Oil glut is our biggest impediment, page-9

Hi DB

You've hit on the question, but not so sure you've hit on the answer.

A few months ago I posted that I couldn't envisage a world tolerant of low oil prices. Now I'm not so sure. We need a sensible discussion about this, based on scenario analysis.

1. OPEC tightens the spiggots. In the old days this would solve the problem in a heartbeat. An OPEC pumping holiday would no doubt see a short-term spike as shorts covered, but enough US shale producers have hung on to fill the gap quickly. Also, Iran is about to resume sales and Russia is already pumping record volumes and will further increase them such is Rasputin's need for cash flow.

2. OPEC maintains its current strategy. Enough said.

3. The Paris - or wherever it's shifted to - climate talks impose some sort of restrictions on oil production/consumption. (And no, I have no idea how that might be done but is it not possible?) Any such restrictions would surely dampen future oil values.

4. World War III breaks out (a call already made by the Pope). This would almost certainly see oil prices skyrocket, but who on Earth wants that to happen?!

There are times in human history when the world order changes surely but imperceptibly, only becoming obvious in hindsight. Bit early to make any definitive call yet, but given the rapid improvements in oil technology, we could well be seeing not just a bear market but the start of a new world order in which countries grown fat on oil revenues can no longer depend on a resumption of normal service.

I know I am suddenly sounding pessimistic. That is in no small way due to the emotional upheaval of the past 48 hours, but it is also in consideration of the realities of a massive bear market for oil with no clear circuit-breaker in prospect other than full-scale war (which suddenly looks more possible but which remains the worst possible outcome).

I repeat last night's observation. Well may some posters complain about FAR failing to roll the dice on the CR; it is pretty obviously now a great decision. Notwithstanding appraisal results - which will surely be good - we have bought 12 precious months in which external circumstances might get better. They can hardly get worse.

OOO

PS: If FAR holds eight cents in tomorrow's bloodbath we will have done exceptionally well. Might be best to leave your screen switched off until at least early afternoon.