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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 vtsnowedin » Mon 20 Apr 2020, 12:13:51

I would think at today's $10 price every well in America should be shut in if it is possible to restart them later. The companies should be lent enough money from the fed at very low rates to pay their interest on all loans for a year and the banks should have to push back all principle payments for that year.
Only when plenty of storage is again present should they start back up.
Employees would mostly need a years enhanced unemployment for that same year.
The companies stay in business, the banks collect their interest and the employees survive until work becomes available.
Anybody got a better plan?
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Re: THE Price of Crude pt 14

Unread postby shortonoil » Mon 20 Apr 2020, 12:25:05

Some people were downright in-your-face about their contempt for this whole thing.


Which is hardly surprising when considering that the chances of dying of suicide are greater than any chance of what looks suspiciously like the yearly flu. People really resent having their world turned upside down, their incomes destroyed, and their intelligence insulted by what appears to be more a case of political theatrics than a medical emergency. Most people are not sick, do not know anyone that is sick, and don't know anyone that knows anyone that is. That makes a virus that flew in on a Chinese bat a rather distant problem. Resentment is to be expected, and is understandable. If anything takes Trump out this year, it will be the Kung Flu. If the Democrats could come up with one candidate that wasn't a senile old head case Trump would be in trouble. Looking at their recent track record that doesn't seem likely.
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Re: THE Price of Crude pt 14

Unread postby rockdoc123 » Mon 20 Apr 2020, 13:10:21

Anybody got a better plan?


I think the industry has to wrap its head around the fact they are not and have never been operating in a free market. Opec has controlled global prices since 1960 and although occasional free market enterprise can run up supply that is usually offset pretty quickly by Opec shutting the taps temporarily. This time is a bit different because of the unprecedented demand drop but that isn't a product of free markets either. In any event, it may be time to revisit the idea of regulated markets. I've read all sorts of articles from ivory tower economists claiming it is better to let the market forces operate and not regulate, their idea being those weak companies will go away and strong companies will prevail. This is not the case now. The unconventional industry was built by small independents who understood cost-cutting and supply chain management and they are what the economists would call "weak" meaning they have no money given they live pretty much day to day on cash flow. What the economists want to see happen is the big boys with lots of surplus cash (ie. Exxon, Chevron etc) come in and buy up all the small guys. I had the experience over the years of being involved in projects where we were partnered with Exxon and/or Chevron. What a recipe for disaster...over spending, way too many people on the project, poor oversight and their solution to every problem was to just throw money at it. The way to avoid this takeover of the industry by the operationally impaired is to regulate production. Economists have pointed to their view that this didn't work in Alberta but the reason for that failure that they fail to address is the regulated production levels were continually increased when they shouldn't have been mainly due to lobbying from ....wait for it ....they big guys.
This is not somehow collusion as some have suggested, the TRC has previously instituted prorationing. But to be effective it would have to be across all states and Canada and it would have to include regular "health" reviews of companies to ensure they were actually doing the best job of efficient E&P. If the regulatory bodies in charge were manned by long time industry workers and not politicians with social science degrees it might work. Having a separate advisory Board with representation from non-lobby prone industry groups might be useful as well.
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Re: THE Price of Crude pt 14

Unread postby GHung » Mon 20 Apr 2020, 13:26:42

You guys are astoundingly entertaining.

Rocdoc thinks this downturn is the same as any other. It's not. And doc carefully avoids any mention of the obscene global debt being racked up, hoping we will all continue to pretend that magic money is the same thing as real capital. In two months US national debt has increased almost $2 trillion, debt to GDP up to over 113% even as revenues are tanking. The hubris that allows any critical industry shill think there won't be enormous long-term consequences for every aspect of the global economy is laughable at this point. What fun!

rocdoc: " I think it is very naïve to think that somehow the world's demand for oil suddenly changed because of a super-flu. It didn’t."

Uh.....
Image
.... Maybe millions of folks just decided to stop burning shit,, because, why??

IEA:
Global oil demand is expected to fall by a record 9.3 mb/d year-on-year in 2020. The impact of containment measures in 187 countries and territories has been to bring mobility almost to a halt. Demand in April is estimated to be 29 mb/d lower than a year ago, down to a level last seen in 1995. For 2Q20, demand is expected to be 23.1 mb/d below year-ago levels. The recovery in 2H20 will be gradual; in December demand will still be down 2.7 mb/d y-o-y.

The lowest estimates I've seen see US public debt exceeding $31 trillion at the end of 2020. Methinks higher. Maybe Americans will have plenty of funny money to continue happy motoring and all that, for a while, but they'll just be pretending,,, until they can't. Not sure how we can assign past behavior to what is clearly a new level of WTF?

