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

[KilonBerlin + 9]

What do you say to the EIA Weekly Supply Estimates Report? 600,000 barrels per day less oil production within 1 week. This will continue less stronger until the price will be at least 40 US-$ for WTI again?

12.4 million bpd for the week ending 3rd April. 

13.0, 13.0, 13.1, 13.0 and 13.1 mbpd in the 5 reports before. This 13.1 mbpd were already an all-time peak posted by the EIA..
 

I also would say that if the US cant produce with real profit for lets say 40 US-$ than others who can should produce and sell... the US and Trump always want a "fair trade", so isn't that fair? Lucky he can't lie here, like he did in the Huawei-Smartphone-Case. Russian and Saudis have costs between 2.70 and 3.10 US-$ I did read. I know they need a price almost 15 times that high for their budget (Russia) or Saudis even almost 30 times as much...

but Saudis will cut social spendings I guess and as usual the average population will feel it. I had contacts to many russians playing a smartphone game, they are not happy about the distribution of wealth. However the "regime" seems untouchable. 

I think 2019 could become the "Peak Demand" year in the history of oil, if EV continue to win market share and same with renewables and more hydropower, in some areas supported by nuclear power. The US never had realistic oil reserves released since WW2 (the reserves always have been around 10 years since I can remember... which would be over 20 years. What happens if the exporters realize that demand won't come back that much, I think than a real flood would start? 

Edited April 9, 2020 by KilonBerlin

[Douglas Buckland + 6,308]

You are taking one data point and then creating an entire narrative to fit YOUR agenda.

Do you often find yourself running in the streets crying, “The sky is falling, the sky is falling!”

Just curious...

Edited April 9, 2020 by Douglas Buckland
Hhh

[Etienne + 2]

Here is another way to mitigate over-supply into the U.S. Market. If Saudi had 2 MBPD enroute to the U.S. in March, and 14 MBPD in April, simply restrict off-loading to the March level. That not only restricts over-supply, it also puts a financial holding penalty on Saudi for gaming the market at the expense of U.S. producers. With VLCC lease rates up 678%, they may not try a stunt like that again.

[James Regan + 1,776]

8 hours ago, James Regan said:

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.

https://oilprice.com/Energy/Oil-Prices/Global-Oil-Producers-Agree-On-Joint-10-Million-Bpd-Output-Cut.html

Looking like a 1.3Mil/Bbl Cut from the USA is on the cards, however they spin it OPEC++ is going to be a reality, the unthinkable may just happen....... 10% a nice round number

[Tom Kirkman + 8,860]

2 hours ago, Douglas Buckland said:

Do you often find yourself running in the streets crying, “The sky is falling, the sky is falling!”

Heck, I find it's easier to simply stay in a constant state of  ZOMG  PANIC  WE'RE  ALL  GONNA  DIE ! !

Also, I watch CNN religiously, to be informed what I need to panic about today.

[James Regan + 1,776]

6 minutes ago, Tom Kirkman said:

Heck, I find it's easier to simply stay in a constant state of  ZOMG  PANIC  WE'RE  ALL  GONNA  DIE ! !

Also, I watch CNN religiously, to be informed what I need to panic about today.

CNN is my main source of information although I do watch it with protection....

[Wombat + 1,028]

3 hours ago, Douglas Buckland said:

You are taking one data point and then creating an entire narrative to fit YOUR agenda.

Do you often find yourself running in the streets crying, “The sky is falling, the sky is falling!”

Just curious...

Yes, and this is the second time it has done so. My agenda is to keep the Western world strong, you have a problem with that? Sadly, not much of my advice was adhered to, and now our govt's realise what a mistake that was but it too late now. Game over red rover.

[Wombat + 1,028]

9 hours 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!

Yes, and just like mining, the shale industry has become "low value"?

[ronwagn + 6,290]

13 hours ago, BLA said:

Trump is listening to the advice of the oil majors Chevron, Exxon, Oxy etc.  Their agenda is very different than the independents and private firms.

He for some reason looks to please the Saudis.  

Oil industry will look different in the next few years.

Who do you think he should listen to?

[Wombat + 1,028]

3 hours ago, Douglas Buckland said:

You are taking one data point and then creating an entire narrative to fit YOUR agenda.

Do you often find yourself running in the streets crying, “The sky is falling, the sky is falling!”

Just curious...

Just tryna teach you economics and geo-politics 101 Doug. If you not interested, that ur problem. If you want the US to end up like Venezuela, that is fine by me. I love Chinese food.

[Wombat + 1,028]

1 minute ago, ronwagn said:

Who do you think he should listen to?

The big boys. National security is at stake.

[ronwagn + 6,290]

13 hours ago, BLA said:

Putin, Xi, Mohamed bin Salmon.

