Trumps Oil Industry....

[James Regan + 1,776]

3 minutes ago, wrs said:

It also looks like there might be some kind of error in the prices being reported.  I have several feeds and the one from INO shows the front month contract at $18.78 a -10% drop from yesterday so I have no idea what is currently the price.  Likely the lower one................ UGH.

@wrs I also thought this as how can it be isolated to WTI, unless this was a human induced correction, something doesn't smell right, or has the USA become an incubator as we should be lagging Brent, this was not a trading hours issue this was a price hike from nowhere, this should be reported to @CMOP and he needs to get world order back in order...lol

[Wtrc + 1]

Despite the higher prices, ETF’s plunging (yes, I know these aren’t spots). Weird times

[D Coyne + 305]

15 hours ago, Gerry Maddoux said:

But Canada didn't try to ruin the oil market by flooding the world with oil. In fact, Canadian oil is just barely hanging on. 

Put a 25% tariff on Saudi oil and see what happens to the price of WTI. I think it will go to a sustainable level: $40-45. 

500,000 barrels a day? I'd take it. The alternative is taking a wrecking ball to the US oil industry.

Gerry,

We put a tariff on Saudi oil, and then import 500 kb/d more from Canada, or Norway, or Nigeria, or wherever (some combination).

Prices are unaffected by such a move, we could do some chest thumping, if it makes you happy.  But your solution is no solution at all. 

[Gerry Maddoux + 3,627]

Just now, D Coyne said:

We put a tariff on Saudi oil, and then import 500 kb/d more from Canada, or Norway, or Nigeria, or wherever (some combination).

Prices are unaffected by such a move, we could do some chest thumping, if it makes you happy.  But your solution is no solution at all.

Why import more Canadian oil? Why not use our own heavy/sour to mix in? Or half the usual Canadian?

I don't know why a tariff on Saudi oil wouldn't make any American happy, to be frank, for all the reasons I outlined in what I think is a pretty fair way. They pulled a cheap destructive stunt at the beginning of a pandemic, then they discounted heavily to our arch enemy in the bat virus war. What would you do as president, Dennis? Ask them to kindly change their ways?

[D Coyne + 305]

21 hours ago, Marcin2 said:

Venezuela would be and will be like Saudi Arabia but it is contingent on 2 scenarios:

- US will manage to take over the country during the next 5-7 years and ramp up oil production,

- US would not manage to take over the country during the next 5-7 years and China&Russia will take over the country a few years later and ramp up oil production.

No matter which scenario would prevail Venezuelans will be rich, but not earlier than 10 years.

Oil Curse.

2 dogs fighting about Venezuelan bone.

The Venezuelan reserves are overstated, most are Orinoco Belt reserves, which are difficult and expensive to produce, reserves are probably more like 100 Gb at reasonable oil price levels, as World reaches peak demand (perhaps in 2040) for crude, much of this resource will remain in the ground, the 250 Gb of "proved reserves" in the Orinoco belt are unlikely to be profitable to produce at anything less than $120/bo in 2020 US$.

[D Coyne + 305]

1 minute ago, Gerry Maddoux said:

Why import more Canadian oil? Why not use our own heavy/sour to mix in? Or half the usual Canadian?

I don't know why a tariff on Saudi oil wouldn't make any American happy, to be frank, for all the reasons I outlined in what I think is a pretty fair way. They pulled a cheap destructive stunt at the beginning of a pandemic, then they discounted heavily to our arch enemy in the bat virus war. What would you do as president, Dennis? Ask them to kindly change their ways?

Gerry, 

They are in a price war with Russia, we don't produce enough heavy/sour to meet the input demand of our refineries, we have excess light tight oil which we export at the level of 3.5 Mb/d, we also export quite a bit of petroleum products.

Tariffs are not the solution to every problem, despite what Mr Trump believes.

