Saudi ARAMCO earnings conference call. Said will continue production increases. Cost $2.80 bbl to lift oil. Upstream capex $4.75 bbl.

[ronwagn + 6,290]

4 hours ago, Gerry Maddoux said:

Moderna vaccinated their first patient yesterday. If their vaccine works, and it likely will because it's a messenger RNA vaccine, then most large pharmaceutical labs will join in a wartime effort to vaccinate everyone. 

And then we'll have a post-wartime recovery: the economy will be starved and it's off to the races. 

By then, KSA will be more in the hole, financially, providing one of the 6,000 or so royal princes hasn't assassinated MbS. If they don't plug him, someone else probably will. It'll take about three to six months to find our place on the page and we'll once again have a semi-orderly situation.

I would desperately hope that the president excludes China from our orbit. In other words, we make our own iPhones, even if we have to pay more. We make our own medical supplies. No drug made in China is allowed in. When Chairman Mao wrote the "Little Red Book" in 1950, he specifically stated that he wanted China to be self-sufficient and enclosed. We're 70 years late but we should take him up on that--he had a helluva point.

For the best economic results I believe we need free and fair trade with ethical and reliable vendors who are at best allies and at worst neutral and non threatening. My first choices would be Canada and Mexico. 

[Ward Smith + 6,615]

3 minutes ago, ronwagn said:

My first choices would be Canada and Mexico. 

The same Canada that incessantly called us racist about our immigration policy has closed their border to non Canadians 

[Uduak + 22]

13 hours ago, wrs said:

What a joke, sure it's $2.80/bbl in LOE but that's not all in. Again, they are liars of the highest order and if you believe them then that's your problem.  They are down 25% from the IPO.  

So let's see, a year of production at $25/bbl gives you $91B in revenue assuming 10mbbl/day which is all I think they will be able to maintain.  So how are they going to pay a $75B dividend?  Same way as every other oil company, borrow.  These guys are the stupidest people on the face of the earth.  They are acting entirely on emotion.

The only reason I'd agree they "are the stupidest people on the face of the earth" is because they've been cutting back production all this while for shale oil producers to increase theirs. 

[BLA + 1,666]

18 hours ago, BenFranklin'sSpectacles said:

The US apparently has 77MMb, and you're claiming china has 180MMb.  That's just the strategic reserves of two countries though.  How much spare storage is there in the world?  Strategic reserves, private crude storage tanks, floating tankers, people filling up their tanks - all of it.  If there was a compelling reason to store oil, how much could we collectively handle? 

An analyst stated today , prior to the present situation the largest ever surplus build up of oil storage was 360 Million barrels.  He said with the Covad-19 the storage surplus buildup will be at least double that. Some analyst predict a Billion bbls glut.

Quote:

Jim Burkhard, vice president and head of oil markets at IHS Markit, wrote in a note Monday, predicting an oil demand contraction of up to 10 million bpd for March and April. 

“Prior to this, the largest six-month global surplus this century was 360 million barrels. What is coming will be twice that or more.”

 

 

Edited March 17, 2020 by BLA

[BenFranklin'sSpectacles + 762]

7 hours ago, BLA said:

An analyst stated today , prior to the present situation the largest ever surplus build up of oil storage was 360 Million barrels.  He said with the Covad-19 the storage surplus buildup will be at least double that.

If I understood correctly, his analysis was based on how much oil was available.  Do we have the means to store all the oil that will be available though?  If not, what happens to the price of oil?  I saw some speculation that, once there's nowhere to store it, the price drops to $10/bbl, but I have no way to verify that speculation. 

I also once read that no one knows the true storage capacity; we merely estimate it.  Do you know anything about how we estimate storage capacity?

[BLA + 1,666]

6 hours ago, BenFranklin'sSpectacles said:

If I understood correctly, his analysis was based on how much oil was available.  Do we have the means to store all the oil that will be available though?  If not, what happens to the price of oil?  I saw some speculation that, once there's nowhere to store it, the price drops to $10/bbl, but I have no way to verify that speculation. 

I also once read that no one knows the true storage capacity; we merely estimate it.  Do you know anything about how we estimate storage capacity?

You are correct.  What happens when the oil storage fills.  This virus has put the economies of the industrialized world on hold. 

Quote on storage from IHS Markit: 

"Jim Burkhard, vice president and head of oil markets at IHS Markit, wrote in a note Monday, predicting an oil demand contraction of up to 10 million bpd for March and April. 

