"Saudi Armada heading to U.S.", "Dumping" is a WTO VIOLATION.

[James Regan + 1,776]

3 hours ago, Douglas Buckland said:

I was not whining, just stating a fact.

You OPINION is that shale will do just fine. Many others respectfully disagree with your opinion.

The lost jobs may come back, but there will not be anyone, with the required experience, to fill them.

In here sits the debate, LTO Shale is not doing just fine, Rig count is dropping like pigs on KSA, this Industry required this rocket up its ass for some time now, the highly over leveraged and unprofitable sector was already being revealed widely as an unhealthy model, COVID19 merely pushed it off the cliff, a classic Black Swan.

This forum needs to understand that the Shale sector although highly important to the US economy is not so highly thought of in the world market, this is the crux of the problem. Everyone else has the same attitude reciprocated they don't care about US jobs as the US doesn't care about Russian, Iranian, Saudi, Nigerian, Ecuadorian etc etc jobs.

This will be just another blip on the Geolograph or the world order, the US will make concessions probably +/- 10% production cuts, Putin and Uncle MBS will back off and the cycle continues.

IMO - 10% from all would do just nicely - Lets see this morning what comes out of the meeting - However If someone plays hard ball prepare to see the current gains fall and then wait for the tank to get filled a few weeks later, we will looking at low teens WTI.

[Wombat + 1,028]

13 hours ago, Vinnie Moore said:

Not true. Trump is a genius, a great businessman. OBAMA depleted our national reserves so Trump has decided this is the best time to increase our national reserves with cheap Arab oil. As soon as he does that he will tighten the screws and get the oil markets back to normal. If Trump is unable to do so, the Saudis will lose more market share. You can bankrupt some US shale companies but you can't bankrupt the process of extraction nor the oil that sits in the Permian, Bakken, Eagleford etc etc. The US will come out stronger and Russia will capitalize on the Saudis loss of market share.

Get real, the Saudis only import 1 mbbl/d to their refinery in US. Agree that Trump is genius, like me, and that US will come out stronger, but so will SA at Russian expense. Why do u think that Trump calls MBS a friend? Between them, they will stitch up Putin good and proper

[Wombat + 1,028]

12 hours ago, Dan Clemmensen said:

I'm not clear on the legal mechanism "the US" can use to make major cuts by fiat. I'm fairly sure President Trump does not have the authority to do this. However, the market will do it for him when lifting cost exceeds price, or the laws of physics will do it as production exceeds consumption and storage fills up. The regulators in each state (notably Texas) can do it state-by-state, but what about transnationals that pump all over the world? should the Permian bear the entire brunt of a cut by itself?

Don't mean to nit-pick, but "laws of economics", not laws of physics. I have degrees in both physics and business and the laws of physics are very dear to my heart

[Wombat + 1,028]

12 hours ago, William Sol said:

SPR is becoming a source of investment instead of an emergency reserve.  Buy low, sell high (whenever that happens)

https://www.usatoday.com/story/money/energy/2018/02/13/us-mandates-biggest-non-emergency-strategic-oil-sell-off/332885002/

 

 

6 hours ago, Dan Clemmensen said:

OK, an uneducated opinion. It's not cost-effective to build new storage: this is a short-term problem. Further, every barrel we store is a barrel we must eventually pull back out and sell, so extra storage keeps the market depressed longer. It's better to just leave the oil in the ground. If necessary you can create virtual storage by selling that oil that is in the ground before you actually lift it. Note that "storage includes gasoline in storage, all the way down to the tanks at individual gas stations. Next opinion: production recovery will occur after consumption resumes. There is nothing the industry can do to affect this. The industry can at best plan for an orderly resumption of production to track consumption as quickly as possible. It appears that you assume that consumption will ramp back up very abruptly, faster than production can ramp. I speculate that the consumption ramp will be more gradual than that. The industry may need government help to keep idled workers paid during the slump so that they are available to resume production. That's OK. It's true for the entire economy, not just oil production.

I agree.

[Wombat + 1,028]

12 hours ago, William Sol said:

SPR is becoming a source of investment instead of an emergency reserve.  Buy low, sell high (whenever that happens)

https://www.usatoday.com/story/money/energy/2018/02/13/us-mandates-biggest-non-emergency-strategic-oil-sell-off/332885002/

 

That was then, this is now?

