OPEC EXPECTED TO CUT - WHERES THE CUT FROM UNCLE SAM

[BLA + 1,666]

13 hours ago, Douglas Buckland said:

Okay, forget the politics and just use common sense.

Was the unrestrained pumping of US shale oil good, or bad, in regards to stabilizing the global oil price?

Did the US shale oil industry benefit hugely from any production cut by OPEC+ while they did not restrain their production in the least?

Can the US shale oil industry remain viable, without a bailout, during this price war?

Does the US shale oil industry accept ANY responsibility for the situation we now find ourselves in?

I keep seeing people commenting that KSA is not our ally, yet we have done absolutely NOTHING to shore up the price of oil, which is crucial for the well-being of KSA! Some ally we’ve been!

I'm continually confounded as to why people that believe in free markets and capitalism feel those same principles should not apply to the oil industry.

I guess it's different when you're a producer, land owner, worker or investor. 

Understandable.

Edited March 13, 2020 by BLA

[0R0 + 6,251]

18 hours ago, George8944 said:

On 3/5/2020 at 9:33 AM, BLA said:

United States is a Free Market Economy

In theory.  The FED with its bubble blowing and Congress with its bailouts have pretty much made it a buzzword more than a reality.

It is still largely a free market and bailouts and interventions are not as common as the headlines make out. Only Agriculture has been constantly supported with some odd unintended consequences of corporate farms getting more aid than the family farms that were supposed to get it. 

The Fed money printing and bubble blowing story popular with the hard money crowd is simply incorrect. The US, since the Saudi petrodollar deal and the installation of Volcker at the Fed, has been tight at all times with hardly any period of relief and no consideration of actual economic and financial conditions. Rates have been raised at consecutively lower levels of capacity utilization, labor participation and employment for over 4 decades. All to satisfy the deranged terms Saudi managed to squeeze out of Kissinger. Wish Lighthizer was around then. 

The real inflators were the perpetual ones with hugely growing baby boom generations. Japan Korea Italy Spain Brazil Greece, were all printing up a storm of money raising M2 above 25% annually. These translated into Eurodollar credit expansion through levering dollar reserve purchases that raised prices everywhere.  US was never over 10% M2 growth but for brief periods in the 1970s due to oil drilling finance (4500 rigs drilling the US did not come cheap and consumed steel and people in huge numbers). From the end of the 1990s, it has been China and its commodity suppliers that have inflated at huge rates and accumulated reserves such that the Eurodollar was forced into investing in high real rate US paper as reserve accumulation gushed in and caused all to look for higher returns. The Greenspan "conundrum" of how raising rates resulted in nothing for commercial rates was the classic effect of this. China was in the midst of a process of of printing up a 20 fold monetary expansion. Bigger than Korea, Japan, Italy and other currencies that don't have a decimal division in circulation because the whole unit is worth a penny or less. 

There is no participation of the Fed in the bubble blowing but for the financial crisis, when the Fed pushed a little too aggressively at QE3 but then stopped too early and had the deranged notion that it could take the reserves back down with no consequence. QE1 and QE2 were late, too small, and were all sucked away by the Eurodollar system out of the US, such that liquidity at home remained constrained. The bubbles were blown by Europe in the late 1990s and China in the 2000s' housing crisis and in the early 2010s commodity bubble part II. Just as in the late 60s and 70s, but with the added kicker of investing huge volumes of capital within the US via the Eurodollar market. Just at the wee end of the housing bubble, foreign capital flows hit 17% of GDP for one quarter in 2007. 

We had a NIC bubble of the 1960s and 70s, a Japan bubble of the 1970-80s, A Eurobubble into 2000, and a China bubble 2000-2020, with the post 2011 portion being in true full blown real estate and industrial bubble territory. And on a scale and degree of leverage not ever seen before. China is the most structurally cyclical economy on the planet yet has had no cycles since 1996. Can you imagine how much money had to be printed to cover the economic dips so that they don't show up? How about 200% of GDP? 

. 

[0R0 + 6,251]

18 hours ago, Douglas Buckland said:

Okay, forget the politics and just use common sense.

