Donate Bitcoin

Donate Paypal


PeakOil is You

PeakOil is You

THE Price of Crude pt 14

General discussions of the systemic, societal and civilisational effects of depletion.

Re: THE Price of Crude pt 14

Unread postby GoghGoner » Mon 08 Jan 2018, 13:19:22

Let's say you has a safety net of $10,000 in a savings account for an emergency in 2014. Then you inherited some money and decided to keep $20,000 in the account. Now, after some unexpected expenses the account is down to $15,000.

It doesn't matter what you had in the account five years ago, it matters how much your balance has fallen. You are going to feel impelled to keep your balance up.
GoghGoner
Heavy Crude
Heavy Crude
 
Posts: 1731
Joined: Thu 10 Apr 2008, 02:00:00
Location: Stilłwater subdivision

Re: THE Price of Crude pt 14

Unread postby GoghGoner » Tue 09 Jan 2018, 13:24:53

WTI at $63. Brent close to $69.

Last time we saw WTI prices this high was in December, 2014. This bull will keep running until crude inventory draws stop.

Supply reports this week from industry group the American Petroleum Institute and the U.S. government’s Energy Information Administration are expected to show U.S. crude stocks fell 3.9 million barrels, an eighth week of decline.
GoghGoner
Heavy Crude
Heavy Crude
 
Posts: 1731
Joined: Thu 10 Apr 2008, 02:00:00
Location: Stilłwater subdivision

Re: THE Price of Crude pt 14

Unread postby Tanada » Tue 09 Jan 2018, 15:59:39

GoghGoner wrote:WTI at $63. Brent close to $69.

Last time we saw WTI prices this high was in December, 2014. This bull will keep running until crude inventory draws stop.

Supply reports this week from industry group the American Petroleum Institute and the U.S. government’s Energy Information Administration are expected to show U.S. crude stocks fell 3.9 million barrels, an eighth week of decline.


Sure, if you have been sitting on stored oil for 18 months and bought in early to mid 2016 it is worth at least 50% more today than it was back then, depending on your timing. Selling off your commercial stocks is a good profit taking opportunity for the big scale storage companies.
I should be able to change a diaper, plan an invasion, butcher a hog, design a building, write, balance accounts, build a wall, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, pitch manure, program a computer, cook, fight efficiently, die gallantly. Specialization is for insects.
User avatar
Tanada
Site Admin
Site Admin
 
Posts: 14770
Joined: Thu 28 Apr 2005, 02:00:00
Location: South West shore Lake Erie, OH, USA

Re: THE Price of Crude pt 14

Unread postby vtsnowedin » Tue 09 Jan 2018, 16:28:56

Tanada wrote:
GoghGoner wrote:WTI at $63. Brent close to $69.

Last time we saw WTI prices this high was in December, 2014. This bull will keep running until crude inventory draws stop.

Supply reports this week from industry group the American Petroleum Institute and the U.S. government’s Energy Information Administration are expected to show U.S. crude stocks fell 3.9 million barrels, an eighth week of decline.


Sure, if you have been sitting on stored oil for 18 months and bought in early to mid 2016 it is worth at least 50% more today than it was back then, depending on your timing. Selling off your commercial stocks is a good profit taking opportunity for the big scale storage companies.
What does it cost to store a million gallons of crude for eighteen months?
User avatar
vtsnowedin
Fission
Fission
 
Posts: 8874
Joined: Fri 11 Jul 2008, 02:00:00

Re: THE Price of Crude pt 14

Unread postby Sys1 » Tue 09 Jan 2018, 16:45:53

I hope this year we will be hit by subprime crisis 2.0. At least, it will be more fun than watching Starwars 24 or reading Fox news.
All we need is oil getting up to a hundred box and all debt morons playing monopoly at FED and BCE in Europe will start to freak out considering those two marvellous choices beside them :
- Hey, guys, let's put down (again!) interest rates to save a slowing economy. Oh shit! inflation skyrocket up to the Moon.
GAME OVER!
- Hey, guys, let's put up interest rates to cool down inflation. Oh shit! All our FUCK'N assets are collapsing again! GAME OVER!

