Oil Slide Worries Traders. *relax* This Should Get Sorted by Year End.

(edited)

10 hours ago, Illurion said:

One of the reasons i trust Trump is that he is already a Billionaire,  and he cannot be bought.

 

You misunderstand I am not suggesting he is making incorrect decisions to benefit himself, he is making these decisions through his inability to understand what he is doing. For example his withdrawal from Syria is going to benefit either Turkey who get to attack the US proxy footsoldiers in Syria, the Kurds, or Russia, Syria and Iran to who the Kurds will need to side with to avoid being slaughtered. This callous disregard for local allies will mean in future interventions by the US overseas more US troops will die as local proxies will be less likely to side with a fickle ally.

Edited by jaycee
Commas, inverted commas fixed
  • Like 1
  • Upvote 1

Share this post


Link to post
Share on other sites

4 hours ago, jaycee said:

This callous disregard for local allies will mean in future interventions by the US overseas more US troops will die as local proxies will be less likely to side with a fickle ally.

Good point.

I would not call it "callous" though.

But nothing new.

Obama, and Carter have already shown many allies that the USA can be "fickle".

As for the Kurds,   i have felt very bad for them for decades now.

The Kurds really should have their own country.

Instead,  they are split up in Iran, Iraq, Syria, and Turkey,  and are oppressed in all of those places.

A week or so ago in another thread,  i said that since LEBANON is really a non-nation,  kept unstable by Hezbollah,  that wouldn't it be great if ALL KURDS FROM EVERYWHERE moved to Lebanon,  defeated Hezbollah,  and stabilized the country.

If not Lebanon,  then Somalia,  or some other unstable place.

 

Share this post


Link to post
Share on other sites

On ‎12‎/‎23‎/‎2018 at 9:32 AM, Meredith Poor said:

The 'return' of oil prices to $70 per barrel becomes unlikelier by the day. The most direct influence is the continual optimization of fracking, leading to lower unit costs. Those with the cheapest oil are happy to drive competitors out of the market. The only way they can do that is to make the high priced producers unprofitable.

The next most direct influence is the continual expansion of 'recoverable' reserves. Some of this is due to better analysis of reservoirs, some of it is due to technology enhancements that expand the scope of 'recoverable' hydrocarbons, and some of it is shrinkage of waste, such as converting flare gas to liquids.

In a complex business, there are endless opportunities for cost reduction, plus the occasional 'disruptive' technology that obsoletes some whole segment. In a global industry, these changes can originate from anywhere. 

Breakeven in the Permian basin is about $62/b at the well head.  Currently south Texas light prices are around $37/b, so not a lot of incentive to complete wells at present in either the Permian or Bakken (where prices are under $30/b).  We are unlikely to see $70/b at the wellhead, but Brent is typically about $15/b or more above Bakken or Permian well head prices, so $77/b for Brent is a very real possibility by June 2019, as pipelines and Ports get sorted in Texas we could see the Brent differential to Midland Texas crude prices fall to $5/b and then oil prices could fall to $67/b by 2021, if OPEC and other nations can continue to increase output, this will become increasingly difficult from 2021 to 2025 as US light tight oil will peak around then and the rest of the World may not be able to fill the gap of increasing demand and falling US oil output after 2025.

  • Like 1

Share this post


Link to post
Share on other sites

23 hours ago, jaycee said:

I remember people \saying that when oil was $40 a barrel.

Well,it's back down to $44.

Transient conditions can spike the price, particularly if someone can circulate some sort of rumor. Eventually, however, the truth is in the tank. If the tanks are full, the price tanks.

Share this post


Link to post
Share on other sites

4 minutes ago, D Coyne said:

Breakeven in the Permian basin is about $62/b at the well head.  Currently south Texas light prices are around $37/b, so not a lot of incentive to complete wells at present in either the Permian or Bakken (where prices are under $30/b).  We are unlikely to see $70/b at the wellhead, but Brent is typically about $15/b or more above Bakken or Permian well head prices, so $77/b for Brent is a very real possibility by June 2019, as pipelines and Ports get sorted in Texas we could see the Brent differential to Midland Texas crude prices fall to $5/b and then oil prices could fall to $67/b by 2021, if OPEC and other nations can continue to increase output, this will become increasingly difficult from 2021 to 2025 as US light tight oil will peak around then and the rest of the World may not be able to fill the gap of increasing demand and falling US oil output after 2025.

