Future strategy to survive discovering 1 out of every 20 bbls of oil we now use.

[Cardboard]

ENB is good but, trapped: they can't make more than a regulated rate of return.

 

If you like a good yield, there is not much better IMO than TOG, WCP and CPG in that order in my mind. This is light oil with high netbacks. And the first two have really good balance sheets, low decline rate and high yields.

 

I like CVE, beautiful Christina (Lake) and their CEO but, when you look at WCS and consider that for these guys that you need to substract 1/3 to 1/4 per barrel of condensates at $75 CAD/barrel to mix with their bitumen to flow into pipelines it gets ugly fast.

 

Cardboard

[tombgrt]

I knew US production was likely to surprise to the upside but jesus... Certainly makes me rethink the entire thesis. With oil down again on this fierce stock rally, one has to wonder how soon we will reach <$60 WTI again.

[Uccmal]

I just read WCPs results and they could easily have doubled the dividend from cash flow.  They are using the cash to being down debt which is good, but I have a hunch they are getting ready to acquire something.  Pure speculation. 

 

 

[Uccmal]

I knew US production was likely to surprise to the upside but jesus... Certainly makes me rethink the entire thesis. With oil down again on this fierce stock rally, one has to wonder how soon we will reach <$60 WTI again.

 

Tom, the headline number was bad but the total petroleum reserves was down quite alot.  A number of big refiners are doing maintenance.  Otherwise, who knows.  At some point the lack of spending worldwide will catch up.  At least thats the hope which is all I have to go on right now:-( .

 

Cheers, Al

[Cardboard]

Yeah and the 300,000 bls/day gain in Lower 48 production is just return to normal production in the GOM following hurricanes. It had gone lower by a similar amount in previous weeks if you look.

 

Q4 last year showed suprising draws in oil and this should reappear soon with refineries starting back up and Uccmal also pointed out correctly that overall petroleum products inventory (including oil) was down a lot or 7.9 million barrels which is enormous considering an oil build of 3.2 million barrels!

 

Also keep in mind that you have Trump manipulating numbers for the mid-term election and he added 1.5 million barrels last week via the SPR. So the 3.2 million barrels build in oil that you see in the press is only 1.7 million. These SPR draws are ending soon after the election...

 

Personally, I thought it was a very bullish report showing very strong product demand accross the board. Makes me wonder how refineries will be able to cope with demand by going back up only 5 to 7 million barrels/week?

 

A few weeks ago, a fund manager said simply: people have jobs in record number and will continue using their cars to go to work. A hike in gasoline price won't change that.

 

I think that puts to rest any of this demand fear that the market seems so worried about.

 

Cardboard 

[Cardboard]

And yes, very strong results from WCP.

 

I bought WCP, TOG and CPG in recent weeks due to their large exposure to Saskatchewan which is seeing much better pricing. Moreover, their netbacks are so high vs the rest of Canadian producers with their light oil that they can almost survive anything. Plus you get paid a 5% yield or more on each of them. Market has gone nuts!

 

These were the most expensive names in Canada for a long time for good reasons and now they sell at very attractive metrics.

 

Cardboard

[tombgrt]

I can't really see anymore how we can draw with the numbers OPEC put up tbh. Guess we could be below 60 really soon.

[sculpin]

Back to horse and cart (assuming there is food for the horse) in the Socialist paradise...

 

#VENEZUELA SUSPENDS FUEL SALES NATIONWIDE UNTIL FURTHER NOTICE AS PDVSA EXHAUSTED ITS SUPPLY - FUTPV OFFICIALS: ARGUS. #OOTT

 

Venezuela running out of fuel, PdV suspends supply

Published date: 02 November 2018

 

Venezuelan state-owned PdV has nearly exhausted its motor fuel stocks, forcing up to 80pc of the country's more than 2,700 service stations nationwide to suspend sales until further notice, according to four senior officials with the federation of oil unions (FUTPV).

 

"The national gasoline deficit is the worst it has ever been," one of the officials said. "Venezuela could be completely out of gasoline and diesel for vehicles in as little as a week."

 

Argus witnessed hundreds of vehicles in lines stretching over a mile at six service stations in eastern Caracas yesterday and today. The station operators said PdV halted gasoline and diesel deliveries completely over the past 72 hours.

 

Service stations in the capital region normally are resupplied up to three times per week.

 

Station operators contacted by Argus in 12 of Venezuela's 23 states including Anzoátegui, Aragua, Barinas, Bolivar, Carabobo, Cojedes, Lara, Miranda, Portuguesa, Táchira, Yaracuy and Zulia confirmed that PdV also suspended fuel supplies to their locations since 29 October.