[Douglas Buckland + 6,308]

24 minutes ago, Wombat said:

Yes and no. I think fair value = $65. Why? Coz u can't make perfect correlation to general inflation rate due to effect of greater efficiency in production these days. It is the same in mining. Everything becoming "low value" due to relentless cost efficiencies. Even gold will be virtually worthless within 10 years thanks to the automation and electrification of the mines and processing. Will be hardly worth the trouble, very low margins and oil heading the same way.

Right, so the mines never reduce production or run out of ore due to geological issues, they just keep producing due to technological advances and efficiencies....we already heard this drivel from the shale oil industry!

[Wombat + 1,028]

7 hours ago, BLA said:

Yea right.

You don't have to cut off relations with Saudi Arabia, but you should not allow a murderer continue as head of state. 

Sure what does the murder of a journalist matter.  Butcher him with bone saws , this the parts in a trash bag and dispose of them.  

Hey, he worked for Bezo so should have burnt him alive too. 

Let me ask you a question. Would you care if it was your mother that MbS cut up with bone saws ?  

Hey, mom don't get in the way of oil and politics.  I'll have to use my Black & Decker on you.  Sorry if that's against your sensibilities. 

Mother's day is right around the corner.  Don't forget to get her a card. 

 

Get real, playing "chop-chop" is standard practice in SA. Not gonna change in a hurry. 100's of journalists die in war zones, always have. The Kagoshi saga may have been tragic, but not special.

[James Regan + 1,776]

9 minutes ago, Wombat said:

I have degrees in both physics and business and the laws of physics are very dear to my heart

Lets apply Newtons 3rd law of gravity ie "what goes up must come down" how would a Physicist interpret this law with the price of oil, using world order and emotions etc can this law be applied? Im sure it can- Genuine question no irony involved.

Respectfully

[Wombat + 1,028]

24 minutes ago, Douglas Buckland said:

Right, so the mines never reduce production or run out of ore due to geological issues, they just keep producing due to technological advances and efficiencies....we already heard this drivel from the shale oil industry!

Yep. You also get the same result. Shareholders and workers get burnt every time. That is the nature of capitalism and competition. The lowest cost producer always "wins", if you can call it that. In a world abundant with resources, the customer is always right? Personally, I think the Western world needs to do a bit of "strategic planning" like the Chinese do. It would require co-operation though, and I don't think we capable of that.

[Douglas Buckland + 6,308]

 “Personally, I think the Western world needs to do a bit of "strategic planning" like the Chinese do. It would require co-operation though, and I don't think we capable of that.”

Interesting. Could you go into a bit more depth re the Chinese strategic planning and the ‘required cooperation’?

[Wombat + 1,028]

29 minutes ago, James Regan said:

Lets apply Newtons 3rd law of gravity ie "what goes up must come down" how would a Physicist interpret this law with the price of oil, using world order and emotions etc can this law be applied? Im sure it can- Genuine question no irony involved.

Respectfully

U cannot apply Newtons Law to an economic question. When the oil storage fills up, the laws of supply and demand will still apply. There will simply be a "shift in the curve". Google it. Price will fall, maybe to zero or even negative, but there will still be SOME demand for oil, and supply WILL FALL to match, the only question is WHO's oil production will be cut? My guess is EVERY producer except the ME countries. I cannot think of any oil company on the planet that has not scaled back investment plans except the 2 warring parties, ARAMCO vs the Russsian ones. Don't forget though, the world needs to replace 6m b/d of oil production each year just to keep production constant. On the other hand, 1.5m extra barrels in storage would take about 5 years to clear even if oil consumption went back to normal and started growing again. This is going to be a long, drawn-out battle

[Wombat + 1,028]

11 minutes ago, Douglas Buckland said:

 “Personally, I think the Western world needs to do a bit of "strategic planning" like the Chinese do. It would require co-operation though, and I don't think we capable of that.”

Interesting. Could you go into a bit more depth re the Chinese strategic planning and the ‘required cooperation’?

OK, need dinner first

[Alex Svobodin + 2]

20 hours ago, BLA said:

James

Glad you get a chuckle about all this. 

