Energy Sector

[SharperDingaan]

Most folks expect the emergence of a tariff wall around these regions within the next few months. Most likely a NA tariff first at around USD 62 WTI. EU to join later at a pegged Brent-WTI spread. We end up with a cartel of supply (Opec+), plus a cartel of demand (The West). Game changer.

 

Would you buy in anticipation of such a tariff, SD?

 

Already have.

 

Not to talk the book but look at WCP, IPL, MTL, etc. on the TSX.

WCP has cut its dividend 50%, cut its capex spend, pays monthly, and has a cash yield of 17%+. Tariff wall goes up, the dividend gets restored, and its 35%. Nothing else happens and you double your money in 2 yrs.

 

SD

 

 

 

[opihiman2]

I believe this:

 

https://www.rigzone.com/news/april_to_be_one_of_toughest_months_in_oil_history-01-apr-2020-161597-article/?utm_source=SOCIAL&utm_medium=REDDIT&utm_campaign=ANDREAS

 

Even if Russia and SA cut production massively, oil is going to be oversupplied by the coronavirus.  Estimates are something like by 85% due to demand drop. 

 

Also, we're seeing the beginnings of the bankruptcies:

 

https://www.marketwatch.com/story/whiting-petroleum-files-for-bankruptcy-has-enough-liquidity-to-keep-operating-its-business-2020-04-01

 

Physical crude is already below $10.  It's just a matter of time before WTI / Brent prices reflect reality.  Damn, never thought I would ever see single digit crude again in my lifetime.  Saw it during the Gulf War, and now this.  Holy shit.  Life is nuts.

 

The US, Canada, and Mexico make up roughly 24% of global oil consumption. The EU is another 15%.

Net the two regions together, and they are largely self-sufficient in the supply of oil/gas.

 

Most folks expect the emergence of a tariff wall around these regions within the next few months. Most likely a NA tariff first at around USD 62 WTI. EU to join later at a pegged Brent-WTI spread. We end up with a cartel of supply (Opec+), plus a cartel of demand (The West). Game changer.

 

We live in interesting times.

 

SD

 

This is about the dumbest thing I've ever heard, and it even pisses me off in many ways.  I don't think there's going to be a tariff on oil, but who knows. Trump has done so much asinine shit it wouldn't surprise me.  What a way to tax Americans even more.  Fucking retarded.

[james22]

An Oilman’s Plea To President Trump

 

What I’m saying is you need to fix the price of oil, maybe basin by basin, or one price for all. Set it at $62/bbl if one price for all. All imported oil would be subject to a tariff. This includes all the Sulphur-rich, low-quality oil the Saudi’s are sending into their state-owned Motiva refinery in Port Arthur, Texas, along with all the other heavy crudes shipped into our ports. Of course, they’re going to cry and moan, but so do my kids when I tell them no more TV.

 

Now, this is putting a simpleton’s spin on it, but no bailout money would be required for the US oil and gas sector, plus you’d be sitting on those tariff dollars.

 

https://oilprice.com/Energy/Energy-General/An-Oilmans-Plea-To-President-Trump.html

[james22]

Most folks expect the emergence of a tariff wall around these regions within the next few months. Most likely a NA tariff first at around USD 62 WTI. EU to join later at a pegged Brent-WTI spread. We end up with a cartel of supply (Opec+), plus a cartel of demand (The West). Game changer.

 

Would you buy in anticipation of such a tariff, SD?

 

Already have.

 

Not to talk the book but look at WCP, IPL, MTL, etc. on the TSX.

WCP has cut its dividend 50%, cut its capex spend, pays monthly, and has a cash yield of 17%+. Tariff wall goes up, the dividend gets restored, and its 35%. Nothing else happens and you double your money in 2 yrs.

 

SD

 

Thanks.

