Where is the bottom for crashing oil prices?

[zoltani]

Are we there yet?

I picked up some cheap oil and gas stocks the past months. Did I catch the bottom? Who knows, but I am happy.

[anisotropy]

Bottom?

$49.09 +/- $2.44 around Jan. 25th +/- 12 days. ;)

last I heard the cost per barrel for Aramco is about $18 dollars. Personal opinion is that the price of oil is currently lower than it "should" be.

/fortunetellingmodeoff

Do we have a winner?

lol I want to win! Please let me win !

alright, looks like I won that round. who wants a new round? does anyone think there's going to be a second dip in the next few weeks?

[RichMoose]

alright, looks like I won that round. who wants a new round? does anyone think there's going to be a second dip in the next few weeks?

I'm with you on this one. I'm pretty sure this is what the fancy pants technical traders will call a "dead cat bounce". Inventories are skyrocketing, production is still going up, and fundamental demand hasn't changed much from a few months ago. The Saudis and Russians are still pumping it out like crazy and willing to sell for low prices for the time being (Saudis because they want to, Russians because they don't have a choice).

[hodedofome]

It's entirely possible that the spot price makes another downturn while energy stock prices hold up.

[user43423]

All of these are huge unknowns, and anyone who tells you they have answer is lying and/or crazy. A few before oil started to drop, many leading analysts said the absolute lowest they could see oil dropping in the near future was around $90/barrel. I promise you when I say no one saw $45/barrel coming.

No one saw the Depression coming. No one saw the Recession coming. No one sees the next bubble nor do they know when that bubble will burst. So the question you need to be asking yourself is not whether we have hit bottom, but are the investments you're looking at trading with a significant margin of safety? In other words, if things can get even worse, how bad will my investment perform? Can it go belly up? Can it withstand a long decline in oil prices? Some of the fracking guys who took on a lot of debt probably can't operate at a profit with oil so low. But others like Exxon, who have huge barriers to entry, a giant global infrastructure, and a diversified business could even emerge stronger.

But yes, I do own XOM stock, and have bought more over the past month.

[DrF]

Perhaps lets wait for some real pain to set in (small/leveraged/unhedged E&P and oil service companies going bankrupt), energy hedge funds shutting down, wells getting capped, before we start making educating guesses that the bottom is in. If we see some of that, and then you see a headline in a major magazine or newspaper that oil is going back to $10/barrel, I would think the real bottom should be close.

http://www.bloombergview.com/articles/2015-02-16/oil-prices-likely-to-fall-as-supplies-rise-demand-falls

Here you go! The recovery should be in full swing now, haha!

Excellent first post Value. Welcome to the forums.

[user43423]

Perhaps lets wait for some real pain to set in (small/leveraged/unhedged E&P and oil service companies going bankrupt), energy hedge funds shutting down, wells getting capped, before we start making educating guesses that the bottom is in. If we see some of that, and then you see a headline in a major magazine or newspaper that oil is going back to $10/barrel, I would think the real bottom should be close.

http://www.bloombergview.com/articles/2015-02-16/oil-prices-likely-to-fall-as-supplies-rise-demand-falls

Here you go! The recovery should be in full swing now, haha!

Excellent first post Value. Welcome to the forums.

Thanks and glad to be here! Long time lurker but figured it was time I started bothering people with my thoughts.

[DrF]

It's been a bit since this thread had some action. I'll revive it here.

There's been lots of talk recently about inventory buildup. Is it normal for the yearly cycle? Who knows. Though generally as the weather warms, inventory drops and prices increase.

Here's the weekly crude inventory from the U.S. energy information administration going back to 2006. They go all the way back to 1990, but I thought it irrelevant.
http://www.eia.gov/dnav/pet/pet_stoc_wstk_dcu_nus_w.htm

I made a chart of the data, added the 4 week moving average, and labeled a couple of the peaks.

Looks like we're about 1.5% above the previous all time inventory high hit back in 2010 around October.

This doesn't seem like a doom and gloom scenario. Anyone else think this is odd?

I also added the latest average US gas pump prices.

[Financial.Velociraptor]

I feel confident in calling it now: it won't go lower than $0.00/bbl.

Seriously, this isn't something you can predict.  At the same time, you can say with a great deal of confidence the price has to eventually climb and level off around 60/bbl.  That is the marginal cost of the swing barrel producers.  And that is just how commodity markets work (with lots of volatility on both sides while you wait for rational behavior.) 

[hodedofome]

I'm not a bottom picker but gun to my head I'll go ahead and say we've seen a good intermediate low for the spot price. Positive divergence (technical trading term, look it up) off the recent low, and the oil stocks did not retest the lows while the spot price did.

[hodedofome]

Stats of big reversals in price after an oil price crash

Taken from here: http://blog.kimblechartingsolutions.com/2015/04/crude-oil-50-average-gain-12-months-after-this-took-place/

[Financial.Velociraptor]

Dr Funk,

Oil has been moving the right direction for you since opening this trade.  Has your ETF moved in sympathy?

[DrF]

Small position, but has the potential to pad my returns. I had another position in my wife's IRA account (basis in that account was 2.6), but sold that a week or so ago. There's been a lot of volatility, but no noticeable decay, probably more of a contango issue.

Go big or go home. Oil will probably settle between 60-70 over the summer (IMO). Which should lead to another 50-60% increase for me.

Plenty of opportunity to buy, lots of 5-10% pullbacks over the last few weeks.

[Jersey Brett]

I trade oil, I will play. I got in at $43 bbl (contract nearby) and rode it up to $54 or so. I am now short until a close above $60 bbl happens. How low will it go? Low I hope ($50 bbl?). More $ for me.

I will say this though. Don't play with commodities unless you know what you're doing.

[Financial.Velociraptor]

I trade oil, I will play. I got in at $43 bbl (contract nearby) and rode it up to $54 or so. I am now short until a close above $60 bbl happens. How low will it go? Low I hope ($50 bbl?). More $ for me.

I will say this though. Don't play with commodities unless you know what you're doing.

It is going to be hard for WTI to climb over 60.  In the high 50s, a lot of marginal wells come of the "fracklog" and into production.  HAL believes there are over 4,000 semi-complete shale wells sitting idle waiting for the right market conditions to frak/complete and put into production.  Probably about 650,000 barrels a day...