Liberty Posted August 27, 2015 Share Posted August 27, 2015 http://scottgrannis.blogspot.com/2015/08/cheaper-oil-does-not-spell-doom.html "oil prices in real terms are only slightly below their long-term average" Link to comment Share on other sites More sharing options...
yadayada Posted August 29, 2015 Share Posted August 29, 2015 How fast can US oil production grow? Based on high oil prices and a set of improving assumptions – i.e., a 27% higher oil well count by 2016 versus 2012 (58% higher than 2011) and a 25% improvement in 30-day initial production (IP) rates per well – we calculate that US oil production could reach just over 10 Mbbl/d by 2020 and maintain this level for a number of years. Although the well count increases by 27%, we note that our oil rig count only increases by 11%, owing to improvements in drilling efficiency – i.e., the number of days to drill a well. Key shale plays to watch include the Eagle Ford, Bakken and Permian. After recent exploration success, the offshore Gulf of Mexico and potentially Alaska should contribute some growth also. What oil price is required to fund this growth? Single well economics suggest break-evens in the US$60-75/bbl range for US shales today. However, driving growth at forecast rates requires substantial capital; access to capital could be a greater constraint. In a simple calculation, we estimate that the US oil industry needs around $95/bbl Brent near term to fund the capital expenditure required to deliver this growth, based on self-generated cash flow alone. 10 This could be lowered by external funding, but we are already seeing some companies reduce capex when WTI recently fell through $90/bbl. As US oil production volumes rise, this breakeven could fall toward $80/bbl. It is important to note that the average recovery of a gas well is three to five times the recovery of a typical oil well on a Btu basis. The oil shale revolution should help meet rising global demand but looks less likely to lead to a collapse in domestic pricing similar to US gas markets. https://doc.research-and-analytics.csfb.com/docView?language=ENG&format=PDF&document_id=1005321471&source_id=em&extdocid=1005321471_1_ENG_pdf&serialid=0sD72ky5PVE69YdSxRIsei9L5gnDVssxzgAuLedlEiQ%3d Page 47 and 48. http://i.imgur.com/qAreiZe.jpg Fwiw current rig count is, 674 http://www.wtrg.com/rotaryrigs.html ANd from the article: Growing US production will require a significant increase in the number of wells drilled from 9,200 in 2011 to 16,000 per annum by 2022. This will require a higher rig count (our Equity Research team’s assumed oil rig count rises by 112 rigs by 2017). Each rig will also need to drill more wells each year. Convential it takes about 20-40 days, unconventional it takes about 10 days (8 for the newer ones, and 14 for older ones). A lot of rigs being cut are unconventional. So let's assume about 25 days to drill a well? That is about 8-10k wells per year. Crazy that global oil rigs have fallen by 30% as well. You would think that is not sustainable. And no signs of slowing down either. What is more crazy is the fall in gas rigs: It is at 211 actually right now. It has not been that low since that entire graph! But it takes a bit longer to empty those wells for natural gas. But you would say that if this keeps up, we will see a supply crunch at some point. If even Peyto, THE low cost provider barely makes a profit at 3$ gas, my guess is we will see 4-5$ gas within the next 2 years. Another interesting graph: http://4.bp.blogspot.com/-9FT3P0j_nuk/VMVGa79bBrI/AAAAAAAAPMg/9olwqrfzUuw/s1600/Eagle%2BFord%2BProd%2BPer%2BRig%2Band%2BPer%2BWell%2B24%2BJan%2B2015.jpg http://www.eia.gov/petroleum/drilling/pdf/dpr-full.pdf Production in most of these fields is declining. Interesting that the largest gas field, Marcellus, is profitable at around 4$ gas in most parts https://oilandgas-investments.com/2015/natural-gas/the-marcellus-is-close-to-peak-production-and-why-this-is-so-important/ I can see why a lot of gas company CEO's are buying stock. Link to comment Share on other sites More sharing options...
