MBS has asked the former Saudi Energy Minister Al-Falih to talk to Russia's Novak

[BLA + 1,666]

It's widely known that the current Saudi Energy minister ABS (MBSs brother) has a very short temper and can be an antagonist.  This is what led to Russia's Novak walking out of the OPEC+ meeting.

ABS stubornly stuck to the terms of the desired cuts and would not consider any concessions to Russia.  Some sources say this was a mandate from MBS , not ABS's own idea. 

Al-Falih has always gotten along with Novak.  He was the person to convince Russia to work with OPEC+ .

He is trying to set up another meeting to work things out.

While the press calls it a "price war" it is really a market share war.  Russia/Saudis can target U.S. shale and hit it hard BUT while many companies will go away the reserves DO NOT.  The strong players will (1) buy up the reserves at heavily discounted price, (2) be unencumbered by lavish royalty agreements (3) don't have crappy balance sheets (4) apply the latest efficiencies, technology, and cost savings.

Saudis deliveries to China are backing up with some being turned away.  Saudis angry when they see (1) Russia continuing to sell decent volumes to China via the Eastern Siberian Asian Pacific pipeline and (2) U.S. becoming South Korean #1 crude supplier where U.S. gains are mostly Saudis losses. Tough for Saudis to accept.  Saudi Arabia needs to get used to exporting less oil. (3) to add insult to injury China bought a discounted  U.S. 2mm bbls VLCC Tanker load of oil the middle of last week and unloaded it ahead of waiting Saudi tankers. That would anger me.

Saudis tend to shoot first , ask questions later. Just think of growing up with all that oil money for the last 40 or 50 years. That type of wealth and power fosters an entitlement attitude. Tough to change. 

Put aside all the bravado , all the positioning.  Oil prices at current level are killing Russia and Saudi Arabia. I'm sure they don't want this to continue at these price levels. 

There was too much oil before the coronavirus. The virus just compounded the problem.  Hopefully an agreement between them soon.  But no guarantees. Both sides very pigheaded.

Eventually, the growth in supply greater than increase in demand will be addressed without the radical drop in prices we saw last week and Monday.

Easing into the transition is preferable to the overnight crash we are experiencing now.

The consolidation of shale will start AFTER the Banks and Bondholders take ownership.  The players are not going to pay up now for the reserves.   Don't expect many buyouts in the short term.  Buyers only interested in the reserves at much lower price.  They will get their wish.

Competition is coming to the oil industry.  It's here. 

Saudi Royalty have to learn they can't always have their way.  Could be a tough lesson for them  to learn.  

 

 

Edited March 11, 2020 by BLA

[BLA + 1,666]

It's been now reported in press a meeting is set.

Bet ya after they meet they come to an agreement THEN go to U.S. and say . . . . .  We can come to an agreement but the U.S. must participate in the cuts.

Hope Trump says no.

Don't care about the old Texas RR Commission.  It would be impossible to monitor and implement a fair production cut. It is counter to U.S. system  .  .  .  and is against U.S. economic principles.  

Let the market forces work it out.

I believe U.S. shale production will drop 2 mm bbls/day if prices stay at these levels .

Imagine what Trump's buddy Harold Hamm is telling Donald ? 

 

Edited March 11, 2020 by BLA

[El Nikko + 2,145]

3 hours ago, BLA said:

It's widely known that the current Saudi Energy minister ABS has a very short temper and can be an antagonist.  This is what led to Russia's Novak to walk out the door.

Al-Falih has always gotten along with Novak.  He was the person to get Russia to work with OPEC .

He is trying to set up another meeting.

Saudis tend to shoot first , ask questions later.

Put aside all the bravado , all the positioning.  Oil prices at current level is killing Russia and Saudi Arabia.

There was too much oil before the coronavirus.  Hopefully an agreement between them soon.  But no guarantees.

Eventually, the growth in supply will be addressed without the radical drop in prices in the last week's. 

Competition in oil industry is here.

