I know it is Rick Perry but lots of what he says in here is true or at the least certainly potentially so.
https://www.yahoo.com/news/verge-massive-collapse-ex-energy-155602853.html
Rick Perry might be a tool but no doubt he knows about the oil industry.
The story mentions the Whiting bankruptcy filing today. Hornbeck, a support company, also is filing chapter 11. These are just the first two dominoes. One lifetime oil industry person I heard today said “I’ve lived through 8 oil busts and the only thing I’m sure of is there will be a 9th’.
But it’s different this time.
United States will have to decide, the oil industry is different than say...the casinos. I know there is a push and a growing sentiment to transition away from the oil or broadly fossil fuel economy. In the meantime, we are not ready for that and this country has grown leaps and bounds in production reducing our foreign dependence and actually become a net exporter. Unimaginable just 15-20 years ago. If we are going to need it, isn’t it better to employ workers here and getting the boost of support jobs here rather than just importing it like we used to.
I think we may see tariffs on imported oil if Russia and Saudi Arabia don’t stand down. This is a national security issue and the administration has used section 232 tariffs for steel and aluminum, I think we could see the same here. It would seem to fit the definition of dumping. Not every company can or should be saved, that’s not the point. The domestic industry as a whole should be saved. Hopefully we’ll see action to that end.
Wow! Informative posts Peoples!!!........joe
Prices surging today on reports that Russia and Saudi Arabia will reverse their increased production plans. China is also said to be buying to fill up their strategic reserve, all told, China has a billion barrels worth of storage space. Outside of their pissing contest with Moscow, the Saudis did say they wanted to stoke demand in Asia with the low price, which appears to be happening.
Oil jumps 12% amid report Saudi Arabia and Russia have reached a deal, cut could reach 20 million barrels per day
https://www.cnbc.com/2020/04/09/oil-jumps-ahead-of-make-or-break-opec-meeting.html
Oil jumps 12% amid report Saudi Arabia and Russia have reached a deal, cut could reach 20 million barrels per day
https://www.cnbc.com/2020/04/09/oil-jumps-ahead-of-make-or-break-opec-meeting.html
One additional positive outcome of the drop in oil prices may be the recently agreed upon cease fire in the war in Yemen between the surrogates of the Saudi's and Iranians...
I would imagine this war is a bit too costly at for both nations given the drop in oil revenue. For how long this cease fire lasts in anybody's guess...
Read that some 150 members of the Saudi Royal family have coronavirus.
Not sure Yemen is actually paying for their war costs, that would be the Iranians, which yes are also financially strapped right now.
Not sure Yemen is actually paying for their war costs, that would be the Iranians, which yes are also financially strapped right now.
I believe the Saudi's and Iranian's, via their surrogate fighters they finance, are doing the vast majority of the fighting. Or were until the recent cease fire agreement.
WTI spent time in the $19 range yesterday.
The production cut by OPEC, OPEC+ and the US isn't enough to boost the price because now and at least the short term future, the global supply of oil is multiples more than demand. The oversupply is going to have to work it's self out and that is going to take some time.
Paraphrasing from a WSJ article:
Federal Reserve Bank of Dallas survey of oil operators estimated it cost them $26-32 to produce a barrel of oil from an existing Permian Basin well. At $20 a barrel prices, operators in the basin would lose $200 million a week.
An energy analytics firm said at $30 a barrel, more than 70 US oil and gas producers could have trouble making interest payments on debt. At $20 a barrel, it would increase to 140 companies.
And as they keep pumping, even at a reduced rate, there simply isn't going to be any where to put it.
The only comparable periods to what we are experiencing now is 1979-83...a 4 year period, we're seeing our supply and demand shock happen over 4 weeks. Then they compare it to the 1930s with Texas oil field discoveries coupled with Great Depression demand levels. Crude was $4 adjusted for inflation, it was $19 yesterday. Oil in Canada's western region closed at $3.16 Monday (down 84% from last month). There just aren't any buyers.
Wow, just unreal.
WTI future for May is $11.54 right now. Down some 30% just today! Contract expires tomorrow must take delivery and nobody knows where to put it. I wish I could physically buy some barrels!
June futures are a more normal low $20s.
What a day, WTI started down 30% on the day and ended down 300%!
