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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 kublikhan » Wed 18 Mar 2020, 18:39:41

Canadian crude dropped as low as $7.36. The Canadian oilpatch absorbed yet another gut punch on Wednesday, as the price of Western Canadian Select Crude plummeted as much as 37 per cent during intraday trading under US$10 a barrel for the first time, raising questions about how long the sector can survive in such an environment and how many more blows are coming.

The combination of sharply dropping demand for oil, because of containment measures related to the coronavirus health pandemic, and on top of that a price war, in which Saudi Arabia and its OPEC counterparts aim to add three million barrels of oil per day to the global supply — roughly the equivalent of 78 per cent of what Alberta produces — has created a one-two punch.

The result is that Canada’s oil sector plunged into a crisis of unparalleled scale at lightning speed. On Wednesday, analysts said there was little certainty about how long COVID-19 or the price war could last, and even less certainty about the shape and timeline of a recovery.
Oil plummets below break-even point for most Canadian producers — with more pain to come
The oil barrel is half-full.
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Re: THE Price of Crude pt 14

Unread postby JuanP » Wed 18 Mar 2020, 18:44:56

Oil at $20! Dow under 20,000.
https://www.rt.com/business/483453-coro ... ket-crash/

I still think that the bond, stock, dollar, and US Real Estate markets continue to be significantly overpriced, by at least 50%. The Dow is a huge lie over 10,000. But, as rock doc claims above, there is a glut of energy available, so we should expect at least a partial recovery at some point. Maybe it's a good time to buy for investors?
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Re: THE Price of Crude pt 14

Unread postby Pops » Wed 18 Mar 2020, 19:10:25

It is entirely possible that KSA RU US drillers all continue to drill even as consumption falls.

Effective oil prices could actually go negative if the cost of storing that oil exceeds the spot price.

Theoretically it isn't the 99.9mm b/d that set the price, it is the last barrel. There are contracts and hedges and I don't know how much stuff I don't know, but it is all a market and the same rules apply to oil as to any other commodity: scarcity creates value, if there's no scarcity, there's no value.
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Re: THE Price of Crude pt 14

Unread postby vtsnowedin » Wed 18 Mar 2020, 19:23:31

I expect somebodies oil fields and facilities to be bombed shortly. Doesn't much matter whose.
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Re: THE Price of Crude pt 14

Unread postby sparky » Wed 18 Mar 2020, 23:44:56

.
Good point, never mind the statistics
if storage is full a batch of crude is not an asset
....it's a liability and its worth is negative

Refineries products are full ,
their crude storage are full ,
Producers terminals are full
next Refineries close for extendd maintenance
super tankersgo into storage in Norwegian fiordso

Thathe would be signs of a floor price being reached , until then it'should downhill all the way
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Re: THE Price of Crude pt 14

Unread postby Tanada » Thu 19 Mar 2020, 09:18:46

sparky wrote:.
Good point, never mind the statistics
if storage is full a batch of crude is not an asset
....it's a liability and its worth is negative

Refineries products are full ,
their crude storage are full ,
Producers terminals are full
next Refineries close for extended maintenance
super tankers go into storage in Norwegian fjord so

That would be signs of a floor price being reached , until then it 'should downhill all the way


Just look back to 2015-16, it isn't all that long ago. Prices steadily declined all through 2015 with a few stops along the way and bottomed out in January 2016. During that same period American fracking wells pushed supply higher and higher until around June 2015.

How did the oil industry as a whole respond? Just like you stated above, first they filled up available storage in places like Oklahoma at the trading/blending hubs. Then when there was nowhere left to use long term storage the terminal storage points got filled up and the refiners filled up their storage onsite with cheap crude while doing repair and maintenance work that in rush times gets delayed to slack times.

Finally well before January 2016 idle oil tankers all over the world, but especially in big ship storage sites like Hong Kong and Singapore were "reactivated" in blocks with a caretaker crew that kept an eye out for leaks on them as "floating storage".

Then around June 2016 when prices had recovered up around $35/$40-bbl the floating storage was getting drained at a sustained rate which kept prices from going up much. At the same time refineries had as far as owners could afford been updated or at least restored to best functionality and onsite storage was drawn down to average levels.

