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Bloomberg article poses that Putin's ultimate rath of "No more Cuts" for OPEC+ is targeted at the U.S.

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(edited)

The thought is Putin is pissed at the U.S. for (1) U.S. not cutting production (2) Sanctioned companies thwarting the Russian completion of Nordstream2 (3) Sanctions on Venezuela screwing with Rosneft's working relationship.

Can't blame Putin.  Trump screwed 'em good.

FROM BLOOMBERG ARTICLE :

"The Kremlin has decided to sacrifice OPEC+ to stop U.S. shale producers and punish the U.S. for messing with Nord Stream 2,” said Alexander Dynkin, president of the Institute of World Economy and International Relations in Moscow, a state-run think tank. “Of course, to upset Saudi Arabia could be a risky thing, but this is Russia’s strategy at the moment – flexible geometry of interests.”

This sounds like war ?  Is U.S. now fighting a two front economic war against both China and Russia ?

Russia playing this hand at this time makes complete sense.  Cuts would only have had a temporary effect, if any.  There is at least 4 million bbls excess supply now and that could easily double if the pandemic expands and as the Chinese spare storage capacity fills.

As was put forth by a previous poster, the Russians are shipping oil to China via their Eastern Siberian-Asian Pipeline. This oil is contracted and committed for and takes priority over Saudi tanker delivery.  At least until the storage spare capacity is full in China.  

A perfect storm ?  Pandemic , OPEC+ cuts , Putin pouting , U.S./Russia Mideast influence, Iran Sanctions , Venezuela Sanctions , attempted Coup by MBS's uncle and cousin , Presidential election. 

What's next ?

If Russia doesn't cut a deal soon and support OPEC+ cuts next is an  .   .   .  .   .   ALL OUT OIL PRICE WAR !

Buyers have to commit to producers for April delivery volumes by March 10th (Tuesday).  Not going to be pretty.

A price war (or in reality true competition) was inevitable with or without the pandemic, with or without OPEC+. TOO MUCH OIL.  Just like too much natural gas.  Every producer will be hurt short term.  The thing to watch is who survives to take advantage of a rebound in prices and prosperity. 

*  Half the shale producers will be acquired.  Chapter 11 reorganization will not be enough . In this next chapter SIZE MATTERS. (Note To Never Shalers: Shale is not dead.  Just moving from weak hands to the strong.  Long overdue)

*  The big question is what affect will a price war have on Soveign producers, as in most of OPEC. Also the stability in the Mideast and African oil states. Don't know ? 

https://finance.yahoo.com/news/putin-dumps-mbs-start-war-172746296.html

BUCKLE YOUR SEATBELTS . THIS WILL BE A WILD RIDE.  

Edited by BLA
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Putin Launches "War On US Shale" After Dumping MbS & Breaking Up OPEC+

OPEC+ is no more, after a torrid 24 hours in which Russia overturned the balance of power in the oil world, leaving the members of OPEC+ dazed and confused, shocking Saudi which now faces social unrest with the price of oil far below Riyadh's budget, and - in a repeat of the Thanksgiving 2014 OPEC massacre - sending oil prices plunging by the most since the financial crisis.

And now, Bloomberg has the stunning backstory behind Friday's announcement that Russia is quitting its output deal with OPEC and its allies, after last week's Vienna summit meant to back a proposal by oil producers to cut output collapsed, causing a 10% plunge in oil prices, with some markets seeing their biggest one-day falls since the financial crisis. 

Driving a stake right through the heart of his former OPEC colleagues, Russian Energy Minister Alexander Novak said that "considering the decision taken today, from April 1 of this year onwards, neither we nor any OPEC or non-OPEC country is required to make (oil) output cuts."

With global fears over coronavirus already severely impacting the oil market (down 30% since the start of the year), and with the Russians surprising oil ministers gathered at OPEC headquarters by suddenly abandoning a plan meant to keep oil prices steady, the biggest shock was felt by the Saudis, because as Bloomberg puts it, Putin has just effectively dumped crown prince MbS to start a war on America's shale oil industry:  ...

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(edited)

Quote

 

BEIJING, Mar 7 - PRIME. The trade turnover between Russia and China in January and February 2020 increased by 5.6% compared with the same period last year and amounted to 17.1 billion dollars, according to the main customs department of China.

