Shorting Oil, Hedging Tesla

[ggies07]

Can't remember who posted this, I think it was in the short-term thread, but interesting developments happening......

In U-Turn, Saudis Choose Higher Prices Over Free Oil Markets

We know the kingdom has had a high deficit, but I really hope the American people didn't just raise gas prices on themselves because some want to sue the kingdom.....

The kingdom has the highest budget deficit among the world’s 20 biggest economies, may delay its first international bond issue and now faces fresh legal uncertainty after the U.S. Congress voted Wednesday to allow Americans to sue the country for its involvement in 9/11.

And this is sad to see....it was a nice thought to have that they were starting to move away from oil.....oh well.....

Just months ago, Al-Falih’s predecessor, Ali Al-Naimi, proclaimed it didn’t matter whether oil prices went “down to $20, $40, $50, $60 a barrel -- it is irrelevant.” Al-Falih now says prices, hovering under $50 a barrel, need to rise to encourage long-term investment.

 

[adiggs]

It may be that the Saudis can increase the price of oil simply by saying they will constrain production, or even by simply removing 500k bbd from their production. My first blush reaction is it sounds like they've gotten confused, where previously they were clear that every barrel they could pump and didn't, was a barrel that would never be pumped and sold. My personal expected outcome is the Saudis will say it, but all of the boots-on-the-ground reports will be that production by the Saudis doesn't change at all.

I'm thinking the world and investors are still adjusting to the idea that there's a lot of oil in the world that doesn't come from Saudi Arabia, that SA can't dictate world supply or price of oil, and that the industry has too many long term price pressures driving to lower prices. Just one of which is that we've already discovered and brought into production all of the oil that we get to extract and burn, if we want to avoid the predicted AGW outcomes / meet the Paris Accords.

My point isn't that the science is correct or incorrect (wholly different argument) - my point as investors is that the oil & gas industry has a really big forcing function constricting it's ability to develop and deliver more product. Obviously the lobbyists will be getting funded and will go to work on loopholes, exceptions, and wholesale repeal. The larger trend is established however, and I wouldn't want to be betting an higher oil prices over anything than the very short term.

 

[renim]

FWIW, looking at the latest EV sales figures. China is larger than the next 4 markets combined.
EV Sales: Markets Roundup August 2016 (Updated)

2016 figures
China 193k
USA,Norway,UK,France 140k combined

(hey there is still 53k gap!, thats enough to fit in Germany at 14k and Japan at 17k)
Wow

 

[Erleichda]

oops

The Billion Barrel Oil Swindle: 80% Of U.S. Oil Reserves Are Unaccounted-For

 

[renim]

China Plans to Grant Low-Speed Electric Car Makers Legal Status

1 Chinese province alone, more than 330,000 unregulated low-speed EVs were sold in the first eight months of this year.

what about the other provinces?



Can't see the forest for all of the trees.

 

[Gerardf]

Posted in ST thread, but relevant here as well :

Batteries May Trip ‘Death Spiral’ in $3.4 Trillion Credit Market

• Fitch advised utilities to lower their risk by diversifying into clean energy technologies.

Batteries have the potential to “tip the oil market from growth to contraction earlier than anticipated,” according to Fitch. “The narrative of oil’s decline is well rehearsed -- and if it starts to play out there is a risk that capital will act long before” and in the worst case result in an “investor death spiral.

 

[doggusfluffy]

Exxon Enters No Man's Land

While most companies have written down the value of their reserves in light of cheap oil, Exxon has not—in line with its own 2014 report suggesting that none of its reserves were at risk of being stranded. In September, the Securities and Exchange Commission launched a review of its accounting practices.

Despite its status as the best in the business, Exxon's finances have been crushed by lower oil prices. Its revenues have been cut in half, and its profits are down 75 percent since 2012. Debt has quadrupled over the past four years. For the first time since the Great Depression, Exxon lost its AAA credit rating this year. For the first time since 1992, it did not fully replace its oil and gas reserves last year. And an earnings announcement Friday showed production had sunk to a 7-year low as profit slid.

 

[ggies07]

Exxon Enters No Man's Land

Maybe this new article compliments yours?

