Tags: Jim Chanos | oil | crude | price

Jim Chanos: 'Days of Finding Cheap Oil Are Over'

By    |   Sunday, 18 January 2015 09:55 PM

The 56 percent plunge of oil prices since late June has put major oil companies such as Exxon Mobil and Royal Dutch Shell in big trouble, says legendary short seller Jim Chanos, founder of Kynikos Associates.

He told CNBC that he has shorted oil majors for a couple years.

'The fracking and shale revolution was propelling us [the United States] to be the largest oil producer in a way that I thought was uneconomic and still is uneconomic for the drillers," he said. But it was going to be enough supply to really disrupt the markets."

U.S. oil output has hit its highest level in at least 31 years. Experts say producers of shale need a price of $60 to $70 a barrel to stay profitable. U.S. crude traded at $47.65 Friday afternoon.

"The days of finding cheap oil is over," Chanos said. He's also short Caterpillar, which supplies equipment for oil production.

The oil price drop will have mixed effects on economies, says Bill Greiner, chief investment strategist of Mariner Holdings.

"The economic growth of nations consuming oil will benefit mightily at the expense of oil-producing nations," he writes on Forbes.com.

The effects will be mixed within some economies too, Greiner says.

"Segments of our domestic economy will struggle. Capital spending growth will be stunted. Segments of the high-yield fixed income market will struggle," he writes.

But consumers will benefit, as falling gasoline prices boost their spending power. U.S. families on average spend 4 percent of their income on gas, Greiner notes.

Gas prices have dropped to a 5 ½-year low, averaging $2.08 a gallon for regular Friday.

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The 56 percent plunge of oil prices since late June has put major oil companies such as Exxon Mobil and Royal Dutch Shell in big trouble, says legendary short seller Jim Chanos, founder of Kynikos Associates.
Jim Chanos, oil, crude, price
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2015-55-18
Sunday, 18 January 2015 09:55 PM
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