For two months, Chinese exports to Russia fell by 15.4% year on year to $ 6 billion, while shipments from Russia to China grew by 21.7% to $ 11.18 billion.

Earlier, Russian Finance Minister Anton Siluanov said that Russia is losing 1 billion rubles a day from lowering trade with China because of the coronavirus. The Minister noted that, most likely, the consequences of coronavirus will have a lesser impact on the Russian economy. In his opinion, this factor is not so significant as to prevent the achievement of the forecast of 1.9% for GDP growth in 2020, but everything will depend on the duration of the quarantine.

At the end of 2019, trade between Russia and China grew by 3.4% and amounted to a record 110.75 billion dollars.

 

Quote

 

Commodity turnover between China and the USA in January-February fell by 20.9%, amounting to $ 60.57 billion

BEIJING, Mar 7 - PRIME. The turnover of the United States and China against the backdrop of the coronavirus epidemic for the first two months of this year amounted to $ 60.57 billion, which is 20.9% lower than the same period in 2019, data published on Saturday by the PRC's main customs department show.

According to Chinese customs, exports from the PRC to the USA during the reporting period decreased by 27.7%, amounting to 42.97 billion dollars, while the United States imported goods to China only by 17.6 billion dollars, which is 2.5% more than in January-February last year.

The turnover of the United States and China against the backdrop of a protracted trade war between the two largest economies in 2019 amounted to 541.22 billion dollars, which is 14.6% lower than in 2018.

 

Very interesting phenomena occur in international trade
 

Quote

 

China in January-February increased oil imports by 5.2%

BEIJING, Mar 7 - PRIME. In January-February of this year, China increased oil imports by 5.2%, natural gas - by 2.8% compared with the same period last year, according to data released by the State Statistical Office of China on Saturday.

Remaining the world's largest oil importer, China imported only 86.08 million tons of crude oil in the first two months of 2020. At the same time, during the indicated period, imports of oil products fell by 13.6%, amounting to 4.9 million tons in 2 months of the first month of the year.

According to statistics, in January-February this year, China imported 17.8 million tons of natural gas.

In 2019, natural gas imports grew by 6.9% in annual terms, amounting to 96.6 million tons, given the commissioning of the Power of Siberia gas pipeline in December. China imported 505.7 million tons of black gold in 2019.

 

 

Edited by Tomasz

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Aramco starts market share war, slashes $6-$8 dollars relative to Russians. That's about $35/barrel or $10 below Brent.

 

https://www.bloomberg.com/news/articles/2020-03-07/saudis-plan-big-oil-output-hike-beginning-all-out-price-war
 

Quote


Saudis Plan Big Oil Output Hike, Beginning All-Out Price War

Saudi Arabia plans to increase oil output next month, going well above 10 million barrels a day, as the kingdom responds aggressively to the collapse of its OPEC+ alliance with Russia.

The world’s largest oil exporter started a price war on Saturday by slashing the prices it sells crude into foreign markets by the most in at least 20 years, offering unprecedented discounts in Europe, the Far East and the U.S. to entice refiners to purchase Saudi crude at the expense of other suppliers.

At the same time, Saudi Arabia has privately told some market participants it could raise production much higher if needed, even going to a record of 12 million barrels a day, according to people familiar with the conversations, who asked not to be named to protect commercial relations. With demand being ravaged by the coronavirus outbreak, opening the taps like that would throw oil market into chaos.

In the first instance, Saudi production is likely to rise above 10 million barrels a day in April, from about 9.7 millions a day this month, according to people familiar with Saudi thinking.

“That’s the oil market equivalent of a declaration of war,” said a commodities hedge fund manager, asking not to be named due to the sensitivity of the situation.

Maximum Pain

The shock-and-awe Saudi strategy could be an attempt to impose maximum pain in the quickest possible way to Russia and other producers, in an effort to bring them back to the negotiating table, and then quickly reverse the production surge and start cutting output if a deal is achieved. Brent crude, the global oil benchmark, closed down 9.4% on Friday, its biggest daily drop since the global financial crisis in 2008, settling at $45.27 a barrel.

The production increase and deep discounts mark a dramatic escalation by Prince Abdulaziz bin Salman, the Saudi oil minister, after his Russian counterpart Alexander Novak rejected an ultimatum on Friday in Vienna at the OPEC+ meeting to join in a collective production cut. After the talks collapsed, Novak said countries were free to pump-at-will from the end of March.

