Silence on flood of Saudi oil

[Oilpatch student + 3]

Why has there been no mention or reporting on the fleet of Saudi tankers with over 40million barrels of oil the hit our shores at the end of May through this month. I read weekly stories and updates on large oil inventory builds when draws were expected but no mention of the huge deluge of oil Saudi Arabia dumped on the US market to try and wipe out the shale industry. It is like all the writers have forgotten or are intentionally not talking about how that surge is working through our supply storage system

[Blackbag99 + 20]

The Saudis have the 3rd biggest storage in the world and they emptied them in March.

The Saudis will use their storage if they can't get an OPEC production deal. Right now it is way to keep powder dry if they want to fight the other members. Whats has changed in OPEC is that the Saudis won't be the daddy.

Movements of oil make little difference. Tanker rates are falling, which suggest oil transport is returning to normal.

 

[wrs + 893]

Watch Cushing because if they can move this oil up there they will.  That will matter to the price but I am not sure that will happen.  I suspect that the oil companies will let Cushing fall in order to push the price back up and turn the tables on the traders.  I certainly hope so anyway.  In any case, notice that Cushing is now below where we were last year with much less demand, what does that tell you about production?

 

 

[Oilpatch student + 3]

It really burns me up that the Saudis have basically gotten away with flooding us with oil to intentionally try to wipe out American shale and they have basically gotten away with it without any retaliation from the US.  And they are not even getting negative press reminding people that it was the Saudis who caused this huge surplus we have here in the US.

[footeab@yahoo.com + 2,129]

2 hours ago, Oilpatch student said:

It really burns me up that the Saudis have basically gotten away with flooding us with oil to intentionally try to wipe out American shale and they have basically gotten away with it without any retaliation from the US.  And they are not even getting negative press reminding people that it was the Saudis who caused this huge surplus we have here in the US.

Let me get this straight: USA uses ~7.5 Billion barrels of petroleum products a year and you are having a piss ant hyper temper tantrum over... 0.5%.  And no they did not get away with it, as it was a great convenient excuse to get our troops out of S. Arabia(now for some follow through... and they were paying us half a Billion to have a couple thousand troops there).  Meanwhile: Wuhan virus knocked off ~30% of consumption all by itself for months.     Lets see 30%<<0.5% in your world is the reason... uh huh  Try reversing those arrows dude.

[Oilpatch student + 3]

Where did you get that we have removed our troops and bases from Saudi Arabia?? That has absolutely Not happened.!

[Jan van Eck + 7,558]

14 hours ago, wrs said:

Watch Cushing because if they can move this oil up there they will.  That will matter to the price but I am not sure that will happen.  I suspect that the oil companies will let Cushing fall in order to push the price back up and turn the tables on the traders.  I certainly hope so anyway.  In any case, notice that Cushing is now below where we were last year with much less demand, what does that tell you about production?

 

 

Readers should note that this chart has no scale units on the left vertical axis, leading to the implication that current storage is roughly 46,000 bbls.  That would be incorrect:  one tank alone holds over 600,000 bbls.  I suggest the left scale is in thousands of barrels, so the "46000" would read out as 46 million barrels currently in storage.   Any reader who has direct information on this please do chime in; I don't work at, or have contacts with, the Cushing operation  (just looking at it as an outsider). 

[Jan van Eck + 7,558]

10 hours ago, Oilpatch student said:

It really burns me up that the Saudis have basically gotten away with flooding us with oil to intentionally try to wipe out American shale and they have basically gotten away with it without any retaliation from the US.  And they are not even getting negative press reminding people that it was the Saudis who caused this huge surplus we have here in the US.

Well, OK, let us just analyze what you have just said here.  First, you lead off by stating that the Saudis "have gotten away with"  "flooding USA with oil..."   We live in a capitalist society.  The Saudis put their oil in some ship and send it to the Gulf Coast.  Is there a Buyer?  If there is no Buyer then the oil never gets unloaded; it just sits there, and racks up per-diem demurrage charges while that tanker is at anchor.  If it does have a Buyer, why would you be upset?  The Saudis are perfectly entitled to compete to sell crude to US refineries, same as the Canadians, the Mexicans, the Nigerians, and so forth.  

