Editor's Update on the Bakken Formation:
By now you know the Bakken is a big deal in our nation's oil picture. The giant oil formation holds as much as 4.3 billion barrels of technically recoverable oil... with many companies already drilling there with success. And now comes word we may be looking at a second giant oil formation... a "second Bakken," as it's being called.
It's called the Three Forks - Sanish formation, and lies directly beneath the Bakken. The news, of which, has already sent our Bakken stock plays skyrocketing. Fortunately it's not too late for investors to get a piece of the action. The details are all in our new report, which you can find right here.
Keith Kohl
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Up or down. More or less. Buy or sell.
Chances are good that you have thought about one of these things lately. I don't blame you. Not a day goes by that they don't cross my mind.
Then again, it all depends on to whom you're listening.
The majority of oil forecasts that I've read lately are tagging year-end oil prices around $40 per barrel. While they differ in how deep the recession will go, nearly all predict prices will stay flat throughout the year. Several even went so far as saying prices will drop fall below $30 per barrel during the second half of 2009.
I can understand how those bearish forecasts are difficult to ignore. After running nearly to $50/bbl a few weeks ago, we are once again looking at oil prices below $35. Last week's U.S. crude oil stocks were 39.5 million barrels above last year's level. In fact, our crude stockpile has been rising since last July, now well above 5-year levels.
Let me ask you, dear reader, "Do you honestly see oil at $20 per barrel in December '09?" Please feel free to leave me your predictions in the comments section below.
Forecast Fears
There's a reason I don't think much of those forecasts. The fact is that many of those people got burnt from their predictions. This time around, I expect all of them will hesitate before making a bullish call on oil.
Earlier today, I couldn't help but laugh after reading one in particular that said oil would stay below $50 for the next five years.
Five years?!?
Even with lower consumption levels, my outlook over the next several years doesn't change. As the world climbs out of this recession, demand will inevitably pick up again. Ever since oil prices collapsed from July records, not a week goes by without another project being delayed. Eventually we're going to see supply balance out.
Then again, there's always the OPEC factor.
The Rare Earth Element Takeover
On Jan. 1, 2010, one tiny company took possession of a vast stretch of property in Greenland.
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Now here's the crucial part...
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Get the full story right here.
Backing OPEC into a Corner
I'll admit that OPEC cuts in the past were nearly always taken with a grain of salt. Cheating on quotas was the norm. Why would they want to cut output? Prices moved from $20 per barrel to $147 per barrel within a few years. It wouldn't make much sense to cut when record revenues were pouring in.
Of course, it was a different climate for prices back then. Oil prices would jump on the mere hint that OPEC would make a cut.
Today is a much different story.
As you know, OPEC recently announced a second cut in output. The effect on oil prices was a bit different this time. The day after the announcement, prices fell under $33 per barrel. Naturally, the question was whether or not OPEC would follow through with their plan to shave output by 4.2 million barrels per day. Perhaps the market was calling OPEC's bluff.
Has OPEC been backed so far into a corner that they're running out of options? In order to defend prices, the cartel has no choice but to follow through on their plan. A few days ago, Iran warned their Asian and European clients that they can expect less oil in the near future. Since September, Iran has cut more than half a million barrels per day from its supply.
Yet again, the news failed to move the dial on prices. Don't be surprised when OPEC comes out with another round of production cuts.
Is Oil's Rebound in Sight?
With the demand slump easing, there is even more opportunity out there for us.
I've said this before, despite all the naysayers, and I'll happily repeat it: Oil prices will make a comeback this year. Although we may not see triple-digit oil prices for a while, that doesn't lessen my resolve.
In this market, the clearcut winner will be any investor savvy enough to recognize the buying opportunity in front of their eyes. How much time will pass before you see how many energy companies have been unfairly beaten down? Personally, I'd rather pick up those quality companies at a discount than wait until they're back at 52-week highs.
Until next time,
Keith Kohl
P.S. Editor's Note: As oil and gas prices are beaten down time and again during this recession, investors have been desperately trying to shelter their investments. However, there is one place that has become practically immune to this economic storm. And their latest recession-proof secret just got a whole lot more profitable. It's not too late to get a piece of the action as we take our second round of profits from this prolific new play. You simply have to see this. Click here to learn more.
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ENJOY YOUR NEWSLETTER. I WILL GO ON THE RECORD, WE WILL BE OVER 75.00 FOR OIL BY DEC 31ST 2009. THE ONLY WAY I CAN SEE IT NOT GOING UP IS IF THEY CAN KEEP THE DOLLAR RALLYING ALL YEAR. I CAN NOT SEE THAT HAPPENING.
JOE
The benefits are:
1.Motivate drivers to be economical both in the mode of transportation and the amount of fuel used.
2.Keep demand and therefore the price of oil low so as to reduce the impact of events in the mid-east, Russia, Venezuela and other petro dollar dictators.
3.Provide a boost to developing alternative energy technology and provide a source of jobs and pride for American industry.
4. Reduce America's carbon footprint
5. Provide a consistent energy cost so families and industry can plan and budget.
My expectation is that this would keep the price of energy low, perhaps in the $30 to $50 per barrel range.
Truth is that no-one knows for certain how the price of oil will track but what is absolutly certain, like morning following night, is that markets will recover. They always have after a significant reversal and always will. That applies to oil as well.
Simple really.
Cheers
Graham
Since, according to what seem to be the most reliable reports, all fossil fuels production is at or near the point where it can no longer keep up with demand, should not prices be rising. And if they are not must it not be only because of lower demand or price fixing.