If 'oil' production is via pumping. If someone is making hydrocarbons - often direct end product such as diesel or gasoline - from water and CO2 extracted from the air (direct air capture) then the price of oil at the 'wellhead' is no longer a useful metric.

Anyone that can show a price advantage over the general market will get investment, usually in a matter of days. Every little niche is being filled the instant some producer successfully identifies it.

  • Upvote 1

Share this post


Link to post
Share on other sites

6 minutes ago, Meredith Poor said:

Well,it's back down to $44.

Transient conditions can spike the price, particularly if someone can circulate some sort of rumor. Eventually, however, the truth is in the tank. If the tanks are full, the price tanks.

I go on the Brent price so some way to go yet before I start rebuying all my oil shares I sold when we are going to $120 was the call.

  • Upvote 1

Share this post


Link to post
Share on other sites

On ‎12‎/‎21‎/‎2018 at 2:12 AM, Jan van Eck said:

Yet the shale drillers and pumpers are not going to stop production simply because the price drops to the point even of negative cash flow.  The reason lies inside the financing structure of these small producers.  They raise their capital by solicitations of private investors who are classified as having capital and total assets above a threshold level that brings them to the status of "sophisticated investor."  Basically, only folks who know what they are doing and have the ability to sustain capital losses are allowed to buy into those investment pools, as limited partners.  Now those folks get seriously upset when the production dividend checks do not emerge, so there is this pressure to pump and sell simply to keep "something" flowing to the investors, or the drill General Partners, the fellows putting the drill deals together, will end up shunned, effectively blackballed.  

Nobody in the oilpatch can afford to take the risk of angering the investors.  Thus, even if WTI sinks to $38, those guys are going to continue to drill and continue to pump, and sell, and issue dividends.  Otherwise they have committed suicide with the investors. The implication is that WTI is going to continue to sink, oil will continue to gush, and will continue to stay well below your target of $60.  Way of the world. 

Jan,

What happened last time?  Seems tight oil output fell by about 500 kb/d.  Also these companies cannot keep losing money forever, breakeven in the Permian basin is about $62/b at the wellhead for the average 2017 well completed, currently the Brent to Midland Spread is about $15/b, so they need $77/b Brent just to earn a 7% annual ROI (which is pitiful considering the risks for an oil company).

tight oil 1812.png

  • Like 1

Share this post


Link to post
Share on other sites

6 minutes ago, Meredith Poor said:

If 'oil' production is via pumping. If someone is making hydrocarbons - often direct end product such as diesel or gasoline - from water and CO2 extracted from the air (direct air capture) then the price of oil at the 'wellhead' is no longer a useful metric.

Anyone that can show a price advantage over the general market will get investment, usually in a matter of days. Every little niche is being filled the instant some producer successfully identifies it.

Are you serious?  How much of the World oil supply is being provided by water and CO2 captured from the air?

I imagine they are using fusion reactors to power this...  :)

 

How about a link to this output from water and CO2, processes that take millions of years for their production cycle need not apply.

Share this post


Link to post
Share on other sites

1 hour ago, D Coyne said:

Are you serious?  How much of the World oil supply is being provided by water and CO2 captured from the air?

I imagine they are using fusion reactors to power this...  :)

 

How about a link to this output from water and CO2, processes that take millions of years for their production cycle need not apply.

http://carbonengineering.com/

https://chemistry.harvard.edu/news/artificial-leaf-named-2017-breakthrough-technology

http://www.biomass2biooil.com/

Carbon Engineering is a company I've been aware of for some time.

The Harvard artificial leaf is really several technologies, a sunlight chip producing hydrogen, the same chip with microorganisms that make isobutanol (a butane-like alcohol), and ammonia (fertilizer).

The biomass to biooil site is just one that showed up out of many - this is being done all over the place, including by major refiners.

Also read up on 'Jeffries Pine', a pine tree that grows at high altitudes in the western US.

  • Like 1
  • Great Response! 1
  • Upvote 3

Share this post


Link to post
Share on other sites

3 hours ago, D Coyne said:

Are you serious?  How much of the World oil supply is being provided by water and CO2 captured from the air?

I imagine they are using fusion reactors to power this...  :)

 

How about a link to this output from water and CO2, processes that take millions of years for their production cycle need not apply.

