Its going to be an oil bloodbath

[Douglas Buckland + 6,308]

5 hours ago, Dan Clemmensen said:

As far as I know, neither the Saudis nor the Russians increased production. In both cases, they declared that they intended to increase production, but there is no evidence that they did so, and no need to do so because the demand crash accomplished much more than any such increase could. So they get their big propaganda win for free, except for the minor problem that the price crash is going to hurt them badly on top of the revenue crash caused by a forced production decrease.

Whether they actually increased production or not is immaterial, the perception is that they did. The resulting price crash and demand destruction resulted from this perception.

There are many countries whose economies are highly dependent on oil prices, and they will NOT forget this flippant destruction of their economies.

Their supposed ‘propaganda win’ will, by no means, be for free.

[ronwagn + 6,290]

1 hour ago, 0R0 said:

There is no doubt that it kills off the virus. 

There is doubt that killing off the virus is related to the final outcome if you already are on a ventilator. As someone was half joking; maybe the ventilators are killing the late stage patients. That may actually be an irrelevant treatment, as the patients have defective hemoglobin that the virus dismantles. They need to kill the virus, protect what hemoglobin they have remaining, and get a whole blood transfusion, preferably from a recovered patient. 

Once the new case count is down, then the easy precautions of physical distancing, gloves and masks (fabric is fine you don't need N95  masks or respirators) are sufficient, the Swedes demonstrated that amply. Transmissibility drops by a factor of 10. That allows you to resume activity in production and retail. well ventilated restaurants too. Office work can be conducted with a preference to working from home when it is not impairing the work. 

The act of quarantine is itself damaging to life and for the US, it is the equivalent of killing over 700k people a month. Well beyond the worst possible outcome of this disease. Particularly now that most of us are informed as to how to attenuate the propagation and to protect the high risk population. The "deaths" calculus is a straightforward misdirection. The political decisions are based on the desire to defeat Trump at the elections, not the welfare of anyone other than the Dem party. The economic halt is bigger than the disease in scale of damage and eventually will cause a much larger damage to the health of the public in suicides, addiction, malnutrition, exposure, untreated patients and the other diseases of poverty. Quarantine is penny wise and pound foolish. 

Dr. Raoult points out that HCQ/Z is best applied at the early stages of the disease. It prevents the need for hospitalization, stops the patient from being contagious within 5 days instead of 3 weeks, and stops the progression of the disease unless you already need a ventilator. That stops the spread of the disease after you have dropped the residual transmission rate by a factor of 10.

Finally, your goal is to get most of the active population to get the disease, not to have a maybe vaccine in the imaginary future. That will be the buffer against contagion spreading. The heavily infected cities of Detroit, NY metro, Philly, Boston are testing at >40% positive. They are pretty much there already. We need to drop the quarantine to allow a slow spread of the disease, not to stop it and leave most of the people without immunity so that the disease strikes back fast if a naive region is infected. 

I would just add that those at high risk need to isolate and avoid getting covid 19 as long as possible. That gives the treatments time to progress and the medications to be fully available and accepted. I am one of those who will try to survive until the vaccine comes, meanwhile more are dying of the ordinary flu. 

[Dan Clemmensen + 1,011]

2 minutes ago, Douglas Buckland said:

Whether they actually increased production or not is immaterial, the perception is that they did. The resulting price crash and demand destruction resulted from this perception.

There are many countries whose economies are highly dependent on oil prices, and they will NOT forget this flippant destruction of their economies.

Their supposed ‘propaganda win’ will, by no means, be for free.

I cannot see how Saudi and/or Russia caused the consumption crash. Covid-19 and worldwide governmental responses caused it. If you believe in a market economy, prices will stay depressed until consumption recovers. We need to plan for what happens then.

