I have reason to think oil is going into the 30s. My information (2nd hand) is that Exxon does their low case economic evaluations around $40/bbl. Certainly, the analysts have some sort of inkling about that, too.
It's doubtul there will be any sort of desperation on the part of producers to slice current and future production (the latter through serious exploration cuts) until we see Exxon and some of their smaller conservative brethren crying uncle. That will require sub-40 oil, and a seemingly realistic threat that prices could stay in that low area (i.e., many weeks of sub-40 prices).
Also, it's doubtful that oil stocks will bottom until Exxon and Chevron are cracked across the skull, and analysts won't do that until they start seeing sub-40 oil as a real possibility.
How low could oil go on a down spike? It was around $12/bbl for some time in the late 90's, so adjusting for inflation, I don't see why $24 is an unrealistic possibility. Certainly, mid-30's is a reasonable target. In fact, I question any analyst who doesn't expect to see oil in the 30s. May not get there, but sure looks like it.
For those who may wonder, I have worked in the oil business for 20 years and work at a mid-size E&P firm, presently.
FWIW
crusty |