[Liberty]

https://www.cnbc.com/2020/04/01/us-oil-industry-pumps-near-record-volumes-even-as-demand-and-prices-collapse.html

 

"U.S. oil production held at near record highs in the past week even as demand for gasoline falls."

[james22]

Today, the Domestic Energy Producers Alliance (“DEPA”) announced the association’s support for an American anti-dumping action petition to be filed with the United States Department of Commerce and the United States International Trade Commission requesting the initiation of an antidumping and/or countervailing duty investigation regarding crude oil price manipulation by Saudi Arabia, Russia, and perhaps others.

 

The petition will seek a determination that the recent actions taken by Saudi Arabia, Russia, and others to unreasonably increase their supply of crude oil at prices below market value will result in material injury to the U.S. domestic crude oil industry.

 

DEPA Chairman, Harold Hamm said, “This is a direct attack on U.S. oil and gas producers. They are taking advantage of this corona virus pandemic that is sweeping the world to focus on this industry and to devastate it. These actions warrant the imposition of antidumping and/or countervailing duties on crude oil imported into the US from these countries. Saudi Arabia’s and Russia’s actions have already, and will continue to, harm U.S domestic crude oil producers and industry.”

 

The petition seeks to protect the U.S. domestic crude oil industry, U.S. energy security, and the U.S. economy.  DEPA is moving expeditiously to investigate and potentially to prepare a filing.

 

https://depausa.org/depa-announces-anti-dumping-investigation/

 

https://www.theamericanconservative.com/articles/time-to-slap-a-tariff-on-oil-imports/

 

 

Trump to meet at White House with oil CEOs

Goal is to talk potential aid to the industry, including tariffs on oil imports from Saudi Arabia...

 

[matts]

An Oilman’s Plea To President Trump

 

What I’m saying is you need to fix the price of oil, maybe basin by basin, or one price for all. Set it at $62/bbl if one price for all. All imported oil would be subject to a tariff. This includes all the Sulphur-rich, low-quality oil the Saudi’s are sending into their state-owned Motiva refinery in Port Arthur, Texas, along with all the other heavy crudes shipped into our ports. Of course, they’re going to cry and moan, but so do my kids when I tell them no more TV.

 

Now, this is putting a simpleton’s spin on it, but no bailout money would be required for the US oil and gas sector, plus you’d be sitting on those tariff dollars.

 

https://oilprice.com/Energy/Energy-General/An-Oilmans-Plea-To-President-Trump.html

 

That really is a simpleton's spin on it. He forgot to mention gasoline and diesel prices would rocket back up for everyone while helping the oil workers.

[james22]

An Oilman’s Plea To President Trump

 

What I’m saying is you need to fix the price of oil, maybe basin by basin, or one price for all. Set it at $62/bbl if one price for all. All imported oil would be subject to a tariff. This includes all the Sulphur-rich, low-quality oil the Saudi’s are sending into their state-owned Motiva refinery in Port Arthur, Texas, along with all the other heavy crudes shipped into our ports. Of course, they’re going to cry and moan, but so do my kids when I tell them no more TV.

 

Now, this is putting a simpleton’s spin on it, but no bailout money would be required for the US oil and gas sector, plus you’d be sitting on those tariff dollars.

 

https://oilprice.com/Energy/Energy-General/An-Oilmans-Plea-To-President-Trump.html

 

That really is a simpleton's spin on it. He forgot to mention gasoline and diesel prices would rocket back up for everyone while helping the oil workers.

 

Could do something like the AC link suggested:

 

If the industry is protected when oil prices are low, the public ought to be protected when oil prices are high. If in the future the oil price were to rise above a specified level, the public should share in the proceeds through the progressive taxation of those profits. Call it a public-private partnership, with advantages for both parties.

