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

[Douglas Buckland + 6,308]

9 minutes ago, Wombat said:

They are all being re-deployed from ME and Afghanistan in preparation for the fight here in Asia region.

Can you provide a source for that statement?

[Dan Clemmensen + 1,011]

1 minute ago, Douglas Buckland said:

Correct! So why pump at all if storage is maxed out! This constant pumping while the world was over supplied was what was keeping prices down even before the pandemic caused the massive decline in demand!

I can understand having a ‘cushion’ of storage, but we are way beyond that. If farmers find themselves in an over supplied corn market, do they keep growing corn?

Let’s suppose that there was a global ‘shut-in’, how long would it take, even with the present demand destruction, to dry up the glut? Anyone have an answer?

Why can’t we all take the hit now (it’s coming anyway), dry up all the surplus oil and reset the industry?

Theoretical max storage of all types is about 2 billion bbl. At 100 million bbl/day, that's 20 days. At 75 million bbl (i.e. 25% consumption crash) that's about  27 days. Of this, I think at most 1.5 billion could be considered "surplus", leaving a 5-day cushion, but that would be awfully dangerous. To calibrate: there are about 750 VLCCs at about 1 million bbl each (average). All are considered part of the max theoretical storage. But  when things aren't weird, half of them are empty because they are on their return trip. That's 375 million bbl "unused storage".  (All numbers are from my recent uneducated web surfing, poorly understood and poorly remembered). But you need to not only dry up the glut, but keep it from building back, so you are back to having everybody cut back by 25% until the consumption gets back to normal.

[Douglas Buckland + 6,308]

2 minutes ago, Dan Clemmensen said:

Theoretical max storage of all types is about 2 billion bbl. At 100 million bbl/day, that's 20 days. At 75 million bbl (i.e. 25% consumption crash) that's about  27 days. Of this, I think at most 1.5 billion could be considered "surplus", leaving a 5-day cushion, but that would be awfully dangerous. To calibrate: there are about 750 VLCCs at about 1 million bbl each (average). All are considered part of the max theoretical storage. But  when things aren't weird, half of them are empty because they are on their return trip. That's 375 million bbl "unused storage".  (All numbers are from my recent uneducated web surfing, poorly understood and poorly remembered). But you need to not only dry up the glut, but keep it from building back, so you are back to having everybody cut back by 25% until the consumption gets back to normal.

Wouldn’t this be to everyone’s benefit? Suffer for a month, dry up the surplus, get the prices back up, THEN discuss individual production levels to prevent it happening again.

[Dan Clemmensen + 1,011]

Just now, Douglas Buckland said:

Wouldn’t this be to everyone’s benefit? Suffer for a month, dry up the surplus, get the prices back up, THEN discuss individual production levels to prevent it happening again.

I haven't a clue. I was under the impression that stopping and restarting production incurs different costs for different wells, and that for some wells it is more cost-effective to cut back than is is to shut in. I will defer to people who actually know what they are talking about. At the global level, the "correct" theoretical approach would be to minimize the total curtailment/restart cost. For that, you would need to set up a "curtailment market", which I suspect would be a political impossibility. Sort of OPEC+ on steroids but only lasting until the consumption resumes and using monetary transfers to buy and sell "pumping rights" instead of high-level negotiation of allocations.

[JoMack + 547]

No pipeline, gas is flared to increase oil production, crude oil is used for 60% gasoline, trucks and planes are still running full out, petrochemicals, etc. are still being used for products, including ventilator and testing machine casings, blah, blah, crude isn't just a "one product use", it is essential to all industries and economies here in the states.   To kill the U.S. oil and gas industry at large, is a terrible consequence to our country, coronavirus or not.  

[Gerry Maddoux + 3,627]

2 hours ago, Douglas Buckland said:

Correct! So why pump at all if storage is maxed out! This constant pumping while the world was over supplied was what was keeping prices down even before the pandemic caused the massive decline in demand!

