Energy Sector

[SharperDingaan]

1 hour ago, Gregmal said:

https://www.cnbc.com/2022/10/13/biden-admin-asked-saudi-arabia-to-postpone-opec-cut-by-a-month-saudis-say.html
 

Sounds like we need to have impeachment proceedings 

 

The SPR release has been hiding the near 1M boe/day US supply/demand mismatch. When the SPR release ends it will amount to another  1M boe/day cut in global supply, over and above the 2 M boe/day OPEC+ cut; sending crude prices up further. Doesn't look good for midterm re-elections when inflation is still 8%+, not really changing despite 200bp+ of rate hikes, and folks cant afford the gas to freely run their SUVs anymore. 

 

Post election most would expect a lot more Canadian south-bound heavy oil rail shipments, and a lot of new shale drilling to refill the reserve. The larger gas cuts on new wells feeding LNG exports, and the NA focus a snub on the SA refusal to delay cuts by a month. Additional carbon load from higher tar sands throughputs offset by lower carbon load from higher use of gas.

 

Higher gas prices are also your friend.

It's hard to sell the environmental story, when folks are having difficulties covering their costs every month, and you're driving gas prices past USD 6/bbl. Lose the midterms, and it changes the equation.

 

ESG is fundamentally about how you make your profit, hence the appeal to younger generations - or governance. Whereas CSR is fundamentally about how you spend that profit amongst stakeholders, hence the appeal to the political world - or management.

 

Governance directs, management does ... and management that doesn't, gets replaced.

 

SD 

 

  

Edited October 13, 2022 by SharperDingaan

[Gregmal]

It’s been such an obvious effort to manipulate the market(especially oil) and when it can’t be manipulated anymore it’s gonna be fun. 

[Spekulatius]

I don’t know how much signal there is in NG European spot prices, but they have gone down to 146 Euro from a peak of ~340 Euro. If I were a betting man, I would bet on these prices going down further and US prices going up.

https://tradingeconomics.com/commodity/eu-natural-gas

[lnofeisone]

Prices of Euro NG will be driven by the weather. It may go lower but overall it will still be high. The demand is there and if prices start to go down more, industry will start ramping back up thus providing price floor. VET's earnings are going to be interesting. Equinor is also reporting on 10/26. 

[Xerxes]

8 hours ago, Spekulatius said:

I don’t know how much signal there is in NG European spot prices, but they have gone down to 146 Euro from a peak of ~340 Euro. If I were a betting man, I would bet on these prices going down further and US prices going up.

https://tradingeconomics.com/commodity/eu-natural-gas

 

"Never saw someone getting killed by a train that they saw coming" (paraphrase)

 

That is how Jeffrey Currie from Goldman Sachs characterize his very bearish view on European natural gas prices, led by a planned collapse of industrial demand.

 

Edited October 14, 2022 by Xerxes

[Ulti]

http://www.gasprocessingnews.com/news/canada-would-back-economically-viable-new-lng-terminals.aspx

A tiny step forward for mankind (peoplekind to be politically correct haha)?

[Spekulatius]

Biden going against Saudi Arabia is a mistake. It accomplishes nothing. As for the OPEC cut, it is likely that then 2M p/brl cut is not actually going to happen in practice. The reason is simple, the OPEC is quota and many members don’t even meet theirs. While it is clearly a political signal and aspect is trying to keep prices high, it’s not like Biden can really do anything and going against Saudi Arabia is doing nothing.

 

The biggest mistake is not selling them weapon systems going forward. That is first an entirely different topic and I don’t really see how it punishes Saudi Arabia. It’s not even clear that the Brits or the French will adhere to this move.

 

 

Likewise, I don’t think a price cap on Russian oil is going to work either after thinking about it for a while. It only works, if the world market price for oil is below the price cap, and then the price cap is redundant.

 

The whole idea I think is nonsense.

Edited October 15, 2022 by Spekulatius

[james22]

> Chevron CEO Mike Wirth warned that the premature transition to green energy is already having a major impact on Europe.

