For newbies, some data points to consider.
- The crawler on your television screen for NYMEX WTI has dropped precipitously from $110 to $90/bbl (rounding)
- Halcon said yesterday that their new completion techniques are resulting in production doubling in some areas; increasing by 35- to 50-percent in other areas
- Lower crude oil prices --> perhaps less demand destruction --> more oil sold, all things being equal, perhaps
- Lower crude oil prices --> perhaps lower energy costs in the US --> perhaps a better economy overall; perhaps
- 500,000 bbls x $110 = $55 million
- 625,000 x $90 = $56.25 million
- Cost of drilling is coming down significantly even without the fall in oil prices
- When oil prices fall, the cost of drilling generally goes down
- RBN Energy recently talked about the netbacks Bakken oil operators receive through CBR
- There appears to be a glut of takeaway capacity in the Bakken
- Interest rates appear to be at or near all-time lows
- As the economy improves, airlines will book more miles, using more aviation fuel (which comes from oil)
- As the price of oil / gasoline drops, consumers tend to drive more (back to demand destruction argument noted above)
- Bakken operators hedge their oil contracts; Halcon has a floor of just under $90
- Weather is unpredictable; weather can play a significant role in oil production in the Bakken; falling oil prices can actually help an operator's bottom line if weather interrupts oil production in the Bakken
- There is a difference between investing and trading
Disclaimer: this is not an investment site. Do not make any investment decisions based on what you read here or what you think you may have read here.
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