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

[Uccmal]

Possibly with net imports down 912,000 barrels/day or 6.384 million barrels in the last week. However, inventories still did decline by 5.2 million barrels despite refineries consuming 452,000 fewer barrels per day than the most recent 4 week average. That represents 3.164 million barrels in the last week. And exports were not down that significantly or less than 10%. They use the same ports and key areas such as the Gulf and Northeast were not affected by the hurricane.

 

So imported much less and consumed less possibly due to the hurricane? If so, with the talks of Libya and Nigeria apparently coming back on line, the oceans must be filled with full tankers and with it higher tanker daily rates. That is not really what I am seeing looking at the stock charts of FRO and TNK.

 

I would also imagine that refineries will get back to the 16 million barrels/day of consumption in a few weeks with the end of the maintenance/turnaround season leading to 4.4 million barrels/week additional of consumption.

 

With OPEC having not cut yet. Just discussions leading up to the November meeting. It seems clear looking at the last 6 to 8 weeks of U.S. data that we are into a deficit already on this side of the ocean. Not sure about Europe and elsewhere but, with the law of supply and demand, you would think that if the U.S. inventories are being depleted that it should be a similar case elsewhere.

 

Cardboard

 

Cardboard/Joe, you both want my opinion of course :-).   

 

Cdbd, I think you are right about tankers getting emptied.  I also, think, and may have mentioned it elsewhere, that the OPECs and Russia are willing to agree to cuts because they have already made them.  I think they were pumping more than they could for a good year and their ability to pump more , or even at the same level, , ex. Major investment, is simply not there.  Even those guys need to plan ahead for major capex.  It is not as simple as just turning on a tap.  The Russians are probably in the same situation. 

 

There is no way in hell that Iran and SA would agree to a cut if it wasn't going to happen organically while they are lobbing bombs at one another all over the region. 

 

Totally an opinion piece from someone who knows about as much about the situation as anyone else actually knows. 

[Cardboard]

"Cdbd, I think you are right about tankers getting emptied.  I also, think, and may have mentioned it elsewhere, that the OPECs and Russia are willing to agree to cuts because they have already made them.  I think they were pumping more than they could for a good year and their ability to pump more , or even at the same level, , ex. Major investment, is simply not there.  Even those guys need to plan ahead for major capex.  It is not as simple as just turning on a tap.  The Russians are probably in the same situation."

 

Tankers were emptied because funds could simply not make money anymore with the contango. And I think that many pension funds who had moved into "alternative" investment during the resource super cycle and who hoarded oil as a form of investment had a look at their resource exposure and decided to reduce. 

 

Regarding OPEC and Russia, there is no indication from official and non-official sources of a reduction in production yet. Flattening and at max production yes. But, everywhere else with such capex cuts including in China (near a 6 year low) there is a decline occurring:

 

http://www.cnbc.com/2016/10/19/reuters-america-update-5-oil-rises-as-chinese-output-drops-us-inventories-shrink.html

 

Cardboard

 

 

 

[sculpin]

Believe this is the correct call on what will take place...

 

http://www.investorvillage.com/groups.asp?mb=19168&mn=55710&pt=msg&mid=16484384

 

Its been a long two years are we here yet?

We hear of all of the oil that will come from Nigeria & Libya and the ongoing

glut of crude and product.

 

The above two countries could add 700-800m bbl. p/d if stable

 

Iran and Iraq can add 300-400m additional if the majors invest in them.

 

All could be true and an additional 1mm to 1.2mm bbl. of crude could come to market

in 2017.

 

Kazakhstan will add 100m plus but at what cost.

 

CAPEX is down much greater than costs.

 

During the shale boom cos. were spending 200-300% of their C/F to get oil that

needed $70-80 to B/E. Today that oil has received $40-50. Cos. are spending

about 110% of their C/F overall.

 

How much oil will they bring to market to reverse the decline?

 

RJA stated 700-900 rigs are needed to balance the market. We have 443 drilling

for oil today.

 

David Demshur is correct net declines will be over 1mm bbl. p/d in 2017. Demand

will be an additional 1mm bbl. p/d.

 

We will need all the worlds oil.

[DooDiligence]

Declining dayrates for MODU's & OSV's.

 

Ditto for sevice hands & I'm just guessing that SLB & others are probably doing everything they can to reduce lifting costs.

 

Low depletion rates for deepwater as opposed to tight shoreside plays.

