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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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Johnny Chimpo

Johnny Chimpo 478

Posted
Posted
11 hours ago, Hate said:

I don’t think you really want to be over there during this. I heard about one of the Stans over there where they are acting like this isn’t even a thing. According to the guys on the radio, they are arresting anyone even wearing a mask in public.

Hahaha. Yea I think that was Turkmenistan. My national coworkers were telling me about the face mask ban there last time I was on site. Their president has a long history of being a crazy bastard. Look him up sometime if you get bored. 

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Johnny Chimpo

Johnny Chimpo 478

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2 hours ago, Fudge Nuggets said:

I think we may work for the same company.  Someone I know was supposed to crew change out of Kazakhstan a couple of days before the lockdown started.  They've been there seven weeks now with no end in sight.

Yea man. It’s wild over there right now. Most of my team took off but out of a group of 40 or so expats one company guy and maybe 5 contractors have decided to ride it out on site in KZ. Looks like they may be there 90 days straight or more. They did offer the opportunity to leave to most everyone in my team but we are on the project side. Certain personnel considered very essential especially to ongoing production operations may not have the ability to leave so easily. 

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tx 3 putt

tx 3 putt 76,352

Posted
Posted
5 minutes ago, Auto Driller said:

So Russia produces about 11MM bbl/day and KSA about 10MM. They’re going to cut 15MM bbl??

Even if he is referring to OPEC as a whole (35MM bbl) plus Russia, that would represent a 30% production cut. Not gonna happen.

1. The art of the deal

2. Alaskans better brush up on their Russian. 

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Lagunamadre

Lagunamadre 1,975

Posted
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1 hour ago, Dnaguy said:


 

This tweet will not age well. I can guar-an-fucking-tee you that Russa and SA will not cut anything close to that, if they even cut at all. Trump is either making shit up or MBS knows exactly how to play Trump like a fiddle. The Saudis are probably reading this tweet and laughing their asses off. 

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Blotto

Blotto 23,432

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17 minutes ago, Lagunamadre said:

This tweet will not age well. I can guar-an-fucking-tee you that Russa and SA will not cut anything close to that, if they even cut at all. Trump is either making shit up or MBS knows exactly how to play Trump like a fiddle. The Saudis are probably reading this tweet and laughing their asses off. 

 Insert WhyNotBoth.gif. 

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tx 3 putt

tx 3 putt 76,352

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power industry services (I'm the only person in my group focusing on refineries and chem plants) - my group was hit today, 2 laid off / let go (9 person group). both have 45+ years. they are 2 of 4 in my group that have left their regions, moved into their retirement houses (lot of travel costs to visit clients). 

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Eastwood

Eastwood 4,394

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16 minutes ago, Dr. Beeper said:

I still don’t know if the 10 mmbbl/d includes US shale. Maybe that was the difference between 10 and his subsequent 15 mmbbl/d tweet.

I bet it does. Permian players who are lobbying the RRC for cuts are likely lobbying DC for cuts, at as well. Maybe we'll replace OPEC+ with Super OPEC++ that includes the US.

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Storm the Field

Storm the Field 5,271

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Regardless of whether any actual agreement was reached to cut production (in no world would they cut 10-15 million unilaterally), it at least looks like both KSA and Russia are realizing that "flood the market with even more unwanted oil during a global demand shock" isn't all its cracked up to be. 

Yesterday, Russia admitted it makes no economic sense for them to increase production as indicated last month. 

https://oilprice.com/Latest-Energy-News/World-News/Russia-Decides-Not-To-Boost-Oil-Output.html

And today, KSA officially called for an emergency OPEC meeting to "reach an agreement to restore the desired balance of oil markets."

https://www.spa.gov.sa/viewfullstory.php?lang=en&newsid=2054240#2054240

If they're not pumping the brakes, at least they may be letting the accelerator up off the floor.

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Johnny Chimpo

Johnny Chimpo 478

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1 hour ago, Storm the Field said:

Regardless of whether any actual agreement was reached to cut production (in no world would they cut 10-15 million unilaterally), it at least looks like both KSA and Russia are realizing that "flood the market with even more unwanted oil during a global demand shock" isn't all its cracked up to be. 

