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The Death Of Oil

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Summary

Energy stocks have taken a beating over the last few weeks.

Concerns about a worldwide resurgence of COVID-19 have raised the specter of declining economic activity and the negative potential impact on oil demand.

Longer-term two news items last month, one from the governor of California and one from China, probably pushed the sentiment surrounding the group even lower.

There continues to be an ill-conceived media narrative perpetuating this tale of woe.

I do believe climate change is real and a threat to our planet, but the feared demise of oil as a primary energy source now and into the foreseeable future seems a bit overdone.

Oil Demand and COVID-19 (The Narrative)

Here’s the narrative (straight from the CNBC website): “Oil declines, posts third negative week in four on demand concerns.”

“Oil slipped on Friday and was on track for a more than 2% weekly decline due to mounting worries about resurgent coronavirus infections crushing fuel demand and as Libyan crude exports resume.”

One of the negatives cited in this article was an uptick in the working drill rig count. It rose 6 to 261. Of course, as usual, there was no context given to this number or why it was so concerning.

Here is the context:

  • Since 1940, when Baker Hughes began to keep track of rig counts, the all-time low was 253. This occurred on July 20, 2020, just a little over two and a half months ago.
  • The peak drill rig count ever occurred on December 28, 1981. That number was 4530 active drilling units (this coincided with oil prices peaking at about $40/barrel in the late ’70s).
  • In recent history, thanks to more efficient drilling technology and $100/barrel oil, the count peaked at 1920 units in December 2014.

A move off a record 80-year low of 8 rigs should not create concern about oversupplying a market where West Texas Intermediate crude is selling at $40/barrel.

Meanwhile, in the near term (one year or less), oil demand is likely to build in the advent of new vaccines and therapeutics to treat COVID-19. This virus is not a secular issue. We will put it behind us.

Governor Newsom and The Chinese speak

On top of the economic concerns fostered by a potential resurgence of COVID-19 (which has happened), there were two news items that I believed particularly roiled oil stocks the week of September 21, one from Gavin Newsom, the governor of California, and one from Xi Jinping.

The one that seemed to cause the most damage was the signing of an executive order by Governor Newsom banning the sale of new gasoline- or diesel-powered vehicles in 2035 (though the sale and purchase of used vehicles of this type will continue to be permitted).

Adding insult to injury, there was a story out on China citing Xi Jinping’s goal to make China carbon-neutral by 2060. More lip service, or do they really mean what they say? Unless someone discovers the fountain of youth, I will not be here to hold them accountable.

I can absolutely see why the California governor signed his executive order given the devastation his state has suffered from the recent fires. I get it, but the devil is in the details. As one of my favorite reads, Steve Wells (a.k.a. “The Fear and Greed Trader”) aptly puts it:

“Alternative energy is the wave of the future. In what can only be described as ironic, the state that has a power grid that doesn’t work tells everyone they have to drive electric cars.

Therein lies a potential opportunity. If the “leaders” promoting the green energy world are serious, it will take a lot of money and infrastructure to make those kinds of ‘announcements’ come to fruition.”

Meanwhile, Chevron (CVX), the integrated oil company formerly known as Standard oil of California (CVX – $72.95 – 10/14/2020 closing price) traded down 7% after the governor’s announcement, finally closing that day down just under 5%. Some of the upstream E&P companies fared far worse, and they had been acting poorly in the preceding days. You think the word might have gotten out in advance that this was coming?

Conclusions

  • If you believe the solutions to the globe’s environmental issues are coming much sooner than 2035, thanks for your attention. You may stop reading here because you will find the rest of my post immaterial.
  • I believe that even if Governor Newsom’s ambitious plans come to fruition, there may still be a significant opportunity availing itself in the energy sector between now and then.
  • Demand will snap back after COVID-19. It already appears to have done this in China – the world’s biggest crude importer.

“China, the world’s top crude oil importer, took in 11.8 million barrels per day (bpd) of oil in September, up 5.5% from August and up 17.5% from a year earlier, but still below the record high level of 12.94 mln bpd in June, customs data showed.”