Take your pick.  

MBS is just the Tyrant of the day.  

So your logic is as long as MBS, Putin or Xi don't kill Americans they can cut anyone up that doesn't agree with them with a medical saw.

Pretzel logic. 

Do you believe MBS should be allowed to dump 14 mm bbls of oil on the U.S. market  ? 

What do you believe in ?

 

Xi and Putin rarely kill Americans, mainly their own people. I have clearly said, many times, that we should tariff dumped oil by anyone. I would tariff oil at any rate below $40 for starters. We do not need any oil except some heavy from Canada. 

I believe in the truth and not slander. 

[Dan Clemmensen + 1,011]

9 hours ago, Wombat said:

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

"Law of economics" == price responses, and yes they will almost certainly kick in first. "Laws of physics" == literal filling up of the total available storage capacity. It is physically impossible to store more than that. This is why I keep trying to distinguish "supply and demand" (economics) from "production and consumption" (physical reality). Yes, classical economics states that as storage fills, remaining storage costs rise, probably hyperbolically. But that hyperbola asymptotically reaches infinity when the last barrel is stored. In a theoretical world, additional storage will magically appear to meet this demand at some high price, but in the real world that takes time. I was attempting to point out that at some point it simply makes more economic sense to leave the oil in the ground and pump it later, after consumption resumes. I think the economists might consider this a type of substitution.

[Wombat + 1,028]

Most economists would call it "market failure". If they can't turn off the spigots, they may just let the oil flow into a pit and burn it. They can flare gas so I guess they could come up with a way to flare oil?

[Gerry Maddoux + 3,627]

13 minutes ago, ronwagn said:

Xi and Putin rarely kill Americans, mainly their own people.

Who do you think just murdered 15,000 Americans with the Wuhan virus, Ron? Hint: Not Putin.

[ronwagn + 6,290]

Just now, Gerry Maddoux said:

Who do you think just murdered 15,000 Americans with the Wuhan virus, Ron? Hint: Not Putin.

A very good point Gerry, I think you are right on. Guess I hadn't fully processed that yet. 77% of Americans have , according to one poll though.  I hope that will help us make drastic changes in our trading partners. 

[ronwagn + 6,290]

15 hours ago, Jan van Eck said:

Oil can be conveniently stored as a solid.  No need to build tanks  (although you could, always handy to have). 

Ok, so you take it to a cold climate and store it there, or refrigerate it?! Must be something else. What?

[Dan Clemmensen + 1,011]

5 minutes ago, Wombat said:

Most economists would call it "market failure". If they can't turn off the spigots, they may just let the oil flow into a pit and burn it. They can flare gas so I guess they could come up with a way to flare oil?

I know basically nothing about physically lifting oil, which which is why I asked for a baby-level tutorial on the subject, and the guys on this forum responded in an earlier topic thread (thanks, guys). To spew this back: Yes you can reduce the flow from a individual well, and you can shut in a well. If you shut in, you will be unable to recover some of these wells later with the likelihood of success falling for progressively poorer wells. This means you will lose a few of your good wells if you begin shutting them in. My tutors here were less clear on why y9u do not simply cut back production on all wells instead of turning off ("shutting in") some an leaving the others running. I think it's cost of operations. If it is cost of operations, then government intervention could preserve existing wells by enforcing some sort of transfer payments.   In any event, the economics of pumping and burning seem wrong to me. pumping costs money ("lifting costs").

[Bob D + 562]

On 4/8/2020 at 11:37 AM, butasha said:

Someone sure thinks the price of oil will rebound. I own a few thousand acres of minerals leased to 5 different companies here in  South Texas. We get quite a few inquiries throughout the year looking to outright purchase our interest. But for some reason this week I have received a much higher than normal number of calls looking to purchase our minerals interest.

Allow me to bid as well.  9 or 10 years cash flow at today's oil and gas strips is a bargain over the life of that reservoir.

 

[Bob D + 562]

19 minutes ago, Dan Clemmensen said:

I know basically nothing about physically lifting oil, which which is why I asked for a baby-level tutorial on the subject, and the guys on this forum responded in an earlier topic thread (thanks, guys). To spew this back: Yes you can reduce the flow from a individual well, and you can shut in a well. If you shut in, you will be unable to recover some of these wells later with the likelihood of success falling for progressively poorer wells. This means you will lose a few of your good wells if you begin shutting them in. My tutors here were less clear on why y9u do not simply cut back production on all wells instead of turning off ("shutting in") some an leaving the others running. I think it's cost of operations. If it is cost of operations, then government intervention could preserve existing wells by enforcing some sort of transfer payments.   In any event, the economics of pumping and burning seem wrong to me. pumping costs money ("lifting costs").