WTI just ticked below $4.00.
Last edited by GHung on Mon 20 Apr 2020, 13:35:20, edited 1 time in total.
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Re: THE Price of Crude pt 14

Unread postby mmasters » Mon 20 Apr 2020, 13:34:46

Oil under 3 dollars a barrel as of this post. Holy carp!
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Re: THE Price of Crude pt 14

Unread postby GHung » Mon 20 Apr 2020, 13:43:11

mmasters wrote:Oil under 3 dollars a barrel as of this post. Holy carp!


$1.72 $1.12
Weeeee!
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Re: THE Price of Crude pt 14

Unread postby rockdoc123 » Mon 20 Apr 2020, 13:47:18

And doc carefully avoids any mention of the obscene global debt being racked up, hoping we will all continue to pretend that magic money is the same thing as real capital.


That has absolutely zip to do with oil demand and supply. We had high debt throughout 2019, did that stop people from consuming oil at an ever-increasing amount? Did that keep oil production from meeting that increasing demand? The answer is no.

... Maybe millions of folks just decided to stop burning shit,, because, why??


Jesus wept, what planet have you been living on? Airlines aren’t flying (jet fuel demand crash), cruise ships have all stopped (diesel fuel demand decrease), people are stuck at home (gasoline demand down). Do you not read the damned paper?

And then you quote the IEA
IEA:
Global oil demand is expected to fall by a record 9.3 mb/d year-on-year in 2020. The impact of containment measures in 187 countries and territories has been to bring mobility almost to a halt. Demand in April is estimated to be 29 mb/d lower than a year ago, down to a level last seen in 1995. For 2Q20, demand is expected to be 23.1 mb/d below year-ago levels. The recovery in 2H20 will be gradual; in December demand will still be down 2.7 mb/d y-o-y.

Which says exactly what I said and you try to spin it into something to do with debt? Maybe you missed that day in grade school math where they taught logic.
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Re: THE Price of Crude pt 14

Unread postby GHung » Mon 20 Apr 2020, 13:53:20

rockdoc123 wrote:
And doc carefully avoids any mention of the obscene global debt being racked up, hoping we will all continue to pretend that magic money is the same thing as real capital.


That has absolutely zip to do with oil demand and supply. We had high debt throughout 2019, did that stop people from consuming oil at an ever-increasing amount? Did that keep oil production from meeting that increasing demand? The answer is no.

... Maybe millions of folks just decided to stop burning shit,, because, why??


Jesus wept, what planet have you been living on? Airlines aren’t flying (jet fuel demand crash), cruise ships have all stopped (diesel fuel demand decrease), people are stuck at home (gasoline demand down). Do you not read the damned paper?

And then you quote the IEA
IEA:
Global oil demand is expected to fall by a record 9.3 mb/d year-on-year in 2020. The impact of containment measures in 187 countries and territories has been to bring mobility almost to a halt. Demand in April is estimated to be 29 mb/d lower than a year ago, down to a level last seen in 1995. For 2Q20, demand is expected to be 23.1 mb/d below year-ago levels. The recovery in 2H20 will be gradual; in December demand will still be down 2.7 mb/d y-o-y.

Which says exactly what I said and you try to spin it into something to do with debt? Maybe you missed that day in grade school math where they taught logic.


Your precious WTI goo futures just dropped below one dollar. Trying to make a comeback. Maybe someone rented a bunch of swimming pools in Houston to put it in.

My bone to pick with the doc is I've never, ever, seen him admit that he was wrong on anything.
Says everything. And Jesus has nothing at all to do with any of this.
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Re: THE Price of Crude pt 14

Unread postby GHung » Mon 20 Apr 2020, 14:09:17

GHung wrote:
mmasters wrote:Oil under 3 dollars a barrel as of this post. Holy carp!


$1.72 $1.12

11 cents

Weeeee!
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Re: THE Price of Crude pt 14

Unread postby mmasters » Mon 20 Apr 2020, 14:12:54

GHung wrote:
GHung wrote:
mmasters wrote:Oil under 3 dollars a barrel as of this post. Holy carp!


$1.72 $1.12

11 cents

Weeeee!

Talk about a clearance sale on oil!
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Re: THE Price of Crude pt 14

Unread postby GHung » Mon 20 Apr 2020, 14:19:24

mmasters wrote:
GHung wrote:
GHung wrote:
mmasters wrote:Oil under 3 dollars a barrel as of this post. Holy carp!


$1.72 $1.12

11 cents

Weeeee!

Talk about a clearance sale on oil!