(CNBC, 10/14/20)

Remember, it was fear about China imploding due to the virus back in April that sent oil plummeting. For some reason, nobody is excited by the fact that they are reporting a pre-COVID-19 year-over-year increase in demand.

  • Over time, oil demand will continue to grow because the infrastructure (clean or otherwise) does not exist now in most parts of the world, especially the developing world, to support widespread use of electric vehicles. Again, this includes California.
  • This happens even as COVID-19 rebounds and even if Saudi Arabia and Russia (plus OPEC) start a measured reintroduction of the production that they have been holding off the market. It happens because we are not drilling to replace our fast-depleting shale reserves. Why would you invest with WTI at $40/barrel with green energy knocking at the door?
  • The psychology and sentiment now surfacing will drive investment away from oil exploration and the replacement of a depleting asset. Supplies will dwindle. This will only be reversed if oil prices snap back convincingly over a long period.

This is a cycle that has been repeated many times in the past 150 years. Remember, we went from oil glut in the early 1990s to peak oil forecasts in 2005. WTI traded as high as $140 barrel in June 2008.

Caveat emptor: I am long energy stocks.

This is my take. What’s yours?

kortsessions



41 Comments on "The Death Of Oil"

  1. DT on Fri, 16th Oct 2020 10:25 am 

    The death of oil is the death of industrial civilization as we know it.

  2. zero juan on Fri, 16th Oct 2020 10:44 am 

    DT is a fully outed sock of JuanP the lunatic:

    DT said The death of oil is the death of industrial civili…

    DT said I predict many predictions shall come forth, most…

  3. the Board on Fri, 16th Oct 2020 10:47 am 

    zero juan is a fully outed sock of delusional davy, the bored lunatic.

    DT said The death of oil is the death of industrial civili…

    DT said I predict many predictions shall come forth, most…

  4. zero juan on Fri, 16th Oct 2020 11:13 am 

    widdle juan Ppee finally had enough. Ppee, are you triggered? LMFAO

    from the lunatic JuanP:
    “the Board said zero juan is a fully outed sock of delusional davy..”

  5. Davy on Fri, 16th Oct 2020 11:38 am 

    I want my mommy!

  6. zero juan on Fri, 16th Oct 2020 11:56 am 

    widdle juan Ppee, are you triggered, lunatic? I am taking you down skumbag…day by day.

    Davy on Fri, 16th Oct 2020 11:38 am
    I want my mommy!

  7. ANSEL ANAL muzz aalah beahed man in paris cops unclear motive on Fri, 16th Oct 2020 12:25 pm 

    police not sure nothing
    nobody harvest top muzz

  8. REAL Green on Fri, 16th Oct 2020 12:30 pm 

    Widdle Davy wants its mommy!

    LOFDAO!

  9. zero juan on Fri, 16th Oct 2020 1:51 pm 

    widdle juan, are you triggered? You can’t fuck off around here like you once did. You fucked with the wrong guy now the troll gets trolled and the stalker gets stalked. Cry uncle pussy and I will leave you alone. LMFAO.

    REAL Green said Widdle Davy wants its mommy! LOFDAO!

    ANSEL ANAL muzz aalah beahed man in paris cops unclear motive said police not sure nothing nobody harvest top muzz

  10. zero davy on Fri, 16th Oct 2020 3:02 pm 

    widdle Davy, are you triggered? You can’t fuck off around here like you once did. You fucked with the wrong guys now the troll gets trolled and the stalker gets stalked. Cry uncle pussy and we will leave you alone. LOFAO.

    REAL Green said Widdle Davy wants its mommy! LOFDAO!

    ANSEL ANAL muzz aalah beahed man in paris cops unclear motive said police not sure nothing nobody harvest top muzz

  11. zero juan on Fri, 16th Oct 2020 3:22 pm 

    yeap, widdle juan is triggered.

    zero davy said widdle Davy, are you triggered? You can’t fuck off…

  12. zero davy on Fri, 16th Oct 2020 3:24 pm 

    yeap, widdle davy is triggered.

    zero davy said widdle Davy, are you triggered? You can’t fuck off…

  13. REAL Green on Fri, 16th Oct 2020 3:33 pm 

    yeap isnt even a REAL word widdle davy.