 

> The oil company chief noted that the global energy crisis had been exacerbated by Western governments "doubling down" on green energy policies.

 

> "The reality is, [fossil fuel] is what runs the world today. It's going to run the world tomorrow and five years from now, 10 years from now, 20 years from now,” Wirth explained.

 

https://oilprice.com/Energy/Energy-General/Chevron-CEO-Blames-Climate-Policies-For-Global-Energy-Crisis.html

[lnofeisone]

Spain is now rejecting LNG shipments. Germany is near full. The Europe is as ready as it can be for the winter (and this is why prices of TTF gas are in the downtrend). Winter months begin next week.

 

https://www.reuters.com/article/europe-energy-spain/spains-gas-grid-operator-says-it-may-rejct-lng-unloads-due-to-overcapacity-idUSL8N31I5I1

[Viking]

Clearly, the energy crisis in Europe is not nearly as bad as i thought…
 

https://oilprice.com/Latest-Energy-News/World-News/Exxons-Refineries-In-France-Will-Take-Weeks-To-Restart.html

 

The three-week strike at Exxon’s facilities is over for now, but the strike at TotalEnergies’ refineries continues after the hard-left CGT trade union walked out of wage increase talks with TotalEnergies early on Friday, vowing to continue the strike at refineries that has crippled France’s fuel supply.

 

Two other trade unions found the offer for a 7% pay rise “rather favorable,” including the staff at Exxon’s refineries.

 

Workers are back to work at Exxon’s facilities, and it will take “10-15 days to first restart the units, and then to produce finished gasoline, diesel,” the GCT trade union told Argus on Monday.

 

The weeks of strikes at refineries in France have left more than 70% of the country’s refining capacity offline while gas stations in and around Paris and in the northern part of the country began to run out of at least one type of fuel. France moved last week to requisition essential workers to staff Exxon’s French oil depot and threatened to do the same for TotalEnergies’ French refineries if talks failed to progress.

[UK]

On 10/16/2022 at 7:00 AM, james22 said:

> Chevron CEO Mike Wirth warned that the premature transition to green energy is already having a major impact on Europe.

 

> The oil company chief noted that the global energy crisis had been exacerbated by Western governments "doubling down" on green energy policies.

 

> "The reality is, [fossil fuel] is what runs the world today. It's going to run the world tomorrow and five years from now, 10 years from now, 20 years from now,” Wirth explained.

 

https://oilprice.com/Energy/Energy-General/Chevron-CEO-Blames-Climate-Policies-For-Global-Energy-Crisis.html

 

I have no strong opinion on that myself, but in my investing lifetime there were probably allready two peak oil times and then two peak demand times. Perhaps reallity is somewhere in between. 

 

https://www.bloomberg.com/graphics/2022-clean-energy-electric-cars-tipping-points/?leadSource=uverify wall

[gokou3]

On 10/17/2022 at 1:25 PM, lnofeisone said:

Spain is now rejecting LNG shipments. Germany is near full. The Europe is as ready as it can be for the winter (and this is why prices of TTF gas are in the downtrend). Winter months begin next week.

 

https://www.reuters.com/article/europe-energy-spain/spains-gas-grid-operator-says-it-may-rejct-lng-unloads-due-to-overcapacity-idUSL8N31I5I1

 

The storage tanks may be full, but is it sufficient to last them through this winter?  Asking a question.

[Viking]

59 minutes ago, UK said:

 

I have no strong opinion on that myself, but in my investing lifetime there were probably allready two peak oil times and then two peak demand times. Perhaps reallity is somewhere in between. 

 

https://www.bloomberg.com/graphics/2022-clean-energy-electric-cars-tipping-points/?leadSource=uverify wall

@UK the Bloomberg article you posted reinforces for me the challenges we will continue to have with the energy transition: the massive disconnect today between the dream and the reality. It is one thing for Norway to decide to do something and then execute it. But to extrapolate that to the rest of the world is simply not realistic. There simply are not enough resources available and there will not be for at least another 10 years - for the simple reason we are not building the mines on the scale needed today (it takes a minimum of 7 years to build a copper mine). Lyn Alden wrote that in every past energy transition the old energy usage never actually falls… it just slows and the new forms of energy drive the majority of incremental energy demand (leading to higher global standard of living). 
 

