Why should OPEC+ Cut Production when U.S. Producers will just produce more?

[William Edwards + 708]

4 hours ago, Mike Shellman said:

Tom, I must now agree wholeheartedly with our friend, William; you are a very smart man. Thank you. Please remember something about stripper well operators; we are generally small, family oriented shops that can take the prospect, or project, from start to finish entirely on our own. I do my own geology, my own land work, design and engineer my own wells and then manage those wells for decades, all to the benefit of hundreds of mineral owners, compliance with regulatory agencies...everything. Whatever the big boys do, we do the same thing, only a little shallower, and a lot smarter. Then I get to standby, with my hands tied, while OPEC on one side, my illustrious President and the US shale oil industry on the other, manipulate my product prices at will. Its incredibly difficult. And one last thing about stripper well operators...if you want to know if a well, covey of wells, a field, a resource play, whatever, is economic, ask a stripper well operator. We deal with real dollars, our own dollars, and know what's profitable and what's not. I've had the US shale oil phenomena pegged for the past eight years. Its a loser.

I get the heebie jeebies when folks, mostly my own industry, now dismiss OPEC as no longer being a significant factor in world oil markets. It is, of course, as William points out, and will continue to be. There are lots of smart people in the Middle East, with computers, and OPEC understands the shale oil thing in America very well. It knows the shale phenomena is totally credit/debt dependent and all about its enormous decline rates, water and infrastructure woes. OPEC is forced to deal with all this at the moment but, I believe, knows US LTO is in a very financially precarious place and is only a threat to world oil markets as long as America is so ignorantly willing to fund it with low interest monetary stimulus. 

How bad is shale oil debt? Public and private upstream shale oil debt totals something in the order of $3000B, about the same as the total national debts of Russia and Saudi Arabia combined. https://www.oilystuffblog.com/single-post/2018/11/28/Cartoon-Of-the-Week 

What a refreshing reminder of reality! Thanks, Mike.

[Tom Kirkman + 8,860]

11 hours ago, Mike Shellman said:

I get the heebie jeebies when folks, mostly my own industry, now dismiss OPEC as no longer being a significant factor in world oil markets. It is, of course, as William points out, and will continue to be. There are lots of smart people in the Middle East, with computers, and OPEC understands the shale oil thing in America very well. It knows the shale phenomena is totally credit/debt dependent and all about its enormous decline rates, water and infrastructure woes. OPEC is forced to deal with all this at the moment but, I believe, knows US LTO is in a very financially precarious place and is only a threat to world oil markets as long as America is so ignorantly willing to fund it with low interest monetary stimulus. 

How bad is shale oil debt? Public and private upstream shale oil debt totals something in the order of $3000B, about the same as the total national debts of Russia and Saudi Arabia combined. https://www.oilystuffblog.com/single-post/2018/11/28/Cartoon-Of-the-Week 

Thanks for your kind words, Mike.  Please do keep hollering about LTO debt and the crazy shortsightedness of the U.S. Shale Oil industry.  There are an increasing number of folks who are reluctantly starting to put 2 and 2 together and see the unsustainability of the LTO hamster wheel of debt spree that never gets paid off.  The mill wheel of debt tied forevermore to the neck of LTO should become increasingly and unvoidably obvious to more and more observers, no matter how studiously some people try to ignore it.

Higher interest rates and lower WTI oil prices are a sure fire way to burst the overinflated production bubbles of LTO and WTI.

[Justin Hicks + 162]

16 hours ago, Mike Shellman said:

Tom, I must now agree wholeheartedly with our friend, William; you are a very smart man. Thank you. Please remember something about stripper well operators; we are generally small, family oriented shops that can take the prospect, or project, from start to finish entirely on our own. I do my own geology, my own land work, design and engineer my own wells and then manage those wells for decades, all to the benefit of hundreds of mineral owners, compliance with regulatory agencies...everything. Whatever the big boys do, we do the same thing, only a little shallower, and a lot smarter. Then I get to standby, with my hands tied, while OPEC on one side, my illustrious President and the US shale oil industry on the other, manipulate my product prices at will. Its incredibly difficult. And one last thing about stripper well operators...if you want to know if a well, covey of wells, a field, a resource play, whatever, is economic, ask a stripper well operator. We deal with real dollars, our own dollars, and know what's profitable and what's not. I've had the US shale oil phenomena pegged for the past eight years. Its a loser.

I get the heebie jeebies when folks, mostly my own industry, now dismiss OPEC as no longer being a significant factor in world oil markets. It is, of course, as William points out, and will continue to be. There are lots of smart people in the Middle East, with computers, and OPEC understands the shale oil thing in America very well. It knows the shale phenomena is totally credit/debt dependent and all about its enormous decline rates, water and infrastructure woes. OPEC is forced to deal with all this at the moment but, I believe, knows US LTO is in a very financially precarious place and is only a threat to world oil markets as long as America is so ignorantly willing to fund it with low interest monetary stimulus. 

How bad is shale oil debt? Public and private upstream shale oil debt totals something in the order of $3000B, about the same as the total national debts of Russia and Saudi Arabia combined. https://www.oilystuffblog.com/single-post/2018/11/28/Cartoon-Of-the-Week 

What part of the country are you in Mr.Shellman? Texas? Oklahoma?

[Tom Kirkman + 8,860]

2 hours ago, J S said:

Ham's , the beer refreshing, and black bear friendly.