ExxonMobil Is Digging Its Own Grave | OilPrice.com

I don’t know how many American’s caught this little tidbit released last week when Exxon stated its Q3 report,

Exxon Mobil Corp. warned that it may be forced to eliminate almost 20 percent of its future oil and gas prospects, yielding to the sharp decline in global energy prices.

Under investigation by the U.S. Securities and Exchange Commission and New York state over its accounting practices—and the impact of future climate change regulations on its business—Exxon on Friday disclosed that some 4.6 billion barrels of oil in its reserves, primarily in Canada, may be too expensive to tap.

At the end of 2015, the company reported a total of 24.7 billion barrels of oil equivalent. That figure includes oil, liquids and natural gas. However, if we just consider their oil and liquid reserves of only 14.7 billion barrels, a 4.6 billion barrel write down would amount to nearly one-third of their oil reserves. This is much greater than the 20 percent stated in the article.

 

[ggies07]

French oil major Total to install solar panels at 5,000 service stations

French oil major Total (TOTF.PA) announced on Tuesday plans to equip 5,000 of its service stations across the world with solar panels, which it said would cut Total's electricity bill by $40 million a year.

 

[replicant]

French oil major Total to install solar panels at 5,000 service stations

For some context, Total's CEO recently unveiled the company ambition for the next 20 years.
Patrick Pouyanné : « Total va intégrer un nouveau métier : l’électricité »

• vertical integration for all energy sources (oil, gaz and renewables)
• switch to low-cost oil projects, as oil decreases in the world's energy mix
  
• creation of a new branch for electricity generated from gaz and renewables
• big investment in gas infrastructure and power distribution to end customers
• some investment in non-solar renewables (e.g biofuels)
• ongoing vertical integration in solar: SunPower subsidiary now exploits solar plants
  
• no plan to invest in nuclear energy

Their current focus is clearly on gaz production, for which they're trying to boost the demand.

They still consider themselves as an oil major but view the 21rst century as 'electric'. They'll integrated themselves as much as possible, to cover the all value chaine: production, transformation and distribution.

They publicly acknowledge climate change and says they'll work to limit global warming to 2°C.
They want renewables to reach 20% of their mix within 20 years, but they admit it's more a symbol than goal, though.

 

[TheTalkingMule]

Given the speed at which Germany has ramped up solar and wind, I wouldn't think the French(as a whole) really have a choice. Being a nuclear country sitting right next to a renewables country with massive peak surpluses will be a huge expense as we move forward. As electricity markets open up, the French will see profit margins for their electricity at peak rapidly shrink and demand will dwindle at night as more and more powerwall-type systems are integrated.

Oil is going away, and even though we'll need more juice, nuclear will be far less profitable. The French are in a bit of a bind.

 

[TNEVol]

I am probably being too simplistic and would like to hear from jhm,Neroden and others but my reading of the oil market leads me to believe that either a drastic cut in supply or a similar increase in demand is what oil companies need from external forces including the Trump Administration. I can see how Trump can cause problems with humankind and with TSLA stock prices but I fail to see how his oil policy can affect the company sales. The best case for big oil is price increase which would clearly positively affect Tesla sales. On the other hand, increased supply (Dig baby dig) negatively affects price which doesn't appear to affect Tesla sales much. And why increase supply in an oversupply situation? Perhaps voiding the Iranian agreement could help price by eliminating the surplus but increased pricing still appears to favor Tesla. Cafe standards (relief?) may increase demand but what good is that if price is unaffected? Help me understand how Trump policy on oil would have much affect on Tesla demand.

 

[ggies07]

Well *sugar*! This is not good for our progress with transitioning to sustainable energy or the environment......

USGS Announces Largest Oil And Gas Deposit Ever Assessed In U.S.

 

[TheTalkingMule]

This is great news. Keep global prices down so tar sands extraction isn't economically viable or necessary and Russia/Saudi Arabia keep spiraling toward bankruptcy.

Nothing is going to stop the transition to 100% renewable energy, we've long passed that tipping point.

