The way I understand it, the "variable" cost of production (as opposed to fixed cost) is low enough that they still make money on every barrel they get. Unfortunately this doesn't cover their fixed costs (in specific their debt) so they are pumping/drilling as many additional barrels as they can, to make whatever they can, to try and cover their fixed costs/debt. I also understand that many of them are hedged out thru at least the end of this year, and some out thru next year, so real pain is still many months of for many of them.
(And yes I understand that those are in some ways contradictory statements.)
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I have heard that companies need to keep oil wells producing to keep from losing leases or to keep from having to cap them per gov regulations. Is it possible to just slow down the output of a well to prevent losing or capping it?
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I have been wondering about this myself and was trying to do some research. I came to the same basic conclusion that rig counts aren't worth much right now.
In my area where I live natural gas drilling has dropped from about 25 active rigs to about 6. That seems like a huge drop, however they tell me that it could go back up to 15 overnight and 20 within 3 days.
Is the 30 million barrels in storage a lot though in the bigger picture? The estimates I saw were from 5m to 35m, but if it is 30m isn't that about 1/3 third of the world's production in a day? Most likely to only have an impact over a couple weeks. Also, it is only speculation that all of the storage is intended to be sold. It is possible they are storing it for other purposes as well.
Thanks Engel532. I have found CL to be very dificult to trade since end of January 2015. CL will get stuck in a tight range for hours and then in the next 10-20 minutes move 80, 120 etc ticks in one direction. To overcome this, i have started doing following ;
1) Reduce profit targets. For example, i am short from 48.97 this morning. I have been holding this short for over an hour. Not a good feeling if one is loaded . Thus , i covered some 48.50, covered some more and now CL is stuck at 48.30 for 30 minutes.
2) I have reduced my stop loss fom 150 ticks to 30-50 ticks range. My short from 48.97 had a stop loss above 49.50 area.
3) I stopped adding to my position size in March. It was just not working out.
I had loosing Monday, Tuesday, Wednesday of last week. Thursday was good and Friday was OK till i loaded up into shorts into the close around 49.30 area. That 1 trade took care of of entire week. Being down 3 days in a row and then having biggest position size of the month into the close is something ONLY comes with experience and involves a fair amount of LUCK also.
When i am trading per plan couple of trades is all i need. Trading beyond average of 6 trades per day means, i am either trying to break even or trying to get out of a hole. I do not recall a day in 5 years of my trading where i had more than 10 trades for the day and i had a GREEN day. Price stays in the middle of bell Curve for most of the trading day and if a trader is trading edges of a BELL CURVE, it's very hard to come up with more than couple of setups per day.
My posts are not meant to give financial advice neither do they imply that my method is special. "THIS IS WHAT I COULD BE IF I HAD A TOTALLY CARE FREE STATE OF MIND DURING TRADING" Mark Douglas.
Last edited by mfbreakout; March 30th, 2015 at 12:04 PM.
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