Gasoline, a pentane, is easily manufactured from CO2 and water.  And no, you do not need to apply fusion-level energy to do it.  Remember that we use oil from the ground, an inconvenient mineral slime, because historically it has been cheap.  But you can use any number of products to manufacture pentanes, including cow manure  (biomass),  and coal.  I think you also need a catalyst to drive the reaction, but it has been a while since I looked at the formation chain.  Just because nobody is doing it, does not mean that it cannot be done. 

  • Like 2

Share this post


Link to post
Share on other sites

3 hours ago, Meredith Poor said:

If 'oil' production is via pumping. If someone is making hydrocarbons - often direct end product such as diesel or gasoline - from water and CO2 extracted from the air (direct air capture) then the price of oil at the 'wellhead' is no longer a useful metric.

Anyone that can show a price advantage over the general market will get investment, usually in a matter of days. Every little niche is being filled the instant some producer successfully identifies it.

In looking at it, I think the next big field is likely the oil sands in Idaho, I think those extraction guys using a solvent mix are onto something.  And if they can sell the nice clean sand to boot, then that is the Big Bucks.  There are billions and billions of oilsand barrels sitting in Idaho, and that is before you go upstairs to the Athabasca fields. 

  • Like 1

Share this post


Link to post
Share on other sites

1 hour ago, Jan van Eck said:

In looking at it, I think the next big field is likely the oil sands in Idaho, I think those extraction guys using a solvent mix are onto something.  And if they can sell the nice clean sand to boot, then that is the Big Bucks.  There are billions and billions of oilsand barrels sitting in Idaho, and that is before you go upstairs to the Athabasca fields. 

One of the issues with places like Idaho is 'distance from markets'. There is a vast amount of kerogen in the Green River Formation. The problem isn't just converting it to a fuel, it's how it's going to get from where it is to, for example, the gulf coast, California, or the east coast. Is there any point in building pipelines or track to carry it off?

  • Like 1

Share this post


Link to post
Share on other sites

On 12/21/2018 at 1:12 AM, Jan van Eck said:

Yet the shale drillers and pumpers are not going to stop production simply because the price drops to the point even of negative cash flow.  The reason lies inside the financing structure of these small producers.  They raise their capital by solicitations of private investors who are classified as having capital and total assets above a threshold level that brings them to the status of "sophisticated investor."  Basically, only folks who know what they are doing and have the ability to sustain capital losses are allowed to buy into those investment pools, as limited partners.  Now those folks get seriously upset when the production dividend checks do not emerge, so there is this pressure to pump and sell simply to keep "something" flowing to the investors, or the drill General Partners, the fellows putting the drill deals together, will end up shunned, effectively blackballed.  

Nobody in the oilpatch can afford to take the risk of angering the investors.  Thus, even if WTI sinks to $38, those guys are going to continue to drill and continue to pump, and sell, and issue dividends.  Otherwise they have committed suicide with the investors. The implication is that WTI is going to continue to sink, oil will continue to gush, and will continue to stay well below your target of $60.  Way of the world. 

It is pleasant to read a bit of reality among all the comments based upon wishful thinking. When everyone reaches an understanding of the mechanism by which oil prices occur and behave, we will have much less of these "certainty for higher prices" or "OPEC knows what they are doing". It might even help a bit if everyone accepted the simple arithmetic of a 150-year average of about $40. After five or ten years below $30 the mood will change, but it won't change quickly.

  • Like 1

Share this post


Link to post
Share on other sites

6 hours ago, D Coyne said:

Breakeven in the Permian basin is about $62/b at the well head.  Currently south Texas light prices are around $37/b, so not a lot of incentive to complete wells at present in either the Permian or Bakken (where prices are under $30/b).  We are unlikely to see $70/b at the wellhead, but Brent is typically about $15/b or more above Bakken or Permian well head prices, so $77/b for Brent is a very real possibility by June 2019, as pipelines and Ports get sorted in Texas we could see the Brent differential to Midland Texas crude prices fall to $5/b and then oil prices could fall to $67/b by 2021, if OPEC and other nations can continue to increase output, this will become increasingly difficult from 2021 to 2025 as US light tight oil will peak around then and the rest of the World may not be able to fill the gap of increasing demand and falling US oil output after 2025.

The cost of Permian production has NOTHING to do with the price-setting mechanism for oil.