 

Senior oil union officials in the capital and the states of Anzoátegui and Zulia said the fuel shortage stems from the nearly complete shutdown of PdV's refineries, the suspension of fuel imports for financial reasons and the breakdown of all but 250 of PdV's more than 1,400 tanker trucks used for local distribution.

 

Venezuelan gasoline and diesel have long been sold for next to nothing. With PdV´s refineries largely shut down, the Opec country is increasingly dependent on imports and can no longer afford to keep supplying the local market. The government in recent months pledged to charge international prices for fuel sold to Venezuelans without a government-issued homeland identity card, as a way to rationalize consumption and curb smuggling to neighboring countries, mainly Colombia. But many Venezuelans resisted, and new card-reading systems at service stations were never properly installed.

 

Local refineries, which have total nameplate capacity of 1.3mn b/d, are barely operating. according to oil union officials on site at some of the facilities, including the 940,000 b/d CRP refining complex, comprised of the 635,000 b/d Amuay refinery and nearby 305,000 b/d Cardón refinery.

 

"Cardón hasn´t been processing any crude for two weeks and Amuay is currently running only 20,000 b/d," Freites said.

 

The 140,000 b/d El Palito refinery on the coast of Carabobo state and the 190,000 b/d Puerto La Cruz refinery in Anzoátegui are effectively halted because of crude supply deficits and unit breakdowns.

 

Crude that was going to the refineries is now being exported to pay debt and generate oil revenues, FUTPV oil union national general secretary José Bodas said.

 

Since early October, PdV has also started cutting imports of finished and unfinished gasoline and components used to manufacture gasoline, the union officials said.

 

PdV reduced imports of some products last month ahead of paying close to $1bn in bond principal and interest due on 27 October. "But naphtha imports appear to have increased since September so that PdV can produce more DCO for export to pay its debts to China and other partners," Bodas added, referring to diluted crude oil (DCO), a mix of Orinoco extra-heavy crude and diluent in the form of naphtha.

 

Since early October PdV also has been diverting crude supplies that had been earmarked for its local refineries in an effort to reduce debts it owes its joint venture partners by delivering crude shipments in lieu of cash.

 

The energy ministry and PdV have not commented on Venezuela's growing fuel deficit

 

 

 

[Cardboard]

Now Goldman Sachs agrees with Nuttal's conclusion of unavoidable supply crunch:

 

There will be an oil shortage in the 2020's, Goldman Sachs says

http://www.cnbc.com/id/105564757

 

It does not matter for now it seems but. people will be crying soon.

 

Cardboard

[Cigarbutt]

-Here's a report:

https://cdn2.hubspot.net/hubfs/4043042/Commentaries/2018.Q3%20Commentary/2018.09%20Goehring%20&%20Rozencwajg%20Market%20Commentary.pdf?t=1541776307196&utm_campaign=2018%20Q3%20Commentary&utm_source=hs_automation&utm_medium=email&utm_content=67134262&_hsenc=p2ANqtz-9pSnqFOIIjRoJQ3aOW1pmgXwn3ggTPSiKH0gc2I3nsettj2Po2RmFs0nXSdc7txXwkEiKT3RwMaTqNie0SqsVzk0p47g&_hsmi=67134262

 

IMO excellent analytical work, including the part on the Aramco IPO.

 

-Went back to the initial reference:

http://eurift.eu/file.php/Twilight-in-the-Desert-Presentation-B-W.pdf-2005-10-27/

 

Helpful reminder that projections are forward looking and prone to revisions, sometimes large. But even if the market gets numb because of what seem to be repeated false alarms, the fundamentals do eventually play out.

 

-The supply side of the equation has a lot to do with the "true" amount of proven reserves in Saudi Arabia. There is a real possibility that the IPO will never be realized because valuation would not meet the test of transparency.

http://studies.aljazeera.net/mritems/Documents/2018/9/18/5202af0c990848d8902aed184d41aa46_100.pdf

 

The energy "transition" is likely to take much longer than consensus and if I could get rid of nagging concerns about demand, I would say that there may be a few PetroChinas out there.

 

"In economics, it’s far easier to tell what will happen than when it will happen. I mean, you can see bubbles develop and things, but you do not know how big the bubble will get."  Warren Buffett (2005), watching the value of his PetroChina stake.

[Cardboard]

"The consensus is we are going to do whatever it takes to balance the market. If that means trimming supplies by a million (bpd), we will,” Saudi Arabia’s al-Falih said Monday.

 

https://www.cnbc.com/2018/11/12/opec-analysis-shows-need-for-a-production-cut-of-1-million-bpd.html

 

“Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.”

 

Cardboard

[Joe689]

Saudi's getting aggressive.    Be no reason for Russia not to follow suit.  They already said they will go with the consensus.    So it looks like a cut is almost guaranteed. 

