The Lemon Fool

I wonder what the investors in the recent float of Saudi Aramco are thinking?

monabri wrote:I wonder what the investors in the recent float of Saudi Aramco are thinking?

I wonder what the sellers are thinking too!

monabri wrote:I wonder what the investors in the recent float of Saudi Aramco are thinking?

"Your investment may go down as well as up"

Oil industry crisis starkly revealed in U.S. weekly data
Petroleum products supplied to the [USA] domestic market, a proxy for total consumption, fell by 7 million barrels per day (bpd) or one-third over just three weeks between March 13 and April 3. The decline was equivalent to more than eight standard deviations for any three-week period since 1992. The abrupt collapse in consumption has no parallel in history, not even the depression years of the 1930s.

https://uk.reuters.com/article/uk-oil-p ... KKCN21R1NT

https://fingfx.thomsonreuters.com/gfx/c ... 202020.pdf

- dspp

https://www.france24.com/en/20200410-op ... ion-cartel

"OPEC, Russia and other allies outlined plans on Thursday to cut their oil output by more than a fifth and said they expected the United States and other producers to join in their effort to prop up prices hammered by the coronavirus crisis."

OPEC insist all OPEC members agree to above but so far Mexico is not in line.

I expect the URL above does not work. It is a front page (FRANCE24) news.

https://www.france24.com/en/20200412-op ... -19-crisis

"OPEC, Russia and other oil producing nations agreed on Sunday to cut output by a record amount, representing around 10% of global supply, to support oil prices amid the coronavirus pandemic. "

I have missed adding the following to my previous post.

"A 15% cut in supply might not be enough to arrest the price decline, banks Goldman Sachs and UBS predicted last week, saying Brent prices would fall back to $20 per barrel from $32 at the moment and $70 at the start of the year."

After Opec+ proposed cuts, Brent is currently down 6% this evening.

Seems to me that Mr Market always calls the shots.

Opec+ and "The Donald" need to pay a little bit more attention.

Funny situation, seeing that, notwithstanding covid19, this whole world runs on oil.

ReallyVeryFoolish wrote:I have given up trying to work out what the markets will do on any piece of news. A drop in oil price when production is being reduced is bizarre. At least, in a normal world it would be.

Unless the market thinks that the 'deal' of reduced production (a mere 10mln bpd) was advertorial to shut Trump up, whilst continuing to bleed undesirables such as US shale, Iran, Iraq, Vz until they quit or die, i.e. still gross oversupply.

regards, dspp

I have been watching PMO and TLW in relation to oil price and missed trading them when the oil price was $22/bbl.

dspp wrote:

ReallyVeryFoolish wrote:I have given up trying to work out what the markets will do on any piece of news. A drop in oil price when production is being reduced is bizarre. At least, in a normal world it would be.

Unless the market thinks that the 'deal' of reduced production (a mere 10mln bpd) was advertorial to shut Trump up, whilst continuing to bleed undesirables such as US shale, Iran, Iraq, Vz until they quit or die, i.e. still gross oversupply.

regards, dspp

journalists find the calculator

"OPEC+ or minus? Oil supply cut numbers puzzle markets"

https://www.reuters.com/article/us-glob ... SKCN21X2DE

- dspp

dspp wrote:

dspp wrote:

ReallyVeryFoolish wrote:I have given up trying to work out what the markets will do on any piece of news. A drop in oil price when production is being reduced is bizarre. At least, in a normal world it would be.

Unless the market thinks that the 'deal' of reduced production (a mere 10mln bpd) was advertorial to shut Trump up, whilst continuing to bleed undesirables such as US shale, Iran, Iraq, Vz until they quit or die, i.e. still gross oversupply.

regards, dspp

journalists find the calculator

"OPEC+ or minus? Oil supply cut numbers puzzle markets"

https://www.reuters.com/article/us-glob ... SKCN21X2DE

- dspp

the general situation a month or so ago was shown in the EIA's prediction

https://www.eia.gov/todayinenergy/detail.php?id=43175

But in reality, both supply and demand are very volatile, making forecasting impossible. Although covid19 is causing a very big decline in demand, most lockdowns seem to going to lasting 1 to 4 months, with restrictions eased incrementally, so anything less than a three month moving average will shed little light. And on the supply side over three months I have read that:

