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THE Price Of Crude Pt. 15

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

Re: THE Price Of Crude Pt. 15

Unread postby vtsnowedin » Tue 21 Apr 2020, 15:24:41

Outcast_Searcher wrote:
vtsnowedin wrote:I wonder if those 10,000 commercial jets that have been parked have had their fuel tanks all topped off? That would take about 18 million barrels of jet fuel.

Does jet fuel age better than gasoline? Depending on how long the vast majority of them sit (and perhaps MANY months or even a couple years or so for some), topping them off might not be what the airlines would want to do.

Surely they have enough experience with aging fuel re maintenance cycles, etc. that they know the score on that.

Yes jet fuel is a slightly lighter refined diesel oil and keeps quite well. They say that keeping jet liners parked requires quite a bit of maintenance so perhaps rotating them into service once or twice a month might be the better maintenance plan then parking the whole lot unused for months.
And yes I'm sure those in the industry know the best course of action. I was only wondering if topping off was part of their plan.
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Re: THE Price Of Crude Pt. 15

Unread postby Outcast_Searcher » Tue 21 Apr 2020, 15:33:56

sparky wrote:.one shouldn't worry too much about the Nymex WTI quoted price
it's a crappy index used as a plaything by speculators
from the financial Times on USO futures
"As of Friday, the fund held the equivalent of 146.5m barrels of WTI crude futures for June delivery on the New York Mercantile Exchange, a division of CME Group."

for memory the total oil production of the US is 13M/B.d , only a fraction of which is Cushing related

there is , what, twenty time more barrels being bought and sold than really exist
many of the investors don't even understand the mechanics of what they are investing or the industry itself
.........suckers !!!!!!

But that's true of a lot of futures markets. The market is there originally to help buyers and sellers of the commodities for their mainline business, manage pricing and cash flow risk. The speculators (of all sizes, shapes, and styles) jump on board to try to profit. On the plus side, it adds a LOT of liquidity to the market. But on the minus side, many speculators (including most of the retail market) are quite clueless, and you have more volume re contracts (sometimes MANY times more) than the actual commodity volume in existence.

Nothing new or special about that.

I just checked oil prices on oilprice.com, and aside from the Urals, it's a bloodbath across the board. Is Brent a "crappy index" too? And the OPEC Members' basket? Both are down over 20% today.

Looking at NYMEX WTI futures, they're ALL down. And for the next year out, they're ALL down pretty strongly, unlike yesterday where the further out months were relatively unscathed.
The overall contango is getting steeper, as was the case yesterday. But today, apparently the market has far less confidence that this is only a short term phenomenon.

Obviously the market could be wrong -- I'm just taking a look at the broader market data to point out that this isn't JUST a weird one-off thing due to a "manipulated" index (re the short term contracts, which is all USO plays in).

Making the imperfect the enemy of the good (i.e. imperfect oil indexes) is a mistake. Looking at one thing in isolation without sanity checking context re LOTS of other available data is, IMO, a mistake. (This is what leads doomers to make endless bad calls, year after year, and decade after decade).
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. 15

Unread postby sparky » Wed 22 Apr 2020, 14:36:27

.
Brent is somewhat closer to reality , Nymex WTI suffer from being quite narrow in it's flow
that's why it has such large differential with other indexes

As for " Obviously the market could be wrong "
.... the market is always wrong , either too high or too low , but right in average
that's a permanently adjusting system
the price of Zero is not the problem ,
some overenthusiastic idiots drove off the cliff , dohhhh !!!
but the main crude index in the main trading market in the world has been dysfunctional for years
that's the real problem
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Re: THE Price Of Crude Pt. 15

Unread postby jedrider » Fri 24 Apr 2020, 10:14:57

Oil glut problem solved:

ExxonMobil Plans to Make Hand Sanitizer
https://www.wsj.com/livecoverage/coronavirus-2020-04-24?mod=article_inline&mod=hp_lead_pos7

Evidently, we're going to need lots of this stuff in the coming years.
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Re: THE Price Of Crude Pt. 15

Unread postby REAL Green » Fri 24 Apr 2020, 10:50:13

“Goldman Sees Global Oil Storage Full In 3-4 Weeks; Expects Another Oil Price Crash”
https://www.zerohedge.com/energy/goldma ... rice-crash

"commodities are spot assets, not anticipatory assets and must clear current supply and demand, which still remain extremely out of balance in all markets. And since oil supply remains vastly greater than demand, we are merely in the eye of the hurricane at least until the June WTI maturity in one month, with Goldman expecting the market to test global storage capacity in the next 3-4 weeks - unlike WTI which was merely a Cushing event - which will likely create substantial volatility with more spikes to the downside until supply finally equals demand, as with nowhere to store the oil, supply has no other option but to be shut-in down in-line with the expected demand losses. Alternatively, we could see another "Monday massacre" with producers of oil willing to pay buyers to take physical possession right around the time all global capacity is full, unless of course US shale producers drastically cut output in the coming days, not weeks…"we have now entered the inflection phase where the rebalancing has started, but this period could take 4-8 weeks to resolve before we can comfortably argue a bottom has been carved out."
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Re: THE Price Of Crude Pt. 15

Unread postby sparky » Fri 24 Apr 2020, 13:57:32

.
"Assuming that no new horizontal wells are put on production from this month onwards, total light oil production will fall by one million barrels per day by May 2, two million barrels a day by July, and three million barrels a day by October to November, according to Rystad Energy. The Permian Basin would account for over half the nationwide base decline, it said."