[SharperDingaan]

An Oilman’s Plea To President Trump

 

What I’m saying is you need to fix the price of oil, maybe basin by basin, or one price for all. Set it at $62/bbl if one price for all. All imported oil would be subject to a tariff. This includes all the Sulphur-rich, low-quality oil the Saudi’s are sending into their state-owned Motiva refinery in Port Arthur, Texas, along with all the other heavy crudes shipped into our ports. Of course, they’re going to cry and moan, but so do my kids when I tell them no more TV.

 

Now, this is putting a simpleton’s spin on it, but no bailout money would be required for the US oil and gas sector, plus you’d be sitting on those tariff dollars.

 

https://oilprice.com/Energy/Energy-General/An-Oilmans-Plea-To-President-Trump.html

 

That's the one.

 

Other interesting bits ...

 

If the Coronavirus has taught us anything, it’s that supply chains essential to life in America should not be outsourced. Move energy and pharmaceuticals and all other essentials back home. We’re safer that way. You’ll be creating homegrown jobs and we won’t have to kiss anyone’s backside.

 

Not mentioned is the shale industry bail-out being discussed.

The domestic o/g supply chain will be controlled by the majors, via bankruptcy buy-outs funded through QE dollars. Leases pass into more disciplined hands, and the oil gets bled off responsibly - to leave the underlying gas fields.

 

SD

 

 

[Spekulatius]

Today, the Domestic Energy Producers Alliance (“DEPA”) announced the association’s support for an American anti-dumping action petition to be filed with the United States Department of Commerce and the United States International Trade Commission requesting the initiation of an antidumping and/or countervailing duty investigation regarding crude oil price manipulation by Saudi Arabia, Russia, and perhaps others.

 

The petition will seek a determination that the recent actions taken by Saudi Arabia, Russia, and others to unreasonably increase their supply of crude oil at prices below market value will result in material injury to the U.S. domestic crude oil industry.

 

DEPA Chairman, Harold Hamm said, “This is a direct attack on U.S. oil and gas producers. They are taking advantage of this corona virus pandemic that is sweeping the world to focus on this industry and to devastate it. These actions warrant the imposition of antidumping and/or countervailing duties on crude oil imported into the US from these countries. Saudi Arabia’s and Russia’s actions have already, and will continue to, harm U.S domestic crude oil producers and industry.”

 

The petition seeks to protect the U.S. domestic crude oil industry, U.S. energy security, and the U.S. economy.  DEPA is moving expeditiously to investigate and potentially to prepare a filing.

 

https://depausa.org/depa-announces-anti-dumping-investigation/

 

https://www.theamericanconservative.com/articles/time-to-slap-a-tariff-on-oil-imports/

 

 

Trump to meet at White House with oil CEOs

Goal is to talk potential aid to the industry, including tariffs on oil imports from Saudi Arabia...

 

 

It’s not anti dumping be sure the Saudis and the Russians still make a profit.

 

Anyways, the tariff would just be a tax on consumers since the US also exports crude. Adjacent industries (petrochemicals, refineries) probably would need to close because they are not cost competitive.

[matts]

Today, the Domestic Energy Producers Alliance (“DEPA”) announced the association’s support for an American anti-dumping action petition to be filed with the United States Department of Commerce and the United States International Trade Commission requesting the initiation of an antidumping and/or countervailing duty investigation regarding crude oil price manipulation by Saudi Arabia, Russia, and perhaps others.

 

The petition will seek a determination that the recent actions taken by Saudi Arabia, Russia, and others to unreasonably increase their supply of crude oil at prices below market value will result in material injury to the U.S. domestic crude oil industry.

 

DEPA Chairman, Harold Hamm said, “This is a direct attack on U.S. oil and gas producers. They are taking advantage of this corona virus pandemic that is sweeping the world to focus on this industry and to devastate it. These actions warrant the imposition of antidumping and/or countervailing duties on crude oil imported into the US from these countries. Saudi Arabia’s and Russia’s actions have already, and will continue to, harm U.S domestic crude oil producers and industry.”

