352 thoughts to “Open Thread Petroleum, March 8, 2020”

  3. No reason the US can’t solve this problem the same way Argentina did. Decree a higher price. Or expand the Fed’s toolkit to enable purchase of some sort of obfuscated oil derivative.

    Stop thinking it all has to make some sort of sense. It doesn’t. The only sense that has to be in place is that the wheels keep turning under the trucks that feed you.

    1. https://moneymaven.io/mishtalk/economics/oil-price-war-and-liquidity-crisis-coming-CuXyuFY1CE-SN-JpsBWi9Q

      If allowing central banks to buy whatever they want in the LONG RUN worked.

      Every country on the planet would be rich!

      Why don’t the poorest countries just start printing more money than everyone else? Then they can be very rich!

      Its called increasing your money supply destroys the value of your currency.

      Everything balances. That’s why we use BALANCE SHEETS.

      1. Of course it works. They’ve been doing it in cooperation with other central banks for at least 12 yrs and more likely 20.

        And all countries are rich. They all eat food. They don’t have horrible body counts. Rich is not measured in a substance created from nothingness. It’s not namby pamby talk of rich in family rich in neighbors rich in experience. That’s similar crap.

        It’s measured in minimum body count. Countries are rich because they printed away body count.

        1. Watcher,

          your opinions defy basic logic ( minimum body count? )

          If any country could print an infinite amount of “money” and it worked? Then why don’t they do it.

          thanks to dennis and ron for this great site!

          MadJimJaspers

        2. >Rich is not measured in a substance created from nothingness.

          This is very much the Marxist theory of value. It’s odd how widespread it is in supposedly anti-socialist America.

          Here is an example of how value can come from nothing: Two farmers live next door to each other. One produces more potatoes than he can eat, and the other produces more eggs than he can eat. So they swap potatoes for eggs. It is a “win-win situation”, or a “positive sum game”, as mathematicians put it. Both parties profit, nobody loses. Value comes from nothing.

          Marx denied this and scoffed at the idea that specialization could add value. He was wrong.

          1. Your example shows Marx was right.
            He always saw the idea of mass production, and swapping in all other goods as a foundation of capitalism.

            Capital + Work gives value.

            Marx is just the basic economic theorie, it has nothing to do with socialism.

            “Rich” with Marx is defined by the ownership of productive goods – factories, land and mines (he would have added oil wells). Being able to let other people work for you and get the additional value.

            Even your farmer is more rich than a worker with his model. Even if he works, he keeps his additional value and don’t has to give it to the factory owner.

            Enough of Marxism here, the oil war 2020 has broken out fully. In the economic press there they don’t see much problems for US – Shale – they think either they are full hedged, or go through Chapter 11 (?) and restart without dept. In both cases, they can contiue to increase producing like crazy.

            1. Nobody ever doubted that landowners were better off than the landless. It didn’t take a great thinker to figure that out.

              Anyway, your comments are irrelevant to the remark I made, which is about the idea of what constitutes value. Apparently you were just triggered by the name Marx to do your standard speech regardless of the relevance.

          2. In the last couple of weeks, the NYSE alone has lost something like $10 trillion in value. Stocks aren’t cash, but they are fairly liquid. I wouldn’t start panicking about inflation just now.

            1. I’m not worried about inflation.

              I am concerned about asset bubbles that get blown by the fed printing money when there is no actual productivity to back it up.

              Deflationary collapse is coming to a store near you!

  4. Oil tanking over night Now currently trading at $32.75!

    Dennis, I guess my crystal ball is working just fine! 🙂

    Dow Future down over $1K and S&P500 down $142!

    Hope you folks are all strapped in, as we are heading for a wild ride! at least until the CB bank start pumping Trillions in QE globally.

    1. at least until the CB bank start pumping Trillions in QE globally.

      I doubt that will work in this situation.

      But I have been wrong before.

      1. If they overdo this, we get a DOW of 2 Billion+ – and you can use Dollars and Euros as toilette paper.
        The moment the believe in the fundations of money is broken, it’s over. So they can only pull a few strings in the dark.

      2. It won’t solve the supply chain shortages (ie US companies import parts, materials, and finished good from China\India). But it can be used to prevent a lot of businesses from defaulting on debt obligations. Just about every major US company is one or two notched above junk bond status due to 10+ years of stock buybacks.

        I imaging US QE 4 is just a week or two away at most. We’ll see the Fed buying up a lot of debt, and if that fails, they start buying US stocks.

        This could be worse than 2008-2009 if the pandemic persists into the summer months. There is a chance that the virus will go into remission during the summer season (for the Northern hemisphere). Even with a lot of money printing, its not going to solve supply shortages if China production and trade is shutdown or operating at a degraded level.

    2. Techguy,

      What does you crystal ball say about the average WTI price for March 2019 and March 2020.

      I do not recall your prediction of the date that WTI will fall to under $33/bo, can you point me to that comment?

      1. Mistyped years I meant March 2020 and March 2021 WTI average oil price.

  6. “A Capital IQ search shows that [in the USA] publicly traded oil and gas companies employ nearly 700,000 people. That’s not including the millions more who work for private companies or in the halo of the industry.”

    1. Why fire them if you can pay them? You guys just haven’t signed onto reality. None of this has to make sense. The only thing necessary is that the wheels keep turning. You can always manufacture phrasing to make it sound like it’s just an aspect of capitalism underway.

  7. The Saudis won’t have to increase production…the market won’t be able to absorb what they produce now.

    We’ll see reduced shipments from them until the current situation plays out or it becomes the new normal.

    As to whether it’s
    A) to hurt shale, disguise the depletion of their fields, and look like the market-maker to the uninitiated (and a global recession is just collateral damage)
    or
    B)

    Hmmmm….need some more scenarios….

  8. Increasing production is easier than finding available oil tankers and storage facilities for all the extra oil. Where is that going to come from?

  9. Why has the oil price crashed and stocks markets crashed is because governments are closing down economic activity.

    Why are they doing so? It is because over the last 30 years massive tax cuts for the rich have deprived funding for many social activities. The health care services have had to cut vast numbers of beds as per person funding has been reduced.

    If people were tested rapidly and taken to hospital immediately the death rate from the virus is low and transmission rates would also be low.

    https://www.statista.com/statistics/185860/number-of-all-hospital-beds-in-the-us-since-2001/

    If those 300,000 beds still existed, with the doctors and nurses to care for the sick, people could be treated as they became ill and nearly all would go home cured after 2 weeks.

    Now people will die at home, uncared for because hospitals will be full.

    https://en.wikipedia.org/wiki/Wealth_inequality_in_the_United_States

    Just think ordinary people voted for these tax cuts, based on the lie that if rich people got richer then poor people would get richer also. Ha ha.

      1. Why has the oil price crashed and stocks markets crashed is because governments are closing down economic activity.

        Well, it’s not just the government that is closing things down, it is the coronavirus that is causing this whole damn mess. And it is the general population that is closing things down by not flying or going to the theater or traveling across the country or going to restaurants. Of course governments do their part as well.

