Oil price discussion and analysis

[Telamelo]

OPEC will roll back production cuts by 2.1 million barrels per day from August.

Crude stockpiles fell 7.5 million barrels for the week ending July 11.

The outsize draw propelled crude prices up by 2.2%

“Crude prices jumped (after) following both the OPEC+ recommendation to slowly bring back some oil supplies, and after the EIA crude oil inventory report showed a much larger draw and some signs that demand is improving,” said Ed Moya, an analyst at New York’s OANDA.

Another positive for the likes of SXY (I hold) no doubt.

https://m.investing.com/news/commod...draw-overwhelms-opec-rollback-on-cuts-2230471

Cheers tela

 

[Telamelo]

SXY storming higher.. up another +9.62% !!! Cheers tela

 

[rederob]

Despite the above news, speculators appear to be avoiding the oil markets:

 

[Telamelo]

SXY +11.54% with a big line wipe @28.5c happy day's perhaps into the 30's by later today into next week (finger's crossed) "trade the trend" Cheers tela

 

[ducati916]

News:


- Marathon Petroleum’s (NYSE: MPC) Tesoro High Plains pipeline was ordered to shut down for the first time in 67 years after the U.S Department of Interior’s Bureau of Indian Affairs determined the pipeline trespassed on Native American land. The pipeline moves Bakken oil through North Dakota.

- Halliburton (NYSE: HAL) jumped more than 8 percent after reporting second-quarter results that beat expectations. Halliburton "inked simply outstanding results vs. expectations... [as] structural cost cuts are clearly bearing fruit," Tudor Pickering Holt analysts say. Halliburton took a $2.1 billion impairment.

- Total (NYSE: TOT) secured financing for its $15 billion Mozambique LNG project.

Tuesday, July 21, 2020

Oil prices rose sharply on Tuesday. Despite bad coronavirus news in the U.S., which could weaken demand, there are high hopes for economic stimulus. The European Union agreed to a historic stimulus, and the U.S. Congress appears intent on passing yet another trillion-dollar economic package. Crude prices hit four-month highs on Tuesday.

Chevron buys Noble for $5 billion. Chevron (NYSE: CVX) announced the purchase of Noble Energy (NASDAQ: NBL) for $5 billion, an all-stock deal worth $13 billion when including debt. The move adds U.S. shale assets in the DJ Basin and, crucially, a large presence in the Eastern Mediterranean. The deal was the first major M&A move since the onset of the pandemic.

Australian LNG hit by impairments. Australia’s LNG sector has been hit hard by multiple impairments from domestic and international gas companies. Woodside Petroleum (ASX: WPL) recorded a $4.37 billion impairment, and Royal Dutch Shell’s (NYSE: RDS.A) massive $15-$22 billion write-down was led by Australian LNG. "Realized prices have dropped dramatically due to global oil oversupply and demand destruction from the pandemic,” a Woodside executive said on an investor call.

Natural gas prices fall. Natural gas prices fell sharply on Monday after data showed another dip in U.S. LNG exports.

Fewer canceled U.S. LNG cargoes for September. The volume of U.S. LNG cargoes canceled by buyers for September slowed compared to preceding months. The exact number is unclear, but Reuters reports that somewhere between 15 and 26 cargoes have been canceled for September delivery, a smaller number than the 40 to 45 reported for July and August. Cheniere Energy (NYSE: LNG) (NYSEAMERICAN: CQP) has the most canceled cargoes.

Brazil boosts oil exports to Asia. Brazil’s oil exports to Asia averaged 1.07 mb/d in the first six months of 2020, a 30 percent year-on-year increase.

Saudi Arabia wants more than $40. The OPEC+ deal has succeeded in tightening up the market and boosting oil past $40, but Saudi Arabia’s Energy Minister, Prince Abdulaziz bin Salman, has highlighted that although OPEC itself does not have a price target, current prices are not sustainable for the industry, leading to potential insecurity of supply in the long term.

jog on
duc

 

[rederob]

Price consolidation continues:


Here's Baker Hughes' rig count summary.
With COV19 rearing its ugly head big time in the USA again, it's difficult to see demand prompting a WTI price rise of any magnitude. Maybe the international rig count data out in a few weeks can provide that prop.
What remains dead certain is that the curtailment of exploration is going to eventually bite and a price spike will occur. I can't see it holding for long as LTO drillers will quickly fill any supply shortfall until the next yoyo.

 

[over9k]

Shale wells take what, 6 weeks to come online?

And we have how many weeks of storage capacity?

We'll be fine.

 

[rederob]

Shale wells take what, 6 weeks to come online?

And we have how many weeks of storage capacity?

