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Hey Oil Barons.......

936horn

By 936horn
in Business and Markets

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Pescado_Rojo
Pescado_Rojo

I bet you could score a Lafayette 10 for a mani/pedi gift card and a pound of boudin right now.  I was sitting in a Starbucks by the med center in Laffy once, and a brand new white Escalade, lift

Rimbo
Rimbo

If you're Trump right now, you're watching Fox News, eating a cheeseburger, and getting mad about the lyin' media and preparing your next tweet about how some lupus treatment should be given to your s

fattyflattie
fattyflattie

My time finally came last Friday AM. I have survived around a dozen, give or take 1-2, since ‘08.  I was consulting for a project set to go in ‘22, but with all the uncertainty, it sounds like they’ve

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Trey3216

Trey3216 15,376

Posted
Posted
14 minutes ago, markstanco said:
24 minutes ago, 936horn said:
Cmon man take that shit to CR

Rimbo is CR. Roll your eyes and go along. Wish imma would do something about these posters.

That’s why I hit him with The Last Jedi shit since he thinks it’s some kind of fucking masterpiece.  He can’t help but meg me for it, when the only reason I post about it is his frequent shitposting.  

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tequila

tequila 319

Posted
Posted

Interesting to see the leverage in futures contracts rear its head. Posted WTI was what today?

Gentlemen, place your bets and buckle up, we’re in for an amazing education about what happens when speculation occurs to the tune of 50+ years of supply.

And on the other hand, it’s going to be equally amazing if producers don’t start reducing production and negative pricing hits the PHYSICAL markets within the next 45 days as storage is completely filled. Every day that goes by is literally 10 days further into the abyss until oil pricing recovers.

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tx 3 putt

tx 3 putt 77,548

Posted
Posted
1 hour ago, tequila said:

And on the other hand, it’s going to be equally amazing if producers don’t start reducing production and negative pricing hits the PHYSICAL markets within the next 45 days as storage is completely filled. Every day that goes by is literally 10 days further into the abyss until oil pricing recovers.

refineries are dragging their feet on shutting down production. 

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Wally Fairway

Wally Fairway 5,590

Posted
Posted
4 hours ago, tx 3 putt said:

refineries are dragging their feet on shutting down production. 

Because they have to soon run out of places to store refined products.

Consumer miles driven have to be down 80%, my guess, and no idea about commercial miles but I'll throw out 50% and jet fuel say 90%. Won't even mention petrochemical storage and other by- products.

Storage tank just be getting to the rim everywhere.

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Dnaguy

Dnaguy 12,105

Posted
Posted
24 minutes ago, Wally Fairway said:

Because they have to soon run out of places to store refined products.

Consumer miles driven have to be down 80%, my guess, and no idea about commercial miles but I'll throw out 50% and jet fuel say 90%. Won't even mention petrochemical storage and other by- products.

Storage tank just be getting to the rim everywhere.


This is true.

Everyone knows you’re fucked if you start rimming and no one took precautions.

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Blotto

Blotto 23,584

Posted
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11 hours ago, Blotto said:

I'm just getting started digging into this, as I expect there have to  be some profitable,  albeit counter-intuitive angles here. 

Well shit. After some additional thought on the matter, I had convinced myself to buy 3.5p on USO right at open. USO beat me to the punch, down 20% already. Guess I'll tap the brakes on that plan for now. 

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Brisketexan

Brisketexan 105,446

Posted
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26 minutes ago, Storm the Field said:

If you want to know just how bad demand has fallen, Spain just put out a report comparing their fuel consumption last week to the same week a year ago.

Jet Fuel -93%

Gasoline -84%

Diesel -55%

 

Again, fucking apocalyptic.  Damn.  This shit is nuts.

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Guest Lobo

Guest Lobo

Posted
Posted
31 minutes ago, LonghornJones said:

Anyone have a RRC update? Has there been a ruling yet?

On proration?  Not yet.  Let's see how they fall in line on the proposed Saudi tariffs/coalition with Mexico-Canada.  

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Bateshorn

Bateshorn 9,942

Posted
Posted
1 hour ago, Storm the Field said:

If you want to know just how bad demand has fallen, Spain just put out a report comparing their fuel consumption last week to the same week a year ago.

Jet Fuel -93%

Gasoline -84%

Diesel -55%

 

I mean, I’m an anecdote, but I fueled both the VWs at the beginning of this thing. I’ve put 30 miles on combined in the last 5 weeks in DC. And that includes me taking the GTI out to “test out” the speedometer. 

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Storm the Field

Storm the Field 5,302

Posted
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Just now, Bateshorn said:

I mean, I’m an anecdote, but I fueled both the VWs at the beginning of this thing. I’ve put 30 miles on combined in the last 5 weeks in DC. And that includes me taking the GTI out to “test out” the speedometer. 

My F150 has the 36 gallon tank. About 10 days ago, for the first time since early March, I filled up a nearly empty tank for about $48. I still have 350+ miles of fuel left. 

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Storm the Field

Storm the Field 5,302

Posted
Posted

JPMorgan analysts saying that, for storage capacity to get back to pre-crisis levels, US producers need to reduce daily output to 8M barrels/day or less through August. April average production has been estimated at 12.3M, down from all-time high of 13.1M in March.

You have to go back all the way to Fall 2013 for the last time production was at or below 8M barrels a day.

A very simplistic way of looking at it is that basically the last 6-7 years of development is being erased. 

