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How low can gas prices go, before they shoot up again?

OPEC Policy Ensures U.S. Shale Crash, Russian Tycoon Says

By Will Kennedy and Jillian Ward
Nov 27, 2014 9:04 AM CT


At today�s prices of just over $70 a barrel, drilling is close to becoming unprofitable for
some explorers, Leonid Fedun, vice president and board member at OAO Lukoil, said in
an interview in London.

OPEC policy on crude production will ensure a crash in the U.S. shale industry, a Russian oil tycoon said.

The Organization of Petroleum Exporting Countries kept output targets unchanged at a meeting in Vienna today even after this year�s slump in the oil price caused by surging supply from U.S shale fields.

American producers risk becoming victims of their own success. At today�s prices of just over $70 a barrel, drilling is close to becoming unprofitable for some explorers, Leonid Fedun, vice president and board member at OAO Lukoil (LKOD), said in an interview in London.

�In 2016, when OPEC completes this objective of cleaning up the American marginal market, the oil price will start growing again,� said Fedun, who�s made a fortune of more than $4 billion in the oil business, according to data compiled by Bloomberg. �The shale boom is on a par with the dot-com boom. The strong players will remain, the weak ones will vanish.�

Oil futures in New York plunged as much as 3.8 percent to $70.87 a barrel today, the lowest since August 2010.

At the moment, some U.S. producers are surviving because they managed to hedge the prices they get for their oil at about $90 a barrel, Fedun said. When those arrangements expire, life will become much more difficult, he said.

Saudi Arabia

While some OPEC countries including Venezuela pushed for a reduction in output quotas at today�s meeting, Saudi Arabia, the group�s dominant member, argued for the status quo.

In Russia, where Lukoil is the second-largest producer behind state-run OAO Rosneft (ROSN), the industry is much less exposed to oil�s slump, Fedun said. Companies are protected by lower costs and the slide in the ruble that lessens the impact of falling prices in local currency terms, he said.

Even so, output in Russia, the biggest producer after Saudi Arabia in 2013, is likely to fall slightly next year as lower prices force producers to rein in investment, Fedun said.

�The major strike is against the American market,� Fedun said.

Penn Virginia just brought out another pioneer coil unit, i'm having a mixing plant brought in in the morning,(this makes 3 we have going) going to breakout two helpers on it. they will get to prove the can run their own jobs. haven't been home in 6 weeks. 20 more wells to complete before the end of the yr. I was told today to expect to work like this at least the next 2yrs

Things will bet ugly here in the short term for our drillers. No doubt. A lot of our energy "explosion" is very heavily leveraged in so much debt I don't think anybody knows the extent of it. The weak will get culled but many will emerge as supply diminishes in the long term and a few other things change.

They could drive it down to the 50's or lower. Who knows. Saudis know how to play the game well.

This perfect storm will create some tremendous buying opportunities if you have a 10yr + time horizon. Don't worry about a "bottom". Buy without fear and forget about it for a long time. Sustainable dividends are your friend.

I was thinking along these lines as well. I have significant positions with BP and Exxon Mobile and have been watching the price continue to decline. But the dividends keep rolling in on schedule.

If seeing red on your brokerage page causes you lost sleep, stay away from oil stocks for awhile.

Low oil prices may not be the great panacea for all that ails you. Low oil prices may curtail oil exploration and reduce oil jobs.

see: http://www.marketwatch.com/story/pl...he-world-of-its-economic-fuel-2014-12-05

Without having read the responses so far, I know that the general theme will be that in no way should we enjoy paying less, because it will hurt us in the long run. Never a reason to feel good about spending less for anything.

Going a bit further into what I think is the theme of your post...I saw an article the other day talking about how this presages a collapse of the economy because this is what happened in 2007. Perhaps, but IMO nearly the whole reason 2008's economy even happened was the extremely high fuel prices that we never recovered from. Fuel prices never recovered from the Katrina debacle when consumers took the hit for all the destruction by that hurricane, of vulnerable oil rigs and refineries. The main two reasons for gas never coming back down that were cited were the hurricane/epa regs precluding updating decayed infrastructure regarding refineries and China emerging as a huge oil consumer. To me, that's bogus. You can possibly use the first half of that in a stretch, to justify the outrageous jump in prices that continued from Katrina to 2007 when they bottomed out at about $1.50 a gallon for gas. The China thing is an ongoing source of price increases, but not to that extent as far as the way they jumped. It is still my opinion that the increase in oil prices during and after the recession in 2008 were mainly responsible for that recession. The low prices in 2007 were only there for a few months. Other than that, we've had just balls-to-the-wall oil prices since Katrina. And that's what's killing the economy.

I'm not a market guy...I don't have Hillary's magic touch. That said, if you go into a market with say $10,000 and within a few months you've turned it into $100,000, I don't think you can bitch too much or be too surprised when within the same amount of time it turns back to $10,000.

I keep hearing how all of these so called "Experts" tell us that low oil prices is bad for us.. and how it is going to destroy our economies etc....

I have to pause and reflect.....

if that is all true and so bad for all of us, how in the hell did our nation survive the 30s 40s 50s and 60s?

Less purchasing power, means it is better for me in the long run????

our problem is less competition, and more big business controls tied in with governmental corruption...sure we'll approve that for a big donation to our re election campaign...

Most of the supposed "controls" on big business were done at their own behest to stamp out competition rather than to control anything. Don't kid yourself. Big business owns both parties at the uppermost levels.

Teddy Roosevelt busted his truss to see that the oil business did not become a monopoly. Back in the fifties and sixties, we had numerous, "small" independent producers/refiners. Then somewhere along the line there was a change, and it was decided that anything other than "whoever has the most money can do whatever they damn-well please" was at least unAmerican and probably commie, and everything went to hell.

I agree with both of you. Our economy crashed when gas was $4-4.50 a gallon here. No coincidence.

I've lived in the Oil Patch most of my life and my Dad financed my education and upbringing with money from big oil. That said, the more money accumulates in a certain area, with a certain company, the more power that company wields and it can be used for good or...and we all know human nature, or at least those of us who ain't Democrats do.

Awful lot of earthquakes directly south and west of me. These weren't happening before the fracking started. Lots of Indians up north that don't want the pipeline going through tribal lands...Lot of people on here want to give the oil companies a free pass. Fracking...pipeline...I dunno. Oil companies just allowed free reign? Hell no.

When jobs were plentiful here in the NE USA gas was $0.25 a gallon and $0.179 in a gas war.

They would ask you how much you wanted, pump it for you and make change at your car window. Offer to check the oil and clean your windshield!

When I borrowed my late dad's Buick I would put up to the pump, say "Two dollars worth" and hand over the money.



My late dad ran his own tool and die shop and got a new Buick every year!

True that!!! So sad the "millenials" don't get it....

The article mentioned the large producers protected themselves from falling prices with future contracts.
Who will be the loser on those contracts? hmmm, maybe the too big to fail banks?
Could this collapse them and cause another government bailout?

Dangerous times!

Been fracking here since the '30's....haven't known of an earthquake here ever. Why is that?

Like I said in my first post on the thread ...