GRG 55 might be on to something

[Mega]

Re: GRG 55 might be on to something

I sense WAR is coming

[shiny!]

Re: GRG 55 might be on to something

I sense WAR is coming

Anything to create inflation, right?

[FrankL]

Re: GRG 55 might be on to something

I sense WAR is coming

It seems like Iran is trying to provoke the US into a limited response that is dramatic enough to spook markets. They might consider the following scenario:
- crash markets further by pouring some oil on the fire
- divert attention from internal covid19 issues
- drive up the oil price
- have the US alienate the Iraqi government if the US takes action autonomously on Iraqi territory


And if they don't get a response it'll make the US look weak

[ProdigyofZen]

Re: GRG 55 might be on to something

do you know who is picking up the now-cheap assets?

Energy E&P in the US is going all private, no one will be looking to go public, basically ever again. It is total annihilation. The public market will cease to exist for energy going forward aside from the names that are already out there.

My former investor is raising a 100 million fund to buy and hold oil producing assets in west texas and plans to never sell. The days of raising capital, buying assets and flipping them for a higher price are over.

[touchring]

Re: GRG 55 might be on to something

And if they don't get a response it'll make the US look weak

In troubled times, it's better to keep your heads down and make as little moves as possible.

[GRG55]

Re: GRG 55 might be on to something

It seems like Iran is trying to provoke the US into a limited response that is dramatic enough to spook markets. They might consider the following scenario:
- crash markets further by pouring some oil on the fire
- divert attention from internal covid19 issues
- drive up the oil price
- have the US alienate the Iraqi government if the US takes action autonomously on Iraqi territory


And if they don't get a response it'll make the US look weak

The US is most likely to entangle itself in a shooting war if the prospects of a Trump re-election become in doubt.

Thats the usual pattern for politicians.

[GRG55]

Re: GRG 55 might be on to something

Energy E&P in the US is going all private, no one will be looking to go public, basically ever again. It is total annihilation. The public market will cease to exist for energy going forward aside from the names that are already out there.

My former investor is raising a 100 million fund to buy and hold oil producing assets in west texas and plans to never sell. The days of raising capital, buying assets and flipping them for a higher price are over.

Come on Andrew.
In the shale drilling game the strategy of raising capital, buying assets and flipping them for a profit ended after the first round of the Barnett gas play. That was when the Chinese were the grand exit plan for the independents.
And companies like Exxon bought XTO, etc.
The next go around was supposed to be the Indians. But they never materialized.
That game has been dead for more than a decade, no matter how ridiculously hopeful some of the private equity founders may have been, especially since 2014.
When private equity says they are "never" going to sell, it means they can't.

[ST]

Re: GRG 55 might be on to something

one of the few smart moves i've seen coming from this administration

well, don't forget that Trump's budget just a few weeks ago proposed selling 15 million barrels for 2021 budget in addition to the congressionally mandated 260m barrels to be sold through 2027 to fund gov't programs.

The interesting question is why the Saudis and Russians are willing to engage in this oversupply during unprecedented demand destruction. For Saudi they appear to care only about total revenue and with spare capacity and a marginal cost in the single digits they seem willing to make a point to Russia while still achieving their revenue targets so that their future stabilization direction is heeded. (for the second time in 7 yrs)

[GRG55]

Re: GRG 55 might be on to something

Shit
OIL just gone to $30!
Goldman expects Oil to fall well into the $20's

Mike

Western Canada Select is down to $16.33

[Mega]

Re: GRG 55 might be on to something

They be paying us to take it away soon !

[Fiat Currency]

Re: GRG 55 might be on to something

Western Canada Select is down to $16.33

[GRG55]

Re: GRG 55 might be on to something

Western Canada Select is down to $16.33

Western Canada Select now at $13.30, down another 18% today.

I think we are getting pretty close to the end of this washout now. Not that it really matters given the destruction going on in the rest of the economies globally.

The Persian Gulf States and Kingdoms seem to have come together in a remarkable display of Arab unity and executed a coordinated "opening of the taps" with far more determination than anyone should have expected.
I would anticipate that will get Russia's attention and we should see some attempt to quietly get back to the table to come to some resolution about supply management after all. The face-saving excuse will be "nobody" anticipated the effects of 2019-nCoV, LOL.

[ST]

Re: GRG 55 might be on to something

i think Russia used this as an opportunity to continue with their US strategy to create issues. People don’t realize how high the level of (covert) conflict is over the past several years (informational, cyber, now economic). Ultimately they benefit from that and from increased oil market share by removing shale output. The US is playing go fish while Russia is playing grandmaster chess. Thoughts?

[GRG55]

Re: GRG 55 might be on to something

i think Russia used this as an opportunity to continue with their US strategy to create issues. People don’t realize how high the level of (covert) conflict is over the past several years (informational, cyber, now economic). Ultimately they benefit from that and from increased oil market share by removing shale output. The US is playing go fish while Russia is playing grandmaster chess. Thoughts?

I don't think shale was the primary target at all. The Middle East is where the USA is most vulnerable, and Saudi is their primary regional agent (and President Trump has proved inconsistent, chaotic and incoherent through his entire term). That's more important to Putin than anything coming out of West Texas or North Dakota, little to none of which ever gets sent as either crude or refined product to any of the markets Russia supplies in quantity. See post #13 on this thread for my arguments.