  14. the Board on Fri, 16th Oct 2020 4:05 pm 

    REAL Green is a fully outed sock of delusional davy, the bored lunatic.

    DT said The death of oil is the death of industrial civili…

    DT said I predict many predictions shall come forth, most…

  15. zero juan on Fri, 16th Oct 2020 4:19 pm 

    Ppee juan, hard to spam muzzie crap when you are being nuetered. LMFAO. welcome to hell, troll

    the Board said REAL Green is a fully outed sock of delusional dav…

  16. REAL Green on Fri, 16th Oct 2020 4:38 pm 

    we spelt neutered rong agin widdle davy

    LOFDAO!

  17. zero juan on Fri, 16th Oct 2020 4:57 pm 

    Ppee juan, everyone knows REAL Green is you on the crazy side of the forum. The REAL REAL Green only comments on the moderated side. BTW, lunatic, why have you not comment on the moderated side lately? Are you having depression issues, poo widdle Ppee juan?

    REAL Green said we spelt neutered rong agin widdle davy LOFDAO!

  18. Davy on Fri, 16th Oct 2020 5:11 pm 

    REAL Green is my sock puppet zero juan.

    cuntface

  19. REAL Green on Fri, 16th Oct 2020 5:15 pm 

    zero juan is are sock puppet to Davy.

    fuckwak

  20. zero juan on Fri, 16th Oct 2020 5:17 pm 

    poo widdle Ppee juan can’t do his muzzie crap when he is being neutered.

    REAL Green said zero juan is are sock puppet to Davy. fuckwak

    Davy said REAL Green is my sock puppet zero juan. cuntface…

  21. REAL Green on Fri, 16th Oct 2020 5:23 pm 

    Don’t call us cuntface, fuckwak.

  22. Davy on Fri, 16th Oct 2020 5:24 pm 

    Dont call us fuckwak, cuntface.

  23. zero juan on Fri, 16th Oct 2020 5:27 pm 

    Ppee, are you upset? Your daddy Wak will be on soon to sooth you. You guys can talk exciting things like how wonderful China is.. LMFAO

    Davy said Dont call us fuckwak, cuntface.

    REAL Green said Don’t call us cuntface, fuckwak.

  24. makati1 on Fri, 16th Oct 2020 5:48 pm 

    Alternate, renewable energy is a sick joke.

    “UK Grid Warns Of Electricity Shortage Due To Drop In Wind”

    https://www.zerohedge.com/technology/uk-grid-warns-electricity-shortage-due-drop-wind

    Just when you need it most…it’s GONE!

    Better hook up to that new Russian pipeline UK! LMAO!

  25. Davy on Fri, 16th Oct 2020 6:07 pm 

    China is wonderful!

  26. Zero juan on Fri, 16th Oct 2020 6:14 pm 

    PPee juan is upset because I am neutering his Bo Chen sock on the moderated side. LMFAO

    Davy said China is wonderful!

  27. Davy on Fri, 16th Oct 2020 6:17 pm 

    Even the Pentagon thinks China is wonderful:

    “Pentagon School To Focus Half Its Curriculum On China, Esper Announces”
    https://www.zerohedge.com/geopolitical/pentagon-school-focus-half-its-curriculum-china-esper-announces

    “Secretary of Defense Mark Esper said on Thursday that he tasked a Pentagon-funded university to focus half of its curriculum on China. The move is a testament to the shift in the US military’s focus from terrorism to so-called “great power competition,” as outlined in the 2018 National Defense Strategy. The National Defense University is a higher-learning facility run by the Pentagon that offers graduate programs mostly to members of the US military. “I also tasked the military services to make the People’s Liberation Army [China’s military] the pacing threat in our professional schools, programs and training,” the Pentagon chief said. Esper also warned of the threat China and Russia pose to US global hegemony.”

