Energy Sector

[rogermunibond]

UK gave it all away to BP and Shell

 

https://tribunemag.co.uk/2020/12/how-north-sea-oil-shaped-britains-economy#:~:text='The first huge areas of,for forty-six years'.

 

What could have been

 

https://www.sciencedirect.com/science/article/pii/S0301421520300331

Edited May 6 by rogermunibond

[Dalal.Holdings]

9 minutes ago, rogermunibond said:

UK gave it all away to BP and Shell

 

https://tribunemag.co.uk/2020/12/how-north-sea-oil-shaped-britains-economy#:~:text='The first huge areas of,for forty-six years'.

 

What could have been

 

https://www.sciencedirect.com/science/article/pii/S0301421520300331

No idea how this has to do with today when the government is talking about banning North Sea drilling and has made it very onerous for anyone who chooses to drill there.

 

Even if they "gave it away" to mostly British firms Shell and BP, they'd get to collect tax revenue, have the jobs, potential export benefits, and other economic benefits of being a producer...

 

British politicians keep denying that there is more oil & gas in the North Sea while Norway keeps finding more...It's okay though because Norway gets to sell it to the UK and reap the profits.

[Cor]

Is anyone else thinking of unwinding their oil exposure/has already? Seeing the Feb futures coming back down over last few days - is the party over?

[sholland]

1 hour ago, Cor said:

 - is the party over?

I believe the Strait of Hormuz will remain effectively closed for a long time.

[SharperDingaan]

3 hours ago, Cor said:

Is anyone else thinking of unwinding their oil exposure/has already? Seeing the Feb futures coming back down over last few days - is the party over?

 

The party is doing fine. The entry ticket just isn't a futures contract.

 

SD

  

[Cor]

3 hours ago, SharperDingaan said:

 

The party is doing fine. The entry ticket just isn't a futures contract.

 

SD

  

Thank you for the reassurance SD. I’m just a lowly newbie trying to learn the ways. 

[SharperDingaan]

21 hours ago, Cor said:

Thank you for the reassurance SD. I’m just a lowly newbie trying to learn the ways. 

 

No worries 

 

You might want to practice via a look at CJ.TO, which reports Q1 earnings later today. Put some time in, then decide which instrument best serves your approach and risk tolerance; choice of debenture, common shares, warrants, or options. Assume no investment until after the SOH has opened, and shipping is again transiting freely.

 

Then keep in mind that those successfully trading today's o/g volatility are the survivors of much bigger initial cohorts; all very good at reading tea leaves, all very good at what they do, and all very experienced. Predators.

 

Assume an initial cohort of 1,000; the best always in the top 33%, successive market cycles of an average 2 years. What does the competition look like at the start of the 5th market cycle?

• 12 with 8 years of experience over the last 4 cycles  1,000 x (0.33)^4  
• 36 with 6 years of experience over the last 3 cycles  1,000 x (0.33)^3

No problem; after 8 years, I'll be one of them! 

.... as long as I don't get eaten, and/or repeatedly get spat back out  

 

Risk management.

 

SD

 

  

 

Edited May 8 by SharperDingaan

[NnnnotSoSmart]

From Bezerkely no less:

 

Report here:

https://haas.berkeley.edu/wp-content/uploads/WP360.pdf

[SharperDingaan]

Few would dispute there have been material savings 'cause of cheap gas; but the actual savings were very likely a lot higher than this across the supply chain.

 

Shale gas was always a by-product, restricting oil output. Where restrictions prevented flaring (gas value > transport cost), it was literally dumped for the cost of transport + the supply/demand price in that local market .... so that oil  production could be maximised. Where there were no restrictions, the gas was simply flared off (value = zero). The result being that the closer to the source fields, the less the gas was worth, as supply greatly overwhelmed demand; hence users (power stations, chemicals, fertiliser, etc.) paid far less for feedstock than they should have.

 

Heating, and agricultural (fertiliser, drying, etc), demand for gas is seasonal; much of the gas is stored for future use. As new shale was continually being drilled, and the gas cut on old wells materially rose over time; reliance could be put on the availability of an ever larger on-going supply of pipeline gas, vs existing/more storage. Savings from less storage infrastructure, and new builds avoided.