        As to the price of oil, hell what would you expect is oil consumption drops like a rock because people are just not traveling any more? The price of oil is doing exactly what we would expect in such a case. It’s not Saudi Arabia’s fault, or Russia’s fault, it that damn virus.

        1. And the SA Russia conflict comes on top of that. They now try to shoot it out who’s the last man standing by increasing the crash to a full price war.

          Instead all oil companies could have made statements like “… because of Corona demand destruction, we scale back investing in capacity this quarter to preserve the money of our investors”. But nobody likes this.

          1. Something tells me the Russians are in a LOT better spot to weather an oil price war than the Saudis.
            Russia is a huge country with plenty of just about everything needed to support her people, with the exception of agricultural lands with a warm enough climate to supply fruits and veggies thru the winter.

            And while the Russian government is unquestionably corrupt, it’s quite stable, at least as far as any outward indications are concerned.

            The Saudi government, aka the House of Saud, is just about totally dependent on oil for revenue, totally dependent on that revenue to keep the priests and people in line, dependent on imported food, dependent on the USA for the fact the House of Saud hasn’t been wiped out by rival factions or neighboring countries with less oil but more and better men in uniform, etc.

            There’s no telling where this wild ride will end.

            1. If oil stays at $30 for a few months, Putin’s going to have to make some choices: (1) spend less on the military, (2) spend less on social programs such as pensions, (3) steal less from the Russian people.

              Whatever he chooses either he or the Russian people or both won’t like it. And yes, Russia is still heavily dependent on oil revenue. Except for military equipment, their manufacturing sector barely exists. Remember that it was low oil prices that brought down the Soviet Union.

        2. Ron Wrote:
          “As to the price of oil, hell what would you expect is oil consumption drops like a rock because people are just not traveling any more?”

          The virus was the catalyst, but the economy was positioned for a decline this year. US CEOS started quitting since the summer of 2019 and cashing out their stock options

          https://www.forbes.com/sites/samanthatodd/2019/10/02/ceos-are-leaving-at-a-record-pace-report-finds/#b6837fa45e83

          Most Major US companies have loaded up on so much debt for Stock buybacks that they are now just above junk bond status. So its unlikely the would be able to continue stock buybacks much longer.

          https://www.businessinsider.com/us-economy-corporate-business-worrying-junk-debt-2020-2

          Consumers are also over leveraged in Debt.

          https://www.marketwatch.com/story/us-consumer-debt-is-now-breaching-levels-last-reached-during-the-2008-financial-crisis-2019-06-19

          This also has been the longest business cycle so a recession is overdue. Bottom line: a recession would have happened even if the virus didn’t happen, but the virus is certainly taking a bad situation into a massive crisis for sure!

        3. Reuters heard what Ron said, decided it was true, and printed their version-

          “A long-standing deal between Saudi Arabia and Russia — two of the world’s oil-producing powerhouses — fell through over the weekend, sending global markets into a spiral and dashing future economic prospects in the US.

          And it has almost everything to do with the coronavirus — or, more specifically, the drop in Asia’s oil consumption that’s being driven by the coronavirus outbreak there.”

        4. Ron

          Pretty well every single death is of someone over 70 or someone with a serious existing health condition.

          So they should isolate themselves if they want.

          People who are under 50 and healthy have an 80% chance of having no symptoms at all and a 99.8% likelyhood of full recovery.

          I was out last Saturday and places were full.

          It is governments that will destroy the economy

          https://apnews.com/3ff579e06d07428f0bc993c0a98c001d

          Shutting down an entire country is insane.

          1. Wayne, it is the extreme contagion of this disease that is the problem. One person infected 696 others on the Diamond Princess, seven of them died. Where the disease is, it spreads like wildfire. Where the disease ain’t, like the places you were at last Saturday, nothing to worry about.

            If you walk into your boss’s office and tell him you have the flu, he will tell you to go home and get some rest. But if you walk into his office and tell him you were exposed to the coronavirus and now you have a high fever and are feeling sick, he will panic and tell you to get the hell away from him and away from anyone else in the company.

            Why is the price of oil so low? It’s simple, people just ain’t traveling. Airlines are cancelling flights. People are afraid to fly because one person on the plane can infect everyone on that damn flight.

            About the lockdowns. Those are only happening in extreme cases. That is how China is getting the problem under control. Draconian measures for sure but it is the only way they can keep their country from total collapse. If new infections are actually slowing in China, it is because of the draconian measures they are taking. Otherwise their economy would collapse and cause a worldwide depression because of the critical parts and drugs that China supplies.

            1. Ron

              I am not saying it is not bad, it is.

              But if countries had maintained the hospital beds they had in the 1970s, there would be sufficient beds, nurses and intensive care equipment to treat the very ill as and when.

              The UK for example has cut 400,000 beds down to 100,000.

              There is now no hope of treating everyone if the virus spreads, so the only solution they have is to close things down. This will slow the rise in the number of cases, but the economic cost could be disastrous.

              Arrogant fools cut health care to the bone and fools are now closing down jobs. Many people are paid week by week, how will they feed themselves and pay the rent?

          2. Wayne,

            The virus is highly contagious so the fact that 80% have no symptoms (or mild cold-like symptoms) means that it is very difficult to detect who has the virus and who does not. Individual nations need to decide what is the best solution for their nation.

    2. Wayne Wrote:
      “Why are they doing so? It is because over the last 30 years massive tax cuts for the rich have deprived funding for many social activities. The health care services have had to cut vast numbers of beds as per person funding has been reduced. ”

      Just the opposite. The economy is supported by the private sector. Health care issues is a combination of aging population & too much gov’t interference. As a American, I’ve seen my Health Ins. premiums and deductable soar since Obamacare. In 2013 I was paying about $280 month for a plan with a$500 deductable, out-of-network access, and a $15M max coverage. Today I pay over $800/mo with a $7500 deductible and very limited network access.

      Most of the west economic problems stem from Financialization of the economy, turning most of the population it debt slaves, and outsourcing most jobs. In the West, gov’t piled on regulations and made it economical for business to offshore production.

      To compound the problem, Gov’t has dumbed down the education system (at least in the US) when they needed to ramp it up so students would have the STEM skills need to fill 21st century jobs. Manufacturing, and white collar jobs have been high-tech jobs as machines replace manual labor jobs. Instead Public schools are more focused on useless liberal arts, instead of Stem classes.

      1. Techguy

        The United States has lost 400,000 beds in the last 30 years.

        Yet it could afford to spend $2 trillion on on the Iraq war.

        https://www.reuters.com/article/us-iraq-war-anniversary-idUSBRE92D0PG20130314

        When you add in Afghanistan, Syria, the costs are staggering. How many nurses and beds could that pay for?

        The rich owners of companies have indeed racked in billions by sacking Americans and providing jobs in China, they were also rewarded with a tax cut from 80% to 40%.

        All that tax lost meant the loss of many jobs such as civil engineering and poor pay for teachers. The entire system has been greatly weakened and ripe for a fall.

    3. >Why has the oil price crashed and stocks markets crashed is because governments are closing down economic activity.

      Haha what is the Libertarian solution to pandemics? Let the chips fall where they may? Go out and buy an AR-15?

