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general Here comes OPEC PR Offensive

OPEC Sec Gen hitting the PR circuit hard at the CERAWEEK OIL. conference this week.  Now they are the US friend.  Never forget how they blocked oil to US '73 '74 after we supported Isreal against Egypt/Syria, tried to kill US oil production both '85 - '86. , '98 - '99, and recently 2014 - 15.  Last one didnt work because non-OPEC oil has grown.  They want US oil companies to join the cartels effort.  It's against the law. 

The OPEC and supporting US oil co's sherade that oil investment will dry up is a false argument.  For instance Hess just reported that new wells 2018 forward get 55% return at $50 a barrel !  Imagin what their return will be at $70 bbl.

Short term prices could rise based on Sandi's cutting "EXPORTS"  in April.  Be careful to distinguish between production cuts and exports cuts.  The producers can play games with these nuanced announcements. 

But more important the thing to watch is if Trump continues the Iranian waivers allowing continued shipping of oil (to India, China, etc).

Sandi's said they will do whatever it takes to support oil prices.  I believe them. BUT FORTUNETLEY THEY HAVE NO CONTROL OVER THE OIL SUPPLY TSUNAMI THAT WILL HIT THE WORLD  MARKET FROM PERMIAN.  Starting Q4 into 2020 (1) new PERMIAN pipelines (2)  4 new or upgraded oil export terminals (3) by the close to 10,000 DUCs (Drilled but Uncompleted wells) will support the supply.

Oil economics have changed.  Technology is transforming another industry and it's only just started.  As Chevron CEO stated, " cut costs or die". Chevron making more now than when oil was $90.0 0 bbl.


What will the valuation of E&P, Refiners, etc be if oil "stabilizes" or "balances" at $45 bbl.

NOPEC should pass Congress. There are no Cartels in , Natural Gas, Iron Ore, Soybeans, Lithium, Cobalt, Gold, Silver, etc, etc, etc. Before the shale gas revolution (2007) the US was importing gas at $12.00 to $14.00 per mm/BTU.  Today it's $2.80 per mm and more investment than ever.  Japan was paying $20.00 + .  Now $7.00.

Oil industry needs to face reality.  Sandi's can't charge $85 bbl for oil that cost them $4.00bbl to lift.

I think we will still have cycles after the decision on waivers is made by May 8th but going forward in the year we should see lower highs with the spread between the high and low tightening until we see prices balancing in the low $50s by Q4 with even lower prices in years ahead.


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