toobad41

Energy Inventories Down More than Expected for the Second Straight Week

Duh! I can't believe oil inventories are going down. With a majority of companies in the news are switching their plans from oil to natural gas what do you expect?

Will Oil Be the Last Asset Standing?

People generally don't know why oil should be in the $70 per barrel range. Let me explain why oil should be $70 and as an independent oil operator. Drilling a well 4,800 feet, running casing and putting it on production (assuming it is not a dry hole) costs me about $1,000,000. Let's say the well is pretty good and produces at a daily rate of 250 barrels per day. And it continues to produce for 60 days at that rate. Conventional thinking is you just multiply $70 x 60 days x 250 barrels and you get $1,050,000. Thus you have $50,000 profit, right. Wrong. You forgot to deduct royalties(as much as 25%!), lease operating costs, employee salaries, production taxes, general and adminstrative costs, transportation costs, tangible and intangible costs, rentals of equipment, etc. The list is very long and the amount of time needed to payout the $1,000,000 well usually runs into 2 to 3 years. Not only that the well is declining in production and may only be making a few barrels a day after 3 years. Lease operating costs can run as much as $3000 a month. So now you have a well that produces say 2 barrels per day and you get $70 (again assuming it stays at $70) that would be $140 per day or $4200 per month. But you have to deduct the $3000 lease operating expense and you are left with $1200. But that is not correct either because 25% royalty is taken off the top. You are left with $52.50 not $70. So $52.50 x 2 barrels x 30 days is now $3,150 not $4200. So you are left with $150 to pay employees, pay taxes, transportation costs, etc. Now do you see where this is going? The well is no longer profitable. Maybe I should spend $250,000 to re-stimulate the well to get production back up to 35 barrels per day. The killer, of course, is the overhead expenses that eat you alive. In order to be in the oil business you have to have a lot of production and a lot of nerve to stay afloat. And you have to have oil above $70 per barrel to make it worth the trouble of getting it out of the ground and into the market.

Will Oil Break Out, Or Fail at Resistance?

Looks like you missed the boat. The boat left the dock way back in February or March when oil was in the $30 range. The upside potential from where we are now is not too exciting to me.

Oil Heads Lower with Gulf Stocks: Buy Both on Weakness

I hate to say it but oil does not care about unemployment figures. It is a commodity and a very complex one at that. That being said, oil is used in over 300,000 products and fuel is just one of them. The demand for oil is still high and will continue to be high. We all know that oil is and will always be a cyclic commodity because of supply, demand and pricing. A couple of well placed hurricanes this season will change all of that. Hopefully it won't happen but no one has any prior knowledge of that.

How $30/Barrel Oil Could Save the World

We are more than a month into hurricane season. I would not bet on $30 oil for a long time. On another note we consume 25% of the worlds production on a daily basis yet we produce less than 10% and we don't export. How can we can control the worldwide price per barrel? As India and China continue to grow and demand more of their oil share of the oil pie we will eventually get less and less of the pie. You laugh but it will happen. Allocation restrictions will eventually apply. Fill up your car on odd or even days. Vouchers may save the day.

Oil: Up to $200 or Down to $25?

My thinking on oil as a commodity is that it is subject to what the producer wants to get for it and what the consumer has to pay for it. In other words, the producer will not sell his oil for less than it costs to get it out of the ground. This is the same all over the world. The consumer will not like it but that is reality. Which brings me as a domestic oil producer I break even at $65 a barrel, after taxes, after leasehold expenses, operating expenses, after drilling costs, transportation fees, workover costs, tubing repairs, employees salary, etc. What is my fair profit? Perhaps 6% profit which brings the cost of a barrel of oil to $69. Anything less is giving away money. Thus I keep the oil in the ground. I don't have any control on the cost of oil that is imported and that is a problem I sometimes cannot deal with. To get oil from overseas cheaper than I can produce it domestically means I shut down operations. I will not sell my oil without making a profit. End of story.

Energy: Zero Sum, We Lose

Conservation is just a delaying tactic. We will still run out of oil and sooner than most people think. The same can be said about natural gas. Like oil, most of the natural gas has been vented or burned off. It's gone and cannot be replaced. What has taken nature millions upon millions of years to accumulate we have used most of it up in less than 100 years. Daily oil production in the US is basically the same as it was in 1945!...that is why we have to import so much to keep up with demand. Oil and Natural Gas is a cash cow for the government. If we conserve they will up the tax rate to make up the difference in lost revenue.

What Really Caused Oil to Boom?

Since we are so good at printing money; why not offer to buy all of Aramco's oil for 54 Trillion dollars (at $54 a barrel). We could have all the oil we want at a set cost for the rest of our lives.

Oil Is Years Away from a Meaningful Recovery

My preference is to forget todays price or tomorrows price of oil or natural gas. Just buy a low expense energy mutual fund or ETF and forget about it. Trying to make any money on a daily or weekly basis by speculation is a fools errand. What, may I ask, is your 5 or 10 year plan?

Oil: Despite Decline, A 'Must-Have' Profit Play

Oil drives civilization. At least developed civilization. If you think other energy current alternatives will be replacing oil you are dead wrong. Current alternatives are based on old technology and they are not even close to replacing oil. A replacement for oil has not even been thought of yet. I look 50 years from now as the world looked 150 years ago (before oil). But I won't be here to enjoy that simpler life.

Oil: What Goes Down Must Go Up?

At this point in time the world demand has fallen just 2%. The demand in the US has fallen just 5%. Although there is a current overage on the supply side that amount can be used up in less than two weeks. The recent collapse of oil pricing does not bode well for future supply. When supply is used up, which it will, speculation will jump in again and prices will go up again.

Bullish Amid Oil Majors' Lay Offs

Cycle is as cycle does. Oil company budgets are set in the fall. Money is spent in the first three quarters. If budgets are cut (which they have) then production will be down. Simple. Inventory has to come down as well. When prices go back up budgets go up, spending goes up, production goes up and the cycle begins again.

Crude Reality: How Long Can Oil Stay Down?

Just a bit of clarification...the Bakken is not a field but an extensive play that stretches across Montana, North Dakota and into southeastern Saskatchewan. The amount of oil reported in the "play" is between 271 and 503 Billion bbls. That is oil-in-place not recoverable oil. Typically, a field when it is discovered it will recover anywhere between 12% and 19% of oil-in-place under primary recovery. Secondary recovery, such as water flooding will add perhaps 6% more if the Bakken can be flooded at all. Also I might add the USGS has restimated 4.3 Billion barrels of recoverable oil on the US side of the "Play". Hardly anything to get excited about IMHO.

Oil ETFs: Worth Investing In Anticipation of a Price Rebound?

In order to trade oil this year at an "average" of $60 a barrel we would have to have it trade for a period of time considerably above $60. I don't see that happening. It may trade at or above $60 towards the end of the year.

60 Minutes on Oil: Did Anyone Verify Anything?

Nice evaluation in that 60 minute segment. To add to the bubble I add the war in Iraq, which also began in 2003 is another factor. The military is the largest user of petroleum next to Agri-business in America.