It's more of market malfunction, nobody is paying somebody $37 to take their oil. They'd not fulfill the contract and risk being sued before that would happen, paying somebody to take the oil isn't what happened. What is true is that when you have to take delivery of the oil at the end of the current future contract, the oil was literally worthless, less than worthless. Wow. Oil futures June-December were in the $20-30 range last I saw. This could all happen again at the end of May when the June contract expires.
Some of these wells can't shut down, or if they do shut down that well can be damaged and unusable.
They keep the well running, keep the oil pumping, even at a loss because it is better financially to lose money for weeks on the oil coming out than the hundreds of thousands of dollars it would take to shut a well, maybe lose the well...all in the hope that the price will come back and they can break even or get back in the red.
It's pretty fascinating to follow. I can't imagine a close where the spread between WTI and Brent has ever been greater. WTI is landlocked, transported by pipeline or rail, and by ship when exported. Brent, the global benchmark enjoys the freedom of moving around the world from country to country. The WTI collapse reflects there were no buyers in the distribution and refiners in the US. No desire or need for the crude, or it's finished products.
Somehow I got on an email list for Wyoming's Casper Star Tribune. Sometimes I poke around the link they send me (get it Wyoming is the Cowboy state, Cowboy = poke, oh well...).
Wyoming had 35 active oil wells in September, just 6 now.
April 10th, the state estimated their projected revenue would fall between $556 million to $2.8 billion over the next two years. The most pessimistic scenario was with oil averaging $35 over that time span.
Sang mentioned the low taxes in Texas due to oil and gas industry tax contributions to county and state coffers. Things are going to get tight. Government jobs and services will be cut no doubt. Can they raise other taxes to try and make up the difference?
One thing that will happen, it is just going to take a while, as wells shutter and global production slows and excess inventory comes back to normal, when (assuming there is a when) demand picks back up there won't be the supply capacity to ramp up output - so eventually prices will rise, perhaps dramatically. Just nobody knows when.
1. Our shale oil and gas gets sold on the international markets. The Covid-19 economy lockdown even internationally has people staying home using less. Oil companies make less money. The fracking and drilling are causing earthquakes. That is bad for our country. If you don't think so watch Dutchsinse's earthquake reports and videos. He shows the drilling sites and the earthquakes that occur because of them and pressure transferring across the plates. He predicts quakes a week ahead of time. It's science.
2. Saudi and Russia have been in a trade war. Saudi has 20 tankers heading here. It is NOT to cut the price of shale.
An intel source said when you see gas prices going down like this it is because it seems there is a glut on the market, but things are not as they seem. The extra oil is to fuel up military vehicles in the event of a war. He said IF Kim Jung Un dies and IF his sister doesn't assume his position the other people there are evil and would nuke us within days, therefore we need to be ready. There are already military vehicles at the naval station in Pensacola.
Iran is a wildcard. If we go to war with Iran, Russia and China back them.
So prices will go down for now, then production will be cut back to raise prices and profits for the companies.
[Edited on 4/25/2020 by gina]
An wild 3 months:
U.S. Shale Companies Are Turning the Oil Taps Back On
As oil approaches $40 a barrel, companies are bringing wells back online, even as the market continues to recover from the demand drop caused by the coronavirus
By
Updated June 7, 2020 3:08 pm ETAmerican oil producers are reopening the spigots, complicating the crude market’s recovery.
Scores of shale drilling companies turned off wells to reduce output when U.S. oil prices fell to negative territory in late April, after millions world-wide stopped driving and flying due to the new coronavirus, causing a steep drop in global demand.
Now that more of the world is reopening and prices are rebounding to nearly $40 a barrel, companies including Parsley Energy Inc. PE -7.86% and WPX Energy Inc. WPX -10.31% are starting to turn some of those wells back on, even as they continue to put off most new drilling.
The increased volumes remain far below peak levels before the pandemic, when the U.S. was pumping more than 13 million barrels a day of crude, the most in the world. But the oil market remains fragile, and many of the world’s other top producers are still voluntarily curtailing their output to help rebalance supply and demand.
The Organization of the Petroleum Exporting Countries and its allies, which agreed in April to limit production by 9.7 million barrels a day through June, struck another deal Saturday to extend cuts another month.
The extension aims to reduce output by 9.6 million barrels a day, as Mexico isn’t going to continue its production curbs. Libya, which is exempt from the quotas, also said over the weekend that it is restarting some 300,000 barrels a day of production, another challenge for global rebalancing.
