Trumps Oil Industry....

[Dan Warnick + 6,100]

9 minutes ago, Dan Clemmensen said:

The Saudis did not "flood the world with oil". They threatened to increase their exports by up to 2 million bbl/day starting on 1 April, but by that time the pandemic had already crashed consumption by >20 million bbl/day, rendering the Saudi action completely irrelevant. If the Saudis had said nothing and done nothing, the result would have been exactly the same.  The Saudis are acting nasty and want you and everybody else to think they are major players, but as of right now they are getting hurt a lot worse than the US, because the (approximately) 60% revenue reduction represents most of their economy, but only a small part of our economy. If the US government intervenes to help support recovery in the oil industry as part of recovery of the entire economy, we will be in much better shape coming out of this than they will.

I agree.  If I had been on the desk that day over in the KSA and the conversation was something like:  Look boss, we've got 10 ships (or whatever number it was) full of oil and the world's markets are crashing.  What should we do with it?  Ship it to the States.  They are the largest consumer and they'll need it eventually.  We can fill in the POs as we go.  Ship It!  Ship it now!

Edited April 20, 2020 by Dan Warnick

[Gerry Maddoux + 3,627]

38 minutes ago, Dan Clemmensen said:

The Saudis did not "flood the world with oil". They threatened to increase their exports by up to 2 million bbl/day starting on 1 April, but by that time the pandemic had already crashed consumption by >20 million bbl/day, rendering the Saudi action completely irrelevant. If the Saudis had said nothing and done nothing, the result would have been exactly the same. 

I'm sorry, my friend, but I don't think you've learned a goddamned thing from about twenty folks who are willing to help you. You put this stuff on here as though you understand it, but in reality you don't have a clue. 

Look, OPEC has run the world's futures markets for many decades. They farted, the market reacted. The futures market is one step up from fortune-telling; it is built, as I've told you ad nauseum, on PERCEPTION of what's about to happen. It is regularly wrong. 

You say this: "They threatened to increase their exports by up to 2 million bbl/day starting on 1 April" and . . . . . well, Dan, what they did was immediately cut the price of oil in half. Then, as you rightly say, the pandemic hit hard, but, contrary to what you said ("rendering the Saudi action completely irrelevant") their stated actions horribly exacerbated a worsening condition. You went on to say something so stupid that I don't even know why I'm reacting: "If the Saudis had said nothing and done nothing, the result would have been exactly the same." That is just so patently false and kindergarten that I wonder about your mental health. It's naive. And stupid. And every time I call you on this, you hide behind "being ignorant." Well, hell, Dan, I'm beginning to believe you on that point, at least. 

Looky, the Saudis desperately wanted to sink US shale. The prince also had a big hard-on for Putin. It's not top secret that Putin can't turn his valves down in the middle of a Siberian winter, so the prince blames Putin--he's the perfect foil. Then there's shale. Like it or hate it, when you're in the middle of a $40M project, drilling a half-dozen wells into the Wolfcamp formation in the Delaware sub-basin, you can't exactly shut down and go play pool for a month. If the virus happens in the middle of that about the best you can do is say holy shit and go on with your rat-killing. But at that point, a true ally, such as the KSA claims to be, would have recognized that America was sick unto death, had our hands full trying to bury a goddamn 2,000 people a day, said gosh, we overplayed this, can we help out, and by the way, we're not going to feed anymore oil into the refinery until you get this straightened out. But instead they put the pedal to the metal. 

And our president didn't do a damn thing. And he should have. After all, Harold Hamm only spent about twenty-four hours ten days ago telling him this was coming. And quite a few people on this site hee-haw'd like it was going to be a fun day. Well, what do you think now, boys? Big time fun, right? Watching our own get pilloried by the goddamn sick prince! Belly up! Big day!

Grow a goddamn pair, Dan. This is a war between this crazy-assed, coked-up prince and the rest of the world of oil. Putin is probably going to blow one right up his butt-hole, so this may all be moot. But to say these ridiculous things you're saying, in a spirit of community sharing of the mind spirits, is just bullshit of Far-side degree. 

Watch! There will be at least three bitter old farts come out to take your side, and that's fine with me. I will live to fight another day. On that score, I'm not so damn sure about the prince. But hey, according to you, "if the Saudis had said nothing and done nothing, the result would have been exactly the same."