Here is a basic fact for you, the US produces about 12.7 Mb/d of C+C, typically the crude input to refineries is about 16.5 Mb/d (2019 average), so we are about 3.8 Mb/d short on crude.  Now we could put a tariff on all crude imports and other nations would respond with tariffs on our exported crude and petroleum products.

The current problem stems mostly from demand at the World level, tariffs tend to lead to poor allocation of resources and generally will reduce economic activity Worldwide.  

In short, it will tend to make things worse rather than better.  In general tariffs are a bad idea.

See  https://en.wikipedia.org/wiki/Comparative_advantage

[Gerry Maddoux + 3,627]

22 minutes ago, D Coyne said:

we don't produce enough heavy/sour to meet the input demand of our refineries,

I made almost the exact statement a few days ago and was abruptly disabused of my notion by someone who seemed to know quite a bit more about it than I.  

Everyone is entitled to his/her view. Mine is that Saudi Arabia behaved atrociously by continuing to pump all-out during this crisis (costing American jobs), and then compounded that by selling on the cheap to the country that spewed this bat virus upon the world. 

You may certainly respond to my view as provincial but you'll likely not change it. In this day and age, whenever a country is misbehaving in a market, there are precious few options available--diplomacy doesn't seem to be one of them. Tariffs talk a different language. If you don't believe me, ask someone in Mr. Xi's universe. I'd be satisfied, though, with an outright ban of Saudi oil on our shores. 😂

 

[D Coyne + 305]

11 hours ago, Dan Clemmensen said:

Looking at the table and the long-term chart it links to:

https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WTTNTUS2&f=W

We see what is basically a linear trend of US net imports decreasing from about 5 million bbl/day in about November 2017 to zero in November 2019. That is about the point where OPEC+ began to panic. The straight line continues down through the beginning of march, at maybe -1million bbl/day: that is, a net export of 1 million bbl/day. Later data will be crazy due to the pandemic, but without the pandemic, we could expect the US market price to act ever more strongly as a cap on the world market price. In addition, US oil will begin to take market share away from OPEC+ outside of the US instead of "merely" within the US. No wonder KSA wants to kill US shale.

And to your point, it isn't really about US imports any more. It's about US exports. Any tarrif on imports is really a signal that we will not longer tolerate the cartel and will not have much real impact. The pandemic renders all of this moot in the short term. We will have to keep the whole industry (and the whole economy) in maintenance mode until we can get out of lockdown and beyond that through a recovery phase. We can then go back to our oil price games.

Dan,

A better way to look at it is to remove the hydrocarbon gas liquids, which are just a byproduct of natural gas production and generally are worth far less than C+C.  Also keep in mind that the US only has refinery capacity for about 5 Mb/d of light tight oil even with blending.  The important figure to focus on is C+C output and crude input to refineries, without which we don't have gasoline, diesel fuel, or jet fuel,  in 2019 the average level of crude input to refineries was 16.5 Mb/d, at the recent peak the US produced about 12.7 Mb/d, of which 8.1 Mb/d was tight oil, and the maximum input of tight oil that the refineries can handle is about 5 Mb/d, so for the crude we need for refinery input we only produce about 9.6 Mb/d (12.7-3.1 excess tight oil), this leaves us 16.5-9.6=6.9 Mb/d short on the proper weight crude oil for which our refineries were designed.  Note we exported about 3.3 Mb/d of petroleum products in 2019, if we assume a one to one reduction of crude inputs to refineries for simplicity then for US consumption the net input to refineries would be 13.2 Mb/d in 2019 and the US would only be short of C+C by 3.8 Mb/d.  Also keep in mind that it is an expensive proposition to refit the refineries in the US to handle all of the 8.1 Mb/d of tight oil produced, that is why the US export ban on crude was lifted in Sept 2015.

In a nutshell, the 3.1 Mb/d of light tight oil which the US is "flooding the market" with have a very limited market (most refineries are designed to handle heavier crude grades).