Let's remember, the USA economy is far, far, far more diversified and far less dependent on crude oil production and revenue than either Russia or Saudi Arabia. Russian and Saudi Arabia collapsing the oil price to hit USA shale producers is like taking high dose arsenic for a headache. Russia underestimated the response from both the hotheaded and impulsive MbS, and even more, the degree to which the major Arab oil producing States (OAPEC) would band together and collaborate with KSA.

[ST]

Re: GRG 55 might be on to something

I don't think shale was the primary target at all. The Middle East is where the USA is most vulnerable, and Saudi is their primary regional agent (and President Trump has proved inconsistent, chaotic and incoherent through his entire term). That's more important to Putin than anything coming out of West Texas or North Dakota, little to none of which ever gets sent as either crude or refined product to any of the markets Russia supplies in quantity. See post #13 on this thread for my arguments.

Let's remember, the USA economy is far, far, far more diversified and far less dependent on crude oil production and revenue than either Russia or Saudi Arabia. Russian and Saudi Arabia collapsing the oil price to hit USA shale producers is like taking high dose arsenic for a headache. Russia underestimated the response from both the hotheaded and impulsive MbS, and even more, the degree to which the major Arab oil producing States (OAPEC) would band together and collaborate with KSA.

Maybe not necessarily primary, but as the largest producer and owning the marginal barrel allows the US a strategic policy weapon that it didn't possess before (not lost on Russia) and increasingly it's hard to discount reports like this out of WSJ and Goldman analysis:

...Mr. Putin asked the room whether Russia could withstand a sharp decline in oil prices that was expected if neither side could reach a compromise. Igor Sechin, the head of the state-controlled giant Rosneft and widely considered a staunch nationalist in Mr. Putin’s circle, said low crude prices “are great because they will damage U.S. shale,” according to people familiar with the meeting.

Days later, Mr. Putin sent his energy minister, Alexander Novak, to the OPEC talks with no mandate to negotiate a production cut with the Saudi-led group, according to oil officials in the cartel. The move, combined with a Saudi insistence on deeper, longer-lasting curbs, led to the collapse of the talks on March 6....

...A former member of the Soviet armed forces, Mr. Sechin was a chief of staff at St. Petersburg’s city hall when Mr. Putin started his ascent to the presidency in the 1990s. Now head of Russia’s largest oil company, Rosneft, Mr. Sechin has never hidden his disdain for the OPEC deal, warning last July it meant “the Americans will immediately take [our] market share.”

U.S. shale producers have increased their production by about four million barrels a day since OPEC and Russia agreed to cut output in late 2016. As it became less reliant on global oil imports, Washington became increasingly bold in its use of oil sanctions. Last year, it took the unprecedented step of banning all sales of Iranian oil without exception and prohibited most Venezuelan exports.
...
Moscow grew concerned when the Trump administration started to focus its energy sanctions on Russia, according to people briefed on the Kremlin’s views. In late December, the U.S. announced restrictions on the $10.5 billion Nord Stream 2 pipeline, which is set to deliver more Russian gas to Germany. In February, Washington placed sanctions on a subsidiary of Rosneft for its ties to Venezuela.

“It could be a protracted struggle as Russia’s strategy seems to be targeting not simply U.S. shale companies but the coercive sanctions policy that American energy abundance has enabled,” said Helima Croft, chief commodities strategist at RBC.

....
full here:
https://www.wsj.com/articles/russia-...rs-11584052675

Edit: If you look at Goldman's coverage especially over the last time Saudi et al did they this, Goldman sees it as economically rationale for them (and Russia) to act in this way. US shale at 8 mbpd has displaced Saudi as the marginal swing barrel

The Revenge of the New Oil Order (03/2020)

• At its core, the decision from Russia to unwind the artificial price support that OPEC+ had created since 2016 is rational. As we argued previously, these cuts to defend prices instead of market share defied the economic incentive of large low-cost producers without pricing power, with Russia's economy able to cope with lower oil prices. Since November 2016, OPEC and Russia production was cut by 4.4 mb/d while the rest of the world increased output by 5.7 mb/d. Media reports over the weekend relayed that Russia's decision was indeed squarely targeted at the shale sector given its current financial distress but also at the US administration in response to recent US sanctions on its Nord Stream 2 gas pipeline and Rosneft.

this is from Nov. 2014 from Goldman oil:

Realization that the OPEC reaction function has changed and that the US shale barrel is now likely the first swing barrel. As concerns about the sizeof the surplus that could be created by the return of Libya in the context of surging non-OPEC supply began to mount, the focus shifted to how will this surplus be accommodated. When Saudi Arabia cut prices to Asia for November delivery it was interpreted as a shift in the Saudi reaction function to a focus on market share.This should have not been a surprise in the new world of shale that has flattened the supply curve, as economic game theory suggests that they should not be the first mover and that the US shale barrel should be the new swing barrel given how easily it can be scaled up and down.

In addition, Saudi Arabia is losing market diversification as the shale barrel crowds them out of the Atlantic basin, leaving them with nearly only the Asian Pacific market which makes defending market share more important due to the lack of diversification and their ability to balance the Atlantic market is more limited (see Exhibit 10).