  • Like 1

Share this post


Link to post
Share on other sites

hmmm, I disagree.  If Permian stopped, POO would increase. 

Share this post


Link to post
Share on other sites

9 hours ago, jaycee said:

I go on the Brent price so some way to go yet before I start rebuying all my oil shares I sold when we are going to $120 was the call.

Great timing.

Can i have 10% of your profit ?

I am a poor refugee.

  • Upvote 1

Share this post


Link to post
Share on other sites

5 hours ago, Meredith Poor said:

One of the issues with places like Idaho is 'distance from markets'. There is a vast amount of kerogen in the Green River Formation. The problem isn't just converting it to a fuel, it's how it's going to get from where it is to, for example, the gulf coast, California, or the east coast. Is there any point in building pipelines or track to carry it off?

That depends on what the final customer wants to pay.  If it is sold as Bunker C, then it would appear to need rail unit trains to carry to port.  Those ports also include Duluth.  If the stuff does coke out without contaminants such as sulfur, then considering the vast amount available, it would be likely that a refinery will be constructed in the neighborhood, and diesel and jetfuel taken off for consumption in the immediate area.  

The more interesting aspect is the potential  for sales of the sand.  I can see unit trains of sand taken all the way to New Jersey for beach replenishment projects.  The acquisition cost of the sand is zero.  if the transport cost in gondolas or barge or some combination is cheap enough, below about $17/cu yd., then you have a winner. Paradoxically, the refiner may well end up making more off the sand than off the oil. Hey, could be. 

  • Like 1

Share this post


Link to post
Share on other sites

13 hours ago, Jan van Eck said:

That depends on what the final customer wants to pay.  If it is sold as Bunker C, then it would appear to need rail unit trains to carry to port.  Those ports also include Duluth.  If the stuff does coke out without contaminants such as sulfur, then considering the vast amount available, it would be likely that a refinery will be constructed in the neighborhood, and diesel and jetfuel taken off for consumption in the immediate area.  

The more interesting aspect is the potential  for sales of the sand.  I can see unit trains of sand taken all the way to New Jersey for beach replenishment projects.  The acquisition cost of the sand is zero.  if the transport cost in gondolas or barge or some combination is cheap enough, below about $17/cu yd., then you have a winner. Paradoxically, the refiner may well end up making more off the sand than off the oil. Hey, could be. 

Read up on the elemental constituents and crystal structure of feldspar. This rock makes up 60% of the earth's crust. Now assume it is broken down by carbonic acid, or other acids that result from the decay of plant matter. Hint: this tells you where the sand on beaches comes from. It also explains why bauxite is found in tropical forests.

More generically, it would explain why high volume sand extraction in Idaho/Wyoming for transport to the east coast is unlikely.

Share this post


Link to post
Share on other sites

(edited)

On 12/23/2018 at 4:50 PM, Illurion said:

 

One of the reasons i trust Trump is that he is already a Billionaire,  and he cannot be bought.

 

Some people just want more money regardless of how much they have.  I'm sure his ego would love to have his name on this list.  For now he will just lie and say "I'm one of the richest in America." when really he is not.

https://en.wikipedia.org/wiki/List_of_Americans_by_net_worth

Edited by Enthalpic

Share this post


Link to post
Share on other sites

4 hours ago, Enthalpic said:

Some people just want more money regardless of how much they have.  I'm sure his ego would love to have his name on this list.  For now he will just lie and say "I'm one of the richest in America." when really he is not.

https://en.wikipedia.org/wiki/List_of_Americans_by_net_worth

@Illurion said Trump is already a Billionaire.  I assume it is beyond comprehension that Trump could have run for president in order to make real change for Americans?  I'm with Illurion in that I believe it is possible.  History will be the judge, and no, I'm not making any bets at this point.  But I am happy that we have a president that is shaking the hell out of the status quo, and 2 years is hardly enough time to see the end results of his policies.

For some baseline on Trump's actual net worth, let's use the Forbes article below:

The Definitive Net Worth of Donald Trump

Just for a bit of perspective, is there anyone here on the forum that is within a $100 million of Trump's net worth?  $200 million?  Half a Billion?  Does anyone on here know of an active politician that is anywhere close to Trump's net worth?

So aside from your personal assertion that Trump would like to have his name on the "list of Americans by net worth", is it possible that @Illurion is right?