OPEC+ might mandate some more cuts
USA (Texas) might impose restrictions and others might cut production voluntarily to prop up prices
Unplanned production outages
OPEX reductions by distressed companies impacting production
Trump imposes import tarrifs
covid19 lockdown workplace restrictions on oil and gas operations
Political instabilities in, or related to, Libya, Iran, Iraq, Venezuela, KSA, Russia etc.
USA shale oil bankruptcies already started
Shale production declines due to lack of both CAPEX and OPEX
Oil storage space going to run out soon
Exploration budgets slashed
Development projects cancelled,downsized or postponed

Meanwhile, demand will probably ramp back up again quite quickly, as all those frustrated consumers get back in their cars and fly off on holiday. Or not, because the world has changed forever etc.

S

The frac spread count is i think below the trough of 2016.

Oil price benchmarks under stress,
hat tip JohnKempReuters

https://www.oxfordenergy.org/wpcms/wp-c ... Stress.pdf

- dspp

https://foreignpolicy.com/2020/05/05/20 ... di-arabia/

Saudi are winners
(I tend to agree short/medium term as this allows them to claim a larger share of the oil pot over next few decades, shale will be cautious)

counter view from Kemp = no winners ( I disagree. Shale is dead and/or dismembered)
https://www.reuters.com/article/us-saud ... SKBN22H1XF

"Saudi Arabia’s decision to wage an oil volume war with Russia, which proved badly timed as it coincided with coronavirus lockdowns and tumbling crude demand, exacted a heavy toll on the kingdom’s finances. Total foreign reserve assets fell by almost $24 billion in March, the largest one-month decline for at least 20 years, according to the latest official data from the kingdom’s central bank, the Saudi Arabian Monetary Authority (SAMA)."

regards, dspp

ReallyVeryFoolish wrote:Would Exxon and Chevron disagree with you about shale oil in the US, dspp?

RVF

By watching their actual spending in the coming years I expect we will find out.
regards, dspp

oil modelling including cv19 stringency index etc
https://www.oxfordenergy.org/wpcms/wp-c ... ind-Us.pdf
- dspp

BP is lowering its long term price forecasts:
https://www.investegate.co.uk/bp-plc--b ... 00109344P/

bp's revised investment appraisal long-term price assumptions are now an average of around $55/bbl for Brent and $2.90 per mmBtu for Henry Hub gas ($2020 real), from 2021-2050.

As a result:
bp is also reviewing its intent to develop some of its exploration prospects and consequently is assessing the carrying values of the group's intangible assets.

(suggests more asset sales on the way?)

Financial impact:
bp currently estimates that the aggregate second-quarter 2020 non-cash, post-tax PP&E impairment charges and exploration intangible write-offs will be in the range of $13 billion to $17.5 billion.

IEA

Oil demand in 2020 is expected to fall by 8.1 mb/d, the largest in history, before recovering by 5.7 mb/d in 2021. Reduced jet and kerosene deliveries will impact total oil demand until at least 2022. In this Report the forecast for 2020 oil demand has been raised by nearly 500 kb/d to 91.7 mb/d, due to stronger than expected deliveries during the Covid-19 lockdown. In China, oil demand recovered fast in March-April and India’s demand rose sharply in May.
Global oil supply plunged by 11.8 mb/d in May, driven by a record OPEC+ cut and economic shut-ins in the US, Canada and elsewhere. After tumbling by 7.2 mb/d in 2020, global oil output is set for a modest 1.7 mb/d recovery in 2021,
etc

https://www.iea.org/reports/oil-market-report-june-2020

- dspp

On the demand side of the price equation, aviation was previously 5mb/d, so about 5% of output, now down to 1.5m/d. Regrowth is sluggish.

"Efforts to contain the 2019 novel coronavirus disease (COVID-19) have dramatically changed global commercial passenger flight volumes. These flights averaged a little more than 70,000 flights per day in January and February, fell to an average of less than 25,000 flights per day in April, and then started to increase again in May. Commercial jet fuel consumption showed a similar pattern, falling from an average of 4.3 million barrels per day (b/d) in January and February to 1.0 million b/d in April."

https://www.eia.gov/todayinenergy/detail.php?id=44676

- dspp