Yesterday, Russia admitted it makes no economic sense for them to increase production as indicated last month. 

https://oilprice.com/Latest-Energy-News/World-News/Russia-Decides-Not-To-Boost-Oil-Output.html

And today, KSA officially called for an emergency OPEC meeting to "reach an agreement to restore the desired balance of oil markets."

https://www.spa.gov.sa/viewfullstory.php?lang=en&newsid=2054240#2054240

If they're not pumping the brakes, at least they may be letting the accelerator up off the floor.

Yea no doubt man. I’ve been reading that they couldn’t even find buyers for 12 mmbbld of physical oil. It’s hard to pump 12 mmbpd when there’s no where to put it, store it, or use it. 

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HoustonFrog

HoustonFrog 368

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Posted
She’s a sweet gal but her career choice has been....interesting. Went from Callon to Whiting. [mention=1928]HoustonFrog[/mention]Is she one of “the” subordinates?  Dude you gotta share the deets. 

Nah, not Correne. She’s awful at her job and a crook but that’s about it.

Her former employer is headed down a dark path unless things turn around.
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MAROON

MAROON 445

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Posted

Callon doesn't have a debt maturity until 2024. I'm expecting a shit town of E&P firms to hire restructuring advisors in the near future, but I guess I didn't think they would be #3 behind CHK and Chap.

What is the issue besides way overpaying for Carrizo in $20bbl environment?  Can they not even service the debt at $20bbl?

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HoustonFrog

HoustonFrog 368

Posted
Posted
Callon doesn't have a debt maturity until 2024. I'm expecting a shit town of E&P firms to hire restructuring advisors in the near future, but I guess I didn't think they would be #3 behind CHK and Chap.
What is the issue besides way overpaying for Carrizo in $20bbl environment?  Can they not even service the debt at $20bbl?

2023 but yeah, they aren’t Whiting by any means.

The Carrizo acquisition is going to burden them and the BBRD is going to be a bloodbath. Currently above 70% drawn, wouldn’t shock to see that number close way in on outstandings. Hedge profile is adequate

I actually think they will be fine, but it could get dicey.
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KYHorn

KYHorn 16,862

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38 minutes ago, Heisenberg said:

As soon as the markets realize that it was all just trump running his mouth and nothing real the $20 WTI / $10 Midland prices will return.  

Saw an article yesterday out of Saudi Arabia that Russia and SA will be agreeing to cut production, or something along those lines.

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Storm the Field

Storm the Field 5,271

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Posted (edited)

Emergency OPEC meeting is scheduled for Monday morning.

Everyone involved agrees that production needs to be cut, but the hard part will be figuring out how to divy up the cuts among all global players to reach a number like 10 million/day KSA and Russia ain't just gonna volunteer to bear all the burden themselves.

Edited by Storm the Field
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Lobwedgephil

Lobwedgephil 1,139

Posted
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22 minutes ago, Storm the Field said:

Emergency OPEC meeting is scheduled for Monday morning.

Everyone involved agrees that production needs to be cut, but the hard part will be figuring out how to divy up the cuts among all global players to reach a number like 10 million/day KSA and Russia ain't just gonna volunteer to bear all the burden themselves.

Whatever the number will be, it won't be enough. 

 

Coronavirus: The Energy Guide
by Peter Zeihan on April 3, 2020

As a rule I try to stay out of discussions about energy prices. Energy trading is a hectic business with a lot of stress, plagued by fleets of hot-headed issues that have nothing to do with supply or demand or technology. But that’s not the problem today. The problem today is the world is at the beginning of its sharpest economic downturn since the 1920s while the world’s largest oil exporter has launched a rage-driven price war. The end result is pretty straightforward:

Oil prices are going to, and through, zero. Sometime soon, probably before the end of May, oil prices will be negative. Pretty much everywhere.

Let’s begin with demand.

When coronavirus took parts of China’s economy offline in February, the country’s oil demand likely dropped by 3-4 million barrels per day (mbpd). As China has come back on-line some of that demand has regenerated, but it has been more than overwhelmed by the rest of the world descending into lockdown. With some 250 million Americans under some degree of stay-at-home order, US gasoline demand today is down by nearly two-thirds. Transport fuels account for about two-thirds of US oil demand, so that’s a headline reduction in oil demand of ~9mbpd.

From just one sector. In just one country.