I can understand having a ‘cushion’ of storage, but we are way beyond that. If farmers find themselves in an over supplied corn market, do they keep growing corn?

Let’s suppose that there was a global ‘shut-in’, how long would it take, even with the present demand destruction, to dry up the glut? Anyone have an answer?

Why can’t we all take the hit now (it’s coming anyway), dry up all the surplus oil and reset the industry?

The storage is not completely maxed out. There is room for 75 million barrels to top off the SPR, using very cheap oil. That right there would get the system moving again. 

If we continue producing 13 m bod and importing 7 m there is no way to ever solve the glut. But if we slapped an unhealthy tariff on across-the-water oil, used only our own production (mostly LTO) with Alberta added to the refinery feedstock, the glut would clear out within about a year, even if it's another two to three months before anything close to normal is seen. 

I'm ordinarily right there with you, take the hit, get the pain behind you, but these are not ordinary times. We are going to have, at best, a 20% unemployment rate, and possibly as high as 30%. The thing that has me so riled up is not President Trump tweeting to the Saudis to pump every time we got up to $60, but the fact that the Saudis interpreted that to mean they could do as they liked and it would always be applauded by the president. I don't believe that's the case; I think he hasn't truly understood the severity of the problem and, to be fair, he has had a lot on his plate. 

Restaurants, bars, hospitality, hotels, golf course--he sees all that and is very likely immensely frustrated about how to bring them back to life and save jobs, prevent suicides, restore dignity and a sense of worth. But right here, right now, there is a chance to SAVE hundreds of thousands of good jobs for hard-working people in the petroleum industry, all the way from the biggest shale jerk to the guy who makes his living at the Goodyear Tire Store in Midland. There is absolutely no time to allow the Saudis to hem and haw on this one, always tricking the eye. This is the time to act boldly and decidedly and I think our president will do that. I would never on these pages or any other pages disparage an American president. If I appeared to be, it was the product of my inept expression of dire thoughts on the whole situation. 

Maybe the first act of the president's infrastructure act would be to enlarge our SPR. There are underground salt domes all over the crescent coast between La and Tx. Drill down, turn on the water to dissolve the salt, pipe hypertonic saline far offshore, let the walls cure and pump in another 250 million barrels of oil. It didn't take long to make the four big cavern complexes back in the seventies--it was a rush job--so I'm sure we can take care of it. And if we're going to make this a pissing contest with the Saudis it wouldn't hurt to have a bit of spare capacity anyhow. 

Everyone is different. I'm no hothead but I believe the Saudis pulling this stunt during a worldwide calamity is inexcusable even for these goons. There are certain whole countries that should be written out of American life. China is one: just move all the medical stuff home and then never do business with them again--they tried to kill us by lying. It would appear that Saudi Arabia has just declared jihad on American oil commerce. There was a time when they could threaten our national security, screw up our economy, and we had no option but to grin and bear it. This is not one of those times.

And this time they crossed the line of decency. My thoughts and I'll probably not alter them anytime soon.

Edited April 11, 2020 by Gerry Maddoux

[Jay McKinsey + 1,489]

US historical high for crude storage was 1.226 billion bbl (including SPR) in March 2017. At that time the SPR was 20 million bbl short of full capacity. That gives the US a minimum storage capacity of 1.246 billion bbl. As of April 3rd storage including SPR was at 1.119 billion bbl. With storage filling at 15 million bbl per week the 127 million bbl proven spare capacity (including SPR) should be reached in 8 weeks.

https://www.eia.gov/dnav/pet/PET_SUM_SNDW_DCUS_NUS_W.htm

Edited April 11, 2020 by Jay McKinsey

[James Regan + 1,776]

1 hour ago, Gerry Maddoux said:

It would appear that Saudi Arabia has just declared jihad on American oil commerce.

Nice line and fitting, but also we have to consider the other, the sleeping bear, Putin has achieved his main goal which was to inflict damage to the LTO sector even at his own cost. We are dealing with some big egos here and political spin. They want Trump to announce a cut and by default join the party. This is the crux of the problem, as I offered a couple of times my opinion the other parties don't consider collateral damage as conscious reduction. Big egos cost lots of people their jobs unfortunately.