Was the unrestrained pumping of US shale oil good, or bad, in regards to stabilizing the global oil price?

Did the US shale oil industry benefit hugely from any production cut by OPEC+ while they did not restrain their production in the least?

Can the US shale oil industry remain viable, without a bailout, during this price war?

Does the US shale oil industry accept ANY responsibility for the situation we now find ourselves in?

I keep seeing people commenting that KSA is not our ally, yet we have done absolutely NOTHING to shore up the price of oil, which is crucial for the well-being of KSA! Some ally we’ve been!

This was all baked into the cake in the 2011-2014 oil price bubble that China and Saudi cooperated in creating.. It caused the shale fracking rush and the horrid lease terms and bad financing deals (good for the companies).  Thus 2 years of prices way below production costs and the resultant 150 oil and gas bankruptcies only brought production down by 1 mil bbl/d for one year. All driven by "use it lose it" lease terms, and a debt canon at the company's back that forced them to drill as much as possible to generate cash flow, rather than wait for better prices. 

You can't blame them now for the predicament they dug themselves into in 2012-2014.

Who caused this? why the Chinese demand, and the Saudi restriction of supply. No mystery. If you want to point fingers then that is where you should point. 

 

[BLA + 1,666]

2 hours ago, 0R0 said:

It is still largely a free market and bailouts and interventions are not as common as the headlines make out. Only Agriculture has been constantly supported with some odd unintended consequences of corporate farms getting more aid than the family farms that were supposed to get it. 

The Fed money printing and bubble blowing story popular with the hard money crowd is simply incorrect. The US, since the Saudi petrodollar deal and the installation of Volcker at the Fed, has been tight at all times with hardly any period of relief and no consideration of actual economic and financial conditions. Rates have been raised at consecutively lower levels of capacity utilization, labor participation and employment for over 4 decades. All to satisfy the deranged terms Saudi managed to squeeze out of Kissinger. Wish Lighthizer was around then. 

The real inflators were the perpetual ones with hugely growing baby boom generations. Japan Korea Italy Spain Brazil Greece, were all printing up a storm of money raising M2 above 25% annually. These translated into Eurodollar credit expansion through levering dollar reserve purchases that raised prices everywhere.  US was never over 10% M2 growth but for brief periods in the 1970s due to oil drilling finance (4500 rigs drilling the US did not come cheap and consumed steel and people in huge numbers). From the end of the 1990s, it has been China and its commodity suppliers that have inflated at huge rates and accumulated reserves such that the Eurodollar was forced into investing in high real rate US paper as reserve accumulation gushed in and caused all to look for higher returns. The Greenspan "conundrum" of how raising rates resulted in nothing for commercial rates was the classic effect of this. China was in the midst of a process of of printing up a 20 fold monetary expansion. Bigger than Korea, Japan, Italy and other currencies that don't have a decimal division in circulation because the whole unit is worth a penny or less. 

There is no participation of the Fed in the bubble blowing but for the financial crisis, when the Fed pushed a little too aggressively at QE3 but then stopped too early and had the deranged notion that it could take the reserves back down with no consequence. QE1 and QE2 were late, too small, and were all sucked away by the Eurodollar system out of the US, such that liquidity at home remained constrained. The bubbles were blown by Europe in the late 1990s and China in the 2000s' housing crisis and in the early 2010s commodity bubble part II. Just as in the late 60s and 70s, but with the added kicker of investing huge volumes of capital within the US via the Eurodollar market. Just at the wee end of the housing bubble, foreign capital flows hit 17% of GDP for one quarter in 2007. 

We had a NIC bubble of the 1960s and 70s, a Japan bubble of the 1970-80s, A Eurobubble into 2000, and a China bubble 2000-2020, with the post 2011 portion being in true full blown real estate and industrial bubble territory. And on a scale and degree of leverage not ever seen before. China is the most structurally cyclical economy on the planet yet has had no cycles since 1996. Can you imagine how much money had to be printed to cover the economic dips so that they don't show up? How about 200% of GDP? 