 

The petition seeks to protect the U.S. domestic crude oil industry, U.S. energy security, and the U.S. economy.  DEPA is moving expeditiously to investigate and potentially to prepare a filing.

 

https://depausa.org/depa-announces-anti-dumping-investigation/

 

https://www.theamericanconservative.com/articles/time-to-slap-a-tariff-on-oil-imports/

 

 

Trump to meet at White House with oil CEOs

Goal is to talk potential aid to the industry, including tariffs on oil imports from Saudi Arabia...

 

 

It’s not anti dumping be sure the Saudis and the Russians still make a profit.

 

Anyways, the tariff would just be a tax on consumers since the US also exports crude. Adjacent industries (petrochemicals, refineries) probably would need to close because they are not cost competitive.

 

The more i think about it the more i think it's likely Trump does agree to a temporary tariff on foreign crude. It's just his style. You said that refineries will close...they are already closing. The adjacent industries work at $40 oil during normal times. Right now they don't work at any price, so why not do the temporary tariff until demand comes back? trump can say he saved millions of energy jobs.

 

I don't want to get into a political discussion about whether it's the right thing to do, but instead, discuss how likely Trump is to make that decision.

 

If it does happen, what are the second-order effects? What happens to all the oil coming out of Saudi Arabia? Does the spot price in Asia also jump? what about tanker demand?

 

 

 

[SharperDingaan]

Just to throw some things out ...

 

The WH meeting with the heads of the oil majors, is no different to when Bernanke met with the heads of US banks.

It's 'here's what we're going to do' ... not a discussion. Our own thoughts are tariffs by the end of April.

 

It's probably the opening round of muscular 'negotiation'.

Do versus talk, and stability until the economy is back to what it was. 12 months+

People are being paid to stay home anyway, with $QE, so most realized 2nd order effects will be external.

 

The game changer is India. Covid-19 is now starting to bite, and much of their in-sourced production is reversing. As China did, their oil consumption is going to collapse. China's consumption isn't going back to what it was, while NA/Europe is dealing with Covid. Take out NA consumption, and the external price must drop like a brick. But nice and cosy, 'inside' the tarif wall.

 

No point to storage, and this strands whatever external storage is already there, if the external price is going lower.               

And it WILL go lower - as nothing prevents the NA block from dumping into the external market. Swing production is a bitch.

 

Allow the EU into the circle, and the US/Europe can leave the ME.

Done being policeman, and don't need to, as we're now largely self-sufficient. And for a very long time.

 

So, gentlemen .... let's negotiate.

 

SD

 

 

 

[matts]

Just to throw some things out ...

 

The WH meeting with the heads of the oil majors, is no different to when Bernanke met with the heads of US banks.

It's 'here's what we're going to do' ... not a discussion. Our own thoughts are tariffs by the end of April.

 

It's probably the opening round of muscular 'negotiation'.

Do versus talk, and stability until the economy is back to what it was. 12 months+

People are being paid to stay home anyway, with $QE, so most realized 2nd order effects will be external.

 

The game changer is India. Covid-19 is now starting to bite, and much of their in-sourced production is reversing. As China did, their oil consumption is going to collapse. China's consumption isn't going back to what it was, while NA/Europe is dealing with Covid. Take out NA consumption, and the external price must drop like a brick. But nice and cosy, 'inside' the tarif wall.

 

No point to storage, and this strands whatever external storage is already there, if the external price is going lower.               

And it WILL go lower - as nothing prevents the NA block from dumping into the external market. Swing production is a bitch.

 

Allow the EU into the circle, and the US/Europe can leave the ME.

Done being policeman, and don't need to, as we're now largely self-sufficient. And for a very long time.

 

So, gentlemen .... let's negotiate.

 

SD

 

 

 

If you take out NA demand you also have to take out NA supply. US won't be exporting anything at 20 bucks a barrel. so I'm not sure if the price would collapse. US would just disappear from both the supply and demand side. I do realize I'm oversimplifying because certain refineries are geared towards certain types of crude. But big picture, I don't follow that the global Brent price has to collapse in a US tariff scenario.

