levin70

Your Oil Stocks Aren't Coming Back

The problem, in my opinion, with this article and the conclusions drawn by the author is that it treats oil as if its manufactured, that supply constraints won't happen outside of economic theory (marginal cost vs marginal revenue of the next barrel of oil produced)

The author should have indicated within his article that his conclusions would become immediately wrong in the event that something happened to seriously constrain supply in the immediate future that was outside of simple economics.

Such events could include, but are not limited to

1) Aforementioned isreal vs iran conflict
2) Internal terrorism within saudi arabia
3) Sudden water cut or other intrusion into the guar field

Imagine a scenario in which 1 month from now either #2 happened at the guar field or #3 were to happen and suddenly Saudi Arabia had to reduce daily production by 4 plus million barrels per day, with no word on how long or if ever that production would ever come back online? What would happen to the prices of oil service and other oil majors? I can think that the multiple expansion would be very large in anticipation of a lot of new orders from every nook and cranny around the world. All it takes is 2% of daily production swings to go from boom to bust. Events over the past 24 months have shown us exactly that

Kind Regards