jayjayjay1212

Oil: A Slippery Slope Ahead?

Interesting point about OPEC's inherent weakness. Indeed, the 'unfriendly regimes' (Iran and Venezuela and non-OPEC Russia) need very high oil prices to fund their expenses. They are caught in a prisoner's dilemma and will probably not implement OPEC's suggested production cuts.

Also, very interesting about the renting of tankers to store unbought oil. I did not know that at all, and shows how weak demand really is!

Where I strongly disagree and where I find you lack adequate research is for your Oil Sands argument. Let's set something clear... Cash costs for Oil Sands ARE NOT 80$ per barrel. You mention Canadian Oil Sands Trust. Had you read their quarterly report (biz.yahoo.com/cnw/0810...) you would see their cash costs per barrel are at 35$ and funding for their investment projects are 10$ per barrel, meaning they are profitable and self-sufficient at 45$ a barrel (more or less). Suncor and other oil sands companies also have cash costs in the low 30s. Low natural gas prices and weaker demand for oil workers will actually make that cost go down.

Oil sands in Canada are often misunderstood. Some 'unconventional projects' indeed might have marginal costs of 80$ a barrel, but these have already been shelved. Most active fields actually have quite low cash costs, so the barrel would still need to come down a lot in order to cause important losses.

Whether the barrel will go as low as 30-35$ is another question to ask, and of course I do not have the answer... But I guess if speculating sent the barrel to 147, speculating can equally send it to 30. Just by listening to the trader sentiment (on Fast Money) on oil, it is insanely bearish.

Anyways the market is setting itself up for a supply squeeze in 5 years that will send oil prices back up again.

Conclusion: Neutral/Bearish short term and Bullish long term

Disclaimer: I own Suncor shares

Oil Sector Flush with Cash, Expect M&A - Canaccord Analyst

HAHAHA 30$ oil... What an irrational investor, I'm guessing he was the first one to call oil at 250$ when it was trading at 140$ + ...

By the way, the integrated companies know the long term equilibrium price should be more towards 100-120$ in real dollars, just as the International Energy Agency mentioned in their study. BrotherMaynard, if you know more than the IEA, please tell us how you got this good and why you are not CEO or on the board of any of the big energy companies!

As Warren Buffett says, better to buy a great company at a good price than an average company at a great price. The great names in Oil Sands (Suncor, Canadian Natural Resources and Encana) would fit in the former category, so the big guys in Energy are likely shopping around as we speak in order to boost their growth prospects.

As for your ''Time to move on'' statement, most of us are actually WORKING in this sector, so this is our job, we are not ''moving on'' to the next ''hot sector'' as I'm sure you already have done. We actually study the fundamentals, not what Roubini or Cramer are saying.

Disclaimer: I own Suncor shares



On Nov 21 12:37 PM BrotherMaynard wrote:

> omg, this site is relentless about hoping for commodity names. integrateds
> have been around for almost centuries now...and that for good reason.
> They don't make crazy assumptions, esp. given the crazy nature of
> crude. $49 of oil is historically extremely expensive. Integrateds
> know this. So why would they pay for an incompetent company that
> can't manage when oil falls below $60 now, rather than wait until
> oil hits $30 and it goes out of business...just buy it from the Ch
> 11 judges.
>
> It was a bubble folks...time to move on.