That just might not be enough cuts to avoid a full blown crisis
while the May contract crisis was bad , the June contract is having exactly the same problem
also many producers have sold their ongoing production for months in advance , someone will be left holding the bag

From CNBC marketwatch
https://www.cnbc.com/2020/04/22/oil-pri ... tters.html

" Varga pondered: Does the price point to a broken U.S. physical market? Will WTI at Cushing cease to exist as the main price market? And, was the carnage a one-off or is there a chance that the June contract will overtake the role of the expiring front month?
One can only guess the answers, he conceded."

while Trump is talking of banning Saudi crude from the US shore , there is an overlooked problem
Saudi crude is heavy , fracking produce light stuff , refineries were doing some blending to get distillate IE diesel and jet fuel
of course the demand is down ,

How all this will work itself out is a bit of a pulp fiction serial , ........the suspense , the suspense !
in fact , the usual will probably happen the proud free market will bawl out to big daddy socialism to come to the rescue
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Re: THE Price Of Crude Pt. 15

Unread postby rockdoc123 » Fri 24 Apr 2020, 15:35:35

while Trump is talking of banning Saudi crude from the US shore , there is an overlooked problem
Saudi crude is heavy , fracking produce light stuff , refineries were doing some blending to get distillate IE diesel and jet fuel
of course the demand is down ,


no. The Saudi Crude imported is light to medium. The heavy crude imported into the US comes from Canada and used to also come from Venezuela. You clearly don’t understand how the refineries work regardless of how many times I’ve explained it here. Once again the vast majority of refineries in the US are tooled for a medium grade which is no longer produced to any great extent in the US. The majority of refineries (with the exclusion of two new small ones) in the US cannot process light tight oil produced from the unconventionals. So heavy oil is imported now from Canada in greater abundance (it makes up 40% of all US imports) to offset less heavy oil coming from Venezuela. That crude is blended with produced LTO in order to make refinery spec and those refineries output mainly gasoline although there is a wealth of other products including diesel, kerosene etc.
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Re: THE Price Of Crude Pt. 15

Unread postby evilgenius » Sat 25 Apr 2020, 09:25:27

rockdoc123 wrote:
while Trump is talking of banning Saudi crude from the US shore , there is an overlooked problem
Saudi crude is heavy , fracking produce light stuff , refineries were doing some blending to get distillate IE diesel and jet fuel
of course the demand is down ,


no. The Saudi Crude imported is light to medium. The heavy crude imported into the US comes from Canada and used to also come from Venezuela. You clearly don’t understand how the refineries work regardless of how many times I’ve explained it here. Once again the vast majority of refineries in the US are tooled for a medium grade which is no longer produced to any great extent in the US. The majority of refineries (with the exclusion of two new small ones) in the US cannot process light tight oil produced from the unconventionals. So heavy oil is imported now from Canada in greater abundance (it makes up 40% of all US imports) to offset less heavy oil coming from Venezuela. That crude is blended with produced LTO in order to make refinery spec and those refineries output mainly gasoline although there is a wealth of other products including diesel, kerosene etc.

Hasn't the US engineered that situation with Venezuela? Every time it knocked over a budding development in Haiti, it was about threatening Venezuela from that position. 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.
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Re: THE Price Of Crude Pt. 15

Unread postby vtsnowedin » Sat 25 Apr 2020, 09:33:57

I think the day they close out the current contract next month should be interesting.Will the speculators have learned their lesson from last week or will there be another strategy that goes wrong for them?
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Re: THE Price Of Crude Pt. 15

Unread postby ROCKMAN » Sat 25 Apr 2020, 14:45:19

vt - Have they learned enough? Time will tell: there have been a total of 600 MILLION BBLS sold (just on NYMEX) for June already and we still have more then 4 weeks of trading to go.
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Re: THE Price Of Crude Pt. 15

Unread postby rockdoc123 » Sat 25 Apr 2020, 14:49:16

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.
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Re: THE Price Of Crude Pt. 15

Unread postby ROCKMAN » Sat 25 Apr 2020, 15:11:22

Just a reminder since the subject has come up: for DECADES US refineries have processed BLENDED oil with a very tight gravity range: 31 to 32 API. As pointed out this provides the yields they want to market.