 

 

I've posted some links elsewhere that show several US oil companies have already commited to reduce activity and spending immediately. I can drop them in here if you haven't seen them and are interested. Companies like Oxy, Marathon, Diamondback and several others. It sounds like US oil is starting to pay attention (hopefully followed by other ones) and production should start falling this year. If the Saudi's and Russians get some agreement back in place we could see a ballancing of the market especially if China gets it's factories running again. I would imagine it could still take quite some time for it to get back to the 50-60.

I agree about the bravado, yes both countries can survive with cheap oil for a few years but at what expense? Both rely on oil exports for a big part of their GDP.

I was going to post this earlier but since I'd already said much of the same in two other threads I decided not to..anyway here's what I wrote.

 

[BLA + 1,666]

1 minute ago, El Nikko said:

I've posted some links elsewhere that show several US oil companies have already commited to reduce activity and spending immediately. I can drop them in here if you haven't seen them and are interested. Companies like Oxy, Marathon, Diamondback and several others. It sounds like US oil is starting to pay attention (hopefully followed by other ones) and production should start falling this year. If the Saudi's and Russians get some agreement back in place we could see a ballancing of the market especially if China gets it's factories running again. I would imagine it could still take quite some time for it to get back to the 50-60.

I agree about the bravado, yes both countries can survive with cheap oil for a few years but at what expense? Both rely on oil exports for a big part of their GDP.

I was going to post this earlier but since I'd already said much of the same in two other threads I decided not to..anyway here's what I wrote.

 

Sure, please post the announced cutbacks. That would be great. 

 

[El Nikko + 2,145]

7 minutes ago, BLA said:

It's reported in press a meeting is set.

Bet ya after they meet they come to an agreement THEN go to U.S. and say . . . . .  We can come to an agreement but the U.S. must participate.

Hope Trump says no.

Don't care about the old Texas RR Commission.  It would be impossible to monitor and implement .  .  .  and is against U.S. economic principles.  

Let the market forces work it out.

Imagine what Trump's buddy Harold Hamm is telling Donald ? 

 

The US oil industry looks to be ready to participate and several companies have announced they're cutting back

If no one is willing to budge we're getting sub $30 oil for the rest of the year and the US producers need to get on board asap...maybe this was the shock they needed. Better to be out of work or on reduced work for the next 6 months than be completely out of a job for ever.

I wouldn't fancy going back offshore or working on landrigs in the terroristy places I used to

[El Nikko + 2,145]

1 minute ago, BLA said:

Sure, please post the announced cutbacks. That would be great. 

 

Bear with me

[El Nikko + 2,145]

Oxy

http://www.rbcrichardsonbarr.com/IndustryResearch/News.aspx?a=news&ticker=a&w=&story=202003bwire10005753r1.xml

Marathon

http://www.rbcrichardsonbarr.com/IndustryResearch/News.aspx?a=news&ticker=a&w=&story=202003202003100657PR_NEWS_USPR_____CL45779

CRC

http://www.rbcrichardsonbarr.com/IndustryResearch/News.aspx?a=news&ticker=a&w=&story=202003bwire09005875r1.xml

Ring

http://www.rbcrichardsonbarr.com/IndustryResearch/News.aspx?a=news&ticker=a&w=&story=202003bwire09005869r1.xml

Parsley

http://www.rbcrichardsonbarr.com/IndustryResearch/News.aspx?a=news&ticker=a&w=&story=202003202003090943PR_NEWS_USPR_____DA44530

Diamondback

http://www.rbcrichardsonbarr.com/IndustryResearch/News.aspx?a=news&ticker=a&w=&story=202003PZONE97866454

[El Nikko + 2,145]

Are you on LinkedIn? The guy posting this stuff and his comments is called Dave-Ramsden-Wood

He also has a website https://hottakeoftheday.com/

He's just another voice to listen to, can't tell you if I think he's right or wrong but he does seem to like his data

[Rob Kramer + 696]

Thanks for helping me stay updated guys . 

[ronwagn + 6,290]

5 hours ago, BLA said:

It's widely known that the current Saudi Energy minister ABS (MBSs brother) has a very short temper and can be an antagonist.  This is what led to Russia's Novak walking out of the OPEC+ meeting.