Its almost laughable that its come down to a blinking game.

A wink would suffice 😉

Edited April 11, 2020 by James Regan

[Wombat + 1,028]

7 hours ago, Dan Clemmensen said:

You are talking about bookkeeping. I'm talking (blabbering) about how to avoid damage to the wells during a short-term physical curtailment required because there is no place to put the oil. I hope the industry wants to implement the curtailment in the way that allowed the quickest and least costly return to full production as consumption returns to normal. That Fed policy can possibly enable this if the bonds are used correctly.

Dan, I will say it again, RELAX! The storage can't fill till November, cutting the number of rigs from 800 to 200 will see production decline dramatically, as will ceasing to complete the DUC's. Just a matter of putting the industry into "hibernation"for 9 months, same as every other industry.

[Gerry Maddoux + 3,627]

6 hours ago, Jay McKinsey said:

With storage filling at 15 million bbl per week the 127 million bbl proven spare capacity (including SPR) should be reached in 8 weeks.

Which would unclog the pipelines and give the system time to reset, in a fashion.

[Gerry Maddoux + 3,627]

2 hours ago, Wombat said:

Dan, I will say it again, RELAX! The storage can't fill till November, cutting the number of rigs from 800 to 200 will see production decline dramatically, as will ceasing to complete the DUC's. Just a matter of putting the industry into "hibernation"for 9 months, same as every other industry.

I'm not Dan but I would like to make an observation about this: 1) Some pipes are full as we speak. 2) Going down to 200 rigs in America would cripple the industry forever--many of those hundred-thousand workers won't be returning, which is a lot of talent lost, and also many of those rigs would never again see the upright position again. Repeat: that would destroy the American oil industry. Shoot it right in the heart. 

The # of rigs in Canada has made a plunge similar to what you suggest for America. It's pretty obvious that Canadian oil production is on its way out . . . and just at the time that we need her heavy oil, providing we get off Saudi imports.

This is easy on paper, but in reality these folks make up the backbone of the industry and you can't train up a fresh batch at the drop of a hat. Not only that but such dialogue fits right into the Saudi playbook. On some level, Putin, ever the shrewd head, knows his limitations in America. The Saudis, on the other hand, have dicked with us for so many decades that they think they can do it over and over and over, with no regard whatsoever for trying to hurt us when we were sick. Well, they've overstepped. And I think they will be severely penalized.  

 

[James Regan + 1,776]

12 minutes ago, Gerry Maddoux said:

Which would unclog the pipelines and give the system time to reset, in a fashion.

https://www.energy.gov/articles/us-department-energy-make-strategic-petroleum-reserve-storage-capacity-available-struggling

Some interesting SPR news released today.

Something here has to give as its becoming leaky roof syndrome in a hurricane.

[James Regan + 1,776]

3 hours ago, Wombat said:

Dan, I will say it again, RELAX! The storage can't fill till November, cutting the number of rigs from 800 to 200 will see production decline dramatically, as will ceasing to complete the DUC's. Just a matter of putting the industry into "hibernation"for 9 months, same as every other industry.

Unfortunately it's not that easy to put an Industry into hibernation, any oil rig onshore or offshore, needs to be kept warm. Newer rigs are full of PLCs which do not like to be turned off, start up costs for a stacked offshore unit is around 30+Million USD, and land rig no doubts cheaper but if a modern rig with cyber chair and said PLCs start up becomes an issue. If you're talking refineries and perhaps refineries having to be set up to receive different feedstock this again is not an overnight job. Pipeline infrastructures and transport in general become complicated the whole supply chain would be affected.

So its not the same as any other Industry at all, we are dealing with a commodity which comes from the ground under pressure, it wants to come to the surface, this in itself  is a huge dilemma no on off switch, if you turn it off you are sending everything connecting upstream home. Peak oil will not be reached due to a calamity it will be reached through a transition system which will take decades.

