Oil price discussion and analysis

[rederob]

Too high too fast...

Here's what the US LTO producer's need to get oil back into production:

For the sake of simplicity, I think I will use $30 as the magic minimum for LTO when assessing the earliest any players are likely to return to drilling.
In reality an average of $50/bbl is required for the US oil industry to break even, so the margin of overall debt to be suffered until we get back there is massive.

 

[Garpal Gumnut]

I find it difficult to imagine any country moving on from coronavirus once it settles without oil.

I'm awaiting a wouldn't be buying oil at any price to buy oilers.

gg

 

[rederob]

Another update on POO:


Looks like stability has returned, albeit at very low prices.
Meanwhile the rig count continues to decline:

 

[rederob]

North America's rig count continues to tumble, down 38 in total (35 USA LTO plays) over the week to 15 May.
This may be playing a part in WTI's price recovery:

 

[rederob]

Here's info on US fracking activity, to marry with the Baker Hughes rig count:

 

[rederob]

Great start to the week for WTI, with a new high posted since prices were floored. This chart is a continuation of yesterday's, but at 30 minute intervals:



That's more than a 15% increase from lows a few days ago and is likely to see Oz producers continue to bounce back.

 

[cutz]

That's great !!

Can't believe the Jun/Jul spreads have collapsed to 1 cent from a peak of 8 dollars a few weeks ago ! I guess no negative prices this expiry ..

 

[ducati916]

US energy consumption in 2019.



If the price war has imparted permanent damage to the production infra-structure, then oil/gas producers that survive are likely to do well. The 'rest' simply do not come close (currently) to step-up.

jog on
duc

 

[Smurf1976]

If the price war has imparted permanent damage to the production infra-structure, then oil/gas producers that survive are likely to do well.

The big unknown is, of course, to what extent production capacity really has been lost as distinct from shut in with the ability to restart. In some cases even the operators themselves won't actually know at this point with absolute certainty.

That's one of the biggest risks to the real economy in my view.

If it's a 1% loss then no big deal. Price goes up and ultimately the market sorts it.

If it's 10% well then from a broader economic perspective the physical lack of fuel would be one of, perhaps the, biggest barriers to recovery. If it's not being produced then it can't be burned no matter what the price, some end use simply doesn't occur in that scenario.

Note that I'm not predicting any particular level of capacity loss here, just noting the possibility of physical, as distinct from purely financial, supply constraints emerging.

 

[Smurf1976]

Looking at Australian consumption data (in the absence of reliable global figures) and comparing March 2020 with March 2019:

LPG: +2.6% (automotive use down 4.0%, other uses up 6.1%)
Petrol (all grades): -7.6%
Aviation turbine fuel: -28.5%
Aviation gasoline: -11.7%
Diesel: +8.6%
Fuel oil: -34.7%
Lubricants: -10.4%
Other products: +16.5%
Total: -3.0%

That wasn't the result I was expecting, I was expecting a far greater drop than 3% in total consumption.

A plausible explanation is that the figures are calculated on the basis of bulk sales not consumption as such and there could well be a lot more fuel sitting in tanks at service stations, fuel depots, mines, farms and even in the hands of consumers (eg in vehicle tanks) than there was previously.

For diesel in particular, it's hard to come up with an explanation which doesn't involve at least some degree of stock building at the distributor, retailer or consumer level taking place. That plausibly would also have occurred to some extent with petrol given it's primarily purchased by private consumers (unlike say fuel oil or aviation fuel) but it's the diesel figure that's most surprising.

Diesel is particularly significant given that it represented 53.4% of all petroleum products supplied in Australia during March 2020.

If consumers, fuel distributors etc have increased their stock levels then we may see a slower return to normal levels of consumption, as measured in terms of bulk deliveries, assuming there's some running down of that inventory back to more normal levels.

Figures compiled by Smurf from Australian Government data available at www.energy.gov.au

To what extent the international situation differs I really don't know but I've posted this since it's data which is available and should be accurate within its limitations (bulk sales being the point of measurement).

 

[qldfrog]

Looking at Australian consumption data (in the absence of reliable global figures) and comparing March 2020 with March 2019:

LPG: +2.6% (automotive use down 4.0%, other uses up 6.1%)
Petrol (all grades): -7.6%
Aviation turbine fuel: -28.5%
Aviation gasoline: -11.7%
Diesel: +8.6%
Fuel oil: -34.7%
Lubricants: -10.4%
Other products: +16.5%
Total: -3.0%

That wasn't the result I was expecting, I was expecting a far greater drop than 3% in total consumption.

