Hope for Oil Price Rebound in 2016 Fading

* Outlook for the price of oil in 2016 looks weak.

* Why it'll take a lot for competitors to come to a production cut agreement.

* U.S. shale will remain resilient, but offshore and Canadian sands will struggle.

* There are no visible catalysts to provide support to the price of oil.



It's humorous to see headlines in the financial media bleating out the idea that the price of oil is crashing because of the decision by OPEC to do nothing to reduce production levels.

I've been on the record for a long time saying it's not going to happen, and there were a number of others, understanding what's really happening in the oil industry, coming to the same conclusion.

Maybe some were hoping it would happen, but the disruption caused from the emergence of the U.S. shale industry has forever changed the oil market landscape, and as Saudi Arabia is finding out, it doesn't matter how much supply is brought to market, it is here to stay.

What that suggests is oversupplying the market won't be able to destroy shale. It does mean the days of Saudi Arabian dominance are coming to an end because eventually it'll have to influence other OPEC members to lower production in order to support the price of oil. It will either lose revenue by maintaining or increasing production levels, or lose revenue by lower production and losing market share. There is no third option.


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Bold Oil Investors Can Make a Killing

Headlines like the one screaming the oil crash has caused losses to date of about $1.3 trillion, should be ignored by those that weren't affected by the disaster, as it has brought about opportunities rarely seen in one's investing lifetime.

The demand for oil is never going to go away, and the price it is now at won't remain at that low level for a long period of time. Producers will simply cut back until the price starts to rise to a level that is profitable to them. That of course has already happened, and it will take time until the effect of it works its way through the market.

That said, I don't see oil prices getting a huge bounce in the short term, and those taking a position in the sector, will need to have patience while waiting for the profits. Those in it for the long term will make a lot of money if they don't sell too quickly.

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BP (BP) (MRO) (RDS-A) End Positive on $100 Oil

Shares of BP (NYSE:BP), Marathon Oil (NYSE:MRO) and Shell (NYSE:RDS-A) ended the session up as oil prices gained the $100 a barrel mark for the first time this week.

Light sweet crude oil for July delivery was up $1.73 to settle at $101.32 a barrel and July Brent crude jumped $2.40 to settle at $114.93.

Also aiding oil prices was a Department of Energy report on Wednesday saying U.S. commercial crude inventories climbed 600,000 barrels in the week ended May 20 versus an expected 1.3 million barrel fall in crude stocks.

Gasoline inventories rose 3.8 million barrels last week versus an estimated 300,000 barrel jump.

Marathon closed Wednesday at $52.76, gaining $0.88, or 1.70 percent. Royal Dutch Shell closed at $69.01, up $0.33, or 0.48 percent. BP ended the day at $44.71, rising $0.34, or 0.77 percent.

Key Energy (NYSE:KEG) Outlooks Should Improve After Weak Quarter

The last quarterly report by Key Energy Services (NYSE:KEG) wasn't too impressive, but Canaccord Genuity sees things improving for them going forward, and maintain a "Buy" rating on them.

"We reiterate our BUY rating on KEG as we expect pricing to gain more traction in the US well servicing business driven by a high oil price and an increasing oil-directed rig count, stronger coiled tubing demand, equipment going to work in new locations internationally like Colombia and Bahrain, and integration of its OFS Energy acquisition," said Canaccord.

Key Energy closed Friday at $9.85, down $0.20, or 1.99 percent. Canaccord has a price target of $13.50 on them.

Goldman Sachs (NYSE:GS) Sees Oil Prices Rising on Weak Dollar, Higher Demand

While oil prices could continue trading between $70 to $80 a barrel for the remainder of 2010, Goldman Sachs (NYSE:GS) sees oil prices rising to the $100 a barrel range by the end of 2011.

Reasons cited were the weakening U.S. dollar and stronger oil demand that originally believed.

One thing that could hinder that assertion would be the recession continuing on into 2011, which could decrease demand levels, along with oil prices.