Bullshit!    

 

[Dan Clemmensen + 1,011]

1 hour ago, Gerry Maddoux said:

... You [Dan] went on to say something so stupid that I don't even know why I'm reacting: "If the Saudis had said nothing and done nothing, the result would have been exactly the same." That is just so patently false and kindergarten that I wonder about your mental health. It's naive. And stupid. And every time I call you on this, you hide behind "being ignorant." Well, hell, Dan, I'm beginning to believe you on that point, at least. 

 

Gerry, In your opinion, where would the price of oil be today if the Saudis had said and done nothing? We still have a >30% consumption crash.

Edited April 21, 2020 by Dan Clemmensen
correct my formatting mistake

[Gerry Maddoux + 3,627]

1 hour ago, Dan Clemmensen said:

Gerry, In your opinion, where would the price of oil be today if the Saudis had said and done nothing? We still have a >30% consumption crash.

Probably about $40, maybe $45. And if the president had stayed true to his affinity of tariffs to "make sure some of our trading partners behave" it would be $50. More importantly, about a million more workers would still have a job. 

There is absolutely no doubt that a) the Permian drillers brought some of this on themselves by hubris, b) even though there was a  melodramatic volume of natural gas they had to deal with, and, c) there has been immense demand destruction due to the pandemic. But these Saudi tribal jackasses were our supposed allies, the very people whom we've protected from harm ever since FDR made his deal with the old king in 1945, the people whose oil pool our companies drilled and completed. We've given them latitude every mile along the journey, when they imposed an embargo, when they cut to drive up the prices, even when they tried to ruin the shale drillers in 2014. And they do this?

Even though this is a commodity, the oil is "worth" the same. The stock market, for example, is down only 15% from where it was before the pandemic hit . . . even though we're still dealing with a great deal more than 15% of economic destruction and debris in banking stocks, insurance stocks, everywhere you look. To compare, a 15% haircut for oil would have us at $42.50.  

But perception of a shortfall or excess creates that wiggle-room in the oil futures contracts--the higher the anxiety the more the leverage of perception. Right now the oil futures traders are making out big time from the super-super-contango that oil is in. Additionally, the Saudis are quite aware of the expiry date. You can bet they're short oil. Tomorrow we reset. But where? $20? $25? Unfortunately, that depends a great deal on what the Saudis say . . . even though they are born liars.  

They've gone too far this time. Way too far. We're talking about whole families crying at the dinner table. For no good reason whatsoever, we just threw the United States oil industry under the Saudi bus. Lots of people cheered the slow-motion wreck, but they're not going to cheer the sequel.  

This.did.not.have.to.happen!

[Dan Clemmensen + 1,011]

4 minutes ago, Gerry Maddoux said:

Probably about $40, maybe $45. And if the president had stayed true to his affinity of tariffs to "make sure some of our trading partners behave" it would be $50. More importantly, about a million more workers would still have a job. 

 

Gerry, the only way I know that crude can maintain its price during a 30% consumption crash is if there is a corresponding 30% reduction in production. How was that going to happen? Feel free to assume that President Trump had slapped a total embargo on imports that were not matched by exports.

[reddy123456 + 10]

MBS is not going anywhere, only people who have zero understanding and are emotionally hurt because of their weak economic position will say this. The only CIA candidate in Saudi royalty was MBN and MBS dealt with him swiftly. Waleed Al - Talaal was also hung upside down and whipped in the Ritz Carlton. These royal families always get the Alpha candidate by game of thrones type of stuff and MBS is that man.

[Hotone + 412]

1 hour ago, Gerry Maddoux said:

Probably about $40, maybe $45. And if the president had stayed true to his affinity of tariffs to "make sure some of our trading partners behave" it would be $50. More importantly, about a million more workers would still have a job. 

There is absolutely no doubt that a) the Permian drillers brought some of this on themselves by hubris, b) even though there was a  melodramatic volume of natural gas they had to deal with, and, c) there has been immense demand destruction due to the pandemic. But these Saudi tribal jackasses were our supposed allies, the very people whom we've protected from harm ever since FDR made his deal with the old king in 1945, the people whose oil pool our companies drilled and completed. We've given them latitude every mile along the journey, when they imposed an embargo, when they cut to drive up the prices, even when they tried to ruin the shale drillers in 2014. And they do this?