 

I think there is some relation dynamics to this as well.  The Khashoggi killing evidence is looking worse and worse for the Saudis.  Seems to me that there will no choice but to hold them accountable in some way.  US will likely act together with allies.  Mid term elections are over, US will be forced to lay the hammer on Saudi... I think this spells higher oil prices as the Saudi's will now get aggressive with prices.

 

 

[SharperDingaan]

Saudi's getting aggressive.    Be no reason for Russia not to follow suit.  They already said they will go with the consensus.    So it looks like a cut is almost guaranteed. 

 

I think there is some relation dynamics to this as well.  The Khashoggi killing evidence is looking worse and worse for the Saudis.  Seems to me that there will no choice but to hold them accountable in some way.  US will likely act together with allies.  Mid term elections are over, US will be forced to lay the hammer on Saudi... I think this spells higher oil prices as the Saudi's will now get aggressive with prices.

 

You might want to keep in mind that what SA & Russia does not produce, Iran can (via market displacement).

SA & Russia also may well not be able to sustain output at the current level (production + storage), & Trump wants lower oil prices, not higher ones.

(assumes SA actually has the money to pay for all the big deals they've recently been signing).

 

To many people - Iran was sent an olive branch. 

Work with us to raise prices (by not compensating for our cutbacks) and we'll work with you to find a way out of the current sanctions?

Both our regimes survive the coming changes?

 

Just a different point of view.

 

SD

 

 

 

[sculpin]

From Marshall Adkins of Raymond James today...

 

Conclusion: Near term oil prices torpedoed by Trump, but 2020 Brent prices still headed to $100/bbl

 

As we’ve covered in today’s report, several bearish factors have converged in the past few weeks (since our oil upgrade) to drive a

sharp downward correction in oil prices. Despite the oil price collapse, our global oil model has not changed and we still believe the

long term fundamentals point to meaningfully higher oil prices over the next two years. So, what drove the oil collapse? First and

foremost it was Trump backing away from his commitment to “put the screws” to Iran. Additionally there have been several other

bearish oil drivers including: 1) increasing U.S. oil inventories, 2) robust U.S. production growth for August, 3) the potential restart of

the neutral zone, 4) increasing concerns about future global oil demand growth, and 5) the resulting technical breakdown and

massive reversal in speculative position – all came to “bear” in relatively short order to drive more than a 20% correction from the

recent oil price peak. But more importantly, what have these transitory factors changed in regard to our oil model. Our answer is

not a whole lot, from a long term supply demand perspective.

Fine, oil prices are still on track to be meaningfully higher in 2020 – but, what catalysts get oil prices moving and when will they show

up? To begin with, the speculative oil positions have now shifted into oversold territory. That means any positive data points over

the next few months could easily drive a sharp upward recovery rebound. With the midterms now behind us and oil prices

noticeably lower, we expect Saudi will proactively temper output (and we think a modest supply swing would have a big impact on

inventories). Additionally, we think there is still potential upside relating to how much Iranian production comes off line. All in, the

next few months could continue to be sloppy for oil prices but we expect enough bullish catalysts to emerge in early 2019 to reverse

the meltdown of the past few weeks. More importantly, the oil market is still on track for Brent prices to move above $100/bbl in

2020.

[sculpin]

RJ pdf attached...

trumpoil.pdf

[Cardboard]

Now the IEA also agrees that a supply crunch is coming:

 

https://www.bloomberg.com//news/articles/2018-11-13/oil-market-reliance-on-u-s-shale-potential-is-risky-iea-says?srnd=markets-vp

 

Cardboard

[Spekulatius]

Saudi's getting aggressive.    Be no reason for Russia not to follow suit.  They already said they will go with the consensus.    So it looks like a cut is almost guaranteed. 

 

I think there is some relation dynamics to this as well.  The Khashoggi killing evidence is looking worse and worse for the Saudis.  Seems to me that there will no choice but to hold them accountable in some way.  US will likely act together with allies.  Mid term elections are over, US will be forced to lay the hammer on Saudi... I think this spells higher oil prices as the Saudi's will now get aggressive with prices.

 

Agreed. The only reason the hammer didn’t come down yet on the Saudi‘s is because Trump wants lower crude prices.

[Cardboard]

Do you recall earlier this year when there was a massive spike in VIX volatility due to speculators unwinding bets on low volatility.

 

Now it seems to be in natty:

 

https://www.themacrotourist.com/posts/2018/11/13/chipper/

 

What the author is missing however is that fundamentals for nat gas are really good with inventories well below normal, weather much colder than normal, LNG plants ramping up in the U.S. and new nat gas pipelines starting up and being built to Mexico:

 

http://ir.eia.gov/ngs/ngs.html

 

Cardboard

[sculpin]

 

So (if this data from HFIR is accurate) December could bring very large drops in US oil inventories and very strong NG prices. Along with the end of tax loss selling, the performance of energy equities could be quite surprising...