 

The mystery is whether it stays this way going forward, and in which geographies. Doubling US West/Gulf Coast LNG exports, may simply absorb the additional gas from the now older shale fields .... avoiding a price decline. World price less transport = export terminal price. Export terminal price less processing cost = terminal pipe price ... is that likely to be higher/lower than it is now?

 

The why gas is priced locally, and not globally ......

 

SD

Edited May 12 by SharperDingaan

[rogermunibond]

[SharperDingaan]

Gas that is way cheaper than it should be ....

 

In the Permian, gas prices have dipped below zero intermittently since 2019 as pipeline construction failed to keep pace with soaring production. But this year, negative pricing has been more pronounced than ever.

 

Cheap supplies of gas — a key manufacturing input and a major player in meeting power demand from artificial intelligence — stand to give the US an edge over countries facing fuel shortages.

 

The divergence between gas prices in America and the rest of the world “could mean the US economy will prove more resilient than expected this year. Natural gas is more important to the manufacturing sector — particularly chemicals, fertilizers, electricity — than crude oil is.”

 

https://oilprice.com/Energy/Natural-Gas/Permian-Gas-Glut-Means-Producers-Are-Paying-Buyers-to-Haul-It-Away.html

 

SD

[Dalal.Holdings]

8 hours ago, SharperDingaan said:

Gas that is way cheaper than it should be ....

 

In the Permian, gas prices have dipped below zero intermittently since 2019 as pipeline construction failed to keep pace with soaring production. But this year, negative pricing has been more pronounced than ever.

 

Cheap supplies of gas — a key manufacturing input and a major player in meeting power demand from artificial intelligence — stand to give the US an edge over countries facing fuel shortages.

 

The divergence between gas prices in America and the rest of the world “could mean the US economy will prove more resilient than expected this year. Natural gas is more important to the manufacturing sector — particularly chemicals, fertilizers, electricity — than crude oil is.”

 

https://oilprice.com/Energy/Natural-Gas/Permian-Gas-Glut-Means-Producers-Are-Paying-Buyers-to-Haul-It-Away.html

 

SD

Chemical companies based in USA having a major structural advantage...

[influx]

On 5/15/2026 at 1:15 AM, SharperDingaan said:

Gas that is way cheaper than it should be ....

 

Why?

AFAIK, there is a lot of gas that is produced as an oil byproduct. If that is correct, if oil production goes higher, than more gas will be produced irrespective of price like permian, no?

 

 

[influx]

I found this podcast useful and informational:

https://www.thegreatsimplification.com/episode/220-art-berman

https://www.thegreatsimplification.com/wp-content/uploads/2026/05/AEB-NJH-TGS-MAY-5-2026.pdf

 

especially his blog post, explaining his earlier chart I posted in this thread.

https://www.artberman.com/blog/the-price-isnt-right-fundamentals-dont-support-100-oil/

 

 

[SharperDingaan]

22 hours ago, influx said:

Why?

AFAIK, there is a lot of gas that is produced as an oil byproduct. If that is correct, if oil production goes higher, than more gas will be produced irrespective of price like Permian, no?

 

A new well might produce an initial 400 bpd. One year out; 15% of that initial 400 bpd is now gas, 10% water, and 75% oil (300 bpd). Two years out, another 15% on that 300 bpd is gas, along with another 10% of water (usually more).

 

To produce the oil, the producer has to get rid of the by-product ... as the oil is produced; 'cause stop producing for any length of time, and it damages the wells/formation. The water is typically pumped back into the formation to maintain pressure; the gas either transported/dumped for whatever can be raised, or flared off.

 

Even if zero new shale wells were drilled, the gas supply would increase (15% in this example). Hence, local demand needs to also rise 15% if the local gas price is not to fall; more if new wells are also drilled.  

 

The purpose of collectors is to aggregate supply/demand at market nodes, and connect them to tide-water. Export LNG via tidewater, and local demand along the collectors automatically increases.

 

All about the egress. 