. 

Good points.

China's current bank credit/ debt is 330% of GDP.  That was before coronavirus. 

Too bad lighthizer wasn't around before.  Trump seems to kowtow to Saudi MBS.  

Do you think U.S. attitude will change toward Saudis after their crash and burn take no prisoners market share campaign ?

Edited March 13, 2020 by BLA

[BLA + 1,666]

19 minutes ago, 0R0 said:

This was all baked into the cake in the 2011-2014 oil price bubble that China and Saudi cooperated in creating.. It caused the shale fracking rush and the horrid lease terms and bad financing deals (good for the companies).  Thus 2 years of prices way below production costs and the resultant 150 oil and gas bankruptcies only brought production down by 1 mil bbl/d for one year. All driven by "use it lose it" lease terms, and a debt canon at the company's back that forced them to drill as much as possible to generate cash flow, rather than wait for better prices. 

You can't blame them now for the predicament they dug themselves into in 2012-2014.

Who caused this? why the Chinese demand, and the Saudi restriction of supply. No mystery. If you want to point fingers then that is where you should point. 

 

 

Don't you think the shale companies themselves should accept some of the blame ?

Their goldrush  mentality, expand at all costs ,  over leveraged balance sheets, oil price is going to $120 bbl , "Geez this is great ! " attitude is just a little bit to blame ?

Maybe some ?

As for the banks, bondholders , and high yield investors that are going to take a haircut .  .  .  .  .   you made your bed, now sleep in it. 

In the end the market will balance this all out .

Chinese sizable demand increases faster than supply ran up the price.  The fact that such a large percentage of world supply came from a select few producers allowed OPEC to prop up prices.

I sincerely believe real competition is coming to the oil industry for the first time in 60 years.

Edited March 13, 2020 by BLA

[Wombat + 1,028]

4 hours ago, BLA said:

 

Don't you think the shale companies themselves should accept some of the blame ?

Their goldrush  mentality, expand at all costs ,  over leveraged balance sheets, oil price is going to $120 bbl , "Geez this is great ! " attitude is just a little bit to blame ?

Maybe some ?

As for the banks, bondholders , and high yield investors that are going to take a haircut .  .  .  .  .   you made your bed, now sleep in it. 

In the end the market will balance this all out .

Chinese sizable demand increases faster than supply ran up the price.  The fact that such a large percentage of world supply came from a select few producers allowed OPEC to prop up prices.

I sincerely believe real competition is coming to the oil industry for the first time in 60 years.

I agree. I thinking Brazil, Guyana and Canada gonna kill OPEC once and for all.

[George8944 + 128]

22 hours ago, Old-Ruffneck said:

Was the unrestrained pumping of US shale oil good, or bad, in regards to stabilizing the global oil price?   ( Q1)

Did the US shale oil industry benefit hugely from any price cut by OPEC+ while they did not restrain their production in the least? (Q2)

Can the US shale oil industry remain viable, without a bailout, during this price war?  (Q3)

Does the US shale oil industry accept ANY responsibility for the situation we now find ourselves in?  (Q4)

A1 -  At what price would you like to see oil prices "stabilize"?  $100?   I guess that's a question, not an answer.  I think it is worth the effort to make us more energy independent of a global hot spot.  You do realize under US law it is illegal for companies to meet and conspire to set market prices, right?  Following OPEC's lead in order to limit supply with the intent of driving up prices is no different, but nobody sees it that way.   

A2 - No benefit from a price cut.  However, do you really think OPEC or Russia would happily concede say,  5 bbl/day just to make us happy?  Of course not.  If we want market share we have to fight it out in the market.   This is what's going on now.   

A3 -  The billion dollar question.  Again,  I oppose most bailouts including this one.   I think the "industry" can survive on its own, but it would look different after the dust settled.  The oil in the ground doesn't care who pumping it out at the top, plus it's not going any place.  Exxon, Chevron and other players have the capital reserves to buy up the failed small drilling companies at fire sale prices. ( Chapter 7 Bankruptcy helps with this.)  When governments step in with bailouts, they reward poorly run companies with money after those same companies have proven they can't manage it.  Had this carnage taken place due to the mother of all huricanes or similar, I would have a different answer.

