UK 19:27 Friday, 23 October 2026
Breaking news and expert analysis on fast-moving AIM and LSE listed shares
Disclosure: I own shares in one or more of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
Oil and gas companies have suffered a three year bear market resulting from concern that US Shale Oil production growth would lead to oversupply. This has now come to pass, oil has plummeted from $115 a few months ago to $72. Oil companies have suffered a further sharp mark down and most trading at large discount to tangible assets.
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Comments
alcira16247
Chris
Thanks for the article, provides a bit of reassurance, as Ben’s piece from yesterday, scared me to death!
I totally miscalled the drop in crude prices, expecting, with political and military uncertainty throughout the world, that crude prices would rise.
Although, recently reduced my holdings in Lekoil, Chariot and Hurricane, Paul’s/Your analysis does provide some comfort.
paul
chris
i cannot argue with you here. i think oil stocks have been sold down too much. as usual, the market has taken flight, there are some good companies at cheap prices. i am invested in several mentioned above, and a few more besides. although there may be a little more downside pain in the short term, long term the upside may be considerable.
Paul Curtis
What does OPEC want to achieve? Which is more likely?
1. Plan A is frighten market for a few months, dump oil down to nearer $60 and then hold emergency OPEC meeting Feb/Mar 2015. Enough damage caused – all projects requiring > $80 oil that can be deferred on indefinite hold, funding costs of US Shale greatly increased and availability of funding reduced. Oil price gently recovers as supply decreases a bit and demand recovers since cheap oil will stimulate economic recovery. Say $80 oil mid 2015 rising to $100 2016. Job done.
or
2. Plan B is the current market/analyst view. OPEC to wipe out high cost and US Shale with 2 year $60 price war.
A sharp drop in future production is guaranteed. Companies would not just mothball high cost projects but would defer lower cost. They would focus on cash flow, not investment. This could cause catastrophic future shortages.
Furthermore the US Junk Debt bubble could explode rather than deflate. Nobody fully understands the consequences of this. Again potentially catastrophic since, thanks to 60 -75% year 1 decline rates US Shale production could fall off a cliff. And access to funding throughout the industry could be affected.
Finally political risk/civil unrest from cash strapped producers unable to fund social costs.
Controlling oil price is like steering an oil tanker. A long time between cause and effect. OPEC must be very careful they don’t screw up future supply, causing > $150 and plunging us all into recession.
My view is their end game not world domination, it’s stable $100 oil. Hence aggressive posturing. Convince the markets that high cost projects now have large bullseye painted on them. OPEC don’t need to exercise the nuclear option now, just the future threat, if credible, will gently tip supply demand back into balance.
stevo
Chris…thanks. any thoughts on Ophir ?