oil bottoms

B

billyjoerob

Looking back to the 80s, oil bottoms tend to take a couple of months (this is a monthly chart). And the confirmation that it's a bottom is a break above the 10 month moving avg. The recent bottom failed to break above the 10 month ma at $41. The oil market is a two-tier market - most of the production is cheap OPEC oil with a cost basis in the $10s, and the marginal producers are much higher, in the $50s+. So the marginal supply is at $50 . . . or at $15, if the marginal supply is coming from Iran or Libya.

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hoodyap said:
Does that mean price will slightly remain not lower than $32? Thats my guess~
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Well that's only $4 from here. The historical price of oil is somewhere around $20, despite what many people are saying, it's not inconceivable it will get back there again. Are the Saudis really going to knife their competitors and not twist the blade? That doesn't really make sense.

One interesting phenomenon is that the Russians are now pumping more oil than ever before, despite the lower prices. THat kind of makes sense. They need the cash now more than ever. Also, I haven't seen anything about this, but a country like Venezuela will shift production from domestic consumption to the international market, adding more supply at lower prices. VZ just recently raised the price of domestic oil from like 5c to 6c a galllon. It's not just selling the oil below market price, it's selling the oil at a $15B annual loss. Mexico has brought in foreign expertize now that Pemex isn't bringing in as much revenue as before. So it's the inverse of the typical supply curve: more supply at lower prices.
 
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billyjoerob said:
Well that's only $4 from here. The historical price of oil is somewhere around $20, despite what many people are saying, it's not inconceivable it will get back there again. Are the Saudis really going to knife their competitors and not twist the blade? That doesn't really make sense.

One interesting phenomenon is that the Russians are now pumping more oil than ever before, despite the lower prices. THat kind of makes sense. They need the cash now more than ever. Also, I haven't seen anything about this, but a country like Venezuela will shift production from domestic consumption to the international market, adding more supply at lower prices. VZ just recently raised the price of domestic oil from like 5c to 6c a galllon. It's not just selling the oil below market price, it's selling the oil at a $15B annual loss. Mexico has brought in foreign expertize now that Pemex isn't bringing in as much revenue as before. So it's the inverse of the typical supply curve: more supply at lower prices.
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Lets say the average historical price of CL in 10 years between 1989 to 1999 is $20.
Between the oil consumption of year 98-99 to 06-16, i believe the volume in year 06-16 is higher hence the probability of reaching $20 again will be quite low. Hence the demand is still high which causes Russians and other player to keep pumping oil. Do correct me if you think otherwise.
Thanks~
 
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