 

SD

Edited May 17 by SharperDingaan

[influx]

On 5/17/2026 at 12:15 AM, SharperDingaan said:

 

A new well might produce an initial 400 bpd. One year out; 15% of that initial 400 bpd is now gas, 10% water, and 75% oil (300 bpd). Two years out, another 15% on that 300 bpd is gas, along with another 10% of water (usually more).

 

To produce the oil, the producer has to get rid of the by-product ... as the oil is produced; 'cause stop producing for any length of time, and it damages the wells/formation. The water is typically pumped back into the formation to maintain pressure; the gas either transported/dumped for whatever can be raised, or flared off.

 

Even if zero new shale wells were drilled, the gas supply would increase (15% in this example). Hence, local demand needs to also rise 15% if the local gas price is not to fall; more if new wells are also drilled.  

 

The purpose of collectors is to aggregate supply/demand at market nodes, and connect them to tide-water. Export LNG via tidewater, and local demand along the collectors automatically increases.

 

All about the egress. 

 

SD

 

Okay, sorry, but I am not sure I follow you, I am re-reading your original comment: "Gas that is way cheaper than it should be ...." plus "Even if zero new shale wells were drilled, the gas supply would increase (15% in this example). Hence, local demand needs to also rise 15% if the local gas price is not to fall; more if new wells are also drilled. "

 

On gas prices:

If they don't drill, that's 15% more supply, which is neutral to bearish to me. What about you? 

If they drill, that's > 15% more supply, which is neutral to more bearish to me. What about you?

 

Did you mean gas prices should be higher because:

1. primarily, more exports are coming

2. maybe an increased coal replacement

3. AI demand (behind the meter or otherwise) ?

[SharperDingaan]

The further from the field the less gas supply there is; as every sale progressively reduces the remaining quantity of gas available. Hence gas at the gas field is worth almost nothing, but has value at a delivery hub where demand is concentrated. Add the demand from LNG exports, and you can raise the price.

 

15% may seem small, but when the base is billions of cubic feet ....it's a lot of incremental gas per day. To move it ... you may have to periodically sell it below cost.

 

SD

 

Edited May 19 by SharperDingaan

[influx]

5 hours ago, SharperDingaan said:

The further from the field the less gas supply there is; as every sale progressively reduces the remaining quantity of gas available. Hence gas at the gass field is worth almost nothing, but has value at a delivery hub where demand is concentrated. Add the demand from LNG exports, and you can raise the price.

 

15% may seem small, but when the base is billions of cubic feet ....it's a lot of incremental gas per day. To move it ... you may have to periodically sell it below cost.

 

SD

 

 

Yeah, okay, fair enough. Understand now. Thanks.

[SharperDingaan]

Gotta love the volatility 

 

Existing crude inventories run dry next month (June); 2-6 weeks left for SOH resolution, then price spikes. Alternatively, another sizeable global SPR release (a good chunk Chinese); price remains largely unchanged, maybe even goes lower. Either case ... the forward curve moves up/out      

 

Of course, some SPRs will never refill to prior levels ... reliance placed on alternative sources and unused domestic production/egress instead; mystery as to how much a US/China might do . But, however much the eventual refill ... it will primarily come from existing producers .... now using mostly damaged wells/reservoir .... and will take quite some time.  All supportive of a forward curve up/out 

 

SD

Edited May 19 by SharperDingaan

[influx]

12 hours ago, SharperDingaan said:

Gotta love the volatility 

 

Existing crude inventories run dry next month (June); 2-6 weeks left for SOH resolution, then price spikes. Alternatively, another sizeable global SPR release (a good chunk Chinese); price remains largely unchanged, maybe even goes lower. Either case ... the forward curve moves up/out      

 

Of course, some SPRs will never refill to prior levels ... reliance placed on alternative sources and unused domestic production/egress instead; mystery as to how much a US/China might do . But, however much the eventual refill ... it will primarily come from existing producers .... now using mostly damaged wells/reservoir .... and will take quite some time.  All supportive of a forward curve up/out 

 

SD

 

Indeed.

The hardest part is probably the waiting and having patience.