As we came to the end of 2016 floating storage was once again empty and enough hub storage space was opened up so the price was dropping again. From 2017 on until about February 2020 things were more or less stable in terms of storage, going up and down seasonally just as it always had before the 2015-16 crash.
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Re: THE Price of Crude pt 14

Unread postby sparky » Thu 19 Mar 2020, 23:39:57

.
The time. lag between orders and delivery of physical oil shipment
go from a day in therror best case to two weeks for super tankers shipments
dayli gyrations of oil index are just traders playing each other positions
the week average is a better reading so is refineries activities
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Re: THE Price of Crude pt 14

Unread postby evilgenius » Fri 20 Mar 2020, 12:07:57

shortonoil wrote:The oil industry will have to be bailed out. This economy can not run without oil. We need oil more than we do new fighter jets. The Middle East will be reduced to the UAE and Kuwait. The Saudis are toast.

The end of the oil age is arriving a decade early thanks to a Chinese bug.

I know what you are alluding to, the demise of the Saudi's super giant oil fields. I think, however, that you are calling this early. I think there are several years left until what you suggest comes about. I think you overlook the most likely doom scenario because you insist upon a shorter time frame than the world actually faces. I guess that's because you are all in with your low oil price will precede the crash theory. But you don't allow facts to adjust your thinking. You only cite what reinforces your position. You have some good things to say, and warnings to offer. I just don't understand why you don't take a more iterative approach rather than sticking to your guns. When you are proven wrong, in other words, you don't change your position. You don't have to become an optimist about the things you point out some very good things about, but you should listen to the facts you hear that ameliorate the situation.
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Re: THE Price of Crude pt 14

Unread postby sparky » Fri 20 Mar 2020, 20:16:41

.
Supply
The elephant in the room is the US fracking production ,
never made much economic sense
but was the darling of the media and the banks
the share holders were suckered but the banks earned plenty from their loans
this mightily pissed of the Russians
US producers were riding every body else efforts
to support the price while producing without restrain . Then it got worst , not only were they supplying their ownew marketc but started to aggressively export to Russian customers.
all the while conducting an aggressive sanction regime against Russia hydrocarbon industry
The NordStream 2 sabotage is still ranking them something severe.
It's Saudi Arabia which went sell crazy ,
but it is all the better for Rosneath
.
Demand
It has Been tightish of late ,demand breaking shortly the 100 millions barrel a day mark
The largest consumer ,China is reporting a decrease of 15% in it's industrial production
transport number will be as large at least
Europe is in a comparable lock down
the US are following suite
Result...... a decrease of demand by 15% is a ball park figure or a fall in production of 15 millions barrel and day .
That's the Canadian tar sands plus all of the US fracking being taken out

The rebalancing would take more than a year
Meanwhile producers will produce until the bitter end
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Re: THE Price of Crude pt 14

Unread postby wildbourgman » Sat 21 Mar 2020, 06:36:53

I personally think that the Shale plays should be allowed to mostly collapse with no bail outs. It should also be looked at as a large strategic petroleum reserve that we would use in an emergency and used in a similar way nuclear powers use ICBM's. It would be a deterrent to having situations such as the oil Embargo of the 1970's.
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Re: THE Price of Crude pt 14

Unread postby jawagord » Sat 21 Mar 2020, 09:00:05

I would be an extreme pessimist on short term oil price due to the unprecedented demand destruction that is taking place with travel restrictions. Oil storage is going to fill up incredibly fast this time, Production is going up, at least that’s the Saudi plan at the moment, maintenance (seasonal outages) at the big Canadian oil sands facilities are being postponed as they can’t bring in the big 500-1000 person crews to do the work. I expect the Saudi’s will rethink their production increases and come up with some Russian deal sooner than later as there is no way they anticipated the demand destruction that is happening and associated price collapse, but until then ....!

As storage reaches capacity, a slide toward $10 per barrel is possible, according to some investors and analysts. That last happened during the 1998 glut before both oil companies and oil producing nations curbed supply.
Some Canadian crude is already trading not far off $10 per barrel because of steep price discounts to U.S. benchmark WTI crude.