Fox Business reporting WTI for May off 121% (gone negative). Seems seller are needing to pay someone to take their goo.
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Re: THE Price of Crude pt 14

Unread postby Outcast_Searcher » Mon 20 Apr 2020, 14:19:53

rockdoc123 wrote:[quote=IEA]:
Global oil demand is expected to fall by a record 9.3 mb/d year-on-year in 2020. The impact of containment measures in 187 countries and territories has been to bring mobility almost to a halt. Demand in April is estimated to be 29 mb/d lower than a year ago, down to a level last seen in 1995. For 2Q20, demand is expected to be 23.1 mb/d below year-ago levels. The recovery in 2H20 will be gradual; in December demand will still be down 2.7 mb/d y-o-y.

Which says exactly what I said and you try to spin it into something to do with debt? Maybe you missed that day in grade school math where they taught logic.[/quote]
Thanks for your sanity / market based explanations of this situation, as usual, rockdoc123. Especially re what the big picture recovery is likely to involve, and reminding us all that the principle of supply and demand is always paramount, over time, re determining price in the longer run.

What's remarkable to my intuition is that given how VERY MUCH of the global economy is mostly SHUT DOWN, how daily oil demand is only down 10% or so. Given the change in the things you cited, including just driving, flying, vacations, etc. I'd intuit a 25% drop instead of a 9-10% drop.

I suppose enough of the global shipping things around and mundane business of keeping the underlying economy going so people can eat and buy what they actually need (or want to use while sitting at home), to STILL burn a hell of a lot of oil.

Still, the math puzzles me. Gasoline is nearly half of what is produced from a barrel of crude.

If locked down people are burning half of what they were before, which intuitively seems like a LOT to me, that right there is over a 20% drop in crude oil demand. Jet fuel use is obviously down. I could see diesel fuel holding up pretty well as businesses still are using trucking to ship things around, and given global consumer stockpiling, hell, that demand could even be rising a little. (Last I checked, Amazon was hiring 175,000 MORE people to try to keep up with increased demand for shipped goods).

I did see a chart from the EIA Short Term Energy Outlook that by year's end, they are forecasting crude demand to drop by close to 20% (re me eyeballing the chart). (World liquid fuels consumption, middle of the page, solid green graph to right of the right of the world liquid fuels production graph.)

https://www.eia.gov/outlooks/steo/report/global_oil.php
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: THE Price of Crude pt 14

Unread postby BrianC » Mon 20 Apr 2020, 14:21:31

Oil Plunges Below Zero for First Time With May Contract Ending (bloomberg.com) 6
Posted by msmash on Monday April 20, 2020 @06:07PM from the breaking-news dept.
Oil futures collapsed to below zero for the first time ever as the deepening economic turmoil caused by the coronavirus crisis left traders desperate to avoid taking delivery of physical crude. From a report:
In an unprecedented day of trading, the price for the May contracts wiped out all value, breaking every low for oil prices since 1946. The exchange where WTI futures trade said the contract would be allowed to price below zero. The extreme move showed just how oversupplied the U.S. oil market has become with industrial and economic activity grinding to a halt as governments around the globe extend shutdowns due to the swift spread of the coronavirus. An unprecedented output deal by OPEC and allied members a week ago to curb supply is proving too little too late in the face a one-third collapse in global demand. On Monday, a technical oddity exacerbated the price plunge as traders fled the May futures contract ahead of its expiration tomorrow. The following month's contract fell 12% to $22.05 a barrel, making the spread between the two months blow out more than $20.
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Re: THE Price of Crude pt 14

Unread postby Outcast_Searcher » Mon 20 Apr 2020, 14:26:54

mmasters wrote:
GHung wrote:
GHung wrote:
mmasters wrote:Oil under 3 dollars a barrel as of this post. Holy carp!


$1.72 $1.12

11 cents

Weeeee!

Talk about a clearance sale on oil!

If only there were a cheap, safe, reliable way to store it for a few years. SURELY this will be mostly over within a few years. Of course, there's not, and building such storage en masse isn't cheap or quick.

So, it looks like producers are PAYING people to take oil contracts, to prevent them from shutting in oil wells, resulting in negatively priced oil. (Per various headlines/articles).

Clearly the financial pressure to not have oil sitting around with no place to store it will be big. What the markets clearly call a "pricing signal" to reduce production until this situation is resolved.
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: THE Price of Crude pt 14

Unread postby kublikhan » Mon 20 Apr 2020, 14:27:44

Outcast_Searcher wrote:What's remarkable to my intuition is that given how VERY MUCH of the global economy is mostly SHUT DOWN, how daily oil demand is only down 10% or so. Given the change in the things you cited, including just driving, flying, vacations, etc. I'd intuit a 25% drop instead of a 9-10% drop.
During the shutdown months, it is closer to a 30% drop. The 10% drop figure is for the entire year, meaning it includes months before the shutdown and months later in the year when demand is projected to start to creep back up.