Similar contractions in fuel demand have occurred in other locations where the virus has forced populations into cloister. And while not strictly petroleum-related, most locations under lock down appear to see electricity demand drop by one-third to one-half based on their industrial make up. The demand crunch isn’t just for raw oil, but for refined products as well. Throughout the world, refiners are either spinning their facilities down to the absolute minimum they can manage without shutting them down completely, shutting them down completely, or attempting to sell cargoes they’ve previously purchased to others rather than take actual delivery.

All told, as of March 31, the total decline in global oil demand appeared to be at least 15mbpd out of a pre-virus total of about 100mbpd. Even if the decline is “only” 15mbpd, this is the largest decline in demand in both absolute and relative terms in the history of petroleum, and it all occurred in under three months (with the bulk of it in less than three weeks).

Which means the price drops we’ve seen so far are just the beginning. First, coronavirus only really shut down the U.S. and European economies last week. Second, meaningful economic contractions in India and South Africa are only happening now. Third, Japan, Mexico, Brazil and Indonesia have yet to enact meaningful social distancing. Demand has a lot further to fall. Penciling in a total demand decline of 25mpbd seems eminently reasonable. Maybe even a touch conservative.

And demand will stay down. Assuming you believe Chinese data and propaganda, a return from quarantine takes about two to three months. That suggests – assuming zero collateral economic damage – that the world should not expect a large-scale increase in oil demand to begin until at least June. And even then there would be a ramp up period. (Any volunteers to be the first person back on a plane?) And as I discussed in the US dollar likely to go up during coronavirus while everything else goes down, the Russians are likely to at least in part regret their decade-old anti-US financial campaign. Perhaps the biggest thing the Russians have going for them is that most Russians consider privation and suffering to be points of national pride. The Russians have to hurt, really hurt, before they’d even consider giving in.

Saudi Arabia’s formal reserves are nearly as large as Russia’s ($500 billion) but Riyadh has access to other funds that are probably worth three times that. And from time to time MBS likes to liquidate this or that prince from the branches of the family that used to have the run of the Kingdom, and take all their stuff. The Saudi royal family literally has hundreds of thousands of princes, so there’s a lot of financial heft just laying around for emergencies like this one.

On April 2, the Saudis indicated they’d like to host another OPEC+ summit with intent of making emergency oil production cuts on a global scale. Consider what the scale of “success” would be. The largest cut OPEC+ has ever made was less than 3mbpd, with the Saudis shouldering half the burden. It’d take a cut (at least) five times that to stop the downward spiral. It is difficult to see the Saudis even considering such unless the Russians don’t simply put some skin in the game, but also pre-commit a couple non-disposable limbs.

So that’s demand and supply. Here’s the time-frame:

With coronavirus gutting economic activity, refiners the world over are for now putting their extra product into storage, but they are running out of space. Governments and refiners both are taking advantage of low oil prices to top off their stored oil reserves, but they are running out of space.

And the crude keeps coming. There are hundreds of millions of barrels of crude on tankers that have left the Persian Gulf and West Africa but have not yet made it to their customers because it often takes up to a month of sailing for Persian Gulf oil to reach a customer. There’s a whole wave of oversupply shocks that will hit and keep hitting every single day for weeks to come.

At the beginning of the crisis total global spare storage capacity was likely about 1 billion barrels. Back of envelope math suggests all storage everywhere will be filled to brim sometime around mid-to-late May, again, assuming the demand decline does not increase above 15mpbd. If the true figure is 25mpd, we hit the wall a 2-3 weeks earlier. And when that happens prices go firmly negative.
 

[IMG]

So that’s demand and supply and time-frame. Here’s the battlefield:

Not all oil is created equal, and I’m not referring to the differences in viscosity and contaminants (light and heavy and sweet and sour for those of you who don’t eat and breathe the oil sector). Instead I’m referring to location. Much of the angst in the oil sector is getting oil from the wellhead to some sort of demand location, typically a refinery or petrochemical facility.

In terms of global shipments there are really only two ways of moving a lot of crude: by tanker or by pipe. The difference between the two determines how long a producer can hang on in the current, rapidly deteriorating, price environment.

