I'll let Eric go first on the supply side equation question. I have my own opinion already but want to hear what he has to say.
The $70 question is the important one now. It's my belief the US manufacturers overall, and certainly the majors can ramp up some quickly. There is a limit to that. This is what gets most in trouble at some point. You have to continue investing in CAPEX, and lately that involves a LOT of debt for most. Guess wrong and you are screwed for a long time. Guess really wrong and the smalls and some mids go BK. Stockholders are devastated. Ever heard this boast in so many words. "Oil company XXX will be buying assets for pennies on the dollar" The majors used to do that as the wildcatters went broke end of cycle. This time they are borrowing their dividends. Some year soon they have to change the model. XOM and CVS stock prices back that opinion up.
On a bear note
..... Do you think it's possible oil goes sub $30 this winter? I think it's likely. What happens to your favorite oil stock? Maybe nothing, or maybe they show us a new unheard of low? Never say never. I never thought I'd ever see XOM at sub $50 and a div not cut. And here we are.
And BTW I now own RDS for the same reasons most true oil bulls now hate them. They had the sense to cut an unsustainable div. They are diversifying their energy stream going forward. Is some of it lip service for the green mob? I suspect it is. Will they leave some oil money on the table during the next oil price surge? I bet they do. Ask me again in five years if this was strategic or suicide. The alternative hasn't been working for a long time.
I am going to keep using OXY as an example. Remember when CVX was trying to buy Anardarko long ago? Well it wasn't long ago at all. It's a near miss from a major many regard as the BEST in the US, maybe the world. The winner was the new crowned champion of fracking. The move was applauded and quite a few on this forum even bought OXY shares. Commodities ain't easy. Never will be. We don't know what the next move will be from the majors.
My first oil losses were Transocean RIG, and Diamond Offshore DO in the late 1990s. Oil was scarce and they were the drillers to own. Stocks crashed and they limp along to this day. I didn't buy them anywhere near the top. Missed my brief chance to sell them. I've done it again with other stocks during other cycles since then.
The $70 question is the important one now. It's my belief the US manufacturers overall, and certainly the majors can ramp up some quickly. There is a limit to that. This is what gets most in trouble at some point. You have to continue investing in CAPEX, and lately that involves a LOT of debt for most. Guess wrong and you are screwed for a long time. Guess really wrong and the smalls and some mids go BK. Stockholders are devastated. Ever heard this boast in so many words. "Oil company XXX will be buying assets for pennies on the dollar" The majors used to do that as the wildcatters went broke end of cycle. This time they are borrowing their dividends. Some year soon they have to change the model. XOM and CVS stock prices back that opinion up.
On a bear note
..... Do you think it's possible oil goes sub $30 this winter? I think it's likely. What happens to your favorite oil stock? Maybe nothing, or maybe they show us a new unheard of low? Never say never. I never thought I'd ever see XOM at sub $50 and a div not cut. And here we are. And BTW I now own RDS for the same reasons most true oil bulls now hate them. They had the sense to cut an unsustainable div. They are diversifying their energy stream going forward. Is some of it lip service for the green mob? I suspect it is. Will they leave some oil money on the table during the next oil price surge? I bet they do. Ask me again in five years if this was strategic or suicide. The alternative hasn't been working for a long time.
I am going to keep using OXY as an example. Remember when CVX was trying to buy Anardarko long ago? Well it wasn't long ago at all. It's a near miss from a major many regard as the BEST in the US, maybe the world. The winner was the new crowned champion of fracking. The move was applauded and quite a few on this forum even bought OXY shares. Commodities ain't easy. Never will be. We don't know what the next move will be from the majors.
My first oil losses were Transocean RIG, and Diamond Offshore DO in the late 1990s. Oil was scarce and they were the drillers to own. Stocks crashed and they limp along to this day. I didn't buy them anywhere near the top. Missed my brief chance to sell them. I've done it again with other stocks during other cycles since then.