    1. It’s hard to say how bad the economic impact of the C V will be, more like impossible. Maybe it will be mostly contained, and the damage mostly short term, rather than medium and long term.Maybe not.

      But there can be no question at all about cheap oil being good for the USA economy, lol.
      The oil guys who go broke won’t go out of business altogether. They’ll mostly go back to being employees rather than employers though. Happens all the time in the trades.
      Bubba will have money enough to fill up his cooler with beer, and the dual tanks on his truck, and the tanks on his fishing and ski boats, and if the airliners are flying, tickets will be cheap, lol.

      I’ll probably try to run the hell out of my big yellow machine all summer, building horseback trails and such on my mountain side farm, enlarging the small private lake, just playing like a kid… an old kid with a REAL Tonka toy.

      The most unfortunate thing about it is that orangutan voters are like my more religious relatives. Anything good happens, Jesus gets the credit. Cheap gas is manna from heaven to that sort of people, because it reminds them of the time they were still young and getting some in the back seat of their muscle car or station wagon, lol, and good times stretched out in front of them, forever.
      They’ll be twice as likely to vote for the orangutan.

      1. Old Farmer Mac,

        Gas was cheap from 1930 to 1933 as well. 🙂

        Cheap oil due to lack of economic activity is not a recipe for political success.

        Hoover was not well liked.

        1. Hi Dennis,
          I agree about Hoover and the thirties, but for now, we’re not in a Depression, at least not yet, and Bubba actually IS better off, in my estimation, than he was three years ago, as HE sees things. It’s easier by a mile to find a job in my area at least now than it was then.

          Plus there’s a huge safety net in place now, in the form of SS, Medicare, rental assistance,unemployement benefits, etc, even though it’s full of holes.

          Plus there’s confirmation bias. Bubba wants to believe he’s better off because he believes in Jesus and the orangutan,interchangeably, so he’s happy as a pig in shit right now, unless he ‘s just recently lost his job.

          Now if the economy crashes between now and October, it’s a whole new ball game for Bubba. He may blame it on Obama, but his slightly smarter wife and kids are more apt to blame it on the orangutan, especially if CV 19 runs wild.

          If I had Bloomberg’s money, I would put up billboards quoting him, making fun of him, about it, in every state in play in the country.

          1. OFM,

            The only way oil prices remain this low for more than a few months is a Worldwide Depression, that was what my comment was intended to imply.

            Bottom line either we have low gasoline prices and a Global Depression or we do not the two go together over the medium term (2020 to 2035) at some point (2035-2050 is my guess) demand for oil may fall below supply as the World transitions to alternative forms of power for transport.

            In the mean time Bubba will be surprised how expensive it becomes to fuel his F150 by 2022. 🙂

            1. Back atcha Dennis,
              You’re pretty much on the money. Cheap oil and good times don’t, because they cannot, mix very well or for very long.

              The days when the industry could supply ninety million barrels or so per day of CHEAP oil are long gone, and will never return. Rust and depletion never sleep, lol.

              It’s obvious that a substantial percentage, maybe close to half, of all the oil we’re using these days costs fifty bucks or more per barrel just to get it out of the ground and into a pipeline or ship, but I’m not a number cruncher.

              Some of the other people here, you in particular, might know about what it costs to produce oil, on average in various countries and various oil fields.

              I wrote my comment thinking in terms of time between now and the election.

              Nuance and context are always important. I dropped the ball this time by not mentioning I was talking about the next few months time only.

            2. OldFarmerMac,

              I was thinking that between now and the election we may have an economic meltdown to go with the low oil prices.

              You seem to think cheap gas trumps being employed or having a successful small business, I would disagree. 🙂

            3. Hi Dennis,

              Actually I don’t disagree.
              I too think a meltdown between now and the election is entirely possible, but I can do no more than guess at the odds of it happening, especially in so short a time frame.

              Bubba’s job, or his business, is definitely more important to him than cheap gas, lol.

              But he’s STILL working, for now at least, and his business is still profitable, for now at least.

              And since Bubba isn’t noted for the size of the data bank between his ears, or the capacity of the CPU associated with it, he will interpret cheap gas as a sign from Jesus and the orangutan that all is well, and that he should therefore dutifully vote for the orangutan again, giving praise while doing so of course.
              A psychologist would be talking in terms of Bubba’s cheap gasoline confirmation bias.Any little thing confirming one’s world view is latched onto like gospel, lol. I forget the term they use to describe deliberately ignored solid information.

              But Bubba may be out of work within a few more days or weeks….. in which case he may vent his rage at the orangutan on election day, depending on just how dumb he really is.

              I had a hard core totally devout Baptist tell me a few days ago, with never a shred of doubt in his voice or demeanor, that his God is a loving God.

              So when I asked him about fifty thousand starving babies in refugee camps today, he told me, JUST as happily and confidently, that “God has His reasons”, without it ever crossing his mind that those starving kids have never committed any conceivable sin.

              He’ll believe anything his preacher and the orangutan tell him. He believes the world was created in seven days, etc.

              He owns a successful long term business, and is a successful farmer as well. I went to school with him thru the ninth grade, so I’ve known him for over well over sixty years.

              He’s about as capable of actually thinking as he is of flying by flapping his arms, but he’s NOT stupid, or mentally handicapped.

              He’s just brainwashed and ignorant of anything outside his day to day life.

            4. OFM,

              We would waste time trying to convince true believers. We will have to hope there are more people who vote that think for themselves.

  11. A pessimistic US tight oil scenario with the assumption that WTI prices remain under $40/b from now until Dec 2021 and then gradually rise to $50/bo by 2028. The completion rate falls to about half the present level and then recovers to only about 70 to 80% of the current completion rate by 2024 and then gradually declines after 2027. The scenario for non-Permian tight oil basins is approximate as this was done quickly.

    As always, this is likely wrong as I do not know future oil prices or completion rates and the underlying model is imperfect.

    Bottom line is that at these oil prices($32.64/bo for WTI) I expect tight oil output will decrease.

  12. One big black swan can make many babies. Oil producing countries will be hit simultaneously with spreading coronavirus and ravaged balance sheets. Not all of them are likely to survive in a stable form. If oil stays this low for six months, many companies and likely some countries will start to fail in large numbers and the oil price will zip right back up. That’s my wag.

    Many candidates for further collapse: Iran, Iraq, Angola, Algeria, Venezuela… but of course the House of Saud would be the biggest domino to fall. They are gambling big time with the current strategy and the little bit of info that comes out of the kingdom suggests not all are happy there.

    1. “Russia says it can cope with low oil prices for six to 10 years.”

      1. Russia was right – how much should Opec+ cut with this large Corona impact ?

        Maybe 4 mio bpd would have been enough ?
        … and all just to save the shalers ass, suppress future prices and give further market share to them ?

        No ! – hit them hard now – and forced “voluntary” cuts from the marginal producers (US) will follow.
        After all, the price will come back up again, when the marginal production is falling while the demand is picking up.