Dan

Many reasons why a producers may have to completely shut in a well but the most obvious is market.  If you are pipe connected and the pipe isn't flowing - shut in.  Same with trucking and injections sites.  Your market dictates the level of shut-ins more so than price because of reservoir risk.

[Dan Clemmensen + 1,011]

1 minute ago, Bob D said:

Dan

Many reasons why a producers may have to completely shut in a well but the most obvious is market.  If you are pipe connected and the pipe isn't flowing - shut in.  Same with trucking and injections sites.  Your market dictates the level of shut-ins more so than price because of reservoir risk.

Thanks, Bob. So pipe-connected wells may not be able to simply reduce pumping instead of shutting in, becasue there is no storage at all at the other end of the pipe any more? My baby-level mental model assumed that a bunch of pipe-connected wells all feed into the same storage resource, and you can therefore either 1) shut in some of them, or 2) reduce pumping on all of them. Apparently not. Why not? I was hoping for a solution that would allow the government to cover the lifting costs for wells that are operated at their minimum pumping rate, as a way to avoid shut-in damage the wells.

[Dwight Schneider + 11]

On 4/8/2020 at 8:04 AM, Jan van Eck said:

Readers might note that "Dumping" is a specific set of events in which surplus product is sold at prices below that commanded in the home country for the same product.   Occasionally, Dumping is taken to mean selling at below the cost of production.  There is no hard evidence - yet - that the KSA is selling that crude for less than equal-quality crude is internally sold.  It is a bit of an abstract, as I assume that the production of petroleum goods inside KSA is all controlled by the State, and thus pricing ladders are artificial.  That said, is there evidence that the oil itself has not already been sold to oil traders?  Can traders "dump"?  Probably not.

I do not see any plausible way for anti-dumping laws to apply to the sale of Saudi oil at fire-sale pricing.  Yo9u have this cheap oil everywhere, the world is awash in it.  I would not put much stock into anything that Rick Perry says, he is a notorious dimwit.  Can the Trump Administration impose import quotas?  Yes, it can, and there is precedent for this.  Readers are invited to review the combination of tariffs and quotas on construction lumber from Canada into the USA  (a perennial sore point, for many decades, between them).  Will Trump do that?  My guess: no. 

The US economy benefits immensely from ultra-cheap oil.  The users of oil  products pay less, thus having more funds to spend on "something else."  Or, as in the case of the air carriers, they can offer lower fares, once the hedging contracts run out.  All that, cumulatively, puts more cash into individual pockets, be that corporations or individuals.  More cash ultimately results in more spending, and greater levels of economic activity.  OK, that is not so pleasant for the domestic oil industry, but it is what it is. 

Very well stated.  Trump can tariff, he can also restrict imports.  But what he can not do is use the huge glut of oil overnight.  At some point that becomes a major factor in the market as people pay for storing and want to move it.  Although there could be concessions by majors, large independents and world wide companies, 'to do what is best for the industry.'  How often do we really see those things work for very long term when companies have to make payments on loans.   If the Sauds really did boost there production as much as they said they did and if USA producers cut more and then Russia honors it's deal, how long will it take for use demand to outstrip production?  Then how long will it take for the economy to pick up enough to draw down storage?  Big questions with lot's speculation for sure.  Growing up in Nebr. as a farm boy and still today traveling through the Midwest, you would see the market crash as farmers had bumper crops and stacks of corn, wheat or milo would set on the ground at grain.  Most times it would only sit for a year, but in severe oversupplies and depressed economy it would sit for 18 months to more then 2 years.  Basically being peddled as low grade feed sources or even disposed of.  Not sure I see much difference here.  Big benefactors, other industries, airlines, travelers, chemical plants that may still have good markets in the recovery, many times refiners when the spread stabilized on gas and diesel.  If the infrastructure bill gets passed and there is a big call for asphalt nationwide refiners could get great spreads there.  But bottom line, personally I am still laughing at prices above $20/bbl.  And look out if Trump tariffs oil.  If we were a big trade partner with more of the OPEC+, maybe we would be able to pressure the market.  But very few countries are going to sanction a supplier who 1 is key, the Sauds aren't to our refiners, and 2 some country like China doesn't see it as another opportunity to tank America be engaging in a dumping location.  Hamm is the only oilman I hear touting tariffs.  Pretty sure the rest of the industry sees it as a way to put the skids on recovering as a lot of industry will pull back on how much energy and feed stock they buy due to artificial higher prices.  Also, how many USA industries (southwest airlines has been a master at this over the years) will hedge major amounts if they get a hint tariffs on oil is a real deal.  Then how does the feds address all those complaints from those who didn't.  Good luck SOE Perry because one you are kind of an idiot and 2 this deal is a no win for you!

