Energy Sector

[SharperDingaan]

Doomberg is more of a feet on the ground personality than most, and this ain't his first rodeo. Very much the US oilfield, and more the grunt versus the suit view. Always worth a listen, even if just as a counterpoint.

 

Just keep in mind that the US fields are very different to the WCSB, and that not everything will translate. Canadian operators are also a lot more disciplined .... those that weren't were road kill a long time ago.

 

SD

 

 

[Dalal.Holdings]

Congratulations: crude is in the mid 50s and POTUS is working on regime change in Venezuela:

 

https://www.wsj.com/world/americas/trump-orders-blockade-of-sanctioned-oil-tankers-in-and-out-of-venezuela-3143a24a

 

 

[Stuart D]

Not looking too promising for oil investors.

[SharperDingaan]

Today everyone is depressed as all the talk is of WTI at sub USD 60. Whereas a month from now it will be quite different when we're all back to work, past the festive season, and it is the start of a new year, with new opportunities. 

 

There is a lot of change lying on the street, for those willing to temporarily take on some modest risk; but it's not for everyone.

 

SD

 

 

 

Edited December 17, 2025 by SharperDingaan

[Sweet]

28 minutes ago, SharperDingaan said:

Today everyone is depressed as all the talk is of WTI at sub USD 60. Whereas a month from now it will be quite different when we're all back to work, past the festive season, and it is the start of a new year, with new opportunities. 

 

There is a lot of change lying on the street, for those willing to temporarily take on some modest risk; but it's not for everyone.

 

SD

 

 

 

Not sure what this post means.  However, you’ve been long oil for as long as I remember.  At the peak of the post covid rebound it made sense to get out.  There is no real reason to get in here unless things get absurd again which I don’t think is likely.

 

Edited December 17, 2025 by Sweet

[SharperDingaan]

17 hours ago, Sweet said:

Not sure what this post means.  However, you’ve been long oil for as long as I remember.  At the peak of the post covid rebound it made sense to get out.  There is no real reason to get in here unless things get absurd again which I don’t think is likely.

 

 

USD 56/bbl is not sustainable, and well below break even for most US producers. When the average bbl delivered is now at a loss, the highest cost oil gets shut in, to lower supply and raise the price.

 

Good or bad, the shares of all producers fall dramatically ... as the entire industry is cursed. Including those shares of producers with break even costs well below the current price .... buy today at 75c off yesterday's price and sell next week at 75c above yesterday's price. Dimes on the street for the picking up.

 

For those low cost producers ... nothing changed, but if you owned them and acted,  you are now a lot richer. However, to know who they are, you need to be continuously long ... and trading in/out as opportunity presents.

 

Not a lot of risk to the approach ... as long as you know your part of the oil patch, the 10,000 hour thing. Ya dance with all the girls, but that's all that you do; ya don't marry them.

 

SD

 

Edited December 18, 2025 by SharperDingaan

[Pelagic]

Dallas Fed Energy survey's commentary is always interesting https://www.dallasfed.org/research/surveys/des/2025/2504#tab-comments

 

The one response saying there's no way US production data is correct has been picked up a lot but I personally enjoyed this one, probably some truth to it.

Quote

• My belief is that the administration is coordinating with Saudi Arabia to either talk about or add additional barrels to the market, which could create leverage over Russian negotiations and also suppress oil price inflationary impacts through the upcoming 2026 midterm election.

 

[Dalal.Holdings]

2 hours ago, SharperDingaan said:

 

USD 56/bbl is not sustainable, and well below break even for most US producers. When the average bbl delivered is now at a loss, the highest cost oil gets shut in, to lower supply and raise the price.

 

Good or bad, the shares of all producers fall dramatically ... as the entire industry is cursed. Including those shares of producers with break even  costs well below the current price .... buy today at 75c off yesterday's price and sell next week at 75c above yesterday's price. Dimes on the street for the picking up.

 

For those low cost producers ... nothing changed, but if you owned them and acted,  you are now a lot richer. However, to know who they are, you need to be continuously long ... and trading in/out as opportunity presents.

