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How low can the oil price go?

Posted on Saturday, November 1st, 2008 | In Energy Markets, Frontier Markets, Investing in Qatar, Saudi Arabia
Contributed by: Daniel Broby (http://danfonds.blogspot.com) -

The last global recession the world had was in 2001. Nymex crude oil prices, which had gone above $35 a barrel in September and October 2000, fell briefly below $20 a barrel in late 2001 before recovering in April 2002 to above $26 a barrel.

The oil price required for a marginal cost player to return its cost of capital is $65-75 per barrel.

Economic necessity is often cited as important in the price level. The lowest breakeven oil price that would bring the 2008- 2009 budget into balance in Saudi Arabia is $30 per barrel. The level in the UAE is $40 and in Qatar it is $55. The average breakeven for GCC is $50 per barrel.

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About Daniel Broby (http://danfonds.blogspot.com)
Danfonds Frontier Markets blog tells the story of the life and times of a Frontier Market's Hedge Fund. Care is taken to avoid any exposure of confidential information and names and places are withheld to upheld the integrity of our many friends in the industry. Please note that this is a blog. It does not constitute investment advice or an offer to invest. Any interpretation otherwise is just plain stupid. Frontier markets can be risky and volatile.

Daniel Broby joined Danfonds Aps from Renaissance Investment Management (UK) Limited where he was Chief Executive Officer. He held various roles and responsibilities throughout the RIM group, principally those of Chief Investment Officer, Head of Asset Management and Director of the Renaissance Africa Fund. His roles involved extensive travel to and from offices in Moscow, Kiev, Nairobi, Geneva and London. In addition to the day to day management of the group’s various investment teams, he also oversaw the successfull launch of the Renaissance Africa Fund, the Global Macro Fund for RIM (UK) and the successfull launch of the offshore Renaissance Russia Infrastructure Fund for RIM.

Prior to Renaissance Investment Management he was a member of the BankInvest Investment Board and joint manager of BankInvest Basis, a flagship global product, rated five stars on Morningstar. Daniel joined Bankinvest, Denmark's third largest asset manager, as chief investment officer in 2000, responsible for the investment process and the day-to-day running of the quoted equity, bond and guaranteed products. He transferred these responsibilities in July 2004 and launched Denmark’s first and only regulated hedge fund on behalf of Bankinvest in November 2005. Daniel joined the fund management industry at the end of 1985 as a trainee at Credit Suisse Buckmaster and Moore. Prior to his role at BankInvest, he was chief portfolio manager at Nordea Investment Management and prior to that head of international research at Morgan Stanley Quilter.

Daniel has an MPhil in economics and an MSc in investment analysis. He was a board member of CFA (UK) for over 10 years. He was the CFA Institute’s President Council Representative for Europe, Middle East and Africa for four years and was presented with the Institute’s Society Leader Award in 2006. He now serves as a member of the Capital Markets Policy Council. He was elected an individual member of the London Stock Exchange in 1990 and is a Fellow of the Securities Institute in the UK.

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