Prediction? Pain

Although this article is almost one month old, it is quite well written. Here are some excerpts:

Operators like Samson Resources and BPZ Resources may have had difficulty performing at $80 oil, but prices have exacerbated their peril and those assets are hitting the market.  Other sellers are justifiably waiting until they are compelled to offer assets for sale given the severe pricing discounts this market commands.  The priority for companies with available capital is to acquire as much upside as possible, yet protect against potential future price declines.

If prices are to see a drop in the next half year, the opportunity to purchase protection will erode, portfolio proceeds will certainly be directed at sustaining operating companies, and existence through 2016 will be an open question for those currently vulnerable.

A surfeit of available inventory from many potential sources stands poised to flood the market, so much so that it’s difficult to keep track of who could scuttle a recovery.  OPEC seems committed to maintaining a breakneck pace of production in order to retain its market share, far exceeding the demand projections of the EIA and IEA, which both see consumption rising above their first quarter forecasts.  External forces such as alleviation of Iran and Russia’s sanctions, countries attempting to stabilize their production from geopolitical threats, and the production growth of independent U.S. operators, could all drive supply such that the downturn is deepened and sustained for a longer period of time.  Crude inventories must see consistent draws in order to fend off a large price decline, which is likely to occur in the next year.


About Scott

Live next to Chevron refinery. Lots of petroleum consultants in the area. I am interested in learning more about the industry. Also, interested in finance, business, and investing in world markets.
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