Silver Lining? | Russell T. Rudy Energy LLC
A recent article in “Rigzone” cites several sources which contend that “low oil prices will eventually cure low oil prices”. We all realize that in theory, as prices drop, demand rises, ultimately causing prices to increase. However, this assumes that all other factors are held constant and ignores the old saying that “Timing is everything”.
Ambrose Evans-Pritchard, writing in “The Daily Telegraph” of London, states that Saudi Arabia might fold before the U. S. industry does. He opines that the desert kingdom will be in financial trouble within two years, and facing an existential crisis by the end of the decade.
Investment firm, Raymond James, cites four factors which led it to downgrade its price forecast for this year and next:
-Record high Saudi production as part of an “increasingly irrational price war” with non-OPEC producers.
-The specter of increasing Iranian exports.
-Recent and unanticipated surges in Iraqi production.
-Diminished global demand.
Consequently, Raymond James sees 2016 as another year of decreased capital budgets, and cancellations and/or delays of major projects, which in turn will lead to falling production rates. They interpret this as meaning that the oil market will be undersupplied in 2017/18 and prices will recover.
To read the article in its entirety, please go to http://www.rigzone.com/news/article.asp?hpf=1&a_id=140044&utm .
