OPEC can still survive even if oil price drops to $10.
For those who can still remember that in 1986, oil price collapsed to $10.
Then a couple years later and another war and voila...oil 100+
The problem now is OPEC only holds 40-50% of the market. They can no longer unilaterally set the price.
At present everybody wants to cut, but nobody wants to do so unless nobody makes a move on their market share. And the US shale producers are too fragmented, i.e. this makes it difficult for the producers to reach some kind of implicit agreement to cut.
Before the Vienna meeting, some of the OPEC representatives + Russia met up to try to reach a deal. Because they are in a panic. OPEC producers can withstand low prices, but their economies cannot. Even Saudi Arabia is feeling the pinch, but they have reserves to back up their budget.
Bottom line, we will see more M&A in the US market over the next year as weaker players are weeded out. The remaining ones can then cut output. Expenditure for R&D probably wouldn't decrease much, but capex and E&P budgets will be hit.
This oil crisis is directed by US and Saudi. Don't forget Saudi is a strong allie of US. I believe that they have shorted the global equities and oil futures markets.
How can oil price collapse at such a rapid speed? It is definitely caused by manipulation. Analysts can come out thousand of reasons on why oil price drop such as global economies slowdown, slower growth in China, Japan in recession, etc. These are old news and how can these events cause a sudden collapse in the oil price. If it is a gradual drop due to lower demand, then it makes more sense; and not at current way of dropping.
Many factors to consider.
Oil is an finite resource.
Low oil price hurts everyone, even the Saudis.
The world is gradually moving towards alternative fuel, placing less reliance on crude oil in the future - but not yet.
US shale oil is still profitable to produce above $45 per barrel.
China, one of the largest consumer of oil; economy slowing down, demand for fuel also slowed.
The price drop is also triggered by market sentiments, further dropped when investors stop loss.
Blue chip oil stocks on sale now. People with cash and holding power would buy and hold. When prices recover, the gain is good.
Question is when? What if other market factors pushes the world into another recession?
Bottom line, we will see more M&A in the US market over the next year as weaker players are weeded out. The remaining ones can then cut output. Expenditure for R&D probably wouldn't decrease much, but capex and E&P budgets will be hit.
Ho ho ho, here comes the pain :bsmilie:
For the whole of 2014, oil price has tumbled 46%.
But not the price in our petrol pump ;(
I pump SPC 95. A while back it was $2.12 a litre. Now it is $1.87. Prices before discounts.
Sound like many invest in oil here, and prefer oil to shoot back above 100.
That is minor adjustment...far from "tumbled" :bsmilie: When I travel up north...I paid ~RM3 for Ron97 2 months ago...and now it is about ~RM2 ;p