Even though this is a commodity, the oil is "worth" the same. The stock market, for example, is down only 15% from where it was before the pandemic hit . . . even though we're still dealing with a great deal more than 15% of economic destruction and debris in banking stocks, insurance stocks, everywhere you look. To compare, a 15% haircut for oil would have us at $42.50.  

But perception of a shortfall or excess creates that wiggle-room in the oil futures contracts--the higher the anxiety the more the leverage of perception. Right now the oil futures traders are making out big time from the super-super-contango that oil is in. Additionally, the Saudis are quite aware of the expiry date. You can bet they're short oil. Tomorrow we reset. But where? $20? $25? Unfortunately, that depends a great deal on what the Saudis say . . . even though they are born liars.  

They've gone too far this time. Way too far. We're talking about whole families crying at the dinner table. For no good reason whatsoever, we just threw the United States oil industry under the Saudi bus. Lots of people cheered the slow-motion wreck, but they're not going to cheer the sequel.  

This.did.not.have.to.happen!

The Saudis are taking this opportunity to buy big stakes in European companies; what do they know?

https://www.wsj.com/articles/saudis-take-big-stakes-european-oil-companies-11586382353

Edited April 21, 2020 by Hotone

[Gerry Maddoux + 3,627]

16 minutes ago, reddy123456 said:

MBS is not going anywhere

Watch and see. 

[Itzram 0]

What was the main reason that today barrel price downfall.... Can any one explain in detail? 

[Douglas Buckland + 6,308]

On 4/19/2020 at 11:00 PM, Tom Kirkman said:

Dang it, I need to modify my comments here then.

Well, there goes half the forum...

[Dan Clemmensen + 1,011]

58 minutes ago, Itzram said:

What was the main reason that today barrel price downfall.... Can any one explain in detail? 

The OilPrice article seems to explain it well. What further details are needed?

https://oilprice.com/Energy/Oil-Prices/Whats-Next-For-Oil-As-Prices-Go-Negative.html

and here is a words-of-one-syllable article for the general reader:

https://www.reuters.com/article/us-global-oil-crash-explainer/explainer-what-is-a-negative-crude-future-and-does-it-mean-anything-for-consumers-idUSKBN22301M

Edited April 21, 2020 by Dan Clemmensen
add reuters article

[Gerry Maddoux + 3,627]

1 hour ago, Itzram said:

What was the main reason that today barrel price downfall.... Can any one explain in detail? 

Yes, the world is awash in oil. At a time when it was old news that there was too much oil, the KSA ostensibly began a trade war with Putin, only the real reason was to sink the world price of oil to about $25---precisely where it went when the Saudis pumped full-out in 2014. But lo and behold the coronavirus was afoot, killing people all over the world so the world stopped driving, flying, taking the train, and the petrochemical plants shut down because their people were ill, and before you could say Jack Sprout, about 30% of the world's consumption of oil just flat disappeared. But production did not. 

The US shale people had about 600 rigs running, most of them in the Permian. They had all seen the warning signs that storage was filling up but they just kept on drilling because they were mostly indebted to the extent that if they stopped drilling they would go bankrupt. The TRRC went along with this wild song, letting them vent and flare gas despite the fact that everyone and his house cat thought that was a bad idea, and besides, it violated Statewide Rule 32. The Saudis understood, right in the middle of their drill and kill campaign that this virus was going to engulf America. So they doubled down and said we're going to produce full-out. You can refrain from completing a well but you can't stop drilling one in mid-stream so about 600 US drilling rigs kept drilling, even as the Saudis made more of an uproar about flooding the market. 

The perception was that they were going to literally fill every mixing bowl in the world with oil. The oil futures traders, always a lovely bunch, halved the futures price, then waited with baited breath for the day before expiry of futures contracts, which was today. I am quite sure that the Saudis had their traders doing this too. In fact, for such a massive move, they had to be holding enormous short contracts.

