The world’s major producers continue to pump oil at record levels, dimming hopes of a price rebound in the near future.
Jack A. Bass tax planning and investing guru says the prolonged stretch of low oil prices to come will bring on economic and geopolitical changes that not so long ago were unthinkable
U.S. crude has lost half its value since the summer, as eight of the world’s Top 10 producers cranked up production at or near record levels, with no one willing to rein in output.
On Tuesday, the global benchmark Brent settled up 2¢ at US$57.90. U.S. crude settled up 51¢ at US$54.12 a barrel. Both measures hit 5-1/2-year lows Monday before rebounding slightly.
International Energy Agency data shows U.S. oil production has risen by 4.7 million barrels per day during the past five years, while Canada’s production is up one million bpd and Saudi Arabia has climbed by 1.7 million bpd.
The surge in production comes as growth in global demand hit a five-year low in 2014, due to “a sharp slowdown in Chinese oil demand growth and steep contractions in Europe and Japan,” the IEA said in its December report.
The global oil market appears heavily oversupplied during the first-half of 2015
At the same time, Saudi, Canadian, American, Iraqi, Kuwaiti, Russian and UAE production were at or near their highest-ever levels.
“The global oil market appears heavily oversupplied during the first-half of 2015, with global stock builds becoming more manageable during the second-half of next year,” said RBC Capital Markets in a Dec. 18 report. “On an annual basis, we estimate the global oil market is approximately 1 million bpd oversupplied in 2015, but should tighten in 2016 as non-OPEC supply growth decelerate.”
There are few upside risks for oil at the moment. Markets barely registered news of a rocket attack last week on an oil terminal in Libya that saw up to 1.8 million bpd of oil wiped out from the market.
Indeed, a deal between Iraq’s central government and the autonomous region of Kurdistan could see up to 300,000-bpd of oil entering the market by the first quarter. On Tuesday, the U.S. administration released more details on what kind of petroleum is allowed to be shipped under the 40-year ban on crude exports, that could further encourage production.
“I think we are in an era of low oil prices for some time to come,” said Phil Flynn, a Chicago-based analyst at The Price Futures Group Inc. “We ended the year in the U.S. with record inventories, we have OPEC basically on track to produce two million barrels per day more than the demand for their oil; and then we have other non-OPEC countries not showing any signs of cutting back in production — the glut is going to go on.”
Oil companies have started to take some action with rig counts at an eighth-month low in the U.S., but it will take a while for the process to filter through the supply chain.
In a sign of the lag, RBC expects non-OPEC supply growth to rise by 1.8 million bpd (compared to its previous estimate of 1.7 million bpd) in 2014, 1.1 million bpd (versus 1.3 million bpd) in 2015, and finally taper to 300,000 to 400,000 bpd in 2016 (compared to its previous estimate of 900,000 bpd).
While smaller, leveraged companies are expected to bear the brunt of the oil price plunge, the bigger, well-capitalized players will likely benefit from the purge of marginal barrels.
“The well-integrated oil companies are loving this,” Mr. Flynn says. “They are going to be able to ride it out and pounce on opportunities when others are going to be tight for cash.”
Few analysts expect an oil price recovery within the next few months, but some believe markets are underestimating supply threats hovering over the horizon.
“We believe oil prices will rebound for three reasons,” said Leslie Palti-Guzman , senior analyst, global energy and natural resources at Eurasia Group.
“Markets are underestimating the Libyan crisis, the U.S. Congress will impose more sanctions on Iran, curtailing its production, and Saudi Arabia and its Gulf allies will take some action.
You Have Options:
What To Do ?
Here is our recent letter:
Have you avoided these sectors – you would have been better off to follow our advice in 2014 and now you have to decide for 2015.
No one – and I am not being humble here – can project the future with great accuracy but our clients continue to do very well and we offer that experience to you.
Fees : 1 % annual set up and a performance bonus of 20 % – only if we perform.
You can withdraw your funds monthly if you require an income stream.
Alternate Guaranteed Income Payments
Private client funds Minimum $10,000 Maximum Loan $500,000
Our client is seeking funds to expand their tanker fleet .
Interest 12 % compounded – paid 1% per month
Floating charge of the full $500,000 against the fleet – valued at more than $ 1 M
To learn more about portfolio management ,asset protection, trusts ,offshore company formation and structure for your business interests (at no cost or obligation)
Call Jack direct at 604-858-3202
10:00 – 4:00 Monday to Friday Pacific Time ( same time zone as Los Angeles).
Similar to wise buying decisions, exiting certain underperformers at the right time helps maximize portfolio returns. Selling off losers can be difficult, but if both the share price and estimates are falling, it could be time to get rid of the security before more losses hit your portfolio.
Tax website Http://www.youroffs