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Re: THE Price Of Crude Pt. 15

Unread postPosted: Sun 26 Apr 2020, 14:05:26
by vtsnowedin
It would be interesting to know the actual price the Chinese are paying for that Russian oil.

Re: THE Price Of Crude Pt. 15

Unread postPosted: Sun 26 Apr 2020, 15:04:50
by JuanP
vtsnowedin wrote:It would be interesting to know the actual price the Chinese are paying for that Russian oil.


I have no idea what the prices are, but the increased sales volume is probably due to the new oil pipelines taking Russian oil to China which were opened last year, and the contracts on those terms were for a few decades, something like 25 to 40 years, IIRC. Since the Chinese have to take that Russian oil, any reductions in oil imports will necessarily have to be from other sources. This will bring Russia and China closer together, which was the whole point of building the pipelines. Also, those overland pipelines are safe from any interference from the USA, particularly its armed forces, since the only way to close them is to attack China and/or Russia directly on their national territories. Even terrorist attacks organized by the US government would require complete deniability.

Re: THE Price Of Crude Pt. 15

Unread postPosted: Sun 26 Apr 2020, 15:17:31
by evilgenius
rockdoc123 wrote:
Now, the Canadians have room to participate in the markets in ways they may not, if Venezuela could get their heads out of the dirt.


Canada was always the main source for heavy oil with Venezuela as a secondary source. As Venezuela production started to decrease (and that started many years ago without any US intervention) Canadian oil filled the gap. Venezuela's problems were self-inflicted thanks to Chavez and his bus driver mentee.

And now Canada can't take up the slack. Or, before these cheap prices they couldn't. I wonder how West African oil fits into this picture? It's only an ocean, not a lot of land mass and an ocean or several oceans, away.

It used to be the mantra that no new oil refineries had been built in the United States in so many years. There were various reasons for this. It was usually brought up when trying to vanquish the EPA. That notwithstanding, is it cheaper to build new or make changes to the existing? Surely the introduction of battery powered everything will have some sort of an impact upon the fuel mix at some point. It would only be chance if that mix matched what refineries are best at putting out now. And don't try and say that the virus is going to kill electric everything.

Re: THE Price Of Crude Pt. 15

Unread postPosted: Sun 26 Apr 2020, 15:20:10
by rockdoc123
And now Canada can't take up the slack.


what "slack" would that be? Refineries are full, storage is full, nobody is buying oil because there is so much of it around and the refineries have lost a lot of the market for their products. Have you been living under a rock? :roll:

Re: THE Price Of Crude Pt. 15

Unread postPosted: Mon 27 Apr 2020, 08:43:50
by REAL Green
Sorry this is zerohedge but a powerful look at an imploding oil industry:

"We Are Moving Into The End-Game": 27 Tankers Anchored Off California, Hundreds Off Singapore As Oil Industry Shuts Down”
https://www.zerohedge.com/markets/we-ar ... stry-shuts

“The economic impact of the coronavirus has ripped through the oil industry in dramatic phases, Bloomberg's Javier Blas writes. First it destroyed demand as lockdowns shut factories and kept drivers at home. Then storage started filling up and traders resorted to ocean-going tankers to store crude in the hope of better prices ahead. Now shipping prices are surging to stratospheric levels as the industry runs out of tankers, a sign of just how distorted the market has become. Ironically, in its latest attempt to kill off shale, Saudi Arabia may have gone a step too far, as "the specter of production shut-downs - and the impact they will have on jobs, companies, their banks, and local economies - was one of the reasons that spurred world leaders to join forces to cut production in an orderly way. But as the scale of the crisis dwarfed their efforts, failing to stop prices diving below zero last week, shut-downs are now a reality. It’s the worst-case scenario for producers and refiners." In short, the entire oil production industry is shutting down, not because it wants to - of course - but because it has no choice. According to Goldman, in as little as three weeks there will be literally no place left on earth to store oil, and unless oil producers want to pay "buyers" to hold the oil as happened on that historic date of April 20, they have no choice but to shut in output. "We are moving into the end-game," said Torbjorn Tornqvist, head of commodity trading giant Gunvor Group. "Early-to-mid May could be the peak. We are weeks, not months, away from it."

Re: THE Price Of Crude Pt. 15

Unread postPosted: Tue 28 Apr 2020, 01:36:05
by Darian S
rockdoc123 wrote:
And now Canada can't take up the slack.


what "slack" would that be? Refineries are full, storage is full, nobody is buying oil because there is so much of it around and the refineries have lost a lot of the market for their products. Have you been living under a rock? :roll:

so much? Not so much, only reason is due to demand destruction from the pandemic.

Re: THE Price Of Crude Pt. 15

Unread postPosted: Tue 28 Apr 2020, 11:27:10
by rockdoc123
so much? Not so much, only reason is due to demand destruction from the pandemic.