My guess is that the loads already have Buyers and the shipments are to fulfill sales contracts.  It is also possible to a chunk of that crude is destined for direct use inside Saudi-owner refinery capacity located in the US Gulf Coast. Hey, they bought the refineries, they are perfectly entitled to buy their own oil - or not.  How would you like it if some outside Authority came along and declared that you must buy your gasoline only at the Sunoco pumps, and never mind that the Esso station is more convenient (and has a better price)? 

Meanwhile, remember that at least some of the US industry's problems are inflicted by the US Congress.  There was that big refinery in Philadelphia but no pipeline to service it,  and the Congress effectively prevents Gulf oils from getting there because of the Jones Act which requires coastal shipping to be only in US tankers with US crews  (and those do not exist).  So that refinery had to obtain supplies by rail unit-train, and some of that came from Canada.  You do have to admit that that was rather a silly arrangement.  The refinery burned, so it is not re-opening due to the high landed crude feedstock costs.   Just lovely. 

You now say that the idea was to "intentionally wipe out American shale..."  But, let's face it, there is no zipper in the back of the skull of the Saudi oil minister, and you cannot reach back there in any event to pull the zipper down, reach in, and pull out the brains to go examine them to determine what the Minister is thinking.  So what you are doing is speculating.  That speculation has an apparent logical foundation, as the conclusion you suggest is plausible, yet determining motive is dicey at best.  All we can do is look at actions, not motives.  

Has American shale production been a nuisance to the Saudi cartel control of markets?  Sure it has.  But so has Russian outputs and sales.  If the Saudis push their crude onto US refineries and in turn the US pushes their light tight oil onto other refineries, whether in China or Korea or Rotterdam, does that not end up displacing Russian crude?  So the picture is much more complex than you would set it out to be.  Cheers. 

Edited June 27, 2020 by Jan van Eck
typing error

[El Nikko + 2,145]

6 hours ago, Jan van Eck said:

Readers should note that this chart has no scale units on the left vertical axis, leading to the implication that current storage is roughly 46,000 bbls.  That would be incorrect:  one tank alone holds over 600,000 bbls.  I suggest the left scale is in thousands of barrels, so the "46000" would read out as 46 million barrels currently in storage.   Any reader who has direct information on this please do chime in; I don't work at, or have contacts with, the Cushing operation  (just looking at it as an outsider). 

I think it's million barrels

 

[wrs + 893]

8 hours ago, Jan van Eck said:

Readers should note that this chart has no scale units on the left vertical axis, leading to the implication that current storage is roughly 46,000 bbls.  That would be incorrect:  one tank alone holds over 600,000 bbls.  I suggest the left scale is in thousands of barrels, so the "46000" would read out as 46 million barrels currently in storage.   Any reader who has direct information on this please do chime in; I don't work at, or have contacts with, the Cushing operation  (just looking at it as an outsider). 

Yes, it should have said thousands of barrels.

[Oilpatch student + 3]

I guess my point is that Saudi Arabia has a long standing agreement with the US concerning the protection of the house of Saud in return for their cooperation on oil.  It would seem they broke that agreement when they flooded our market with oil in what appears to be a clear attempt to destroy American oil industry and yet we let it go unpunished with no response from our government

[Jan van Eck + 7,558]

4 hours ago, El Nikko said:

I think it's million barrels

The "M" would stand for "Mille," or Thousand

[Jan van Eck + 7,558]

1 hour ago, Oilpatch student said:

I guess my point is that Saudi Arabia has a long standing agreement with the US concerning the protection of the house of Saud in return for their cooperation on oil.  It would seem they broke that agreement when they flooded our market with oil in what appears to be a clear attempt to destroy American oil industry and yet we let it go unpunished with no response from our government

I would gently suggest that you misapprehend the nuances of the Saudi-US relationship.  Yes, the US protects the House of Saud, at least from offshore threats.  The "cooperation on oil" would be that the USA can purchase and import that Saudi oil to the USA for its needs, without getting into threats of embargo.   That would be different than what you are suggesting, that the KAS is now obligated to tailor its sales to meet some pre-determined (by whom?) quantities to establish some pre-determined (by whom, again?) pricing. 