 

I am wondering if we may see a Biden-like moment (the Trump debate and the common knowledge; the emperor is naked).

 

Extend and pretend  

 

Who knows. 

[SharperDingaan]

19 million barrel total draw down last week ... largest in history. Very likely more this week, along with new all time highs; yet the SOH remains closed, and the WTI price is going lower 

 

"The American Petroleum Institute (API) estimated that crude oil inventories in the United States fell by 9.1 million barrels in the week ending May 15. In the week prior, US crude oil inventories fell by 2.188 million barrels.  For week ending May 15, 9.9 million barrels left the SPR - the largest single-week draw down in history"

 

https://oilprice.com/Latest-Energy-News/World-News/US-Crude-Inventories-Fall-Quickly-But-Still-Up-This-Year.html

 

SD

[tede02]

I've been soaking up knowledge from commodity people like Jeff Currie, Rory Johnston and Amrita Sen for the past two months. What's striking is how people in the energy world are saying things like, "we've never seen numbers like this," and the rest of the financial world is totally complacent. Makes me wonder if the current moment is analogous to Jan/Feb 2020 as the pandemic was spreading country to country. Didn't matter until it did. I don't know the answer but their are similarities. Seems like consensus is forming in the commodity world that shortages are going to hit globally in the next 1-2 months but no one knows precisely. But there definitely are signals. In recent days, reports of motor oil suppliers in the US are warning auto manufacturers and retailers of potential shortages. That's pretty crazy! 

 

Although I had been thinking about this for some time, in March I bought a 300 gallon tank and filled it with diesel (I live on a little farm so it's handy to have regardless). The price is looking pretty good right now. Also been buying some E&P ETFs. 

 

Steve Eisman just had a commodity guy on his podcast. Was a good discussion for those without lots of knowledge in the space. One interesting point the guy made about the oil majors in the US is the companies are well run and throw off tons of cash to shareholders via dividends and share buybacks. Because of this, he said one way to think about them is they are comparable to TIPS conceptually. If they are paying 2-3% dividend plus buying back stock, you end up with a decent real yield even if oil prices don't do much. If prices do go way higher, that can really juice your return. 

 

 

[yesman182]

2 hours ago, tede02 said:

Seems like consensus is forming in the commodity world that shortages are going to hit globally in the next 1-2 months but no one knows precisely.

These experts originally prognosticated that is this went on more than two weeks we would be at $150+ oil. They are always bullish and commonly wrong. I too am surprised by the oil price, I would have expected it to go up.  

[tede02]

100%. Originally, a lot of them said if the strait didn't open by the end of April all hell would break lose. Now it's June/July. Obviously no one really knows but it is notable that sharp drawdowns of inventories are starting to show up in the tracking stats and companies are warning of shortages in across industries. Will be interesting to watch it play out. 

[SharperDingaan]

Commodities have always been despised by PM's, as it often means the pending end of a career. While you can indeed make a great deal of money from commodities; become too well known as the 'o/g (or mining) star' .... after the party is over, and all are paying the piper, you're yesterdays man .... and unemployable. Same as the pro athlete, you need to be fairly certain there are at least a few good years to the cycle, and avoid injuries (scandal, firings, etc.). Bias.

 

Share price as a multiple of earnings is largely within capital market control; employers pay the analysts, and reports that don't sell ... result in unemployment. Commodities screw it up, as earnings are a function of the price products sell at, and commodity forward curves are notoriously inaccurate. Reliance has to be placed on specialist supply/demand forecasts; by folks much more independent, and much less influenced by capital markets. Control issues.    

 

O/G is the most political of all commodities; as the end user public is price sensitive, and too high a price, at the wrong time, often causes loss of power. Widespread price manipulation is common, and expected. Misinformation.

 

The result is incentive to pooh-pooh commodities ... as whatever, pooh-pooh those folks much more independent, and much less influenced by capital markets, tweet/threaten, and manipulate press/reserve releases. Paid for via a little front running of insider information. 

 

So .... always sniff test, then help yourself! Mosquito bites only 

 

SD

   

Edited May 20 by SharperDingaan