 

I went the easy route with VDE as oil hit $30 & would add if it went lower (you guys are more capable of deep dives on individual operators & quite frankly; I'm a coward...)

 

Most of the above is just me trying to convince myself that I'll get to keep my job!

[Cardboard]

"Most of the above is just me trying to convince myself that I'll get to keep my job!"

 

I wonder what is going to be your reaction when Hillary will state: "We are going to put out of business a lot of oil & gas workers".

 

Cardboard

[DooDiligence]

"Most of the above is just me trying to convince myself that I'll get to keep my job!"

 

I wonder what is going to be your reaction when Hillary will state: "We are going to put out of business a lot of oil & gas workers".

 

Cardboard

 

The needs of the many & all that.

 

I don't want to lose my job but I have spent the past decade preparing.

 

I own my home (built 2 years ago) & I have no debt & a nice pile saved up.

 

I do home renovations on my time off & have actually been thinking about taking it on full time.

 

I already voted absentee for Hillary (I'm at work now & haven't missed a vote in decades...)

 

If you lived in Florida we'd cancel each other out...

[Uccmal]

"Most of the above is just me trying to convince myself that I'll get to keep my job!"

 

I wonder what is going to be your reaction when Hillary will state: "We are going to put out of business a lot of oil & gas workers".

 

Cardboard

 

The needs of the many & all that.

 

I don't want to lose my job but I have spent the past decade preparing.

 

I own my home (built 2 years ago) & I have no debt & a nice pile saved up.

 

I do home renovations on my time off & have actually been thinking about taking it on full time.

 

I already voted absentee for Hillary (I'm at work now & haven't missed a vote in decades...)

 

If you lived in Florida we'd cancel each other out...

 

Cmon Cardboard, we already have at least two threads dedicated to your hatred of the Clintons. 

 

:)

[Cardboard]

The API report last night was pretty negative with a 4.8 million U.S. oil inventory build vs expectation for a 400,000 barrels build.

 

http://www.marketwatch.com/story/crude-prices-tumble-as-us-inventories-rise-sharply-opec-deal-fears-rise-2016-10-26

 

Gasoline inventories were also on the rise. So overall a bearish report. I don't expect the EIA report at 10:30 to be that different since both have been pretty aligned in recent weeks.

 

The bigger concern vs this weekly swing to a build, while we are about to end the refinery turnaround season, is Iraq which expressed their disagreement to cut or cap their production this week-end. It is amazing to me that a large OPEC member such as Iraq agrees for cooperation in Algiers, then in Istanbul, then comes up with these comments. These are the same people who had major difficulties paying their oil contractors for 2016 and are now shooting themselves in the foot.

 

Nonetheless, most if not all these OPEC producers continue running deficits and this will hurt badly at some point bringing unintended consequences. Raising production by a few 100,000 barrels/day in Iraq sounds like a very bad economic decision vs the extra revenue from higher prices.

 

Cardboard

[Cardboard]

"I don't expect the EIA report at 10:30 to be that different since both have been pretty aligned in recent weeks."

 

Wow! I was totally wrong.  :D

 

Very positive across the board except for some increase in U.S. production.

 

Cardboard

[Uccmal]

"I don't expect the EIA report at 10:30 to be that different since both have been pretty aligned in recent weeks."

 

Wow! I was totally wrong.  :D

 

Very positive across the board except for some increase in U.S. production.

 

Cardboard

 

They were very different.  Any ideas why, or who is more accurate, or if any of it is even relevant?

[Joe689]

Both EIA and API use the exact same survey.  API is voluntary in that they cannot compel companies to return the survey.  EIA survey is mandatory.  This is how I understand it.

[JayGatsby]

Both EIA and API use the exact same survey.  API is voluntary in that they cannot compel companies to return the survey.  EIA survey is mandatory.  This is how I understand it.

So basically the API survey is an estimate based on a certain % of surveys and EIA is accurate based on 100% of surveys? Could this be compared to exit polling on election night (API being exit polls, followed up by actual votes cast)? I follow the stats at zerohedge (don't laugh, they're actually the best source for a synopsis of this data that I've found so far), and haven't understood the frequent wide gap between API and EIA.

[Uccmal]

Both EIA and API use the exact same survey.  API is voluntary in that they cannot compel companies to return the survey.  EIA survey is mandatory.  This is how I understand it.