I continue to be bullish on commodities over the next 5 years. I see demand increasing at the same times supply will remain constrained.
- underinvestment for years; ESG guarantees future supply growth will be muted
- increasing demand driven by mega trends: developing world, deglobalization, move to EV and clean energy sources etc.

- war & geopolitical split into West vs authoritarian blocks adds more complexity

We expect world governments to thread the needle moving forward? 

Edited October 19, 2022 by Viking

[Kupotea]

2 hours ago, gokou3 said:

 

The storage tanks may be full, but is it sufficient to last them through this winter?  Asking a question.

Under normal circumstances it wouldn’t be but with significant demand destruction and fuel switching it should be enough. As always though it depends on the weather.

[Kupotea]

Biden is proposing a ban on US oil products. He’s also floated the idea of reinstating the US crude export ban from the past. Obviously either or both of these scenarios would have ramifications for US refiners and producers. It would also be terrible for Canadian producers who have no access to tidewater. I’m wondering if anyone knows how it would impact Canadian producers who export out of the US to global markets? Would flow through exports have similar restrictions? If you add US diluent to Canadian heavy midstream does that make it a US product? Does anyone know any good producers tied to Brent pricing? I’m thinking Australia may be the best market to look into but wouldn’t be surprised with a windfall tax in that jurisdiction if Brent moons.

[UK]

3 hours ago, Viking said:

@UK the Bloomberg article you posted reinforces for me the challenges we will continue to have with the energy transition: the massive disconnect today between the dream and the reality. It is one thing for Norway to decide to do something and then execute it. But to extrapolate that to the rest of the world is simply not realistic. There simply are not enough resources available and there will not be for at least another 10 years - for the simple reason we are not building the mines on the scale needed today (it takes a minimum of 7 years to build a copper mine). Lyn Alden wrote that in every past energy transition the old energy usage never actually falls… it just slows and the new forms of energy drive the majority of incremental energy demand (leading to higher global standard of living). 
 

I continue to be bullish on commodities over the next 5 years. I see demand increasing at the same times supply will remain constrained.
- underinvestment for years; ESG guarantees future supply growth will be muted
- increasing demand driven by mega trends: developing world, deglobalization, move to EV and clean energy sources etc.

- war & geopolitical split into West vs authoritarian blocks adds more complexity

We expect world governments to thread the needle moving forward? 

 

Yes, I do not have a strong view, but I agree with you om this. More importantly Buffett seems also on this side:). And these transitions are long and costly trends, so perhaps what happens to world economy or even China (if something happens) is much more important than that in the near/mid term. However if demand would collapsed in the short term due to one or another reason (I am not predicting it), do not be surprised those peak demand theories getting attention again:)  

 

 

[Ulti]

https://podcasts.apple.com/us/podcast/columbia-energy-exchange/id1081481629?i=1000583065972
 

admin mouthpiece on price caps

[Eng12345]

Biden to Sell More Oil From Strategic Reserve to Keep Gas Prices in Check - WSJ

 

Mr. Biden also plans to call on the Energy Department to be prepared for more sales from what’s left of about 400 million barrels in the reserve if Russia or others disrupt world markets, according to the White House.

...

The administration also plans to complete a new plan for buying more crude to refill the reserve, although officials expect they won’t make such purchases for months. The plan would buy crude when prices are at or below about $67-$72 per barrel, an approach that would “will protect taxpayers and help create certainty around future demand for crude oil,” the White House said in a fact sheet.

 

 

 

When do they actually expect $67-72 per barrel oil? Seems hopeful to me

Edited October 19, 2022 by Eng12345

[dealraker]

Buffett has learned to love growth stocks but also when there is reluctant capital he in my opinion gets downright excited to be there.   I'll wager he's aware of some long term probabilities that have got him quite revved up.  

 

Energy is his theme right now.  