How about a wager ?  I bet your precious monarchy in Saudi Arabia is toppled within 1 1/2 years.  Bet for $1000 U.S.

You pay double if MBS is beheaded before he can escape to Switzerland. 

Well ?

 

Imagine you're a US solider that has been deployed to Saudi Arabia , WTF do you tell your family you're putting your life on the line for? 

So Saudis can destroy your U.S. shale industry unencumbered ?  

Trump better wise up if he wants reelection.  He needs to  stop this abuse by Saudi Arabia.  

 

WTF are the US soldiers doing there, half a world away, anyway?

[Wombat + 1,028]

Before I talk about solutions Doug, I need to define the problems: 

1: China has one ambition, to supplant the US and dominate the entire planet

2: It has one tool to do this, a closed capital account (ie: currency manipulation)

3: It also steals IP at an alarming rate and we are foolish enough to let them do so.

OK, a bit more detail. In order to dominate the planet, the Chinese need to have both economic AND military superiority. They already have the former, and are very close to achieving the latter. How did they become the largest economy on the planet in PPP terms? Most think it started with Bill Clinton when he let them into the WTO and they "stole" our manufacturing base with very low wages and lax environmental standards. True, but not the whole story. The whole "engagement with China" story actually began with Kissinger. Anyway, the idea was that the whole thing would be a "win-win". China could manufacture all the low-value stuff, which would give Americans cheap goods in order to tame inflation, and by killing half the unions, wages growth would also be tamed, further cutting inflation. The US would also win because the Chinese would buy higher-value products such as air-craft and cars. What could go wrong? Nothing to learn from the way in which the Japanese came to dominate the global car market? Here lies the rub. The US foreign policy elite STILL BELIEVE they have the situation firmly under control because the USD is still the reserve currency of the globe. They still believe they can crush any economy on the planet by monetary means, even if the currency is fixed to the dollar. They are wrong. Let me explain why.

Lets say the average US wage = $70,000 and average Chinese wage = 35,000 Yuan = $5,000

Now give the US worker a 2% wage rise:

2% x 70,000 = $1400 = 9800 Yuan

Now give chinese worker a 10% pay rise = 3500 Yuan! Can u see how the jaws of death operates against US worker given fixed exchange rate? Unless US can devalue dollar against Yuan, US worker loses competitiveness every year!

[BLA + 1,666]

5 hours ago, 0R0 said:

Trump will have the support of the oil patch in any case, because his alternative wants to shut it down altogether. 

That said, a stance that pretends to do something about the Saudi oil coming in will do him some good in TX and related areas. Perhaps MBS will cooperate and act like he was hurt. 

Besides, the Port Arthur refinery eats 600k/d so those 13 mil bbl are 20 days' worth of supply. How is that dumpig? 

Perhaps Trump should demand they blend in more local LTO, but they probably do that already, since it is cheaper than what they get for their oil elsewhere. Otherwise, the monthly delivery would be 18 mil bbl. Like many other US refineries, they are not structured to make enough diesel out of LTO to meet the market demand ratio of diesel to gasoline. 

The Motiva storage is full.  Actually, almost all the U.S. storage is full.  They plan to sell the heavy oil to the other refiners that use the heavy oil on the gulf.

They will "ask" their JV partners that have refineries and E&P operation in the KSA to buy their oil.  

Do you just like to argue or do you support Saudi dumping.  

Edited April 9, 2020 by BLA

[Wombat + 1,028]

1 hour ago, Wombat said:

OK, need dinner first

Usually, when an emerging country exports a lot to the rest of the world, their currency rises so their labour becomes "less cheap"compared to the rest of the world and things start to balance back out. Not so with China. That is why Obama was furious with them and announced his "pivot to Asia". I invited him to station marines in Australia, and our governments agreed. What we really need to do, is either boot China out of the WTO, or form our own Western+ Alliance and exclude China. Obama could see the logic to this, which is what the trade agreement was all about but unfortunately, Trump made an election issue out of it and Hillary didn't have the balls to tell the public what it was all about in fear of being labelled racist or something? That is the only problem with Trump. Like most Americans, he under-estimates the Chinese. The Pentagon does not. At least Trump tried his absolute best to wring a better trade deal out of China, but oh boy, didn't he cop a lot of flak for it from all corners? Every vested interest came to the fore and under-cut him.