OPEC delegates were briefed on the likelihood that U.S. producers would turn the taps back on last week but also discussed forecasts that American production would likely decline later in the year before agreeing to extend output cuts.
While turning existing wells back on is likely to temporarily boost U.S. production this summer, American oil output is still widely expected to drop in 2020. That is because shale wells lose steam quickly, and companies have sharply cut back on the number of new wells they are drilling.
The decline in new oil-drilling activity is likely to remain a drag on employment and the national economy. Analytics firm IHS Markit thinks the country will be generating around 10 million barrels a day by year-end, down nearly a quarter from the peak.
Global oil demand has recovered from an April trough, but the International Energy Agency estimates that this month it will still be about 86 million barrels a day, or roughly 13% below last year’s levels.
Oil prices have staged a remarkable recovery from April 20, when futures plunged to negative $37.63 a barrel as sellers effectively paid buyers to take contracts off their hands amid a growing shortage of oil storage.
In May, as stay-at-home orders eased, drivers returned to the road and American energy producers curtailed output, West Texas Intermediate futures posted their biggest monthly increase on record in both dollar terms and percentage gain. Crude futures climbed another 11% last week to end Friday at $39.55 a barrel.
“We’re seeing production coming back in pretty much all of the basins,” said Kelcy Warren, chief executive of pipeline giant Energy Transfer ET -4.18% LP. “It’s been a steady recovery since the first week of May.”
The amount of oil traversing Energy Transfer’s systems fell about 20% from March to May, but the company said it is on track to regain about half of those losses this month.
American companies that can get their oil onto boats and into the global market can sell it for more than the U.S. price. Brent crude, the international benchmark, closed Friday at $42.30.
Current prices remain below the levels many companies need to drill new wells profitably. But the bounceback is sufficient for many to start up existing wells. The average price required to cover operating expenses on existing wells ranges from $23 a barrel to $36 a barrel in the U.S., depending on the region, according to a recent Federal Reserve Bank of Dallas survey.
EOG Resources Inc., EOG -4.25% one of the largest U.S. oil producers, has a plan to ramp its output back up in the third quarter.
“In the mid-$30s, some of the existing shut-in production will be coming back on. There’s no doubt about that,” Kenneth Boedeker, EOG’s exploration and production chief, told investors last week.
Rivals aren’t waiting. Parsley Energy told investors last week that it is already restoring a “vast majority” of the roughly 26,000 barrels a day of production that it choked back last month from its Permian Basin fields in West Texas.
WPX, which drills in the Permian as well as in North Dakota, said in a securities filing Wednesday that it is restoring the 45,000 barrels a day that it took off the market last month.
Concho Resources Inc., CXO -10.16% another Permian producer, pinched its output by some 5,000 to 10,000 barrels a day during the lockdown.
“As prices have improved, we are working to bring that production back online,” Brenda Schroer, the Midland, Texas, company’s finance chief, told an online gathering of investors.
Some operators have said in recent weeks that they planned to turn wells off for only a portion of the month rather than shutting them down entirely, said Mark Houser, chief executive of University Lands. The organization manages oil and gas leases across 2.1 million acres in West Texas for a state endowment, with the royalty payments supporting education.
“It’s a mixed bag,” Mr. Houser said.
U.S. crude production during the final week of May averaged 11.2 million barrels a day, down from a record 13.1 million in mid-March, according to the U.S. Energy Information Administration. Some estimate that output has fallen even lower.
Roughly 1.75 million barrels a day worth of production losses this spring were attributable to turning off existing wells, according to IHS Markit. The analytics firm expects most of that output to be restored by September.
But without new drilling, U.S. onshore production would decline by more than a third in a year, far more quickly than in most other places in the world, IHS Vice President Raoul LeBlanc said.
“If you stop feeding the beast, it declines incredibly quickly,” Mr. LeBlanc said.
The number of drilling rigs in the U.S. has dropped by more than 70% in the past year, to 284, according to oil-field services company Baker Hughes Co.
Mr. Warren, the pipeline chief, said the loss of rigs is worrisome, longer-term. “You pull all those rigs out, it’s not overnight like a shut-in that you can just turn it back on,” he said. “We’re concerned about declines.”
edit- wrong article copied
[Edited on 6/9/2020 by nebish]
