OPEC and Russia could discuss emergency cuts

[0R0 + 6,251]

22 hours ago, Tomasz said:

I think they will cut production by 1 milion barrels.

In the current situation, shale oil production has slowed down and I think that the increase in shale oil production in this respect that shale production is growing so fast that shale supply exceeds global demand will not be a problem.

An additional problem for American producers is that they produce in this way lighter and lighter oil with higher API oil and more and more gas and the fact that we also have overproduction of gas also kills the economics of shale oil production. You should not forget about problem with oil quality because there is too much light oil in the market and we need more heavy oil. Shale oil has increasing API density and thats becoming a problem.

In this situation, OPEC may cut production without risking the Third Shale Revolution, so the situation seems to me more advantageous for the cartel because cutting production now will not give away market share to other producers.

Which would blend well with Venezuelan extra heavy crude. Which is why I expect Venezuela to be a target for Washington activity. Don't know what and how, but sure as heck they will be trying to release their oil into the open market, i.e. not Russia or China.

Canadian Tar Sands crude can be made to good composition with the very light shale oils diluting it down to refinery spec. Great symbiosis. Much more likely to happen now that they are actually allowed to have pipelines. 

We are at the second shale investment trough. Because of the Coronavirus quarantine debacle in China, which was the marginal source of demand growth for 2 decades, the prospect of further demand growth is good in the short term as a large minority of China's industry has to be duplicated outside China with major infrastructure and development. That is about 2-3 Mob/d marginal demand. This will push oil to a higher plateau and induce some resumption in Shale expansion. LNG displacement of diesel will take off during this higher oil price period. After that, oil demand will fall back to its declining trend. Chinese oil demand will only shrink as their car market is saturated and new cars are increasingly EVs. Once PHEV and EV big trucks take to the roads, the remaining China demand will gradually shrink. 

https://www.forbes.com/sites/kenrapoza/2020/03/01/coronavirus-could-be-the-end-of-china-as-global-manufacturing-hub/#485398675298

“Our survey shows that a large majority of executives are moving or have moved portions of their operations from another country to Mexico,” says Christopher Swift, Foley partner and litigator in the firm’s Government Enforcement Defense & Investigations Practice.

The most frightening aspect of this crisis is not the short-term economic damage it is causing, but the potential long-lasting disruption to supply chains, Shehzad H. Qazi, the managing director of China Beige Book, wrote in Barron’s on Friday.

Chinese auto manufacturers and chemical plants have reported more closures than other sectors, Qazi wrote. IT workers have not returned to most firms as of last week. Shipping and logistics companies have reported higher closure rates than the national average. “The ripple effects of this severe disruption will be felt through the global auto parts, electronics, and pharmaceutical supply chains for months to come,” he wrote.

https://www.barrons.com/articles/coronavirus-hit-chinas-economy-worse-than-expected-china-beige-book-51582902867

 

 

[D Coyne + 305]

On 2/26/2020 at 6:06 PM, ronwagn said:

I like my take on free and fair markets. I never did believe in price fixing. I think everything balances out for fair pricing. It is indeed painful, but we have all experienced ups and downs. That is the nature of life IMHO. I am no expert economist, but those who were, destroyed the markets and brought us Obama to "fix" it. They are also the ones who said Trump would crash the economy. Go figure. 

Ronwagn,

The free and fair markets includes international markets, if you believe in that sort of thing.

Read some history, free markets are not always optimal, that is a conservative myth.  Take a look at US economic performance during the Herbert Hoover administration.  Nobody is arguing for price fixing.  It is simply a matter of adjusting supply so businesses can be profitable.  Worked pretty well from 1945 to 1970 when the RRC controlled Texas oil output.  It could work again, no US producer makes money with oil at $45/bo or less, in fact Permian tight oil producers don't make money at a wellhead price under $50/bo.

[ronwagn + 6,290]

Laissez Faire Capitalism is definitely not a cuddly teddy bear! I am not trained in economics. The Texas Railroad Commission definitely helped the oil and gas industries to get off to a strong start. I hate to see any industry go through hell. My favorite is the natural gas industry and it is going through hell too. The TRC has not slowed flaring very much if at all. They are not enforcing their own rules.

I pray for the whole industry and all of useful industries. My anger is directed at those who would force citizens to pay higher bills for wind, solar, nuclear, etc. I am all for carefully studying the cost benefit ratios using known numbers not garbage CO2 numbers. When renewables can win on their own that is great for me too. Same with electric vehicles versus natural gas vehicles.