“Saudi Arabia is now really going into a full price war,” said Iman Nasseri, managing director for the Middle East at oil consultant FGE.

Record Discounts

With jet-fuel, gasoline and diesel consumption rapidly falling due to the economic impact of the coronavirus outbreak, the energy market now faces a simultaneous supply-and-demand shock.

After the failure in Vienna, Riyadh responded within hours by cutting its so-called official selling prices, offering record discounts for some of the crude it sells worldwide, according to a copy of the prices seen by Bloomberg News. Aramco has set the prices, but the official communication to clients is likely to come on Monday, a person familiar with the matter said.

The Saudi Energy ministry didn’t respond to a request for comment.

Last month, Saudi Arabia not only implemented the OPEC+ output cuts, but “voluntarily” restrained its production even further in an effort to lift prices. When the OPEC+ deal expires in three weeks, Riyadh will be able to pump as much as it wants.

Aramco tells refiners each month the price at which it will sell its crude, often adjusting the OSP by a few cents or as much a couple of dollars. But on Saturday, Aramco told customers it was slashing official prices by $6-$8 a barrel across all regions. The dramatic move will resonate beyond Saudi Arabia. The kingdom’s pricing decision affects about 14 million barrels a day of oil exports, as other producers in the Persian Gulf region follow its lead in setting prices for their own shipments.

Getting Nasty

In the most significant move, Aramco widened the discount for its flagship Arab Light crude to refiners in north-west Europe by a hefty $8 a barrel, offering it at $10.25 a barrel under the Brent benchmark. In contrast, Urals, the Russian flagship crude blend, trades at a discount of about $2 a barrel under Brent. Traders said the Saudi move was a direct attack at the ability of Russian companies to sell crude in Europe.

“This is going to get nasty,” said Doug King, a hedge fund investor who co-founded the Merchant Commodity Fund. “OPEC+ is going to pump more, and the world is facing a demand shock. $30 oil is possible.”

Oil traders are looking to historical charts for an indication of how low prices could go. One potential target is $27.10 a barrel, reached in 2016 during the last price war. But some believe the market could go even lower.

“We’re likely to see the lowest oil prices of the last 20 years in the next quarter,” said Roger Diwan, an oil analyst at consultant IHS Markit Ltd. and a veteran OPEC watcher, implying that the price could fall below $20 a barrel.

Brent crude, the global benchmark, fell to a low of $9.55 a barrel in December 1998, during one of the rare price wars that Saudi Arabia has launched over the last 40 years.

 

 

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I don’t understand why we don’t do away with buying any foreign oil at lest for awhile. From what I hear we get over 70% of our oil from OPEC, why not reverse that? Unless I’m missing something wouldn’t it be to our benefit and give us leverage? I think it would be a huge weapon in this ‘Oil war’

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So after 1 April nobody will be required to cut production. The oil market is presently over-supplied. The price of oil is falling like a rock. Exploration is essentially non-existent....

How can any rational adult see a ‘happy ending’ to this pissing contest? 

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1 hour ago, Tom Kirkman said:

Putin Launches "War On US Shale" After Dumping MbS & Breaking Up OPEC+

OPEC+ is no more, after a torrid 24 hours in which Russia overturned the balance of power in the oil world, leaving the members of OPEC+ dazed and confused, shocking Saudi which now faces social unrest with the price of oil far below Riyadh's budget, and - in a repeat of the Thanksgiving 2014 OPEC massacre - sending oil prices plunging by the most since the financial crisis.

And now, Bloomberg has the stunning backstory behind Friday's announcement that Russia is quitting its output deal with OPEC and its allies, after last week's Vienna summit meant to back a proposal by oil producers to cut output collapsed, causing a 10% plunge in oil prices, with some markets seeing their biggest one-day falls since the financial crisis. 

Driving a stake right through the heart of his former OPEC colleagues, Russian Energy Minister Alexander Novak said that "considering the decision taken today, from April 1 of this year onwards, neither we nor any OPEC or non-OPEC country is required to make (oil) output cuts."

With global fears over coronavirus already severely impacting the oil market (down 30% since the start of the year), and with the Russians surprising oil ministers gathered at OPEC headquarters by suddenly abandoning a plan meant to keep oil prices steady, the biggest shock was felt by the Saudis, because as Bloomberg puts it, Putin has just effectively dumped crown prince MbS to start a war on America's shale oil industry:  ...

