Back
2 Dec 2014
Oil might see an increase in volatility – KBC
FXStreet (Barcelona) - The KBC Bank Research Desk, expects an increase in volatility in the price of Oil as markets search for a new equilibrium price.
Key Quotes
“Yesterday’s session confirmed that we might expect months of increased volatility ahead as the market searches for a “new normal” or a new “equilibrium” price.”
“In these days, everyone is looking at US shale oil producers who are expected to be among the first producers who should cut investment on new oil production due to falling oil prices.”
“The truth however is that nobody knows the cost curve of the shale industry with certainty and rather than being constant, marginal cost of production is likely a moving target. This stems from several factors, among others from possible fall of costs across the supply chain or the fact that the drilling technology has probably improved markedly over past couple of years (this is suggested by EIA’s Drilling Productivity Report).”
“Moreover, additional factors such as past hedging or contracts on oil delivery may also be in play and could slow a response of shale producers to falling oil prices.”
Key Quotes
“Yesterday’s session confirmed that we might expect months of increased volatility ahead as the market searches for a “new normal” or a new “equilibrium” price.”
“In these days, everyone is looking at US shale oil producers who are expected to be among the first producers who should cut investment on new oil production due to falling oil prices.”
“The truth however is that nobody knows the cost curve of the shale industry with certainty and rather than being constant, marginal cost of production is likely a moving target. This stems from several factors, among others from possible fall of costs across the supply chain or the fact that the drilling technology has probably improved markedly over past couple of years (this is suggested by EIA’s Drilling Productivity Report).”
“Moreover, additional factors such as past hedging or contracts on oil delivery may also be in play and could slow a response of shale producers to falling oil prices.”