We'll be fine.

There is plenty oil.
The issue is at what price.
The existing fracking industry remains burdened in debt.
So which investors are game to stump up again knowing how quickly things can go sour?
This article calculates current break even prices for LTO by region and by category of field. When we match that with recent LTO rig counts it is seems that the lowest cost tier 1 wells at $20 wellhead breakeven need significantly more than another $20/bbl to spur more drilling.

 

[over9k]

Drilling a shale pad is loose change to the supermajors. They'll start drilling as soon as there's a whiff of return. It's nothing to them if the return doesn't eventuate.

It's the little guys that are getting cleaned out, just like in basically every other sector.

I'm not an oil specialist, but I can't see the ridiculousness we've already seen repeating.

 

[rederob]

Drilling a shale pad is loose change to the supermajors. They'll start drilling as soon as there's a whiff of return. It's nothing to them if the return doesn't eventuate.

It's the little guys that are getting cleaned out, just like in basically every other sector.

I'm not an oil specialist, but I can't see the ridiculousness we've already seen repeating.

The oil majors are all doing poorly and, as shown below, were not performing that well when oil prices were much higher:

While it might be loose change for the majors to drill for LTO, they are not going to be in a hurry to drill anywhere unless the numbers stack up, else they just compound existing losses. Because the decline rate is so rapid for fracked wells, it makes no sense to start drilling on the off chance prices will rise.

 

[over9k]

Yes but it's relative.

 

[tinhat]

Yes but it's relative.

Relativity, if true, states that all things that will be already are. We are all dead already.

 

[Knobby22]

Relativity, if true, states that all things that will be already are. We are all dead already.

Or born yesterday.

 

[tinhat]

Or born yesterday.

So sorry for your loss. Justice is not personal.

 

[Knobby22]

So sorry for your loss. Justice is not personal.

Justice is a philosophical construct based on revenge.

 

[tinhat]

Justice is a philosophical construct based on revenge.

clap hands.

 

[rederob]

Back on topic, nothing positive in sight for oil prices:

Another week goes by with little action in US shale oil patches, with the a zero net change to their rig count.
Adding to supply seems unwise anyway, as crude oil stock levels remain historically high:

 

[Muckman]

Is oil becoming redundant?
Australia has basically an unlimited amount of natural gas, and having new gas to liquid fuels that are more cleaner and cheeper, does anyone even see oil on the market in 50 years ?Synthetic fuels are far more superior then crude oils and are getting much cheeper to produce. Not to mention more and more emission regulations banning current petrol and Diesel engines. Last time I saw this was when leaded fuel was being fazed out.
I see shell even investing huge into gas energy and from the looks of it are gearing up for the future with there new prelude off shore gas refinery.
Not to mention modular reactors on the horizon suppling cheep energy alternatives.

I just don’t see the use for oil anymore other then the fact it needs to be traded.

 

[Smurf1976]

I just don’t see the use for oil anymore other then the fact it needs to be traded

Long term you may well be right.

Short term though well pretty much every motorbike, car, truck, bus, plane, helicopter and ship is going nowhere without petroleum-based fuels. Then there's diesel powered trains and farm machinery.

Then there's the various relatively minor uses of fuels such as mowers and so on. Minor but not zero.

Whilst not the major method, some oil is used for electricity generation (it's a minor source in Australia but not zero) and in some places it's a significant fuel for space heating (minor in Australia but it's significant in the north-eastern US in particular and also parts of Europe it's a major method of heating).

Then there's all manner of lubricants, chemicals, bitumen (road sealing) and so on from the computer you're using right now (plastic) through to the paint on the walls, there's oil involved somewhere with all of that.

Ultimately I agree with the idea that there'll be a move away from it but it'll be a gradual thing is my thinking. It's going to take a long time to see all that machinery etc replaced with something else that uses some other form of energy be it gas, electricity or whatever and in the meantime there's still a need for oil-based fuels to run what we've got.

 

[frugal.rock]

Long term you may well be right.

Short term though well pretty much every motorbike, car, truck, bus, plane, helicopter and ship is going nowhere without petroleum-based fuels. Then there's diesel powered trains and farm machinery.

It's a bit of a "let's revisit this conversation every 10 years" case, me thinks. See how much things have changed.

Oil isn't disappearing any time quickly, it's a multi billion $ industry that fuels economies.
All required infrastructure is already in place, generally.
Gas requires pressure vessels for storage. A bit of an issue in itself.

You make a good point Muckman, in that the big players are starting to move to hedge themselves for the future, be it gas or electric vehicles and whatever else they are delving into, noting that there's environmental push behind it which currently has been temporarily forgotten about.