Guest Schwab711 Posted August 29, 2015 Share Posted August 29, 2015 On the geopolitical side, there is something really bizarre going on. http://www.startribune.com/russia-s-putin-hosts-middle-east-leaders-at-air-show/322836261/ These are supposedly American's friends. What are they doing in Russia looking to buy warplanes or regular airplanes? Boeing, Airbus, Lockheed anyone??? Also, why did the Saudis promised to invest over $10 billion in Russia recently following an official visit? They are hurting them like crazy with their over-production and making the Siberian-China pipeline a bad project. Then we have the U.S. currently sending F22's to Europe to send a message to Russia or in support of NATO and at the same time we have a joint naval exercise between Russia and China. Finally, if it is not scary enough, this stuff! What is true and what is not? http://www.israelnationalnews.com/News/News.aspx/191966#.Vd0GKZtRFjo http://www.theglobeandmail.com/news/world/netanyahu-repeatedly-pressed-for-iran-attacks-but-was-rebuffed-by-military/article26064799/ Cardboard You probably know this, but the US has extremely strict regulations for defense exports and I've always heard there were "unofficial" quotas that further limited trade. You'll never see a foreign sovereign purchase the latest radar systems or fighter jets (just to name a few), outside the occasional sweetheart deal to allow Israel and Canada/UK to upgrade their defense. They are probably trying to anger the US or were told to get excess capacity elsewhere. http://pmddtc.state.gov/ http://www.state.gov/strategictrade/resources/c43182.htm http://www.propublica.org/article/in-big-win-for-defense-industry-obama-rolls-back-limits-on-arms-export Link to comment Share on other sites More sharing options...
SharperDingaan Posted August 30, 2015 Share Posted August 30, 2015 Today’s fire at the Aramco Khobar towers is not the first instance they’ve had. http://www.bbc.com/news/world-middle-east-34101228 http://www.reuters.com/article/2015/08/26/us-saudi-security-usa-idUSKCN0QV0PL20150826 Interesting article on the war on Yemen. http://www.mintpressnews.com/saudi-arabias-war-on-yemen-opened-the-floodgates-of-dissent-within-its-own-borders/208403/ When it started in late March 2015 WTI was US48/bbl, before moving up to US60/bbl in May & June as the bombing made the western media. Today WTI is roughly US$45, the war still goes on, & it has escalated. Saudi Arabia is flooding the market, global strategic inventories are bloated, & the bombing is not on the western media. Some notable clips from the article ... Though little known to the public, the Houthis have a wealth of experience when it comes to “breaking into the kingdom.” Back in 2009, the Houthis managed to hold on to the city of Jizan long enough to negotiate a royal ransom. Shamefaced and under the cover of a well-orchestrated media blackout, the kingdom paid up and moved on. Arguably the most violent and reactionary theocracy in the world, Saudi Arabia’s totalitarian monarchy is also absolutely opposed to any form of political criticism. For those inquisitive minds which cannot bear to be confined to silence, Saudi officials invariably react by way of whip or death. As Nassim Nicholas Taleb and Gregory F. Treverton explained earlier this year in Foreign Affairs: “Fragility has five principal sources: a centralized governing system, an undiversified economy, excessive debt and leverage, a lack of political variability, and no history of surviving past shocks.” For Saudi Arabia, all five criteria have already been fulfilled. Most would argue that WTI should trade with a war premium of at least US$15-20/bbl. Arguably the only reason it isn’t is because strategic reserves & storage facilities are being flooded in anticipation of disruption, the low price is stimulative to the global economy, & the recent invasion is not in the western news. OPEC members need a higher price, Saudi Arabia doesn’t have many friends, & the Houthis are very good at breaking in; how long before somebody pays them to blow a minor pipeline. Matches & oil do not mix. SD Link to comment Share on other sites More sharing options...
