Shorting Oil, Hedging Tesla

[mspohr]

That sounds like miracle fuel for shipping. Not only is it easy to convert existing ships and engines, but if I'm understanding it right, you can use your ballast tanks (which usually carry water) as an additional fuel tank for methanol. I guess it stays enough separate from the water that you can suck it up as you need it. And methanol can even carry along some water with it and maintain its efficiency when combusted.

Methanol and water do mix and methanol is hygroscopic so you don't want to mix it with water. If you get too much water in your methanol, it won't burn.
Also, methanol is corrosive to metals commonly used in engines and fuel lines.

 

[adiggs]

Methanol and water do mix and methanol is hygroscopic so you don't want to mix it with water. If you get too much water in your methanol, it won't burn.
Also, methanol is corrosive to metals commonly used in engines and fuel lines.

I figured there had to be something - that article, with that as my only information, sounded too good to be true

 

[neroden]

Reuters: Exxon Tries To Block Investor Push For Emission Reduction | OilPrice.com

What's to keep these institutional investors from simply exiting these stocks?

Nothing, but they don't want to take their losses; their positions are large enough to move the stock price down. They could exit and then sue the Exxon board for mismanagement to get compensation, which is what they probably should do.

 

[TheTalkingMule]

Too much oil in the US.
Too much oil in the Middle East.
Far too much oil in Canada.
Now apparently Venezuela can't find a non-embargo buyer for their black gold.

Venezuela Fails To Sell Its Heavy Crude Amid Dwindling Supply | OilPrice.com

Edit: API is now out with last week's US commercial stockpile report.....a large crude draw. Shocking! I wonder how badly the EIA will refute this claim tomorrow? These markets are completely rigged.

 

[jhm]

BP CEO Dudley: U.S. Shale Is ‘A Market Without A Brain’ | OilPrice.com

This one is funny. The CEO of BP complains that US shale only reacts to prices "without a brain." This is an odd criticism because that is exactly what competitive markets do. If price is high, supply increases. If price is low, supply decreases. But apparently this is too mindless for BP. The idea seems to be that producers ought to consider volume demanded and supplied to determine supply moves apart from what is reflected in price. In other words, there should be some sort of gentleman's agreement to jack up price and not produce so much oil as to spoil the market for others. Apparently BP prefers collusion to competition.

This seems to be the kind of price elasticity of supply that we've been hearing about. The US is the number one producing country, and it is simply going to keep taking more market share as long as the price of oil is high enough to do so. OPEC and Russia can cut production if that suits their fancy. But if that supports a higher price of oil, then US shale will keep taking market share.

Welcome to free market economics, BP.

 

[TheTalkingMule]

Great illustration today of how backward the global oil markets are both here and abroad.

Headline...."US commercial stockpile draw of 10M barrels last week!". WTI is up 2.5% and drags Brent with it.

Upon closer inspection of the EIA report for last week.....Total imports to the US are the lowest for any one week since Barry Sanders left the Detroit Lions:



Saudi imports to the US are the lowest single week on record and the 4wk average is cratering worse than May of 2017 when they were purposely manipulating exports to transparent markets:



The largest oil consumer in the world apparently does not need any oil whatsoever and the domestic supply that's cratering import demand is growing exponentially and hasn't nearly peaked.



European demand was down 755k barrels per day in December year-over-year and China demand growth is flattening. How in the hell does one play this from an investor standpoint? We MUST be building a massive global supply glut, but when do prices actually react?

Oil markets are clearly on autopilot based on an algorithms developed with 1952-2006 price action vs. economic indicators. When do market makers wake up to the realities of US production, renewable energy's impact, and a looming global demand peak? Brent should be at $32 right now.

Perhaps the other side of the new reality should be considered as well? We should be tilting into global recession right now, but we're not. Oil is cheap, electricity is absurdly cheap for industrial buyers. Combine that with cheap interest rates and there's no resource tightening to slow things down, put a cap on production and enter a true global recession.

 

[jhm]

What is going on in net import is even more striking? It's not clear why a draw would primarily push up WTI and in turn drag Brent with it. I believe the Saudis our pulling back on heavy crude exports to the US, but the WTI is light crude, which the US tends also to export. So likely the draw is for heavy crude, not WTI crude, so this need not have a primary impact on WTI prices.

