Oil price discussion and analysis

[waterbottle]

I'm not sure if the price is oil will be predictable...
If Russia is locked out of Europe then they will only be able to sell to China and India - both of whom will be asking for a bargain, and both of whom will probably not be seeking the same oil supply as the rest of the world.
Interestingly, price limits on gas have been introduced in Spain. Whether that will catch on to other EU nations and also extend to oil remains to be seen.
Meanwhile rig counts are steadily increasing...

 

[rederob]

I'm not sure if the price is oil will be predictable...
If Russia is locked out of Europe then they will only be able to sell to China and India - both of whom will be asking for a bargain, and both of whom will probably not be seeking the same oil supply as the rest of the world.
Interestingly, price limits on gas have been introduced in Spain. Whether that will catch on to other EU nations and also extend to oil remains to be seen.
Meanwhile rig counts are steadily increasing...

US Oil Output Slips as Higher Costs Hit Drillers​

Fracking also requires a continuous and high new-drilling regimen to maintain output due to the well production curve which is shaped thus:

The Dallas Fed Energy Survey’s first quarter 2022 report, revealed that firms needed $56 per barrel on average to profitably drill in the country. Across regions, average breakeven prices to profitably drill a new well ranged from $48 per barrel to $69 per barrel, with breakeven prices in the Permian Basin averaging $52 per barrel. Eagle Ford drilling was shown to have the lowest breakeven price at $48 per barrel, and ‘other U.S. shale’ had the highest at $69 per barrel.
With US inflation now running over 8% and material supply constraints preventing a rush to more drilling activity, the light tight oil industry will need present high prices to prevail for some time in order to cover previous costs and maintain an exploration profile.

 

[Garpal Gumnut]

Well @waterbottle and @rederob , I had done all the whatifs and the calculations on PO Oil and Gas a few weeks ago, and frankly I was more confused than when I started.

Trying to work Oil out is a bit like trying to work out POG.

There are so many seemingly stable and unstable actors. It is a bit like ole Rumsfeld's known knowns only squared.

Stable that we know to be unstable.
Stable that we know to be unstable that many believe to be stable etc etc...

I lived through part of the 70's in Europe when you had to put a large deposit on a motor three months prior to delivery because if you didn't it would have gone up in price by 10-20%.

Basically we are headed for rampant inflation. It has started in fact. and if you don't buy from the last mug you will pay 10-20% more from the next.

Gold, Oil and Materials, and not necessarily in that order, I am accumulating.

Cash will be a peasant unless you want to earn 2-3% as the Fed and our Bank and rates are being held to ransom by the markets and construction.

Unfortunately charts will not be much use as there is panic in the air, events will overtake any chart while you sleep.

I like when others are in panic mode. Long live panic.

Just go on your gut and devil takes the hindmost to ride this out.

BYO.

gg

 

[frugal.rock]

I've noticed that diesel seems to be floating around 10-15% above petrol prices.
I'm considering a 2nd hand vehicle purchase, but am wondering how long the price disparity may stick around?

Previously, I would be inclined to go a diesel vehicle, but now, not so sure!

Slightly off topic I know, but probably relevant in the bigger picture.
Thanks in advance to the remarkable knowledge bank here at ASF.
Hats off and a salute. ?

 

[divs4ever]

US Oil Output Slips as Higher Costs Hit Drillers​

Fracking also requires a continuous and high new-drilling regimen to maintain output due to the well production curve which is shaped thus:
View attachment 141627
The Dallas Fed Energy Survey’s first quarter 2022 report, revealed that firms needed $56 per barrel on average to profitably drill in the country. Across regions, average breakeven prices to profitably drill a new well ranged from $48 per barrel to $69 per barrel, with breakeven prices in the Permian Basin averaging $52 per barrel. Eagle Ford drilling was shown to have the lowest breakeven price at $48 per barrel, and ‘other U.S. shale’ had the highest at $69 per barrel.
With US inflation now running over 8% and material supply constraints preventing a rush to more drilling activity, the light tight oil industry will need present high prices to prevail for some time in order to cover previous costs and maintain an exploration profile.

