Oil stocks, oversupply and the Iran deal

Dropping to a six-year low should definitely help out the gas prices...should drop a good quarter in the next week as it goes to under $43 a barrel. Very nice.

Now, as far as how it got there, this is not my strong point.

I don't pretend to argue this point as I am too ignorant in this area, but what makes you believe it drops another 30-35%? That would possibly bring gas to a national average of $1.30-1.40.

I wouldn't touch oil stocks right now until after at least 1Q earnings come out. The stocks haven't fully priced in lower oil yet in my opinion and earnings will look much more in line with the current prices after the 1Q then they did after 4Q 14. People are guessing that sometime over Q2/Q3 the storage picture will clear up a bit and the market could try to rebalance once US production drops but nobody can give you a correct answer as to when that will be. In short I'd watch to get indications that US production has dropped and see what companies look like then as the bloodletting is far from over.

The one certainty, at the risk of being trite, is an increase in volatility.

My impression is that we are going to continue to see downward pressure as a result of storage capacity constraints as well as persistently growing production, and one thing people kind of overlook, a strengthening dollar. The question now is to what extent those developments are offset by a sharp drop in drilling, as we are now approaching a 50% decline in US oil-focused land rig count In 5 months.

A new trend emerging for producers is to delay well completion until prices rise and it becomes sensible to do so. So any uplift we see late in the year and in 2016 could be mitigated or possibly erased by a supply response.

You ever nail down the job search? Feel like I've seen you talk on here about that, hope it's turned out alright for you.

I was down to one offer which is still in play, they pushed it back again but should be starting it in mid April. One of the other companies that had pulled theirs got back with me a couple weeks ago to see if I was still interested, which I am. They may have some limited spots and options and wanted to know my preferences, waiting for them to get back to me. Keeping my fingers crossed, just when I think things are going to stabilize a little bit it takes another dive.

Add to that the fields that are offline in Iraq and Syria bc of IS. It could come down to our only saving grace is the quick depletion rates of the shale plays which isnt going to have that dramatic affect on the global market anyway. I fully expect to see some companies go under and get acquired cheap.

If I could only hit a big power ball, be able to pick up some shale acreage for the cheap in about 6 months or so. Turn my 200M into a Billion.

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My impression is that we are going to continue to see downward pressure as a result of storage capacity constraints as well as persistently growing production, and one thing people kind of overlook, a strengthening dollar. The question now is to what extent those developments are offset by a sharp drop in drilling, as we are now approaching a 50% decline in US oil-focused land rig count In 5 months.

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I think the x factor could be interest rates. If rates start to tick upwards, a lot of these marginal shale players will die quickly and supply will drop.

I also don't see how this trend of delayed well completion will continue for very long. I don't think it matters how cheap drilling gets, that is pure expense with no revenue. Bankers, and investors, won't support that.

With the price so low, and Saudi Arabia refusing to cap to meet OPEC guidance, and Iran coming back online, I read in the WSJ that the Iranian government has a break even point of $130/bl. This means they will be losing their @sses off once the Sanctions are lifted. If and when a deal is reached, BTW.

So with Iran taking it up the tailpipe with selling oil at this price after coming out of crushing sanctions, the glut of their pent up production on the market will actually cause them to lose even more money.

Zero Hedge quoted some industry experts as saying after that initial glut moves, Iran's going to need some retooling of their mature fields and significant infrastructure investments to keep up their previous production levels as well as invest in new plays. With them losing their @ss off compared to their break even point, this will require heavy investment as they just won't have the cash to do it.

Which means there will be huge pressure on an isolationist, saber-rattling government that nobody except for broke d!ck Russians wants to work with. They'll be in a real bind. May be ripe for regime change in the near term if this deal pushes through.

Here's an interactive illustration from WSJ with additional info.

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