Oil Price Slide Continues

I personally find it hard to believe that recent news about fusion or LENR has anything to do with this, but the recent slide in oil prices continues, and to day the benchmark prices for crude oil have slipped below psychologically important levels.

Reuters reported this morning that:

Brent crude oil fell below $85 a barrel on Monday after Goldman Sachs slashed its price forecasts, citing abundant supply and lacklustre demand despite a pick-up in global economic growth.

In US markets, WTI crude oil is trading below $80, at around $79.50 at this moment; Goldman Sachs set $75 as a near term target price for WTI — and $70 in the second half of 2015.

This slump is serious news for nations whose economy depends in large part on revenues from oil sales, but interestingly Saudi Arabia has yet to call for a cut in production from OPEC members, even though countries like Venezuela are urging OPEC to act by cutting oil production to help bring prices back up.

Some analysts are reporting that Saudi Arabia is actually hoping that lower oil prices will affect investments in the North American oil industry. The US is now highly competitive with Saudi Arabia with prices at current levels, but shale production technology is more expensive, and at certain price points shale oil production becomes unprofitable. Saudi Arabia can produce oil profitably. See below for a chart which shows the breakeven price points for various types and places of oil production.

While there are various reasons put forward for the fluctuation of oil prices, generally speaking, I think it’s supply and demand that drives the overall direction. Supplies worldwide are up, with the US now contributing as much oil as Saudi Arabia to world markets. I believe that technological innovation in the auto industry is one factor that will continue to affect the consumption of oil. While still not ubiquitous by any means, electric and hybrid vehicles are becoming increasingly popular. We also are seeing fuel cells and natural gas being developed for transportation. Overall economic slowdown will also have an impact on the amount of oil that is consumed.

On this site we have discussed the impact that LENR could have on energy markets. I think if it is widely accepted as a commercially viable technology (we are not there yet), we could see much more pressure on the energy markets. As things stands now, there are maybe some forward-looking traders who have been paying attention to the LENR story, and could possibly be making bets based on future expectations, but I think for the most part it is still not considered an significant factor in the energy markets.

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