Cardboard Posted August 31, 2015 Share Posted August 31, 2015 SD, I am pretty busy right now, but don`t forget that the UAE has already soldiers on the ground around Aden since early August and the Saudis entered from the North late last week. MORE IMPORTANT!!! The lies from the EIA are finally being reported by themselves. They could no longer hide the truth that U.S. production had been declining more than their estimates found in their weekly reports. Rail car loads, inventories and State reports simply did not match. Their May and June production now being re-estimated are quite a bit lower than their latest August weekly figure! That is why oil shot up just before noon. Cardboard Link to comment Share on other sites More sharing options...
rb Posted August 31, 2015 Share Posted August 31, 2015 SD, I am pretty busy right now, but don`t forget that the UAE has already soldiers on the ground around Aden since early August and the Saudis entered from the North late last week. MORE IMPORTANT!!! The lies from the EIA are finally being reported by themselves. They could no longer hide the truth that U.S. production had been declining more than their estimates found in their weekly reports. Rail car loads, inventories and State reports simply did not match. Their May and June production now being re-estimated are quite a bit lower than their latest August weekly figure! That is why oil shot up just before noon. Cardboard Or it could be because of this: http://www.bloomberg.com/news/articles/2015-08-30/oil-trims-gain-after-biggest-2-day-rise-since-2009-as-rigs-climb Link to comment Share on other sites More sharing options...
SharperDingaan Posted August 31, 2015 Share Posted August 31, 2015 We rather suspect the EIA numbers are still very overstated, & that this weeks US crude import numbers may be very revealing; 3 declines in a row would suggest some quiet production cutting. All the run-up so far has been strictly supply related, & does not reflect any war premium. But play with matches around gas tanks, & sooner or later there will be a fire. We do not really want to be on the other side of Taleb on this one! SD Link to comment Share on other sites More sharing options...
Uccmal Posted August 31, 2015 Share Posted August 31, 2015 We rather suspect the EIA numbers are still very overstated, & that this weeks US crude import numbers may be very revealing; 3 declines in a row would suggest some quiet production cutting. All the run-up so far has been strictly supply related, & does not reflect any war premium. But play with matches around gas tanks, & sooner or later there will be a fire. We do not really want to be on the other side of Taleb on this one! SD Seems like a real cluster f**k. The whole world is trading this commodity on incomplete, inaccurate data from chronic liars, and cheaters. Take your 90 m bbl/day worldwide usage +- 2 m (alleged excess). These numbers give us a 2.2% difference from a supposed supply/demand balance. All this using data that is as precise as the Drake equation. It really makes me think that oil pricing is a trading game with no basis in the real world. We need a real live explanation from T-Boone Pickens such as his: "Its cheaper to drill for oil on the floor of the New York stock exchange". Link to comment Share on other sites More sharing options...
racemize Posted September 1, 2015 Share Posted September 1, 2015 I talked to an oil exec who is on a few boards this weekend. He basically said that exact quote and was expecting a lot of M&A among O&G this year. Link to comment Share on other sites More sharing options...
meiroy Posted September 1, 2015 Share Posted September 1, 2015 Saudi Arabia has plenty of local friends such as Egypt, thanks to a common enemy: Iran. This also answers the question "why do they buy weapons in Russia", see recent agreement with Iran led by the USA. The oil and match thing may or may not happen, seems a bit of a biased wishful thinking. You can also throw ISIS into the picture, why not. So, if it is better/safer to invest in the shovels company: which company would benefit from the increase in M&As and which from the rise of weapons procurement and maintenance. Link to comment Share on other sites More sharing options...
rb Posted September 1, 2015 Share Posted September 1, 2015 If you're thinking in terms of weapons procurement and maintenance for Saudi Arabia than the names are BAE, Rolls Royce and Boeing. Link to comment Share on other sites More sharing options...
SharperDingaan Posted September 1, 2015 Share Posted September 1, 2015 Just keep in mind Talebs argument that you are not investing to be right (ie: talking head forecasting correctly), you are there to make money (ie: be right just once, but make a killing). You want the black swan event, & we know they happen regularly. There are so many matches in that tinderbox, that accidentally striking one is really just a matter of time. We cant say when, but we can be pretty sure there will be a naked flame at some point. The Houthis seized the Saudi city of Jizan again yesterday. Bombing your own cities does not play out too well on TV, & there are way too many willing cameras in the area eager to show the world. SD Link to comment Share on other sites More sharing options...
