I was watching the news yesterday. They had a report that the oil companies are currently holding at least 12 super carriers full of oil out at sea and won’t off load them. They’re all stationed outside of the worlds major markets. Asia, North Sea the Gulf etc… They are buying their oil at low prices and holding it not wanting to sell.
They’re speculating another oil price jump and are holding out to sell till it jumps up OR the demand is low enough that they have more then they can sell? If so, it seems the world is awash in oil. More then we know what to do with.
Or everything is simply full. Oil drilling/exploration in the US has literally dropped by 80% if not more. Areas that have hundreds of rigs have scaled back to tens, just to make contractual obligations, as well as not lose pre-existing leases.
[quote]Aggro wrote:
Or everything is simply full. Oil drilling/exploration in the US has literally dropped by 80% if not more. Areas that have hundreds of rigs have scaled back to tens, just to make contractual obligations, as well as not lose pre-existing leases.
[quote]hedo wrote:
It seems to be the OPEC nations, not the oil companies who are warehousing the oil.[/quote]
It’s not the OPEC producers doing this it’s everyone with common sense including the majors (BP, Shell etc.) they are simply waiting for oil to continue to creep up and then sell when they are happy with the price, this method has become economical due a reduction in tanker day rate because of lack of tanker utilisation due to the slowdow.
nothing new either. a few speculators did the same thing at the start of the first gulf war, thinking prices would skyrocket.
Unfortunatly, for them, the war didn’t last long and they lost a shit load of money.
This could certainly backfire for the oil companies as well. At some point the tanker cost will eat up any additional profit they hoped to make. Just depends on how much oil can increase in price and how fast.
Make no mistake, if oil gets to 60-80$ a barrel, they’ll sell. They’re not waiting for the 100-150$ price. The 60-80 has always been perceived as a justifiable price for the oil companies as well as the general public.
This slowdown also allows the oil companies to lower the costs of service companies which were creeping higher and higher. This “reset” will allow them to drill wells for cheaper.
The question we should be asking is why are gas prices steadily increasing, and oil isn’t?
i work at making oil well tubing.“alot” of use are laid off,till the price of oil hits 70 dollars a barrel.but on the bright side, i get alot of gym time.
[quote]toejam wrote:
i work at making oil well tubing.“alot” of use are laid off,till the price of oil hits 70 dollars a barrel.but on the bright side, i get alot of gym time.[/quote]
What’s been seen in the market over the last 6 months is that all of the smaller players with marginal assets who had been ramping up and executing developments which were previously considered marginal and they made good profit due to the high price of oil but cut back immediately when oil dropped. The majors - those in it for the long haul with larger balance sheets and assets are still spending big at the moment and actually increasing their annual spend on exploration and production in some cases.
This core of activity will keep the oil and gas sector strong over the short term and avoid the typical collapse that we have seen in E&P in the past and the collapse we are seeing in other industries. The majors should be credited for this approach and the government should be assisting them with tax cuts and offering new exploration acerage.
The majors are merely spending to keep their contractual obligations. Yes a few companies like Anadarko here in the US have dictated that they’re not going to change their drilling practices now, but they are the exception, not the rule.
The Bakken which is a very prolific US oil play has cut their rig capacity. Operators on the Western Slope (W Colorado) have cut from 100+ rigs down to 40ish. Texas rig counts are down considerably.
Speaking strictly of offshore companies, then yes they are more than likely continuing forward, but again that’s more than likely due to pre-existing contractual obligations more than anything else.
The hardest hit will be those in the oilfield service sector. Operators as well as contractors will be hit too, but like TOejam said they’ve slowed down their business dealings until oil comes back. The ebb and flow of the oil industry is well documented.
The unfortunate part in all of this is when the slowdown hits, people leave for a less volatile industry, thereby losing qualified employees. This leads to a degrading of the quality of workforce.
I’ve worked through 2 “busts” and grew up through 2-3 others. The most notable being in 1982. While I don’t think this one is akin to the one in 82 it is comparable to the one in 98. Oil prices haven’t fallen to single digits yet, and I honestly don’t think they will, but the impact on an over extended industry is similar to what was felt in 1998.
While I won’t predict a collapse, the downturn will be greater than whats been felt since 1998.
(disclaimer) I base a majority of my oil experience and opinion on that of the US. I haven’t been international since 2004 and have somewhat fallen out of the loop in regards to the goings on. So excuse me if we’re speaking of 2 different sectors of the same industry.
[quote]Aggro wrote:
The majors are merely spending to keep their contractual obligations. Yes a few companies like Anadarko here in the US have dictated that they’re not going to change their drilling practices now, but they are the exception, not the rule.
(disclaimer) I base a majority of my oil experience and opinion on that of the US. I haven’t been international since 2004 and have somewhat fallen out of the loop in regards to the goings on. So excuse me if we’re speaking of 2 different sectors of the same industry.[/quote]
They are not spending to honour their existing contractual obligations, what we are talking about is new spending as you can see from the attached link (Exxon are from the US right?). I could post up several other links where MOC’s have made the exact same commitment as Exxon to new spending.