Keith Schaefer’s Take on Low Oil

Keith Schaefer, Editor of the Oil & Gas Investment Bulletin and his take on low oil prices.

You know, the reason oil price collapse is actually going to be good news for the long term.  We saw a really undisciplined growth rate in the U.S. shale production that was built totally on debt.  It was wasn’t built on economics, because none of these U.S. producers are showing any free cash flow or positive cash flow, even at a $100 oil.  That’s because they were just growing too fast and spending too much money.  And so, the Saudi’s said, wow! Thais is going to impact our market for a long time unless we do something about this.  So on American Thanksgiving, when everyone is sitting down, eating Turkey, the Saudi’s decided to start eating the American’s lunch.  And they said, we are not going to cut production at all ever for a long time.  That really took the market by surprise, traders needed no pushing after that, they just started ticking down oil, as far as it would go.  So, that’s where we are at right now where truly the fundamentals of oil haven’t, don’t make any difference right now on the market.  No one is making money at these prices.  It’s all about the derivatives and the agendas behind oil that is deciding prices these days.

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