At current oil price levels tight oil output will drop like a rock (by about 3 Mb/d over the next 12 months) as the completion rate of new tight oil wells drops over the March 2020 to March 2021 period.

[D Coyne + 305]

28 minutes ago, Gerry Maddoux said:

I made almost the exact statement a few days ago and was abruptly disabused of my notion by someone who seemed to know quite a bit more about it than I.  

Everyone is entitled to his/her view. Mine is that Saudi Arabia behaved atrociously by continuing to pump all-out during this crisis (costing American jobs), and then compounded that by selling on the cheap to the country that spewed this bat virus upon the world. 

You may certainly respond to my view as provincial but you'll likely not change it. In this day and age, whenever a country is misbehaving in a market, there are precious few options available--diplomacy doesn't seem to be one of them. Tariffs talk a different language. If you don't believe me, ask someone in Mr. Xi's universe. I'd be satisfied, though, with an outright ban of Saudi oil on our shores. 😂

 

Gerry,

The Saudis have a lot of oil and have been our ally for many decades, I suppose you prefer Russian oil?    Tariffs could come back to bite us later. The US uses about 6 Gb of crude per year, we likely have less than 100 Gb (but only if oil prices rise to $90/bo or more), we would reach half of that 100 Gb in 8.5 years (assuming no imports).  We will continue to need imported crude oil, perhaps you have been fooled by the "energy dominance" meme, we do produce a lot of natural gas, coal, and oil. We don't produce as much oil as we need at present, though by 2045 we might be close as EVs and plugin hybrids gain market share.

I don't expect to change your view, just pointing out the facts of the matter.

You were right on the low amount of heavy/sour produced in the US. Total US C+C output peaked recently at 12.7 Mb/d (monthly data, the weekly data is BS), tight oil output peaked around 8.1 Mb/d, so the rest of the oil produced in the US was no more than 4.6 Mb/d, only a small portion of this is heavy/sour oil.

See  https://www.eia.gov/dnav/pet/pet_crd_api_adc_mbblpd_m.htm

Let's call heavy oil that with API gravity of 30 degrees API or less, in Dec 2019 the total "heavy oil" (as just defined) produced in the US was 1.33 Mb/d, about 8% of the average 2019 crude input to refineries in the US.

See https://www.eia.gov/dnav/pet/pet_pnp_inpt_dc_nus_mbblpd_a.htm

Edited April 17, 2020 by D Coyne

[James Regan + 1,776]

3 hours ago, El Nikko said:

https://oilprice.com/Latest-Energy-News/World-News/Rystad-Lowers-Production-Outlook-For-Shale-By-215-Million-Bpd.html

Plunging shale production?

Think you're right now, big correction....... This is what is known as the ass is falling out of the market, in 24hours the situation in Brasil has drastically changed and world wide, rigs being pulled off contract with immediate affect, this is going to get real UGLY. Snowball affect, nothing can stop, viral fundamentals outweighing economics.

Edited April 17, 2020 by James Regan

[Gerry Maddoux + 3,627]

17 minutes ago, D Coyne said:

The Saudis have a lot of oil and have been out ally for many decades, I suppose you prefer Russian oil?

The Saudis have been a very poor "ally" for many decades, and yes, I know all about the history, but no, I wouldn't prefer Russian oil.

In my narrow-minded elderly vision, these various geopolitical misadventures are conjoined. The Chinese has been lobbing killer viruses at the world for two decades. Most of these came from their unusual preoccupation with bats, which are chock full of bad viruses. Having worked with viruses for a long period of time, I strongly suspect this virus came out of the Wuhan lab. But even if it didn't, when the Chinese refused to share pertinent data with the world, they committed--on the spot--a bioterrorist act that cost thousands of lives and trillions of dollars. 

What does that have to do with the Saudis, and more germanely, the price of oil? The Saudis grossly discounting oil to this bioterrorist country is disgusting to me--and certainly not something any "ally" would do. Just business, you might say, and again I would admonish you that aiding and abetting the enemy is not within the usual scope of a well-intentioned "ally's" range. And make no mistake: the Chinese Communist Party is an enemy of the United States. 