        1. I agree. It seems OPEC+ basically decided to put shale oil+tar sands out of business.

            1. Not according to the articles I’ve read:

              https://www.reuters.com/article/us-canada-oilsands-economics-analysis/canadas-oil-sands-survive-but-cant-thrive-in-a-50-oil-world-idUSKBN1CN0FD

              Estimated breakeven:
              https://www.oilsandsmagazine.com/news/2017/2/9/oil-sands-breakeven-prices-decline-since-2015

              And this forbes article has the right crystal ball:

              With oil demand softening, only the most efficient oil producers will survive. By some estimates, “the price of oil could permanently plummet to $25 a barrel by the mid-2020s. Only the cheapest oil in places like Saudi Arabia could be economically produced. Canada’s oil sands, where most projects need an oil price of $60 to $80 a barrel just to break even, would cease to make financial sense.”

              https://www.forbes.com/sites/prakashdolsak/2019/10/30/us-coal-bankruptcies-reveal-the-future-of-alberta-tar-sands/#6a0ed705df46

            2. Mike,

              Oil sands will be fine.

              Growth will slow, but they’re won’t be bankruptcies from the majors (google their balance sheets).

              It was either Suncor and CNRL that posted a record performance in one of the recent quarters with oil at ~$55 USD (before discount).

              $60+ is what’s needed for new projects to make sense. Most of the major current operations are in facilities 10-50 years old with operating costs in the low $20 CAD range.

              And unlike shale, there’s essentially 0% decline rate, so they can tighten up on capital spending and weather these types of storms easily.

            3. doodles,

              The tar sands oil is discounted about $30/b below Brent, so if Brent falls to $50/b, the gross revenue would be about $20/bo and profit would be zero.

              If Brent falls to $40/bo then they lose $10/bo on every barrel of oil they sell, the more they produce the more they lose at that price.

              Not a pretty picture.

            4. … and it’s the same as with shale there. If everyone would coordinated reduce producing by 10%, pipeline space would be enough for everyone and everyone would earn money. So only pipeline companies earn money.
              But nobody wants to reduce first, giving others the possibility to pump more (and they will do it). So everyone has to suffer.

            6. It’s not as simple as applying 1 discount rate to the entire Canadian market.

              The oil sands sell everything from diluted bitumen to various type of upgraded crude.

              For example, Syncrude Sweet Premium is currently trading at $30USD ($41 CAD, since their operating expenses are paid in CAD).

              With an operating BE in the mid-to-low $20 CAD, and billions in cash on the balance sheet, they can cut capex and wait this out, just as they always do.

  13. Russia have stated they can live with oil price 25 -30 usd each barrel, they use their petroleum foundation to support their economy. Saudi need to sell more oil to get income to cover their bills with an oil funded sosiety. Seems they will do what ever it takes to take back market shear from US shale. The CEO off Exxon says their break even is abour 40 usd , Chevron tells their a bit lower and they see possibility to cut this further. The Investors , banks have been disapointed for long time now, they did not get back what was promissed. I believe with oil price WTI 25-30 usd most investment will stop, very few new wells will be drilled, fracking off DUCS will be kept to a minimum. Some need to add millions off barrels to the market to cover reduced production from US shale. Russia have told they ate willing to increase production, same Saudi but that remain to see how much.

  14. Oil demand will fall for first time since 2009 because of the coronavirus, IEA says

    World oil demand is expected to fall this year for the first time since 2009, as the coronavirus pandemic deals a sharp shock to the global economy.

    The International Energy Agency said in a report Monday that in a worst case scenario — if the coronavirus continues to spread globally and China’s need for oil remains subdued — global oil demand could fall by as much as 730,000 barrels a day in 2020.

    The Paris-based agency, which monitors energy markets for the world’s most advanced economies, says its base case is for a slump in demand of around 90,000 barrels a day, assuming that the situation in China improves in the second quarter.

    “While the situation remains fluid, we expect global oil demand to fall in 2020 — the first full-year decline in more than a decade — because of the deep contraction in China, which accounted for more than 80% of global oil demand growth in 2019, and major disruptions to travel and trade,” the IEA said in its March oil market report.

  15. Oil Price crash scenario for WTI prices in 2020$. Note the WTI price at $65/bo continues until 2070 and then declines gradually to $40/b by 2090 (not shown on chart).

    1. I don’t know Dennis. It’s too early to call a bottom for oil prices. I can see WTI hitting low $20.
      The amount of corporate debt and junk bonds out there, the virus now has the potential to trigger a liquidity crisis.

      1. Iron Mike,

        It would make little difference for the scenario as the current price is enough to make the completion rate drop to zero. It will not happen overnight whether prices are $20/bo or $30/bo, also note these are monthly oil prices. Perhaps there will be a liquidity crisis, these problems are not possible to predict in advance in my view. we can speculate on lots of low probability events, a large asteroid might strike the Earth, but the probability is fairly low.

        Also take a look at futures market for Dec 2020 and Dec 2021, currently $35.64/bo and $41.08 respectively, my guess at future prices was based on the futures curve, though I did not adjust for real oil prices, which would make the price somewhat lower, $42/bo in Dec 2029 in 2020$, instead of $50/bo nominal.

        If oil output falls as much as in my scenario, the World will have difficulty replacing that tight oil, a recession is unlikely to last for more than a year or two and growth in demand for C+C is likely to resume, just as it did after the GFC. Or that’s how I see things. COVID19 will eventually pass and the World will recover from the economic shock, probably by 2021, 2022 at latest.

    2. Using oil price scenario above and using my usual economic assumptions for the Permian basin, we get the scenario below. Note that I expect oil prices might be much different than the scenario created which was intentionally conservative (from my perspective.)

      For the rest of US tight oil my guess is that it would also fall by at least the same amount (4000 kb/d to 1000 kb/d), but would recover to only about half the previous level to about 2000 kb/d by 2035 and then begin to decline. Under this scenario US tight oil production would never regain the peak of 2019/2020.

      Also note that US tight oil would fall from about 8100 kb/d to about 2000 kb/d in late 2024, so about 6000 kb/d over 5 years with a 1300 kb/d drop in output in 2020 and a 2600 kb/d drop in tight oil output in 2021. So basically tight oil output is cut in half over that initial 2 year period.

      1. “Under this scenario US tight oil production would never regain the peak of 2019/2020.”

        Depending on how long and deep this economic doldrum becomes, global peak oil demand/production may just be at hand.

        1. Hickory,

          I doubt that will be the case, a more realistic case has oil prices rising faster in response to the drop in oil output, the recession is not likely to last more than a year or maybe 2.

          1. The problem is that by the 2025 recovery in your above chart, GM, VW, Tesla etc will be producing many millions of EVs with 400 mile range at the same cost as ICE cars. After having been badly burned by shale oil over the last decade and a half, are any banks really going to be loaning money to shale oil companies in 2025 for your theoretical uptick? I doubt it, the oil story will be even more over then than it is now.

            In terms of thinking of the Earth as a living system (Gaia), is this virus, dubbed the Revenge of the Pangolin, not a means for breaking the shackles of the ossified Age of Baby Boomers/Fossil Fuels? Why else does it only seem to make those over 60 sick? Something to think about perhaps.