An analyst at Goldman believes the $100 a barrel mark could be reached sooner rather than later.

If the economy actually begins to improve, existing constraints could be removed and oil prices begin to surge.

Goldman (NYSE:GS), JPMorgan (NYSE:JPM) Raise Oil Price Estimates for 2011

Goldman Sachs (NYSE:GS) and JPMorgan Chase (NYSE:JPM) raised their forecasts for oil prices in 2011, with Goldman saying prices in the second half of the year should move significantly higher. JPMorgan sees oil prices moving to $85 a barrel.

Nomura International say oil prices could rise to over $100 a barrel in 2011, basing their assessment on whether or not the Federal Reserve inflates again through quantitative easing.

Knowing it will happen soon, it guarantees oil prices will rise going forward.

The only question remaining for the Federal Reserve to inflate is to what degree. How much will they spend is all that's left to be determined, not if they're going to spend.

If oil does reach or surpass $100 a barrel, it would compensate producers from the weakening of the U.S. dollar. If prices don't reach that high, or remain low, which is possible from slowing demand, it could put even more pressure on the global economy.

JPMorgan (NYSE:JPM) Sees $90 Oil by End of 2010

JPMorgan (NYSE:JPM) said the price of oil by the end of 2010 should reach close to $90 a barrel.

Data perceived as positive for the economy is partly driving the outlook, but probably the weak U.S. dollar is the main catalyst, as the commitment by the Federal Reserve to interfere in the economy if it remains weak a a major driver as well, which is part of the loss of value of the dollar.

One possible thing that could derail the higher price is if consumers continue to hold back on traveling and spending, which could cause demand to go down and inventories to go up, which could push oil prices down to lower levels than expected.

For Friday, in afternoon trade West Texas Intermediate crude for November contracts was up to $76.35 a barrel, gaining $1.17 on the New York Mercantile Exchange.

Halliburton's (NYSE:HAL) Share Estimates Raised

The analysts of Susquehanna have lifted their estimates on earnings and maintained their Buy rating as well as a price target of $38 on Halliburton (NYSE:HAL) shares. This lift was after better than expected activity.

The analysts wrote, "U.S. Land drilling is trending up 12% 2Q to date relative to 1Q. This, coupled with favorable service intensity (horizontal drilling is trending up 16%) and improving pricing paves the way for a considerably better than expected 2Q. We note that the group has began to out preform the market with the OSX up 12% since June 1 vs. the S&P up 4%. Attractive oil prices, improving international spending levels, and compelling valuation are all reasons to be optimistic that the oil upcycle remains underway."

"Halliburton represents on of the most attractive stories in the industry right now, with an industry leading position in North America and growing market share domestically and internationally."

Halliburton serves several natural gas and oil companies worldwide in about 70 countries. These services include the production, exploration, and development of the oil and natural gas. The 2010-2012 earnings per share estimates by Susquehanna were raised from $1.39, $2.08, $2.71 to $1.46, $2.10, and $2.74.

Oil Prices Plunge 20 Percent in Two-Week Period

While oil companies may not like it, consumers definitely will, at least when the price of gas starts to move down in unison with the price of oil, as oil has dropped 20 percent just a short two-week period.

Like most other raw materials and products, concerns over the European debt crisis and the inflation China is battling has companies and investors concerned over the demand problem and how it'll effect companies and their exports.

Not just that though, as it's not just the existing European crisis everyone is worried about, but whether or not it's about to become a contagion which brings the global economy down with it.

This will especially have a dramatic impact on commodities and countries and companies producing raw materials, as that will probably take a significant hit in the short- to mid-term if things get worse at all, and probably even if they stay where they're at now, as the fallout from Europe has yet to be revealed outside of Greece, and that information is probably going to be released in stages in an attempt to manage the potential panic that could come with it, which could cause a run on an unknown number of banks, as it did with banks in Greece.