Demand in April is estimated to be 29 mb/d lower than a year ago
The oil barrel is half-full.
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Re: THE Price of Crude pt 14

Unread postby GHung » Mon 20 Apr 2020, 14:51:41

Outcast_Searcher wrote: .......
Thanks for your sanity / market based explanations of this situation, as usual, rockdoc123........


Sanity or a compartmentalized failure to adapt one's thinking? Rocdoc said what he said, it's right up thread, and he now wants me to pretend it wasn't said? This pandemic clearly HAS affected consumption in a big way. What happens mid to long term is pure speculation. Nothing more.
As for EIA and demand destruction; it's a lagging indicator as of now,, and the EIA's projections have been mixed at best over the years. Anyway, I don't think a 10%ish drop in demand has caused the price of WTI to tank over 120%. If so, the market isn't as resilient as some of you want me to believe. People got greedy and are holding far too many futures contracts. Call that a healthy market if you want. Dump And Run!

As for global debt, I still laugh at those who want me to believe that doesn't matter or won't have an eventual large effect on demand. None of you have explained that and made any sense at all.

Anyway, WTI showing at negative $21 and rocdoc wants me to believe we've seen it all before. Really? Show me......
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Re: THE Price of Crude pt 14

Unread postby Outcast_Searcher » Mon 20 Apr 2020, 14:57:43

kublikhan wrote:
Outcast_Searcher wrote:What's remarkable to my intuition is that given how VERY MUCH of the global economy is mostly SHUT DOWN, how daily oil demand is only down 10% or so. Given the change in the things you cited, including just driving, flying, vacations, etc. I'd intuit a 25% drop instead of a 9-10% drop.
During the shutdown months, it is closer to a 30% drop. The 10% drop figure is for the entire year, meaning it includes months before the shutdown and months later in the year when demand is projected to start to creep back up.

Demand in April is estimated to be 29 mb/d lower than a year ago

Ah. OK, that makes far more sense. Thanks.

Apparently oil stocks, which are fairly flat, aren't dropping as long as they believe oil futures won't ALL collapse. Producers can sell their production forward ahead of time as long as there is strong contango in the crude market.

I suppose all the producers glare at each other and hope someone else blinks as time goes on. (Re things like global gasoline demand, jet fuel demand, etc. -- I don't think moves to "open up" help ALL that much, as people are going to continue to be quite cautious relative to normal activity, until herd immunity is reached one way or another.

So compared to normal:

Going to crowded places, not so much. Going to high-touch/exposure places, not so much. International travel, not so much. Domestic air travel -- I'd bet significantly less than normal. Eating out, MAYBE half of what is normal, with tables configured for "distancing" -- but I'd bet that overall, it's much less than that. For me, even if dining out comes back, I'll continue to just do occasional carry out, and be very careful with the packaging, vs. sit in a dining room and have all that exposure.

And on and on. Commuting could come back to some degree, but no where near like before as distancing, working from home, and reduced demand all play a role.
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: THE Price of Crude pt 14

Unread postby shortonoil » Mon 20 Apr 2020, 15:08:39

Oil under 3 dollars a barrel as of this post. Holy carp!


$1.72 $1.12
Weeeee!


Things are looking up; $1.28. Looking up from the bottom of a grave. They needed to cut production by 26.5% to bring the market back into balance. Maybe they over did it a bit? They have also cut the bottom out of the economy. Maybe they think that Fairy dust, and magic FED money is going to hold up the top? Only a government operation could screw things up this badly. Now we have a bunch of them working together! Multiple indemnity coverage now available. They'll get it all fixed as soon as the new, not made in China, face masks arrive. Oil, or Chinese induced runny noses; decisions, decisions. Chinese induced runny noses- 1 ; Oil - 0. Just like the government; break it, and then charge you to fix it. Rome fell into the same trap. But instead of oil, for them it was wheat. When the Egyptian wheat ships stop arriving, Rome burned.
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Re: THE Price of Crude pt 14

Unread postby kublikhan » Mon 20 Apr 2020, 15:20:55

Oilprice.com is showing WTI at $-30. WTF negative 30 dollars?
The oil barrel is half-full.
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Is this really peakoil.com & nobody noticed oil is -$0.

Unread postby SeaGypsy » Mon 20 Apr 2020, 15:21:20

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