ABS stubornly stuck to the terms of the desired cuts and would not consider any concessions to Russia.  Some rumors say this was a mandate from MBS , not ABS's own idea. 

Al-Falih has always gotten along with Novak.  He was the person to convince Russia to work with OPEC+ .

He is trying to set up another meeting to work things out.

Saudis deliveries to China are backing up with some being turned away.  Saudis angry when they see (1) Russia continuing to sell decent volumes to China via the Eastern Siberian Asian Pacific pipeline and (2) U.S. becoming South Korean #1 crude supplier where U.S. gains are mostly Saudis losses. Tough for Saudis to accept.  Saudi Arabia needs to get used to exporting less oil. (3) to add insult to injury China bought a discounted  U.S. 2mm bbls VLCC Tanker load of oil the middle of last week and unloaded it ahead of waiting Saudi tankers. That would anger me.

Saudis tend to shoot first , ask questions later. Just think of growing up with all that oil money for the last 40 or 50 years. That type of wealth and power fosters an entitlement attitude. Tough to change. 

Put aside all the bravado , all the positioning.  Oil prices at current level are killing Russia and Saudi Arabia. I'm sure they don't want this to continue at these price levels. 

There was too much oil before the coronavirus. The virus just compounded the problem.  Hopefully an agreement between them soon.  But no guarantees. Both sides very pigheaded.

Eventually, the growth in supply greater than increase in demand will be addressed without the radical drop in prices we saw last week and Monday.

Easing into the transition is preferable to the overnight crash we are experiencing now.

Competition is coming to the oil industry.  It's here. 

Saudi Royalty have to learn they can't always have their way.  Could be a tough lesson for them  to learn.  

 

 

I certainly hope you are right. I am also factoring in the production of  Iran, Iraq, Nigeria, The North Sea, Canada, renewables, etc. It seems that oil may being headed for an extended period of very low prices worldwide. That is much like situation with natural gas. It could certainly lead to immense frustration that can quickly become anger and cause bad decisions all around. 

Maybe someone knows the legality of us just using our own domestic production and that of Canada for heavy oil. Could we just refuse importation of foreign oil and export to non producers?

[BLA + 1,666]

16 hours ago, ronwagn said:

I certainly hope you are right. I am also factoring in the production of  Iran, Iraq, Nigeria, The North Sea, Canada, renewables, etc. It seems that oil may being headed for an extended period of very low prices worldwide. That is much like situation with natural gas. It could certainly lead to immense frustration that can quickly become anger and cause bad decisions all around. 

Maybe someone knows the legality of us just using our own domestic production and that of Canada for heavy oil. Could we just refuse importation of foreign oil and export to non producers?

That would be nice but the oil industry is controlled by the International Super Majors and Petro States. (the exception being U.S. shale. That will change before your eyes over the next year or two) Even the likes of Exxon and Chevron are not really U.S. corporations anymore.  They are a collection of internationally domiciled companies operating under their U.S. based headquarters.  They pay very little corporate income taxes in the United States . 

Saudi Arabia could sell oil at $35 for years . But the House of Saud would be overthrown long before that. In the meantime they are trashing their economy and banks. So much for MBS's Vision 2030 with flying cars.

Hopefully the meeting allows them to save face and get an agreement. 

I give it 50/50 chance.  

U.S. and Europe are just starting to shut down as a result of Covad-19

I doubt any production cuts will help at this point.  Just have to hunker down for the duration.  

This too will pass

 

Edited March 11, 2020 by BLA

[ronwagn + 6,290]

2 minutes ago, BLA said:

That would be nice but the oil industry is controlled by the Super majors and Petro States.  Even the likes of Exxon and Chevron are not really U.S. corporations.  They are a collection of internationally domiciled companies operating under their U.S. based headquarters.  They pay very little corporate income taxes in the United States . 

Saudi Arabia could sell oil at $35 for years . But the house of Saud would be overthrown long before that. 

Hopefully the meeting allows them to save face and get an agreement. 