“We believe we have not seen the worst of the price rout yet, as the market will soon come to realize that it may be facing one of the largest supply surpluses in modern oil market history in April,” said Rystad Energy’s Head of Oil Markets Bjornar Tonhaguen.
IHS Markit analysts estimated the global oil supply surplus on a monthly basis to range between 4 million barrels per day (bpd) and 10 million bpd from February to May 2020 - equal to 4-10% of global demand.


https://www.reuters.com/article/us-heal ... SKBN2152WK
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Re: THE Price of Crude pt 14

Unread postby Darian S » Sat 21 Mar 2020, 10:40:36

rockdoc123 wrote:
did you bother to read Shortonoils post? Apparently not because that was not what he was claiming. Are you arguing that somehow the market isn't currently flooded with more oil than we know what to do with?

The market seems flooded because both saudis and russia increased production while there's demand collapse because of covid 19.

The problem is shale, shale won't be able to significantly increase oil in the decades to come. Maybe the saudis and russia can increase production now by a few mbpd. But in about ten years between production drops and demand increase we need 20~mbpd of additional production. There's nothing to suggest U.S shale or Saudis or russia or all of them combined will be able to add that amount of production to keep up with expected demand and production drops across the world.
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Re: THE Price of Crude pt 14

Unread postby evilgenius » Sat 21 Mar 2020, 16:20:04

Any second now... tariffs.
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Re: THE Price of Crude pt 14

Unread postby vtsnowedin » Sat 21 Mar 2020, 16:58:25

evilgenius wrote:Any second now... tariffs.
Doubt it. USA is self sufficient especially with current low demand so the only oil being imported is that that will be refined and re exported. A tariff would just move that stream of oil to other refiners located outside the US and at present there is plenty of capacity there.
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Re: THE Price of Crude pt 14

Unread postby rockdoc123 » Sat 21 Mar 2020, 23:13:51

yes I think you are correct on the fact imposing tariffs on any oil being imported into the US will not work. The US needs heavy oil from Canada or Venezuela (good luck) to blend with the light oil produced in the unconventionals, it doesn't need light oil from OPEC but it would like to export the excess light oil it has. Tariffs result in responsive tariffs, never works. It's a global economy so the response to SA and Russia has to be something that gives them pause to think about what they are doing. The US still provides the vast majority of security for SA and much of the Middle East countries against realized threats from Iran and Yemen. If the US decided to pull all of its troops and airbases out of SA and remove its ships from their patrols in the Gulf I suspect that might get MBS attention. Saudi Arabia is extremely vulnerable from a security standpoint. Qatar hates them, Iraq and Kuwait try to ignore them and Iran and Yemen hate them. They actually need security support from the US. Just the threat of doing this would probably get their attention.
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Re: THE Price of Crude pt 14

Unread postby vtsnowedin » Sun 22 Mar 2020, 05:57:51

rockdoc123 wrote:yes I think you are correct on the fact imposing tariffs on any oil being imported into the US will not work. ......
.............
They actually need security support from the US. Just the threat of doing this would probably get their attention.

We could start pulling troops saying we need them at home to maintain order from the Covid-19 crisis and let MBS read between the lines.
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Re: THE Price of Crude pt 14

Unread postby evilgenius » Sun 22 Mar 2020, 10:10:52

Do we really know that the Saudis and the Russians aren't doing this together? Market forces can disguise political intentions. They both hate American fracking.
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Re: THE Price of Crude pt 14

Unread postby vtsnowedin » Sun 22 Mar 2020, 11:07:33

evilgenius wrote:Do we really know that the Saudis and the Russians aren't doing this together? Market forces can disguise political intentions. They both hate American fracking.

I think that is at least plausible. They along with China would like to bring down the USA a peg or three and any workable angle is fair game.
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Re: THE Price of Crude pt 14

Unread postby JuanP » Sun 22 Mar 2020, 11:54:29

evilgenius wrote:Do we really know that the Saudis and the Russians aren't doing this together? Market forces can disguise political intentions. They both hate American fracking.

That is definitely possible.
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Re: THE Price of Crude pt 14

Unread postby sparky » Wed 25 Mar 2020, 02:07:08

.
the Russian position is clear enough ,Mr Igor Sechin CEO of Rosneft has been quite vocal about it
he hold that Russia and Saudi Arabia are protecting the oil price by cutting their production
while the US fracking ride high on someone else pain , pumping everything they can without making any money

on top the US was starting to export crude to Russia markets and has been hitting Russia with a blizzard of sanctions
compromising their hydrocarbon industry ,
Saudi , offended , decided to show the world they can cut their own nose to spite their face
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