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Lobwedgephil

Lobwedgephil 1,139

Posted
Posted

Oil: The Storm Before the Really Big Storm
by Peter Zeihan on April 21, 2020
West Texas Intermediate, the oil grade most associated with American production, plunged down to -$40 April 20. You read the right. For a while yesterday, sellers had to pay people forty bucks to take a barrel of crude.

As with any product, the business of oil isn’t a once-and-done. It must be produced, shipped and processed, and then the refined product must be shipped and retailed. What happened April 20 is a bottleneck in that process. Production surged ahead of pipeline shipping capacity, leaving some producers with nowhere to put their crude.

The real kicker is that this is not the “negative prices” outcome I predicted a couple weeks back. “All” the April 20 event was was a single facility in a single country running out of future leased storage capacity for the month of May. The April 20 price crash will happen again in the same place and it will be bigger: June WTI futures contracts are now spazzing, and America’s Cushing oil storage and transport nexus undoubtedly will be actually full by then. But even this is nothing but the warmup for the big show.

That will happen when the world runs out of storage.

Numbers are fuzzy in this corner of global oil markets. In part because everyone classifies and categories their oil storage capacity differently. In part because they should (gasoline storage is functionally different from raw oil storage). In part because some countries don’t share data because they’re lazy or secretive. But no one thinks there’s a whole lot of storage capacity left. Global oversupply of crude right now is over 20mpbd (with 30mbpd seeming to be the “average” guestimate). Most folks in the know are now musing that what storage remains will be filled up completely sometime in May or early-June.

And filled up it will be, because that is the express goal of the world’s largest oil exporter, Saudi Arabia. The Saudi price war started out as a spat with the Russians over carrying the burden of a production cut. It has since expanded into the Saudis targeting the end markets of every single one of what the Saudis’ consider to be inefficient producers. The Saudis are directly targeting markets previously serviced not just by US shale and Russian, but those serviced by Kazakhstan and Azerbaijan and Libya and Iraq and Iran and Malaysia and Indonesia and Mexico and Norway and the United Kingdom and Nigeria and Chad and you get the idea.

As of this morning, there are still at least 24 supertankers carrying at least 50 million barrels of Saudi crude en route to the U.S. Gulf Coast. Most will arrive in May, seeking to fill up as much of what remains of U.S. storage as possible. Similar volumes are in route to Europe and even bigger volumes to Northeast Asia. In most cases the destinations are the transshipment nodes that enable distribution of inland-produced oil to coastal locations: Rotterdam, Suez, Singapore, Korea.

Assuming you’ve got deep pockets, and Saudi Arabia’s are some of the world’s deepest, it isn’t a stupid strategy. If the Saudis can push prices firmly negative, it will absolutely crush many of the world’s energy producers. My back-of-envelope math suggest some 20 million barrels per day of production capacity – one-fifth of global output – will go offline for years. And then Riyadh will have what it wants: the ability to raise prices as much as it wants and to reign supreme over the world of oil for at least several years. (There are still a veritable swarm of flies that will need to be dealt with in that particular ointment, but the Saudi plan seems sure of generating plenty of ointment nonetheless.)
 

[IMG]

The WTI price crash on April 20 confirms that if the Saudis didn’t realize the potential for their strategy’s explosive success before, they certainly do now. They have no reason to back down.

There are a few producers worthy of callouts.
 

  • Canada’s Alberta province has the most to lose. Not only landlocked, it must sell all its oil into the American market that is already so saturated. Its production must be shut in for years.
  • Venezuela was facing civilizational collapse due to mismanagement before oil prices tanked. As oil is the government’s only remaining income stream, this marks the end of Vene as a country. Its oil will not come back for at least a decade, and even then only if an outside power first physically invades the place to rebuild the country from scratch.
  • America’s sanctions regime against Iran has been so successful the country isn’t an oil exporter any longer. Its output will absolutely collapse this summer, and the country lacks the funds to bring in foreigners to help restart it or the skills to do the work itself.
  • Russian fields are in swamps and permafrost. Drilling is only possible during the winter. Any shut-ins means the wells freeze solid, necessitating completely new drilling. Last time this happened it took the Russians nearly 15 years to get production back.
  • Azerbaijan and Kazakhstan are both dependent upon other countries (in some cases, Russia) to transit their crude to market. High production costs plus finicky neighbors equals long-haul shut-ins.
  • Nigeria is a mess on a good day, and the supermajors who have made Nigerian output possible have steadily moved offshore to get away from the chaos and violence. Once they turn off their wells, they won’t even consider returning until global prices rise to the point that they are once again willing to subject their staff to frequent kidnapping. That’s several years off.
  • Iraq has been in a state of near civil war for some 15 years. The country is now producing over 4mbpd, the income of which helps hold the place together. Negative prices will remove the “near” from the country’s political condition and (at best) make the place a ward of the Arab states of the Persian Gulf.


It is also worth noting that the speed that this could all go from head-spinning to head-chopping is intensely short. Right now there’s still a fair amount of spare oil tankers to shuttle about the world. The Saudis have been leasing out every tanker they can find, so before long all the the world’s tankers will be full as well.

Oil has been a panacea for all sorts of inefficient, compromised, and in some cases evil regimes for decades. Huge demand in the West and Northeast Asia allowed a raft of previously insignificant or morally reprehensible leaders and societal situations to effectively print dollars out of the ground and count the industrialized world as a hungry customer. Not anymore. Demand patterns have shifted, the United States is now an exporter of crude oil and products, and the petro-economy that has kept ayatollahs and ideologues afloat is crumbling. Before anyone cheers it’s worth remembering that things will get a lot uglier before they have any hope of improving.

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