Well let's agree to differ. No one will win this argument this year.
I see 2016 as the make or break year for shale. Only 11% of 2016 US shale production is currently hedged and the industry is essentially a Ponzi scheme that relies on the continued availability of credit.
The oil price bounced hard on the recent market correction we just experienced. Why do you think this happened? Logic would dictate that if you are invested in an already heavily sold off product or sector and a market crash is in train then buying up that sold off sector would make absolutely no sense in the world. The reason was that the markets are heavily manipulated and the price of oil jumped hard to protect the shale oil junk bond market and the oil ETF funds were billions of dollars are invested. A run on either of these markets would have likely spilled over into the other junk bond and ETF markets where trillions of dollars are invested in total.
The oil price is more than a simple supply and demand economics 101 commodity. It is a geo-political globally significant product capable of making and breaking governments, markets, economies and countries.
Even if shale oil drilling proceeded at full speed (which it won't) peak production in a play like the Eagle Ford shale (and that's drilling 2 thousand wells per year) would occur sometime mid way between 2017 and 2020.
God forbid if the US does actually raise interest rates. That Ponzi scheme would be in even more trouble.
You've run the numbers on DLS, BPT and SXY and the A$ in your head. I've run the realities of the world oil price tussle in my head.
I'm OK with making only 30% per year on a trade if I think its rock solid.
The path to $1 is clear even if it takes us along memory lane back to 64.5cents.
Good luck my friend.
Eshmun
DLS Price at posting:
77.5¢ Sentiment: Hold Disclosure: Held