The West has so many enemies, it is difficult to know which one to crush first. I asked my Dad what he would do, and he said "go after the biggest one first". I would do the opposite. I would go after the small ones first, like Hitler, and I think that is what China is doing. They know there is no point in Nuclear war, nobody can win that, so they aim to win a conventional war, starting by booting the US out of the South China Sea which would make them masters of Japan, South Korea, Taiwan, and Australia, amongst the rest in the region. Then China would have all the resources required to take on the rest of the globe. They would do so at their leisure. At the end of the day, my Dad was right. It makes sense for the US to go after China while still possible and it makes sense for China to pursue the opposite strategy.

[Douglas Buckland + 6,308]

53 minutes ago, Alex Svobodin said:

WTF are the US soldiers doing there, half a world away, anyway?

Same thing they are doing in Europe, Korea, Japan, I assume.

[BLA + 1,666]

3 hours ago, Wombat said:

Get real, playing "chop-chop" is standard practice in SA. Not gonna change in a hurry. 100's of journalists die in war zones, always have. The Kagoshi saga may have been tragic, but not special.

Going to the embassy in Turkey to get your marriage license approved is not a war zone, dopey.

Using your logic if President Trump doesn't like what a journalist writes about him he can murder him.  Those are your standards ?  Wow !

[Wombat + 1,028]

At the end of the day, the only way to prevent WW3 is to "constrain" China. We can no longer contain them but we can certainly balance them if we all agree that we need to stop chasing their market and competing with each other to do so. It would require one helluva coalition and a helluva lot of co-operation, but it is our only chance. I would start by booting China and Russia out of the G-20 and make plans for new TPP trade and military talks as soon as the US election over.

[BLA + 1,666]

58 minutes ago, Alex Svobodin said:

WTF are the US soldiers doing there, half a world away, anyway?

I'm with you.

BRING THEM HOME !

Thanks

[Wombat + 1,028]

4 minutes ago, BLA said:

Going to the embassy in Turkey to get your marriage license approved is not a war zone, dopey.

Using your logic if President Trump doesn't like what a journalist writes about him he can murder him.  Those are your standards ?  Wow !

Not my standards, Saudi standards, get over it.

[Wombat + 1,028]

24 minutes ago, BLA said:

Going to the embassy in Turkey to get your marriage license approved is not a war zone, dopey.

Using your logic if President Trump doesn't like what a journalist writes about him he can murder him.  Those are your standards ?  Wow !

I might ask MBS to chop you up if you go to Turkey and don't learn to be polite.

[Wombat + 1,028]

2 hours ago, Wombat said:

U cannot apply Newtons Law to an economic question. When the oil storage fills up, the laws of supply and demand will still apply. There will simply be a "shift in the curve". Google it. Price will fall, maybe to zero or even negative, but there will still be SOME demand for oil, and supply WILL FALL to match, the only question is WHO's oil production will be cut? My guess is EVERY producer except the ME countries. I cannot think of any oil company on the planet that has not scaled back investment plans except the 2 warring parties, ARAMCO vs the Russsian ones. Don't forget though, the world needs to replace 6m b/d of oil production each year just to keep production constant. On the other hand, 1.5m extra barrels in storage would take about 5 years to clear even if oil consumption went back to normal and started growing again. This is going to be a long, drawn-out battle

PS: I meant 1.5 billion in commercial inventories.

[wrs + 893]

10 hours ago, Dan Clemmensen said:

. If necessary you can create virtual storage by selling that oil that is in the ground before you actually lift it.

That's called the futures market.

[wrs + 893]

3 hours ago, Wombat said:

Yep. You also get the same result. Shareholders and workers get burnt every time. That is the nature of capitalism and competition. The lowest cost producer always "wins", if you can call it that. In a world abundant with resources, the customer is always right? Personally, I think the Western world needs to do a bit of "strategic planning" like the Chinese do. It would require co-operation though, and I don't think we capable of that.

The lowest price producer gets sold out first.  The supply isn't infinite.  The cheap oil from the middle east only represents about 25% of all the oil produced and consumed in the world.  Oil is not fungible.