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OPEC+ Could Cut Up To 2.7 Million Bpd | OilPrice.com
This is surprising. OPEC is considering a 2.7 mb/d production cut. This is quite significant. I think is is nearly a 9% cut. This has got to be painful.
This is surprising. OPEC is considering a 2.7 mb/d production cut. This is quite significant. I think is is nearly a 9% cut. This has got to be painful.
hmm a comment from above
'One other reason behind Russia’s reluctance to join any cuts is that its economy can live with an oil price of $40 a barrel or less compared with $85 or even higher for OPEC members. Moreover, Russia has financial reserves estimated at more than $550 bn so it can afford to wait until the coronavirus outbreak is contained before making an assessment about the need for new cuts in support of oil prices.'
TheTalkingMule
Distributed Energy Enthusiast
Lol......this is a new one. I guess this weeks crude oil report is literally too bad to release!
TheTalkingMule
Distributed Energy Enthusiast
Apparently not, commercial stockpiles only up 1M last week to a still elevated 444Mb.
Net imports hit a new all-time low of -1.52Mb/d on production of 13.1Mb/d. We are PUMPING.
Net imports hit a new all-time low of -1.52Mb/d on production of 13.1Mb/d. We are PUMPING.
TheTalkingMule
Distributed Energy Enthusiast
Overcapacity Pushes Chinese Refiners’ Profits Down 42% In 2019 | OilPrice.com
China has zero demand growth this year. There is substantial overcapacity of refineries, and China expects to add about 3% more capacity next year.
This takes me back to the concern that peak oil demand could crush the profitability of refiners. The simple thing to watch out for is overcapacity. While oil fields and oil wells have a natural decline rate of several percent annually. How about refinery capacity? Overcapacity can push margins down to the point that only marginal cost is covered, not enough to cover capex, expensive maintenance and other general overhead.
Moreover, this margin compression can come at a time when refiners need to retool to focus on petrochem. Some of this new capacity is supposed to be "integrated." If I understand correctly, this is supposed to be integrated with petrochem.
China has zero demand growth this year. There is substantial overcapacity of refineries, and China expects to add about 3% more capacity next year.
This takes me back to the concern that peak oil demand could crush the profitability of refiners. The simple thing to watch out for is overcapacity. While oil fields and oil wells have a natural decline rate of several percent annually. How about refinery capacity? Overcapacity can push margins down to the point that only marginal cost is covered, not enough to cover capex, expensive maintenance and other general overhead.
Moreover, this margin compression can come at a time when refiners need to retool to focus on petrochem. Some of this new capacity is supposed to be "integrated." If I understand correctly, this is supposed to be integrated with petrochem.
mspohr
Well-Known Member
Nationalizing the Power Industry Isn’t Radical
Far from a radical socialist sledgehammer, nationalization and its variants have been used by both Democratic and Republican administrations, sometimes to wide acclaim. The fuel and utilities industries, which Sanders’s platform focuses on, present a particularly good case for some kind of government intervention.
Thanks to oil and gas companies, who’ve ridden high on cheap debt since the last recession, energy carries the largest corporate debt burden of any sector. In the past month, the coronavirus has suppressed demand for oil, bringing prices below $50 a barrel, flirting close to the break-even price for producers in the American Southwest’s prolific Permian Basin. As the Wall Street Journal has reported, $137 billion worth of oil and gas debts will mature between 2020 and 2022, much of that from companies with negative cash flows; amid a recession, that could spell disaster.
Nationalizing these companies as their valuations plummet, some progressive economic advocates argue, could provide a pathway for such communities and the country as a whole to transition quickly toward a low-carbon economy, rather than suffering larger disruptions as CEOs and investors walk away with whatever’s left; coal miners have seen the latter all too often.
The Democratic Socialists of America are now running a number of campaigns to bring electric utilities under public ownership, with the aim of decarbonizing them along a science-based timeline. In the Bay Area, that’s meant calling on Governor Gavin Newsom to take control of PG&E, which is sitting in tens of billions of dollars’ worth of wildfire liabilities, thanks in large part to neglecting basic safety and maintenance measures. It’s worth noting, as well, that publicly owned utilities aren’t a rarity, either in the United States or abroad, where privatization has looked to make them accountable to shareholders rather than ratepayers.
Far from a radical socialist sledgehammer, nationalization and its variants have been used by both Democratic and Republican administrations, sometimes to wide acclaim. The fuel and utilities industries, which Sanders’s platform focuses on, present a particularly good case for some kind of government intervention.
Thanks to oil and gas companies, who’ve ridden high on cheap debt since the last recession, energy carries the largest corporate debt burden of any sector. In the past month, the coronavirus has suppressed demand for oil, bringing prices below $50 a barrel, flirting close to the break-even price for producers in the American Southwest’s prolific Permian Basin. As the Wall Street Journal has reported, $137 billion worth of oil and gas debts will mature between 2020 and 2022, much of that from companies with negative cash flows; amid a recession, that could spell disaster.
Nationalizing these companies as their valuations plummet, some progressive economic advocates argue, could provide a pathway for such communities and the country as a whole to transition quickly toward a low-carbon economy, rather than suffering larger disruptions as CEOs and investors walk away with whatever’s left; coal miners have seen the latter all too often.