A4 -  Good question.  Probably not since they are asking for bailouts.  

[PE Scott + 563]

All though the U.S. can not and will not limit the production of U.S. E&P companies, the U.S. can and will purchase large quantities of cheap oil for the strategic reserve, which in effect takes that oil supply off the world market.

Besides punitive taxes and regulations, I *think* that's the only real mechanism by which the U.S. can affect available supply to market. Of course, really that just represents a small uptick in demand....not a production interruption/cap. 

Edited March 14, 2020 by PE Scott

[J.mo + 165]

12 hours ago, BLA said:

I'm continually confounded as to why people that believe in free markets and capitalism feel those same principles should not apply to the oil industry.

I guess it's different when you're a producer, land owner, worker or investor. 

Understandable.

Everyone loves capitalism until it kicks their door down..

 

On the flip side if oil was $150 a barrel and crippling other industries and businesses I'd bet the farm these same people crying wolf would say too bad, capitalism baby!

[wrs + 893]

16 hours ago, BLA said:

Good points.

China's current bank credit/ debt is 330% of GDP.  That was before coronavirus. 

Too bad lighthizer wasn't around before.  Trump seems to kowtow to Saudi MBS.  

Do you think U.S. attitude will change toward Saudis after their crash and burn take no prisoners market share campaign ?

I think Trump filling the SPR just showed that it is changing.  That was the thing I have been most concerned about with Trump, the fact that he erroneously believes that low oil prices are a tax refund to the consumer.  It's not true, they are just moving jello around the plate as is this dumping the Saudis are doing. People spend the pay in some other place that they save on gasoline.  In the same way, the Saudis are just pulling out of their storage to dump into someone else's storage.  They will not get to 12mmbbl/day and most certainly not at this price.

The oil they are going to activate is higher cost to produce and it costs money to get it fired up as well.  From past history, their greatest production was for one month slightly over 11mmbbl/day.  They don't have enough wells.  That is their problem. They have a lot of fields but not enough wells and drilling more is expensive.  

[wrs + 893]

11 hours ago, George8944 said:

  Had this carnage taken place due to the mother of all huricanes or similar, I would have a different answer.

 

How is CV not the same?  Keep in mind, the market was pretty much in balance before this occurred.  

[wrs + 893]

9 hours ago, J.mo said:

On the flip side if oil was $150 a barrel and crippling other industries and businesses I'd bet the farm these same people crying wolf would say too bad, capitalism baby!

Strawman, that's not the case at all.  The futures markets distort pricing and they are as bad as stock markets at pricing things.  Proof is how things have gone the last couple of years.  

Edited March 14, 2020 by wrs

[dboxtv.info + 1]

🤔🤔🤔🤔😁

[dboxtv.info + 1]

1 minute ago, dboxtv.info said:

🤔🤔🤔🤔😁

🤾I was trading oil at 3.48 pm while listening to Trump press conference and near the end 3.52 pm he spoke About buying buying oil to fill up u.s reserves . All I could say is the oil jumped from mid 30 to 32 while Dow surged above high of day setting up a weekend high all we need is news from 2 alpha male this weekend 🙄🤪but my prediction is lower open on the night session Sunday testing Fridays lows with another few days of volatile lows with minor swings upwards. 

[James Regan + 1,776]

@George8944 A1 -  At what price would you like to see oil prices "stabilize"?  $100?   I guess that's a question, not an answer.  I think it is worth the effort to make us more energy independent of a global hot spot.  You do realize under US law it is illegal for companies to meet and conspire to set market prices, right?  Following OPEC's lead in order to limit supply with the intent of driving up prices is no different, but nobody sees it that way. 