 

  • Like 1

Share this post


Link to post
Share on other sites

On 12/25/2018 at 2:50 AM, Illurion said:

Great timing.

Can i have 10% of your profit ?

I am a poor refugee.

I pay my taxes, refugees get a percentage as it is.

If you follow my posts however I generally post what I am buying and selling, I posted when I sold oil shares so you can follow my thought processes. I do not give advice only my thoughts which are not always 100% what happens so follow at your own risk. My current pet purchase is dividend paying gold mines to protect from the inevitable fall in the US economy, and therefore world one, after the Trump policies over the last 2 years start biting. I have been posting that thought for a while. Do some research it can be profitable.

  • Like 1
  • Upvote 1

Share this post


Link to post
Share on other sites

13 minutes ago, jaycee said:

I pay my taxes, refugees get a percentage as it is.

If you follow my posts however I generally post what I am buying and selling, I posted when I sold oil shares so you can follow my thought processes. I do not give advice only my thoughts which are not always 100% what happens so follow at your own risk. My current pet purchase is dividend paying gold mines to protect from the inevitable fall in the US economy, and therefore world one, after the Trump policies over the last 2 years start biting. I have been posting that thought for a while. Do some research it can be profitable.

I'm pretty sure @Illurion was being sarcastic, and the poor refugee thing was not directed at you personally; more at the tone of the various threads these days.  I hope so anyway, because that was why I "up-voted" his comment.

Share this post


Link to post
Share on other sites

2 hours ago, Dan Warnick said:

I'm pretty sure @Illurion was being sarcastic, and the poor refugee thing was not directed at you personally; more at the tone of the various threads these days.  I hope so anyway, because that was why I "up-voted" his comment.

I guessed that my answer though now I re read it does not really reflect that I am still little hungover from Xmas festivities lol. I know he is retired.

The investment bit was really a follow on from my earlier stuff about buying and selling.

  • Like 1
  • Upvote 1

Share this post


Link to post
Share on other sites

On ‎12‎/‎24‎/‎2018 at 3:35 PM, Jan van Eck said:

Gasoline, a pentane, is easily manufactured from CO2 and water.  And no, you do not need to apply fusion-level energy to do it.  Remember that we use oil from the ground, an inconvenient mineral slime, because historically it has been cheap.  But you can use any number of products to manufacture pentanes, including cow manure  (biomass),  and coal.  I think you also need a catalyst to drive the reaction, but it has been a while since I looked at the formation chain.  Just because nobody is doing it, does not mean that it cannot be done. 

Jan van Eck,

 

How much gasoline is produced from CO2 and Water?  Just because something can be done, does not mean that it will be done.

What is the profit margin on the gasoline produced from CO2 and water?  If it is not more than zero, I expect we will see very little of it produced.

Note that coal and cow manure are not CO2 and water.  The comment implied gasoline was produced from CO2 and water, rather than crude oil , CO2, and water or whatever third (or more inputs) one might choose.

Would you agree that it is likely to be expensive to produce gasoline from CO2 and water if those plus energy were the only inputs?   My guess is that we will see such a process become profitable at about the same time as the first profitable fusion reactor is running.  :)

Share this post


Link to post
Share on other sites

On ‎12‎/‎24‎/‎2018 at 2:19 PM, Meredith Poor said:

http://carbonengineering.com/

https://chemistry.harvard.edu/news/artificial-leaf-named-2017-breakthrough-technology

http://www.biomass2biooil.com/

Carbon Engineering is a company I've been aware of for some time.

The Harvard artificial leaf is really several technologies, a sunlight chip producing hydrogen, the same chip with microorganisms that make isobutanol (a butane-like alcohol), and ammonia (fertilizer).

The biomass to biooil site is just one that showed up out of many - this is being done all over the place, including by major refiners.

Also read up on 'Jeffries Pine', a pine tree that grows at high altitudes in the western US.

And how much gasoline is actually produced profitably from these processes?

Not at all clear that this is a cheaper way to go than BEVs for transport, at some point we might need to attempt to remove CO2 from the atmosphere in this way, though alternatives such as better soil management and cement production that absorbs CO2, and forest regrowth might be cheaper alternatives.  Biofuels probably will not scale to the point that they could replace oil and natural gas.

Share this post


Link to post
Share on other sites