SharperDingaan Posted September 1, 2015 Share Posted September 1, 2015 http://www.zerohedge.com/news/2015-08-31/russian-military-forces-arrive-syria-set-forward-operating-base-near-damascus SD Link to comment Share on other sites More sharing options...
meiroy Posted September 2, 2015 Share Posted September 2, 2015 SD, The situation over there is clear. What's also very clear is that Taleb sucked as an investor. I'm not saying that it's not all going to blow up, it might. But than again, a huge gas field was found on Egyptian coast just now, Iran could start selling oil again soon which it has hoarded for so long, the wsj reports today that "Applying newer fracking methods to existing field offers potential for more and cheaper fuel" http://www.wsj.com/articles/drillers-get-super-size-natural-gas-output-1441127955, and if it does explode over there the U.S. can pump it up again etc.. I actually completely agree with the general volatility increase the world is going towards to. So this could be interesting as an event driven speculation but it would have to have extremely low cost and very high risk reward as I for one have no conviction about the timing. edit: so I read that entertainment site [zerohedge] article and after all the blah blah it jumps to the conclusion that this will result in a face-off between the USA and Russia. If anything, this is coordinated between the USA and Russia. Pfft. Link to comment Share on other sites More sharing options...
shhughes1116 Posted September 2, 2015 Share Posted September 2, 2015 SD, The situation over there is clear. What's also very clear is that Taleb sucked as an investor. I'm not saying that it's not all going to blow up, it might. But than again, a huge gas field was found on Egyptian coast just now, Iran could start selling oil again soon which it has hoarded for so long, the wsj reports today that "Applying newer fracking methods to existing field offers potential for more and cheaper fuel" http://www.wsj.com/articles/drillers-get-super-size-natural-gas-output-1441127955, and if it does explode over there the U.S. can pump it up again etc.. I actually completely agree with the general volatility increase the world is going towards to. So this could be interesting as an event driven speculation but it would have to have extremely low cost and very high risk reward as I for one have no conviction about the timing. edit: so I read that entertainment site [zerohedge] article and after all the blah blah it jumps to the conclusion that this will result in a face-off between the USA and Russia. If anything, this is coordinated between the USA and Russia. Pfft. SD, The situation over there is clear. What's also very clear is that Taleb sucked as an investor. I'm not saying that it's not all going to blow up, it might. But than again, a huge gas field was found on Egyptian coast just now, Iran could start selling oil again soon which it has hoarded for so long, the wsj reports today that "Applying newer fracking methods to existing field offers potential for more and cheaper fuel" http://www.wsj.com/articles/drillers-get-super-size-natural-gas-output-1441127955, and if it does explode over there the U.S. can pump it up again etc.. I actually completely agree with the general volatility increase the world is going towards to. So this could be interesting as an event driven speculation but it would have to have extremely low cost and very high risk reward as I for one have no conviction about the timing. edit: so I read that entertainment site [zerohedge] article and after all the blah blah it jumps to the conclusion that this will result in a face-off between the USA and Russia. If anything, this is coordinated between the USA and Russia. Pfft. Gimme a break. Establishing a forward operating base is not a sign of bilateral cooperating between Russia and the United States. Russia is protecting their interests in Syria by going after ISIS and propping up Assad. If you don't recall, Assad and Putin were good buddies. More importantly, Tartus is Russia's primary (and up until very recently their only) deep sea naval base in the Mediterranean. It is hard to confront NATO in the Mediterranean when your closest naval bases for the Russian Atlantic Fleet happen to be on the north side of the Nordic countries. Also don't forget that Russia's influence over Syria, coupled with their defacto puppet states in the Caucaus Region, have prevented countries in the Middle East from building over-land pipelines to Europe for natural gas and crude oil. Gasprom is a clear beneficiary of this strategy. Finally, don't forget that Putin wants to sell military hardware to Assad, some of which is prohibited by sanctions and other agreements. A forward operating base provides great cover for bringing in prohibited military equipment and munitions, all under the guise of be used by the Russian military. So what if the Syrian Army drives off with a few tanks, MRLS's, and other munitions prohibited by the Geneva Convention? Putin sure doesn't care as long as he gets paid. Link to comment Share on other sites More sharing options...