Not surprisingly, oil cratered. Surprisingly, it went negative, which meant that if you were holding a futures contract, you were entitled to actually receive that physical commodity, oil, in the amount specified in your contract, free of charge. This has never happened before in the history of oil and I sincerely hope it never happens again. Today, literally, was a day of free oil. If you had a spare mixing bowl.

What this means in human terms (which very few on this board will identify with) is that a whole lot of American jobs are going to be lost because there is no longer a viable US oil industry. I can tell you from personal experience. I own very small portions of a whole lot of wells, on minerals collected during my long life. I live off of that income. It is generally a good living. I feel that I have contributed to the life force of oil and gas because I have been an active participant. I have some brand new wells, having just signed division orders a few days ago. Just about all of those wells are going to be shut in: there is nowhere to go with the oil and no one wants it right now. 

My income will mostly go away for awhile. I think it will come back at some point. I have no debt, so I have no pressure to sell anything but I am not terribly pleased by this happenstance. When I learned that the Chinese oil imports went down 30%, I immediately put aside enough cash to last me for five years of a rather austere existence, barring a calamity. I figure just about any moron could figure this out by then, and I'll likely be dead anyway. In fact, if this gets worse, I may socially undistance myself. 

And this, Itzram, is the reason oil went negative today. As payment for my discourse, I must be allowed to say that this did not have to happen. There were any number of ways to prevent the utter nonsensical collapse of the American oil industry. There will be a hundred smarter guys than I say that tariffs never work and would be a short-term remedy, but short-term is okay if you live to fight another day--I learned that as an interventional cardiologist. This debacle is not entirely a Saudi-engineered disaster, but mostly so, and an outright ban on Saudi oil is certainly in order if it will save a million American jobs and allow us to retain our work force. Like I said, I can likely survive this, but this is one sad day for America. Somehow, it feels just like jihad.   

[Dan Warnick + 6,100]

47 minutes ago, Gerry Maddoux said:

Yes, the world is awash in oil. At a time when it was old news that there was too much oil, the KSA ostensibly began a trade war with Putin, only the real reason was to sink the world price of oil to about $25---precisely where it went when the Saudis pumped full-out in 2014. But lo and behold the coronavirus was afoot, killing people all over the world so the world stopped driving, flying, taking the train, and the petrochemical plants shut down because their people were ill, and before you could say Jack Sprout, about 30% of the world's consumption of oil just flat disappeared. But production did not.

If MBS had gotten his considerable ass out of the palace and stayed abreast of the real state of affairs in the world, he "might" have acted differently.  I mean, it's easy to sit inside the cocoon of the palace and listen to the ass-kisser's version of world affairs; quite another to get real-world information.  I'd wager MSB simply thought, and was advised, that the whole Covid 19 affair was not as serious as it is and that the West would fix things again, like they always do.  And then he went and made all the wrong moves...(and the ass-kissers are still in there telling him he did all the right things.)  I guess heads are going to roll down the palace bowling alley once again.  Whose will they be?

(I hope the above is not incredibly naive, but I'll admit it does kind of feel that way?)

The rest of what you wrote, Gerry, seems to be much more relevant, and I found the entire comment enlightening, although unavoidably sad.  Hang in there.  This too shall pass.

Edited April 21, 2020 by Dan Warnick

[Enthalpic + 1,496]

43 minutes ago, Gerry Maddoux said:

Yes, the world is awash in oil. At a time when it was old news that there was too much oil, the KSA ostensibly began a trade war with Putin, only the real reason was to sink the world price of oil to about $25---precisely where it went when the Saudis pumped full-out in 2014. But lo and behold the coronavirus was afoot, killing people all over the world so the world stopped driving, flying, taking the train, and the petrochemical plants shut down because their people were ill, and before you could say Jack Sprout, about 30% of the world's consumption of oil just flat disappeared. But production did not. 

The US shale people had about 600 rigs running, most of them in the Permian. They had all seen the warning signs that storage was filling up but they just kept on drilling because they were mostly indebted to the extent that if they stopped drilling they would go bankrupt. The TRRC went along with this wild song, letting them vent and flare gas despite the fact that everyone and his house cat thought that was a bad idea, and besides, it violated Statewide Rule 32. The Saudis understood, right in the middle of their drill and kill campaign that this virus was going to engulf America. So they doubled down and said we're going to produce full-out. You can refrain from completing a well but you can't stop drilling one in mid-stream so about 600 US drilling rigs kept drilling, even as the Saudis made more of an uproar about flooding the market. 

