Dealing with Low Energy Prices

28 February 2015 Publication
Authors: John P. Melko

FuelFix from the Houston Chronicle

Let’s quickly review the numbers: According to the EIA, spot prices of WTI have retreated from $107.04/bbl in June of last year, to $44.45 in late January 2015, flirted with the low $50s in February and are back to $49 plus change this week. Natural gas in the same time frame went from $4.70 to under $3/mcf. U.S. rig counts, according to BakerHughes which has reason to track such things, as of February 20, 2015, has fallen by 48 rigs from the prior week, and by 461 rigs from the same period last year.

Yet, US production has continued to rise. We are awash in oil – so much so, that the chairman of the world’s biggest crude oil tanker player estimates that 5% of the world’s fleet of VLCC’s are being used as floating storage for crude oil, let alone what is being stockpiled in land based storage facilities.

Many Texans have seen this movie before, and some of us have seen it several times. Until the commodity cycle turns, as it always does, refocus on the basic blocking and tackling of running a business. Take protective measures to guard against avoidable losses.

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