 

Not a lot of risk to the approach ... as long as you know your part of the oil patch, the 10,000 hour thing. Ya dance with all the girls, but that's all that you do; ya don't marry them.

 

SD

 

Yes we all know oil producers are highly rational. Not to mention, many of them have been bragging that their production costs are <$60 or even <$50 a barrel...

 

And then you have oil fields that are not shale around the world (Guyana) that produce at much lower cost.

 

And once the ground is leased/owned, the well drilled, the incentive is to continue producing.

 

The incentive to stop producing happens at much lower prices. It certainly isn't near break even prices. That's why I wait until there is real pain to invest in this sector.

[Dalal.Holdings]

DJT speech on "affordability" last night. After Mamdani, etc every politician knows affordability a key issue for voters...

 

And DJT knows low gas prices is a key part of affordability. The guy likes oil prices and has always liked them as a politician. For Donald, low gas prices is a KPI for his Presidency.

 

Contrary to conventional wisdom, that is not good for the oil investoooor

 

He is still letting Chevron continue in Venezuela. If Maduro is out, the taps open on the largest oil reserves in the world, all close to the U.S. in the Western hemisphere.

 

Edited December 18, 2025 by Dalal.Holdings

[Spekulatius]

59 minutes ago, Dalal.Holdings said:

DJT speech on "affordability" last night. After Mamdani, etc every politician knows affordability a key issue for voters...

 

And DJT knows low gas prices is a key part of affordability. The guy likes oil prices and has always liked them as a politician. For Donald, low gas prices is a KPI for his Presidency.

 

Contrary to conventional wisdom, that is not good for the oil investoooor

 

He is still letting Chevron continue in Venezuela. If Maduro is out, the taps open on the largest oil reserves in the world, all close to the U.S. in the Western hemisphere.

 

I dont think that lowering crude prices does much for inflation from here. It seems that most of the lower crude input has been going into higher refining margins so far. Prices at the pump are barely lower than they were at the start of his presidency .

 

On Venezuela, I doubt he can create an oil colony in Venezuela . Maduro would be a good one to go but installing a puppet regime there would quickly undermine legitimacy and lead to problems. However if anyone sane is going to be running Venezuela, its going to be producing quite a bit more crude a few years down the road for sure.    

[Dalal.Holdings]

35 minutes ago, Spekulatius said:

I dont think that lowering crude prices does much for inflation from here. It seems that most of the lower crude input has been going into higher refining margins so far. Prices at the pump are barely lower than they were at the start of his presidency .

 

On Venezuela, I doubt he can create an oil colony in Venezuela . Maduro would be a good one to go but installing a puppet regime there would quickly undermine legitimacy and lead to problems. However if anyone sane is going to be running Venezuela, its going to be producing quite a bit more crude a few years down the road for sure.    

Well the woman who won the Nobel Peace Prize is the rightful ruler and seems to have a low key relationship with Trump:

 

Quote

Machado has publicly stated that she credits President Trump's "decisive" actions and pressure campaign against the Nicolás Maduro government in Venezuela as being influential in her cause. She even dedicated her award to him, leading to commentary in the media about how he "got his Nobel Peace Prize after all" in a symbolic sense. 

 

I don't think it will be like Iraq because there is a leader who was rightfully elected by Venezuelans who can take over. And yes, the thing that has kept Venezuela from producing is a lack of competence. Someone sane running the show will meaningfully change things and allow the U.S. majors to go in significantly (Chevron already there). End to Maduro would mean end to Hugo Chavez era--the guy who seized Exxon's assets in Venezuela.

 

It is clear that Trump admin wants to reorient U.S. strategically in the Western Hemisphere. His actions and words have made it clear. That means reducing Chinese/Russian influence in the region. It means securing minerals and resources for the U.S. over those other powers.