By 'propaganda win', I meant that Saudi and/or Russia wanted to create a dramatic drop in the price of oil. They got what they wanted without actually doing anything.   Your point is certainly valid: they got the price drop, but the timing was such the "propaganda" they got is not the propaganda they wanted. One the countries dependent on oil prices is the US. Not nearly as dependent of course as others, but we have the tools to defend ourselves, and I hope we do. I'd like to see a tariff or severe import restriction on crude, set to let the internal price rise to about $45, and a tax on gasoline to raise its price back to about where it was when oil was at $60. (or whatever combination balances supply with demand.) Ban flaring and venting, and stabilize the price of NG. We need to do all of this because the OPEC has shown that they cannot be trusted and they are willing to destabilize our economy.

[Gerry Maddoux + 3,627]

 

25 minutes ago, Dan Clemmensen said:

I cannot see how Saudi and/or Russia caused the consumption crash.

Of the several factors that determine volatility and pricing in the oil market, geopolitical chess is very likely #1 and actual supply/demand is down the list, about #5. Lately, the perception is that an unstable Saudi prince blew his top and declared jihad on the Russians and also the US. With that stated threat, the market immediately cut the price of a barrel of oil in half. True enough, this was accentuated by demand destruction beginning to set in about the same time, but the price fell before the reality of that set in.

As you know, oil trades in a futures exchange, where liquidity is relatively low and leverage is routinely sky-high. This is the roulette wheel of commodities trading. The people who do this are adrenaline junkies, living in roughly the same part of the Venn diagram as the prince. When he blows his top they blow theirs, but because they're leveraged to the gills, they blow theirs more, which drives him nuts and makes him even more irrational than he ordinarily would be.

Supply and demand ultimately reset oil markets, but only during times of unusual peace and tranquility. All other times, the pricing of oil by the futures exchange is one chaotic, jittery son of a gun that will give an analytical sort (like yourself, and I mean no offense) acid reflux. These cats who set the price of oil are jumpy and all jacked up on Red Bull and lose or gain more in a week than I made in my life. It's not understandable by any practical metric, but it is the heartbeat of the oil business. You think I have trouble with some of the oilfield terminology: these guys don't care about any of that--they're in the business of making gambles on emotions.

Don't struggle too hard with the concept of supply/demand--the price of oil is more a roulette wheel than an honest broker. 

[Douglas Buckland + 6,308]

Is it legal to Taser these cats jacked up on Red Bull? Wouldn’t doing this inject some rationality?

I think it is only fair and equitable that they should ‘feel the pain’ as well.

[James Regan + 1,776]

Equal Market Share is the only solution or this cycle will continue. Its a simple concept.

[Old-Ruffneck + 1,177]

8 hours ago, ronwagn said:

How about the production per rig or the oil produced per worker?

good question Ron, @cbrasher1is more current than I am by 30 years. He is correct one to ask exacts!!

[Douglas Buckland + 6,308]

5 hours ago, James Regan said:

Equal Market Share is the only solution or this cycle will continue. Its a simple concept.

Another unicorn fart...

[JoMack + 547]

15 hours ago, Dan Clemmensen said:

As far as I know, neither the Saudis nor the Russians increased production. In both cases, they declared that they intended to increase production, but there is no evidence that they did so, and no need to do so because the demand crash accomplished much more than any such increase could. So they get their big propaganda win for free, except for the minor problem that the price crash is going to hurt them badly on top of the revenue crash caused by a forced production decrease.

Saudi Arabia added 500,000 additional bbls the first of April.

[D Coyne + 305]

14 hours ago, ronwagn said:

I guess you don't care about all the cars their owners want to drive 12,000 miles a year or more. You don't care if people can run their home heaters and air conditioners in extreme weather. You are in good company if you believe Joe Biden who wants to stop drilling on federal lands, stop fracking etc. You are very unrealistic though and so is Joe Biden and his Demoncrat friends.

Biden wants to stop drilling and fracking on Federal lands, he does not plan to ban all fracking, that is Sanders position not Biden's.