[Bob D + 562]

Take my situation ... I have producers selling to me for transport to Corpus Christi (TX coast).  Once the oil gets to Corpus it is stored, refined or exported.   Can't do anything else with crude oil.   Export window is closed despite the Brent-TX Coast spread (MEH or LLS).  Coastal Storage is full.  Refiners are either 60-70 operating capacity or off line.  If I can't transport to Corpus or store in basin (Delaware/Midland) I have to shut in.  That's where it's going.  Nothing is 100% accurate here as I have clients with gathered by refineries (they will flow).  Some have capacity to Cushing (Basin Pipeline) so they will flow.  

[Bob D + 562]

7 minutes ago, Dwight Schneider said:

Very well stated.  Trump can tariff, he can also restrict imports.  But what he can not do is use the huge glut of oil overnight.  At some point that becomes a major factor in the market as people pay for storing and want to move it.  Although there could be concessions by majors, large independents and world wide companies, 'to do what is best for the industry.'  How often do we really see those things work for very long term when companies have to make payments on loans.   If the Sauds really did boost there production as much as they said they did and if USA producers cut more and then Russia honors it's deal, how long will it take for use demand to outstrip production?  Then how long will it take for the economy to pick up enough to draw down storage?  Big questions with lot's speculation for sure.  Growing up in Nebr. as a farm boy and still today traveling through the Midwest, you would see the market crash as farmers had bumper crops and stacks of corn, wheat or milo would set on the ground at grain.  Most times it would only sit for a year, but in severe oversupplies and depressed economy it would sit for 18 months to more then 2 years.  Basically being peddled as low grade feed sources or even disposed of.  Not sure I see much difference here.  Big benefactors, other industries, airlines, travelers, chemical plants that may still have good markets in the recovery, many times refiners when the spread stabilized on gas and diesel.  If the infrastructure bill gets passed and there is a big call for asphalt nationwide refiners could get great spreads there.  But bottom line, personally I am still laughing at prices above $20/bbl.  And look out if Trump tariffs oil.  If we were a big trade partner with more of the OPEC+, maybe we would be able to pressure the market.  But very few countries are going to sanction a supplier who 1 is key, the Sauds aren't to our refiners, and 2 some country like China doesn't see it as another opportunity to tank America be engaging in a dumping location.  Hamm is the only oilman I hear touting tariffs.  Pretty sure the rest of the industry sees it as a way to put the skids on recovering as a lot of industry will pull back on how much energy and feed stock they buy due to artificial higher prices.  Also, how many USA industries (southwest airlines has been a master at this over the years) will hedge major amounts if they get a hint tariffs on oil is a real deal.  Then how does the feds address all those complaints from those who didn't.  Good luck SOE Perry because one you are kind of an idiot and 2 this deal is a no win for you!

Farmers get paid to NOT produce crops.  You do that for oil companies then you're talking equivalency.  And I'm certain the accomplished SOE and 4 time Gov of Texas is terribly upset at your childish name calling.  LOL

How vital is Saudi oil right now, when they produce 10+mm bbls/d in a market over supplied by 15-20mm bbls/d and 1 Billion? bbls in storage.  I've said it too many times already but f@%$ the Saudis.  For decades the US imported 10-15mm bbls/d at a time when global demand was 50-60-70mm bbls/d.  Now 2020 approaching 100mm bbls/d demand, the US asks the world to absorb 4 million bbls/d and their response is to send the world into a depression.  

My suggestion is for Pompeo to advise the Saudis and Iran of our immediate military withdrawal of troops and defense missiles from SA and the removal of US Naval policing of the Pershing Gulf and wait a few months.  The murderous middle east dictatorships will right the situation for all of us!  Assuming Pompeo hasn't done that already.

 

[Dan Clemmensen + 1,011]

15 minutes ago, Bob D said:

Take my situation ... I have producers selling to me for transport to Corpus Christi (TX coast).  Once the oil gets to Corpus it is stored, refined or exported.   Can't do anything else with crude oil.   Export window is closed despite the Brent-TX Coast spread (MEH or LLS).  Coastal Storage is full.  Refiners are either 60-70 operating capacity or off line.  If I can't transport to Corpus or store in basin (Delaware/Midland) I have to shut in.  That's where it's going.  Nothing is 100% accurate here as I have clients with gathered by refineries (they will flow).  Some have capacity to Cushing (Basin Pipeline) so they will flow.  

Thanks, Bob. It appears that the problem is that there is no way to allocate the scarce storage to allow individual wells to operate at a minimum production level, because other producers are still pumping at max based on previous contractual arrangements. This looks like an ideal situation for some arbitrage: Someone who needs to pump a little bit to keep a wall alive should be willing to pay one of the privileged  producers to back off from max to a lower volume still above its own min)  and transfer the pipe and storage allocations.