The other thing you should keep in mind is that the typical barrel of oil sold in the USA has traded hands some 17 times at least from the producer well to the refinery.  Those sales are done by speculators on the commodity exchanges.  The speculators, or "traders," are a mixed blessing and curse.  On the one hand they provide liquidity to the market.  On the other hand they create these wide swings in pricing, and send distorted signals to the producers.  Fortunately, most oil is sold by long-term contract, so it escapes the clutches of the trader sharks. You don't want to confuse "traders," or rank speculators, with orderly buying and selling.   Cheers.  

[Ward Smith + 6,615]

2 hours ago, Oilpatch student said:

I guess my point is that Saudi Arabia has a long standing agreement with the US concerning the protection of the house of Saud in return for their cooperation on oil.

The deal made by Kissinger was for the KSA to denominate their sales in US dollars, which they have done ever since, hence Petrodollars. Having billions a day of petrodollars sloshing around the world's economies has cemented the US dollar as the defacto reserve currency planet wide.

We can not overestimate the value that has accrued to the US public for this arrangement. When India buys Saudi crude they do it in dollars, which they have to acquire for the transaction. Same for 195 other countries. That creates a steady and constant demand for US currency and causes every American's standard of living to be better than it would have been otherwise, as our currency is constantly being debased by debased politicians buying votes and taking bribes. 

[El Nikko + 2,145]

18 hours ago, Jan van Eck said:

The "M" would stand for "Mille," or Thousand

That's quite confusing, I would have thought lower case m would be used for thousand and upper case M for million but you are right.

[ronwagn + 6,290]

On 6/26/2020 at 11:39 PM, Jan van Eck said:

Well, OK, let us just analyze what you have just said here.  First, you lead off by stating that the Saudis "have gotten away with"  "flooding USA with oil..."   We live in a capitalist society.  The Saudis put their oil in some ship and send it to the Gulf Coast.  Is there a Buyer?  If there is no Buyer then the oil never gets unloaded; it just sits there, and racks up per-diem demurrage charges while that tanker is at anchor.  If it does have a Buyer, why would you be upset?  The Saudis are perfectly entitled to compete to sell crude to US refineries, same as the Canadians, the Mexicans, the Nigerians, and so forth.  

My guess is that the loads already have Buyers and the shipments are to fulfill sales contracts.  It is also possible to a chunk of that crude is destined for direct use inside Saudi-owner refinery capacity located in the US Gulf Coast. Hey, they bought the refineries, they are perfectly entitled to buy their own oil - or not.  How would you like it if some outside Authority came along and declared that you must buy your gasoline only at the Sunoco pumps, and never mind that the Esso station is more convenient (and has a better price)? 

Meanwhile, remember that at least some of the US industry's problems are inflicted by the US Congress.  There was that big refinery in Philadelphia but no pipeline to service it,  and the Congress effectively prevents Gulf oils from getting there because of the Jones Act which requires coastal shipping to be only in US tankers with US crews  (and those do not exist).  So that refinery had to obtain supplies by rail unit-train, and some of that came from Canada.  You do have to admit that that was rather a silly arrangement.  The refinery burned, so it is not re-opening due to the high landed crude feedstock costs.   Just lovely. 