But the Biden campaign said that he misspoke and that his position was the same as ever: He would issue no new fracking permits for federal lands or waters, while allowing existing fracking operations to continue.

From

https://www.washingtonpost.com/politics/2020/03/19/fact-checking-biden-fracking-fracas/

[Auson + 123]

On 4/1/2020 at 8:14 PM, Hiten Shah said:

World is getting rid of crude oil addiction

Pollution free world. in India we call Karma. We pay for your deeds. Those who earned money from pollution will lose their money.

Hiten Shah,

A worthy sentiment my friend. Ok you go first no oil or oil products for 12 months. Please let us know how you get on.

[Dan Clemmensen + 1,011]

5 hours ago, JoMack said:

Saudi Arabia added 500,000 additional bbls the first of April.

They said they were going to, but it's meaningless. They were originally going to increase exports by this amount and the industry speculated that they intended to surge exports by this amount by using their stored oil and then backfilling with increased production. (All of this comes from my perhaps faulty understanding of articles here at OilPrice). But in the mean time, their customers are declining to accept delivery, at least in the case of India and the EU, so we won't know until the end of April what their actual exports are. My uneducated guess: shipments will have declined. They will then try for a big propaganda win by pointing out how they magnanimously cut back in response to the Covid-19 demand collapse.  My further uneducated guess: they will not have increased production to further fill their own storage because that's crazy.

[Gerry Maddoux + 3,627]

 

36 minutes ago, Dan Clemmensen said:

My further uneducated guess: they will not have increased production to further fill their own storage because that's crazy.

Dan, I can tell you for a gold-plated fact that trying to figure out what the Saudis will or won't do based on crazy or sane is . . . . crazy. 

Those people came into a massive fortune by total accident. No other country but the US could have helped them develop it and certainly no other country but the US could have protected them for seventy-five years. You'd think we'd be family by now. 

Well, guess what, they're so accustomed to getting their way, to controlling the lifeblood of modern life, to being able to a shake the world by making an arcane threat, that they really can't stand it now that they can't do that any longer. But they can, in a way, can't they? Even these days, remarkably, they can say they're going to pump aggressively and oil drops 50%. Today, I wonder what's happening: oil was up 3%, now it's down 7%--that's a ten percent swing in just a few hours. Nothing happened to supply/demand. This is perception!

Today, somebody in the business of buying and selling oil futures received some precious inside information, or thinks he did (he because women are too smart to do this sort of thing). What was that nugget of truth that was no valuable it made billions of dollars change hands? I have no idea, but the fact that it happened portends a very bad result to come from the G20 meeting. I suspect someone got an inside suggestion that the KSA is willing to cut a million barrels if Russia does, and the US does. And the prince of course knows that for anything tangible to happen, each of the three entities would have to cut 5M barrels a day apiece until we return to normal.

President Trump is much like you in that he thinks the oil market runs on a free market supply/demand policy--he said that very thing today. The oil market has NEVER run on a free market policy: OPEC has always run this by dint of their emotions and primitive desires and the US--until lately more of a bit player--has always run its contribution according to a free market. The game-players in the middle--the people who make the market by buying and selling oil futures--extort their living by using this market dichotomy like a crack spread. On this dispositive day, the spread between state-owned oil entities and the private sector just got wider. The bet--the 10% swing--is a bet on business as usual, tiny cuts and hope and some perverse belief that tribal ways will see the Saudis through and Mother Russia will just persevere as some sort of stodgy tagalong. 

That right there--no matter what belief system one has--explains why the only feasible way to a rebalanced market which protects America's oil independence rests with a simple 25% tariff on across-the-water oil. That's how wide the dichotomy--the spread--has become. There is no meeting in the world, whether virtual or in a socially-distanced ballroom with all those crooks wearing masks, that can reach a "free-market" policy. Sixty-dollar oil set forever will see this country through the storm. Trying to talk to these Saudis answering to a mentally-deformed prince who has never been told no is a farce.