 

And while lower oil prices from here might not impact inflation, Trump will certainly act to counter any significant rise in oil prices. He has acted in such a manner before such as when the U.S. struck Iranian enrichment sites in the summer. He does not like high oil prices and will work to make sure they do not occur. He will use whatever tools he has available -- including working with people in middle east. So oil prices have a Trump imposed ceiling to them...

 

Edited December 18, 2025 by Dalal.Holdings

[SharperDingaan]

The majors will continue to produce, so long as the cash netback is >0. It costs significant cash to shut-down/restart a reservoir, it permanently impairs future production, and when the losses are primarily from amortisation ... it's better to just temporarily incur and claim back on taxes. If you insist on only buying the majors, you can do no better than everyone else, and your gain will be limited to primarily the difference in the level of the tide ... between when you sold and bought. Buy an o/g index fund, and walk away; the PM will do it better than you, and at less risk.

 

Buy the reservoir specific juniors and intermediates, the same economics apply; but local knowledge will make you rich. Tourist roadkill, and the absence of a comparable competing index fund (high career risk for a PM), further adding to your wealth. But it means ability to think for yourself, and expertise with risk management ... not typical tourist attributes.

 

Even with instant VZ regime change, it will take quite some time to get the VZ infrastructure working at scale again; then there are the new rounds of bribes/shipment, extortion via drone attack on the processing/egress facilities, and the many mouths of the political opposition and little fish. Similar thing with Iraqi heavy oil; against all of which there is more reliable and cheaper heavy oil from Canada, in quantity, and today.

 

Lot of spin/hype ... but not much actual change.

 

SD      

Edited December 18, 2025 by SharperDingaan

[Sweet]

These guys drill loads of wells when the times are good and sit on these uncompleted wells.

 

Even when prices are below ‘break even’, they can still turn an operating profit because the costs for drilling (maybe 30% if break even costs) are already expensed in a prior quarters or years.

 

This is a long way of saying that completing and operating a well can be a lot below the theoretical break even and it’s why oil can continue to flow when prices are supposedly lower than what producers can tolerate.

 

So yeh, I’m with Dalal, I really need to see stupid prices to get into this sector again.  Whilst a made a lot of money last time, it wasn’t an enjoyable experience.

 

Edited December 18, 2025 by Sweet

[SharperDingaan]

Look at the Cardinal Energy thread .... it might change your mind 

 

SD

 

 

Edited December 18, 2025 by SharperDingaan

[fareastwarriors]

The World Is Awash With Oil and Prices Are Poised to Keep Falling 

[Sweet]

13 hours ago, SharperDingaan said:

Look at the Cardinal Energy thread .... it might change your mind 

 

SD

 

 

There is almost no circumstance where I would buy cardinal from an admittedly brief look.  Everyone has their own criteria though, yours differs from mine.

[Eng12345]

I mean if you believe the bs 3.8 mm bpd surplus number for 2026 I have a bridge to sell you. Prices would be so low, if not negative. The world doesn't have enough storage to sustain a surplus number of that sort for any real time. 

 

OPEC seems to disagree as well. 

 

[Dalal.Holdings]

The problem with oil investors is they forget that the industry goes through pain that can last decades

 

Oil supply going up. China churning out EVs and dumping them across the globe

 

Shale drillers -- the high cost producers -- not getting the memo

 

[Spekulatius]

23 hours ago, Dalal.Holdings said:

Well the woman who won the Nobel Peace Prize is the rightful ruler and seems to have a low key relationship with Trump:

 

 

I don't think it will be like Iraq because there is a leader who was rightfully elected by Venezuelans who can take over. And yes, the thing that has kept Venezuela from producing is a lack of competence. Someone sane running the show will meaningfully change things and allow the U.S. majors to go in significantly (Chevron already there). End to Maduro would mean end to Hugo Chavez era--the guy who seized Exxon's assets in Venezuela.

 

It is clear that Trump admin wants to reorient U.S. strategically in the Western Hemisphere. His actions and words have made it clear. That means reducing Chinese/Russian influence in the region. It means securing minerals and resources for the U.S. over those other powers.