“Prior to this, the largest six-month global surplus this century was 360 million barrels. What is coming will be twice that or more.”

What is a health crisis will turn into a banking crisis.  

Is $10 oil possible ? Sure.

Also, China does not divulge their storage capacity or inventory.  It's estimated.

A company called Orbital Insight  does a daily survey of they say is  90% of the above ground tank storage.  I used to subscribe. 

Reuters Article Storage Capacity:

https://www.bing.com/amp/s/mobile.reuters.com/article/amp/idUSKBN2140IJ?PC=EMMX20&refcv=G9vgEHBLRwUvjw5H.0.0.2.20

Edited March 17, 2020 by BLA

[Rob Kramer + 696]

9 hours ago, BenFranklin'sSpectacles said:

If I understood correctly, his analysis was based on how much oil was available.  Do we have the means to store all the oil that will be available though?  If not, what happens to the price of oil?  I saw some speculation that, once there's nowhere to store it, the price drops to $10/bbl, but I have no way to verify that speculation. 

I also once read that no one knows the true storage capacity; we merely estimate it.  Do you know anything about how we estimate storage capacity?

When storage is full - price would have to drop - and at that point refining into fuels has to make sense - then it would go to fuel storage - and if fuel came down low - (I'm sure) population would start storing more so it's a knock on effect id think.

[0R0 + 6,251]

1 hour ago, Rob Kramer said:

When storage is full - price would have to drop - and at that point refining into fuels has to make sense - then it would go to fuel storage - and if fuel came down low - (I'm sure) population would start storing more so it's a knock on effect id think.

Someone would have to stop producing because nobody would take the oil. That is what Saudi is trying to accomplish now. They are trying to have Russian crude turned away at the ports, and hired away VLCC capacity to do transpacific and transatlantic shipping to the US. They are intending on emptying all their storage this month and plugging all demand for Russian oil in MW Europe an the Mediterranean - in order to clog up the Russian delivery chain to force Russia into stopping at least one field from producing. At that point, this line of reasoning is putting the Russians at the table, where Saudis can join in "cutting production" by moving to refill their tanks. 

[BenFranklin'sSpectacles + 762]

2 hours ago, Rob Kramer said:

When storage is full - price would have to drop - and at that point refining into fuels has to make sense - then it would go to fuel storage - and if fuel came down low - (I'm sure) population would start storing more so it's a knock on effect id think.

 

1 hour ago, 0R0 said:

Someone would have to stop producing because nobody would take the oil. That is what Saudi is trying to accomplish now. They are trying to have Russian crude turned away at the ports, and hired away VLCC capacity to do transpacific and transatlantic shipping to the US. They are intending on emptying all their storage this month and plugging all demand for Russian oil in MW Europe an the Mediterranean - in order to clog up the Russian delivery chain to force Russia into stopping at least one field from producing. At that point, this line of reasoning is putting the Russians at the table, where Saudis can join in "cutting production" by moving to refill their tanks. 

Both of those make sense.

Suppose the price falls until all storage is full, and there's nowhere left to put the oil.  Is there a price low enough to spur significant, new demand?  E.g. the average consumer will only drive so far regardless of how cheap gas is, and industry requires capital investments and time to significantly increase oil demand.  Is there a market demand that would respond to sufficiently low prices? 

[Isuzu Buyer 0]

Putin is a very stupid man. He's allowing his arrogance to cost Russia a great deal of money. Going to be a depression in Russia, not that they ever had much of an economy to start with.

[Ward Smith + 6,615]

22 hours ago, 0R0 said:

It is entirely fine for Apple and Nike to produce in China for the China market. They just need to move production to other regional locations outside China for the US and other markets. But it takes a large investment to produce in the US, you need to train people how to do manufacturing work. Foxcon can do it, but were unwilling so far due to cost. That is why their buildings in Wisconsin are still mostly empty. There is also the matter of attitude. Younger workers have never had a manufacturing job and look down on it as a career as well as a stable source of income because of the history of manufacturing employment in the US. Finally, the worker skills issue is even worse when it comes to using large scale intricate automation. They need vocational school and remedial math and science for the year before, sometimes even college grads can't do the job without the vocational training. 

Not complete about Foxconn. My brother in law is a senior executive there. Realize they have one factory in China with over 350,000 employees! Where are you going to place that factory here to allow that many Americans to show up for work every day? Foxconn uses automation like crazy. They've got the best pick and place robots in the world. They'll replace every robot with ones that can perform 1.5% faster. That is the expense, but the humans are there in the factories to feed the robots. I've been in their best factory in the US. They can't even round up enough people to run it, and it's relatively tiny. 

