Welcome to Tesla Motors Club
Discuss Tesla's Model S, Model 3, Model X, Model Y, Cybertruck, Roadster and More.
Register

Shorting Oil, Hedging Tesla

This site may earn commission on affiliate links.
Low Gas Prices Crush Appalachia Shale Boom | OilPrice.com

So it looks like gas prices below $2.5/mmBtu are too low to sustain production in Appalachia. Starting to see production declines. And producers are headed for bankruptcy. Associated gas can tolerate even lower prices.

So maybe $2.2/mmBtu at Henry Hub is about as low as it can get.

It seems a nasty act of climate aggression to be flooding the markets with so much surplus gas.
There is hope...
"but at the very least, the drilling boom has come to an end."
 
  • Like
Reactions: jhm and ggies07
U.S. refinery sales hit the brakes, with 5% of capacity on block

Anybody want to buy a refinery in the US? About 5% of US capacity has a For-Sale sign on it.

Concerns are margin compression, expensive upgrades needed, and competition from other refineries re-opening in the Caribbean. But unstated in the article is that fuel consumption in North America is declining too. Declining demand is what forces domestic refiners to export and worry about competition that increases trade or decrease imports.

So we are already seeing signs of peak oil demand. It create surplus refining capacity andrives margins down. Eventually some of this surplus refining capacity will need to be shut down. So find buyers now while you can.

I wonder what the scrap metal value is of all that equipment?! Gotta practice those 3-R's - Recycle, Reduce, ... erm, two out of three isn't too bad.
 
Today various outlets reported on a greenshoe bonus from Aramco's domestic IPO. Maybe I'm too cynical, but I suspect this news may be intended to increase interest in upcoming IPOs on larger, more liquid exchanges.

Aramco’s ‘greenshoe option’ pushes IPO to $29.4 billion

DUBAI: Saudi Aramco announced on Sunday that its initial public offering raised a record $29.4 billion, a figure higher than previously announced, after the company used a so-called “greenshoe option” to sell millions more shares to meet investor demand.

The company said that the sale of an additional 450 million shares took place during the initial public offering process.

The oil and gas company began publicly trading on the local Saudi Tadawul exchange on Dec. 11.

It hit upwards of $10 a share on the second day of trading.

This gave Aramco a market capitalization of $2 trillion, making it comfortably the world’s most valuable company.

[...]​

A greenshoe option, or over-allotment, allows companies to issue more shares in an IPO when there is greater demand from participants in the initial offer. Investors were allocated the additional shares during book-building, Aramco said.

[...]

Sunday’s trading figures value Saudi Aramco at $1.85 trillion, still well ahead of Apple, the second largest company in the world after the oil giant.

[...]​
 
  • Informative
Reactions: willow_hiller
This Aramco valuation is obviously be considered nonsense until anyone other than a regional billionaire with a gun to his head invests.

Given their low cost of production, Aramco should be able to justify maybe a $300-500B market cap today. And that's with them pumping enough to driven US fracking out of existence. Odds they'll take any kind of optimal strategy like that appear minimal, so a fair price might be closer to $200B.

Think they'll even be in operation if/when the royal family loses power? There goes that low cost of production.
 
This Aramco IPO seems way to orchestrated. Behind the scenes it's not hard to imagine collusion. "Okay, now that we've all bought in, we're were going to trade shares to each other at $10. Then we'll roll out to another exchange. Then we trade at $12."

It should not be much of a stretch considering OPEC has been price fixing oil of decades. Why not price fix Aramco shares too?
 
CITI and CNBC are catching up.....now just three short years behind this thread.

Citi explains why there's an 'ultimate cap' on oil prices

A shame @neroden isn't here for this phase.
I wish the reporting were a little deeper here. I'd like to piece together a quantitative view of this price cap. We've been discussing this for quite awhile here. Price caps and floors are often about critical prices at which substitutions happen. It sound like the are looking at some substitution between solar and oil. Only a few percent of oil demand is for power generation. So that might not be such a durable cap. Island grids have been switching to solar for several years now. Batteries can further compete with diesel gensets to the point that fuel is only used as occasional back up. Once oil power generation is pushed back to backup use only, this cap should become ineffective.
 
Oil markets shrug off tension in the Middle East
After a brief jump to over $70 a barrel, the price of Brent crude has subsided again

[...]

Oil producers in the Middle East are adjusting to a new normal. Geopolitics threatens to disrupt crude production, but the broader oil market is unconcerned. The threat to oil infrastructure is real. Iran and its proxies may continue to attack pipelines, tankers and processing facilities, as they did last year. “We have squeezed Iran with these sanctions and they have no way out,” says a former senior American military official, who expects further violence. Iraq, which has become the second-largest producer in the Organisation of the Petroleum Exporting Countries (opec), might also see a sudden drop in output. President Donald Trump has threatened sanctions if Iraqi lawmakers make good on their vote this month to push out American forces.

Meanwhile America’s role in protecting the region’s oil infrastructure looks uncertain. “We are independent, and we do not need Middle East oil,” Mr Trump declared on January 8th. That is not strictly true. In October America imported 741,000 barrels a day of crude oil and petroleum products from Gulf producers. [...]