 

And while lower oil prices from here might not impact inflation, Trump will certainly act to counter any significant rise in oil prices. He has acted in such a manner before such as when the U.S. struck Iranian enrichment sites in the summer. He does not like high oil prices and will work to make sure they do not occur. He will use whatever tools he has available -- including working with people in middle east. So oil prices have a Trump imposed ceiling to them...

 

Yes, good summary of the situation in Venezuela. I think engagement in Venezuela follows his interpretation of the Monroe doctrine. 

Edited December 19, 2025 by Spekulatius

[Marco Van Basten]

There is another reason why Trump, and any US leader right now would want low oil prices: they hurt Russia making it more likely that they would agree to a negotiated end to the war in Ukraine, and it also hurts Iran, which is one of the key funders of terrorism around the world.  

[Eng12345]

No doubt a lot of people will lose money. 

 

Like you - I don't think it's right time to drop into the oil stonks yet. But the idea that the world is going to maintain a 4 mm bpd surplus is hilarious. 

[wondering]

@SharperDingaan, if oil major companies return to Venezuela again en mass, what does that mean for Canadian oil sands producers?  My thinking behind my question is Venezuela and Canada are both heavy oil producers and thus competitors to one other.  If Venezuela ramps up their oil production would this have a downward effect on the price of Western Canadian Select?

 

My own thinking is that short term, there would be little to no direct effect, because it will still take years to rebuild the oil infrastructure that years of neglect.

 

Long term, it may affect WCS since I assume the oil from both countries is refined primarily in the refineries in Texas.

 

I am still a beginner when it comes to oil markets.  Would appreciate any thoughts.

[bizaro86]

1 hour ago, wondering said:

@SharperDingaan, if oil major companies return to Venezuela again en mass, what does that mean for Canadian oil sands producers?  My thinking behind my question is Venezuela and Canada are both heavy oil producers and thus competitors to one other.  If Venezuela ramps up their oil production would this have a downward effect on the price of Western Canadian Select?

 

My own thinking is that short term, there would be little to no direct effect, because it will still take years to rebuild the oil infrastructure that years of neglect.

 

Long term, it may affect WCS since I assume the oil from both countries is refined primarily in the refineries in Texas.

 

I am still a beginner when it comes to oil markets.  Would appreciate any thoughts.

 

Yes, I would expect any large increases in heavy venezuelan production to hurt WCS prices (and oil prices in general). Your assumption re:Texas is not correct. The majority of WCS is refined in PADD 2 refineries. PADD 2 is the Midwest, 15 states roughly centered on Chicago. 

 

But the Gulf Coast has been the marginal buyer of Canadian crude - although with Transmountain being open the WCSB may not need to compete for space on the Gulf Coast - if that oil gets backed out of Texas it might be able to just go to the Pacific instead.

[Mephistopheles]

Yea I think that Trump wants the oil and its likely that larger amounts of Venezuelan crude come back on the market in the next few years. Maybe Iranian too at this point. 
 

Probably not a good outlook for oil prices but I’ve learned now to spend too much energy (pun) on oil.

[shhughes1116]

43 minutes ago, bizaro86 said:

 

Yes, I would expect any large increases in heavy venezuelan production to hurt WCS prices (and oil prices in general). Your assumption re:Texas is not correct. The majority of WCS is refined in PADD 2 refineries. PADD 2 is the Midwest, 15 states roughly centered on Chicago. 

 

But the Gulf Coast has been the marginal buyer of Canadian crude - although with Transmountain being open the WCSB may not need to compete for space on the Gulf Coast - if that oil gets backed out of Texas it might be able to just go to the Pacific instead.

+1

 

If Venezuelan crude comes back to the market in significant quantities, it would end up in Padd 3 and likely displace Canadian crude.  The current direction of pipelines would make it hard for Venezuelan crude to be refined in other geographic areas, so padd 2 and padd 4 would continue to be the primary destination for Canadian crude.  
 

All of this probably leads to small drop in WTI, and a more considerable widening of the WTI-WCS differential - negative for Canadian oil producers and especially the oil sands producers.