In any case, when the fuels we have come to (imprudently) depend on run out or become unusable (because of environmental imperatives) we will have no alternative but to turn to alternative energy sources. It's as simple as that.
Of course, if business as usual prevails, the whole issue will be made moot by the head on collision with the world wide ecological -- and thus necessarily economic -- brick wall we are now headed for.
And what we need bear in mind is that the our ecological situation, which is determined by the adequacy of every factor essentially involved in maintaining our existence, is the one that really matters. Among these of course are such as food, water and food supply and others not commonly taken into account, such as sanity.
Donald MacDonald, Sydney, N. S.
I will make a guess of $65 / barrel by the end of 2009. And that is a guess. I suspect that as summer approaches and we start to have a better idea of the state of the economy, even if people do not start spending again, production cuts will have an impact.
Demand is down, supplies stable, and the speculators don't have anything to play with. When there are people between the well head and the gas tank that can wield untold amounts of money the people at the paying end pay the price.
What is the value of a barrel of oil? What a reasonable person will pay and not what profitiers create.
Anyone that says speculators can't move prices on price/supply convergence lies.
Output is about the only thing anyone has the slightest idea about.
Prediction for 2009 $15-$100/p.b.
Unemployment goes up, oil price goes down. Unemployment is about to rise quite fast in the near term. Wait a little longer, oil will come back.
I have one problem with your analysis. Why will there be a recovery? And if low interest rates and large stimulus packages do manage to generate a recovery the same conditions that caused the recession in the first place will only be exacerbated: Very high debt levels coupled with rising commodity prices. In fact I think a recovery will actually worsen the situation and cause an even deeper depression. There will still be investment opportunities into the future but the success of those will be based on an accurate reading of the global and local situations and how good a trader you are.
This recession has been building for at least a decade. In 2001 I wrote:
The level of debt in western countries and around the world is high. The USA is the prime example requiring 20% of its GDP to service its debt. Escalating oil and energy prices will cause economic downturns and recessions as is current in 2001. As the price of oil and energy increase through this decade it will cause further economic recession, the burden of debt will increase. As the GDP reduces due to recession, the percentage of GDP required to service that debt will increase. Companies and individuals will start to go bankrupt under the burden of debt. These collapses will have effects on other companies and individuals and will eventually cause a domino collapse leading to a depression. I believe some time 2011-2015 but very possibly much sooner.
(So much for Greenspan and others. Does anyone really believe they could not see this coming? I for one do not believe that they could not see this coming)
With the additional massive costs of the invasion and protracted occupations of Iraq and Afghanistan and the tight demand/supply balance for many commodities but especially energy the fate of western society was cast. That combined with the now almost a certainty that oil peaked in 2006 (much production has been scaled back and many projects shelved reducing near term and future supply capacity) and with both Saudi and Russian oil production in deep decline it is only a matter of time before demand exceeds supply, a recovery will only hasten that situation.
While we have to expand renewable power as fast as we can. Renewable power that has an Energy Profit Ratio greater than the needed
1:7 ratio to be economically viable, actually has a reasonably low production potential compared to our current consumption.
Electric and hybrid vehicles are also a non runner, they may save fuel but actually cost more energy and money over their lives than conventional but fuel efficient vehicles.
And nuclear is many decades away from going even close to supplying needed energy.
In short my forecast is Doom and Gloom: "The Great Energy Depression of the Twenty First Century" and especially if we have a recovery but in the long term there will be little difference. World population will be down to around 1.5-2 billion by 2100 unless a whole new paradigm of energy production, not even in conceptual stages at the moment, takes place. I have little faith of that but live in hope for my children and grandchildren.
Dan
danny_hannan@yahoo.com
Oil stockpiles are up and so are, probably, the oil companies profits - A G A I N !!!!!!!
Currently, I am seeing the reduction in goods and services starting to decline and getting more in line with the price of oil and gas current prices.
As an independent company, we can operate at a lower cost than the large independent and major oil companies.
We need to be drilling today. The wells can be drilled at lower costs and the costs are starting to decline hopefully getting in line with the actual price of oil and gas. We see the potential of developing projects NOW while prices are lower. Restrict the flow rates further until prices increase and produce on a longer term payout.
A reasonable payout of two years is acceptable. Where else can you make an initial return on your investment in any industry in that period of time.
Sincerely,
R. Lane Burgess
President
Burgess Energy, Inc.
A nation cannot survive on the manufacture of Big Macs and fries alone.
Opecs influence of late cutting production has had little affect on crude prices.
As for the pump price its the way it should be. All the talk about oil shortages and peak oil? If there really was a doom and gloom and we were indeed running out of oil, do you believe that the pump price for gas would be low.
If we were in such a dire situation then we would see gas rationing such as in WW2
Even with a potential New Depression perhaps already occurring we must find the courage and audacity to break the chains that bind us to petroleum.
Yes, it will cost us much comfort and even grief, but how does that compare to potentially infinite wars for resources.
Canada's Tar Sands are the worst example of the depths of venality where human need and yes, greed cross paths.
If we are willing to despoil such a vast area of the earth as if it is our right to feed our vanity then we certainly deserve the potential fate of extinction as a species.
We MUST be responsible for the consequences of further such actions. Something as wrong-headed and blithe as the Alberta example shows a very impaired sense of life and surroundings outside of the Towers of Finance.
This is war already so it is past time to live up to a wartime footing and take this endless OPEC dependence and stuff it in the trash can. The entire civilization and its underpinning of petroleum has led us into a trap.
Courage and sacrifice lie ahead, the old paradigm must go before it kills us.
Better we choose now than keep reacting to events only controlled by asserting our military into this.
Ahem, We are not only badly bent, we're broke!