Nobody at the top of the pyramid gets our civilisation is doomed. They are spoiled by their beloved money they call God. The richest in the Titanic were the last to get the boat was sinking.
User avatar
Sys1
Tar Sands
Tar Sands
 
Posts: 930
Joined: Fri 25 Feb 2005, 03:00:00

Re: THE Price of Crude pt 14

Unread postby kublikhan » Tue 09 Jan 2018, 17:32:34

vtsnowedin wrote:What does it cost to store a million gallons of crude for eighteen months?
Current rates are around 35-50 cents per barrel per month. $1.20 per barrel per month if you bought in when it was most expensive(2015-2016, when tanks were filling up). So a million barrels for 18 months at current rates would be around $7 million. Triple that if you are talking the most expensive rates from around 2015-2016.

In the Houston area, traders that took out storage at the height of capacity issues in 2015 at around $1.20 a barrel are finding it no longer economical. The futures contract for oil storage there LOSc1 has fallen to around 40 cents per barrel, down about half in a month.

The going rate for putting oil in tanks in Cushing is around 35-50 cents per barrel per month, though some secured cheaper space still considered profitable before the oil price rout began in mid-2014.

One of the most expensive storage options is to hold oil on tankers at sea. During the massive build up in inventory through 2015 and 2016, even some of that was profitable.
Traders drain pricey U.S. oil storage as OPEC deal bites
The oil barrel is half-full.
User avatar
kublikhan
Master Prognosticator
Master Prognosticator
 
Posts: 4170
Joined: Tue 06 Nov 2007, 03:00:00
Location: Illinois

Re: THE Price of Crude pt 14

Unread postby vtsnowedin » Tue 09 Jan 2018, 20:44:15

kublikhan wrote:
vtsnowedin wrote:What does it cost to store a million gallons of crude for eighteen months?
Current rates are around 35-50 cents per barrel per month. $1.20 per barrel per month if you bought in when it was most expensive(2015-2016, when tanks were filling up). So a million barrels for 18 months at current rates would be around $7 million. Triple that if you are talking the most expensive rates from around 2015-2016.

In the Houston area, traders that took out storage at the height of capacity issues in 2015 at around $1.20 a barrel are finding it no longer economical. The futures contract for oil storage there LOSc1 has fallen to around 40 cents per barrel, down about half in a month.

The going rate for putting oil in tanks in Cushing is around 35-50 cents per barrel per month, though some secured cheaper space still considered profitable before the oil price rout began in mid-2014.

One of the most expensive storage options is to hold oil on tankers at sea. During the massive build up in inventory through 2015 and 2016, even some of that was profitable.
Traders drain pricey U.S. oil storage as OPEC deal bites

I have read elsewhere that the number of storage tankers anchored at Singapore is declining. It looks like world wide the supply situation is getting tighter.
User avatar
vtsnowedin
Fission
Fission
 
Posts: 8874
Joined: Fri 11 Jul 2008, 02:00:00

Re: THE Price of Crude pt 14

Unread postby Tanada » Tue 09 Jan 2018, 23:11:19

vtsnowedin wrote:I have read elsewhere that the number of storage tankers anchored at Singapore is declining. It looks like world wide the supply situation is getting tighter.


Based on this Reuters article at sea tanker storage off Singapore had already fallen 2/3rds from 30 MM/bbl to 8.1 MM/bbl between June and September 30 of 2017. Given where prices were in November and December last year I presume that remaining 8.1 MM/bbl has since entered the market as well. Put simply, OPEC/Russia and their allied exporting nations may have lost a few sales with their quotas, but the increase in prices has more than compensated for that effect so far. Once all the floating storage is effectively emptied out it becomes a race between the oil exporters willingness to maintain cuts to maintain prices and increases in USA shale oil production.


By Serene Cheong (Bloomberg) — One of the biggest stores of oil at sea is showing signs of emptying out.