I see you are having a fun weekend there JS : )

Have a cold one or three for me while you're celebrating.

[Mike Shellman + 548]

"What part of the country are you in Mr.Shellman? Texas? Oklahoma?"

Mr. Hicks, Texan thru and true; born and raised. Was born in the oilfield, literally.

[Tom Kirkman + 8,860]

18 minutes ago, Mike Shellman said:

Texan thru and true; born and raised. Was born in the oilfield, literally.

You have amazing experience Mike.  

https://www.oilystuffblog.com/about

[NickW + 2,714]

On 11/30/2018 at 9:22 PM, Mike Marcellus said:

Please, I really am anxious for your answer to why won't opec nations help Venezuela with some infrastructure help?  some management help?  I say, because they don't care about there business partner.  In fact I would further guess they would rather Venezuela's oil just stayed in the ground, making theirs that more scarce and valuable.    What are the benefits for the "junior" members?

I am being stubborn, I know, but please know that I am not arguing to argue. I'm just picking your brain so-to-speak.

Because OPEC nations really are just a bigger version of the Arab League. They stand on the sidelines sneering and criticising everyone else without lifting a finger themselves to try and resolve issues. 

[John Foote + 1,135]

Part of my impression of the Venezuela issue is with years of poorly managing their fields, and I won't get into the how that happened, clearly looney governance (it was never socialist, it was populism and dictators taking the mickey), and the cost of doing business in Venezuela, has made the economics of physically producing oil not viable. Yes, world's largest reserves perhaps, but what is the cost to produce with their situation? You give that country to a Texan and only a small portion of their reserves makes sense to pumpt today. And what kind of company would make the serious long term investment there to improve. 

While Saudi Arabia is still a massive producer, but they can't afford to seriously cut back production because of the cost of maintaining the society. In a sense, not all that different from Venezuela. Adam Smith is right again. Had oil not skyrocketed as Putin came to power he probably wouldn't have been the raging success he has been. Timing often isn't planned, but it is important.

[Mike Marcellus + 157]

https://www.cnbc.com/2018/12/03/qatar-to-withdraw-from-opec-as-of-january-2019.html

Qatar to quit OPEC after more than 57 years  1 Hour Ago | 01:03

Qatar announced plans to pull out of OPEC on Monday, just days before a crucial meeting between the influential oil cartel and its allies.

Speaking at a news conference, Qatar's Energy Minister Saad al-Kaabi said the country would withdraw from OPEC on January 1, 2019, ending a membership which has stood for more than half-a-century.

 

This could stop here, but I'm going to inch out on my limb a little further and say, there will be more members leaving opec

-MIke

Edited December 3, 2018 by Mike Marcellus
my comments looks like it's part of the article clip, sorry

[Glenn Ellis + 57]

On 11/30/2018 at 11:04 AM, William Edwards said:

How low can you go? $10/B?

~ ACTUALLY,  when you and I were young McGee, "big aill" made a lot of money @ $2.85 per bbl.

True, we were not concerned with supplying China, nor anyone else for that matter but ourselves.

Taking a step back, during FDR's administration, FULL PRODUCTION, was his instruction to all domestic oil companies. 100 oct. AVGAS,87oct REGULAR & DIESEL, with lubricants 30w motor oil and heaver, and EP 90 to keep the gears of wartime greased.

Not since that time have prices in our industry been "stable"

PRICE GOUGING not only was frowned on but a criminal act.

BUTT, I digress>>>>>

TRADERS & SPECULATORS determine price, since we are not on a wartime economy, even so we should be.

OPEC, is no longer the relevant force, it was during the "embargo" of 1973 or the "shortage" of 1979.

A shooting war, somewhere in the middle east, Africa, a strongman dictator popping up elsewhere, or a rainy day will cause a price spike in one direction or another.

Our business is cyclical, always will be. Keyesnosian Economics of supply and demand no longer apply.

TURN THE BUCK! ~ and the quicker the better is the mantra now.

[paultaylor 0]

On 11/30/2018 at 7:17 PM, William Edwards said:

You are simply a smooth-talking devil, Tom.

 

[Mike Shellman + 548]

Roosevelt was president during part of one of the most stable oil price eras in history 1932-1971, thanks entirely to the Railroad Commission of Texas and proration (restriction) of existing production and administration of rules (statutory laws) regulating the density of wells per acre of land and spacing between wells and from lease lines. Prior to OPEC, the TRRC set the price of oil in the world. Nobody "price gouged' because of anti-trust laws, which the TRRC helped, indirectly, implement.

The TRRC now regulates nothing, hardly; case in point is the incredible amount of associated gas from shale oil wells in Texas being wasted. In the mean time for every BO OPEC + takes off the market, the shale oil industry puts back on the market and prices are low, and volatile, and that will ultimately cause America great harm. I wish the Texas RRC had the huevos to re-implement restrictions on well density and spacing, in the name of conservation and price stability, but it won't. There are too many votes to be had in jobs. So, the question is, which will the American shale oil industry run out of first...resources, are printed money to borrow from the US government? Either way, America looses. And OPEC is circling.

The cyclic nature of oil pricing is understandable in a free market system, and when there was abundant supply. There is no longer abundant supply and what is left is, and will be, expensive to extract and clearly, unprofitable. Its time to change the cycles and promote stability, which in turn is good for sustainability.

 

 

 

 

 

Edited December 4, 2018 by Mike Shellman