[Dan Clemmensen + 1,011]

1 hour ago, Gerry Maddoux said:

... The game-players in the middle--the people who make the market by buying and selling oil futures--extort their living by using this market dichotomy like a crack spread. ...

 

 

Well, yes, from the outside looking in, it does look like a crack spread. Oh, wait, I now see you were making an analogy with refinery margins.

Edited April 7, 2020 by Dan Clemmensen
i had messed up what was quoted and what was new

[Gerry Maddoux + 3,627]

48 minutes ago, Dan Clemmensen said:

Well, yes, from the outside looking in, it does look like a crack spread. Oh, wait, I now see you were making an analogy with. refinery margins.

No, no, crack cocaine!

You were right the first time!

[0R0 + 6,251]

19 hours ago, ronwagn said:

I would just add that those at high risk need to isolate and avoid getting covid 19 as long as possible. That gives the treatments time to progress and the medications to be fully available and accepted. I am one of those who will try to survive until the vaccine comes, meanwhile more are dying of the ordinary flu. 

I am not expecting a conventional vaccine to work. Prior SARS vaccines caused immediate cytokine storm reaction upon re-exposure to the virus. So they made it MORE deadly, though you did ultimately destroy the virus before dying. 

The availability of treatments is all that matters. So HCQ and Zithromax or doxicycline (for those with heart issues) and whatever antivirals prove worthwhile is how it will happen. The US needs this to be made in the US at sufficient volumes.. 

[ronwagn + 6,290]

20 minutes ago, 0R0 said:

I am not expecting a conventional vaccine to work. Prior SARS vaccines caused immediate cytokine storm reaction upon re-exposure to the virus. So they made it MORE deadly, though you did ultimately destroy the virus before dying. 

The availability of treatments is all that matters. So HCQ and Zithromax or doxicycline (for those with heart issues) and whatever antivirals prove worthwhile is how it will happen. The US needs this to be made in the US at sufficient volumes.. 

And plasma from cured patients https://www.nbcnews.com/health/health-news/plasma-treatment-being-tested-new-york-may-be-coronavirus-gamechanger-n1178436?cid=public-rss_20200407

I am hearing that Zinc is also a helpful adjunct. You may have mentioned it along with silver and copper. I am taking a multi mineral including copper and we have some zinc supplements.

Here is my complete Covid 19 topic https://docs.google.com/document/d/1MXY8T0j7k0oUBsHW4BfjJM__DRIyzqrDf_FSlV4hHpw/edit#

Edited April 8, 2020 by ronwagn
reference

[ronwagn + 6,290]

15 hours ago, James Regan said:

Equal Market Share is the only solution or this cycle will continue. Its a simple concept.

What does that mean exactly? Price fixing?

[NessyOil + 5]

Not sure what you are talking about?    Lets see you don't think Saudi shorted oil aggressively in shell accounts before the great oil collapse

Now they are setting everyone up for round two.   People buy oil while  they open up new shorts

The Saudis are positioned perfectly to weather this storm.  Take out shale, CDN oilsands and other high priced non opec oil.  Heck take out OPEC oil for that matter.

Eventually the market rolls back to $50 a barrel and they own the market with Russia 

 

 

[Douglas Buckland + 6,308]

53 minutes ago, NessyOil said:

Not sure what you are talking about?    Lets see you don't think Saudi shorted oil aggressively in shell accounts before the great oil collapse

Now they are setting everyone up for round two.   People buy oil while  they open up new shorts

The Saudis are positioned perfectly to weather this storm.  Take out shale, CDN oilsands and other high priced non opec oil.  Heck take out OPEC oil for that matter.

Eventually the market rolls back to $50 a barrel and they own the market with Russia 

 

 

Well, the world is swimming in oil, countries are going to be very annoyed with the Saudi’s and Russia for collapsing their economies, and everyone may just sanction Russian and Saudi oil. They can produce as much as they desire....but no market for it.