Just a couple of weeks ago oil seemed to be assured of a long and profitable run-up in prices, now it's debatable as to how low prices will go throughout the usually busy summer season, and even further beyond, as more than likely consumers will cut back on travel because of the fears of what could possibly happen to the economy with more negative factors out there that are not small by any means, including the China inflation factor, which has been largely over-shadowed by the EU debt crisis; but it is every bit as real, and could cause numbers projected and expectations to be far too optimistic in light of the new circumstances.

In early May, oil prices had hit 18-month highs of $87.15 a barrel, and on Monday they had plunged to $70.08.

If oil prices stay at around $70 a barrel, it is expected to would drop from between $2.60 to $2.65 a gallon on average, with some places in the U.S. enjoying $2.50 a gallon.

Oil Slumps on Higher Inventories

Oil prices dropped after oil inventory has risen for the 10th straight week.

Prices for May delivery fell to $84.92, a 47 percent decline on Friday. After reaching 17-month high of almost $87 a barrel on Tuesday, prices have fallen $2 a barrel since then.

Taking into account the 10 straight weeks of oil inventory rising, and the 17-year high supply of gasoline, and there's sure to be downward pressure on prices in the next week or two, depending on how long the supply remains high and demand low.

Still, refiners continue to pump out crude oil at increased levels, which consumers will ultimately appreciate as they consider how much they're going to travel this year and whether they're going to stay closer to home.

CFTC Caves in to Government

Government Interference in Oil Markets

Somehow the Commodity Futures Trading Commission, which has always said it has never found a correlation between speculation and oil price swings, has suddenly got regulation religion, and now says it's ready to go before Congress and 'admit' speculators are playing a huge role in price runups. This is plain evil, and an investigation needs to be conducted on where this new found information has come from, and if shady politicians and some big energy companies are behind the new found information.

Any price swing in any commodity can happen short term with commodity investors, but to say that is what's behind the price swing of last year which pushed oil prices up is in itself huge speculation, and just another attempt by the socialist Obama and Democrats to attempt to play god, thinking they can alter the age-old reality of supply and demand.

One of the major reasons this is ludicrous is commodity investors can make money when prices go up and down, and so the idea they can push prices up on their own has no merit, and supply and demand always bring it back to reality either way, as consumer respond to price swings. It's as simple as that, and the strong-arming and dishonesty emerging concerning so-called speculators being able to manipulate the market in any meaningful way is just ugly and a lie.

Some Democrats need to be investigate concerning this, along with the Commodity Futures Trading Commission to see if there is any criminal activity concerning this sudden turn around by the CFTC, which is unprecedented.

Misguided and misinformed watchers say this will help consumers. No it won't. Consumers do struggle at times when prices swing up, but they also profit tremendously when prices go down. To say government regulation of the oil market will make a difference is stupid and ignorant.

The failure of socialism and turning of communist countries to capitalism has already shown that governments cannot and should not attempt to interfere with any market, as the unintended consequences that always follow never seem to teach them to stick to minding their own business, rather than interfering with the market place.

Government Interference in Oil Markets

Oil | Forty Dollars the Low for oil?

