IT IS FINISHED. OPEC Victorious

[Osama + 248]

13 hours ago, Dan Warnick said:

Would you say that the OPEC/Saudi ministers have grown complacent dealing with bureaucrats over the years, so a businessman confounds them?

Hello Dan! So I am jumping into the discussion here:

Yes they have...but now with their SaudiVision 2030 on the horizon and the debacle of Jamal's murder...they need to learn modesty and they will. I am waiting for another Tweet by Trump.

[cbrasher1 + 272]

9 hours ago, Jan van Eck said:

We can have that discussion when oil slides all the way to $27.   Which is what I suspect is going to happen, eventually. Probably once the Winter is over, as winter oil heating demand tends to prop up consumption. 

any particular reason why $27? what are your thoughts for what that will do to the industry? are you suggesting another bust in the near future?  insight on the effect of that on the economy as a whole?

[Dan Warnick + 6,100]

3 hours ago, Osama said:

Hello Dan! So I am jumping into the discussion here:

Yes they have...but now with their SaudiVision 2030 on the horizon and the debacle of Jamal's murder...they need to learn modesty and they will. I am waiting for another Tweet by Trump.

Hi Osama.  Others on here have pretty much declared SaudiVision 2030 dead before it even got started.  They may wish to jump back in and I hope they do, but it would seem that the dream of SaudiVision 2030 has never been further from reality than it is today.

[Dan Warnick + 6,100]

10 hours ago, Enthalpic said:

Saudis recently bought 15 billion worth of arms from Canada

Link?  Not saying they didn't, just want to read the details.  Thanks.

[Dan Warnick + 6,100]

6 hours ago, William Edwards said:

supply always matches demand

Hi William.  To take this to its extreme, IF the Saudis (and not necessarily any other player) were to "curb" supply by 100% then supply would not match demand.  Is that right?  I think I understand your context to mean a simple curbing of 500k, 1 million or even 2 million barrels ultimately, would not necessarily mean that supply did not match demand, but there could come a tipping point where simple supply did not meet demand, right?

To the more specific question of how prices go up and down on any given day in this, the real world, the speculators control the prices for the most part.   Is that also your position?

I hold a great deal of respect for your wisdom and experience, so these questions are not meant in any way to be a challenge; they are meant to help me along my way in understanding this game called oil.   

[Jan van Eck + 7,558]

12 hours ago, Enthalpic said:

Saudis recently bought 15 billion worth of arms from Canada

Not really. Those purchases in the main are wheeled armored vehicles manufactured by the (U.S.) General Dynamics Corp. at its big plant in London, ONtario.  Half that plant is General Dynamics, the other half was Caterpillar, formerly Electro-Motive Diesel, the big locomotive builder that dominated the rail sector in North America  (until CAT got into a public brawl with the union and ended up doing a lock-out, then closed it and moved to a new plant in Indiana).

Although the "deal" is with a Canadian Address, the product is 100% American, all General Dynamics stuff.  Cheers.

[Jan van Eck + 7,558]

2 hours ago, Dan Warnick said:

Link?  Not saying they didn't, just want to read the details.  Thanks.

Bought from the U.S. General Dynamics Co., wheeled armor designed in USA but fabricated in London, Ontario.  Basically US product.  See my longer comment in this thread.

[Dan Warnick + 6,100]

22 minutes ago, Jan van Eck said:

Bought from the U.S. General Dynamics Co., wheeled armor designed in USA but fabricated in London, Ontario.  Basically US product.  See my longer comment in this thread.

Saw that above.  Thanks, Jan.  

[Jan van Eck + 7,558]

55 minutes ago, Dan Warnick said:

Hi William.  To take this to its extreme, IF the Saudis (and not necessarily any other player) were to "curb" supply by 100% then supply would not match demand.  Is that right?  I think I understand your context to mean a simple curbing of 500k, 1 million or even 2 million barrels ultimately, would not necessarily mean that supply did not match demand, but there could come a tipping point where simple supply did not meet demand, right?

To the more specific question of how prices go up and down on any given day in this, the real world, the speculators control the prices for the most part.   Is that also your position?

I hold a great deal of respect for your wisdom and experience, so these questions are not meant in any way to be a challenge; they are meant to help me along my way in understanding this game called oil.   

Supply always matches consumption  (setting aside inventory flows).  Supply does not really match "demand."  