The disadvantage lies with the producers who rely upon pipelines. When demand and storage facilities down-pipeline become maxed out, that’s…it. The pipeline backs up and up-pipeline producers have no choice but to shut-in their production. (There may be some minor shipping via truck or rail, but those options cost more per barrel than pipe and typically first require some new loading infrastructure.)

Shipments via tanker have more flexibility. Ocean-going supertankers can sail to any appropriate port in the world and interface with any coastal demand facility. If one port is full-up, the tanker can just sail to the next.

The Saudis enjoy the second-lowest day-to-day production and second-lowest full-cycle costs in the world (only Kuwaiti oil is cheaper to produce). In addition, all the oil they send to market is via tanker. All else being equal, the Saudis will be the last men standing.

In contrast, the Russians have a mixed system. At the point of the Soviet collapse nearly all Soviet crude was shipped by pipe. But under the leadership of President/Strongman Vladimir Putin the Russians have built out pipe systems that terminate in ports on the Baltic Sea, Black Sea, and Sea of Japan. However, not only are all those seas constrained, none of the ports are capable of supporting supertanker loading. All are either for supporting regional markets, or need shuttle tankers need to bring their product to a larger (non-Russian) ports for reloading onto larger vessels. Collectively, these Russian ports can theoretically push out nearly 4mpbd (although they have never operated at full nameplate capacity).

The Saudi game plan is pretty direct. Dump nearly unlimited volumes of crude oil into markets where Russia’s pipe network terminates in order to a) undercut the Russians in what the Russians think of as captive markets, and b) preemptively fill up any available storage capacity in those markets or any nearby transshipment nodes so the Russians have nowhere to sell their crude.

Should the strategy work, the Russians will have no choice but to turn off their pipelines as well as a fair amount of their port capacity, locking in the vast bulk of their 5.5mbpd of crude exports as well as a painful chunk of their 3.6mbpd of refined product sales. The focused dumping is designed to force negative prices and in the markets Russia serves before negative pricing hits everywhere else. That would make Russia the first and most obvious casualty in the price war. Riyadh could then turn its attention to other oil producers for whom it holds slightly less…aggressive feelings.

US shale certainly falls into that bucket, although the rules for US shale are a bit different than for more conventional oil fields. While all US shale oil relies upon pipes to take it to market, those pipes are linked to port loading capacity which enable some 7mbpd of export by tanker. In addition, the nature of shale oil is that it isn’t pumped; natural pressure in the rock formation pushes the oil up and out. Lifting costs are minuscule, and much of their daily operating costs come down to pipeline rates. Shutting-in crude under current circumstances may incur higher costs than simply letting things run.

This is both better and worse than it sounds.

Worse in that most shale operators are small firms. In some parts of Texas, the crude overload is already so bad that shale oil is selling for only $7, below the operations costs for most everyone. For small firms, a year with low-to-zero-to-negative income is more than enough to gut them and offer them up to the supermajors as acquisition targets.

But it is better in that a shale well’s output declines rather quickly compared to more conventional oil production methods, so for the most part the output loss the sector will suffer represents natural well depletion rather than any conscious effort to shut-in production. Back of envelope math suggests the sector as a whole is eyeing a 2mbpd decline for the year.

Moreover, it isn’t as if the shale techs are going to be un-invented. The entire production process from drilling to first flow for an American shale well occurs in less than six weeks. Traditional oil fields take months simply to bring mothballed production back on-line, much less new production. Output increases for big offshore projects take years. Once the market rebounds US shale will be the first oil to return in force.

But back to the main event: The real kicker is even if all Russian piped exports goes offline and the Russians’ own viral epidemic reduces their domestic oil demand by half, that still wouldn’t be half of what was needed to bring the global oil market back into balance. Make no mistake, negative pricing is only the beginning of the producer reckoning that the Saudis and coronavirus have kicked off. Collateral damage will be everywhere.

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Heisenberg

Heisenberg 162

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Posted (edited)

(1) Morning of the tweet - "certain types" are tipped of the upcoming tweet.

(2) "Certain types" go long on oil.

(3) Tweet appears, oil goes up 25%, "certain types" make a 25% gain in less than one trading session.

(4) "Certain types" know it's all bullshit, and will collapse soon, so they short oil, and wait until the bullshit is acknowledged by the market, and make a huge profit when it falls.

It is just that simple.  This sort of thing is often the purpose of the tweets.

Edited by Heisenberg
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