The volume of supplies held on tankers in the Strait of Malacca in September dropped to the lowest level since August 2016, according to data from cargo-tracking and intelligence company Kpler. The waters off Singapore, Malaysia and Indonesia — one of the world’s busiest shipping channels and a major hub for what’s known as floating storage — held 8.1 million barrels late last month on a 10-day moving average basis, compared with about 30 million in May.

Some traders are giving up on ships they chartered for storing oil as potential profits from future sales no longer justify the cost of hiring the vessels. That’s after the market’s structure has flipped to backwardation, where crude for later delivery is cheaper than near-term shipments, as demand improves and OPEC-led output curbs contribute to a supply squeeze. Not all are abandoning the strategy, though, with some traders still finding ways to benefit by offering tailor-made cargoes put together at sea.

Kpler defines floating storage as the volume of oil on tankers that are idled offshore for 15 or more days. The Strait of Malacca consists of anchorage areas including Pelepas, Linggi, Batu Pahat and Tanjung Bruas.

© 2017 Bloomberg L.P


On the other side of the coin in order to make best use of the shale oil being produced at its prevalent API weight at some point the USA market is saturated and overseas markets are the only option left besides storage. It certainly isn't in the interest of the shale companies to push us back into a glut when they are just starting to recover from the prices of 2016, but on the other hand they are all independent and act in their own perceived best interests which in 2014 meant completing and pumping just as fast as they could until the glut economics forced prices down and bankrupted a good number of those same companies.

ROCKMAN likes to tell stories about how less than angelic company owner/leaders can ride the boom to the top and bail out as the company goes bankrupt selling off the completed wells to other companies as producing assets and leaving the financial institutions that put up the capital with pennies on the dollar returns. My question as always is, will the financial institutes make the same mistake this time around that they made in 2013-14 of throwing money at every fracking company? Or will they exercise much tighter due diligence and only loan capital to companies with proven track records that made it through the glut? IIUC the Federal Regulators can have a big impact on how easy or difficult it is to get a loan to frack for oil/gas once you have a lease.
I should be able to change a diaper, plan an invasion, butcher a hog, design a building, write, balance accounts, build a wall, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, pitch manure, program a computer, cook, fight efficiently, die gallantly. Specialization is for insects.
User avatar
Tanada
Site Admin
Site Admin
 
Posts: 14770
Joined: Thu 28 Apr 2005, 02:00:00
Location: South West shore Lake Erie, OH, USA

Re: THE Price of Crude pt 14

Unread postby kublikhan » Wed 10 Jan 2018, 00:41:14

Tanada wrote:My question as always is, will the financial institutes make the same mistake this time around that they made in 2013-14 of throwing money at every fracking company? Or will they exercise much tighter due diligence and only loan capital to companies with proven track records that made it through the glut?
Banks have tightened their spigots to shale companies but that just left a void that others were eager to fill. Private equity funds, hedge funds, oil hedges, SPACS, etc are all part of the new picture of growing financing options for shale drillers.

DECEMBER 14, 2017 - Financiers keep pouring cash into the shale oil sector, providing producers with a path to keep U.S. output rising through the middle of the next decade. The United States is on track to deliver up to 80 percent of the world’s oil production gains through 2025, the International Energy Agency estimates, increases fueled in part by easy access to capital. Rising U.S. production is undermining OPEC’s attempts to curb global supply and boost prices, forcing the oil cartel to continue restraining output through the end of 2018.

Hedge funds and private equity firms have given producers a range of new and traditional financial levers they can pull as needed to keep shale rigs drilling. The money continues to flow despite rising pressure from some investors for drillers to prioritize better profit margins over expanded production. Producers holding land in prime fields with oil trapped in shale rock are having little trouble financing their fracking projects. “If you’ve got the rocks, you can get the money.”

Through the third quarter of this year, private equity firms have put $20.26 billion into energy-related deals, 36 percent more than all of last year. Initial stock offerings for U.S.-listed oil and gas firms raised $2.93 billion this year, up from $1.52 billion in 2016.