            1. Stephen,

              Doubtful that Demand for oil will fall below supply (with World real economy in constant $ growing at 3% per year) until 2035 to 2040. Oil companies can finance with shares of stock or by selling bonds at high rates. Tight oil is quite profitable at over $70/bo, as World output peaks in 2025-2027 (delayed peak due to current crisis) oil prices may rise to $100/b. The claims that OPEC nations and Russia can boost output significantly and balance budgets at oil prices of $50/bo or less, will be proven false within 12 months, 24 months at most.

            2. Denise ,several years ago I read a quote ^ China will become old before it becomes rich ^ Today’s analogy ^ The world will go bankrupt before oil touches $ 100 per barrel .^

            3. Hole in head,

              Doubtful that the World will go bankrupt, if it did, some assets are written off, life goes on.

            4. I never said that life will end . I said that with the assets that will be available ,society will not be able to afford buying the $ 100 barrel oil . Just like diamonds are plenty but if you cannot afford them they are of no value (at least to you ).

            5. Hole in head,

              First the $100/b oil is in constant 2020$. I doubt World income( flow of money)will decrease. Perhaps the price of assets(stock rather than flow) may fall. World real GDP will grow on average at 2.5% over the 10 year period after the current crisis ends in 2022.

              At $100/b the 30 Gb of oil produced in 10 years would be 3 trillion dollars and at 2.5% annual real GDP growth World income will be 99 trillion dollars. So about 3% of income spent on oil, from 2011 to 2013 the percentage of World income spent on oil was 4%.

              As to what is affordable, that is up to each individual in choosing what to buy.

              At 55 dollars per barrel currently about 2% of income is spent on oil. In 10 years time when World income is 28% higher 70 per barrel would be 2% of income.

              Note we are currently in a glut situation so oil prices are low.

              Supply will be constrained in 2026 and oil prices will rise. Assuming here that demand for oil continues to grow and supply growth stops by 2026. Shortage leads to higher oil prices.

              It really is that simple.

            6. It will be even more decline.

              At 3x$, no deep sea project will get green light anymore. And even more sophisticated recovery technics will slow down in installation. Countries like Mexico and Brasil will have even less money to sustain production in their old fields. And perhaps even one additional OPEC member will break down on civil unrest due to the government does not has enough money anymore (not SA).

              So, a few more mbd will be missing after 24 months of low prices. Decline rates in offshore oil are high – old north sea oil beside a few good fields is on the brink to dying anyway.

            7. Eulenspiegel,

              Yes there will be decline in other places besides tight oil so my decline estimate might be conservative, though note tight oil would likely decline by only 4 Mb/d rather than the 6 Mb/d I originally estimated. Offshore might also decline by 4 Mb/d, though I think this would affect new projects more than existing production, and offshore may decline no faster than tight oil ( I think it is a bit slower decline rates for offshore than tight oil).

              In any case I agree decline from non-OPEC may be quite steep at under $35/bo.

              The steeper the decline, the sooner oil prices recover and arrest the decline.

            8. Dennis,

              Oil companies can finance with shares of stock or by selling bonds at high rates. Tight oil is quite profitable at over $70/bo, as World output peaks in 2025-2027 (delayed peak due to current crisis) oil prices may rise to $100/b.

              The problem with statements like this is that you need to envisage a mechanism by which the global economy will start humming again. And central bank interest rates returning to “normal” as a result. There is absolutely no guarantee of this occurring.

              The world economy could remain anemic for extended periods, the way it was prior to the covid-19. It seems to me that we are close to seeing the limits of central banks policies. I believe their policies and actions have turned the world into a casino and they have made unbelievable equity and asset bubbles.

              And now they are desperate to keep away a recession (by throwing public money at it) since a recession could easily pop the asset and equity bubbles they created. And make investors lose confidence in central banks.

            9. Iron Mike,

              World real GDP has grown at about 3% per year on average from 2010 to 2019.

              You are correct that I cannot predict the future, nor can you. If World GDP grows more slowly, then demand for oil will also grow more slowly, in addition the transition to EVs will also happen more slowly at low economic growth rates.

              Central banks have very limited ability to affect things when interest rates go to zero. When economic times are good governments should balance the budget and even pay down debt through a combination of lower spending and higher tax rates. This gives room for fiscal stimulus when there is an economic downturn.

              Eventually we will get a handle on the pandemic, in my view, more testing in the US would help.

              How does the World economy get going after the crisis? Fiscal stimulus would work best.

            10. Dennis,

              You can rightly keep using 3% GDP figure for the past decade, but it’s taking more and more debt to addon to that percentage. It seems like we are reaching or in diminishing returns or even peak consumerism or maybe debt saturation.

              There seems to be an underlying factor here. All OECD central banks are at or close to record low interest rates (some even negative), i believe this is something that has never been seen before, so we are in uncharted waters i believe.

              Again i don’t pretend to know anything, just giving my 2 cents. I am probably wrong. Anyways i don’t think we’ll see $100/b oil barring a middle eastern war or geopolitical tension, unless we see inflation in OECD countries going above 5-10% sustained over a few years. And in my dirty crystal ball, that is not going to happen for the foreseeable future (next 5 years).

            11. Iron Mike,

              I agree that we may not see $100/b in next 5 years especially given that the current crisis will slow economic growth for the next one to two years.

              Consider a scenario where oil prices remain under $35/b0 for the next 24 months. US tight oil output falls by about 6 Mb/d, Nov 2019 average 12 month OPEC output was only 2 Mb/d under its maximum 12 month average output level, so at maximum OPEC output level only 2 Mb/d is made up. Note also that if we exclude Libya, Venezuela, and Iran Nov 2019 average trailing 12 month output is only 405 kb/d above the maximum 12 month average output.

              So we are likely to see oil prices rise as Russia can only increase output by about 500 kb/d and the World will be at 3.5 to 5 Mb/d lower oil supply after 24 months.
              I doubt World demand will drop by 3.5 to 5 Mb/d at an oil price level of under $35/bo, so we will see demand greater than supply as tight oil output drops like a rock from May 2020 to March 2022 (by 6 Mb/d or from 8 Mb/d to 2 Mb/d).

              As to debt, at the World level the Debt to GDP level has been relatively stable. Yes interest rates are low, but so is the rate of inflation.

              Now consider a peak in Oil output in 2027 with the World Real GDP growing at 2% per year, it is likely that the growth in income will be coupled with an increase in the demand for oil, as supply growth slows as the peak in output is approached (2025 to 2027) oil prices will rise in order to destroy some demand and balance the market. Just the way markets work.

              Debt to GDP chart below, click on chart for larger view

            12. A wise country would keep the debt to GDP ration below 120%.
              That level may not enable the highest potential growth, but it would be much less vulnerable to a storm.
              Are you the kind of guy who spends every penny in your pocket ( and every dollar you are eligible to borrow), or are you the kind who saves some in reserve for future projects or emergencies.
              I am the second type.

            13. Hickory,

              When I was young and had less savings, I borrowed to finance a home. Basically debt to income for mortgage lending is considered safe at a debt to annual income ratio of 3 to 1.