The perception was that they were going to literally fill every mixing bowl in the world with oil. The oil futures traders, always a lovely bunch, halved the futures price, then waited with baited breath for the day before expiry of futures contracts, which was today. I am quite sure that the Saudis had their traders doing this too. In fact, for such a massive move, they had to be holding enormous short contracts.

Not surprisingly, oil cratered. Surprisingly, it went negative, which meant that if you were holding a futures contract, you were entitled to actually receive that physical commodity, oil, in the amount specified in your contract, free of charge. This has never happened before in the history of oil and I sincerely hope it never happens again. Today, literally, was a day of free oil. If you had a spare mixing bowl.

What this means in human terms (which very few on this board will identify with) is that a whole lot of American jobs are going to be lost because there is no longer a viable US oil industry. I can tell you from personal experience. I own very small portions of a whole lot of wells, on minerals collected during my long life. I live off of that income. It is generally a good living. I feel that I have contributed to the life force of oil and gas because I have been an active participant. I have some brand new wells, having just signed division orders a few days ago. Just about all of those wells are going to be shut in: there is nowhere to go with the oil and no one wants it right now. 

My income will mostly go away for awhile. I think it will come back at some point. I have no debt, so I have no pressure to sell anything but I am not terribly pleased by this happenstance. When I learned that the Chinese oil imports went down 30%, I immediately put aside enough cash to last me for five years of a rather austere existence, barring a calamity. I figure just about any moron could figure this out by then, and I'll likely be dead anyway. In fact, if this gets worse, I may socially undistance myself. 

And this, Itzram, is the reason oil went negative today. As payment for my discourse, I must be allowed to say that this did not have to happen. There were any number of ways to prevent the utter nonsensical collapse of the American oil industry. There will be a hundred smarter guys than I say that tariffs never work and would be a short-term remedy, but short-term is okay if you live to fight another day--I learned that as an interventional cardiologist. This debacle is not entirely a Saudi-engineered disaster, but mostly so, and an outright ban on Saudi oil is certainly in order if it will save a million American jobs and allow us to retain our work force. Like I said, I can likely survive this, but this is one sad day for America. Somehow, it feels just like jihad.   

Canada will provide - we already have experience with mandated slowdowns due to low pipeline capacity. 

If we can finish the transmountain fast we can fill it with oil for free. Heck even if it's not done just start filling the finished sections -which there are many- with free oil. A large pipeline is effectively a tank.

[Enthalpic + 1,496]

[Enthalpic + 1,496]

[TipTheScale + 2]

The President is not responsible for the profitability of oil. Oil lobbyists have made oil a major part of the national energy policy, however, what the USA has is an Energy Secretary as part of the President's cabinet.  The President has the capacity to lead the country's energy policy. Since the Government's energy policy is committed to oil, it has some concerns about the availability of oil. So to address the question: No, President Trump, like many before him, have not pursued an energy policy that serves the interest of the United States. Yes, the government has pursued an energy policy profitable for the oil industry.

The current price of oil is due to the industry's over production. Normally, the President cannot take responsibility for that. Yet, when politicians continually take credit for the economy, instead of government policy, the lines that mark the separation of government and economy become blurred, and one begins to look like the other. 

 

[Enthalpic + 1,496]

How does the "most powerful nation" fall victim to every whim of any other nation?

China had the virus - so does everyone else.

Normally the USA controlled middle eastern oil; directly or not. That's obviously gone. USA played some unsubstantiated shale oil card...

Mismanaged the Covid...

Trump will have resided over the greatest failure in USA history. 

Let's check on green power companies! https://www.theverge.com/2020/1/29/21113987/tesla-q4-2019-earnings-results-profit-revenue-model-3

 

Edited April 21, 2020 by Enthalpic

[Enthalpic + 1,496]

8 minutes ago, TipTheScale said:

The President is not responsible for the profitability of oil. Oil lobbyists have made oil a major part of the national energy policy, however, what the USA has is an Energy Secretary as part of the President's cabinet.  The President has the capacity to lead the country's energy policy. Since the Government's energy policy is committed to oil, it has some concerns about the availability of oil. So to address the question: No, President Trump, like many before him, have not pursued an energy policy that serves the interest of the United States. Yes, the government has pursued an energy policy profitable for the oil industry.

