Sunday, September 9, 2012

Re-Pricing of Oil: New Floor -- $80


Later: another look at WTI/LSS/Brent pricing. Link provided by a reader. This may be the best line:
“We have all these sweet barrels in the Midwest that need to find a home, and they’re getting to the market by planes, trains and automobiles, you name it,” said Stephen Schork, president of the Schork Group Inc. in Villanova, Pennsylvania. “You compound that with increased production in west Texas and the Eagle Ford, and you have a template for LLS to move to a discount.” 
Investors: time to get back into refiners? (See disclaimer for this blog.)

Original Post

Remember that Barclays' projection that oil will hit $125/bbl within the next 12 months, and $180 by the end of the decade?

Barclays is not alone. There is a great article at the Oil Drum.

It is in two parts, Part I and Part II.

Part I is very, very long and provides an excellent foundation for the author's conclusion. The entire article, Part I, is free.

Part II requires a paid subscription but the executive summary is provided. My hunch is that the executive summary is more than enough for most blog readers.

I can't even begin to summarize what is said in the very long Part I, but two things jumped out at me:
  • the discussion of qualitative easing as it applies to the price oil
  • OPEC and spare capacity -- a topic I have talked about at length at this blog
Barclays said $125 and $180.

The linked Oil Drum article says the new floor for oil (average Brent/WTI) is $80; and the price is "marching toward $200."

So, we'll see. We only have to wait a year. Caveat: I've noticed that folks have been projecting $200-oil for several years.


  1. Interesting Plains E&P story. They make deals regularly. They project big cash flow. They like LLS crude. Hate gas and distrust Cushing crude. Have some fine Gulf prospects. So, why not pick up more for a song or two?

    At WSJ.

    Anon 1

  2. For those interested, link:

    If link doesn't work, google the headline: BP Near $7 Billion Deal To Sell Some Gulf Fields

    Synopsis of story: PXP in talks with BP to buy some BP gulf assets in $7 billion deal.