              Note that the debt in my chart is for all non-financial sectors, not just government,
              see https://www.bis.org/statistics/totcredit.htm

              and for government only see

              https://stats.bis.org/statx/srs/table/f5.1

              For all reporting nations the aggregate in 2019Q3 was 86.1% for Debt to GDP for the government sector at market exchange rates.

            15. As to what is affordable, that is up to each individual in choosing what to buy.

              At 55 dollars per barrel currently about 2% of income is spent on oil. In 10 years time when World income is 28% higher 70 per barrel would be 2% of income.

              Dennis,

              Do you realize that with high oilprices almost EVERYTHING gets more expensive. In the current situation, with so much consumer debt, I doubt that world economy can stand oilprices of more than 80-90$ for a long time, in case those oilprices are reached before 2024-2025. Significant electrification of the transport sector is needed for high oilprices not making almost everything considerably more expensive (cost recovery)

            16. Han,

              2011-2014 Average real oil price in 2019$ was about $110 /bo for Brent. Real GDP for World grew at about 3% per year. Spending on crude oil was about 4% of World income over that period.

              Real World GDP will grow after the crisis ends at some unknown future rate, likely higher than 2% per year on average. Oil output is unlikely to rise much above the 2018 level, oil will be more affordable looked at as a percentage of World income.

      2. Revised Permian oil price crash model with new oil price assumptions (read off right axis). URR is about 57 Gb. Possibly tight oil might return to the 2019 peak of about 7.7 Mb/d by 2027, I have only run scenarios for Bakken and Permian, so it is a guess and obviously we do not know future oil prices so any scenario of the future is always a guess based on assumptions of what the future might entail.

        1. Denise, as per your reply to Iron Mike you agree that we may not see oil at $ 100 for the n ext five years which brings us to 2025 . In your reply to my post you made two gross bad assumptions .
          1. World GDP will grow at 2.5% from 2022 when this crisis ends in 2022 . Who came to that conclusion ? The FED,IMF,WB,ECB. All have a brilliant track record of BS forecasts . My point is very simple ,before you get to the medium term , you have to go thru the short term . One cannot be 4ft tall today and 5 ft tall tomorrow . It will be miracle if we get to 2022 without a lot of damage to our financial infrastructure and all other industries . By the way , yesterday is not today and today is not tomorrow . Past data is now irrelevant . This is a new paradigm .
          2. Supply will be constrained by 2026 and oil price will rise . Assuming etc,etc etc. You can assume anything you want . How about assuming that demand falls so low that extracting oil is just not worth it .How about assuming that there is a coup in KSA and the jihadi’s takeover . How about assuming that Putin is no more . We can argue back and forth. Your assumption is way out of the ball park .

          1. Just because you may disagree with someone, to be intentionally disrespectful to someone who is conducting themselves with dignity,transparency and restraint, as Dennis always does, serves only to erase any respect people may have extended to you.
            The point you are trying to make becomes irrelevant.
            Is that your intent?

            [I am not perfect in this regard by any means, and we all could use occasional reminders to be decent to others, as we would like in return]

            1. Hickory, Denise and me have an agreement to disagree . I have on every possible occasion appreciated his work ( you can ask him ),but at the same time I have bought to his attention when I feel his assessment has been incorrect . I have in the past apologised to him for some not so good statements and he was gracious to accept . As Denise himself said on one of our earlier disagreements ^ we are not here to parrot ^ views but put different angles to a situation . I do not know about you , but I was one of the first subscribers to the blog and conduct myself with decency ,however if you feel otherwise , then I can apologise for the offense caused . It is was and never is my intention . I treat this matter as closed .

          2. Hole in head,

            I often say this, I will repeat, I do not know what will happen in the future.

            Absolutely correct that my assumptions are likely wrong, this is true of any assumptions about the future. Possible assumptions are infinite, chance that any set of assumptions will be correct are very clse to zero.

            In my opinion the probability that demand for oil will be close to zero before 2050 is nearly zero.

            Different people think differently about the future.

            Generally every “best guess” scenario I have made about future oil output in the medium term (3 to 5 years) in the future has always been below actual output.

            It is possible that will change, we will know in 5 years. I have never claimed clairvoyance. 😉

            I missed comments by Hickory,

            I am not offended by holeinhead, we simply see things differently.

            I agree with him that there maybe damage to the economy. My guess is that the World economy will recover just as it did after GFC.

            I hve guessed at 2.5% growth which is less than the 3% we have seen since 2010. Perhaps it will only be 2%, this is unknown. The point is that oil prices are likely to rise when supply peaks in 2026/2027.

  17. Saudi Arabia has announced it will increase output to 12.3 Mb/d in April 2020 from recent levels of 9.8 Mb/d.

    https://gulfnews.com/world/gulf/saudi/saudi-aramco-to-increase-production-to-123-million-barrel-1.1583831606585

    If this becomes reality, we may well see $20/bo in April.

    It seems they are calling Russia’s bluff that they are fine with oil prices at $25/bo.

    The US tight oil completion rate may quickly fall to zero under this scenario, we will see which tight oil producers were swimming naked as their hedges expire over the next 6 to 12 months.

    Also see https://www.cnbc.com/2020/03/09/cramer-9-or-10-oil-companies-may-go-bankrupt-amid-crude-declines.html

    -CNBC’s Jim Cramer said Monday he could see the oil industry experiencing a significant wave of bankruptcies if low crude prices persist.
    -Of the more than 35 companies in the oil industry he follows, Cramer said, “I think fully maybe 9 or 10 can go.”
    -“I feel better about the banks than I do any oil company,” Cramer said.

    1. I think other will follow – let’s see the next few months what the true reserve capacity of OPEC is, including fakes ( tapping hidden tanks and caverns ).

    2. This is the recipe for the perfect storm. Oil production rising like a rocket while oil consumption is dropping like a rock. What could this lead to?

      1. Ron,

        Low oil prices and a shut down of the tight oil industry is the obvious answer.

      2. Ron, I assume they would be tapping their reserves to get to 12.3 Mb/d? They don’t have the ability to bring online 2.5 Mb/d between now and the end of the month do they?

        1. I don’t think they could possibly ramp up that quick. And I do not believe they could ever produce, for more than one month, 12.3 million barrels per day. I think that figure is mostly bluster and threat. I just don’t believe it will happen.

          1. Ron,

            I agree probably it is bluster.
            Note that they may be talking about C+C rather than crude only. It will be interesting to see if they follow through, I think they are just talking the price down. I also think they are mostly angry with Russia, and are saying let us see how mu h you like low oil prices.
            It has become a game of chicken, we could see $15/bo if this lasts a couple of months. Tight oil completions will go to zero, if oil prices remain below $30/bo.

      3. There will be nowhere to store oil. Renting tankers costs money.
        Therefore, the price will go down.

    4. Dennis,
      Trump is making noises about bailing out the shale oil industry, which may reduce the threat of a financial crash. But as far as I can tell this won’t create any incentive to keep drilling, so output seems very likely to fall.