Now that oil futures prices have traded above the $40 mark for a couple weeks, some are concluding that the bottom may have finally been reached for the black gold.
After hitting a four-year low of $32.40 a barrel on Dec. 19, oil has now rebounded more than 20%. While occasionally falling below $40 in intraday trading, it has closed above $40 everyday since Jan. 20. Similarly, national average gasoline prices have risen above $1.90 a gallon from below $1.70 a month ago.
"While crude-oil markets may remain vulnerable to further disappointments in [...] economic conditions, there is also the potential for a price base to be forming," wrote Brenda Sullivan, an analyst at Sucden Financial Research, in a note.
Ultimately, analysts say the future direction of oil prices will depend on the outcome of the struggle of two opposing forces.
On the one hand, the weakening global economy is expected to lead demand for oil to fall for a second year, marking the first two-straight-year decline in decades. On the other hand, the Organization of Petroleum Exporting Countries is expected to continue cutting production at a record pace to put a floor under prices.
High stakes
The stakes are high for investors who are bullish on oil, especially those who've poured record amounts into oil exchange-traded funds.
Data showed investment in oil ETFs, a convenient investment channel for retail investors, has reached record levels. The number of crude futures contracts held by the United States Oil Fund (USO) , the largest oil ETF, hit a record high near 80,000 recently. One contract represents 1,000 barrels of oil.
Last year, the commodity proved one of the best ways to earn a lot of money - and then, to lose it all. After hitting a record high of $147 a barrel in July, oil fell more than $100, or 70% by year-end. It closed 2008 down 54%, its biggest loss ever and more than the stock market's tumble.
Trading in the first months of this year also didn't bode well for oil bulls. Crude has lost 10% so far this year, compared with a 5% loss in the Reuters/Jefferies CRB commodities index, and a 4% gain in gold prices.
On Friday, oil fell 2% to near $40 a barrel on the New York Mercantile Exchange after the U.S. reported a 16-year high unemployment rate. See Futures Movers.
Some analysts predict oil prices could fall to as low as $25 in the second quarter. The inflation-adjusted record low for Nymex oil is at $18.90 a barrel, hit on April 1, 1986. In non-adjusted dollar terms, that low was $9.75, the only time in Nymex history that oil fell below $10.
OPEC cuts production
Investors aren't the only ones wanted oil prices to stabilize. The 12 OPEC member countries, whose revenues heavily depend on oil prices, have made record cuts in their production.
Some of the members of OPEC said they want to see oil prices rise to at least $60 a barrel.
At its December meeting, OPEC agreed to reduce production by a record amount of 2.2 million barrels a day, starting from Jan. 1, adding to previous cuts of 2 million barrels. Overall, the reduction is equal to about 5% of the world's oil demand, which should easily offset any drop in demand, analysts believe.
Most energy agencies, including the U.S. Energy Information Administration and the International Energy Agency, predict world oil demand will fall by 1% to 2% this year, following a similar decline in 2008.
Chakib Khelil, Algeria's energy minister, said Tuesday there was a 50% chance of another supply cut during OPEC's next meeting on March 15, according to media reports.
But OPEC members, who control more than one third of the world's oil production, have a sketchy record of implementing production cuts.
Oil could rise if OPEC cuts production, said Phil Flynn, vice president at Alaron Trading. "But the problem is the compliance."

OPEC in January met only two-thirds of its pledge to lower oil output, as several members continued to pump above target levels, a Reuters survey showed on Tuesday.
While Saudi Arabia and the United Arab Emirates lowered their production below or close to their targets, some other countries, such as Venezuela and Iran, have pumped more oil than their allowed quotas, the survey found.
Economic rebound?
Investors are also hoping demand will rebound once the economy is revived. With governments worldwide adopting stimulus packages, some economists believe the economy could bottom out in the second half of the year.
The Federal Reserve said late January the economy was in worse shape than it was in December, but a "gradual recovery [...] will begin later this year."
And in its January monthly report, the Energy Department's EIA said that after two years' decline, world oil consumption is expected to record a modest rebound in 2010,.
Such forecasts have already encouraged oil investors to build up their positions, even before prices start rising.
"We are in a world of increasing demand and decreasing supply for tangible things, especially energy," said Steven Podnos, a financial advisor at Wealth Care LLC. "Oil represents an attractive investment sector."
But for now, the oil market is still plagued by weak demand and lofty inventories. The EIA reported Wednesday that crude inventories in the U.S., the world's biggest oil consumer, rose for a sixth straight week to 346.1 million barrels, the highest level in 18 months.
Meanwhile, inventories at Cushing, Okla., the delivery point for Nymex crude futures, have reached a new record high of 34.3 million barrels.
Global demand is poised to post the largest contraction this year since 1982, analysts at Morgan Stanley said in a recent report.
"Supply constraints will remain a longer-term issue and will be intensified by the current bout of weaker prices," the Morgan Stanley analysts said. But "the magnitude of demand weakness will leave this constraint a non-issue in 2009."
They expect oil prices to average $35 barrels in 2009 and fall to a low of $25 in the second quarter.
The EIA, meanwhile, said in its January report, it expects oil prices to average $43 per barrel in 2009 and $55 in 2010.