Another way to finance drilling - production hedging, or contracts producers use to lock in prices on future output - also is on the rise this year. Hedging acts as insurance against price drops, letting producers drill with more certainty they can earn a profit. Forty midsize producers tracked by researcher PetroNerds LLC hedged 45 percent of their production in the third quarter, up from 36.5 percent a year earlier. Those same companies boosted capital spending by nearly two-thirds this year.

RISING OUTPUT, SPENDING
In response to investor pressure for better profits, producers are touting efficiencies from newer well designs and their efforts to shed less productive shale acreage as evidence that they can lift returns and output at the same time. A 39 percent increase in crude prices since June also has helped shale producers deliver better returns while boosting spending. ConocoPhillips - which has sold properties in the Canadian oil sands, along with less profitable shale holdings - recently said that its capital budgets from 2018 to 2020 will average $5.5 billion annually, up from about $4.5 billion this year, because of higher production and cash flow.

The rising investment marks a reversal from the period following the 2014 oil price collapse, which triggered scores of oil-firm bankruptcies and caused banks to abruptly pull back on lending to oil and gas producers. In their place, private equity firms, hedge funds and others have added to investments and unleashed new ways to finance drilling. “You’ve seen this marriage of necessity between private equity and independent producers needing to drill acreage.” The retreat of banks and other lenders opened “a finance vacuum that we’re looking to fill,” said Mark Stoner, a partner at Houston private equity fund Bayou City Energy. “Folks are dying for yield. They are doing what it takes to find that yield.”
Investors pour cash into U.S. shale despite questions on returns
The oil barrel is half-full.
User avatar
kublikhan
Master Prognosticator
Master Prognosticator
 
Posts: 4170
Joined: Tue 06 Nov 2007, 03:00:00
Location: Illinois

Re: THE Price of Crude pt 14

Unread postby GoghGoner » Wed 10 Jan 2018, 07:16:36

In any discussion about oil prices, you will always find the supply side analysed to death. Remember the demand side and have some balance in your lives.

Global growth back at pre-crisis levels, says World Bank

The bank's new forecast is that the world economy will expand by 3.1% this year before slowing slightly.

It will be the first time since the financial crisis that growth is operating at its full potential.
GoghGoner
Heavy Crude
Heavy Crude
 
Posts: 1731
Joined: Thu 10 Apr 2008, 02:00:00
Location: Stilłwater subdivision

Re: THE Price of Crude pt 14

Unread postby GoghGoner » Thu 11 Jan 2018, 05:55:01

WTI at $64. Brent at $69.50. Looks like the ratio is closing quick between the two -- no surprise, with another major decline in Cushing stocks this week.

The consistency of these gains is amazing to behold. It has been 7 years since we have seen a market this bullish.
GoghGoner
Heavy Crude
Heavy Crude
 
Posts: 1731
Joined: Thu 10 Apr 2008, 02:00:00
Location: Stilłwater subdivision

Oil Reaches $70 a Barrel for First Time in Three Years

Unread postby AdamB » Fri 12 Jan 2018, 09:52:49

Oil topped $70 a barrel in London for the first time in three years as production cuts by OPEC and rising demand whittle away a global surplus. Brent crude futures, used in the pricing of more than half the world’s oil, rose as much as 1.2 percent to the highest since Dec. 4, 2014. Prices rallied after the longest stretch of declines in U.S. inventories during winter in a decade. Oil’s rally shows that the Organization of Petroleum Exporting Countries and its allies are succeeding in clearing the glut triggered by the growth of U.S. shale oil. Prices have also been supported by concerns that supply disruptions could stem from rising political tensions in OPEC members Iran and Venezuela. “Pretty much all of the fundamental boxes are supportive of the current rally and a bit more,” said Paul Horsnell, head of commodities research at


Oil Reaches $70 a Barrel for First Time in Three Years
Peak oil in 2020: And here is why: https://www.youtube.com/watch?v=2b3ttqYDwF0
AdamB
Volunteer
Volunteer
 
Posts: 4304
Joined: Mon 28 Dec 2015, 16:10:26

Re: Oil Reaches $70 a Barrel for First Time in Three Years

Unread postby AdamB » Fri 12 Jan 2018, 09:55:23

Oil Reaches $70 a Barrel for First Time in Three Years

Can anyone say...thermodynamically impossible?

