A multi year bull market for oil with producers being a fantastic investment23 Apr 2022 13:49
Oil and gas prices are in a very unique situation with the Russia Ukraine war. With sanctions starting to bite Russian oil export losses will only grow further. I believe Russian oil will be phased out gradually to hurt the tyrant Putin as countries will not want to be seen supporting blood money. I actually think that the EU will announce next week more phased in embargoes of Russian oil.
Also, note Russia has asked to be paid in Rubles for its gas. My take is Euros will go to the Russian bank and be exchanged at the rate you are given, controlling the amount of gas that you are given. Putin will also roll the Ruble exchange rate in to metals, grains an oil imo. Food prices an fertiliser are already going up an inflation will rocket.
The outages I posted about in detail last week for Libya are serious and politically motivated. At the moment there are currently IRO 525,000 BOPD outages and I see this conflict lasting for some time and the losses have the potential to grow to 1 million BOPD . This is a prolific oil and gas basin. It will leave Europe scrambling for more oil.
Then we have the Iran deal which is at stale mate. There will be pressure put on the US for not agreeing to everything Iran want and heightened tensions in the middle east.
Another looming problem, and bullish for oil, is the Yemen’s Houthi cease fire which ends in June and it is a risk that they will come back attacking Saudi Arabian oil storage facilities with drones and rockets.
We have had loss of demand for oil with covid in China, but they will begin to open up and this will be another bullish catalyst that will largely offset the SPR release.
It is well documented that OPEC spare capacity will become a problem end of 2022. Western governments once saw OPEC as an organisation that had exclusive possession or control of the supply of or trade of oil, that influenced prices. It should be mentioned also that Biden has tried many times in unsuccessful attempts to pass a no OPEC law to punish them for their influence on oil prices.
Do not rely on US Shale either with constraints on resources from rigs, taking 6 months to a year to sort out, and labour shortages. Most US shale life of a well is short lived anyway. DUC’s are also dropping fast in US through being left.
Now on to Biden with the largest SPR release announced in history….yet oil is still above $100. Only two years ago we were at negative oil prices, and now we are back plus $8 . There is a structural imbalance in the oil market and the SPR will not encourage production - history again tells us after an SPR oil prices rise. This has not been thought through as there would be logistical problems with an SPR release of this size and production would need to be curbed . It takes six months to bring on a well so Biden’s plan seems illogical to me and extremely irresponsible for security reasons.
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