Although it was ok for the O&G majors to colude to drive down rig rates and put 1000s out of work 

[Old-Ruffneck + 1,246]

13 hours ago, George8944 said:

  On 3/12/2020 at 9:50 PM, Old-Ruffneck said:

Was the unrestrained pumping of US shale oil good, or bad, in regards to stabilizing the global oil price?   ( Q1)

Did the US shale oil industry benefit hugely from any price cut by OPEC+ while they did not restrain their production in the least? (Q2)

Can the US shale oil industry remain viable, without a bailout, during this price war?  (Q3)

Does the US shale oil industry accept ANY responsibility for the situation we now find ourselves in?  (Q4)

This wasn't my quote, as Bob Seger song, "Turn the Page" is apt here. 

 

[James Regan + 1,776]

@Douglas Buckland Remember that wee conversation over Hysteria I think it’s coming. Bogroll ???

https://www.usatoday.com/story/money/2020/03/02/coronavirus-toilet-paper-shortage-stores-selling-out/4930420002/

[El Nikko + 2,145]

49 minutes ago, James Regan said:

@Douglas Buckland Remember that wee conversation over Hysteria I think it’s coming. Bogroll ???

https://www.usatoday.com/story/money/2020/03/02/coronavirus-toilet-paper-shortage-stores-selling-out/4930420002/

That's happening everywhere in the UK, totally insane. You can't buy rice or pasta where we are....bought by the half of the population that can't cook and have no creativity no doubt

 

[James Regan + 1,776]

1 hour ago, El Nikko said:

That's happening everywhere in the UK, totally insane. You can't buy rice or pasta where we are....bought by the half of the population that can't cook and have no creativity no doubt

 

Wonder how much guns and ammunition sales are up in the USA my 50.Cal trumps your bog roll hand it over ah ah ah ah atichoooo.....

[James Regan + 1,776]

U.S. shale oil companies have asked oilfield service providers for price cuts of at least 25 percent as they grapple with tanking oil prices and pessimistic oil demand forecasts, Reuters reports, citing industry executives and a letter sent to oilfield service companies.

ahahahahaha really drop your budgie smugglers and we will give you a reach around at the same time.

Free Market it’s a bitch.

Edited March 14, 2020 by James Regan

[El Nikko + 2,145]

15 minutes ago, James Regan said:

U.S. shale oil companies have asked oilfield service providers for price cuts of at least 25 percent as they grapple with tanking oil prices and pessimistic oil demand forecasts, Reuters reports, citing industry executives and a letter sent to oilfield service companies.

ahahahahaha really drop your budgie smugglers and we will give you a reach around at the same time.

Free Market it’s a bitch.

That's not going to make an ounce of difference at this point especially if demand starts crumbling in the US and Europe

They all need to stop drilling right now and the siutation will balance itself out, also sending someone to have a little word in MBS's ear about pulling this stunt when there is a 'pandemic' already threatening the global economy.

[0R0 + 6,251]

22 hours ago, BLA said:

Good points.

China's current bank credit/ debt is 330% of GDP.  That was before coronavirus. 

Too bad lighthizer wasn't around before.  Trump seems to kowtow to Saudi MBS.  

Do you think U.S. attitude will change toward Saudis after their crash and burn take no prisoners market share campaign ?

 

22 hours ago, BLA said:

Don't you think the shale companies themselves should accept some of the blame ?

Their goldrush  mentality, expand at all costs ,  over leveraged balance sheets, oil price is going to $120 bbl , "Geez this is great ! " attitude is just a little bit to blame ?

Maybe some ?

As for the banks, bondholders , and high yield investors that are going to take a haircut .  .  .  .  .   you made your bed, now sleep in it. 

In the end the market will balance this all out .

Chinese sizable demand increases faster than supply ran up the price.  The fact that such a large percentage of world supply came from a select few producers allowed OPEC to prop up prices.

I sincerely believe real competition is coming to the oil industry for the first time in 60 years.

Yes, China is over-levered, it is not just the 330% of the official statistics. There is an additional shadow banking credit that is not directly reported. It was deliberately off the books both to keep the banks afloat during a financial breakdown. Despite SOE Provincial and Municipal SIVs filling out as much or more than the private credit, the owners are the general public via insurance and trust products and Wealth Management products and managed asset accounts (WMPs AMP) deliberately issued outside the banks and at arms length to them despite much of the origination having had come from the banks proper or their investment banking arms. 