What are the costs of shipping, extra charges for loading and offloading? What about imposing tariffs just high enough to allow our own production to have a competitive advantage?

Edited March 11, 2020 by ronwagn

[BLA + 1,666]

12 hours ago, ronwagn said:

What are the costs of shipping, extra charges for loading and offloading? What about imposing tariffs just high enough to allow our own production to have a competitive advantage?

They are already doing that U.S. producers are giving "shipping credits" to cover the extra costs to ship from U.S. 

Korea loves  U.S. West Texas Light oil.  Remember they tested Eagleford and rejected it.    Permian just right.  

Edited March 11, 2020 by BLA

[Boat + 1,324]

7 hours ago, ronwagn said:

What are the costs of shipping, extra charges for loading and offloading? What about imposing tariffs just high enough to allow our own production to have a competitive advantage?

Sounds like a plan China would implement. A better plan would be to end flaring and see if the US would have exports of oil.

[wrs + 893]

18 hours ago, BLA said:

 

(3) to add insult to injury China bought a discounted  U.S. 2mm bbls VLCC Tanker load of oil the middle of last week and unloaded it ahead of waiting Saudi tankers. That would anger me.

 

 

 

This is really an interesting data point, where did you read this?

[BLA + 1,666]

4 minutes ago, wrs said:

This is really an interesting data point, where did you read this?

Not at liberty to disclose. 

It's true.

[El Nikko + 2,145]

Another one Matador Resources Company

http://www.rbcrichardsonbarr.com/IndustryResearch/News.aspx?a=news&ticker=a&w=&story=202003bwire11005186r1.xml

Time for the likes of Exxon to step up to the plate,it sounds like even Chevron are now concidering. Also cuts in the next article announced by Cenovus Energy and Ovintiv (Encana?). Can't just leave it to the smaller guys it would take too long.

https://oilprice.com/Energy/Oil-Prices/US-Shale-Collapse-Will-Lead-To-Higher-Oil-Prices.html

https://oilprice.com/Energy/Energy-General/Big-Oil-Prepares-To-Suffer-In-2020.html

[Ward Smith + 6,615]

18 hours ago, El Nikko said:

The US oil industry looks to be ready to participate and several companies have announced they're cutting back

If no one is willing to budge we're getting sub $30 oil for the rest of the year and the US producers need to get on board asap...maybe this was the shock they needed. Better to be out of work or on reduced work for the next 6 months than be completely out of a job for ever.

I wouldn't fancy going back offshore or working on landrigs in the terroristy places I used to

I spoke recently with an offshore service provider who says he's changing his business model from enhanced production to decommissioning assistance. At these prices a number of platforms are going to be scrapped. Too expensive to operate at a few measly thousand bbls per day. 

[El Nikko + 2,145]

43 minutes ago, Ward Smith said:

I spoke recently with an offshore service provider who says he's changing his business model from enhanced production to decommissioning assistance. At these prices a number of platforms are going to be scrapped. Too expensive to operate at a few measly thousand bbls per day. 

I found an interesting post someone made about how there's 50,000 vertical wells in Texas that are all losing money as well, they need to be abandoned even if temporarily but I get the impression the money hasn't been put aside for that. I posted it in one of the other threads

[wrs + 893]

We have some of those wells on our Orla section, they make a barrel or two a day or even less.  Mike Shellman runs a business that specializes in those wells.  They are called stripper wells and their all in cost per barrel is around $25.  We calculated that based on inputs from one of our stripper operators back in 2016 when we accused them of not producing in paying quantities and they were losing money with oil at $30/bbl back then.  

[El Nikko + 2,145]

9 minutes ago, wrs said:

We have some of those wells on our Orla section, they make a barrel or two a day or even less.  Mike Shellman runs a business that specializes in those wells.  They are called stripper wells and their all in cost per barrel is around $25.  We calculated that based on inputs from one of our stripper operators back in 2016 when we accused them of not producing in paying quantities and they were losing money with oil at $30/bbl back then.  

That was the post, no idea if it's true or not.