  28. zero juan on Fri, 16th Oct 2020 6:22 pm 

    Poo widdle juanPPee is so upset because his Bo Chen Sock has been neutered on the moderated side

    Davy said Even the Pentagon thinks China is wonderful: “Pent…

  29. REAL Green on Fri, 16th Oct 2020 6:30 pm 

    It’s real obv. Bo Chen an JuanP are not the same goy Davy.

    luntic

  30. makati1 on Fri, 16th Oct 2020 6:46 pm 

    “… the threat China and Russia pose to US global hegemony.”

    There it is in a nutshell! The US is desperate to hold on to their supposed “power”. They have already lost that, but are too stupid to realize it. We live in a multi polar world now.

    The desperation is because, by keeping the world on the edge of war, they $ell a lot of expen$ive weapon$. The US needs to be crushed so it cannot afford 800+ foreign bases, 12 carrier groups, etc. The world would rejoice at that event.

  31. the board on Fri, 16th Oct 2020 6:46 pm 

    BUSTED
    REAL Green on Fri, 16th Oct 2020 6:30 pm
    It’s real obv. Bo Chen an JuanP are not the same goy Davy.
    luntic

    Lunatic you just gave it away with your ID theft. I will continue to neuter you

  32. Nutters on Fri, 16th Oct 2020 6:50 pm 

    Widdle davy

  33. ANAL hopefully france will harvest their muzz soon after beheating but last france gave more jizya to muzz on Fri, 16th Oct 2020 6:53 pm 

    the lovin never stop

  34. makati1 on Fri, 16th Oct 2020 6:55 pm 

    ““We’re number one!” The United States famously fails to actually lead the world in anything desirable, but it does lead the world in many things, and one of them turns out to be the poisoning of the Pacific and its islands. And by the United States, I mean the United States military.”

    https://www.globalresearch.ca/top-poisoner-pacific-us-military/5726747

    “Of course, the U.S. military has lied, and lied, and lied some more about this sort of thing.”

    But then, Amerika, the number one hypocrite country, is also the number one lying country. It is obvious to the rest of the world.

  35. makati1 on Fri, 16th Oct 2020 7:03 pm 

    Proof of my assertion that the US is losing/has lost it’s MOJO.

    “Despite the aggressive campaign by the United States against the Cuban candidacy for the Council, the General Assembly elected Cuba as a member with 170 votes out of 193 possible.”

    https://www.globalresearch.ca/victory-cuba-un-human-rights-council/5726815

    Watching the US suicide is interesting. Amerikans, are YOU prepared for your fascist police state future?

  36. zero juan on Fri, 16th Oct 2020 7:06 pm 

    Fuck face DT is outed as your sock. We no you are obsessed with anuses. Get help lunatic

    ANAL hopefully france will harvest their muzz soon after beheating but last france gave more jizya to muzz said the lovin never stop

    DT said One might even argue that the gold standard was ru…

    Nutters said Widdle davy

  37. Davy on Fri, 16th Oct 2020 7:08 pm 

    Wak, global research dot com is a nutter site so stop spamming shit

  38. REAL Nutters on Fri, 16th Oct 2020 7:12 pm 

    widdle davy

  39. zero juan on Fri, 16th Oct 2020 7:15 pm 

    Lunatic, JuanPpee is that all your dumbass has?

    REAL Nutters said widdle davy

  40. REAL REAL Nutters on Fri, 16th Oct 2020 7:20 pm 

    Widdle davvee

  41. Cloggie on Sun, 18th Oct 2020 9:17 am 

    Talking about oil. New Dutch series, “the Flying Dutchman”, about the competition between Dutch airplane company Fokker and Dutch airliner KLM. Trailer:

    https://www.youtube.com/watch?v=NlDJrNku-NE

    Before WW2, KLM was the third airliner, after Pan American Airways and Imperial Airways. In these days KLM had the longest route from Amsterdam to Jakarta in the Dutch East Indies.

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

    In 10-30 years, kerosene will be replaced by hydrogen or green kerosene:

    https://deepresource.wordpress.com/2019/05/31/amsterdam-airport-carbon-neutral/

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