there will be others wanting to buy Russian oil , i am thinking Russia would prefer sending via pipelines ( so greater Asia , Afghanistan and Pakistan ) , Russia's worst weakness is hardly any 'warm water ' ports

Russia is ( or potentially ) fully self-sufficient , and Russia in general isn't awash with luxury goods , so i think if Russia can lock in the equivalent of $US 100 a barrel for oil for most of what they sell they will be fairly happy , and have a so-so but not harsh standard of living , Chinese and Indian goods filling most voids that Russia doesn't produce themselves

 

[divs4ever]

I've noticed that diesel seems to be floating around 10-15% above petrol prices.
I'm considering a 2nd hand vehicle purchase, but am wondering how long the price disparity may stick around?

Previously, I would be inclined to go a diesel vehicle, but now, not so sure!

Slightly off topic I know, but probably relevant in the bigger picture.
Thanks in advance to the remarkable knowledge bank here at ASF.
Hats off and a salute. ?

research bio-diesel , it might be the solution you are after ( you might even be able to produce it yourself if you have the right rural property )

 

[frugal.rock]

research bio-diesel , it might be the solution you are after ( you might even be able to produce it yourself if you have the right rural property )

To my left sits a chemical mixer.
In front sits a settling drum.
I sold the rest of the methanol.
Been there, done that.
Pushing clay up hill with modern high pressure direct injection systems.
Not impossible I know, but climate etc are limiting factors.
Prefer a "cleaner" method.
Cheers

 

[Smurf1976]

Fracking also requires a continuous and high new-drilling regimen to maintain output due to the well production curve which is shaped thus:​

A point often missed is that oil fields aren't a case of once built that's it, they're built.

Rather they're somewhat more akin to building wooden houses and installing a termite nest during construction.

You have to keep constantly building new ones to replace all that fall down and with light tight oil they don't last long at all. Stop or even just slow the pace of drilling and production starts to slip.

With US inflation now running over 8% and material supply constraints preventing a rush to more drilling activity, the light tight oil industry will need present high prices to prevail for some time in order to cover previous costs and maintain an exploration profile.

A major issue in the 1970's oil crisis and inflation situation was that there were an abundance of projects that were almost viable and just needed oil to be a few $ higher in order to get the go ahead.

Trouble is, the rising price of materials and labour pushed the cost of the project up in line with the price of oil rising. Then the rising interest rates ratcheted up the required rate of return to gain board approval.

End result is that the higher the oil price went, the further away those "almost there" projects became.

 

[Smurf1976]

I've noticed that diesel seems to be floating around 10-15% above petrol prices.
I'm considering a 2nd hand vehicle purchase, but am wondering how long the price disparity may stick around?

Short answer is refining capacity itself, as distinct from the supply of crude oil to be refined, is maxed out.

Governments releasing crude from inventories helps suppress the price of crude but it does nothing to get more through refineries, thus widening the gap between crude and refined products.

Diesel's particularly scarce for several reasons:

Along with fuel oil it's the primary direct substitute for natural gas in boilers etc. Consumption is being driven higher by the gas situation.

Russia exports refined products not just crude and its oil yields a high portion of diesel. Versus the lighter grades of oil, such as the US light tight oil, which has yield biased more toward the gasoline end of the spectrum.

At the consumption level to the extent there have been lockdowns etc due to Covid that has far more effect on petrol than on diesel. For example, data for Australia comparing April 2020, lowest point of consumption, versus same time a year earlier:

Aviation turbine fuel ("jet fuel") down 79.7%
Aviation gasoline (what small planes use) down 71.2%
Petrol down 42.7%
Fuel oil down 36.4%
LPG down 20.7%
Diesel down 9.8%
Lubricants down 7%
Other products (bitumen, solvents etc) down 11.9%
TOTAL down 30.9%

Data from Australian Government statistics.

