Pranjay Kaushal

The Ghost of Crude Oil Futures (Part 1/2)

If we say that OPEC countries cutting production as they cannot sustain at 30-40$, one needs to understand that the cost of production for an Onshore oil well is around 5-6$/bbl approx., and around14-15$/ bbl for off-shore production. Other charges included i.e. FOB price is what we see. Second, treating it as commodity would mean that as the recession in US, Europe and Japan deepens, which it will might bring the price of oil to less than 20$/bbl, and I think for sustained period of time. As there is always new oil discoveries, new more efficient technology development for auto etc. Please be cautious on derivative positions and hedge it well. Happy investing!