The current price of oil is due to the industry's over production. Normally, the President cannot take responsibility for that. Yet, when politicians continually take credit for the economy, instead of government policy, the lines that mark the separation of government and economy become blurred, and one begins to look like the other. 

 

Trump sure made that better.... not.

Yes, normal presidents do not think that a few tweets will change global economics on a lasting scale.

[0R0 + 6,251]

8 hours ago, Gerry Maddoux said:

Keep in mind, folks, the overall picture on a global basis. The only person madder than I am today is a guy named Vladimir Putin, as Russia is making roughly fifty cents a barrel on their exported oil and that, along with gas (also in the shitter) are their only exports. Mr. Putin is not likely to sit in the Kremlin playing electronic chess as he watches Mother Russia lurch once again toward poverty and famine. So there is that.

 

Not their only export. They also export lots of food. Not looking good for Russians. Since they diversified from oil to ag for export income, they can't really afford to drop the Ruble too far, because food gets exported and local prices rise. Sort of a problem if your were going to straighten out the books by letting the Ruble weaken. 

[Douglas Buckland + 6,308]

1 hour ago, Enthalpic said:

Any particular reason for posting a picture of Trump? I think we all know what he looks like. Did you forget your normal clever, yet totally asinine, comment?

[0R0 + 6,251]

5 hours ago, Gerry Maddoux said:

Probably about $40, maybe $45. And if the president had stayed true to his affinity of tariffs to "make sure some of our trading partners behave" it would be $50. More importantly, about a million more workers would still have a job. 

 

That is entirely absurd. Nobody would be thinking those numbers after a 30% drop in global consumption. That essentially means that OPEC+ would be cutting 80-90% of production to actually balance the market. Not going to happen, when it is the lowest cost oil around. They should expect to have all the higher cost producers to cut first. Each use some byproduct for their own purposes which has no substitute. E.g. Saudi uses associated NG from the production of 8.5 MOB/d for electric production. Though they may sell less oil to the world, they would still be producing at that level till their storage filled up. 

While you are right that they pushed the prices down substantially right off the bat before consumption tanked entirely and maneuvered to take VLCCs right quick and load the Rotterdam port immediately and tried to cram China and Korea ports where Russia normally sells. They effectively blocked their sales. That did not change the situation to the worse now, but managed to pull Putin into a deal. . 

[Rob Plant + 2,601]

On 4/20/2020 at 2:41 AM, John Foote said:

I saw the real king (Dennis) live in his last match. Seen Best and Charlton and talked to half of the '73 squad

Ive seen Djemba Djemba, that bad they named him twice!

[Shakil + 1]

Poor US shale is getting wrecked. I am about to make so much money shorting the shit out of WTI.

[Rob Plant + 2,601]

1 hour ago, 0R0 said:

7 hours ago, Gerry Maddoux said:

Probably about $40, maybe $45. And if the president had stayed true to his affinity of tariffs to "make sure some of our trading partners behave" it would be $50. More importantly, about a million more workers would still have a job. 

 

That is entirely absurd. Nobody would be thinking those numbers after a 30% drop in global consumption. That essentially means that OPEC+ would be cutting 80-90% of production to actually balance the market. Not going to happen, when it is the lowest cost oil around. They should expect to have all the higher cost producers to cut first. Each use some byproduct for their own purposes which has no substitute. E.g. Saudi uses associated NG from the production of 8.5 MOB/d for electric production. Though they may sell less oil to the world, they would still be producing at that level till their storage filled up. 

While you are right that they pushed the prices down substantially right off the bat before consumption tanked entirely and maneuvered to take VLCCs right quick and load the Rotterdam port immediately and tried to cram China and Korea ports where Russia normally sells. They effectively blocked their sales. That did not change the situation to the worse now, but managed to pull Putin into a deal. . 

Gerry is a smart guy I dont think he really believes these numbers are sustainable with a 30% drop in global consumption, its just an angry response to an unbelievable situation.

Oro I think you assessment is pretty much spot on as usual.