Oil: Test of the Strongest

[errolanderson]

Saudi Arabia and OPEC allies have a major battle ahead. Who will be able to sustain a chronically long period of depressed oil prices? Who is the strongest?

Cdn production is apt to decline at least 10 per cent, possibly more. But high costs and investment in the oil sands will mean production will continue to roll inspite of the downturn of 2015.

Government budgets globally that depend on oil revenues are in shock. Russia will be hard hit.
Canada will be hard hit (IMO). Some producers will thump their chest until the financial bleeding is too great.

Government and companies that can respond quickly via cost cutting measures will withstand the financial challenge that lies directly ahead. But there are many that won't. Defence will keep you in this high stakes game, not offence (IMO).

[Oliver88]

I was reading that this will absolutely cripple Russia so hopefully the measures that NATO has put against Putin start to work.

.....or will Putin do something crazy like more action against Ukraine.....or bring back more of a communist system??

[Oliver88]

The Saskatchewan finance minister is claiming we will still have a balanced budget due to a lower CDN $, increased revenues in potash and lease/royalty sales.

All provinces will need to cut costs, especially the ones who already had huge deficits.

Quebec/Ontario will get smaller transfer payments from Alberta,Sask, BC and NFLD.

[bucket]

Interesting how a lower dollar can help the province's revenue but has little effect on our grain prices.

And no one gives a shit.

BTW port price for HRWS, that farmers pay to get the west coast, is 331 a tonne this week. 9 bucks a bushel. You guys do the math with an average 6 bucks on the prairies. Railways still only charge 35 a tonne moose jaw to vancouver.

Durum is moving off the coast at 503 a tonne.

[food4u]

Interesting talk this week with a fellow that told me that railways make more per car hauling grain than hauling oil.Seems if the oil does not go by rail there is a truck waiting to haul it.Amazing what competition will do...

[Hopalong]

Food4u, maybe same reason railways don't want to haul feed grains to Fraser valley or oats to US mills.
Revenue cap rates give better return than competing with trucks.

[rkaiser]

Just in case you would like to entertain an alternative view Oliver88.


Ministers of the OPEC decided on Nov. 27 to maintain its output level of 30 million barrels a day despite crude oil price falling to a four-year low [Xinhua]
President Vladimir Putin on Friday played down the oil price drop, saying it would not last and would not damage long term projects for oil companies in Russia, the world’s biggest producer which has budgeted for $100 crude.

The oil price plunge is an inevitable market response to the expected decision by OPEC to maintain its current output quota of 30 million barrels a day, said Putin.

“We took part in the OPEC meeting. It was absolutely clear for us that the market will react to OPEC’s announcement to maintain output,” Putin said.

Russia was not surprised with OPEC’s recent decisions of not cutting oil production quotas, Putin told the meeting with the visiting top managers of French oil giant Total.

Ministers of the OPEC decided on Nov. 27 to maintain its output level of 30 million barrels a day despite crude oil price falling to a four-year low.

“No major energy resources producers insisted (during the OPEC meeting) on any special measures to adjust the prices, including Russia. We are, in general, satisfied with and see nothing exceptional in that,” said Putin.

According to Putin, the world oil market will stabilize in the first quarter or in the middle of 2015.

Russia’s 2015-2017 budget is based on an average oil price of $100 per barrel.

Despite current difficult times for the world energy sector, Russia does not foresee any unexpected developments of the cooperation with Total, Putin stressed.

The Russian President added that Moscow has large-scale projects with Total, such as the gas reserve exploration in Russia’s Yamal Nenets Autonomous District, which “can undoubtedly influence both European and global energy”.

Meanwhile, Total’s new CEO Patrick Pouyanne said that Russian market would remain at the core of the company’s strategy, as Total has invested $10 billion in Russia.

Russian Minister of Economic Development Alexey Ulyukayev also said on Friday that oil prices at about $70 per barrel will have no adverse impact on Russia’s budget.

When the oil price was $110 per barrel and the rouble exchange rate was 32-33 roubles per one US dollar, the rouble-denominated oil price was about 3,600 roubles.

“Its price in roubles is about the same now, when the oil price is 71-72 US dollars per barrel and the rouble exchange rate is 49-50 roubles per dollar – the same 3,600 roubles,” the Minister said.

“For us as a spending unit, for the budgetary system, the rouble-denominated oil price is much more important than the dollar component,” he added.

“For those whose currency is not pegged to the U.S. dollar, recent price drops have been partly offset by swings in foreign exchange rates: thus Russia’s nominal export revenues in roubles inched up lately even as they plunged in dollar terms,” the International Energy Agency said in a report in October.

[cottonpicken]

The oil market "was" an 8 billion dollar a day market.

You need to always keep an eye on where capital is flowing.

It would not take much to get us moving,although at this moment in time i do not believe we will,to much blood in the water.

In 24 hours we will have a better handle on direction,the smart money will be moving.

[rkaiser]

Are you referring to the Swiss vote cotton. Yup - smart money going places.

[cottonpicken]

Ya,that one was to surprising to believe.

[errolanderson]

Oil price collapse is going to be real tough on the juniors (IMO). Real loss of equity ahead.

Moody's dropped Japan's credit rating overnight. If oil drops below $60 per barrel, this will be a train-wreck in Calgary.

[mbdog]

Errol...do you think can$ tracks oil going forward?

[rkaiser]

cotton - the Swiss are a small population and word spreads fast. They obviously know what is coming and knew that a vote in favor of repatriation of their gold would not change the outcome. Petro dollar will be gone very soon and a new wonderful replacement that will be good for everyone is on it's way.

[errolanderson]

mbdog . . . yes, more pressure on the loonie ahead (IMO). Sense our spot loonie will break below 85 cents at some point ahead.

Job losses and a real estate price drop
also ahead. This has an ugly smell to it.

[boarderbloke]

Falling crude prices may finally be the catalyst that deflationary proponents needed, to win the battle of inflation vs. deflation that has been going on for the last 7 years(minimum).