To elaborate, go back to the use of whale oil for lighting.  There was a huge, staggering demand.  The New Englanders went at it with a passion, even to the extreme of spending four years at sea on one voyage, to go kill whales and boil off the oil into big vats on board. You get back to New England and the stuff is all sold off right there on the dock.  It was an insatiable demand - and did not get even remotely close to being satisfied by supply until crude oil was found and distilled into kerosene in Western Pennsylvania.

Eventually, supply availability matched the pent-up demand, and the price of kerosine collapsed to ten cents a gallon. And the gasoline was pretty much worthless, so I am guessing that was dumped onto the ground, in the traditional way of disposing of waste. 

Today the attempts at "supply management" are being practiced by guys who are not good at it.  To understand the dynamics of supply management, I invite you to study the past masters at that game, the Canadians - who use the technique to prop up prices for both maple syrup and retail milk.  In maple syrup, Quebec, the overwhelming leader in production, all producers sell their syrup to the Marketing Board, and the Board then releases just enough to meet the pent-up demand, after which the retail door is nailed shut and the balance simply stored in big vats (against the day that there is a crop failure).  The neighboring Vermonters don't do that, but cannot penetrate the market for syrup by exporting to Canada, both due to import restrictions and due to the collapsed Canadian Dollar, which would price their imports into the stratosphere (and then nobody would buy it anyway). 

In oil, the adjustment times to react to changes in market demand are years long - figure on at least four years.  So the producers are always, always, behind the proverbial eight-ball in attempting to meet what they think is market demand. In effect today's producers are making their investment decisions based on today's numbers, and by the time they get their new E&P on-line, they are facing tomorrow's demands - which they did not anticipate, other than by gazing into the crystal ball.  SO the entire market is constantly going to do the price see-saw. 

In the short term, less than four years, the pricing on the spot market is all determined by the greed and the fear of the traders  (OK, the speculators), and some gain big and others lose their shirt.  It is all a fool's game, but since it is human nature to think that you are smarter than the next guy, and humility is not exactly omnipresent on the trading floor, you get these very aggressive guys who bet mostly other peoples' money on these wild trades.  And lots of investors who hand over their cash to those traders end up bust. 

But since traders also do the short on the market, some make the big bucks as the market crashes.  So you have these guys beating each other up and the pricing is in constant turmoil.  And that is why I stay away from trading.  You cannot control the testosterone of the other guys. 

Edited December 8, 2018 by Jan van Eck
scrivener error

[Dan Warnick + 6,100]

Yes, I should have realized that @William Edwards meant consumption as that would explain his answer completely.

P.S.  The rest of your answer was, as usual, very informative and interesting.  Thanks, Jan.

Edited December 8, 2018 by Dan Warnick

[William Edwards + 708]

3 hours ago, Jan van Eck said:

Supply always matches consumption  (setting aside inventory flows).  Supply does not really match "demand."  

To elaborate, go back to the use of whale oil for lighting.  There was a huge, staggering demand.  The New Englanders went at it with a passion, even to the extreme of spending four years at sea on one voyage, to go kill whales and boil off the oil into big vats on board. You get back to New England and the stuff is all sold off right there on the dock.  It was an insatiable demand - and did not get even remotely close to being satisfied by supply until crude oil was found and distilled into kerosene in Western Pennsylvania.

Eventually, supply availability matched the pent-up demand, and the price of kerosine collapsed to ten cents a gallon. And the gasoline was pretty much worthless, so I am guessing that was dumped onto the ground, in the traditional way of disposing of waste. 

Today the attempts at "supply management" are being practiced by guys who are not good at it.  To understand the dynamics of supply management, I invite you to study the past masters at that game, the Canadians - who use the technique to prop up prices for both maple syrup and retail milk.  In maple syrup, Quebec, the overwhelming leader in production, all producers sell their syrup to the Marketing Board, and the Board then releases just enough to meet the pent-up demand, after which the retail door is nailed shut and the balance simply stored in big vats (against the day that there is a crop failure).  The neighboring Vermonters don't do that, but cannot penetrate the market for syrup by exporting to Canada, both due to import restrictions and due to the collapsed Canadian Dollar, which would price their imports into the stratosphere (and then nobody would buy it anyway). 

In oil, the adjustment times to react to changes in market demand are years long - figure on at least four years.  So the producers are always, always, behind the proverbial eight-ball in attempting to meet what they think is market demand. In effect today's producers are making their investment decisions based on today's numbers, and by the time they get their new E&P on-line, they are facing tomorrow's demands - which they did not anticipate, other than by gazing into the crystal ball.  SO the entire market is constantly going to do the price see-saw. 