We already have a posting about how MBS is selectively targeting Russia'a key export targets with discounts below Russia's and spot oil prices. He is making sure Russia loses its buyers. I think that with his political power "house cleaning" MBS can proceed and cut down Russia and US shale to size. But his target is obviously Russia, as retaliation, US shale is a welcome case of collateral damage. I think Russia's unstated target is Saudi development of its shale gas fields which would add a 4th major competitor to its gas, which already lost half its international price the past 3 years. 

I bet China is having a dragon dance over this. 

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1 hour ago, Crude73 said:

I don’t understand why we don’t do away with buying any foreign oil at lest for awhile. From what I hear we get over 70% of our oil from OPEC, why not reverse that? Unless I’m missing something wouldn’t it be to our benefit and give us leverage? I think it would be a huge weapon in this ‘Oil war’

As much Russia oil as OPEC. We need it because LTO doesn't produce enough diesel and has to be blended with heavier crudes. US refiners had just finished installing extra stages to their process so they could take sulfur rich heavy crudes just when Shale LTO showed up. 

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3 minutes ago, 0R0 said:

As much Russia oil as OPEC. We need it because LTO doesn't produce enough diesel and has to be blended with heavier crudes. US refiners had just finished installing extra stages to their process so they could take sulfur rich heavy crudes just when Shale LTO showed up. 

American refineries on the Gulf Coast were always set up to process the heavy Venezuelan crude. The LTO fiasco started and Venezuela went to the dogs. A double hit.

If the US environmentalist could pull their heads out of their butts, make the permitting of a new refinery streamlined and reasonable so that it doesn’t take YEARS to obtain a permit, that would help.

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The biggest winner in the importing nations as their bill goes down. (Funny China is number 1) biggest losers are exporters (especially non diversified economies) so Saudi is number 1 there. Russia Canada and USA are gonna have pain in the oil sector. I think non saudi OPEC will feel it alot also - I dont think their economies are overly strong . I want to say low fuel helps economies with cheap work but I'm thinking financial fallout is gonna spill over. This didnt happen after 140$ oil so the world is a different place than 2014

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1 hour ago, Douglas Buckland said:

American refineries on the Gulf Coast were always set up to process the heavy Venezuelan crude. The LTO fiasco started and Venezuela went to the dogs. A double hit.

If the US environmentalist could pull their heads out of their butts, make the permitting of a new refinery streamlined and reasonable so that it doesn’t take YEARS to obtain a permit, that would help.

I think Trump might be able to do that by an executive order. Cutting regulations is his forte. 

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It's a net stimulus to the world economy to be sure. Probably will spur a spike a demand in oil which may soften the blow of coronavirus. Probably benefits countries like China, India, and Japan the most.

Assuming that this continues for a while:

 

Quicker consolidation in the E&P industry in the US.  Companies that had good timing with hedges or healthy balance sheets should be well positioned. Others not so much.

The response from the American capital markets will be interesting. Probably a quicker pace of insolvencies from companies whose debt is already distressed. I think US production starts going down in 4-5 months (it did after 6 months in 2014, but we're already a few months in this cycle due to coronavirus)

Probably good in the medium term for the pure shale gas industry assuming that production in the permian slows down and causes a turn in NG prices.

Bad for the renewables sector.

Worse for countries like Venezuela, Iraq, Nigeria, etc than Saudi Arabia, Kuwait, or Russia.

It looks like Russia wanted this market share war much more so than Saudi Arabia did, so maybe they think they have the upper hand, or didn't think SA would be as aggressive in turning the tap as they look like they might be.

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7 minutes ago, surrept33 said:

It's a net stimulus to the world economy to be sure. Probably will spur a spike a demand in oil which may soften the blow of coronavirus. Probably benefits countries like China, India, and Japan the most.

Assuming that this continues for a while:

 

Quicker consolidation in the E&P industry in the US.  Companies that had good timing with hedges or healthy balance sheets should be well positioned. Others not so much.

The response from the American capital markets will be interesting. Probably a quicker pace of insolvencies from companies whose debt is already distressed. I think US production starts going down in 4-5 months (it did after 6 months in 2014, but we're already a few months in this cycle due to coronavirus)

Probably good in the medium term for the pure shale gas industry assuming that production in the permian slows down and causes a turn in NG prices.