Image
Peak oil in 2020: And here is why: https://www.youtube.com/watch?v=2b3ttqYDwF0
AdamB
Volunteer
Volunteer
 
Posts: 4304
Joined: Mon 28 Dec 2015, 16:10:26

Re: Oil Reaches $70 a Barrel for First Time in Three Years

Unread postby Subjectivist » Fri 12 Jan 2018, 20:01:46

AdamB wrote:Oil Reaches $70 a Barrel for First Time in Three Years

Can anyone say...thermodynamically impossible?


Only people who haveno idea how thermodynamics works.
II Chronicles 7:14 if my people, who are called by my name, will humble themselves and pray and seek my face and turn from their wicked ways, then I will hear from heaven, and I will forgive their sin and will heal their land.
User avatar
Subjectivist
Light Sweet Crude
Light Sweet Crude
 
Posts: 4296
Joined: Sat 28 Aug 2010, 06:38:26
Location: Northwest Ohio

Re: THE Price of Crude pt 14

Unread postby Outcast_Searcher » Sun 14 Jan 2018, 14:51:27

On hedging gasoline prices:

1). On a yearly average, the price of gasoline in the US hasn't changed all that much over time. (Green line in link below). Gasoline is now getting to be roughly $2.60 in central KY where I live. The vast majority of the time since early 2016, it's been in the low $2.00ish range on average. (Relying on my memory there -- and I pay attention to this).

https://energy.gov/eere/vehicles/fact-9 ... -1929-2015

So despite all the carping, for the normal consumer who might burn 520ish gallons of gasoline per family car (13,000 miles at 25 miles per gallon for a typical sedan) WITH NO CHANGES in driving behavior, the magnitude of the gasoline expense differential in a typical year is far more emotion than substance. (Until and unless oil truly rises dramatically in price and stays high. The four year stretch with oil near $100 a barrel on average from 2010-2014 is the closest we've seen to that.

And for people truly claiming a pinch, it's not like less driving, driving an efficient car, etc. is impossible for the vast majority of people.

2). So lets say you want to hedge a $500 annual change in your gasoline costs, or roughly a dollar a gallon change (a huge change, historically for a national average price). Oil stocks in solid companies like Chevron or even BP would make a fine hedge over time. Look at the way either of them have climbed over the past 6 months in response to oil climbing meaningfully over the same period.

For people willing and able to plan ahead a little, and make a little effort to hedge oil prices, it's not rocket science. (Arithmetic helps. Data helps. There's the internet and apps like CALC on Windows.)

I know, there are very poor people. The world is far from perfect. In the US, taxpayers pay roughly $1 trillion in taxes for roughly 100 federal anti-poverty programs, plus there are numerous state and local programs. My city runs the local bus system at a meaningful loss, for example. A primary reason is to help truly poor people commute to/from work.
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
User avatar
Outcast_Searcher
COB
COB
 
Posts: 5436
Joined: Sat 27 Jun 2009, 20:26:42

Re: THE Price of Crude pt 14

Unread postby ROCKMAN » Sun 14 Jan 2018, 16:31:07

Outcast - Chevron? Not just the last 6 months. Since it reached a recent low of $78/share in Sept 2015 it has increased 70% to $133/share. Typically folks tend to way over react to low oil prices with respect to stock values. As I've said many times: an oil company's profitability IS NOT determined by what it sells its oil for but what it cost to find its oil. Over 4 decades some of the biggest money losing companies I've worked for happened during periods of very high oil prices.
User avatar
ROCKMAN
Expert
Expert
 