While oil prices should rise this year, it'll be interesting to see if we've really hit an oil futures low, or it takes more time to work out depending on consumer demand connected to the economic crisis.

Crude Oil Poised for First Annual Decline in Seven Years

With consumers tightening their wallets over economic concerns, crude oil will suffer its first annual decline in seven years, as supplies rise over decreasing demand.

On the New York Mercantile Exchange, prices fell 99 cents for February delivery of crude oil, settling at $39.03 a barrel. Earlier in the day it fell below $38 a barrel. So far this year oil prices are down by 59 percent.

Crude-oil inventory fell last week by 1.45 million barrels, while on the other hand, according to analysts' estimates, gasoline stockpiles are rising, with projections of an extra 1.7 million barrels added for the week ending December 26.

Also increasing were heating oil, diesel, and other distillate fuel supplies, adding 1.5 million barrels to the inventory.

On London's ICE Futures Europe exchange, Brent crude oil fell by 40 cents to end the session at $40.15 a barrel.

I don't see anything changing the primary fundamental of declining oil demand changing any time soon, and that should be the key element to watch with oil, barring any geopolitical problems that may unfold.

Oil Plunges to Lowest Level in Four Years

Today on the New York Mercantile Exchange, oil fell to its lowest level in four years, dropping to $36.22 at the end of the trading day. That was a 9.6 percent or $3.84 plunge per barrel for January delivery.

While trading volume was higher for February, it still fell $2.94 to finish the session at $41.67 a barrel on the NYMEX.

OPEC is of course panicking at the potential unrest that will inevitably come if prices continue to fall, and so cut production by another 4.2 billion more barrels a day on Wednesday, but that hasn't impressed traders much, as assertions and practical cooperation are two different things. Many countries say they'll participate in cutbacks historically, but full cooperation rarely, if ever, happens.

Price is the driving force behind the decline, as economic weakness is causing consumers to cut back on driving. If prices were to go higher at this time, consumers would simply cut back more. It's not a good time for OPEC, and it could become an even more dangerous situation going forward in a number of the countries that are part of the organization.

It'll be difficult to develop a supply/demand balance going forward, as economic uncertainty and the unknown continue to hamper stability. Whenever that becomes stable, the price range is expected to flucuate by around $15 a barrel.

January gasoline on Globex also moved down with oil, as prices drooped 5 cents to finish at 92 cents a gallon. Heating oil followed suit, ending down by 7 cents to $1.37 a gallon.

OPEC Could Cut Production by 1 Million Barrels in Cairo

Fighting to stave off oil plunging below $50 a barrel, OPEC may cut production another 1 million barrels a day.

Expectations are at the next OPEC meeting on November 29 they will definitely cut production again, the question is only by how much. The 1 million barrels a day figure is expected by most analysts; although some have said it could be anywhere from 500,000 a day to 3 million barrels a day.

The problem from OPEC's standpoint is it's one thing to announce production cuts, it's another thing to implement them, as supply cut announcements from September and October are still in the process of being put into action.

Iran is calling for cuts between 1 to 1.5 million barrels a day.

Oil futures closed Friday's session down to $57.04 a barrel for December delivery on the Nymex.

Crude Drops Below $59 a Barrel as Demand Expectations Continue to Fall

Healthy assumptions that the International Energy Agency (IEA) will lower its forecast for oil demand in 2009, again drove crude oil prices down, as it settled at $59.33 barrel; it's lowest close since March 2007.

A number of factors, including the increasing strength of the U.S. dollar and the anemic equity markets continue to put downward pressure on energy prices.

So far the original 2008 forecast has been revised downward seven times this year, dropping usage by close to 1.3 million barrels a day.

Gasoline prices are mirroring the crude price drop, as regular gasonline across the U.S. dropped to an average of $2.22 a gallon, said the AAA.