Prof. Malinen in Finland estimates another 200% or more of GDP in these shadow banking instruments in China. He charts it out to total 600-700% of GDP.

I can't fault the aggressive early bird frackers. New tech, enormous profits dominating the vistas as far as the eye can see, if I were them, I would have been doing just the same, not considering that a million others like me may just bust the market in a year or two when we were all on line. In "shale oil Fiasco" we all lamented the disappointing productivity of child wells, particularly in the Permian, can you imagine what prices would have been like if the productivity was as expected originally? Would $20 have actually held up? "careful what you wish for"

Just remember that at the time, China GDP was growing double digits in the aftermath of the biggest stimulus ever conducted anywhere over the 2008-1019 crisis. 85% of the world's growth. All were straight lining their oil demand growth on logarithmic charts to the sky and nobody was paying attention to the pathetic oil demand trends in the developed world and NICs. It is hard to stop stupid when history and statistics were on your side and you didn't need to even put lipstick on your pig on the investor road show, everyone was thinking crown roast. 

So they signed horrible leases and terrible funding terms and paid the price in 2016. Those that survived are paying the price now. 

As I pointed out elsewhere, the Saudis are targeting Russia at EU ports. Not so much US shipments. If @ceo_energemsier is correct then they are being rather successful with what looks like displacing 2 mob/d of Russian crude in N Europe. Roughly one additional Russian VLCC per day being held up at sea. Have not identified a Russian counter move yet. The Urals grade crude is just sitting there on the ocean. Eating a bit of Russian money as rates have ballooned, and providing no revenue. The Russian revenue picture is hurt also by NG and LNG prices having crashed a few months ago already. It is a double whammy for Russian FF revenue. The little <$2 Bil hole that the CBR was projecting for the Russian budget is about 1/3 of what is already happening this week. Either Russia rejoins OPEC+ or oil will be permanently sold at the lowest cost of marginal production out of the US shale, about $30 till depletion takes care of production volumes. 

Yes, this is what a free market looks like. Prices fluctuate between high supply constrained markets and low oversupplied markets. The OPEC + cartel, like the TRRC before it and Standard oil before, have rigged the market for a century. Production is now too far flung and no longer requires enormous concentrated capital projects so there is going to be a boom and bust cycle unless Russia joins in, in which case, the prices will be supported but OPEC+ will slowly lose share. Russian oil company plans to rush ahead with development are not something the Saudis are considering a healthy move. It may make sense for the Russian oil majors but promising to increase future supply into an overwhelmed market is not going to fly. I doubt they manage to fund it externally, nor to speak of funding it from cash flow. 

 

 

 

[0R0 + 6,251]

2 hours ago, El Nikko said:

That's happening everywhere in the UK, totally insane. You can't buy rice or pasta where we are....bought by the half of the population that can't cook and have no creativity no doubt

 

What is that for? The new pound sterling?

 

Edited March 14, 2020 by 0R0

[0R0 + 6,251]

6 hours ago, James Regan said:

@George8944 A1 -  At what price would you like to see oil prices "stabilize"?  $100?   I guess that's a question, not an answer.  I think it is worth the effort to make us more energy independent of a global hot spot.  You do realize under US law it is illegal for companies to meet and conspire to set market prices, right?  Following OPEC's lead in order to limit supply with the intent of driving up prices is no different, but nobody sees it that way. 

Although it was ok for the O&G majors to colude to drive down rig rates and put 1000s out of work 

To enforce law you need to have someone willing to prosecute or file suit. Besides, I am not sure that there was a conspiracy so much as lower demand cutting rig counts and thus rig rates. 

[James Regan + 1,776]

1 hour ago, 0R0 said:

To enforce law you need to have someone willing to prosecute or file suit. Besides, I am not sure that there was a conspiracy so much as lower demand cutting rig counts and thus rig rates. 

“Lower demand”? Can you clarify?