[Gerry Maddoux + 3,627]

31 minutes ago, Ward Smith said:

Not complete about Foxconn. My brother in law is a senior executive there. Realize they have one factory in China with over 350,000 employees! Where are you going to place that factory here to allow that many Americans to show up for work every day? Foxconn uses automation like crazy. They've got the best pick and place robots in the world. They'll replace every robot with ones that can perform 1.5% faster. That is the expense, but the humans are there in the factories to feed the robots. I've been in their best factory in the US. They can't even round up enough people to run it, and it's relatively tiny. 

Not sure about all the logistics but Mnuchen said just now that 20% of the workforce may soon be unemployed. Given that the virus originated--like SARS, Avian, Swine flu viruses--in China, seems reasonable to relocate Foxconn here in the US. Assuming that the US workforce is 100 million, it sounds as though we'll have plenty of people out of work. 

[Rob Kramer + 696]

1 hour ago, BenFranklin'sSpectacles said:

 

Both of those make sense.

Suppose the price falls until all storage is full, and there's nowhere left to put the oil.  Is there a price low enough to spur significant, new demand?  E.g. the average consumer will only drive so far regardless of how cheap gas is, and industry requires capital investments and time to significantly increase oil demand.  Is there a market demand that would respond to sufficiently low prices? 

I agree theres only so much room to current refinery rates and tanks . Fill the channel and something is gonna have to wait. I have read GTE a Colombia producer has halted their higher cost wells. But I think Americans dont notice so much because you live with low fuel prices. But in Canada during the 2015 price crash I saw one day at 68c/L ... huge line ups people trying to cut in line honking filling 8 jerry cans ... even costco gas is 8c cheaper ALWAYS has a line for fuel. That's vs Canadian tire or huskey with 3c and 5c off so I'd think places like India or more 2nd 3rd world makes a massive difference mabey even higher taxed places like France EU.  Isnt .68c something like 2.50$ a gallon aka your  normal price. I'm 10 mins from Niagara Falls and know lots of people who go shopping in the states and some just for food and fuel. ... before 1.40 exchange tho lol. 

[Rob Kramer + 696]

2 hours ago, 0R0 said:

Someone would have to stop producing because nobody would take the oil. That is what Saudi is trying to accomplish now. They are trying to have Russian crude turned away at the ports, and hired away VLCC capacity to do transpacific and transatlantic shipping to the US. They are intending on emptying all their storage this month and plugging all demand for Russian oil in MW Europe an the Mediterranean - in order to clog up the Russian delivery chain to force Russia into stopping at least one field from producing. At that point, this line of reasoning is putting the Russians at the table, where Saudis can join in "cutting production" by moving to refill their tanks. 

Q3 GTE FEC and PXT had lower sales and had Colombia storage at port before q4 19 when  it was sold. Might be the same again now either less ships available less urgent to sell ships used for storage. Who knows. Mabey other ports have storage at port like Colombia.  I'm sure oil will build in places it didnt before. 

[footeab@yahoo.com + 2,133]

1 hour ago, Ward Smith said:

Not complete about Foxconn. My brother in law is a senior executive there. Realize they have one factory in China with over 350,000 employees! Where are you going to place that factory here to allow that many Ame

Not true about the factory as it does MANY different product lines and is done for entire world.  Split it up would be just fine. 

[0R0 + 6,251]

1 hour ago, Ward Smith said:

Not complete about Foxconn. My brother in law is a senior executive there. Realize they have one factory in China with over 350,000 employees! Where are you going to place that factory here to allow that many Americans to show up for work every day? Foxconn uses automation like crazy. They've got the best pick and place robots in the world. They'll replace every robot with ones that can perform 1.5% faster. That is the expense, but the humans are there in the factories to feed the robots. I've been in their best factory in the US. They can't even round up enough people to run it, and it's relatively tiny. 

 

1 hour ago, Gerry Maddoux said:

Not sure about all the logistics but Mnuchin said just now that 20% of the workforce may soon be unemployed. Given that the virus originated--like SARS, Avian, Swine flu viruses--in China, seems reasonable to relocate Foxconn here in the US. Assuming that the US workforce is 100 million, it sounds as though we'll have plenty of people out of work. 