Unfortunately the oil industry is a 24 hours a day job.

[Gerry Maddoux + 3,627]

^

Great article with the wording from the DOE: ". . . . . intentional disruption of world oil markets by foreign actions." And they also used the term, "a sense of urgency." Okay, they get it. Good. 

That, coupled with James' explanation above, underscores just how alarming this situation has become. Yes, American shale producers are responsible for part of the mess, but still, they were held up to the sky to show the rest of the country that America was "energy-independent." 

It has become overwhelmingly apparent that "energy independence" and importation of 7 M barrels of mostly unneeded oil a day don't live in the same universe. At this point, it's either the Saudis or the United States of America. To me that's no contest. 

And as to protecting the Saudis from Iran, perhaps they should have thought of that when they launched a slick campaign to damage us forever when we were sickened unto death by a damn viral pandemic. We probably need to keep our bases there, mainly to help protect the Israelis, but Saudi Arabia in general, and MbS specifically, need to receive the message loud and clear that America is no Khashoggi: you can't slice and dice us and put us down the grinder. 

[Jan van Eck + 7,558]

1 hour ago, Gerry Maddoux said:

We probably need to keep our bases there, mainly to help protect the Israelis,

The only reason the US "protects the Israelis" is the undue influence of AIPAC  (American Israeli Political Action Committee. 

AIPAC is a totally Zionist operation run by hotheads from Brooklyn, NY.  They have distorted American policy in the ME for almost a century. Nobody in American politics has the balls to tell those guys to shove off.  The result:  constant conflict in the ME. 

[Dan Clemmensen + 1,011]

15 hours ago, JoMack said:

No pipeline, gas is flared to increase oil production, crude oil is used for 60% gasoline, trucks and planes are still running full out, petrochemicals, etc. are still being used for products, including ventilator and testing machine casings, blah, blah, crude isn't just a "one product use", it is essential to all industries and economies here in the states.   To kill the U.S. oil and gas industry at large, is a terrible consequence to our country, coronavirus or not.  

Sorry, but no. Jet fuel consumption is down by more than 80%. Product manufacture and consumption has taken a hit that cannot be immediately quantified, and less diesel is being sold to trucks. Yes "killing" the industry is unacceptable, but the industry must find a way to reduce its pace, just like the rest of the economy. This is not because of some sinister human machinations, it's because of reduction of physical and economic activity as the result of a pandemic. The industry needs to figure out how to best manage this reduction in order to rebound as quickly as possible when the time comes. trying to assess blame is worse than useless.

[BenFranklin'sSpectacles + 762]

On 4/10/2020 at 4:01 PM, Dan Clemmensen said:

Conventional units are trained and equipped to take and hold ground, and they are very effective at that mission. If that is not the mission, then they are the wrong units. What, specifically, is the military mission for the US in the middle east? Is there a specific, non-vague, mission that the US should do that "small elite units" can do? Note that bullshit like "win the peace", "win hearts and minds", and "build democracy" are not valid military missions. At best they are diplomatic or political missions where the military might or might not  be a useful tool in the early phases. If the military is still needed after the first year, the mission, not the military, has failed.

You make a valid point.  I'll be more specific: US conventional units no longer appear cost effective for their intended "take and hold ground" mission.  The declining competence of US personnel has a lot to do with this.  US conventional units are certainly good at killing anything within range, but "holding ground" implies a bit more than that.  Populations must be dealt with, and US conventional units are certainly not up to this task. 

"Taking and holding ground" is no longer a cost effective option.  It is, however, possible to station enough firepower in a region to threaten oblivion.  The US still can still say, "Do as we say or we'll replace your leaders with people who will.  If we can't replace your leaders, we'll ensure your country falls into ruin."  As a result, I think we see the US engaging in more shadow wars and more disruptive behavior in lieu of "taking and holding ground".  E.g. the sanctions on Iran and subsequent assassination of Soleimani. 