So basically the API survey is an estimate based on a certain % of surveys and EIA is accurate based on 100% of surveys? Could this be compared to exit polling on election night (API being exit polls, followed up by actual votes cast)? I follow the stats at zerohedge (don't laugh, they're actually the best source for a synopsis of this data that I've found so far), and haven't understood the frequent wide gap between API and EIA.

 

So, the consensus here might be:  ignore the actual numbers each week, but follow the broader trend. 

 

Its funny.  I used to pump gas and we measured our storage tanks using dipsticks, the truck driver delivering the fuel used a dipstick before and after using a dipstick.  And this is how we were billed (+/- dozens of litres).  But over time with different trucks and different dipsticks with each truck it probably was relatively accurate.  This is kind of how I envision these weekly stats.  Inaccurate and imprecise as hell, but able to show a trend.

 

What blows my mind is the amount of trading (multi billions per day) that happens around rig counts, inaccurate reserve measures, and talking heads. 

[Joe689]

Precisely,  both reports are estimates.  One estimate just has a larger sample size....  Only thing reliable is the long term trend. 

[sculpin]

Peter Tertzakian ‏@PTertzakian  Oct 27

 

This is unsustainable...IMF projects that oil exporting countries will pack on $340 billion in new debt (2017-2021):

 

 

http://www.wsj.com/articles/oil-companies-shift-exploration-tactics-curb-spending-1477474206

 

[Cardboard]

API reported a 9.3 million inventory build last night... I don't know what to make of it anymore. Is this going to be reversed again by EIA this morning ? I can't see "luck" working in our favour two weeks in a row.

 

If EIA is reporting a large build too, where is this oil surge coming from?

 

OPEC being all aligned and now the Iraqis followed by the Iranians apparently refusing to participate in any cap is not helping the oil price. I hope that capital markets will be closed to these guys seeing how little trust they deserve.

 

Cardboard

[DooDiligence]

We've been sitting at the dock for nearly 2 weeks so I got nothing as to the Loop facility anchorage occupancy rate (wish we'd get some cargo...)

[Uccmal]

API reported a 9.3 million inventory build last night... I don't know what to make of it anymore. Is this going to be reversed again by EIA this morning ? I can't see "luck" working in our favour two weeks in a row.

 

If EIA is reporting a large build too, where is this oil surge coming from?

 

OPEC being all aligned and now the Iraqis followed by the Iranians apparently refusing to participate in any cap is not helping the oil price. I hope that capital markets will be closed to these guys seeing how little trust they deserve.

 

Cardboard

 

You didn't expect this to be linear did you?

 

EIA reported 14.4 million barrel build. 

 

So much for statistics.  Its all BS.  How do you get a sudden inventory build of 14 million barrels?

And the markets trade on this information. 

 

BTE and PWT reported as expected earnings today.  BTE even paid off 80 million debt in the Quarter. 

I haven't had a chance to check if either advanced their hedges while oil was up.  Regardless of what happens my 3 direct oil holdings will survive at these prices for at least a couple of years. 

 

What we do know:

1) Opec is pumping the most it ever has.

2) Russia is pumping the most it ever has.

3) Oil investment is way down from 2014 and long project investment is a fraction of what it was. 

4) Worldwide demand is stable or growing.

5) No one really has a clue what is going on in the short term.

6) In the past higher prices have always followed lower prices.  The same applies to all commodity cycles.

 

Looks like a buying opportunity to me. 

 

 

[tombgrt]

Hm, interesting how it's all bullshit when it goes against you. I bet it didn't feel that way when it was the other way around with inventory dropping. Why even bother watching the numbers when you are just going to rationalize when the trend reverses against you?

 

 

 

[KinAlberta]

Hm, interesting how it's all bullshit when it goes against you. I bet it didn't feel that way when it was the other way around with inventory dropping. Why even bother watching the numbers when you are just going to rationalize when the trend reverses against you?

 

Maybe read Uccmals prior post, on prior page.  Sounds reasonable.

 

 

Actually, here, let me post it below:

 

 

Both EIA and API use the exact same survey.  API is voluntary in that they cannot compel companies to return the survey.  EIA survey is mandatory.  This is how I understand it.

So basically the API survey is an estimate based on a certain % of surveys and EIA is accurate based on 100% of surveys? Could this be compared to exit polling on election night (API being exit polls, followed up by actual votes cast)? I follow the stats at zerohedge (don't laugh, they're actually the best source for a synopsis of this data that I've found so far), and haven't understood the frequent wide gap between API and EIA.

 

So, the consensus here might be:  ignore the actual numbers each week, but follow the broader trend. 