The Democratic Socialists of America are now running a number of campaigns to bring electric utilities under public ownership, with the aim of decarbonizing them along a science-based timeline. In the Bay Area, that’s meant calling on Governor Gavin Newsom to take control of PG&E, which is sitting in tens of billions of dollars’ worth of wildfire liabilities, thanks in large part to neglecting basic safety and maintenance measures. It’s worth noting, as well, that publicly owned utilities aren’t a rarity, either in the United States or abroad, where privatization has looked to make them accountable to shareholders rather than ratepayers.
mspohr
Well-Known Member
https://www.investors.com/news/us-shale-oil-boom-threats-fracking-revolution/
Meanwhile, solar and wind are set to overtake natural gas electricity production far faster than experts predicted just a year ago.
And the shale industry faces its own issues. Well productivity has peaked, while prime drilling areas may soon be fully tapped. Meanwhile, shale oil and gas companies haven't generated returns for investors, who no longer want to finance expansion given environmental and political risks.
Meanwhile, solar and wind are set to overtake natural gas electricity production far faster than experts predicted just a year ago.
And the shale industry faces its own issues. Well productivity has peaked, while prime drilling areas may soon be fully tapped. Meanwhile, shale oil and gas companies haven't generated returns for investors, who no longer want to finance expansion given environmental and political risks.
TheTalkingMule
Distributed Energy Enthusiast
Most of the far left ideas on transition have been completely wrong-minded IMO, including this one. Simple clear FERC rules would have the same impact in a far far more efficient manner.
Mandate grid-level storage capacity build-out as a function of regional demand and seasonal variance. Flip the power dynamic so homeowner and business interests outweigh those of utility investors. We don't need complex solutions, just political will behind a simple and transparent top-down rebuild of regulation. I will save you my rant normal 4 paragraph rant on how Germany has ALREADY DONE THIS.
Edit to add: Mandate building codes wire every new home for easy import/export of electricity via solar or storage.
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TheTalkingMule
Distributed Energy Enthusiast
That was a post from last October, before we had any coronavirus or related contagion. If you'd asked me back then what the absolute worst case scenario would be for oil, I'd have described precisely what's happened since then.
US production growth isn't negative or slowing, it continues on it's upward trajectory as if nothing's changed. 13M+b/d in the US has taken us firmly and permanently into exporter status as of this month. See: 4wk moving average of net crude/products imports...
That chart combined with flat demand from China means WTI is going to $30. It's become physically impossible to see any other possible reality. WTI @ $30 means full on consolidation of US fracking. At the same time I think we'll see oil majors stocks rebound after corona passes in 3 weeks, there is simply too much money out there searching for yield.
We are in the perfect storm for can't-miss longterm oil industry shorting. The big players will get bigger relatively cheaply and the market will likely see that as a positive this summer, but decades-long dividend bumps cannot be maintained for the next 18 months.
We rode the TSLA rocket up to this new level, time to ride oil's drop to 50% of today's valuation. Good times.
Dr. J
Active Member
I'm not so sure I like the idea of the government being the buyer of last resort for stranded fossil assets. Investors who are overinvesting in fossils should have no hope of government bailouts. Talk of saving jobs is just political hostage taking. Socializing fossil losses is not a good idea in my view.
mspohr
Well-Known Member
I think the point is to buy fossil assets at market value. If they are stranded assets they should be a low price. Stranded assets have some value to someone at the right (low) price and if the government buys them at their low market value, they can be retired. If a private person buys them, they will sell the assets to be burned.
So basically, the government can buy an retire fossil fuel assets at a very low market price. Not a bailout.
How isn't this the case? AC is by nature bidirectional. or we talking 2 different ideas
China Could Start A New Solar Price War | OilPrice.com
Solar price war? The author is not aware that new installations are pursuing higher ratios of DC to AC, and this is leading to better economics for around the clock solar. As we've discussed new oversized plants with batteries are pushing a 60% capacity factor at 4c/kWh. Any sort of module price war will only push this trend faster and drive us more demand for batteries. I'm not worried about oversupply, coal and gas should be worried though.
Solar price war? The author is not aware that new installations are pursuing higher ratios of DC to AC, and this is leading to better economics for around the clock solar. As we've discussed new oversized plants with batteries are pushing a 60% capacity factor at 4c/kWh. Any sort of module price war will only push this trend faster and drive us more demand for batteries. I'm not worried about oversupply, coal and gas should be worried though.
This presumes a liquid market with lots of well funded buyers and that the government only buys a tiny fraction of distressed assets. But the whole notion of distressed assets is that there really are not many eager buyers. When the government becomes are substantial buyer, it essentially pushes the market prices higher than if the government were not buying at all.
So while the policy intention may lie elsewhere, the likely economic outcome is that the government props up asset prices, which amounts to a wealth transfer from tax payers to oil and gas investors. Moreover, if a government were to stop production on these assets, this would shrink supply and drive up fuel prices to the benefit of oil and gas investors still producing in their own assets. So again this is a wealth transfer from tax payers to oil and gas investors.
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