 

 

 

[SharperDingaan]

Just to throw some things out ...

 

The WH meeting with the heads of the oil majors, is no different to when Bernanke met with the heads of US banks.

It's 'here's what we're going to do' ... not a discussion. Our own thoughts are tariffs by the end of April.

 

It's probably the opening round of muscular 'negotiation'.

Do versus talk, and stability until the economy is back to what it was. 12 months+

People are being paid to stay home anyway, with $QE, so most realized 2nd order effects will be external.

 

The game changer is India. Covid-19 is now starting to bite, and much of their in-sourced production is reversing. As China did, their oil consumption is going to collapse. China's consumption isn't going back to what it was, while NA/Europe is dealing with Covid. Take out NA consumption, and the external price must drop like a brick. But nice and cosy, 'inside' the tarif wall.

 

No point to storage, and this strands whatever external storage is already there, if the external price is going lower.               

And it WILL go lower - as nothing prevents the NA block from dumping into the external market. Swing production is a bitch.

 

Allow the EU into the circle, and the US/Europe can leave the ME.

Done being policeman, and don't need to, as we're now largely self-sufficient. And for a very long time.

 

So, gentlemen .... let's negotiate.

 

SD

 

 

 

If you take out NA demand you also have to take out NA supply. US won't be exporting anything at 20 bucks a barrel. so I'm not sure if the price would collapse. US would just disappear from both the supply and demand side. I do realize I'm oversimplifying because certain refineries are geared towards certain types of crude. But big picture, I don't follow that the global Brent price has to collapse in a US tariff scenario.

 

Big picture is China, India, and EU on the consumption side. Russia, ME, Others on the supply. Storage is full. Demand has collapsed, so either supply cuts back < demand, or the margins go to zero. SA/Russia unlikely to cooperate, so EU/Brent production shuts in. EU joins the NA tariff wall, that is now 40% of consumption. EU/Brent production restarts, and stability.

 

SA/Russia fight it out for the remaining demand. US/EU protection looks the other way, and just maintains its arms agreements. How long do you think those SA facilities remain in one piece, should rivals and neighbours gang up? And when selling replacement weapons is just good business?

 

NA also doesn't have to produce the oil that it dumps. It just sells ME paper oil at today's prices, and closes out by taking tomorrows spot rate physical delivery at the specialized on-shore refineries. And it's not even 'dumping' because NA didn't produce it  ;D

 

SD

 

 

 

[james22]

Just spoke to my friend MBS (Crown Prince) of Saudi Arabia, who spoke with President Putin of Russia, & I expect & hope that they will be cutting back approximately 10 Million Barrels, and maybe substantially more which, if it happens, will be GREAT for the oil & gas industry!

 

https://twitter.com/realDonaldTrump/status/1245720677660925952

 

VDE +11%

[Foreign Tuffett]

Just spoke to my friend MBS (Crown Prince) of Saudi Arabia, who spoke with President Putin of Russia, & I expect & hope that they will be cutting back approximately 10 Million Barrels, and maybe substantially more which, if it happens, will be GREAT for the oil & gas industry!

 

https://twitter.com/realDonaldTrump/status/1245720677660925952

 

VDE +11%

 

10 MBOPD OPEC + Russia cut isn't going to happen. That is around the same amount Saudi Arabia typically produces!

[SharperDingaan]

Just spoke to my friend MBS (Crown Prince) of Saudi Arabia, who spoke with President Putin of Russia, & I expect & hope that they will be cutting back approximately 10 Million Barrels, and maybe substantially more which, if it happens, will be GREAT for the oil & gas industry!

 

https://twitter.com/realDonaldTrump/status/1245720677660925952

 

VDE +11%

 

The number being discussed is 15M bbl/day ... and this is before Fridays WH oil major discussion.

