Slump In Oil Price, October 1, 2014 -- December 31, 2014: Pricing, Part I

Slump In Oil Price, October 1, 2014 - December 31, 2014

 

Pricing, Part I
Pricing, Part II
Pricing, Part III
Permit Status
Saudi Arabia Market Share
Mid-East Geo-Politics
OPEC Realities


Pricing, Part I

Musings on pricing.

There are two questions to ponder:

• what is the right price for oil?
• when will we see the right price of oil?

For now I will just cut to the chase, and develop the argument at a later date, if the spirit moves me.

Assumptions:

• oil is not a typical commodity: one producer has historically been able to affect global supply and prices to a greater extent than other producers; a relative monopoly
• the US is or soon will be the world's #1 producer of oil; and the US, by law, cannot export oil (there are exceptions)

One of many unknowns:

• will "conditioning Bakken oil" meet the exception; allowing Bakken oil to be exported?

My conclusions:

• more and more, "like" oils, regardless of origin, will be driven by market (supply and demand) forces
• the "right" price for Brent, OPEC, and WTI oil is $100/bbl (baseline year, 2014)
• we will see the "right" price not earlier than December, 2015

Other media links:

• IEA sees oil  price rising near $100 in coming years (doesn't seem like a hard prediction to make)
• Projects will be canceled in 2015 
• Operators circling the wagons

Updates and News

December 30, 2014: break-even points for five largest producers in the Bakken.