      1. I am taking this “bail out Shale Oil” thing with a grain of salt.
        Who do you give the money to? Under what conditions? I am hard pressed to figure out a way (even a corrupt way) that can be transparent enough to be passed and politically defensible. Do you give Harold Hamm the $2 billion he lost in stock value? Do you give anyone who wants to build a well a couple of million bucks without strings? Do you guarantee a price per barrel produced? Do you write off the usual suspect’s previous loans and say “Do it again?”

        I’m pretty sure that honest answers to the questions for any reasonable government supplement would require disclosures (either before drilling or once a well is producing) that would reveal the actual costs and total lack of profit potential. It’s one thing for the private sector to con bankers and stockholders: conning the Government is a different ball game…even a government as corrupt as the current one.

        As for Watcher’s “When yo gotta have it, money is irrelevant” mantra, when you already have too much, you may be a little more careful with your spending.

        1. This article suggests there isn’t a lot of political support from either party for a shale bailout.

          https://www.politico.com/news/2020/03/11/oil-bailout-trump-125949

          Even top Republicans on Capitol Hill have said they don’t see the need to help the oil industry.

          “I don’t think they need any bailouts,” said Sen. John Cornyn (Texas), whose state has been the biggest contributor to U.S. oil output growth over the past decade.

  18. Why do people in he media swallow this “war” between Mohammed Bone Saw and Putin? First Bone Saw rounded up the Old Guard, the traditionalists who would throw a fit. Then he and Vlad put on this Kabuki show to drive the Frackers out of business. The Frackers are the common enemy of both the Saudis and the Russians. It looks obvious from the outside that they are colluding on this to break the back of the shale business in the U.S. The only question is what took them so long?

    2. That is one way to see it, but consider that it is Russia and Gulf Oil exporters that are competing for sales to the Asian oil market. The USA is not involved in that trade to any significant degree, primarily just serving its own consumption.
      It is market share that SA and Russia are fighting over, at the moment.
      True, there would be plenty of sales for all if the USA was still a big importer, rather than a big tight oil producer. And thus they would cry no tears if the shale oil production suffered, but that is more of a longer term issue.

      1. It is only U.S. production that keeps OPEC +1 from having the cherished price control of a swing producer. Eliminating that threat would mean everything to both Saudi and Russia.

      2. Giving much on market share makes no sense with such an exchangable product. Not at that cost.

        It’s against shale, and not to forget: Against deep water pre salt. This can also been delayed or reduced. One or 2 Mbpd less here would let enough room for OPEC+ and a recovered Shale when the crisis has gone.

    3. The individual tight oil focused companies will do poorly with many going bankrupt and being relieved of much of their debt burden. The strategy by the Russians and Saudi Arabia is not a smart one, they are simply shooting themselves in the foot with the crash in oil prices that is likely to result.

      The tight oil resources will still be there when Russia and Saudi Arabia realize their stupidity and output is again balanced with consumption and inventory gets drained to normal levels. Then oil prices rise above $60/bo and tight oil output resumes.

      In the meantime OPEC plus forfeits about $500 billion over a year’s average output level (47 Gb times $30/bo lower price). Eventually they will realize this is a foolish policy and reverse course, just as was the case in late 2016. Maybe it will take two years as it did from November 2014 to November 2016, though in this case there is a more severe drop in consumption coupled with a market share contest so maybe we will see $10/bo, that might shorten the time needed for Russia and Saudi Arabia to realize their mistakes.

      1. OPEC +1 regain price control they will try to keep that price below the frackers break even for as long as possible. They still make tons of money there.

        1. SW,

          From what I have read, Saudis and many others need $80/bo to balance their budgets, breakeven for Permian basin is about $55/bo, that leaves them $25/bo short.

          So let’s take a simple example, 9 Mb/d at $80/bo or 11 Mb/d at $55/bo. For the first case we have $263 billion in gross revenue, for the sceond we have $221 billion in gross revenue. High output at low oil price is not a winning strategy.

            1. SW,

              I believe everything I read.

              Just kidding, I think the source was pretty good so I believed it, but there’s plenty of poor estimates out there, so you might be correct.

        2. They don’t need. You can see the limits of shale now, it’s perhaps current production +2-3 mbpd.
          Hitting long time projects in deep sea oil does the same thing, reducing peak production by a bit. Demand has grown since 2016, and will continue to grow a few years after the current problems. Then the best shale spots are drilled up, and prices can raise again without output exploding.

          Even now – with all but Permian getting short on top location, a production race to old highs after a deep 20$ production decline will get hard – so it’s all about Permian getting drilled even more.

          1. Eulenspiegel,

            I agree the basins besides the Permian may not have enough good locations left to increase output after a sharp drop, especially at a low oil price level. Difficult to predict how this will go.

    4. Sw, i agree
      Looks like a good cop, bad cop routine from KSA and Russia with an eye towards hurting USA LTO.
      I recall USA being bragged up as the new swing producer. Sounded good on the upswing I guess.

  19. There is a limit for Saudi patience:
    1- It accepted that base line for quota is 10.6 not 12 mmbpd
    2- Its voluntary cut of additional 0.4 mmbpd
    3- It accepted exclusion of Russia condensate from the cut
    4- Watched patiently many of OPEC+ cheating on quota

    Enough is enough

    1. Excluding condensate is what the OPEC nations do, it should apply to everyone. As to cheating, that has always been a problem.

  20. Still too much focus on money. What company is going bankrupt or not. Nationalized oil companies don’t present this issue. They pump oil just fine without that focus. There has already been talk of nationalizing oil companies, when oil price was high. No reason that can’t also get mentioned if the price is low.

    It’s a peak oil matter. Not a peak EBITA matter.

    If NYMEX whimsically holds price low, oil is still going to flow. Nobody knows what 2020 consumption is going to be so maybe it will flow enough. Can’t know yet. “Enough” is defined as food and pharmaceutical transport. The rest is EBITA stuff.

    Note that EBITA stuff is a focus of US oligarchs and those from other countries too. The deep state(s) of finance. They certainly care about what oil scarcity would do to GDP, but that need not define food. KSA can ship food into the country for its own citizens (not the foreign oil workers) at a much lower production level than they presently pump.

    1. It’s a very financial thing.

      That’s why mexican and brasilian state oil companies have to call in the cavalry, the private companies to boost production.

      And they only come if there is money to earn.

      State companies only work if very well organized and with enough money to earn, since instead of dividends they have to pay all the wishes of all ministers and presidents before investing in their fields. And without enough investing – once the easy oil ist gone….

      The USA could endure a state oil company doing losses – but they don’t need this when there are private companies producing oil while making losses.

      When this 20-30$ oil thing is longer, debt will be restructured, losses will be socialized by the FED with a no noise operation and with new money oil can flow again. There will be a production dent, but nothing more.

      And when oil stays at 20$ for longer – why bother with producing it, simply buy as much as you can. Fill all strategic reserves, barrels and buckets. It won’t last because even state companies will have to stop investing.

      1. >>The USA could endure a state oil company doing losses – but they don’t need this when there are private companies producing oil while making losses.
        >>

        Imagine that.

