Mainly, "pumping" to take advantage of hedges expiring. In addition, lease requirements to produce are in place. Hedges roll off and forward production will seriously decline and will bring back rational prices. If you think adjustments will not happen soon enough, by all means stay away from investing here. Lag factors are in place.
Insults and generalities are not trading strategies. Oil will go UP because it's irrationally priced. Want to debate that instead of silly correlations with other commodities?
No "rose colored glasses here", I was commenting on capitulation in markets today and lack of buyers. Perfect for MM's to accumulate. I recognize the challenges here. I've stated that. Either you believe in near term change, or you don't... Repeat.
Cheer leaders don't win football games.
Buyers not motivated? Gosh-oh-roody I wonder why? Don't they know now is the time to accumulate?
You sound like a degenerate gambler with an addiction problem. Just one more pull at the slot machine, you just KNOW the big payoff is coming.
Re. short positions: the shorts aren't stupid, they knew 6-months ago oil was heading to $20. Have you seen any serious attempts at covering? You should get a job at Zacks, I see they're out there pumping RIG today, LOL!!
" ... the best thing to stimulate the global economies is some inflation. Oil can do that."
Oh really?? Oil is an industrial commodity, the global commodity complex jumped off the cliff last summer and has yet to splat on the ground. What makes you think OIL is going up when things like iron ore and copper are at ten year lows? The nearest gas station just posted regular-unleaded @ $1.44 per gallon today, that's a 20-cent drop in less than a month.
This ain't 2008, Bunky. Get your head around it.
Mr. Borg..I give up. You're wrong. You have a asset (Rig) and a liability (loan)..not two liabilities. The asset is capital, enabled by loan. That's how balance sheets work.
" If one were to convert a loan into a rig, would you not call the rig "capital"?"
Uh, no, the bank owns that rig. And how do you plan on making those loan payments? You have to get that rig working, you have to pump oil /gas like crazy in a deflationary environment, that adds to the supply glut, which suppresses prices even more, so you have to pump more, which drive prices even lower. Pretty soon it's costing you more to pump the oil than what it's worth.
BUT YOU CAN'T STOP! You gotta keep pumpin' even @ $10 cuz you got the banks breathing down your neck, you gotta meet those monthly payments! The banks aren't stupid like you, they'll cut your credit line, maybe close it altogether, keep you from borrowing even more.
At some point (pretty soon now), you'll default on your loans, can't make interest payments to your bond holders or can't payback bond holders at maturity. Not to worry, long before that happens, you'll be forced into bankruptcy. Your REAL assets will be sold off to pay your creditors and bond holders.
You need to take off your rose colored glasses. The pps decline that has been occurring for several months as well as today is not a shake-out. It is institutional dumping and shorting by hedge funds. At this time there is absolutely no bottom and I predict sub $2 soon and amazed it is not there already.
I agree forecasting is a fool's game.
But I disagree these prices work for no one. Most of the large producers (namely Russia & Saudi, but many others as well) can profit with $30 oil.
They don't like it, and their budgets are getting crushed - but they do profit.
Saudis in particular can fund their budget deficits with sovereign wealth for a few years. They can do so with a cool head because they know they can ratchet back supply/force up price whenever they need.
The rest of us don't have the luxury of being able to effectively dictate the price of oil.
Plenty of entries at higher levels. Stops in place. Blood in the streets. Buyers not motivated. Accumulation of shares is opportunistic now.
Mr. Borg, I definitely don't need an accounting semantics lesson from you. You need to look up other definitions of "capital" and what it means. Here's just one: Capital means excess of total assets over total liabilities. If one were to convert a loan into a rig, would you not call the rig "capital". On the balance sheet: One a liability, another an asset. They have "access to capital" Mr. Borg, I repeat.
Shorts have "piled on" every E&P in last 6 months, nothing new there. Why wouldn't they?
China demand still growing but not as fast. The curve is still positive, look it up. You also can't predict demand. FACT.
Oil benefited from ZIRP. Institutions and bond holders aren't so easy to lose their investment. Oil is "irrationally" priced. FACT. In reality, since another round of QE is a bad idea, the best thing to stimulate the global economies is some inflation. Oil can do that. It can work inverse magic from 2008.
My trade documented "real time". Sold out at $8.20, rebought $2.49. Again, you didn't answer OP. Your "Equity Driven" theory? Thanks.