Declining competence of conventional troops is one issue, but the bigger driver may be that the US no longer needs any given foreign country's support to maintain its empire.  There are still natural resource imports, but any given nation's contribution can be replaced.  That means taking and holding ground - the single most difficult way to secure resources - is no longer required.  Small producers who step out of line can be made examples off.  In the language of negotiation: the Best Alternative to a Negotiated Agreement is no longer "take and hold ground".  It's "find another partner or make it yourself". 

This is all a bit Machiavellian.  I don't particularly like living in such a world, but it seems to be the way things work. 

[BenFranklin'sSpectacles + 762]

On 4/10/2020 at 10:19 PM, Dan Clemmensen said:

As a newbie from the outside, I still agree with you. Screw the Saudis and screw the Russians. They have demonstrated that they cannot be trusted, so using any of their oil at all, at any price down to or even below zero, is dangerous to our country's security.  Cut 'em off and tell that we refuse to allow those 14 VLCCs to dock and offload: they can just sail away with the oil.

BUT: as of right this very moment, and for at least the next three months,  are confronted with an unprecedented demand collapse. Our short-term storage is already full. Until this short term problem is resolved, somebody in going to curtail production in this country because there is no physical place to put it. This is the situation I"m trying to address, not some fantasy agreement between OPEC+ and some random entity  in the US government.

I'm well aware of Saudi dickery.  What did Russia do? 

[BenFranklin'sSpectacles + 762]

On 4/10/2020 at 10:46 PM, Wombat said:

I think "debt-deflation" more likely.

I'm not familiar with that term.  How does it work? 

[BenFranklin'sSpectacles + 762]

23 hours ago, Jan van Eck said:

The only reason the US "protects the Israelis" is the undue influence of AIPAC  (American Israeli Political Action Committee. 

AIPAC is a totally Zionist operation run by hotheads from Brooklyn, NY.  They have distorted American policy in the ME for almost a century. Nobody in American politics has the balls to tell those guys to shove off.  The result:  constant conflict in the ME. 

How do they achieve such outsized influence? 

[Eyes Wide Open + 3,537]

I find reading these threads quite illuminating. What I have not seen is a fundamental question....Does a country in this case the US have a right to its own sovernity. To make decisions based on its own self interest.

It would be most interesting to see US leadership make a statement to the effect the US or any other country must obide by rulings of the WTO.

 

Edited April 12, 2020 by Eyes Wide Open

[RichieRich216 + 454]

The WTO, WHO and a host of other global agencies are nothing but proxy’s of China! The President is right America First!

[Dan Clemmensen + 1,011]

10 hours ago, BenFranklin'sSpectacles said:

I'm well aware of Saudi dickery.  What did Russia do? 

Russia joined OPEC+. This is enough IMO to assume that they acquiesced in the early 2020 attack on shale. The problem is that crude is somewhat fungible, so it's hard to embargo just OPEC. NO I don't really know what the appropriate details of a tariff/embargo should be.

[Douglas Buckland + 6,308]

On 4/12/2020 at 12:42 AM, Jan van Eck said:

The only reason the US "protects the Israelis" is the undue influence of AIPAC  (American Israeli Political Action Committee. 

AIPAC is a totally Zionist operation run by hotheads from Brooklyn, NY.  They have distorted American policy in the ME for almost a century. Nobody in American politics has the balls to tell those guys to shove off.  The result:  constant conflict in the ME. 

I guess Hamas, Hezbollah and the PLO get a ‘pass’ on the constant conflict issue...

[Jan van Eck + 7,558]

1 minute ago, Douglas Buckland said:

I guess Hamas, Hezbollah and the PLO get a ‘pass’ on the constant conflict issue...

Ask yourself what pours fuel on the fires of those guys.  They are not nice people, and AIPAC has been a bonanza for them, both in recruitment and in raising cash.  And therein lies the problem:  defang AIPAC, and simultaneously you deflate the Hamas balloon.