Bad for the renewables sector.

Worse for countries like Venezuela, Iraq, Nigeria, etc than Saudi Arabia, Kuwait, or Russia.

It looks like Russia wanted this market share war much more so than Saudi Arabia did, so maybe they think they have the upper hand, or didn't think SA would be as aggressive in turning the tap as they look like they might be.

I don't know exact figures on which countries are the most overly reliant on oil and gas exports, but I would say Russia and all of the OPEC countries are. The new finds and extreme availability of natural gas added with fracking, horizontal drilling, etc. will make oil and gas more abundant for the near future. To me, that means that all of the above countries are in deep trouble economically. 

In America we can use our oil and natural gas if we don't allow green extremists to run all over us. We also need to fight against the global warming alarmists and quit going along with us. The oil and gas industries have been punching themselves in the face for the last decade by going along with wind and solar because of very bad advice from public relations "experts". It is time to tell the truth about renewables and their limitations. 

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Could it be like a (mini) reset button? Shale gas and oil will fall off , global plans stall, demand restored, prices of Gas and Oil rebound and the world continues on? *And shale returns to its size but a year (plus?) later when demand has grown and other oil has declined some.

- I dont meant to say its gonna feel mini to those in the thick of it.*

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(edited)

1 hour ago, ronwagn said:

I don't know exact figures on which countries are the most overly reliant on oil and gas exports, but I would say Russia and all of the OPEC countries are. The new finds and extreme availability of natural gas added with fracking, horizontal drilling, etc. will make oil and gas more abundant for the near future. To me, that means that all of the above countries are in deep trouble economically. 

In America we can use our oil and natural gas if we don't allow green extremists to run all over us. We also need to fight against the global warming alarmists and quit going along with us. The oil and gas industries have been punching themselves in the face for the last decade by going along with wind and solar because of very bad advice from public relations "experts". It is time to tell the truth about renewables and their limitations. 

That might be useful

Oil rent according to World Bank

Quote

Oil rents are the difference between the value of crude oil production at world prices and total costs of production. The volatility of worldwide oil prices results in large fluctuations in the percentage of GDP because of the economy's reliance upon the petroleum sector

https://data.worldbank.org/indicator/NY.GDP.PETR.RT.ZS

Russia https://data.worldbank.org/indicator/NY.GDP.PETR.RT.ZS?locations=RU&most_recent_value_desc=true

Saudi Arabia https://data.worldbank.org/indicator/NY.GDP.PETR.RT.ZS?locations=RU-SA&most_recent_value_desc=true

 

Gas rent 

https://data.worldbank.org/indicator/NY.GDP.NGAS.RT.ZS?most_recent_value_desc=true

 

Total resources rent https://data.worldbank.org/indicator/NY.GDP.TOTL.RT.ZS

 

Edited by Tomasz

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1 hour ago, ronwagn said:

I think Trump might be able to do that by an executive order. Cutting regulations is his forte. 

That would be a blessing!

Also, some of the recently closed military bases are located in pretty good spots for a new refinery. As per present environmental law, these sites would NOT need to be cleaned up to ‘pristine conditions’ (physically impossible in any case) prior to siting a new refinery there.

Just a thought. 

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2 hours ago, Douglas Buckland said:

American refineries on the Gulf Coast were always set up to process the heavy Venezuelan crude. The LTO fiasco started and Venezuela went to the dogs. A double hit.

If the US environmentalist could pull their heads out of their butts, make the permitting of a new refinery streamlined and reasonable so that it doesn’t take YEARS to obtain a permit, that would help.

Why do we need more refineries? We already process more then we can consume

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1 minute ago, Refman said:

Why do we need more refineries? We already process more then we can consume

Because a certain percentage of heavy oil has to be mixed with our predominant LTO in order for the old refineries to handle the feedstock. Meridian Energy had plans to build the Davis Refinery in North Dakota and a similar but larger refinery near Kermit, Texas exclusively for LTO. I don't know the status of those. 

MbS has gotten his tit in a wringer on this one. Trump let him get by with Khashhogi. Putin is now really upset about this new shale gas field that Mo has proposed. Putin can outlast the KSA. We're all going to come out of this bruised. 

