Shorting Oil, Hedging Tesla

[mspohr]

Estimates from IHS Markit show that China's crude oil inventories will have jumped by 440 million barrels in the first half this year—the largest six-month increase in inventories anywhere in the world, ever. If imports continue to rise at a record rate, floating storage may become the only option.

China Sees Tanker Traffic Soar As Oil Storage Runs Out | OilPrice.com

 

[TheTalkingMule]

US Dept of Energy is apparently working to formalize it's new role as "swing storage" for US oil producers. Absurdly inappropriate.

 

[mspohr]

What’s Holding Back A Full Recovery In Oil Demand | OilPrice.com

Oil demand recovering to pre-pandemic levels will likely take more than a year and a half. The recovery will not be V-shaped, but it's so uncertain and could be so bumpy that no letter in the alphabet can describe it.

I vote for L

 

[jhm]

A 90% Clean Grid Can Be Achieved Quickly. What’s Holding It Back?

Most decarbonization proposals play out over 30 years, aiming toward 2050. But a new roadmap from researchers at UC Berkeley and the policy firm Energy Innovation shows the grid can get to a level of 90% clean in just 15 years' time.

No new fossil fuel plants. Lower rates for consumers. 85,000 lives saved. 500,000 additional jobs. Region by region, the researchers lay out exactly how it can be done.

The sooner we get to 90%, the more time we'll have to figure out the last 10%. But I have a hunch that the last 10% will be much easier to solve once we're 80% there. This is no time for feetdragging.

 

[renim]

US Dept of Energy is apparently working to formalize it's new role as "swing storage" for US oil producers. Absurdly inappropriate.

This is actually a good fit for a responsible government. Its very similar to how hydroelectric dams dams operate with releasing water for irrigation.

How this differs from private enterprise is that in private enterprise, profit is only considered maximised when curtailment is demonstrated. Bad for wider society.

But buying low, selling high to stabilse prices and make a nice profit. If water storage guys can do it, why not oil storage?

It also is in direct opposition to how OPEC wages oil war, and oil traders make their profit.

 

[TheTalkingMule]

Buying oil for the SPR is perfectly fine, especially in times of low price. What's not appropriate is oil companies using the SPR for their own private storage needs.

 

[renim]

This would be a great time to have a spy in china. Just how do they maintain their strategic storage, in multiple commodities?

I dont know if american politics on either side can appreciate the benefits of price stability and how to profitably obtain it

Perhaps the lure of killing the golden goose is just too great, come time for election promises.

 

[mspohr]

Big cheese has a similar problem

What’s Gotten Into the Price of Cheese? What’s Gotten Into the Price of Cheese?

 

[TheTalkingMule]

On the oil tanker stock front....

Got a random price alert for TNK today that it dropped below $14. Apparently I thought that was relevant back in March.

Anywho, TNK(Teekay Tankers) is a large global operator of midsize oil tankers. SP has been stubbornly high since covid, but market cap is now below $500M. Adding a bit of this to my FRO tanker/storage play.

My bet is that a lot of these shady tanker stocks will take the true fundamental opportunity of ultra-high charter rates to throw off large dividends and raise share prices......so they can quietly cash out. That's what I would do if I were a scumbag.

 

[navguy12]

So you're asking, "what will the exact price of a barrel of oil be a few weeks from now?"

Not at all.

 

[jhm]

Buying oil for the SPR is perfectly fine, especially in times of low price. What's not appropriate is oil companies using the SPR for their own private storage needs.

I'm fine with private companies leasing storage capacity. Public still generates revenue, and it avoids the risk of public funds getting used to buy high and sell low, a form of subsidization.

 

[renim]

I'm fine with private companies leasing storage capacity. Public still generates revenue, and it avoids the risk of public funds getting used to buy high and sell low, a form of subsidization.

There are some pretty simple ways (or complex if desired) to avoid subsidization given enough time.

But thats another topic.

 

[mspohr]

Europe could face oil shortage in a decade, study warns

Europe could face oil shortage in a decade, study warns

Europe could face a shortage of oil within the next decade, making the move to increase the use of low carbon energy even more urgent, according to a new report.

The study has warned that oil production may fall faster than the EU’s reliance on fossil fuels, raising the risk of a looming oil supply crisis and severe market price shock

“The impact on society from an undersupplied oil market is largely under-communicated, so a rapid energy transition is crucial not only for the climate but also to avoid enduring recessions in emerging markets triggered by undersupply of oil and energy,” Nysveen explained.

He concluded the forecasts offer “yet another reason” for economies to reduce their reliance on oil.

 

[Oil4AsphaultOnly]

Europe could face oil shortage in a decade, study warns

Europe could face oil shortage in a decade, study warns

Europe could face a shortage of oil within the next decade, making the move to increase the use of low carbon energy even more urgent, according to a new report.