 

[neroden]

BP CEO Dudley: U.S. Shale Is ‘A Market Without A Brain’ | OilPrice.com

This one is funny. The CEO of BP complains that US shale only reacts to prices "without a brain." This is an odd criticism because that is exactly what competitive markets do. If price is high, supply increases. If price is low, supply decreases. But apparently this is too mindless for BP. The idea seems to be that producers ought to consider volume demanded and supplied to determine supply moves apart from what is reflected in price. In other words, there should be some sort of gentleman's agreement to jack up price and not produce so much oil as to spoil the market for others. Apparently BP prefers collusion to competition.

Well, that's how the good old Texas Railroad Commission did it in the 1950s, and that's how OPEC did it in the 1970s. Of course he prefers it.

In fact, Adam Smith wrote (in _The Wealth of Nations_) that businessmen always prefer collusion to competition. Of course they do! They make more money that way.

This seems to be the kind of price elasticity of supply that we've been hearing about. The US is the number one producing country, and it is simply going to keep taking more market share as long as the price of oil is high enough to do so. OPEC and Russia can cut production if that suits their fancy. But if that supports a higher price of oil, then US shale will keep taking market share.

Welcome to free market economics, BP.

 

[neroden]

There may be stockpilers. There's strong evidence that the fracking boom is going to bust, and so some may be stockpiling in anticipation.

 

[jhm]

Reuters Survey: OPEC Oil Production Drops To Four-Year Low | OilPrice.com

It is becoming clear that OPEC has hit its demand peak.

In 2017 net demand for OPEC oil hit the peak of 32.90 mb/d. This fell to 31.61 mb/d in 2018, and OPEC expects it to fall to 30.59 mb/d in 2019.

I cannot reconcile how the CEO of Saudi Aramco asserts that peak demand is many decades away, when the more salient peak demand of OPEC oil looks to have happened two years ago. So Aramco must already deal with a post demand peak reality. Sure it could produce more if it wanted to, but that would only lead to lower oil prices which it does not want. That is exactly what post demand peak means. OPEC must continue to reduce production year after year for the foreseeable future because global demand is growing too slowly, slower than non-OPEC producers will increase their supply.

Peak demand has come early for OPEC.

 

[jhm]

Goldman: OPEC To Clear Supply Glut By April | OilPrice.com

OPEC is stuck.

While it’s safe enough to say prices will inch down when OPEC announces the end of the cuts, it is probably the only thing that’s safe to say. Currie told CNBC’s “Closing Bell” that prices could rebound to above US$70 for Brent thanks to the tighter supply and strong demand. But just a month ago worries about oil demand pressured prices and kept them from climbing much higher. In other words, nothing is certain, especially where oil prices are headed.

The uncertainty becomes even more pronounced if we factor in a recent statement by Saudi energy minister Khalid al-Falih that he was willing to extend the production cuts into the second half of the year. Now, this would certainly support prices but leave them vulnerable to economic data from Asia specifically, where everybody looks to gauge future oil demand trends.

So the question is how long OPEC will extend the production cuts. If too long, Brent rebounds above $70/b (or what, $80/b?) throws demand growth into question.

It sure sounds like $70/b is the demand threshold. OPEC want to maximize the price to whatever demand growth will sustain. But this is a level high enough to keep US shale drilling and adding supply faster than demand grows. This locks OPEC into a post peak demand for OPEC oil (global demand minus non-OPEC supply).

I have a question: at what price does demand for OPEC oil grow? It has to be low enough that non-OPEC producers, specifically US shale, pulls growth back to something less than global demand growth? OPEC seems loathed to let oil prices go that low whatever that threshold may be.

 

[adiggs]

I agree with your comment that OPEC is stuck. It looks like at the price they want, those lunatics in the US will just keep funding unending expansion of shale and stealing market share at small margins, breakeven, or losses.

To combat they, they can bring a lot of supply into the market and drive the price down, but that'll hurt OPEC as well.


As long as OPEC is tied to say $70/bbl oil as their target, they turn themselves into the swing producer. A few years ago, being the swing producer was a good thing and made them a lot of money. Today, being the swing producer is looking more and more like "willing to accept whatever demand is left over after all the other suppliers have supplied all that they want to".

I think this is what post Peak demand looks like - some producers are more motivated by total revenue, so they're pumping like made. Other producers are motivated by $$/bbl, and they have enough production that they can restrict their supply in order to sustain the industry wide $$/bbl.