[Ulti]

https://www.cnbc.com/2022/10/19/biden-says-oil-companies-should-prioritize-lowering-prices-over-stock-buybacks.html

 

 

[lnofeisone]

20 hours ago, gokou3 said:

 

The storage tanks may be full, but is it sufficient to last them through this winter?  Asking a question.

It's not. Spain consumes 12x what it can store. Draw your own conclusions as to how long those tankers will stay there full.

[dealraker]

I remember a decade ago or so when the Gov of North Carolina wanted and was selling every moment of every day statewide fracking and offshore wells all over Cape Hatteras.  He was of course pro-business but lacked the insight to see what was clear- that massive capital going into an industry whose market cap to the total market cap was at all time highs.

 

Same as tech in the late 1990's because profits didn't justify anything of the sort.  We average people around here were saying, "We will have abandoned oil rigs everywhere the eye can see."  The gov was an economic idiot...Dancing With The Stars was his game.

 

Today?  So far away from too much capital chasing energy  --  as except for reading this board that's occasionally mentioning energy I still see a lot of interest still in stuff like bitcoin...it is the conversation.  Nothing about energy  - and the energy market cap to total market cap is...

[Mephistopheles]

Has anyone looked at Petrochina (PTRCY)? China is now hated and supposedly uninvestable. I saw that the Hang Seng closed at its lowest since 2009. Plus a bunch of Chinese companies voluntarily delisted from the NYSE recently. 

 

I recall that Buffett's reason for buying PTR back in like 2006 was that it was trading at a huge discount to Western majors given their reserves. Today PTR has approximately same proved reserves as XOM and a bit greater production, but the EV is $75bn vs. XOM EV of $480bn. I am taking into account the H shares that trade at a discount to the mainland Chinese A shares. They committed to pay at least 30% of profits as dividends, current yield is >10%. 

 

One negative is that their capex budget is way higher than XOM as they are still exploring vs. returning all cash to shareholders like the Western cos. Still on a P/FCF basis they sell for 1/2 of XOM.

 

I haven't bought yet but might be worth it given the awful sentiment and strengthening USD.

 

However I also had bought some LUKOY prior to Russia sanctions so tread carefully. lol

Edited October 21, 2022 by Mephistopheles

[SharperDingaan]

You might want to wait until after the BoC and the Fed each hike rates by an additional 75bp on October 26, and November 02 respectively. Next weeks headlines will be all 'the central banks are clueless', it's creating a recession! - lots of whining about rate increases, lots of ranting, it's all sh1te!! Drop the market a good 3- 6% 

 

Comes December/January it will be more about that you actually own an oil stock, versus which one. But if the market is willing to sell to you 'cause it's all sh1te ....... well, who are we to argue  

 

SD

[Spekulatius]

30 minutes ago, Mephistopheles said:

Has anyone looked at Petrochina (PTRCY)? China is now hated and supposedly uninvestable. I saw that the Hang Seng closed at its lowest since 2009. Plus a bunch of Chinese companies voluntarily delisted from the NYSE recently. 

 

I recall that Buffett's reason for buying PTR back in like 2006 was that it was trading at a huge discount to Western majors given their reserves. Today PTR has approximately same proved reserves as XOM and a bit greater production, but the EV is $75bn vs. XOM EV of $480bn. I am taking into account the H shares that trade at a discount to the mainland Chinese A shares. They committed to pay at least 30% of profits as dividends, current yield is >10%. 

 

The one negative is that their capex budget is way higher than XOM as they are still exploring vs. returning all cash to shareholders like the Western cos. Still on a P/FCF basis they sell for 1/2 of XOM.

 

I haven't bought yet but might be worth it given the awful sentiment and strengthening USD.

 

However I also had bought some LUKOY prior to Russia sanctions so tread carefully. lol

I think the biggest risk is that you are forced to sell it because it is a state controlled entity like what happened to CHL and CNOOC.

 

Similar idea is PBR-A. It has paid out more than 20% of my investment in just a couple of month. it's interesting to hold these dividend monsters in tax deferred accounts.

 

You really want to get your investment back very quickly with these sort of iffy entities. 10% return is not enough, imo