 

44 minutes ago, footeab@yahoo.com said:

Not true about the factory as it does MANY different product lines and is done for entire world.  Split it up would be just fine. 

I think the urgency to get out of China is "post haste". Nobody wants to be reliant on Chinese sole sourcing. Anything they make exclusively will be duplicated regardless of cost both for the EU market and the N. Am market. Nobody is going to be caught missing one of the 100 or so pharmaceutical precursors that are sole sourced in China again. No single sourced components from China. No assembly facilities sole sourced in China.

My point is what Ward was putting up here. The US has shifted education so far away from anything hands on or practical that the skill set once deeply embedded in American culture with popular mechanics, DIY electronics, etc. has disappeared. Foxcon and the like need to join in the investment in these Millennials' skills with government support and positive media portrayal of production labor and their work.

The auto worker's unions demands to shut down production are insane. The workers have no real social exposure in the thinly populated plants full of robots. The workstations are dispersed, communal facilities are easily sanitized. They are at less risk than the cubicle dwellers in the offices. They are probably at the same risk level at home with their families. 

 

Mnuchin was talking about the potential unemployment levels due to the covid 19 quarantine if the government didn't step up to the plate and arrange for companies to hunker down for the period without firing their employees. He talked about it being a post facto business interruption insurance. Already Marriott and Hilton have furloughed  tens of thousands.

San Fran essentially banned activity. Its mayor and the County officials should be sitting in Jail. I would say it is a perfect time to quarantine city officials and separate them from electronic devices. NYC is on the edge. Hoboken NJ is on lockdown. Another city council and mayor with a place in jail. Don't they understand that among the Millennials that chose them in particular for office there is a view that they SHOULD risk their own death to "save the planet" and to risk their old relative's lives in order to clear the decks of useless old people "clogging up the planet"? They aren't going to bars  parties and raves just for fun. They are going as an environmentalist political statement. Door knob licking is their version of Vietnam war demonstrations. 

[Ward Smith + 6,615]

2 hours ago, footeab@yahoo.com said:

Not true about the factory as it does MANY different product lines and is done for entire world.  Split it up would be just fine. 

It is true about that factory, he used to manage there. Primary customer was Apple and still is. The wiki article mentions Hewlett Packard, but they've fallen on even harder times since the suicide wave a decade ago and their slots were all filled by Apple. It's only gotten bigger and the logistics of getting that many people in and out means they provide dorm housing. The people killing themselves were jumping out the dormitory windows. Now there are nets all around the buildings. Also there are 50k more employees since then. 

Again, where in the US can you readily get 10% of that number to come to work every day? Boeing can't even do it in one place and they've been trying to leave Seattle for quite a while. 

[Ward Smith + 6,615]

1 hour ago, 0R0 said:

I think the urgency to get out of China is "post haste". Nobody wants to be reliant on Chinese sole sourcing. Anything they make exclusively will be duplicated regardless of cost both for the EU market and the N. Am market. Nobody is going to be caught missing one of the 100 or so pharmaceutical precursors that are sole sourced in China again. No single sourced components from China. No assembly facilities sole sourced in China.

My point is what Ward was putting up here. The US has shifted education so far away from anything hands on or practical that the skill set once deeply embedded in American culture with popular mechanics, DIY electronics, etc. has disappeared. Foxcon and the like need to join in the investment in these Millennials' skills with government support and positive media portrayal of production labor and their work.

The auto worker's unions demands to shut down production are insane. The workers have no real social exposure in the thinly populated plants full of robots. The workstations are dispersed, communal facilities are easily sanitized. They are at less risk than the cubicle dwellers in the offices. They are probably at the same risk level at home with their families. 

Mnuchin was talking about the potential unemployment levels due to the covid 19 quarantine if the government didn't step up to the plate and arrange for companies to hunker down for the period without firing their employees. He talked about it being a post facto business interruption insurance. Already Marriott and Hilton have furloughed  tens of thousands.

San Fran essentially banned activity. Its mayor and the County officials should be sitting in Jail. I would say it is a perfect time to quarantine city officials and separate them from electronic devices. NYC is on the edge. Hoboken NJ is on lockdown. Another city council and mayor with a place in jail. Don't they understand that among the Millennials that chose them in particular for office there is a view that they SHOULD risk their own death to "save the planet" and to risk their old relative's lives in order to clear the decks of useless old people "clogging up the planet"? They aren't going to bars  parties and raves just for fun. They are going as an environmentalist political statement. Door knob licking is their version of Vietnam war demonstrations. 