The study has warned that oil production may fall faster than the EU’s reliance on fossil fuels, raising the risk of a looming oil supply crisis and severe market price shock

“The impact on society from an undersupplied oil market is largely under-communicated, so a rapid energy transition is crucial not only for the climate but also to avoid enduring recessions in emerging markets triggered by undersupply of oil and energy,” Nysveen explained.

He concluded the forecasts offer “yet another reason” for economies to reduce their reliance on oil.

Seems like an overly simple analysis. At 10 years out, and with the amount of known oil reserves, any supply shortfalls will be a result of production decisions the year before (shale oil production is being drawn down due to price competition, not because the wells are dry). Isn't the point of strategic oil storage (of which, both the US and China has one) to act as a buffer against temporary supply shortages. In which case, although the price of oil might rise, it shouldn't be possible to reach "crisis" levels like the 1970's oil embargo.

 

[TheTalkingMule]

Nonsense. Demand has now peaked....and all of the sudden we're worried about supply?

If anything we're trending in the other direction. Consensus used to be that production wouldn't be able to ramp up and down fast enough as fossil investment waned. Now it's looking much more likely we'll be in a glut until the end of oil for transport.

There's just too many entities exclusively reliant on oil extraction. They're gonna pump til they're dumped. And fracking being taken over by the global majors means it can likely be ramped up and down quite quickly and dramatically.

I see nearly zero chance of a supply shortage within 10 years. Then by 2030 demand will reeeeally start to decline. There will be major supply/price swings then, but who cares? Most everyone will have EVs.

 

[jhm]

There are some pretty simple ways (or complex if desired) to avoid subsidization given enough time.

But thats another topic.

Sure, it can be avoided. But the problem is that it is in the hands of politicians to do the right thing!

 

[jhm]

Nonsense. Demand has now peaked....and all of the sudden we're worried about supply?

If anything we're trending in the other direction. Consensus used to be that production wouldn't be able to ramp up and down fast enough as fossil investment waned. Now it's looking much more likely we'll be in a glut until the end of oil for transport.

There's just too many entities exclusively reliant on oil extraction. They're gonna pump til they're dumped. And fracking being taken over by the global majors means it can likely be ramped up and down quite quickly and dramatically.

I see nearly zero chance of a supply shortage within 10 years. Then by 2030 demand will reeeeally start to decline. There will be major supply/price swings then, but who cares? Most everyone will have EVs.

A supply shortfall would mean that a lot of oil producers missed an opportunity to turn a profit prompting more oil. That would require a significant shift in the mindset of oil producers. Most would prefer to lose money pumping oil at a loss than to sit out a chance to break even.

And I agree. Oil storage has gotten huge, especially in China. This means market can run a deficit for a very long-time before critical shortages. There is plenty of time for the price of oil to trend upward and stimulate massive production growth.

Also a long price signal like this can hasten the purchase of EVs and other equipment that avoid oil consumption. This is one reason why I am eager of Tesla to start cranking out the Semi. When a diesel truck in your fleet is sucking down 165k gallons of diesel to go 1 million miles, a diesel price increase of $1/gal pretty much pays for the cost of a new Tesla Semi. Put another way, as the price of diesel goes up the time breakeven on an electric semi over a new diesel on becomes really short. So demand for the Semi goes way up. Each Semi sold can offset about 1 b/d of demand for diesel. A couple years of expensive oil could take a serious bite out of oil demand creation and accelerate the entire trucking industry along an irreversible path to electrification.

 

[jhm]

Three Companies That Are Bigger Than The Entire Oil & Gas Industry | OilPrice.com

The oil&gas industry is starting to realize that is is dwarfed by the value of the big tech. Moreover, the three tera-cap companies, Apple, Microsoft and Amazon are all investing heavily in renewable energy.

I'd also point out that little ole Tesla at $186B market cap is withing striking distance of surpassing ExxonMobil at $198B. A little hop to $1065 per Tesla share would do it.

One could argue that Aramco at $1.88T is bigger than Apple, but it is hard to take this valuation seriously when 98.3% of shares are owned by the Saudi government. The value of shares not held by the government is a mere $32B, easily swayed by sovereign controlling interest.

 

[TheTalkingMule]

You should never take investment advice from a random internet discussion forums, but if you were looking to play the the oil tanker / storage angle, now might be a good time to get in.

Picked up a bit of TNK @$12.60 and FRO has dipped down to $7.50 and lower today. A full Wednesday US stockpiles update coming later tomorrow, but I did peek and total stocks continue to rise. US production also jumped back up.

I still don't see how we avoid a global price shock similar to the WTI dip negative, but this time based on too much actual oil not just paper oil contracts. That should cause a major rush to floating storage that won't end in 2020.

 

[mspohr]

30% of shale oil companies could go belly up if crude stays this cheap - CNN