The issue has been a one two punch from Covid and Saudi Arabia. Ongoing containment has resulted in decreased demand but at the same time Saudi Arabia opened the taps on a market that was already oversupplied. You suggest there isn't "so much" oil around and yet storage is now completely full. If the issue was just a drop in demand and production responded immediately to that that drop in demand then the storage issue would not be something to worry about. That is not the case. Not only has demand decreased due to ongoing containment of the virus but production has increased in the first quarter and the OPEC agreed cuts do not come into affect until May so are not going to make a dent in things as far as the June contracts are concerned. It takes time for producers to respond to rapid price drops as they have some work that must be completed or they face penalties and for some of their production they are hedged. That means the drop in production even when spot prices are seemingly below break even can be somewhat slow. Hence the double whammy, lack of demand imposed by the response to the Covid and lack of response to that decreased demand via decreased production and then throw on top of that the fact SA increased production.

Re: THE Price Of Crude Pt. 15

Unread postPosted: Wed 29 Apr 2020, 15:30:59
by sparky
.
available numbers suggest storage in the US will be full by the middle of June
Cushing is reported as 60% but the remaining 40% are contracted already ,
I suppose some extortionate deal can be obtained ,there probably will be stories of some guy with a n old barge making millions

https://www.bangkokpost.com/business/19 ... age-demand

Re: THE Price Of Crude Pt. 15

Unread postPosted: Wed 29 Apr 2020, 18:43:44
by sparky
.
From Kate Teasdale of Oxford energy on the problems with the WTI index
her proposal is to investigate using WTI Houston fob as a better marker
also a warning that while unlikely ICE Brent going negative would be a much bigger problem

A fundamental flaw in the design of its (CME’s) WTI contract, in particular the rules restricting
physical delivery to Cushing.
Normally, this does not impede delivery for WTI futures contracts.
Butpipeline access to and storage at Cushing is almost impossible to obtain for next month,
while capacity is still available elsewhere…. Since CME knew this might happen
— writing to clearing firms and clients two weeks earlier to say options contracts could handle negative pricing —
the exchange could have acted to avoid disorderly pricing by ensuring that all open contracts could make or take delivery and closing out

Finally, PRAs should intensify efforts towards waterborne WTI contracts.
One candidate could be WTI fob Houston, which reflects cargoes that are loaded for export at the US Gulf Coast.
the differential of WTI fob Houston price to ICE Brent was more stable than the pipeline-based grades
such as WTI Houston (MEH) in the period when WTI prices went into negative territory.
The WTI Houston (MEH) only partly compensated for the slump in the futures
and while it was almost $18 per barrel higher than the futures price, its value was still negative.
Identifying an appropriate waterborne WTI contract is a long-term project that applies to all the market players
and this task is far from straightforward.

The Brent benchmark has remained relatively insulated from the dislocation of WTI, as Brent is a
waterborne crude and is not constrained by the logistical problems encountered by the WTI contract.
The Brent terminal at Sullum Voe has storage capacity of just over 30 million barrels. However, being
a waterborne terminal, theoretical storage capacity for the contract includes all the shore tanks in North
West Europe plus potential shipping storage.
While we live in ‘unprecedented’ times when all records are being broken,
it is highly unlikely that we shall see negative prices in the ‘Brent’ contract.
The brunt of the demand loss is being taken up by the quality differentials and Dated Brent.
Brent spreads have reflected the weakness of the front end of the market
as well as the uncertainty of the demand recovery.

While the market may expect the June WTI contract to price negatively again, an unlikely negative
pricing of Brent would represent a much bigger event.

Re: THE Price Of Crude Pt. 15

Unread postPosted: Wed 06 May 2020, 17:52:07
by sparky
.
Rystad Energy a well respected Norwegian oil industry research group has released a paper on the US oil industry

the prediction are dire
a decrease of 1 million /B.d for May , 2 millions by july , 3 millions by October
drilling is in a state of collapse

good reading try it

https://www.rystadenergy.com/newsevents ... -persists/

Re: THE Price Of Crude Pt. 15

Unread postPosted: Thu 07 May 2020, 02:04:59
by vtsnowedin
At this rate they will be pouring it back down wells just to keep from polluting the ground with it.

Re: THE Price Of Crude Pt. 15

Unread postPosted: Tue 12 May 2020, 18:18:16
by sparky
.
Opec+ is talking of extending the proposed cuts after July

https://www.reuters.com/article/us-oil- ... SKBN22O2AH

" OPEC and its allies, led by Russia, who are known as OPEC+, agreed in April to cut output by 9.7 million bpd for May and June, a record reduction.
While producers will slowly relax curbs after June, supply reductions will remain to April 2022.

“The ministers want to keep the same oil production cuts now which are about 10 million bpd, after June.
They don’t want to reduce the size of the cuts.
This is the basic scenario that’s being discussed now,” one OPEC+ source told Reuters."