Posts: 11033
Joined: Tue 27 May 2008, 02:00:00
Location: TEXAS

Oil Could Hit $80 a Barrel This Year

Unread postby AdamB » Mon 15 Jan 2018, 00:29:18


Tightening global supplies and rising demand for crude oil helped prices for the commodity start the year with a bang—hitting their highest levels in more than three years—and many analysts believe the market has the fuel it needs to continue the rally to as high as $80 a barrel. “The reason that oil will soar is the oldest story in the oil world: Low prices created strong demand and growth, and now that demand is leading the way,” says Phil Flynn, senior market analyst at Price Futures Group. Oil futures suffered hefty declines in 2014 and 2015, as a global glut in supplies and the Organization of Petroleum Exporting Countries’ unwillingness to significantly curb production amid fear of market-share loss sliced the per barrel oil price roughly in half. On Friday, it notched its highest levels since December 2014, with West Texas


Oil Could Hit $80 a Barrel This Year
Peak oil in 2020: And here is why: https://www.youtube.com/watch?v=2b3ttqYDwF0
AdamB
Volunteer
Volunteer
 
Posts: 4304
Joined: Mon 28 Dec 2015, 16:10:26

Buy Oil, Make Money

Unread postby AdamB » Mon 15 Jan 2018, 00:35:45


The last time I got into a row over oil prices with Christian DeHaemer, the U.S. oil industry was in a far different state. It was years ago, before the Bakken in North Dakota became a household name. Back then, our shouting matches would reach a crescendo in the office, and he just happened to always take the opposing position. When I suggested in early 2007 that oil was about to make a run to $100 per barrel, he started rattling off a dozen reasons why it was about to head to 10 bucks. And he did it with a smile. Ah, but those were much simpler days, dear reader… when you saw the words “peak oil” more than you do Bitcoin today. So you can probably imagine my surprise this morning when I overheard my favorite cubicle cellmate here in Charm City mutter something about .


Buy Oil, Make Money
Peak oil in 2020: And here is why: https://www.youtube.com/watch?v=2b3ttqYDwF0
AdamB
Volunteer
Volunteer
 
Posts: 4304
Joined: Mon 28 Dec 2015, 16:10:26

Re: THE Price of Crude pt 14

Unread postby Outcast_Searcher » Mon 15 Jan 2018, 15:43:42

ROCKMAN wrote:Outcast - Chevron? Not just the last 6 months. Since it reached a recent low of $78/share in Sept 2015 it has increased 70% to $133/share. Typically folks tend to way over react to low oil prices with respect to stock values. As I've said many times: an oil company's profitability IS NOT determined by what it sells its oil for but what it cost to find its oil. Over 4 decades some of the biggest money losing companies I've worked for happened during periods of very high oil prices.

Not disagreeing at all. I just used six months as the timeframe I've noticed oil prices AND stocks like CVX and BP moving up relatively rapidly. Thus my comment on the general correlation, and CVX as an example.

I tend to think of my best investments as multi-decade undertakings, but we're dealing with short-attention-span world these days, and the pervasive upward trend for the past six months should be hard for even the hard core deniers to ignore (try as they might).
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
User avatar
Outcast_Searcher
COB
COB
 
Posts: 5436
Joined: Sat 27 Jun 2009, 20:26:42

Re: THE Price of Crude pt 14

Unread postby GoghGoner » Sat 20 Jan 2018, 08:16:20

Man, this is really shaping up to be a great bull commodity market. China has been cooking the books for the last few years but this is real growth. Where it stops nobody knows.

China's 2017 GDP growth accelerates for first time in seven years

A synchronized uptick in the global economy over the past year, driven in part by a surge in demand for semiconductors and other technology products, has been a boon to China and much of trade-dependent Asia, with Chinese exports in 2017 growing at their quickest pace in four years.
GoghGoner
Heavy Crude
Heavy Crude
 
Posts: 1731
Joined: Thu 10 Apr 2008, 02:00:00
Location: Stilłwater subdivision

PreviousNext

Return to Peak Oil Discussion

Who is online

Users browsing this forum: No registered users and 26 guests