So diesel consumption tends to hold up relatively well compared to others under lockdown conditions, at least it did in Australia, thus skewing the inventory of refined products toward less diesel / more petrol and aviation fuel.

 

[frugal.rock]

Thanks Smurf.
Legend.

So, I guess petrol will be the go for a few years, what with EV's on the rise, which I would take to be largely replacing petrol vehicles, owing to diesel being a more industry based fuel, rather than a consumer based fuel.

Shame lpg is on its last legs also..

 

[Smurf1976]

I guess petrol will be the go for a few years

Given the international situation, predictions of the future are particularly problematic at this time.....

Current wholesale pricing for the record. This includes excise and GST and is the bulk price for tanker loads to be delivered to service stations. Price does not include delivery. Price is AUD cents per litre.

Location = Sydney

Diesel = 200.63

Petrol:
E10 = 181.18
91 = 183.69
95 = 197.42
98 = 204.42

Source = Ampol. Prices as at 14 May 2022 and change daily.

 

[qldfrog]

Short answer is refining capacity itself, as distinct from the supply of crude oil to be refined, is maxed out.

Governments releasing crude from inventories helps suppress the price of crude but it does nothing to get more through refineries, thus widening the gap between crude and refined products.

Diesel's particularly scarce for several reasons:

Along with fuel oil it's the primary direct substitute for natural gas in boilers etc. Consumption is being driven higher by the gas situation.

Russia exports refined products not just crude and its oil yields a high portion of diesel. Versus the lighter grades of oil, such as the US light tight oil, which has yield biased more toward the gasoline end of the spectrum.

At the consumption level to the extent there have been lockdowns etc due to Covid that has far more effect on petrol than on diesel. For example, data for Australia comparing April 2020, lowest point of consumption, versus same time a year earlier:

Aviation turbine fuel ("jet fuel") down 79.7%
Aviation gasoline (what small planes use) down 71.2%
Petrol down 42.7%
Fuel oil down 36.4%
LPG down 20.7%
Diesel down 9.8%
Lubricants down 7%
Other products (bitumen, solvents etc) down 11.9%
TOTAL down 30.9%

Data from Australian Government statistics.

So diesel consumption tends to hold up relatively well compared to others under lockdown conditions, at least it did in Australia, thus skewing the inventory of refined products toward less diesel / more petrol and aviation fuel.

In short diesel is industry demand,retail is petrol..using Australian linguo..always confusing when reading US news.
If you buy a car/ute,
Remember the consumption difference as well.
10+y old ute: a diesel 4wd,
had to do a return trip to Brisbane lately.
One way freeway,return going up and down the great dividing range 2 times,nearly 3..average real consumption below 8l/100km as when brand new..
Diesel has a huge consumption advantage $ $ and can run on cooking oil...
But it can not run on synthetic fuel.
Does not really matter as this carbon neutral option is fully cancelled in our Brave New World...

 

[over9k]

Also worth noting that crude oil isn't just crude oil - it's on a matrix of heavy/light and sweet/sour, so a refinery might be tooled to be extra efficient at light/sweet if it usually refines light/sweet and then now be faced with having to start refining heavy/sour as a replacement for the light/sweet it used to get, so its refining capacity effectively drops dramatically.

So if you're replacing say, russian crude with something else, and it's a different grade of crude, you might be in for a real headache, and that's before we even start talking about how different grades are easier/better to refine into different daughter products - you want heavy for bitumen but light for petroleum for example.

So yeah, just like castrol's "oils ain't oils", refining capacity ain't refining capacity either.

 

[Telamelo]

I've noticed that diesel seems to be floating around 10-15% above petrol prices.
I'm considering a 2nd hand vehicle purchase, but am wondering how long the price disparity may stick around?