The thing that continues to be kind of weird to me, is that the energy consumers are increasingly living in a world where they don't need to be price takers for the energy they need. There have been bits of this reported from Australia, where a major mining and smelting operation is staying open because its building its own private solar farm to provide the bulk of the energy need to run its smelter.

My surprise is that we're not reading a lot more about energy users / consumers doing that, as long as we're living in a world where the energy providers and utilities are so intransigent about lowering prices of energy.

 

[renim]

...Australia, where a major mining and smelting operation is staying open because its building its own private solar farm to provide the bulk of the energy need to run its smelter.....

historically, refineries etc could buy electricity from the gov at a price based upon cost, with the understanding that perhaps once a year, the refinery might lose power for 1/2 an hour, to cover for annual peak 30 minute load. this saved other electricity users the cost of building a dedicated power plant for 30 minutes use per annum and allowed the refinery to access some the cheapest coal power in the world, about 2cents per kwh.

however, once the power privatized, the population would wonder why big business could get power for 2cents and they had to pay about 20cents. so now big business tends to build their own captive solar plant, to get free electricity, just like how home owning Australians install solar to get free electricity.

 

[TheTalkingMule]

Trying to find the current EIA consumption outlook, but only found charts through Sep 2017. Funny to see the evolution of their "projections".

2013 - EIA projects world energy consumption will increase 56% by 2040

2016 - EIA projects 48% increase in world energy consumption by 2040

2017 - EIA projects 28% increase in world energy use by 2040

I don't see that they did a headline in this format for the 2018 report, which makes sense. Anyone seen that figure around?

Also of note today....Saw a headline on Bloomberg this morning referencing Chinese oil demand peaking in 2025, now I can't see to find it anywhere online. Nice to see it being talked about at least a little bit in the media.

 

[ItsNotAboutTheMoney]

Trying to find the current EIA consumption outlook, but only found charts through Sep 2017. Funny to see the evolution of their "projections".

2013 - EIA projects world energy consumption will increase 56% by 2040

2016 - EIA projects 48% increase in world energy consumption by 2040

2017 - EIA projects 28% increase in world energy use by 2040

I don't see that they did a headline in this format for the 2018 report, which makes sense. Anyone seen that figure around?

Also of note today....Saw a headline on Bloomberg this morning referencing Chinese oil demand peaking in 2025, now I can't see to find it anywhere online. Nice to see it being talked about at least a little bit in the media.

You might be able to find it in the EIA's 2018 International Energy Outlook.
https://www.eia.gov/pressroom/presentations/capuano_07242018.pdf

From
International Energy Outlook 2018

I think there was no headline last year.

 

[winfield100]

You might be able to find it in the EIA's 2018 International Energy Outlook.
https://www.eia.gov/pressroom/presentations/capuano_07242018.pdf

From
International Energy Outlook 2018

I think there was no headline last year.

"........Record U.S. electricity generation in 2018 driven by record residential, commercial sales - Today in Energy - U.S. Energy Information Administration (EIA) sales of electricity do not include distributed generation, such as electricity generated by small-scale solar PV systems installed on residential rooftops. These systems reduce the amount of electricity that consumers need to buy from the electric grid. Although small-scale solar PV generation has grown, its output was not enough to meet increased demand for electricity in 2018. In 2018, customer-sited solar installations produced an estimated 30 million MWh of electricity, compared with less than one million MWh in 2007......"
So, the 30 million MMh is behind the meter and NOT on the graph for residential

 

[jhm]

Also of note today....Saw a headline on Bloomberg this morning referencing Chinese oil demand peaking in 2025, now I can't see to find it anywhere online. Nice to see it being talked about at least a little bit in the media.

Hmm, I can't find that, but I did find this:
China's diesel demand has peaked, gasoline to peak 2025: CNPC research | Reuters
So if EIA is following a similar line of analysis as China, they may well be drawing similar conclusions.

Why do I fell like some political operatives freaked out and had the EIA pull its report?

 

[RobStark]

White House to automakers: Back Trump emissions plan or face costly Calif. rules

 

[mspohr]

White House to automakers: Back Trump emissions plan or face costly Calif. rules

Just evil

 

[TheTalkingMule]

LOL

Saudi Oil Minister: Aramco IPO On Track For 2021 | OilPrice.com