As I said, we have precious few ways of tsk-tsking a rogue country. China will be dealt with harshly, because by now the whole world knows what they did. The Saudis launched this Russian gambit knowing full well that they would wreck the US shale basins--even if only temporarily--and then capitalized on a propitious worldwide disaster. Suddenly, the US lost 25 million (MILLION!) jobs. In the last two weeks, with either a ban or a 25-50% tariff on Saudi oil, the price of WTI would have jumped to about $40 and many of the US oil industry jobs could have been saved. As an American, I like that. 

When a rogue nation--even an alleged "ally"--thinks it is winning, it keeps pushing. My strong suspicion is that we will still wind up with either a tariff or a ban, but at this point the damage has already been done. Maybe as a renewables advocate, you like this. I don't. 

Over and out. 

[KeyboardWarrior + 527]

Really wish these oil news outlets would shut the hell up. Every time I go long and get a rally they start dumping negative news, making me pull out with less than I'd like. 

[Tom Kirkman + 8,860]

11 minutes ago, Gerry Maddoux said:

In my narrow-minded elderly vision, these various geopolitical misadventures are conjoined. The Chinese has been lobbing killer viruses at the world for two decades. Most of these came from their unusual preoccupation with bats, which are chock full of bad viruses. Having worked with viruses for a long period of time, I strongly suspect this virus came out of the Wuhan lab. But even if it didn't, when the Chinese refused to share pertinent data with the world, they committed--on the spot--a bioterrorist act that cost thousands of lives and trillions of dollars. 

^ Good summary

[James Regan + 1,776]

45 minutes ago, KeyboardWarrior said:

Really wish these oil news outlets would shut the hell up. Every time I go long and get a rally they start dumping negative news, making me pull out with less than I'd like. 

If your day trading oil in the past two weeks, you should have switched to Poker Stars....

[Dan Clemmensen + 1,011]

1 hour ago, D Coyne said:

Dan,

A better way to look at it is to remove the hydrocarbon gas liquids, which are just a byproduct of natural gas production and generally are worth far less than C+C.  Also keep in mind that the US only has refinery capacity for about 5 Mb/d of light tight oil even with blending.  The important figure to focus on is C+C output and crude input to refineries, without which we don't have gasoline, diesel fuel, or jet fuel,  in 2019 the average level of crude input to refineries was 16.5 Mb/d, at the recent peak the US produced about 12.7 Mb/d, of which 8.1 Mb/d was tight oil, and the maximum input of tight oil that the refineries can handle is about 5 Mb/d, so for the crude we need for refinery input we only produce about 9.6 Mb/d (12.7-3.1 excess tight oil), this leaves us 16.5-9.6=6.9 Mb/d short on the proper weight crude oil for which our refineries were designed.  Note we exported about 3.3 Mb/d of petroleum products in 2019, if we assume a one to one reduction of crude inputs to refineries for simplicity then for US consumption the net input to refineries would be 13.2 Mb/d in 2019 and the US would only be short of C+C by 3.8 Mb/d.  Also keep in mind that it is an expensive proposition to refit the refineries in the US to handle all of the 8.1 Mb/d of tight oil produced, that is why the US export ban on crude was lifted in Sept 2015.

In a nutshell, the 3.1 Mb/d of light tight oil which the US is "flooding the market" with have a very limited market (most refineries are designed to handle heavier crude grades).

At current oil price levels tight oil output will drop like a rock (by about 3 Mb/d over the next 12 months) as the completion rate of new tight oil wells drops over the March 2020 to March 2021 period.

Thank you for your explanation. I'm new here, trying to find out what covid-19 is doing to our economy, and incidentally what is happening in the oil supply balance.