 

Its funny.  I used to pump gas and we measured our storage tanks using dipsticks, the truck driver delivering the fuel used a dipstick before and after using a dipstick.  And this is how we were billed (+/- dozens of litres).  But over time with different trucks and different dipsticks with each truck it probably was relatively accurate.  This is kind of how I envision these weekly stats.  Inaccurate and imprecise as hell, but able to show a trend.

 

What blows my mind is the amount of trading (multi billions per day) that happens around rig counts, inaccurate reserve measures, and talking heads.

[Uccmal]

Hm, interesting how it's all bullshit when it goes against you. I bet it didn't feel that way when it was the other way around with inventory dropping. Why even bother watching the numbers when you are just going to rationalize when the trend reverses against you?

 

Maybe read Uccmals prior post, on prior page.  Sounds reasonable.

 

 

Actually, here, let me post it below:

 

 

Both EIA and API use the exact same survey.  API is voluntary in that they cannot compel companies to return the survey.  EIA survey is mandatory.  This is how I understand it.

So basically the API survey is an estimate based on a certain % of surveys and EIA is accurate based on 100% of surveys? Could this be compared to exit polling on election night (API being exit polls, followed up by actual votes cast)? I follow the stats at zerohedge (don't laugh, they're actually the best source for a synopsis of this data that I've found so far), and haven't understood the frequent wide gap between API and EIA.

 

So, the consensus here might be:  ignore the actual numbers each week, but follow the broader trend. 

 

Its funny.  I used to pump gas and we measured our storage tanks using dipsticks, the truck driver delivering the fuel used a dipstick before and after using a dipstick.  And this is how we were billed (+/- dozens of litres).  But over time with different trucks and different dipsticks with each truck it probably was relatively accurate.  This is kind of how I envision these weekly stats.  Inaccurate and imprecise as hell, but able to show a trend.

 

What blows my mind is the amount of trading (multi billions per day) that happens around rig counts, inaccurate reserve measures, and talking heads.

 

Thanks Kin.  Saved me from replying. 

[Cardboard]

API reported a build of 4.4 million barrels last night and EIA is reporting 2.4 million now.

 

However, there is a big decline in everything else (gasoline, distillate, etc.) making Total Stocks down 7 million barrels (includes crude). This is despite refineries consuming 2.6 million more barrels of crude this week.

 

There was a major decline in net imports of 10.9 million barrels for the week so, we are seing some normalization that could help explain the huge crude build of 14.4 million barrels last week or the largest since records were kept.

 

On the bearish side, we are seeing a big increase in Lower 48 States production of 163,000 b/d or 1.141 million barrels for the week. I find that a little weird since there was no large increase in rig count recently and the oil price has been down quite a bit over the last 2 weeks. It could be a surge in initial production from drilled but uncompleted wells. We have also had a large weekly increase of 150,000 b/d (if I recall properly) 4 or 5 weeks ago that was mostly reversed in subsequent weeks.

 

Unlike for Alaska, this is a production estimate and has been unreliable on a week to week basis. The number is still large, so we will have to see next week to see if a trend is forming or not.

 

Cardboard

[tombgrt]

 

What we do know:

1) Opec is pumping the most it ever has.

 

 

 

Oh look, OPEC output jumps and they expect even more for 2017. But that's bullish right?

 

Thesis drift?

[Cardboard]

Why don't you short it? Put your money where your mouth is.

 

At the end of the day, the largest OPEC producers all get destroyed financially if they continue acting irrationally. Civil war or war ensues leading to massive production drop: see Libya and Nigeria.

 

Cardboard

[Cardboard]

We had also mentioned that the drilling industry was slowly being dismantled. Here is further proof to that:

 

http://www.stockwatch.com/News/Item.aspx?bid=Z-C%3aESN-2420808&symbol=ESN&region=C

 

Many have moved back "home" which means 1,000's of km for some. Returning means moving costs, abandoning a new found job in a different field, disrupting the family, all for a potentially higher paying job with zero certainty as to its duration.

 

Ramping back up to previous production level in the NA shale industry will prove much more difficult that the media has made so many believe. Based on the above, it is pretty clear that drilling costs have reached a bottom and that producers will have to pay more for new wells. Indication of that are multiple in current Q3 reports.

 

And this is for shale which is more flexible with low investment, low risk per well. For deepwater, the situation has got to be much worse.

 

There is no thesis drift in the very large producing bucket outside OPEC and Russia.

 

Cardboard