Oil Price and US Shales Fate Lies in the hands of MEXICO??

[James Regan + 1,776]

So what's it to be folks 10million or 20Million it seams POTUS isn't very good at math, granted three weeks until cuts take place but he was expecting a rocket this morning and got a damp squib instead, so 10 20 30, take your pick? Saudis also selling at a discount to Asia damn Scoundrels....

[BLA + 1,666]

3 hours ago, Gerry Maddoux said:

Part of it likely has to do with Mexico's 50% ownership in the Deer Park Refinery, which is just across the Houston Shipping Channel. Mexico made an atypically shrewd investment in that facility for $1B back in 1993, agreeing to supply Shell--its unlikely JV partner--with a certain amount of Maya heavy/sour for thirty years. That has been a good relationship for both parties, but the amount of Maya feedstock goes down to a third of its 30-year supply, in about 2023, under terms of the agreement. 

Mexico's president is determined to grow Mexico's oil industry . . . hell or high water. Completion of the new Pemex refinery coincides precisely when the JV agreement with Shell reduces Maya feedstock, so Mexico will suddenly (2023) have abundant Maya to supply their new refinery, even if they are unable to grow production much at all in the interim. 

This determination is probably a good thing for the US, as Pemex is going to need LTO to blend with Maya, and they will become even bigger buyers of natural gas too (Richard Kinder is addressing this on a minute-to-minute basis). Anyway, that's a convoluted answer to a convoluted agreement hatched way back in 1993 and winding down 30 years later. 

Mexico saw this latest OPEC+ thing as a chance to flex muscle that they really don't have yet--but it's coming. As Douglas says, shale does not exist in a vacuum, and the Mexico/Shell Deer Park JV shows that in spades. Mexico realizes that if they can grow their production, they will need a whole lot of LTO from the US. In other words, they were trying to make a statement. 

Yea, dearfield since 1992.

So the fate of U.S. shale is in the hand of Mexico ? 

Nah

[Gerry Maddoux + 3,627]

8 minutes ago, BLA said:

So the fate of U.S. shale is in the hand of Mexico ? 

Of course not, and that's not at all what I wrote. I explained the Pemex-Shell 30-year contract, its downshift in 2023, and why Mexico was trying to exert some influence . . . that's all. In reality, as I'm sure anyone who watches this sort of thing knows, Mexico has only a modicum of influence on shale, ours or anyone else's. But I was merely responding to your post: "So how does Mexico specifically affect the fate of US shale. I honestly don't understand the answer." 

Well, the answer is the one I gave you. And in so doing I made absolutely no claim that it was a massive effect. They're going to be excellent buyers of LTO and natural gas and we're going to be buyers of Maya heavy/sour. It could be a much better fit than we currently have with KSA.

[James Regan + 1,776]

Quick WhatsApp to Uncle Abdulaziz and hey bingo I saved your asses, and my own I think....

https://oilprice.com/Energy/Energy-General/Saudi-Arabia-Is-Planning-Even-More-Oil-Production-Cuts.html

[BLA + 1,666]

3 hours ago, James Regan said:

Quick WhatsApp to Uncle Abdulaziz and hey bingo I saved your asses, and my own I think....

https://oilprice.com/Energy/Energy-General/Saudi-Arabia-Is-Planning-Even-More-Oil-Production-Cuts.html

JR

The article you referenced should read:  "The Saudis are Forced to Cut Even More Oil production"

THEY HAVE TO,  THEY ARE RUNNING OUT OF STORAGE.  THEY HAVE NO CHOICE.  

Everybody has to cut.  By mid May the oil  production will be cut by at least 20 mm bbls/day voluntarily.  

Saudis are used to exporting 8 mm bbls/day. Saudi Arabia export 80% of their crude production.   They have a great deal of storage but still can't handle all those bbls for very long in this environment as demand destruction continues. The world is drowning in oil.  

Next thing you know they will be filling your uncle Ab's swimming pool with oil.   

Usual Saudi ploy.  They act like they are making a sacrifice.  

Don't make the mistake of confusing desperation as sacrifice. Regardless of what Uncle Ab tells you.  

Oil everywhere is hurting .  It will be fatal to over leveraged shale players. I sense your schodenfraux at these  shale player's dilemma.   Don't get to excited.  Aramco will certainly survive.  However, I would give it a 20% to 25% chance the ruling Saudi monarchy will be out of power within 2 years.  

 

Edited April 14, 2020 by BLA

[waltz + 140]

Gerry,  

Pemex gets billions in state funding annually, typical import substitution economics, where is AMLO going to get the cash to finish building Dos Bocas?  He has scared off all foreign investment and with his response to Covid 19 not so sure that tourism is going to bring in money anytime soon.  Hugging your way forward does not sound like the recipe going forward.

waltz

 

 

[Gerry Maddoux + 3,627]

^

Good point. 

I don't know the answer. I am aware that the Mexican oil program has been in wild decline for several years. 

The Mexicans are so macho that they may have just seen the opportunity to pull a bluff with the Saudis and Putin and President Trump. I understand that the prince chuckled when the Mexican oil minister made her bluster. 

Surely they can build one refinery, though. 

You see, I don't think this is a done deal. In fact, the Saudis have already violated the spirit of the deal, if not the terms--not yet written--in just 24 hours by offering a four dollar discount to China and upping their price to us. I don't believe President Trump is going to sit still for that. He must have at least a half-dozen oil men telling him about this. I expect a tariff, still, on Saudi oil. I don't usually like tariffs but this Saudi prince is just a hotheaded fool who acts high on something. 

[waltz + 140]

Sorry, that was kind of a rhetorical question.  I am not a fan of leaders who are bombastic and believe themselves to be saviors.  Of course he can devalue the peso to save on labor but that makes all of the imported parts for the refinery more expensive.  Of course that doesn’t work if foreign partners are not given some assurance for the value on their investment and absolute assurance against nationalization. Not sue I would take AMLO’s word.  He would be better off going after the oil and fuel thieves while their “product” offers a much lower relative savings.

https://www.google.com/amp/s/www.rollingstone.com/culture/culture-features/drug-war-mexico-gas-oil-cartel-717563/amp/

 

 

 

Edited April 14, 2020 by waltz