A plausible explanation is that the figures are calculated on the basis of bulk sales not consumption as such and there could well be a lot more fuel sitting in tanks at service stations, fuel depots, mines, farms and even in the hands of consumers (eg in vehicle tanks) than there was previously.

For diesel in particular, it's hard to come up with an explanation which doesn't involve at least some degree of stock building at the distributor, retailer or consumer level taking place. That plausibly would also have occurred to some extent with petrol given it's primarily purchased by private consumers (unlike say fuel oil or aviation fuel) but it's the diesel figure that's most surprising.

Diesel is particularly significant given that it represented 53.4% of all petroleum products supplied in Australia during March 2020.

If consumers, fuel distributors etc have increased their stock levels then we may see a slower return to normal levels of consumption, as measured in terms of bulk deliveries, assuming there's some running down of that inventory back to more normal levels.

Figures compiled by Smurf from Australian Government data available at www.energy.gov.au

To what extent the international situation differs I really don't know but I've posted this since it's data which is available and should be accurate within its limitations (bulk sales being the point of measurement).

Diesel is surprising until i remembered what i saw around.
None of the tradies seem to have slow down(yet), all building sites mines farms are and were still going full speed.
So except trains and buses,most diesel users are hardly affected.
The office guys do not commute to the city train station but they nevertheless fill up as price was low.
Increase was unexpected, but flat was my expectation.
We saw that at the pump price:
Record low for unleaded, hardly moved for diesel.
We saw opposite move during part of GFC: diesel smashed then due to economic activity down while unleaded less affected as people were still driving
Conclusion: diesel in Australia is a clear indicator of economic industrial activity..tradies included.
Not sure i get a seat at the RBA with that demonstration

 

[Smurf1976]

Increase was unexpected, but flat was my expectation.

Yep - flat or a small decline (due to some being used in private vehicles) I could understand but the increase was a surprise.

 

[rederob]

What a difference a day makes (and a fortnight).
Although it's not obvious from the below chart, the circled increase since yesterday's open represents an 8% price increase, which is substantial in market terms.
Over the fortnight WTI has now gained over 60%, which is massive in anyone's terms:

It will be interesting to see what happens to the rig count by week's end.

 

[frugal.rock]

I put a few dollars in OOO today.
Fingers crossed!
Hoping that the supply and demand situation continues.

 

[rederob]

I put a few dollars in OOO today.
Fingers crossed!
Hoping that the supply and demand situation continues.

I believe it will for a while to come.
However, as WTI crude has increased over 100% in a little over 3 weeks, I expect a pullback is looming.
Here's the hourly chart showing the incredible price increase:

 

[rederob]

Further overnight gains are giving WTI's chart a welcome makeover:

 

[frugal.rock]

Thanks for the daily updates @rederob
I wasn't to worried about a pull back. Am thinking any pull backs are gaps filling, so won't last long before the updraft continues.
Am guessing that production versus consumption trends are equalising, but am waiting for the production drop lag to kick in properly over the coming days/ weeks.
Looking forward to hearing the well count again.
Need some profit to help pay for impending higher fuel costs!

F.Rock

 

[qldfrog]

We are soon reaching the 40usd a barrel.might stay there for a while

 

[frugal.rock]

The figures get interesting from the start of April after peaking.
Around 11.5% drop in production from end of March to last date recorded 15th May.
"Weekly U.S. Field Production of Crude Oil"

 

[pavilion103]

Hello friends. I have questions about oil...

Recently I bought into the Betashares crude oil index ETF on the ASX.
I bought $10,000 @ $2.90 and
$5,000 @ $2.97
For an average price of around $2.93.

I know about the risks with contract expiry and prices.

I have a question however.
From my calculations the dividend of 5.978c in April means a yield on my average purchase price of 8.12%.
However I saw that this was slashed from over 40c the previous quarter.
Is this almost certain to fall further next quarter?

Also why doesn't the price on this ETF reflect the percentage increase in the WTI futures.
For example I bought in when WTI was around $12 and its now $34.
BUT I do know that the ETF is linked to the June July and August contracts.
Is the reason why prices don't move the same percentage wise have anything to do with the ETF costs, dividend payment and potential costs when moving from one month's contract to the next?
Still it is much lower than the WTI movement.

Any thoughts would be a tremendous help

Has anyone else purchased?