Member Info for hey_arnold

“We absolutely believe in keeping the markets open,” Steven Mnuchin, US Treasury secretary, said on Tuesday. “We may get to a point where we shorten the hours if that’s something they need to do.”

Just a FYI:

EnQuest is expecting to be free cash flow break-even at a price of around $38/barrel this year and $35/barrel in 2021. It has hedged 20 per cent of its production for this year — 2.9m barrels at an average floor price of $65/barrel and a further 1.1m barrels at an average price of $52/barrel.

We are getting to the point where there are bargains to be found.

Its shorts taking profit. Stop chatting **** about a leak.

Oil needs to drop another 25%.

I'm gonna guess the canary islands?

Where do you expect oil to get to Bluelight? sub 20?

Thats because it was sold so heavily yesterday.

The disconnect between PMO and TLW as others have pointed out, is interesting.

Brent down 6%. This currently seems to not go below 7.7 without someone buying it back up. Not sure how long that will last but defo seems a level at the mo.

" we will then have another 2 years of glut "

Based on what?

MBS = Mohammed bin Salman

He wrote recently this:
Putin has ensured no Russian companies are indebted and
he has cleverly created an economy that can provide subsidised
food, water and energy for the masses and combine that with
exports which provide the income necessary for him and his
government to prosper. He has looked at MBS and realised that
Saudi can’t long survive a sub $70 oil price because the regime is
dependent on welfare payments and a sub $45 oil price will take
out the shale gas and oil industry in the USA. Shale was already
showing itself to be treacherous prior to this but now looks
terminal. MBS is praying for a quick war because he cannot
afford anything more, which means a low oil price.

With OPEC+ now pursuing a market share strategy, we believe that this will bring about the healthy consolidation and rationalization of the industry we had hoped for in 2014/15 when we first constructed the New Oil Order lower-for-longer thesis. Our thesis was interrupted in 2016-2018 by Chinese stimulus, OPEC production cuts and US fiscal policy. By 2019, the industry returns were so poor due to too many inefficient indebted producers that capital was already fleeing at $65/bbl oil, a large part of why the international offering of Saudi Aramco struggled. Assuming this rationalization occurs over the next year (which was one of our top themes for 2020 even before this), the industry is likely to emerge in a much more healthy position with many of the zombie companies that were a dead weight on returns removed, even paving the way for an attractive international offering of Saudi Aramco.

While it is tempting to view the COVID-19 oil demand shock and the oil ‘price war’ as separate events, we like to emphasize that OPEC+ pursuing a market share strategy is simply a second-order effect of the virus made possible by extremely weak demand, pushing the market far down the global supply curve. With oil demand down almost 5 million b/d at the time, a production cut was not economically feasible. In contrast, with nearly 3.5 million b/d of OPEC+ spare capacity, the demand shock plus their spare
Exhibit 4: COVID-19 will cut 8m b/d from global oil demand at its peak
Impact on global oil demand from COVID-19 (kb/d); highest monthly average is 7m b/d despite a peak of 8m b/d at the end of March
Exhibit 5: Liquidity constraints are creating volatility in markets like gold
-7,000-6,000-5,000-4,000-3,000-2,000-1,0000JanFebMarAprMayJunOECD (kb/d)China (kb/d)Other EM (kb/d)Total
0%10%20%30%40%50%60%70%80%2000200220042006200820102012201420162018Gold 1 week ATM implied volCurrent level
Source: Goldman Sachs Global Investment Research
Source: Bloomberg, Goldman Sachs Global Investment Research
17 March 2020
3
Goldman Sachs
Commodity Watch
For the exclusive use of ROBERT.KEEN@GS.COM
83a2d821be29c10110270000402724b1
capacity was now enough output to entirely undercut the 7.7 million b/d of total shale output – an opportunity OPEC has not had since 2012. With Iran, Libya and Venezuela all offline there was no longer the risk that production increases would simply offset these loses. However, even without the demand shock, the production cuts from late 2016 have been a disruptive policy error, costing not only OPEC $220 billion per year in lost market share, but also energy equity shareholders over a trillion dollars as it created an unsustainable future for the energy industry with inefficient companies continuing to operate (see Exhibit 6). Specifically, OPEC cut 4.4 million b/d (1.8 excluding Venezuela and Iran) which generated a 5.7 million b/d supply response, of which 5.0 million b/d was from shale.

Thanks JP253. Very interesting.

GS: Lowering 2Q Brent to $20/bbl from $30/bbl. Large commitments from core-OPEC for April/May deliveries pushes the net supply increase near c.3m b/d, which, when combined with the demand losses, results in an April/May surplus of 7mb/d, which will likely breach system capacity during 2Q20.

I have the note, they dont think under 20 they think 20

The difference this time is that its a combination of HUGE oversupply combined with HUGE levels of demand destruction and not much storage left.

Makes sense. Thanks sudnal