 

[ggies07]

This is great news. Keep global prices down so tar sands extraction isn't economically viable or necessary and Russia/Saudi Arabia keep spiraling toward bankruptcy.

Nothing is going to stop the transition to 100% renewable energy, we've long passed that tipping point.

I guess, I just see this as an opportunity for Trump to jump on his "oil/coal energy independence" mentality.

 

[Cobos]

I guess, I just see this as an opportunity for Trump to jump on his "oil/coal energy independence" mentality.

I agree on that, but what would realistically stop Trump from doing just that anyway? As a Norwegian I'm hoping for oil at $100 (I said hoping, not that I think it will happen) and hence bigger EV industry. The more interesting question I guess is what this will do with OPECs wish to increase the price slightly. And as US oil companies has been on a starting death spiral, these kind of cheap oil reserves might be able to let them pretend the emporer still has clothes on.

Cobos

 

[RobStark]

South Texas to get America’s largest new refinery since ‘77

A Houston company is looking to pump $500 million into South Texas to create the largest new refinery in the U.S. in nearly 40 years.

The facility — located in the southwest corner of Duval County off of Texas Highway 359 — will be able to process up to 50,000 barrels of Eagle Ford shale light crude oil a day, and will have up to 4 million barrels of available storage, the company said in a news release.

 

[neroden]

South Texas to get America’s largest new refinery since ‘77

A Houston company is looking to pump $500 million into South Texas to create the largest new refinery in the U.S. in nearly 40 years.

The facility — located in the southwest corner of Duval County off of Texas Highway 359 — will be able to process up to 50,000 barrels of Eagle Ford shale light crude oil a day, and will have up to 4 million barrels of available storage, the company said in a news release.

They'll probably go bankrupt, unless they've done something very clever, which they might have; I can't tell from the article.

Most oil refineries today are optimized for gasoline production. That's going to be a disaster financially within 10 years. If they've optimized their refinery for *jet fuel* production, they'll be sitting in the catbird's seat as all the other refineries go bankrupt. But I doubt they're doing that.

Apparently they get ten years of property tax breaks for building this thing:
Plans to build new crude oil refinery in Duval County

 

[Erleichda]

OK gang, you guys are smart. I'm in the middle of a discussion with others about what the reality of Russian interests in our election really mean. In my mind, there are many reasons Putin wanted a Trump presidency. His strategic moves are clear. However, seeing their GDP in the dumps during the oil crash, the rise of Iran, their control attempts for sea access and pipelines...their number one priority is not only expansion and an end to Western containment by the US and EU. But it is vastly in search of higher oil prices for their oil. They want Iran shut down. They aren't different from Exxon in this regard...pitiful economics due to the crash and a need for higher prices, less production. They then see the EV revolution not far off and the fall of demand. They know Suadi is going to fall apart in those economics, they are losing clout. Russia needs to win their new geopolitics very badly and threw all they could into Brexit and Trump for some reason...what is it? I think it's oil. I think the fossil fuel industry here sees an alignment. You guys are smart, how do we figure this out not only to invest but for far more important reasons?

 

[neroden]

Sadly, I don't think Putin is a sensible person, and I find it hard to predict his behavior because it often seems to be driven by insecurity and macho attitudes. That said, the US really needs to get rid of that "missile defense system" in Europe, as it is something Russia can genuinely complain about, and has no real value.

I don't think Russian government strategy is driven by oil. It's too senseless for that. They are dependent on oil revenues, but nothing they're doing will actually increase their oil revenues, and they are not even claiming that it will AFAIK.

Regarding oil, the Saudis -- or, when the collapse, whoever succeeds them at control of that part of Arabia -- are always going to be the last oil producers standing. Their cost of production from existing wells is the world's lowest (estimated at $5/bbl or less!) and they've still got a lot of oil in their biggest fields. Russia loses customers for oil long before the Middle East loses customers for oil.

It is in the interest of every oil producer to raise prices for oil, but none of them can do it unilaterally, and the competition always cheats and produces more supply and undercuts them on price. So there's no way for the oil supply to drop, and the price to go up accordingly, until some of the oil producers hit the wall and go bankrupt, or at least run out of money for drilling (which may finally be happening right now).