Has oil price reached its bottom?

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This post was last edited by yinkuilin6868 on 2016-2-17 at 14:50. These days, everything depends on crude oil. Currently, in the global market, exchange rates as well as the U.S. stock market take crude oil prices into account. All markets are focused on crude oil prices, determining whether to take risks or avoid them. If oil prices start to rise, it will indicate that demand has returned. The stock market and crude oil will remain synchronized until crude oil prices stabilize. Investors are fairly lucky, as oil prices are expected to rise, given signs that OPEC** is working with non-OPEC** countries to limit crude oil supply. The Russian Ministry of Energy said on its website on Wednesday that Russian oil companies discussed the possibility of coordinating actions with OPEC. Given the unfavorable situation in global oil prices, Russian oil companies have discussed oil production plans, taxation, refining, and the possibility of coordinating actions with OPEC. Saudi Arabia has confirmed that $30 per barrel must be maintained; they cannot allow oil prices to fall any further. If they inform the market that they will curb supply, it will be sufficient to trigger a buying trend by short sellers. Six factors will determine oil prices in 2016. Analysts in the market have consistently been wrong in their predictions regarding short- and medium-term oil price trends. When oil prices drop to $100, market sentiment will take into account every potential factor that could affect oil price trends. At $28, $30, or $40, market sentiment remains the same: supply continues to increase, while demand will decrease or stagnate. Therefore, let’s set aside the various opinions prevailing in the current market and focus on the fact that oil prices will be higher in the future than they are now. What will be the future trend of oil prices? The current trend in oil prices is driven by the global economy. The 6 Key Factors Affecting Oil Prices: 1. U.S. crude oil productivity. This is the simplest and most transparent of the “6 key factors” that influence oil prices. This unconventional revolution involving shale oil is a major reason why global crude oil production has risen over the past 6 years. What people don’t realize is that the production of shale oil starts about 5 months after drilling begins; therefore, if drilling on that well starts in December 2014, production will not begin until April 2015. Analysts and the media, however, say they are not aware of this feature. In April, we predicted that U.S. crude oil production would reach its monthly peak in May, after which it would start to decline by 100,000 to 350,000 barrels per day. When we look at the additional monthly output, keep in mind that it is based on the natural decline slope in production. For example, in 2014 the United States needed to increase its crude oil production by millions of barrels per day, and it ultimately managed to raise production by 2.2 million barrels. However, to balance the base tilt, only 1.2 million barrels of crude oil need to be produced daily. U.S. crude oil production experienced a mixed annual decline for the first time, rising from a 41% drop in 2010 to a 47% drop in 2013. Therefore, the number of oil wells is expected to drop by 49% in 2014, and by 51% in 2015. The decline in the following year was smaller compared to before, ranging between 10-20%. In other words, due to the decline in the number of oil wells in 2015, we will see a real decrease in U.S. crude oil production in 2016. The decline in the following year will range from 400,000 barrels per day to 1 million barrels per day. Therefore, the United States will no longer appear in news reports about a global surplus of crude oil. In fact, the production capacity of U.S. oil producers themselves has been significantly damaged to some extent; most oil producers merely carry out simple routine maintenance on their oil production equipment. These simple maintenance tasks will have permanent consequences. Result: It is not a factor driving oil prices. II. Saudi Arabia’s production capacity: Although the number of drilling rigs in Saudi Arabia is increasing and production is rising as well, the country’s crude oil output has reached new records. Most analysts believe that Saudi Arabia no longer has the capacity to increase production further. Result: It is not a factor driving oil prices. III. Iran’s potential production capacity: When subjected to sanctions, Iran’s official oil production dropped by 600,000 barrels per day. This is also the official production figure stated by Iran. Iran **has not yet invested in its oil production infrastructure, but it is seeking external funding to invest in its existing oil production facilities. Iran hopes that investment levels over the next 5 years will reach $30 billion to $500 billion. However, at the current oil price of $30 per barrel, it is difficult to attract external investment. Some analysts believe that Iran will not be able to increase its production in the short term. Of course, Iran will not admit that it is selling oil on the black market. Therefore, Iran can bring in at most an additional 500,000 barrels per day in production. Result: It is not a factor driving oil prices. IV. The slowdown in China’s economic growth and its impact on crude oil demand This year, the Chinese economy has faced significant pressures, which may indicate that the growth rate of China’s crude oil demand will also slow down. Imports of metals and building materials have actually declined, while crude oil has not. China is continuing to import crude oil, as it aims to use low oil prices to build up its strategic reserves. China’s shift in its \"guns versus butter\" investment strategy is not a sign that crude oil is in a bear market. The global crude oil production forecasts issued by the International Energy Agency and the U.S. Energy Information Administration both indicate that the market will not show any significant reaction to current low oil prices. Essentially, despite the unexpected increase in demand for crude oil in 2015, low oil prices will not, for the first time in history, spur an increase in crude oil demand. Conclusion: It is not a factor driving oil prices. V. Russia’s capacity for increased production: Russia’s situation in 2015 was quite interesting, as economic sanctions caused the ruble to lose 50% of its value. This means that Russia’s oil extraction costs have dropped by 50%, with the sharp decline in the ruble effectively offsetting those costs. This is because the costs for oil producers are settled in rubles, while the crude oil sold is priced in dollars. But this advantage no longer exists with oil prices at such low levels. Russia cannot achieve a 20% profit rate anymore. Conclusion: It is not a factor driving oil prices. VI. OPEC’s unpredictable crude oil strategy: If anyone thinks that OPEC has lost control over oil prices, they are completely wrong. When it comes to OPEC, it’s mainly Saudi Arabia. Globally, only Russia, Saudi Arabia, and the United States have the technical capability to influence crude oil prices by adjusting production rather than reducing productivity. U.S. environmental regulators are focusing on the efficiency and safety of crude oil production, rather than price. Because the United States is the only one of these three countries to benefit from low oil prices. Saudi Arabia is tired of being the only member of OPEC that competes for market share, while other OPEC members are secretly manipulating their own production levels. Saudi Arabia is using its influence in global geopolitics to strengthen its control over OPEC and to influence the funds allocated for investments in energy projects worldwide. Therefore, U.S. shale oil production will eventually decline, and Iran, Russia, and other OPEC members lack the funds, a situation that has already emerged to some extent. How big is the stick Saudi Arabia is waving? Very, very large. So what is the fate of U.S. crude oil producers? Current oil prices are just as absurd as they were at $120 per barrel back then. A global supply surplus of just 2% led to a nearly 70% drop in oil prices. Just as every analyst predicted two years ago that oil prices would never fall below $100, they now claim that oil prices will not rise back to $40 any time soon. They were wrong back then, and they are wrong now too. The difference between the two mistakes is that this time, the cost of capital in the United States has **increased**. This won’t change soon. Banks and other lending institutions have begun to tighten funding. The market needs investors. Even if oil prices start to rebound, this situation will not change soon. The break-even point for the cost of capital in the oil industry will worsen. The oil industry will go through a period of trouble. The recovery of the industry will not be as rapid as it was when it collapsed.