‏

@HFI_Research

 

October was one of the lowest exports ever to the US from Saudi, Mexico, Iraq, and Venezuela.

 

November may break that October low.

 

Implications? Watch US crude imports starting the end of Nov into Dec.

 

#OOTT $USO

 

https://blog.clipperdata.com/misdirection-of-houdini-sized-proportions

 

 

http://blog.gorozen.com/blog/interim-special-report-on-the-oil-sell-off?utm_campaign=Blogs&utm_content=79974515&utm_medium=social&utm_source=twitter

 

 

[Uccmal]

FWIW Sculpin, I think the Canadian Oil patch is in tax loss selling mode right now.  I guess we wait a few weeks and see if things turn even without any change in fundamentals. 

[DTEJD1997]

hey all:

 

A happy Thanksgiving to all!

 

I am wondering if the low oil prices have something to do with politics.

 

Specifically, I wonder if Trump & the Saudis have reached an agreement of sorts.  Something along the lines of the USA will go soft on the murder of the journalist in exchange for the Saudis pumping, selling & flooding the market for the next year or so?

 

Saudis get a pass, and USA (Trump) gets low oil prices?

 

Any thoughts?

[Cardboard]

Truth of it is that the Saudis got betrayed by Trump when he gave 180 days waivers to about the 8 largest buyers of Iranian crude just around the mid-term election.

 

They had already opened up the taps along with Russia to avoid any supply disruption as Trump had asked for help and mentioned many times the desire to take Iranian exports to zero starting Nov 4. This was discussed at OPEC June meeting.

 

This reversal in U.S. policy caused oil price to plunge 30% in recent weeks.

 

Now ask yourself this question? Are the Saudis going to lose billions of $ and run a big deficit again only to save a prince who is not liked at all by a lot of members of the family who will be deciding if they nominate him or not as king once the old man dies?

 

Or this question: will the Saudis fear any Trump reprisal if they cut back on excess production to balance the market while he is hell bent on selling weapons to them and keep American jobs while they could turn around anytime and buy Russian?

 

Cardboard

 

 

[Spekulatius]

Yes, I believe that oil prices are influenced  by politics. Trump makes no bones about that he wants to push oil prices down when they are too high.

 

FWIW, I just added to my CVE position. I am not sure it’s the best bet out there,  it I owned already some, so I don’t have to do any additional work to buy more. It sure seams cheap,  it then again, the discounts for heavy oil to WTI are horrifying, although CVE has a partial hedge via their refinery operations.

[Cardboard]

Maybe that my memory is poor but, I never recall two heads of state shaking hands like this:

 

https://www.cnbc.com/2018/11/30/watch-putin-and-saudi-crown-prince-mbs-exuberant-handshake-at-g-20.html

 

Oil cooperation should be assured. Both countries need higher prices to keep their people happy and quiet.

 

I have read that Platts indicated the rig count down 25 in the U.S. last week. We will see in less than 5 minutes what Baker Hughes has to say.

 

It is imperative that U.S. producers slow down their madness. I was thinking that investors would demand more discipline from producers considering the debacle mostly of their own doing in 2014. It seems to have worked for a while and now they got back to their drill no matter what mode.

 

This is an interesting video. I disagree with some of the conclusions but, it certainly goes to the issue that I mentioned or little regard for return on capital, decline rate, capital efficiencies and free cash flow.

 

 

Cardboard

[Cigarbutt]

^Thanks, many parts of the latter video were quite informative.

For instance, I had not realized that, to stay on the treadmill, the frackers have relied more on net rounds of "fresh" equity than junk debt although I think that junk issuance in the Permian moved into high gear during the first half of 2018.

 

Interesting parallel also to what a certain Wilbur Ross said about shale in 2015 when he described a wall of debt coming due in 2018. The wall has grown higher.

 

Assumption: this is not a Ponzi scheme and investment in shale has a rational basis but requires the ability (discipline) to survive a poorly defined period of red ink.

 

Inverting back around 2010, how would one go about annihilating capital discipline? I would lower interest rates and keep them low in a whatever it takes kind of way. In my humble experience, spontaneous discipline is not a given.

 

Speaking of annihilation, I have a creepy feeling that the two "leaders" shaking hands share similar pleasures when hearing certain sounds coming from certain journalists. In my humble experience, spontaneous cooperation is not a given.

 

The idea is to encourage the winners and to get rid of the zombies.

The way to get there is open for debate.