Oil prices

[king183]

[ATTACH=CONFIG]

BTW, oil prices aren’t rising because of new domestic demand, but because of threats of instability on the world market as well as a general government attitude towards green energy and global warming. Burning polluting fossil fuels is great with the far right wing GOP.

The recent rise in prices has little to do with "government attitude toward green energy," which has virtually no effect, and much more to do with falling global supply, led by the Saudi's production cuts and disaster in Venezuela. One can be reversed relatively easily, while the other is likely here to stay for the foreseeable future. Even American shale is having a tough time quickly ramping up supply due to the dearth of capital investment the last several years, which resulted in a lack well-to-consumer infrastructure.

[BG918]

The recent rise in prices has little to do with "government attitude toward green energy," which has virtually no effect, and much more to do with falling global supply, led by the Saudi's production cuts and disaster in Venezuela. One can be reversed relatively easily, while the other is likely here to stay for the foreseeable future. Even American shale is having a tough time quickly ramping up supply due to the dearth of capital investment the last several years, which resulted in a lack well-to-consumer infrastructure.

The Permian for example is experiencing a glut due to its under-sized pipeline infrastructure.

https://pgjonline.com/magazine/2018/...eaway-capacity

[pw405]

Surprised there hasn't been much here for almost 2 months. Here's PW405 with your market report:



A. Jan 2004 - 248MM bbls in storage. $32/bbl.
B. Sept 2014 - 325MM bbls in storage. $91/bbl. Edge of the cliff.
C. April 2015 - 456MM bbls in storage. $52/bbl
D. March 2017 - 535MM bbls in storage. $50/bbl all time high in storage.
E. August 2017 - 457MM bbls in storage. $49/bbl


A few meaningful developments - over the past 5 months, demand has outpaced supply to the tune of 78,000,000 bbls. Interesting how price has yet to react. If this trend continues for another 10 months, we'll find that July 2018 will have about 300MM bbls in storage. Less than we did in Sept. 2014 when oil was in the ~$90's. Now, trader sentiment plays a large factor in all of this, but inventories are finally being meaningfully reduced. Some are warning that we'll see a price spike in 2020.

Interesting to go back and read this thread.

Wanted to post some updated info to show where US stockpiles are today vs. my previous post in September 17. It'll be fun to read these posts in the future.



F. Jan 2018 - 412 MM bbls in storage. $62/bbl
G. May 2018 - 438 MM bbls in Storage. $71/bbl

(Source: https://www.eia.gov/dnav/pet/hist/Le...s=WCESTUS1&f=W)

Current US drilling rig count:

May 2018 - 1,046
May 2017 - 901

US Production:
May 20, 2018 - 10,725,000 bbls/day.
May 19, 2017 - 9,320,000 bbls/day.

The next 6-12 months are going to be very interesting. With sanctions looming on Iran and possibly Venezuela, it could reduce global supplies and cause quite a supply shock. On the flip side, I could see Trump releasing strategic reserves in order to keep fuel costs lower for political reasons.

For the time being, I think the State of OK and OK Energy companies finally can breath a (partial) sigh of relief. Even if oil falls back to the $50's, the companies of today are leaner and far more efficient than they were back in '15 when the S*** really hit the fan hard.

If the GPT goes to 5% and oil stays above $60, I really think much of the state's budget concerns will be eliminated. I'd need to run some numbers to really figure out what $65 & 5% GPT means for State of OK revenue, but hopefully we can finally start funding the government properly. Of course, problem is, state revenue sources are still not diversified enough.

[pw405]

Wow, after news today that OPEC and Russia are going to up production and Venezuela claiming they are going to double production, combined with a larger than expected build in crude inventories in the US, oil prices down almost 5% to ~$67.

It will take Venezuela quite a long time and money to build up their production to double today's levels. Saudi and Russia likely have true spare capacity, but I have a feeling this is part of a tactic of some sort. Not sure what that would be, but we shall see!

[gopokes88]

Wow, after news today that OPEC and Russia are going to up production and Venezuela claiming they are going to double production, combined with a larger than expected build in crude inventories in the US, oil prices down almost 5% to ~$67.

It will take Venezuela quite a long time and money to build up their production to double today's levels. Saudi and Russia likely have true spare capacity, but I have a feeling this is part of a tactic of some sort. Not sure what that would be, but we shall see!

If they use their spare capacity to ease prices this year it just setups up a bigger jump in 19. Natural declines plus no major projects coming online because deep water is dead. US shale won’t keep up. Plus Venezuela is in terminal decline. It could go to 0. We’re in for a 4-5 years of good prices.

[sooner88]

If they use their spare capacity to ease prices this year it just setups up a bigger jump in 19. Natural declines plus no major projects coming online because deep water is dead. US shale won’t keep up. Plus Venezuela is in terminal decline. It could go to 0. We’re in for a 4-5 years of good prices.

Russia and OPEC seems like optics more than anything. US Shale (Permian and Scoop/Stack/Merge) has seen gusher agrernhusyjer.

[gopokes88]

Russia and OPEC seems like optics more than anything. US Shale (Permian and Scoop/Stack/Merge) has seen gusher agrernhusyjer.

