporting Russia and their own actions in Hong Kong, the Spartleys and the Sennikku islands.
The only problem with that is obama and the dem’s have wrecked relations with our allies. Would YOU hop in bed with obama given his recurring decisions to hurt not only the U.S. but his “community organizing” type decisions that hurt our (once) allies?
Charles Payne of Fox Business Network had a column at Townhall.com a couple of days ago; according to his info, here are the break-even points for various U.S. oilfields:
Drilling Region Breakeven Begins
Permian Basin $75
Bakken $75
Eagle Ford $65
Mississippi Lime $83
Texas Panhandle $81
Niobrara $78
Scoop $91
Tuscaloosa Marine $86
If his data is correct, the current price of crude is already below the profit point for most major U.S. fields. The House of Saud won’t rest until lots of American wells are idled.
On the other hand, all it takes is a new global crises to send prices spiking again. Long term, U.S. and Canadian shale oil represent a safe, secure and almost limitless source of crude and the Saudis know it. Their days of controlling the world oil market are coming to an end. They can’t afford oil at $40 a barrel indefinitely.
Budgetary fiscal break-even costs are NOT equal to ‘cost of production’?????
I highly recommend everyone re-familiarize themselves
They quote anywhere from $8 to $40. It’s all nonsense.
I’ve worked as PE for years in Saudi. It’s way north of $40.
That’s to drill new.
Yes, but he is correct in that the Saudi numbers don’t account for a royalty or tax since AARAMCO is effectively a government entity.
A realistic break even for Saudi is north of $70.
Agreed. They didn't spend $17-billion on the Manifa project because they were producing at $40 per barrel. Most won't understand it isn't the cost of the current barrel, but the next barrel that drives the economics.
Quote from Saturday’s Wall Street Journal editorial:
“Much of such proven areas as the Bakken Shale in North Dakota can remain profitable even at $50 a barrel, by most estimates. The Eagle Ford Shale in Texas also has a relatively low break-even.” Hard to say, estimates are all over the place. I’m pretty sure the extractors don’t want it known what their cost is, so all we’re going to get are estimates from outsiders.
It’s all a bit of a dip and much ado about nothing. Strip prices tell me that the people actually betting money think it will be somewhere north of $70, probably $80 for 2015.
Current average betting is $69~70. But I do suspect it will rise in the next few weeks.
Also it will make Venezuela and Iran unstable. Not exactly a bad idea.
Yes, but that is the floor people buy for insurance, which tells me that the banks selling it bet higher and the people buying the hedge think it is probably higher.
I’ll print my credit suess and Goldman info after lunch.
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