[wrs + 893]

I don't know about the gas part of it because our wells don't produce any gas that can be flared but we have 10 of them on our section and several still need to be cemented and plugged.  The oldest one from 1960 is still pumping out a few barrels per month, it's in the fractional barrels per day now.

[Ward Smith + 6,615]

1 hour ago, wrs said:

I don't know about the gas part of it because our wells don't produce any gas that can be flared but we have 10 of them on our section and several still need to be cemented and plugged.  The oldest one from 1960 is still pumping out a few barrels per month, it's in the fractional barrels per day now.

My technology company has exactly one well. It doesn't really produce yet, we use it for experimental EOR techniques but by law we needed to buy oil well insurance. That insurance costs about $30k per year. Run the numbers and see how many bbls per day selling at $30 covers that expense. Then add in the power to run the pump and even the occasional hand to collect the oil and check on things. 

[Rob Kramer + 696]

1 hour ago, Ward Smith said:

My technology company has exactly one well. It doesn't really produce yet, we use it for experimental EOR techniques but by law we needed to buy oil well insurance. That insurance costs about $30k per year. Run the numbers and see how many bbls per day selling at $30 covers that expense. Then add in the power to run the pump and even the occasional hand to collect the oil and check on things. 

I was literally gonna ask : if these wells had pumps , if theres any other expenses,  if they can be plugged and re opened without damage . Thanks for the answers folks! But I didnt see if these are fraced wells or older horizontal wells or conventional? 

[Dmitry Bedin + 25]

On 3/10/2020 at 7:27 PM, BLA said:

It's widely known that the current Saudi Energy minister ABS (MBSs brother) has a very short temper and can be an antagonist.  This is what led to Russia's Novak walking out of the OPEC+ meeting.

ABS stubornly stuck to the terms of the desired cuts and would not consider any concessions to Russia.  Some sources say this was a mandate from MBS , not ABS's own idea. 

Al-Falih has always gotten along with Novak.  He was the person to convince Russia to work with OPEC+ .

He is trying to set up another meeting to work things out.

While the press calls it a "price war" it is really a market share war.  Russia/Saudis can target U.S. shale and hit it hard BUT while many companies will go away the reserves DO NOT.  The strong players will (1) buy up the reserves at heavily discounted price, (2) be unencumbered by lavish royalty agreements (3) don't have crappy balance sheets (4) apply the latest efficiencies, technology, and cost savings.

Saudis deliveries to China are backing up with some being turned away.  Saudis angry when they see (1) Russia continuing to sell decent volumes to China via the Eastern Siberian Asian Pacific pipeline and (2) U.S. becoming South Korean #1 crude supplier where U.S. gains are mostly Saudis losses. Tough for Saudis to accept.  Saudi Arabia needs to get used to exporting less oil. (3) to add insult to injury China bought a discounted  U.S. 2mm bbls VLCC Tanker load of oil the middle of last week and unloaded it ahead of waiting Saudi tankers. That would anger me.

Saudis tend to shoot first , ask questions later. Just think of growing up with all that oil money for the last 40 or 50 years. That type of wealth and power fosters an entitlement attitude. Tough to change. 

Put aside all the bravado , all the positioning.  Oil prices at current level are killing Russia and Saudi Arabia. I'm sure they don't want this to continue at these price levels. 

There was too much oil before the coronavirus. The virus just compounded the problem.  Hopefully an agreement between them soon.  But no guarantees. Both sides very pigheaded.

Eventually, the growth in supply greater than increase in demand will be addressed without the radical drop in prices we saw last week and Monday.

Easing into the transition is preferable to the overnight crash we are experiencing now.

The consolidation of shale will start AFTER the Banks and Bondholders take ownership.  The players are not going to pay up now for the reserves.   Don't expect many buyouts in the short term.  Buyers only interested in the reserves at much lower price.  They will get their wish.

Competition is coming to the oil industry.  It's here. 

Saudi Royalty have to learn they can't always have their way.  Could be a tough lesson for them  to learn.  

 

 

An old fake news

Edited March 11, 2020 by Dmitry Bedin