WCP +23%

 

SD

 

[SharperDingaan]

Just spoke to my friend MBS (Crown Prince) of Saudi Arabia, who spoke with President Putin of Russia, & I expect & hope that they will be cutting back approximately 10 Million Barrels, and maybe substantially more which, if it happens, will be GREAT for the oil & gas industry!

 

https://twitter.com/realDonaldTrump/status/1245720677660925952

 

VDE +11%

 

10 MBOPD OPEC + Russia cut isn't going to happen. That is around the same amount Saudi Arabia typically produces!

 

They both have covid-19. Shut in almost entirely for 2-3 months, and sell from storage.

 

SD

[opihiman2]

Well, we finally got some direction from opec+, that's a plus.  However:

 

1) Will they actually cut?  That's the problem with these cartels.  No one trusts each other to cut.

2) Will it matter?  No.  They could shut down entire production and the demand destruction from Covid is still something like 85% of the market.

3) Oil prices are just bouncing.  I think we see a retest of the lows as economic #'s are coming in.

 

Finally, if there's anything that should be learned from all of this is that there is a TON of oil out there.  In retrospect, peak oil was the dumbest idea floated.  There is so much oil, and with new extraction technologies, I think we will see enough oil to last centuries at this point.  Especially with the start to electrify autos.  Deep Basin Capital has said that there will be a large cap on oil prices going forward.  I think so too.  It will be a multi decade bear market in oil prices where prices bounce around a range. 

 

That is of course we have something insanely ridiculous like a oil tariff wall around North America. 

[james22]

Anyone believe Trump could ask for a 50% production cut without threatening a tariff?

[Foreign Tuffett]

Just spoke to my friend MBS (Crown Prince) of Saudi Arabia, who spoke with President Putin of Russia, & I expect & hope that they will be cutting back approximately 10 Million Barrels, and maybe substantially more which, if it happens, will be GREAT for the oil & gas industry!

 

https://twitter.com/realDonaldTrump/status/1245720677660925952

 

VDE +11%

 

10 MBOPD OPEC + Russia cut isn't going to happen. That is around the same amount Saudi Arabia typically produces!

 

What might happen is that Russia might use legacy stripper well production that is in the process of being shut in as a bargaining chip. So a Russian 1 MBOPD "cut" could be entirely composed of production shut in due to low prices.

[opihiman2]

Geezus, I've been bamboozled by the media!  Looks like Trump's tweet might be bullshit:

 

https://oilprice.com/Energy/Energy-General/Russia-Oil-Producing-Countries-Not-Discussing-Any-New-Deal.html

 

https://oilprice.com/Energy/Energy-General/Why-A-15-Million-Bpd-Cut-Will-Never-Happen.html

 

Yeah, it doesn't make sense to me why Russia would cooperate with fucking USA to subsidize their bullshit, inefficient oil production.  We'll see.  I'll believe all of this when production #'s come down outside of the US. in the next IEA report.

 

[Liberty]

Kasparov:

 

 

Had a whistleblower leaked to the media that Trump, Putin, and bin Salman were conspiring to raise the price of oil & gas to prop up the industry, it would be a huge scandal. Instead, Trump tweets it.

 

Trump should be working with Congress and every US institution to help the American people, including those who work in the energy sector. Instead, he's working with two brutal dictatorships to prop up their regimes & put more money in their pockets.

[SharperDingaan]

Trump just puts the tariff up, and then talks. The opening ante is a 12.5 million bbl/d cut, for a couple of months.

Don't care how you do it.

 

SD

[opihiman2]

How the hell does Kasparov know anything worth a shit when it comes to oil? 

 

From the IEA:

 

https://www.iea.org/articles/the-global-oil-industry-is-experiencing-shock-like-no-other-in-its-history

 

and not some rando's on the Internet!  We'll see tomorrow whether Trump is full of shit or not.