BTW this is why Cushing exists: it is the largest oil blending complex on the planet.
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Re: THE Price Of Crude Pt. 15

Unread postby sparky » Sat 25 Apr 2020, 16:02:11

.
@ Rockman " this is why Cushing exists: it is the largest oil blending complex on the planet."
......good point !
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Re: THE Price Of Crude Pt. 15

Unread postby GoghGoner » Sat 25 Apr 2020, 17:04:06

So only 20 days til Cushing fills?

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Re: THE Price Of Crude Pt. 15

Unread postby JuanP » Sat 25 Apr 2020, 19:23:24

"Saudi Arabia to take on billions in debt to survive the oil price crisis"
https://www.rt.com/business/486747-saud ... isis-debt/
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Re: THE Price Of Crude Pt. 15

Unread postby REAL Green » Sat 25 Apr 2020, 19:57:04

rockdoc123 wrote: Venezuela's problems were self-inflicted thanks to Chavez and his bus driver mentee.


Exactly, I have said this numerous times.

Chavez succeeded very well eliminating the America influence for years but unfortunately for Venezuela time was not on their side and other conditions came into play to destroy this South American experiment in oil state socialism. Oil price volatility played a roll but so did bad economics. It was only up until recently the Americans began to make good headway in destabilizing Venezuela but by then it was already a train wreck. Chavez socialism was basically a raid the bank by a bombastic, egotistical, and power-hungry clown who wanted to be a world leader. Venezuela was not “world leader” material. Chavez was not much different from many other world leaders but in this case, he had the wealth and power to do real damage.
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Re: THE Price Of Crude Pt. 15

Unread postby rockdoc123 » Sat 25 Apr 2020, 20:13:09

Chavez succeeded very well eliminating the America influence for years but unfortunately for Venezuela time was not on their side and other conditions came into play to destroy this South American experiment in oil state socialism. Oil price volatility played a roll but so did bad economics. It was only up until recently the Americans began to make good headway in destabilizing Venezuela but by then it was already a train wreck. Chavez socialism was basically a raid the bank by a bombastic, egotistical, and power-hungry clown who wanted to be a world leader. Venezuela was not “world leader” material. Chavez was not much different from many other world leaders but in this case, he had the wealth and power to do real damage.


well you got that entirely wrong. What actually happened was Chavez nationalized the industry and made all the oil and gas experts at PDVSA (who had been very vocal against him) enemies of the state (most of them moved to Colombia or the US). He took all the revenues from the oil and gas fields and used them to fund his social programs which was basically a bribe to get re-elected. No money was reinvested in the oil fields and that is a sure road to disaster and especially so in these particular oil fields that need considerable reinvestment to maintain output. As a consequence oil production decreased continuously well before oil prices fell in 2015 and that fall just exacerbated the situation. The problem was poor oil field management and the fact that Chavez chased out all the foreign oil companies. It is well known that the key for many of these countries is to use other peoples money to explore and develop oil and gas. Basically the foreign company would pay 100% of all costs and receive somewhere between 10 - 20% of the production. If Chavez had not nationalized he would have had revenues to invest in social programs and the oil fields would have been properly managed.
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Re: THE Price Of Crude Pt. 15

Unread postby REAL Green » Sat 25 Apr 2020, 20:32:38

rockdoc123 wrote:well you got that entirely wrong. What actually happened was Chavez nationalized the industry and made all the oil and gas experts at PDVSA (who had been very vocal against him) enemies of the state (most of them moved to Colombia or the US). He took all the revenues from the oil and gas fields and used them to fund his social programs which was basically a bribe to get re-elected.


AH, that is what I said so I am not sure where the “entirely wrong” came from? You went on to describe the oil industry side of the issue. I am talking about the geopolitical spectrum. Chavez took great delight in pushing his Bolivarian anti-Americanism. He loved getting in bed with Russia, China, Iran, and Cuba thereby irritating the hell out of the Americans. He was as bad about giving money to nations like Cuba and Ecuador as buying votes with the chavistas. In a way Chavez was buying personal prestige with nations with Venezuela as his gift. All this took a toll on his treasury instead of reinvesting in the oil industry like you related.
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Re: THE Price Of Crude Pt. 15

Unread postby JuanP » Sun 26 Apr 2020, 12:09:17

"China boosts oil imports from Russia, while slashing supplies from Saudi Arabia"
https://www.rt.com/business/486917-chin ... l-imports/

The Chinese purchased 30% more oil from Russia in March than they did on the same north last year, while reducing imports from KSA by 1.7%.
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Re: THE Price Of Crude Pt. 15

Unread postby REAL Green » Sun 26 Apr 2020, 12:45:18

JuanP wrote:"China boosts oil imports from Russia, while slashing supplies from Saudi Arabia"
https://www.rt.com/business/486917-chin ... l-imports/

The Chinese purchased 30% more oil from Russia in March than they did on the same north last year, while reducing imports from KSA by 1.7%.


Get back to me with this month and next month’s figures then we will kick the subject around as significant. Meanwhile, in the real world, the global oil market has been turned upside down in April.
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