HydroPhi Technologies Group Inc. (fka HPTG)

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The mechanism why the WTI price will remain low for a long time:

http://www.telegraaf.nl/dft/goeroes/alexandersassenvanelsloo/24971479/__Oliebrand__.html

Fri 08 Jan 2016
oil fire
by Alexander Sassen van Elsloo

The situation in the Middle East has recently deteriorated significantly. Tensions between Iran and Saudi Arabia are vastly increased since the latter country has executed a Shiite cleric. With this extra power, the investor may think that the decline in oil prices could well be over. But is this really so?


pain Border

Last month I wrote about some of the reasons why oil prices but continues to decline. The main reason is geopolitical in nature. Saudi Arabia wants oil through dumping of the Russians and Iran to its knees. All this with a view to Syria. The unleashing of sectarian violence in the region (Shiites against Sunnis) is a consequence of this. Question is when Saudi Arabia gave finds and the (relative) normality in the oil market late return.

Production country one barrel of oil
Brazil $ 48.80
Canada $ 41
US $ 36.20
Russia $ 17.20
Iran $ 12.60
UAE $ 12.30
Iraq $ 10.70
Saudi Arabia $ 9.90
Kuwait $ 8.50

Source: UCube by Rystad Energy

As the above table shows, Russia is in serious trouble if oil prices around $ 17 à $ 18 state. The problems are, however, far already started before, because less oil revenues provide enormous pressure on the budget (under $ 100 arise in Russia and Saudi Arabia all budget deficits). Under the break-even price, however, oil production comes to a halt, or need money for (the government), thus will cause an even higher deficit.

Then, it's the question of which government can collect the longest a budget deficit. The answer is Saudi Arabia, when it can, despite the low oil prices and high spending (and therefore high deficits) for years to come by the large financial reserves and lower production costs, while Russia now surely uncomfortably close to the red zone is.

This means that Saudi Arabia right now will not stop the dumping of oil. After all this geopolitical strategy is only beginning to bear fruit. Only when the Russians have capitulated, there is, from this perspective at least, an upward movement in oil are expected.
Economic growth

It rumbles on the supply side is clear, but that is only one side of the story, because the demand side must also be taken into consideration. This is due to the global economic growth: the higher the growth, the higher the oil consumption.

Now I warn for some time for a cooling world economy, but recently I am not alone; now falling all sorts of agencies and analysts over each other to adjust downwards the growth forecast. If the past something has made clear, it is that these people and institutions always proved to be positive. I therefore anticipate that the growth forecasts for economic growth continued to be revised downwards. This is not exactly positive for oil prices.
Dividend cheap oil

It is not one and all bad news because the lower oil price causes consumers and businesses to pay more because their energy costs lower. This should ensure an increase in demand and thus an economic boost. However, the question is whether this effect is large enough and soon will be sufficient to offset the negative effects of oil price decrease (reduction of oil-related investments, job losses in the sector, foreclosures and so on).

In 2015 consumers have been able to benefit from lower energy prices, but that has led to very little economic growth. What is increasingly in the news, the mass layoffs in the sector and the problems of many energy companies to pay off the debt (default).

Together with what is described in the previous section, there is substantial evidence that the negative impact it wins the positive. But, as they say so nicely that his English: the jury is still out on That One.
Consequences for oil and oil funds

All in all, there can still be said that the pain has not suffered. This is of course also have implications for Royal Dutch Fugro, SBM Offshore and Boskalis. Now, the last three have a common denominator, and that's HAL as a shareholder. Which has been known to take advantage of substantial price cuts to buy, so who knows, there are some positive fireworks for these names (except for Boskalis, for it is the acquirer).

The Royal Dutch management will come under further pressure to lie in order to reduce the dividend given the poor market conditions and costs associated with the acquisition of BG. Now, the dividend yield is already ridiculously high, indicating that the market has already priced in a dividend reduction. So I wait the time of the dividend reduction before I'm going to buy Royal Dutch.

Until that time, the investor must go to extreme rides up and down in oil and the oil companies. Through long-short structures can be made use of this and certain risks are excluded. But for a single long position in oil is in any case still really early.