Oil Spike

[noirua]

How oil price boom could put global economy at risk

www.ii.co.uk

Oil prices are at another eight-year high, with the world seemingly powerless to stop the rise. Today's 7% increase came despite only the fourth-ever coordinated oil release from the International Energy Agency since its founding in 1974 – the others being the Gulf War in 1991, Hurricanes Rita and Katrina in 2005, and the Libyan civil war in 2011.

 

[Dona Ferentes]

Not sure the supply response will be as rapid?
(What's the answer to higher oil prices? Higher oil prices)

 

[waterbottle]

Not sure the supply response will be as rapid?
(What's the answer to higher oil prices? Higher oil prices)

View attachment 138751

Does Shale oil compensate for this?

 

[Dona Ferentes]

many of the rigs are involved in tight oil. The issue is the spending by the companies.

The last $100-per-barrel cycle lasted around three years, from March 2011 to August 2014.

• oil producers have no plans to ramp up production.

They changed their spending plans after the last energy bear market. Instead of plowing money into exploration and production, they’re returning cash to shareholders through dividends and share buybacks. Oil majors like BP (BP), Exxon Mobil (XOM), and Chevron (CVX) plan to spend $38–$41 billion on buybacks this year, according to the Financial Times .

Looking at BP, and you’ll see how this is playing out…

• From 2011 to 2014, BP spent an average of $27.5 billion annually on capital expenditures and acquisitions. In 2021, it spent less than half that—just $12 billion. Analysts expect that figure to stay low for the next few years.
• Meanwhile, BP plans to pour $3–$5 billion annually into alternative energy investments for the next eight years. And it could spend over $4 billion on buybacks this year alone. That’s more money pulled away from oil production.

 

[rederob]

Does Shale oil compensate for this?

It could.
But so far it has not.
Note that the international rig count excludes North America:

As @Dona Ferentes points out above, oil majors are consolidating their position in the market rather than breaking new ground.
Meagre profits in the past led to massive slide in oil company share prices over recent years and I think they are trying to turn this around. But if they get back into a drilling frenzy, oil prices will again collapse.

 

[waterbottle]

Do spikes down count?

Crude down 11%.... USA is working Venezuela for oil, UAE calls for more output from OPEC, meanwhile EU admits they can't give up Russian oil immediately so are phasing it out over 2022

 

[qldfrog]

Do spikes down count?

Crude down 11%.... USA is working Venezuela for oil, UAE calls for more output from OPEC, meanwhile EU admits they can't give up Russian oil immediately so are phasing it out over 2022

I think Russia should ban oil export to Europe.they can sell it to china..same same but with opacity
Oil price will rise,china gets it at a discount but even discount higher than pre crisis, and paid in real money
does anyone realised US has just voluntarily remove the trust in usd.
It is just another fiat at the mercy of a change of government

Win win for China and Russia imho

 

[Dona Ferentes]

Urals crude is high sulphur; Chinese refineries are not set up for it.

 

[qldfrog]

Urals crude is high sulphur; Chinese refineries are not set up for it.

Do not worry too much about that.our coal was low ash and sulfur
and has been replaced in China within 3 months with crappy one.

 

[Country Lad]

Crude oil prices rose sharply again as the prospect of an early peace faded, and the United Arab Emirates appeared to backtrack on comments that it may break with the OPEC+ pact on production discipline.

Iraq’s Energy Minister also repeated his country’s adherence to the pact, which had been criticised for not raising output quickly enough to accommodate the recovery in global demand after the pandemic. U.S. inventories fell again last week as record high gasoline prices failed to make a noticeable dent in consumption.

By 6:25 AM ET, U.S. crude futures were up 3.4% at $112.40 a barrel, while Brent crude was up 4.3% at $115.89 a barrel.

 

[Smurf1976]

USA is working Venezuela for oil, UAE calls for more output from OPEC, meanwhile EU admits they can't give up Russian oil immediately so are phasing it out over 2022

Key issue here is production capacity.

Oil in the ground is one thing but all it really amounts to is a potential source of oil.

What matters to the market is oil above ground and in that context there's a lot of constraints. Estimates do vary but in short:

*There's effectively zero unused oil production outside OPEC + Russia (before the invasion). Anywhere else, if someone's got the capacity to produce then they're producing.

*OPEC spare capacity falls a long way short of Russian export volumes. Russia exports (pre-invasion) 7.5 million barrels per day and whilst estimates do vary, most put OPEC spare capacity at very much less than that.

This one claims 2.3 million bpd spare: https://oilprice.com/Energy/Oil-Prices/OPECs-Shrinking-Capacity-Could-Send-Oil-Above-100.html

OPEC+ will see its spare capacity reduced to just 2.3 million bpd by July 2022, at the height of the driving season, according to Bloomberg estimates.

Other estimates are order of magnitude similar.

For Iran, the country claims capacity of 3.8 million bpd versus present production around 2.4 million on recent figures. As a one-off it's also generally thought that Iran's above ground oil storage facilities are full or very close to it, meaning that they could achieve a temporary surge of exports by draining those if sanctions were lifted. Obviously that's a one-off boost but it's a boost nonetheless.

Anyone's guess what Venezuela could produce and by when - the wheels have basically fallen off their oil industry pretty spectacularly. There's plenty in the ground but not a lot of ability to get it out.

The one thing I really disagree with is the EU's claim that they'll free themselves from Russian oil and gas by the end of 2022. Well, OK, they might stop importing it, they might have no choice in that, but I disagree that they'll have an alternative actually in place in that time. It's simply war propaganda in my view there - talking tough but without any real backing in practice with gas being the biggest problem of the lot.

My reasoning there is simply the scale of what's required. There's too many cars, trucks, buses, boilers and so on using oil or gas throughout the EU + UK to convert any serious number of them to some other fuel in the time available meanwhile the worldwide production capacity for oil and LNG, excluding Russia, isn't sufficient to end reliance on Russia simply through logistics.

Time will tell but in my view if there's to be no buying from Russia in the near term, and in this context "near term" means the next few years, then it'll be done in a chaotic manner not "business as usual" with alternative energy or alternative sources of oil or gas.

There's no quick and easy fix here, it's not like saying that if Coles is out of stock of pasta then you just go to Woolworths instead. Doesn't work like that when what you're trying to buy is an additional 45% output of the entire worldwide LNG industry excluding Russia. Things just don't get built that quickly.

45%?

To replace Russian gas supplied to Europe by pipeline with LNG would add about a third to worldwide LNG use. With the added problem that 8% of present worldwide LNG production is indeed from Russia. Add those two up and it's a 45% increase in non-Russian production required.

That's simply too massive to do that quickly. Even China with its well known ability to build things quickly can't build refineries, petrochemical plants or anything else with a maze of pipes and so on full of high pressure flammable gas in just a few months and 45% worldwide is an epic task. At least it is unless pretty much every country with gas in the ground declares a wartime emergency and "just do it no matter what" - possible I suppose but unlikely in practice.

 

[Smurf1976]

Current Ampol terminal gate prices for reference.

Price is for bulk loads, minimum 35,000 litres, and includes taxes but does not include delivery (it's the price to fill the tanker at the bulk terminal).

Location = Sydney

E10 = 197.40

91 = 200.82

95 = 213.39

98 = 220.13

Diesel = 213.88

Add delivery and whatever margin the service station adds and it's getting rather costly.