Re: THE Price Of Crude Pt. 15

Unread postPosted: Wed 13 May 2020, 15:23:11
by sparky
.
from news agencies

"The EIA now expects world oil demand to fall by 8.1 million barrels per day this year to 92.6 million
compared with a previous forecast for a drop of 5.2 million bpd.

The statistical arm of the U.S. Department of Energy also expects U.S. output to fall by 540,000 bpd,
against a previous forecast of 470,000 bpd.
It expects global output of 11.7 million bpd this year and 10.9 million bpd in 2021.

The Organization of the Petroleum Exporting Countries also slashed its world oil demand forecast, now expecting it to contract by 9.07 million bpd this year, it said in a monthly report. Last month, OPEC expected a contraction of 6.85 million bpd.

OPEC+ agreed to cut output by 9.7 million bpd in May and June and to scale back cuts to 7.7 million bpd for the rest of the year.

it is reported that Saudi Arabia had pushed production to more than 12 .0 million bpd when the last cut agreement collapsed

the price have been somewhat steady just below 30$ a barrel for ICE Brent and 25$ Nymex

Re: THE Price Of Crude Pt. 15

Unread postPosted: Wed 13 May 2020, 15:28:16
by vtsnowedin
I've noticed traffic picking up a bit. $1.85 gas and drive around listening to the CD player gets you out of the house and away from the kids for a while. Hope parents are taking turns so the kids don't trash the house while they are gone. Sucks to be a single parent.

Re: THE Price Of Crude Pt. 15

Unread postPosted: Wed 13 May 2020, 16:15:57
by REAL Green
vtsnowedin wrote:I've noticed traffic picking up a bit. $1.85 gas


I paid $1.49 delivered to the farm two days ago.

Re: THE Price Of Crude Pt. 15

Unread postPosted: Fri 15 May 2020, 11:05:35
by sparky
.
Oil price are slowly emerging from the coma , stocks are being trimed somewhat from a glut down to a plenty

https://www.spglobal.com/platts/en/mark ... ebalancing

however this is just finding the "new normal " , there is 9 million bd of production which is being held back until October
same cause same effect , but not so violent
it's a safe bet than as soon as the price stabilize at an acceptable level production will , again , surge
one can speculate than 40 $ Brent and 30$ WTI should see at least 5 million bd of extra production on the market
if there is a market , the big "if"

Re: THE Price Of Crude Pt. 15

Unread postPosted: Fri 15 May 2020, 19:49:05
by vtsnowedin
It would not surprise me a bit to see an unprecedented level of cooperation to balance supply with actual post Covid demand to keep as many of the oil producing countries as possible solvent. They have no better option so it will be participate or starve.

Re: THE Price Of Crude Pt. 15

Unread postPosted: Sat 16 May 2020, 21:56:05
by sparky
.
Certainly most of the oil producing countries are big customer for manufactured goods ,
then going belly up would do no good to a world recovery

Re: THE Price Of Crude Pt. 15

Unread postPosted: Sun 17 May 2020, 07:28:34
by REAL Green
vtsnowedin wrote:It would not surprise me a bit to see an unprecedented level of cooperation to balance supply with actual post Covid demand to keep as many of the oil producing countries as possible solvent. They have no better option so it will be participate or starve.


I agree except this event is so much more than oil so the other issues may get int he way of cooperation.

Re: THE Price Of Crude Pt. 15

Unread postPosted: Sun 17 May 2020, 10:13:08
by rockdoc123
It would not surprise me a bit to see an unprecedented level of cooperation to balance supply with actual post Covid demand to keep as many of the oil-producing countries as possible solvent. They have no better option so it will be participate or starve.


Although everyone may end up going in the same direction it won't necessarily be for the same reasons nor because they came to some accord. Dislocation in supply and demand have happened many times in the past and they tend to be self-regulating. What makes this one different is you had both a crash in demand (Covid) following on the heels of increasing production (US Shale) and topped off by the Saudis essentially opening the taps to exacerbate the situation. So arguably it will take a bit longer to self correct but we are seeing that correction process happening. The low prices due to too much supply for the existing demand means companies stop drilling and in some cases may shut-in production (they are doing that in the oil sands now as transportation costs are higher than revenues) and as the economy begins to open back up people start to drive again and it will be enticing for them to do so as gasoline prices are relatively low right now. And then the refineries will kick up production due to higher fuel demand. Gradually demand and supply will come back into line. Will that be at substantially lower demand and production level? It might but I wouldn't bet on it. The vast majority of consumers aren't going to change their ways drastically because of a two to three month shutdown.

and we will see this again. Not necessarily with the drop in demand we have seen given I think next pandemic governments will not be so foolish as to put medical people in charge of economic planning but rather because the shale basins are somewhat unique in that production can be brought on very fast. I would have preferred to see the Texas RRC get together with other State regulators and begin to impose restrictions on production based on some formula of maximum economic offtake or some similar measure that would see production kept to more reasonable levels allowing demand and supply to stay more in sync.