Salient to Investors:

Andrew John Hall at Astenbeck Capital Mgmt said:

  • The shale-oil boom will not mean long-term cheap, abundant energy because it will play out far sooner than many analysts expect, resulting in a steady increase in oil prices to as much as $150 a barrel in 5 years or less.
  •  The US renaissance will not be repeatable abroad, where the shale revolution faces political, environmental and technical hurdles that will stall its roll-out.
  • If oil falls toward $75, much of the wave of new US production would become unprofitable, prompting output to be cut and prices to rise.
  • The world may be awash in new oil but it is not cheap to produce. The Big 5 have been spending almost every dime of earnings yet their combined output has declined by more than 1.4 million bpd, so prices have to rise.
  • The fact that the US shale revolution has been able to replace most of the crude lost to strife in places such as Iraq and Libya in recent years is a fluke.
  • Energy powers such as Russia and Saudi Arabia will have to significantly increase investments to maintain production levels.
  • Producers have already drilled in many of the best areas so growth in shale output will begin to moderate this year and US production peak as soon as 2016.

The combined year-over-year growth in production in the Bakken and Eagle Ford formations – which account for almost all of the jump in US output – fell below 30 percent in July for the first time since February 2010.

The US EIA predicts domestic production will reach an all-time high by 2016.

Philip Verleger at PK Verleger said Andrew Hall has three gears: long, longer and really long.

Edward Morse at Citigroup said it took a long time for believers in the Cold War to admit it was dead, and it is taking a long time for peak oil believers to admit that it is dead also. Morse and many in the energy world says the US renaissance will be repeated abroad.

David Neuhauser at Livermore Partners said Andrew Hall is a phenomenal trader and is right about long-term prices.

Carl Larry said the best traders always learn how to adapt.

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