Foxconn is Hu XiCon in Mandarin. It's a Taiwan company. All the senior mgt there are Taiwanese. Think how that makes the CCP feel, knowing the best and biggest precision manufacturer in the world belongs to a "renegade" province. When Foxconn leaves China, the CCP is well and truly screwed. They'll keep the buildings, and they might even steal the robots, but they'll never see another contract. Manufacturing will move to Thailand, India, Mexico, Vietnam, Malaysia, you name it. They can try to social shame their citizens to buy Chinese crap, but since they can't innovate their way out of a paper bag, and since it will be considerably more difficult to steal intellectual property from Vietnam than Shinzen even IP theft will drop off. 

Re your final point, a millennial licking a toilet seat for a TikTok challenge. Because millennial equals moron. 

[BLA + 1,666]

9 hours ago, Ward Smith said:

Not complete about Foxconn. My brother in law is a senior executive there. Realize they have one factory in China with over 350,000 employees! Where are you going to place that factory here to allow that many Americans to show up for work every day? Foxconn uses automation like crazy. They've got the best pick and place robots in the world. They'll replace every robot with ones that can perform 1.5% faster. That is the expense, but the humans are there in the factories to feed the robots. I've been in their best factory in the US. They can't even round up enough people to run it, and it's relatively tiny. 

Some good points.

Just put tariff on imported smart phones.

Foxconn will figure it out.  

[Enthalpic + 1,496]

They can produce huge amounts of oil for cheap.  Selling twice the amount of oil at half the margin yields the same amount of money.

[Enthalpic + 1,496]

39 minutes ago, BLA said:

Some good points.

Just put tariff on imported smart phones.

Foxconn will figure it out.  

Tariff everything until the US figures out how to make anything competitively.

[BLA + 1,666]

10 hours ago, Enthalpic said:

Tariff everything until the US figures out how to make anything competitively.

Who gave the Chinese the right to own the U.S. consumer and pillage the U.S. economy.

No one. 

China CCP should be charged with Gross Negligence, Malfeasance and Manslaughter 2 for what their Chinese Wuhan Virus did to the world economy.

Edited March 18, 2020 by BLA

[Douglas Buckland + 6,308]

On 3/17/2020 at 12:39 PM, Uduak said:

The only reason I'd agree they "are the stupidest people on the face of the earth" is because they've been cutting back production all this while for shale oil producers to increase theirs. 

Well, a national oil company can be ordered to reduce production, a private oil company, in essentially a free market cannot.

Tell me that they didn’t understand this...

[0R0 + 6,251]

9 hours ago, Douglas Buckland said:

On 3/17/2020 at 12:39 AM, Uduak said:

The only reason I'd agree they "are the stupidest people on the face of the earth" is because they've been cutting back production all this while for shale oil producers to increase theirs. 

Well, a national oil company can be ordered to reduce production, a private oil company, in essentially a free market cannot.

Tell me that they didn’t understand this...

They want "regime change" back to the Seven Sisters market structure. They don't get that laws matter and are not arbitrary. They are an absolute monarchy, they can be forgiven for not understanding that law does not come out of the president's @$$. 

[0R0 + 6,251]

It is up to Russia and Saudi to decide who will cut how much. The higher cost producers are stopping production where they can, but the vast bulk of reactions has been to just stop investment, particularly on early stage wells. Only end stage wells will go online. So Saudi and Russia are relying on Shale well's rapid decline profile to produce the production cut. But that will not come close to plugging the demand gap. 

But the world's storage capacity is being strained already and the explosive expansion of the virus in Europe and the US quarantine are already killing off  more consumption of oil so the oversupply is probably already well over 10 mob/d. We touched $20 for a moment earlier today. 

Only OPEC+ can stop this disaster of storage fillup. The Saudi action to quickly stuff the offtake in Europe will clog up the Russian supply chain within days. The Ruble has not come close to filling the drop in the oil price. At 65 going to 81 to the dollar, they only had a small compensation for oil prices falling more than 60%. Surprising though it may be that the Ruble held up better than the oil price, it remains the fact and will squeeze the Russian oil companies. Somebody in the Southern production zone in Russia will have to shut down because its oil has nowhere to go but sit on the ocean sucking cash for VLCC storage. Day rates are already near their peak levels of late last year.

Only Russia and Saudi, and a couple of other OPEC members can actually shut down major production. Saudi has just cleared storage domestically by dumping oil in Europe.