Here’s One Theory for Why Oil Is Going Nuts

[Wiljor]

Brent oil surged to $58 a barrel on Tuesday. It is now 24 percent higher than it was just a few weeks ago, meeting the technical definition of a bull market. (Some perspective: Prices are still down 50 percent since June.)

One possible reason for the recent surge: an industry in despair. U.S. drillers idled 94 rigs last week, the most in data going back to 1987, according to Baker Hughes. In the past eight weeks, 352 rigs were idled. BP on Tuesday said it will reduce spending to $20 billion this year, compared with previous guidance of as much as $26 billion. The cuts bring renewed focus to rig counts and raise questions about how low prices can go and still sustain the U.S. oil boom.

U.S. Rigs Fall to a Three-Year Low

Source: Bloomberg

The history of oil prices follows a golden rule: What goes down must come up. Goldman Sachs in December identified almost $1 trillion in investments in future oil projects that are no longer profitable with oil under $70 a barrel. Eventually, supply will shrink and prices will rise again.

At least that's what the market might be betting on now.

http://www.bloomberg.com/news/articles/2015-02-03/oil-rises-in-longest-run-of-gains-since-august-as-strike-endures

[Markinsa]

It doesn't take very long to get a rig running.  All of these Oil Companies have scheduled out where they want to drill... The only thing that will happen is the smaller companies won't be able to hold out very long, and they'll go out of business and the larger Oil Companies will step in.

 

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[v-star 650]

funny  how  they  have put   drilling  on hold ,  but  at same time  ,  have bought  millions  of  barrels of  oil  and are  supposedly holding  them  in  tankers  and  on shore tank farms .....  purchased at  the low price  of  48.oo   dollars  per   barrel ,   and  going to wait it out  till oil is  high  again  ,  most  like   in the 80 ,oo   too  90.oo  per  barrel  range ,   bring  out  this  saved  oil  and  sell it  at   the higher  cost  !  double  their  money ......     and  now  we  have  the  refinery workers  going on strike  at  a  couple  of  stations,   gas  will start  it`s   clime  back  too the  ugly   value  we  so   hate     

[Texstorm]

Oil has always been over inflated that's how the rich get richer. OPEC has made a big play and they are going to show the world that they are still in control because we don't have anyone in our hierarchy with enough huevos  to stand them down !