Oil is low and going to stay low for awhile, imo.
Upthread someone mentioned the Saudi-Russian price war with the aim of knocking out US shale. One huge side benefit for the Saudis is that low oil prices also severely hurt their regional competitor, Iran. The Iranians have difficulty selling oil on the international market due to sanctions. Only the Chinese (and Indians?) will buy from them and then only at a significant discount to the world market price. Due to sanctions the Iranians cannot sell oil futures in New York or London. Of course they can enter into a futures contract with a set price with the Chinese government, but.... maybe the Chinese gov't doesn't want that? Not so easy for the Iranians.
With all the COVID induced shut-ins, etc. a lot less oil is being consumed every day, pretty much all across the world. So, the pipelines are going to get backed up and storage facilities filled b/c it's not so easy to stop pumping from one day to the next.
Thus there's lots of $20 oil in storage now that has to drawn down before the price can rise. Not going to happen within the next 6-12 months without a supply disruption.
totally agree. asked on another thread, but whats a good oil stock to buy (dont know much about)? it can only go up over time....at some point after our life time oil will become a precious substance due to dwindling reserves...
Will it though? I've been hearing the exact same argument since I was in elementary school (37 now) and gas is the cheapest it's ever been in my life time. It was $1.19/gal this morning on my drive to work. Maybe 30 years from now it will be even cheaper for a whole variety of reasons and people will still be talking about how "it can only go up" because it's a limited and non-renewable resource.
But in your lifetime (just 12 years ago) oil was a staggering $165/barrel.
I could certainly see oil going lower, however where it sits right now few, if any companies or countries can be profiting off $23/barrel oil. Eventually, a demand will be created and the only companies to meet it will be the select few companies (and countries) who can handle this current downfall.
You also have to remember that there are many major oil and gas companies that do more than just “drill for oil.” You have the 3 major divisions, Upstream (drilling), Midstream (transporting, i.e. pipelines), and Downstream (Refineries). Many of these companies are diverted in two or even three of those different divisions of the oil and gas sector.
Not only that, is many of these companies do more than just oil. There are ethane crackers going up all over the country that manufacture resins/plastics. These ethane crackers require ethane to operate, which is transported through a pipeline.
My guess is that prices slowly bounce back to around $35-$40/barrel within the next 12 months. The longer it lasts, the more it’s going to keep bankrupting the smaller producers, which is going to increase prices in the long run.
Our country really needs to harness nuclear power better, however the regulations are so incredibly severe in new construction of nuclear power plants (I’ve worked on one) that they are becoming nearly impossibly to justify the cost.