On London's ICE Futures Europe exchange, Brent crude oil fell $3.37 for December delivery, settling at $55.71 a barrel.

Will Global Oil Demand Contract in 2009?

A number of energy analysts are asserting that global oil demand for 2009 will contract for the first time in 26 years.

If this were to happen, it would pretty much depend upon the depth the economic crisis goes and reaches.

The major emerging market economies (BRIC) are expected to decline in growth from between 2 percent to 3.5 percent, but will still remain in the positive, if projections are accurate.

More significant as far as oil contraction goes, is whether demand in the U.S. can fall to the point where it becomes a factor. with oil and gas prices falling so much in the recent months, it's difficult to see this continuing to the point of it going into negative territory.

Still, it's unknown at this time how deep the economic crisis will go, and there is definitely the possibility oil demand could contract with BRIC slowing down.

It remains to be seen if the increase in domestic gasoline demand in the U.S. last week is an anamoly, or if it's the beginning of increased use.

Weak Economy Continues to Put Downward Pressure on Oil Prices

Prices for oil dropped to near $60 a barrel Thursday, the lowest level in close to a year and a half.

With growing consensus showing we will be in for a long economic downturn, consumers are cutting back on everything but buying necessities, drying up oil demand.

The obvious effect of this is also to push gas prices down with oil, and that has many experts saying that could result in gas falling to $2 a gallon by the end of 2008. The AAA says overnight gas prices fell to $2.34 a gallon on average.

In just the last month average prices of gasoline have declined by close to 33 percent in the U.S.

Oil for December delivery settled at $60.77 a barrel on the New York Mercantile Exchange, a drop of $4.53 or 7 percent.

Brent Crude on the ICE Futures exchange in London fell $4.44, to settle at $57.43 for December delivery.

Oil Falls Almost 6 Percent Monday, as Demand Drives Prices Down

OPEC, other oil producers and oil companies, at this time must sit on the sidelines and watch, as oil prices are being driven by only one thing at this time, and that is demand; and demand is continuing to decline.

What is driving demand is fears of consumers on the condition of the economy, and that has them holding their cash close to their chests.

Confirming this even more was the level of factory activity in the U.S., which has been the key indicator on the demand for oil. That dropped sharply in October, down to its lowest levels in 26 years.

With the Institute for Supply Management saying factory activity in the U.S. dropped to 38.9 for October, it underscored the deep cutbacks experienced in the sector. Anything under 40 is considered a very weak performance. The month of September came in at 43.5.

For the last several weeks, U.S. demand for oil has fallen off by about 2 million barrels a day.

Crude in the U.S. fell 6 percent to $63.91 a barrel, a drop of $3.90. London Brent Crude fell even more, finishing the session at $60.49 a barrel, a decline of $4.84 a barrel.

OPEC Cuts Oil Production by 1.5 Million Barrels a Day

As expected today, OPEC announced it was making significant cuts in oil production, dropping it by 1.5 million barrels a day. That's about half-way between the 1 million to 2 million barrel cut analysts were looking for.

OPEC President Chakib Khelil was quick to communicate that the cuts weren't for the purpose of prices increasing, but to keep them from falling to unsustainable levels.

OPEC came under fire from some quarters for possibly fueling the flames of the economic crisis rather than helping it out.

Still, Khelil added that if prices continue to drop, OPEC was ready to step in at any time and reduce production again until prices stabilize.

Even with the oil production cuts, prices plunged by 5 percent today, dropping to below $63 a barrel at one point in the trading session. At about noon EST prices stood at $64.51 a barrel.

As Commodity Surge says, here's OPEC's problem:

"OPEC is of course cautious in their approach, as some of the other oil-producing nations pressured them to cut production by at least 2 million barrels a day. The problem they face is if they cut it too much, and prices surge too high, consumers will cut back even more on expenses, and the plan would backfire."

OPEC seems to be attempting to keep prices from falling below $60 a barrel.