Really just the Permian. The stack isn’t really growing that much. The Permian bottleneck and labor shortage is going to force it to cool off

[pw405]

Really just the Permian. The stack isn’t really growing that much. The Permian bottleneck and labor shortage is going to force it to cool off

Article I read recently stated Permian producers are getting up to $18 less/bbl than WTI.... ouch. Analysts calling for 11MM bbls/day of US production by the end of 2018. I wonder if those forecasts are a little optimistic given the fact that other basins aren't growing production as much the Permian, which now appears to be nearing a topped out level?

https://seekingalpha.com/article/417...igniter-widget

[pw405]

Here's a very well researched article about the next 5 years of oil prices:

https://seekingalpha.com/article/417...l-next-5-years

Essentially, producers will have trouble meeting demand.

[gopokes88]

https://www.cnbc.com/2018/05/28/oil-...gist-says.html

[Bunty]

On the other hand: http://money.cnn.com/2018/05/28/inve...pec/index.html

[gopokes88]

On the other hand: http://money.cnn.com/2018/05/28/inve...pec/index.html

Oil went up relentlessly for what 5 weeks? A correction was coming. Underlying fundamentals are strong.

[Jersey Boss]

New variable introduced that could affect US energy providers.
http://www.msn.com/en-us/money/marke...uoE?li=BBnbfcN

[gopokes88]

New variable introduced that could affect US energy providers.
http://www.msn.com/en-us/money/marke...uoE?li=BBnbfcN

Harold Hamm sells lots of CLRs oil to the Chinese. Harold Hamm is a trusted Trump advisor. The Chinese are smart.

[pw405]

What the hell happened to the LLS (Louisiana Light Sweet crude) price today? Fell $10? Whoah!

[gopokes88]

Productivity report out today

https://www.eia.gov/petroleum/drilling/

[mugofbeer]

The Chinese imposed tarrifs on US Oil in retaliation to Trumps. Trumps tarrifs certainly haven't benefitted Hamm.

[gopokes88]

The Chinese imposed tarrifs on US Oil in retaliation to Trumps. Trumps tarrifs certainly haven't benefitted Hamm.

Trumps tariffs hurt Hamm. Hamm has trumps ear on energy issues. The Chinese have a pattern of hitting trump consitituents with their tariffs.

[Pete]

I moved a bunch of posts about taxation here:

http://www.okctalk.com/showthread.php?t=44610

[Johnb911]

I moved a bunch of posts about taxation here:

http://www.okctalk.com/showthread.php?t=44610

Relocation without Representation!

[Bellaboo]

Relocation without Representation!

Those with the gold make the rules ! lol

[Jersey Boss]

Record set. First time price declined for 11 straight sessions. Price is off 20% compared to one month ago.
https://www.marketwatch.com/story/oi...cut-2018-11-12

[mugofbeer]

Oil prices are vital to keeping inflation at a minimum. Trump wants oil prices low because inflation is a key indicator of whether or not the Fed will raise interest rates or not. Trump needs a strong economy to make his tarrifs most effective and higher interest rates will slow the economy. The Saudis have been appeasing him because of politics but also to keep him quiet about the Kashoggi murder. Oil prices firmed a butvearlier today but droppedcagain when Trump tweeted that he wanted the Saudiz to keep the spigot open.

[gopokes88]

Oil prices are vital to keeping inflation at a minimum. Trump wants oil prices low because inflation is a key indicator of whether or not the Fed will raise interest rates or not. Trump needs a strong economy to make his tarrifs most effective and higher interest rates will slow the economy. The Saudis have been appeasing him because of politics but also to keep him quiet about the Kashoggi murder. Oil prices firmed a butvearlier today but droppedcagain when Trump tweeted that he wanted the Saudiz to keep the spigot open.

Inflation doesn’t count oil so that’s not true.

The main reasons for the drop

is fear of a slowing global economy, and trump talking super tough about Iran and then backing down when push came to shove. When the expectation was sanctions would knock a million barrels a day off the market Saudi and Russia ramped up by a million, waivers were granted and now we’re oversupplied.

The dollar keeps getting stronger because the fed keeps raising rates. Oil is priced in dollars. Stronger dollar keeps oil prices down.

The general stock market weakness. Which is somewhat tied to the global economy slowing.

US production keeps growing at an awe inspiring rate.

Trump has very little control over oil prices, and now that the midterms are over they’ll stop answering the phone as much.

[king183]

Inflation doesn’t count oil so that’s not true.

The main reasons for the drop

is fear of a slowing global economy, and trump talking super tough about Iran and then backing down when push came to shove. When the expectation was sanctions would knock a million barrels a day off the market Saudi and Russia ramped up by a million, waivers were granted and now we’re oversupplied.

The dollar keeps getting stronger because the fed keeps raising rates. Oil is priced in dollars. Stronger dollar keeps oil prices down.

The general stock market weakness. Which is somewhat tied to the global economy slowing.

US production keeps growing at an awe inspiring rate.

Trump has very little control over oil prices, and now that the midterms are over they’ll stop answering the phone as much.

I think you're correct in our analysis of the situation, but Mug is correct that oil prices do affect inflation. The price of oil is not counted in the "Core Inflation" measure, which is what I think you meant, but the the cost of oil affects the price of a large number of other products made using petroleum and the cost of doing business for those who must transport materials (e.g., manufacturers), which does contribute to inflation.