SharperDingaan Posted September 2, 2015 Share Posted September 2, 2015 Agreed zerohedge is not the best source; a more conventional news outlet would have been better. None were available. It was posted because a Russian operating base in Syria evidences escalating risk. Somebody makes a mistake, & the sh1t could hit the fan real quick. Quick strike matches. Taleb is vilified because he does not play the talking head game (being right); & makes money by actually betting against the head. Nobody likes being made a fool of. SD Link to comment Share on other sites More sharing options...
meiroy Posted September 2, 2015 Share Posted September 2, 2015 shhughes1116, Thank you for double quoting my post, I have looked at it through my 3D glasses and now see it in a whole different perspective...ooo.. I don't think anything you wrote really contradicts what I said. International politics is a game on its own. For example, the recent agreement with Iran does not mean that the Islamic Republic of Iran is all of a sudden a friend of the U.S. or will stop aggressively acting against U.S. interests. Other than that, I rather not continue with this area of discussion, thank you for replying. Link to comment Share on other sites More sharing options...
meiroy Posted September 2, 2015 Share Posted September 2, 2015 SD, My comment about Taleb is based on what I remember of his poor record of actually managing a fund (if I'm wrong, please correct me) I also recall his multiple calls throughout the last few years about coming inflation, everyone should sell their stocks, no point in being in the investment industry and how if you succeed it's just luck etc. I don't follow the guy, that's just the general impression. So this is what it comes down to, can you make money off this guy, *consistently* or not. I mean, yeah, shit happens, and "big shit is going to happen" so if we find a great risk:reward and really low cost and consider it event driven investing, than sure, it can be considered, why not. But, we should be very careful to use second-level thinking and then use third-level confirmation bias. Anyhow, you're the smart guy with the PHD and I'm the anonymous idiot on the forum so what do I know :) Link to comment Share on other sites More sharing options...
SharperDingaan Posted September 2, 2015 Share Posted September 2, 2015 No DBA yet … but the world of block chain smart contract derivative fin-tech is looking more & more promising ;) Talebs approach is best executed using derivatives to maintain a position against the market. Negative carry, a portfolio entirely of straddles, reliance on volatility, and an anti-marketing bias; make it an incredibly hard sell to OPM. Very different story when it is private money, & there is skin in the game. Our interest is because we hold PWT, & we view it as an infinite life call option on WTI. Our risk is that PWT goes under, which we think very unlikely. In the meantime there is no carry, & no timeline as to when an event needs to happen by. Ultimately we should do very well, but there is no way you could sell this to a retail investor concerned with monthly/quarterly portfolio volatility. Different strokes. SD Link to comment Share on other sites More sharing options...
Cardboard Posted September 2, 2015 Share Posted September 2, 2015 http://www.reuters.com/article/2015/08/31/russia-venezuela-oil-idUSL5N11632N20150831 Go Putin! Defend the Mother land from your leftist ennemies! Cardboard Link to comment Share on other sites More sharing options...
Cardboard Posted September 4, 2015 Share Posted September 4, 2015 Western media hates oil, it is so obvious. Just one more example: The title: "Russia will not cut oil production, Arkady Dvorkovich, Deputy Prime Minister of the Russian Federation, told CNBC Friday." What was really said: "For Russia, given the structure of production, it's very difficult to cut supply artificially," he said. "If oil prices will be low enough for a long period of time, supply will go down in (a) natural way, and I think this (is the) most efficient stabilizer for the market." Will not cut and very difficult is not the same thing. Furthermore, when you listen to the man in the interview, they discuss about more discussions with OPEC and what steps they will take in the future. Also, if they stop investments in the sector as he is hinting, then it is a cut in production due to the decline rate. I also think that Putin came back empty handed following this week's meeting with Xi. No new deal or investment announced. The Russians are now seeing that China will not help them out in the way they were hoping for. Being more insulated leaves them with little choice but, to find a way to make oil more valuable. Cardboard Link to comment Share on other sites More sharing options...
