LSE tonight, page-201

Hi LeMajor

They say the recovery rate (all things being equal) is generally the length of decline x 1.50 to meet the old average ie: around $50bl.

For example, 1998 saw 1.5 year decline with 2 years to get back to $45.

This fall is a bit different.

April 2014 was start of decline off $105 base.
Dropped to $50 Jan/Feb 2015 - deemed average price.

Then rose to $60 albeit a dead cat bounce in Feb/March 2015, just as we saw last few days now in 2017. Then dropped to say $25 Feb 2017

So the main drop to concern with is Jan 2015 to now Feb 2017, say 2 years.

So when would or could it get back to $50bl average.

Well using the theory of 1.50 x the decline rate, If prices were to stop dropping now, then it would take until around Start 2020 IMO to get back at $50bl.

The problem here is that we have not reached the bottom yet IMO, so the stopwatch to get back to the average hasnt started.


Forty-eight North American oil and gas companies have filed for bankruptcy since 2015, according to law firm Haynes & Boone. The next shakeout could come in April, when banks reassess the value of the assets against which drillers borrow money.

The last time oil sank this low was at the height of the Asian financial crisis in 1998.

"Given that no fundamental relationship is currently driving the oil market towards any equilibrium, prices are being moved almost entirely by financial flows caused by fluctuations in other asset prices, including the USD and equity markets,” Horsnell said. "We think prices could fall as low as $10/bbl before most of the money managers in the market conceded that matters had gone too far."

Oil prices have dropped more than 70 per cent since mid-2014 as producers every day pump one to two million barrels of crude in excess of demand.

According to the International Energy Agency, this was inevitable, as supplies are growing at a time when the world is "already awash with oil".

Morgan Stanley has added its voice to predictions the glut will persist until at least 2017. Vitol, the largest oil trader in the world, said yesterday that even an eventual recovery then will be underwhelming as demand softens in the wake of a broader move to renewable energies, capping prices at around $60 for a decade.