With oil finally trading back above the $50-a-barrel level, it’s time to recognize that crude prices are probably not going to remain low for very long, and may end up fluctuating in the $50-$80 range – regardless of what happens to the prices of other commodities.
Even an agreement on the draft of the $700 billion bailout bill couldn’t raise US stocks today. The Dow (DJI) sank over 300 points in the first hour of trading today.
Money Map editor Horacio Marquez says the financial meltdown is dragging down shares of even the strongest companies; but short-term volatility aside, these firms will rebound sharply. This means plenty of contrarian bargains.
Horacio says oil-and-gas company Suncor Energy (NYSE:SU) is a good example. It’s expanding production in the Canadian tar sands. And a strong cash flow and low leverage ratios make for a healthy balance sheet.
It’s been a volatile year for crude oil prices. After touching above $147 a barrel in July, the black goo is trading back below $110 a barrel.
Don Miller says industry insiders are now betting on triple-digit crude oil prices for the next decade. And long-term oil futures show demand will continue to outstrip supply, as Asia industrializes and proven reserves diminish.
Don says Transocean Inc. (NYSE:RIG), StatoilHydro ASA (NYSE:STO), and Petrobras (NYSE:PZE) are likely to benefit from new drilling projects. And the company that supplies equipment lines for 90% of oilrigs, National Oilwell Varco (NYSE:NOV), is also well placed for profits.
Dan Denning in The Daily Reckoning Australia says the world is facing a global oil crunch. And new ’solutions’ like Canada’s tar sands and Colorado’s shale oil are actually hugely wasteful of energy. We need an real advance in solar technology, says Dan…
He’s a decade too late – the oil price will stay high. George Bush’s plans to boost US oil production are pathetic… but there was nothing more he could say.
Crude oil prices are through through the roof. Supply is not keeping pace with demand. Speculators may or may not be pushing prices even higher.
There are two major options on the table to increase supply: Canada’s oil sands and Arctic reserves.
Canada has massive oil reserves in Alberta’s oil sands. Companies are already mining 1.3m barrels a day of heavy crude oil from the sands. But they expect to spend another £50bn to more than double production to 3.5m barrels by 2011. But a huge amount of energy is neederd to get extract the oil.
Editor’s note: What are shale fields, and how easy is it to suck oil out of them? That depends, says Matt Badiali. As companies like Schlumberger (SLB), Halliburton (HAL) and Baker Hughes (BHI) are finding out, if it’s a permeable reservoir then it’s all systems go. If it’s an impermeable reservoir, then it will take time, effort and horizontal drilling.
This piece is taken from The Growth Stock Wire. It’s in the form of a questions and answers session. But it’s well worth the read if you’re interested in the ins and outs of shale oil.
For a useful way to think about energy exports and prices, Dallas based geologist Jeffrey Brown points to the current situation with global rice supplies. Brown among others worked on the Export Land Model (ELM), a model that reflects the decline in oil exports as a result of Peak Oil.
Solar stock Ersol rose to a new record after German engineering giant Bosch said it paid $157 a share, a premium of more than 60%, for a controlling stake in the company. This from The Guardian:
Shares in leading German solar stocks rose substantially on expectations that other big players, including oil groups, are on the prowl in a market that grew to €6.6bn last year and is forecast to top €18bn by 2020.
Royal Dutch Shell Chief Executive has weighed in alongside OPEC, claiming that there is no shortage of physical oil supplies, and the crude oil prices should drop.
“As the post-Memorial Day hangover lingers, and $4 per gallon gasoline becomes a national reality, expect more and more daily energy prognostications,” says William Patalon III in Money Morning.