SharperDingaan Posted September 6, 2015 Share Posted September 6, 2015 A 100B budget shortfall is not sustainable. The forthcoming Iranian production is also no where near what many people thought it might be. SD http://www.telegraph.co.uk/finance/oilprices/11847268/Low-oil-price-forces-Saudi-Arabia-to-cut-spending-amid-record-budget-shortfalls.html Saudi Arabia has projected an official budget shortfall for this year of $39 billion, but the IMF and other institutions believe the actual deficit will be much higher. The IMF forecast in July that the deficit will be 20pc of Gross Domestic Product (GDP), while Saudi Arabia's Jadwa Investment firm said on Wednesday it expects the shortfall to be around $109bn http://www.moneycontrol.com/news/commodities/saudi-arabia-reassuresoil-prices-strategist_2930801.html Croft thinks that Iran's supply likely won't come online until the end of the second quarter of 2016 because of "the types of modifications the Iranians are going to have to do to their facilities to be compliant with the deal." She also doesn't think the output will be 1 million barrels a day, as has been suggested, and instead will fall somewhere between 375,000 to 500,000 barrels per day. Link to comment Share on other sites More sharing options...
meiroy Posted September 7, 2015 Share Posted September 7, 2015 I take your zerohedge thingie and raise you with a qz double thingie (ok, I have no idea how to play poker) http://qz.com/461369/here-are-the-25-iranian-oil-tankers-waiting-to-ship-out-somewhere-in-the-world/ "Most analysts expect Iran to be able to step up its oil production only next year in the wake of its nuclear agreement with world powers. By that reckoning, any big new plunge in oil prices may also wait until at least the first few months of 2016. But Iran’s oil isn’t only in the ground. While the country has been under stern sanctions for more than two years, it’s been pumping oil and storing it in humongous tankers known as Very Large Crude Carriers (VLCCs) in various places. Iran hasn’t disclosed how much oil is in these tankers, but it’s been variously estimated between 30 million and 50 million barrels. If parceled into the already-saturated market in, say, 250,000-barrel-a-day dollops, that would make oil prices even softer for the four to five months until it was all sold." Link to comment Share on other sites More sharing options...
SharperDingaan Posted September 7, 2015 Share Posted September 7, 2015 Of course, Iran has tankers; they need to deliver their oil to market. It does not mean that their tankers are full (the picture shows an empty one), or that the oil they may have contained has not already been sold. It is also highly likely that any oil contained was delivered under a futures purchase, & will be delivered against either a spot or futures sale ie: it has already been sold. It also means that cargo owners are expecting higher prices; cargo x (selling-purchase) price > months x storage cost. The haggle to get to higher prices will of course have to address this. Just keep in mind that Russia takes a different view regarding enforcement, and that pipelines and tankers are vulnerable assets. Cant pump if the pipeline is broke, or deliver if the tanker has sunk. SD Link to comment Share on other sites More sharing options...
Cardboard Posted September 7, 2015 Share Posted September 7, 2015 Look Meiroy, you don't have to listen to what I have to say since I did not predict the large oil price decline last year. However, this man did and this video adresses floating Iranian oil, which is mostly condensate, and he also talks about every source of supply and demand going forward. Worth watching in its entirety IMO. http://www.bloomberg.com/news/videos/2015-07-20/isis-is-a-clear-and-distinct-danger-to-oil-ross Andrew Hall is another one who was bearish, made a ton of money and who is now bullish. He also called it right in 2008. He is also calling the current IEA 3 million barrels a day surplus estimate bogus. Cardboard Link to comment Share on other sites More sharing options...
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