"Australia will be hit especially hard with the oil rout"

[aus_trader]

@Smurf1976 just wanted to say a huge thanks for your amazing, in-depth knowledge and posting here.

I'm just letting your writing percolate in my brain for a bit.

So good mate.

Very knowledgeable isn't he?
Because of the volume of information coming in at turbulent times like this, I sometimes skim read some of his long posts, but still understand the core message.

Thanks Smurf and his sidekick Cat.

 

[Smurf1976]

As the oil prices squeeze companies and states relying on oil prices, there must be an increased risk of disrupting the already shaky geo-political games being played in that part of the world.

Worth noting that a lot of the major players are government owned. Looking at the 10 largest crude oil producing companies (note that's companies not countries - the USA produces more oil than Saudi Arabia these days but in the US it's spread across numerous companies most individually quite small hence they don't make the list).

(Following was correct a few months ago, I haven't verified it all to see if anything has changed since then).

#1 - Saudi Aramco is listed (Saudi Arabia) but 98.5% government owned

#2 - Rosneft is a listed company (Russia) although the Russian government ultimately owns half the shares.

#3 - Kuwait Petroleum Company is government

#4 - National Iranian Oil Company is government

#5 - China National Petroleum company is government

#6 - ExxonMobil is a listed company (USA)

#7 - Petrobras is listed but the Brazil government ultimately owns about two thirds of the shares.

#8 - Abu Dhabi National Oil Company is government

#9 - Chevron is a listed company (USA)

#10 - Pemex is government (Mexico)

So 8 out of the 10 largest crude oil producers are either partly or wholly owned by national governments and are thus subject to political considerations and influences in how they operate. There's quite a few smaller government-owned ones too.

 

[Smurf1976]

Very knowledgeable isn't he?

Rest assured there's plenty of things I know nothing about.......

 

[Junior]

@Smurf1976 just wanted to say a huge thanks for your amazing, in-depth knowledge and posting here.

I'm just letting your writing percolate in my brain for a bit.

So good mate.

Agreed, thanks @Smurf1976 !!

 

[Smurf1976]

Agreed, thanks @Smurf1976 !!

The good thing about this forum is others sharing their knowledge. It seems to be by far the most rational place online when it comes to discussing the ASX and related topics.

The impact on Australian domestic market gas prices is starting to show up by the way. They're volatile and do move up and down with the weather and other factors but right now in Victoria the spot price is at $4.28 / GJ and it hasn't been over $5 since the 11th of March. Prior to the oil price fall gas was sitting in the $5 - $6 range mostly and if we go back 18 months then it was sitting at literally double that price.

So the impact is starting to filter through as the LNG exporters in Queensland would be lowering the maximum price they'll willing to buy gas (in gas form to make LNG with) at which in turn impacts the rest of the market.

I'll add that on the gas and electricity consumption side there is of course also uncertainty as to the impact of everything (businesses, concerts, sports, everything) that's shutting down at the moment with the virus. There's no major change in consumption yet however beyond normal fluctuation due to weather etc.

 

[fiftyeight]

Is there some kind of practical limit as to how far out companies can hedge?

I guess a company like QAN would be happy to be a massive buyer at these prices and the longer dated the future the better but who is selling long dated futures at these prices?

 

[fiftyeight]

Covid-19 is starting to have an impact on FIFO here in Oz. I know of at least 2 sites who have sent samples for testing, with one site having 20+ workers currently in quarantine waiting for results.

If the situation progresses as some expect, ALL casual staff sent home and all non essential staff sent home. Potential for major shuts to be cancelled and all non essential maintenance put on hold.

These are fine for the medium term, but companies don't spend millions on shuts for the fun of it, at some point the reduced maintenance will impact production. Lots of oil and gas gear comes out of Italy, so there are already disruptions in the supply chain.

 

[fiftyeight]

Is there some kind of practical limit as to how far out companies can hedge?

I guess a company like QAN would be happy to be a massive buyer at these prices and the longer dated the future the better but who is selling long dated futures at these prices?

Probably should of asked this in the main oil thread

 

[Junior]

Covid-19 is starting to have an impact on FIFO here in Oz. I know of at least 2 sites who have sent samples for testing, with one site having 20+ workers currently in quarantine waiting for results.

If the situation progresses as some expect, ALL casual staff sent home and all non essential staff sent home. Potential for major shuts to be cancelled and all non essential maintenance put on hold.

I have a mate who just took a new gig at an oil refinery in Victoria here, and he has just been given the heads up that they will be sending home all non-essential workers.

 

[jbocker]

If that's really their cost then they're at the lower end certainly.

There'd be some who'd be more than happy if they could get their costs down to a multiple of that amount.

Confirming @fiftyeight BOE number for WPL is $3.9 per BOE from their annual report can be found early in the report highlights.

www.edocumentview.com.au/WPL2020/2020/2303/index.html?voting=false#d=1&p=5&m=1