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May 24, 2016 | Decent Chance Oil Will Top $50 a Barrel

Rick Ackerman

Rick Ackerman is the editor of Rick’s Picks, an online service geared to traders of stocks, options, index futures and commodities. His detailed trading strategies have appeared since the early 1990s in Black Box Forecasts, a newsletter he founded that originally was geared to professional option traders. Barron’s once labeled him an “intrepid trader” in a headline that alluded to his key role in solving a notorious pill-tampering case. He received a $200,000 reward when a conviction resulted, and the story was retold on TV’s FBI: The Untold Story. His professional background includes 12 years as a market maker in the pits of the Pacific Coast Exchange, three as an investigator with renowned San Francisco private eye Hal Lipset, seven as a reporter and newspaper editor, three as a columnist for the Sunday San Francisco Examiner, and two decades as a contributor to publications ranging from Barron’s to The Antiquarian Bookman to Fleet Street Letter and Utne Reader.

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Archives May 24th, 2016

Posted In: Radio

One Comment

  • Avatar Alfred Winkler says:

    Rick Ackerman does not understand the oil industry or it fundamentals.
    I do not disagree with his call for oil to hit low 50s and then consolidate it gains
    but his call for oil to stay below 50s for many years year is miss understanding of the fundamentals
    the surplus supply was 2 million barrel on a base of over 90 million barrel
    I think he looking back at the chart from earlier declining after Arab embargo this long period of low oil prices was the result of a 11 million surplus on a bas of 70 million barrel .
    Their are the economics of oil shales wells even if they generate a return of 20 % or better in sweet spots in some oil field as the Ealgeford. the fact are they do not generate enough cash flow or production to offset the decline in production of the companies total portfolio of oil assets. f we use a metaphor these high return wells are like a good pump but even with these good pumps the ship is slowing sinking as the declines are higher new production.The Bakken America biggest field ,need 50 -55 buck oil to break even less generate any type of return on a full cycle bases , if you have good Eagleford ground that economic at low 20s you can not off set Bakken declines too

    I belive we need oil to move into 55 to 65 US dollar range before production declines can be reduced
    To stabilize production the rig count need to double before oil production declines will be flatten to zero
    Many companies need to repair balance sheets before they start increase drilling this take 18 to 24 months to do

    As for the oil service industry they have being cannibalizing equipment to stay in business
    so when the industry improves with increased drilling prices will need to normalize to meet the demand
    and rehire work back many have new jobs

    The facts are clear that the price of oil has to increase to offset natural declines ( all field loss pressure with production and produce less each year )
    even at 2 % decline the surplus is gone in a year
    we are not replacing the oil that we are using
    the current prices are to low below the cost of replacement
    In the US we see an other 10-20,000 barrel decline each week
    this is not isolate to the US but happening globally
    it happening in China too ( the 4th largest producer )

    It all about timing supply and demand cross over
    supply is decreasing and demand increasing
    it does not matter the cause !
    if it disruption of supply only accelerates the process
    the underlying cause natural decline is major driver
    we are not replacing the oil using

    My argument is we will see the market react and normalize prices to economic return levels for producers ( min. $ 65-75 per barrel )
    when the surplus is less than 500,000 barrel as their is a lag time to any increased production can take place.
    and the trend and cross over from surplus to shortage is in view

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