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Msg  501025 of 552093  at  5/31/2023 2:00:03 AM  by


The following message was updated on 5/31/2023 2:00:40 AM.

Good Twitter topic on oil oversupply

Back from the hindsight, its easy to see, why we have 70 oil now.
Since 4Q21, OECD liquids production has more than matched demand growth thru 1Q23. Demand only grew by about 1 Mb/d. Shale liquids grew this much. Throw in some other OECD growth from Canada and Norway and you have OECD growing more than demand growth. Go ahead and dump over 200 Mb of SPR in there and you really have a problem. The SPR releases were preventative. The market never actually experienced a shortage, prices were just high. Basically shot up the patient with steroids and fentanyl for a scraped knee. Anyway, if you’re OPEC+, that leaves you with having to cut production to keep prices up. This is the classic problem OPEC+ experienced when it returned to market management in 2017. When they keep prices high, shale and other non-OPEC sources grow, and they’re invariably left having to cut production to make room for this supply growth. Russia hates this, and I don’t blame them. You’re left with constantly having to cut production to halt a falling market while shale shitcos just grow and grow. This is why I have long been upset with the shale industry. They ruin profits for virtually everyone in the upstream community, and destroy all investment dollars they are given in pursuit of killing everyone else. An upstream mass murder-suicide. I digress. Russia says, if we’re gonna be left with shitty pricing anyway, why not just produce all out? Takes some pain initially, as lower prices are needed to stop the shale and other non-OPEC production, but eventually, you get back to the same price level, in theory, with more quantities being sold. This pain process can take a very long time and a successful outcome is not guaranteed. Saudi’s greatest oil minister of all time Ali Al-Naimi, opted for the market share strategy, anticipating that nonstop cutting would await them if they stuck with market management. Again if your price is going to be shit you might as well maximize quantity sold. Saudi and OPEC this for two years and tossed in the towel. Too painful. The Russians finally came on board. Oil gluts can be very long and drawn out. No one has time for this. Least of all MBS and his 2030 vision which he only has 6.5 years to complete. But if you can’t stop non-OPEC production from growing in excess of demand growth at a certain price, you’ll NEVER be able to get prices above that level. Herein lies the super cycle thesis. People think non-OPEC production (read: shale) is generally done. If shale is done, regardless of price, then yea, OPEC is good to go, as long as demand grows, and the group can stick together. If shale is only kinda done, still eking out growth, and demand flattens out, and Guyana and Norway are growing and Libya, Iran, Venz are inching up, the math becomes much more difficult and Saudi loses control. This is where we are now. Balances are stable, not remotely tight. Demand needs to keep climbing but the market is giving no credit to higher demand growth expectations in 2H. Gasoline and jet are only products holding us up. Industrial demand demand for distillates and NGLs is shit. If shale really is tapped out, Saudi has a green light to cut here, even unilaterally, and it should be revenue maximizing. But if it’s not, Saudis risk losing market share and inevitably receiving the same price as before, which is not profit maximizing. Having a bit of a hard time seeing unilateral cut given how much freeriding is already taking place at Saudi’s expense. They must get tired of being the only reliable market manager. An outcome where the group can come together and cut in unison would be much more bullish. Russia really needs to get on board. Without cohesion among the group, we risk a sloppy, emotionally driven meltdown like we saw in 2020. #EFT #OOTT

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Msg # Subject Author Recs Date Posted
501026 Re: Good Twitter topic on oil oversupply Greenbub 1 5/31/2023 3:20:28 AM
501028 Re: Good Twitter topic on oil oversupply coolreit 9 5/31/2023 3:41:39 AM

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