You now say that the idea was to "intentionally wipe out American shale..."  But, let's face it, there is no zipper in the back of the skull of the Saudi oil minister, and you cannot reach back there in any event to pull the zipper down, reach in, and pull out the brains to go examine them to determine what the Minister is thinking.  So what you are doing is speculating.  That speculation has an apparent logical foundation, as the conclusion you suggest is plausible, yet determining motive is dicey at best.  All we can do is look at actions, not motives.  

Has American shale production been a nuisance to the Saudi cartel control of markets?  Sure it has.  But so has Russian outputs and sales.  If the Saudis push their crude onto US refineries and in turn the US pushes their light tight oil onto other refineries, whether in China or Korea or Rotterdam, does that not end up displacing Russian crude?  So the picture is much more complex than you would set it out to be.  Cheers. 

So what is the end game? I see Russia and the Saudis suffering greatly economically from the low oil prices along with all other countries overly dependent on oil and gas prices. China benefits greatly from oil and gas prices IF they still have a good worldwide market for their exports. That is quite questionable now that they have angered many countries with their aggressive tactics in a seeming push for world dominance. We have our own oil and gas but our economy is not as dependent on exports as China's. 

To me, we and our "allies" seem to have a winning hand if we stick together and cut purchases from China. The problem I see is that if Trump is not reelected the Democrats will give away all of the advantages for short term profits by their cronies, part of which will end up in their pockets and the party coffers. 

[Jan van Eck + 7,558]

1 hour ago, ronwagn said:

To me, we and our "allies" seem to have a winning hand if we stick together and cut purchases from China. The problem I see is that if Trump is not reelected the Democrats will give away all of the advantages for short term profits by their cronies, part of which will end up in their pockets and the party coffers. 

"Cutting" purchases is not going to be enough.  The only plausible way to deal with the Chinese continuing threat of planet domination and abuse is to cut them off completely.  Americans simply stop buying from China. 

US exports have dropped by some 30%, but that is not the end of the world for the Americans.  First, exports make up perhaps 7% of American wealth generation.  Second, most of US exports head to Canada, which in turn is the largest source of imports of finished goods and oil into the USA. Canada is also the largest external source of lumber and wood products, including wood furniture.  Canada makes up about 30% of US construction timber supply  (and would do more if the Americans let it). Mexico is a very large source of assembly labor, in the maquiladora plants along the Border, specificaly at El Paso. The US does not really need the Chinese; it is all in the mind. 

Chinese exports have dropped by some 37% although hard numbers are tough to come by as the Chinese simply bury the figures.  What that does is stall the expansionism and bring on currency collapse.  And that puts pressure on the CCP.  Without that pressure, you can write off freedoms for the people of Hong Kong.  As the Borg controllers say:  "Prepare to be assimilated.  Resistance is futile." 

Will the Clintonista Democrats do any of this?  Of course not.  It was the Clintonistas, and Hillary specifically, that was pushing for the Trans-Pacific Partnership  [TPP], a "deal" which would cement China as the economic powerhouse of the future. The only benefit of the TPP was that the USA would be the supplier of grains and pork to China.  So what - big deal.  You don't need that market. 

When the Australians attempted to  take a hard look at the China policies of right suppression and environmental destruction, the CCP retaliated by banning the import of australian cattle, and chopped the import of Aussie ores and coal.  China citizens were effectively stopped from traveling to Australia; that clobbered the Aussie tourism sector.  The Chinese can play rough, don't kid yourself.  Right now, the CCP grabbed two Canadian businessmen and are holding them in torture chambers in some prison, locked in concrete cells with no water and the lights on 24/7, and charged them with "espionage," and will hand then the Death Penalty - all done to force Canada to release Meng Wanzhou, the chief financial officer of Huawai Electronics, on estradation request from the USA on charges of money laundering and funnelling cash from Iran through US banks.  Her detention consists of being restricted to the City of Vancouver, at her house there, which is worth some $14 million, complete with a stable of fine cars and lots of servants.  Not exactly a concrete bed in a cold cell in Beijing, now is it? 

https://www.bbc.com/news/world-us-canada-53183654