In the short term, less than four years, the pricing on the spot market is all determined by the greed and the fear of the traders  (OK, the speculators), and some gain big and others lose their shirt.  It is all a fool's game, but since it is human nature to think that you are smarter than the next guy, and humility is not exactly omnipresent on the trading floor, you get these very aggressive guys who bet mostly other peoples' money on these wild trades.  And lots of investors who hand over their cash to those traders end up bust. 

But since traders also do the short on the market, some make the big bucks as the market crashes.  So you have these guys beating each other up and the pricing is in constant turmoil.  And that is why I stay away from trading.  You cannot control the testosterone of the other guys. 

Yes, Jan, I should be more precise with my terminology. I should use the word "consumption" since it is more precise. "Demand" has many definitions. Thanks.

[Justin Hicks + 162]

11 hours ago, ronwagn said:

What concessions are you referring to? 

US oil producers will have to be involved in the give and take of production quotas as well.

[William Edwards + 708]

3 hours ago, Dan Warnick said:

Yes, I should have realized that @William Edwards meant consumption as that would explain his answer completely.

P.S.  The rest of your answer was, as usual, very informative and interesting.  Thanks, Jan.

Thanks for helping me communicate accurately, Dan.

[specinho + 470]

14 hours ago, John Foote said:

Curious, how many think Saudi could have maintained their recent record run rates? 

Pardon me......... counting: One.....

[specinho + 470]

6 minutes ago, mthebold said:

This.  People underestimate the difficulty of wielding a military.  In the hands of incompetents, high technology barely matters. 

On that note, only a minority of militaries are capable of competently waging war.  Of those, even fewer have a proven track record and recent experience.

uuhhhh....... pardon me..... but isn't the key concept in the modern society is putting the incompetent in-charge so that more can be wasted?? 

[Dan Warnick + 6,100]

7 minutes ago, William Edwards said:

Thanks for helping me communicate accurately, Dan.

Well, it was Jan that caught it, surprisingly enough .  I should have caught it myself, but you sometimes don't come around here often enough to remind us of those very different definitions, so I'll still have to lay that at your feet.   

[William Edwards + 708]

Just now, Dan Warnick said:

Well, it was Jan that caught it, surprisingly enough .  I should have caught it myself, but you sometimes don't come around here often enough to remind us of those very different definitions, so I'll still have to lay that at your feet.   

"so I'll still have to lay that at your feet. " As you rightly should! I need all the help that I can get. Thanks.

[Dan Warnick + 6,100]

1 minute ago, William Edwards said:

"so I'll still have to lay that at your feet. " As you rightly should! I need all the help that I can get. Thanks.

Great prose, eh?  Maybe a simple "blame you for that" would have been more "tongue in cheek".  I'll stop now.  Time for bed, not more posting.  It's been a pleasure!

[Jan van Eck + 7,558]

2 hours ago, William Edwards said:

Yes, Jan, I should be more precise with my terminology. I should use the word "consumption" since it is more precise. "Demand" has many definitions. Thanks.

Actually, in all candor, it was YOU who drilled that subtle difference into my skull!  

I learn at the feet of the Master. 

[William Edwards + 708]

Just now, Jan van Eck said:

Actually, in all candor, it was YOU who drilled that subtle difference into my skull!  

I learn at the feet of the Master. 

You are much too kind!

[jose chalhoub + 388]

Of course venezuela wont be included... its been the best compliant ever in OPEC recently... by default. 

[jose chalhoub + 388]

Of course venezuela wont be included... its been the best compliant ever in OPEC recently... by default. 

[Enthalpic + 1,496]

9 hours ago, Jan van Eck said:

 

Although the "deal" is with a Canadian Address, the product is 100% American, all General Dynamics stuff.  Cheers.

I assure you that a good chunk of that 15 billion will stay in Canada.  Cheers.

[Jan van Eck + 7,558]

3 minutes ago, Enthalpic said:

I assure you that a good chunk of that 15 billion will stay in Canada.  Cheers.

Oh, sure, in wages and in raw materials purchases.  

The profits, and I can reasonably say that there will be quite some, given that this is General Dynamics, will flow back to the Headquarters.  tax-free, of course, compliments of some highly-paid tax attorneys on staff. 

[ronwagn + 6,290]

On 12/7/2018 at 10:22 AM, Annamaples said:

Hi, I am so happy I hope they really cut production, this is really great news for me. Thank you, I hope Trump doesn't twist their arm, they really need to cut production big time. 

Anna

Why? So oil prices rise in the USA?