Previously, I would be inclined to go a diesel vehicle, but now, not so sure!

Slightly off topic I know, but probably relevant in the bigger picture.
Thanks in advance to the remarkable knowledge bank here at ASF.
Hats off and a salute. ?

Did you have to remind me @frugal.rock !? lol as I drive a diesel car.. makes me regret my decision now with talk/rumour that diesel heading towards $2.50 more wallet pain to come it seems

 

[rederob]

Looking at POO's trend from 1 December 2021 we see the present price smack on the median, in a nice uptrend:

Still too early to work out how much Russian oil can't be sold into western markets, but the threat of not buying it is keeping prices nicely elevated.

 

[waterbottle]

Not too sure what everyone's play is here, but here's a bearish warning for the oil bulls

Failure To Implement Russian Oil Ban Could Send Oil Crashing To $65 | OilPrice.com

Lack of internal support for a full EU embargo on Russian crude oil may take out one of the key fear factors for oil, which may send prices crashing back to $65 per barrel

oilprice.com

An oil price crash would put the brakes on any inflationary pressure and could see the rate hike cycle prematurely interrupted.
$65 a barrel might be hyperbole, but I'd agree with the sentiment that several EU countries would veto any Russian oil ban (which is currently driving the run up in prices) if it meant their populace was disadvantaged....

 

[divs4ever]

my main oil plays are BPT , NHC ( via Bridgeport Energy ) and WPL

 

[qldfrog]

Not too sure what everyone's play is here, but here's a bearish warning for the oil bulls

Failure To Implement Russian Oil Ban Could Send Oil Crashing To $65 | OilPrice.com

Lack of internal support for a full EU embargo on Russian crude oil may take out one of the key fear factors for oil, which may send prices crashing back to $65 per barrel

oilprice.com

An oil price crash would put the brakes on any inflationary pressure and could see the rate hike cycle prematurely interrupted.
$65 a barrel might be hyperbole, but I'd agree with the sentiment that several EU countries would veto any Russian oil ban (which is currently driving the run up in prices) if it meant their populace was disadvantaged....

we have the fundamentals: less and less exploration and greenwash of the economy conflicting with real world and POO..and Ukraine.
Even if Ukraine issue fades, the fundamentals remain..but we would then see POO crash until reality prevails..a bit like POG will imho
That would be a great opportunity to double up on oil...
FWIW, sold my last OOO this morning...nice profit and 48c distribution per share today..the cherry on the cake

 

[divs4ever]

we have the fundamentals: less and less exploration and greenwash of the economy conflicting with real world and POO..and Ukraine.
Even if Ukraine issue fades, the fundamentals remain..but we would then see POO crash until reality prevails..a bit like POG will imho
That would be a great opportunity to double up on oil...
FWIW, sold my last OOO this morning...nice profit and 48c distribution per share today..the cherry on the cake

will Russia ever sell to the West ( 'unfriendly' countries ) again

i might be a total bastard but i WOULDN'T ( price is irrelevant when they try to steal AND avoid payment , they are VERY likely to try it again in the future )

that would mean the West would have to invest in other 'heavy crude ' projects investment into Venezuela might be a bit .. tense
Canada with their tar sands might ( or might not ) be a push-over , so 'green-wash policies' MIGHT be relaxed or reversed ( policies don't work when groups are removed from power )

remember Russia now heavily sanctioned MIGHT embrace trade with other heavily sanctioned nations ( who might likely remain resentful to the West )

does anyone know how much of the global diesel comes from Russian oil ??

nice work on the trade .. i wouldn't have considered OOO in the current climate

 

[Telamelo]

Oil Prices Surge Past $113 As Shanghai Signals End Of Lockdown | OilPrice.com

Oil prices have topped $113 per barrel on optimism that China’s lockdowns are coming to an end and demand will not take a prolonged hit

oilprice.com