Oil markets are staying calm partly because buyers and sellers seem to be discounting the possibility that Iran will close the Strait of Hormuz, through which around 20% of the world’s oil passes. They are also reassured by Saudi Arabia’s speedy recovery from September’s attacks. The next month Saudi Aramco showed off a vast command centre within its headquarters to The Economist, emphasising its capacity to respond nimbly to any problems. Saudi Arabia has invested in new security measures, too. New supplies from America, Brazil, Guyana and Norway have also helped contain the price of crude. This year geopolitical risk may make oil operations in the Middle East harder, without making oil much more expensive.​
 
Here's the Economist's take on this week's Blackrock announcement.

BlackRock says it wants to do more for the climate
The proof will be in its investment and shareholder-voting strategies

[...]

The direct impact will be limited: the pledged coal divestments, for example, are less than 0.1% of BlackRock’s assets. The indirect impacts may be larger, as firms are prodded to improve disclosure and the share of assets run under green mandates rises. Part of Mr Fink’s motivation is self-interest. Climate change is the biggest concern of BlackRock’s clients, he says. Even as a price war in passive fund management rages, demand for green investment funds is soaring. And BlackRock will integrate climate analysis into Aladdin, a risk-management system that it sells to many other financial firms.

[...]

So is the letter so much greenwash? A good test is whether BlackRock’s active and passive funds vote against the expansion plans of fossil-fuel firms they invest in.​
 
Here's the Economist's take on this week's Blackrock announcement.

BlackRock says it wants to do more for the climate
The proof will be in its investment and shareholder-voting strategies


[...]

The direct impact will be limited: the pledged coal divestments, for example, are less than 0.1% of BlackRock’s assets. The indirect impacts may be larger, as firms are prodded to improve disclosure and the share of assets run under green mandates rises. Part of Mr Fink’s motivation is self-interest. Climate change is the biggest concern of BlackRock’s clients, he says. Even as a price war in passive fund management rages, demand for green investment funds is soaring. And BlackRock will integrate climate analysis into Aladdin, a risk-management system that it sells to many other financial firms.

[...]

So is the letter so much greenwash? A good test is whether BlackRock’s active and passive funds vote against the expansion plans of fossil-fuel firms they invest in.​

Even if the economist is right, that's $7.4B pledged to be divested. But then, they got BlackRock's position wrong though. Mr. Fink isn't saying that it wants to do more for climate change. It said that it needs to be responsive to its investors, who are pushing for action to deal with climate change. So it's not about what Blackrock plans for its investments, but more about what its investors are demanding from BlackRock. So the divestitures (both direct and indirect) will happen.
 
  • Like
Reactions: ggies07
Even if the economist is right, that's $7.4B pledged to be divested. But then, they got BlackRock's position wrong though. Mr. Fink isn't saying that it wants to do more for climate change. It said that it needs to be responsive to its investors, who are pushing for action to deal with climate change. So it's not about what Blackrock plans for its investments, but more about what its investors are demanding from BlackRock. So the divestitures (both direct and indirect) will happen.
It's clear corporations only care about profits. They need to be pushed by people who do care.
I overheard a conversation on the ski tram last week. A woman was telling her friend about her husband's board meeting. Some young people came to request divestiture. She thought they were cute but in the end he husband declined citing the need to maintain profits. (Probably short sighted.)
 
  • Like
Reactions: ABCTG
Big Oil has a do-or-die decade ahead because of climate change
The 2020s are poised to be to energy firms what the 2010s were to utilities—disruptive

[...] of a whopping $80bn or so of capital expenditure by Europe’s seven biggest listed energy firms last year, only 7.4%—less than $1bn each on average—went to clean energy. In order to meet the goals of the Paris agreement to keep global warming below 2°C, the ratio of dirty energy to the clean sort will need to be turned upside down. On January 14th ubs, a bank, calculated that capital spending on renewable energy, power grids and batteries will need to rise globally to $1.2trn a year on average from now until 2050, more than double the $500bn spent each year on oil and gas. To help fund that, it reckons that oil-and-gas companies will need to divert $10trn of investments away from fossil fuels over the same period.

[...]

Yet excuses for prevarication are growing thinner. As Peter Parry of Bain, a consultancy, puts it, it has become “something of a myth” that oil is a high-return industry. As national climate commitments grow more stringent, governments may go on the warpath. ubs argues that it may be necessary for governments to “ban” the $10trn of oil-and-gas investments to reach net zero emissions by 2050. [...]​
 
BlackRock gets praise for coal divestment. What it really needs is regulation | Ann Pettifor

Let’s not beat about the bushfires. It’s not the impacts of climate breakdown on our ecosystems or the world’s poorest in the global south that worries Larry Fink, the CEO of that financial behemoth BlackRock. No, what really worries him and his shadow banking peers is the “fundamental reshaping of finance” threatened by climate protesters, and what this means for his company’s interests.

The real concern is that the world’s politicians and regulators have allowed this behemoth to scoop up our savings, while turning a blind eye to how those savings are managed. This, in turn, has fuelled the creation of vast amounts of credit and debt, which has made the global financial system unstable and fragile.

But self-regulated divestment is not enough. The “reshaping” needs to be democratically enforced and accountable. We must ensure that companies such as BlackRock are brought back down to Earth and properly regulated by public authority. We have to do this if we are to redirect investment into the transformation of economies away from their addiction to fossil fuels and into more sustainable transport, energy and land-use systems.