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Dan Dicker

Dan Dicker

Dan Dicker is a 25 year veteran of the New York Mercantile Exchange where he traded crude oil, natural gas, unleaded gasoline and heating oil…

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Oil’s Catch-22 That Nobody Saw Coming

For several months, I’ve been trying to reconcile two divergent and counter-intuitive trends in oil, and it’s forced me towards a soberer outlook going forward.

It’s not that I don’t think oil prices aren’t ultimately headed back to triple digits – I absolutely do. But the timeline for that move continues to lengthen, as oil companies find ways to survive and revive in this horrible market.

Two quick charts will tell you what I mean:

(Click to enlarge)

Here’s the Haynes and Boone bankruptcy monitor charting the number of new filings since the start of 2015. You can see the number continuing to increase, even through the first few months of this year, when oil prices have stabilized above $50 a barrel.

Now look at this one:

(Click to enlarge)

Here we see the recovery in oil production in the U.S. beginning in late 2016 and through today, with oil production well over 9.2M barrels a day.

Wait a minute - How can producers keep going belly up while production continues to ramp?

Producers would have you believe it’s their inestimable business savvy in top-line cost cutting and incredible technological advances. Read this from Laredo Petroleum’s CEO as he talks about how amazingly smart he’s been.

Hooey – Capex cuts and tech advances have helped of course, but it’s been more the constant influx of money from investor funds and fancy bank restructurings that have kept even the most egregiously over-leveraged…




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