I have never seen prices plummet this rapidly since I have been watching Crude Oil Futures. I know the history is quite volatile because of many determining factors, but really? The world is turning upside down.
I am no professional; I just own some acreage in Garvin so getting quite concerned. Read an article by Clive Maund saying oil is done, the glory days are over.
Seeking opinions from the rest of you who perhaps have been around longer than me. We have received a few offers recently which makes one wonder.
This cart may be helpful n answering your question. Yes, it has happened before-several times. Drops are usually quite rapid and recovery is usually slower and stepwise.
Crude Oil Prices - 70 Year Historical Chart
There are also usually buyers who like to take advantage of the lows. Offers are usually in areas where they see future potential and our family just ignores them, but saves the offers for reference.
When the coronavirus is gone we’ll probably see a big turnaround in the oil prices because people will start using cars, planes, etc. to travel again but until then we just need to stay in and stay safe and do our part to stop the spread. Hopefully people put back profits to have a safety net for times such as these. I don’t look for a turnaround until the demand for fuel goes back up. In our seventies we have seen the oil business go through at least 3 big booms and busts but never had we had such circumstances as these. Take this social distancing seriously and help us with God’s help to lick this deal.
I think the oil market is closer related to the Saudis increasing their output to purposefully drive down the price. The virus issue is certainly contributing in a negative way, but I would not expect oil markets to bounce right back once we can get back to normal.
There has been some chatter about the Railroad Commission tightening allowables like they used to do to limit domestic output, but I don’t see that as likely unless the big players in the industry get on board. The RRC will do whatever the big companies want them to do.
I know that the Saudis are not keeping control on the amount of oil they are producing but not sure it is to “purposely” drive down the prices. How would that benefit them? I don’t think the demand will get back to the place where it was before the virus as soon as it is gone but it has to help the demand and lessen the glut when everyone can go back to work, travel, and socializing. Not an instant turnaround but better. We were in the oil well servicing business for 35 years and have seen oil down as far as $5.00 a barrel and up to over $100.00. It will turnaround, not overnight but probably some years from now. Of course, we never had all these circumstances at once before so no one knows for sure how it will play out and the timeline. If we did we could probably get rich (on the stock market if not with selling our oil)! lol Best wishes for a safe, healthy, and prosperous year!
Susie, I have experienced the oil prices from $9/bbl to $147/bbl.
Right now 2 major factors:
Oversupply and demand destruction (because of Corona).
There was an oversupply before we got hit with the Corona issue that created a very, very fast demand destruction. Demand has dropped by 3-5 million barrels per day of crude, people not being able to travel, gasoline and jet fuel demand killer, industrial shutdown, fuel oil, diesel and natural gas/LNG demand killer.
Price war between the Saudis and the Russkies.
Saudis trying to kill two birds with one stone, the Russkies and the US shale.
Producers and lease operators are not even getting paid the posted prices; they get paid wellhead or other midstream companies’ prices. I know several producers who are paying $$$ for companies to take away their crude and gas.
Really tough times when benchmark crude oils are at such lows.
Markets will stabilize and grow and prosper again, just like oil over time. As soon as COVID-19 has been subdued, there will be a bounce back into the 30s range then over time back into the 50s.
And if all goes well, we can see the prices in the 60s and 70s for some time because the demand will be high and there will be a lag in supply.
Stay safe and healthy.
It’s not about economics right now with the Saudis; it is about politics. They are having an ongoing fight with Putin and Russia and purposely trying to drive the prices down to make their point. Russia and Saudi Arabia, which previously had cooperated in making the world market well-supplied, no longer can agree on how to share the benefits.
The Saudis produce the cheapest oil, so they can withstand lower prices longer than most countries. They can produce at less than $10/barrel whereas the rest of the world produce on an average of $30-40 per barrel.
To answer your question as to whether oil is going to come back this time or not, I offer the following:
For oil to not come back, consumption would need to be in decline or a suitable substitute would have to arrive to replace it. World consumption is not going down; it is actually going up as you can see by the attached chart. Of course, if and/or when the world goes into recession, there will certainly be decreased demand, but IMO, it will only be temporary.
Worried about the electric car replacing the need for oil? It will be a while, since the internal combustion engine has been around for over 100 years and you don’t replace that easily or quickly.
Don’t worry about it; oil will be back after the excess supply wears off. All it would take would be a war in the Middle East to turn it around very quickly.
Can we really blame OPEC+ for trying to protect their market share under attack by US oil?
As if they’re supposed to be the ones to adjust while US production goes through the roof?
I think they see this as the perfect timing to hurt debt-laden US Shale. This will cripple the shale industry—for a while at least. You can’t fire all your experienced hands who wind up getting different jobs and companies go belly up, then think it’s all going to normalize quickly when prices recover—which I’m sure they will—maybe make new highs.
They know this will also put a kink in wind, solar, and EV industry.
If an oil company started drilling before oil went down and has been drilling for 4 months, will they complete the well or shut it down and stop drilling? Thank you.
They will likely finish drilling the well and get it into a safe mode. Depending upon the company, they will either complete and get some money coming in to start paying off the costs of drilling (and pay royalties) , or they will wait and complete later when prices are higher (and pay higher royalties) or never complete for production.
What helps us in this group to access what is really going on is some tangible information that is based on fact and not the media-induced fear facing all of us now in many aspects of our lives.
In my opinion Wall Street has distorted many commodities markets so that prices don’t really reflect true supply and demand. That is to say that oil prices are influenced by investor psychology, not necessarily the actual supply of oil or the actual demand. However it should be pointed out that several nations including the USA are closing down many businesses in an attempt to limit the spread of the dreaded COVID-19 virus. There are many states in the USA that are restricting travel, hence a reduced demand for gasoline and diesel fuel.
Some involved here in the oil field believe they will go ahead and drill the wells they have permitted and not complete them until the price goes up enough to justify their cost. At least that’s what they are saying.