Others here have already educated me (at the baby level) about the differences in types of crude, types of product, and refinery design optimized for particular input mixes, and I appreciate your further explanation. I know that LTO is now worth less in some sense than heavy crude. But I think this is a short-term phenomenon based on the existing refineries. The country-level refinery input mix has changed by a lot on the timescale of decades, and I think it can and will continue to change in the future. So, you describe the current situation, but KSA is trying to maximize the total long-time value for their oil asset as the world moves away from oil. The market-driven US response is not centrally planned, but will inevitably end up adapting the refinery suite to use the available crude mix, certainly by 2030 and probably by 2025. In the mean time, we will continue to sell LTO and buy heavy crude, but that is just as scary as far as KSA is concerned, and that is why the are panicking.

[El Nikko + 2,145]

2 hours ago, James Regan said:

Think you're right now, big correction....... This is what is known as the ass is falling out of the market, in 24hours the situation in Brasil has drastically changed and world wide, rigs being pulled off contract with immediate affect, this is going to get real UGLY. Snowball affect, nothing can stop, viral fundamentals outweighing economics.

Yep the oil industry is dead, I highly doubt to see any activity in the next year and can't imagine there will be any hiring. LinkedIn is just full of people saying they've been laid off.

Time to look for that supermarket job I've always dreamed of

 

 

[Gerry Maddoux + 3,627]

^

Then tell me why XLE is up 7.5%.

Someone knows quite a bit more than I do. 

Likely a ban on that flotilla, or a tariff. THE SAUDIS ARE PUSHING THEIR LUCK! 

IMHO, be a great day to buy XLE. 

Tomorrow we may wake up to $30 WTI. 

[Kenneth Rexrode + 2]

Does anyone have any information on what's going on with oil stocks today? I think there must be some kind of federal announcement soon. They are already up huge today yet WTI is cratering....Please advise.

[KeyboardWarrior + 527]

2 hours ago, James Regan said:

If your day trading oil in the past two weeks, you should have switched to Poker Stars....

I don't believe so, given that I'm comfortably in the positive. 

And I'm not, I'm trading equities that are influenced by the price of oil.

Edited April 17, 2020 by KeyboardWarrior

[scoobiesnacks 0]

Hey guys! Curious as to why I see oil price at $18 some places, and other places (TD Ameritrade) shows $25ish. Thanks.

[surrept33 + 609]

34 minutes ago, scoobiesnacks said:

Hey guys! Curious as to why I see oil price at $18 some places, and other places (TD Ameritrade) shows $25ish. Thanks.

Rolling from one futures month to another?

https://www.marketwatch.com/investing/future/cl00

Usually the difference between months is not as high, but we are in "super contango" right now:

https://www.marketwatch.com/story/oil-market-in-super-contango-underlines-storage-fears-as-coronavirus-destroys-crude-demand-2020-04-17

Edited April 17, 2020 by surrept33

[James Regan + 1,776]

4 hours ago, El Nikko said:

Yep the oil industry is dead, I highly doubt to see any activity in the next year and can't imagine there will be any hiring. LinkedIn is just full of people saying they've been laid off.

Time to look for that supermarket job I've always dreamed of

 

 

See you in the booze section of ASDA

[Tom Dowling 0]

A president should understand basic facts about how economies work.

I'd be surprised if he knew many details of the oil industry.   What about the oil industry do you think he should understand?

What about any of the many industries in the USA should he understand?
 

[Douglas Buckland + 6,308]

2 hours ago, Tom Dowling said:

A president should understand basic facts about how economies work.

I'd be surprised if he knew many details of the oil industry.   What about the oil industry do you think he should understand?

What about any of the many industries in the USA should he understand?
 

It is unrealistic to expect ANY Head of State to have detailed knowledge of all the industries or institutions which they are ultimately responsible for. This is why they have cabinets and advisors.

[Douglas Buckland + 6,308]

 

”Time to look for that supermarket job I've always dreamed of”

 

I already took it! Go find another!😂

Edited April 18, 2020 by Douglas Buckland
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