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25 minutes ago, Rob Kramer said:

Could it be like a (mini) reset button? Shale gas and oil will fall off , global plans stall, demand restored, prices of Gas and Oil rebound and the world continues on? *And shale returns to its size but a year (plus?) later when demand has grown and other oil has declined some.

- I dont meant to say its gonna feel mini to those in the thick of it.*

Unlike 2014-2015, the investment community might be a lot more hesitant to recapitalize the shale industry, especially the weaker players, this time around.  The stronger players need less capital since they can self fund from operations. Obviously this all depends on how long any drop in price lasts for and a million other variables.

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48 minutes ago, Refman said:

Why do we need more refineries? We already process more then we can consume

Because the refineries, steel mills and other heavy industries in the States are running off of ‘old school’ technology and processes due to the fact that it is almost impossible to permit new infrastructure due to the bullshit environmental constraints. 
You cannot handcuff your manufacturing sector to unattainable environmental concerns and expect your industries to remain competitive.

Newer factories, refineries and smelters would likely be ‘cleaner’ and more ‘environmentally friendly’ in any case.

 

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1 hour ago, Refman said:

Why do we need more refineries? We already process more then we can consume

Well, what do farmer’s do when they produce more than they consume? They sell it and make money so that they can stay in business. Do you think refineries exist simply to service domestic consumption?

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(edited)

SAUDI ARABIA NOT STARTING A PRICE WAR

 

Big deal. Look at ARAMCO's financial reports. 

Their 2018 Production 10 mm bbls/day. Their 2019 Production 10 mm bbls/day.  

EIA , IEA , OPEC , Analyst all projected increase in supply in 2020 from Shale, Norway, Brazil, Guyana.  So both Russia and Saudi Arabia both increased production in January and February in anticipation of new cuts at the March OPEC+ meeting.  ITS ALL A GAME.

The problem is coronavirus showed up.

Today's headlines herald "SAUDI ARABIA STARTS PRICE WAR WITH HUGE DISCOUNTS".   Bull.   The April contract settled the third Friday of February at $58.50.  The buyers have to commit to April volume purchases they will accept on the 10th of prior month, this Tuesday March 10th.  

Brent Spot price  $45.27

Brent April Contract Price $58.50

Saudis have to give huge discounts to adjust to the $45.27 ($58.50 to $45.27) spot price or no buyer will accept delivery.  

I hear Saudis want to produce 10 mm bbls/day.  They can produce 11 mm , but nobody to buy it.  

It's going to be crazy pricing environment this year.

Russia is smart.  With the virus  any cuts would have very little effect.  OPEC has unsuccessfully tried to kill off U.S. shale in the past. Oil prices going down from virus. 

U.S. shale debt/loans bi-yearly review is in April.   The consolidation of the U.S. shale industry begins.

I believe filing for chapter 11 reorganization will not suffice.  The next chapter of shale will mandate top efficiencies where SIZE MATTERS.  

Buyers will name their price. 

This consolidation was inevitable.  The nature of the industry and OPEC cartel price support always kept the shale producers that destroyed their balance sheets 6 years ago in the game.  

Never Shalers Note:  Shale is not going away.  Moving from weak sisters to the strong.  Big shakeup. Lower prices in the interim, Lower production until it settles.  

"They" call it a   "Price War"

"I" call it  "Free Market COMPETITION"

This was inevitable.  The virus just accelerated the timeline. 

Edited by BLA
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There's got to be more to this that just a war on shale which just doesn't seem necessary at this point. Most shale drillers seemed to have been cutting back already and production was forcast to start falling.

Is it possible there has been some other spat between Saudi and Russia?

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15 hours ago, Refman said:

Why do we need more refineries? We already process more then we can consume

Because it is a good business and would be great if the refineries were new and tweaked to maximize LTO rather than heavy crudes. 

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5 hours ago, BLA said:

Brent Spot price  $45.27

Brent April Contract Price $58.50

Saudis have to give huge discounts or no buyer will accept delivery.

They made offers of $10 below Brent in Europe (North Sea ports where Yamal oil is going) and varied discounts elsewhere. The target markets were Russian bread and butter delivery ports. That isn't the discount you are referring to. That one is backed up in the contract markets so the buyer is already committed and has posted collateral as I understand it. They can refuse the delivery but still be out the difference. Saudi may be giving that sort of discount for good will in order to retain market share. 

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