[Dan Clemmensen + 1,011]

1 hour ago, NessyOil said:

The Saudis are positioned perfectly to weather this storm.  Take out shale, CDN oilsands and other high priced non opec oil.  Heck take out OPEC oil for that matter.

Eventually the market rolls back to $50 a barrel and they own the market with Russia 

 

 

If you believe in a free market, then if they price oil near or below the break-even price of the next-lowest competitor, then they can and should be able to sell at that price. This causes horrible damage to other oil producers but not to the rest of the economy, and we all move on. Personally, I think there are non-economic considerations. Specifically, the Saudis have proven that they don't want a free market, they want to artificially limit the supply. They cannot be trusted, and this means we are forced to take action to become energy independent. This means not depending on foreign oil, and that means accepting (and enforcing) a price that allows US/Canadian producers to make a modest profit, while encouraging consumers to use less product. We can do this because of shale. We could not have done this prior to shale.

[Douglas Buckland + 6,308]

And you can only do this if the ‘shale miracle’ has the longevity to make it happen....and continue to make it happen.

Does it?

[Dan Clemmensen + 1,011]

14 minutes ago, Douglas Buckland said:

And you can only do this if the ‘shale miracle’ has the longevity to make it happen....and continue to make it happen.

Does it?

An excellent question. I'm an outsider. I have seen estimates that we will exhaust shale by somewhere between 2025 and 2030. To remain energy independent, we need to move away from oil by then. But we need to do this anyway to avoid climate change, so my uneducated guess is that shale will last long enough. In the most extreme implementation of energy independence, we quit exporting any oil which, extends shale life, so our own resources will last long enough. The Saudis and Russians can supply the rest of the world. We could choose to export (or be prepared to export) at our price in order to keep the Saudis from screwing the rest of the world, but that's a political decision.

Edited April 8, 2020 by Dan Clemmensen
comma

[Douglas Buckland + 6,308]

First off, your whole position seems to be based on the assumption that climate change is due to human activity. This is still under debate and is not a proven fact. If you can prove it, please do so.

Furthermore, why should we retreat from using a relatively cheap, high energy density form of energy, which our infrastructure is set up to run on, simply because one source is exhausted? Because shale oil is depleted, should we immediately stop conventional production both onshore and off?

Shale oil, by itself, will never make the US energy independent.

[Dan Clemmensen + 1,011]

3 minutes ago, Douglas Buckland said:

First off, your whole position seems to be based on the assumption that climate change is due to human activity. This is still under debate and is not a proven fact. If you can prove it, please do so.

Furthermore, why should we retreat from using a relatively cheap, high energy density form of energy, which our infrastructure is set up to run on, simply because one source is exhausted? Because shale oil is depleted, should we immediately stop conventional production both onshore and off?

Shale oil, by itself, will never make the US energy independent.

I think we should agree to disagree on climate change, since neither of us will change the other's opinion. I take it as a proven fact. the inexorable year-on year increases in atmospheric CO2 track pretty much exactly with the amount of fossil fuel being burned.

I do not think shale is the only oil. I think it boosted us from energy dependence to energy independence. No we should not stop all production simply because shale runs out. We should take advantage of the time that shale is giving us to move away from oil in the least disruptive way possible, so by the time shale becomes uneconomic, we will no longer need it. I also think that the shale magicians will keep coming up with tricks to extend the life of shale. The imminent demise of shale "real soon now" has been predicted once every six months or so since about 2015, as production has continued to increase. Almost s predictable as the imminent availability of fusion power, which has been coming "in 20 years" since about 1950.

Back to our topic. There will be an oil bloodbath if we let the Saudis continue to control the price, because they will periodically crash the price to drive out the competition. To stop it, we need to maintain a stable price. The current disruption is a great time to start.