        Look, people, I know there is a desperate desire for it all to make sense. But it doesn’t have to. This was the great evil Bernanke revealed. We can’t blame him. There was no choice but to show the whole world that money could be and was created from thin air.
        There need be no logical ugly result of this as long as you get cooperation from the other CBs. Which he did.

        This much willy nilly global printing was supposed to result in horrible inflation. Look at how that horrible 2000% inflation has driven interest rates sky high. Just look at it!

        I think he just hoped there would be more time to conceal it. Somehow.

        The president, Larry Kudlow and Steve Mnuchin are very well versed in the nuances of debt. We’re very lucky to have them right now because the 10 yr Treasury is at 0.5% and shale, cruise lines, airlines and retail are all going to need bailouts. And deserve them. Anything that involves keeping the wheels turning deserves whatever it can get.

        1. Just wrong in about every way- funny/tragic actually
          “The president, Larry Kudlow and Steve Mnuchin are very well versed in the nuances of debt. We’re very lucky to have them right now”

          1. +1 . To Watcher ,please quit whatsoever you are smoking . It is not only injurious to the body but also the brain .

            1. Well Trump did go bankrupt four times so maybe he is a bankruptcy genius.

    1. Bailing out the companies. Socialism for the rich and capitalism for the others.

      “Socialize the losses and Privatize the gains”

      1. McConnell punted on stimulus, Trump is going to have to go hat in hand to Pelosi. Most of the Rs in the House made their bones running against the Obama stimulus in 2008 so it is an interesting dynamic. The rebound in stocks in the afternoon is predicated on a stimulus. Looks like Pelosi has his nuts in a vice again. Unlikely to include anything for oil if it comes from the Dems.

        1. The Tarp stimulus program was indeed from 2008. $700ish B. Signed into law in October.

          The president at the time was GW Bush.

          Subsequent stimulus was largely monetary and from Bernanke.

          Though deficits certainly were run, and still are, and from a pure capitalism perspective every penny of that is fiscal stimulus.

            2. It was. It was spread out quite a bit. Some features extended all the way to last year. Not really an emergency effort (as TARP was) and it was certainly included in the deficit, which both sides haven’t really complained about lately.

              That was another thing that was to drive interest rates through the roof.

          2. Obama passed a fiscal stimulus. That is what Wall Street is clamoring for now. That is what Obama was pilloried for by the Republicans. You know. Money that actually goes to people and things instead of banks. Unforgivable. They built their careers on how terrible that was although it wasn’t nearly enough. Now Wall Street is screaming for it and there is only one person who can give it to them. And she doesn’t have orange hair.

  22. Shaleprofile.com just released North Dakota shale oil production for Jan 2020. It’s interesting that 77% of the drop from Nov 2019 to Jan 2020 was due to the drop in production from wells producing greater than 800 bpd.

    This shows that sweet spots are running out and the decline in North Dakota could keep going, at about 45 kbd/month. The current low oil price will ensure that decline. That means by the end of June, North Dakota production could be about 1,150 kbd, down from 1,473 kbd in Nov 2019.

    Shaleprofile declining ND production confirms the discussion of high grading and the dwindling of Tier 1 prospects.
    http://blog.gorozen.com/blog/shale-oil-the-high-risk-of-high-grading

    2. Tony,

      Completion rate from Nov 2019 to Jan 2020 was as follows (by month):

      106, 97, 74.

      That is the reason output decreased, the average well profile has not changed much over the past year, see average quarterly well profiles for 2019 in chart below from blog at

      https://shaleprofile.com

      1. For a bakken oil price crash scenario, I get the following:

        This may be a somewhat more reasonable oil price scenario (see right axis), oil prices gradually recover starting in Jan 2021.

        1. Thanks for all. I supppose that there is also the depletion of oil reserves in your scenario?

          1. Jean,

            Yes I start with USGS TRR mean estimate for North Dakota Bakken/Three Forks (about 11 Gb), then I apply economic assumptions (transport cost, lease operating expense and other overhead expense, well cost, royalties, taxes, discount rate, and the price of oil.) New well estimated ultimate recovery (EUR) is assumed to start decreasing in August 2019 and with no economic assumptions applied (or a very high oil price scenario) about 47,000 total wells would be completed and the rate of EUR decrease is consistent with that number of wells resulting in the URR=mean USGS TRR. With the economic assumptions applied, 19000 fewer wells are completed and the economically recoverable resources are about 2.3 Gb less than the TRR for the oil price scenario presented on the right axis. A scenario with much higher oil prices could lead to a higher URR, but the limit would be the 11 Gb of the USGS mean estimate for the model presented above.

  23. Lukoil: The main trends in the development of the global liquid hydrocarbon market until 2035
    Some of the statements in this report are forward-looking statements. Such statements, in particular, include future events, including the Company’s view on the prospects and trends of the global hydrocarbon market. All information except historical fact is predictive.(Russian language):
    https://lukoil.ru/FileSystem/9/451551.pdf

    1. Lot’s of if’s in this calculation.

      First, pumping more cost more. And second, in a full price war there are more involved. So price won’t stay at 31, but go into the 20s when everyone participates.

      It’s not neccessary to increase production (if you can’t), you just temporary crank it up and empty storage tanks to create the biggest possible damage.

      In a price war like this, the 1x oil price is possible, too. Simply by flooding the spot market with everything in store.

  26. One thing looks certain to me. I agree with Dennis up above, once the price war is over,tight oil will be back FAST.

    Neither the Russians nor the Saudi’s can afford to continue it forever. Most likely it will be over in a year, or two at the most.

    Tight oil production in the USA will come back like a runaway forest fire. The deals have been made, the roads and pipelines and tanks are in place, the drill rigs will be sitting there ready to grease them up and run them again, and there will be plenty of people eager to get back to work on the better than average wages, with overtime, paid in the oil fields.

    The big boys with money will be ready to grab anything and everything that looks good at fire sale prices.

    I’m no number cruncher, but I wouldn’t be surprised if the tight oil industry in the USA ramps up at a thirty or forty percent annual rate, from price war lows, until it’s bau again, once the price of oil is up high enough that new owners or lenders feel comfortable putting the rigs and men back to work.

    1. I think I’ve asked before . . . why isn’t there more automation in oil?

    2. I think the Rus/Sauds are trying to punish the banks that loan to shale.

      If the bankruptcies cost them enough, it may act as a warning that shale is a losing gamble.

  27. https://oilprice.com/Latest-Energy-News/World-News/Only-5-Shale-Drillers-Are-Still-Profitable-At-31-Oil.html

    From article above:

    Most shale oil wells drilled in the United States are unprofitable at current oil prices, Rystad Energy has warned. The Norwegian consultancy said, as quoted by Bloomberg, that drilling new wells would be loss-making for more than 100 companies.

    Just five shale drillers—Exxon, Chevron, Occidental, and Crownquest—can drill new wells at a profit at $31 per barrel of West Texas Intermediate.

    1. Thanks Tony.

      Chart below compares the oil price assumptions of the Feb 2020 STEO with the March 2020 STEO.

      Different oil price results in a different output curve, as we would expect.

  29. https://www.politico.com/news/magazine/2020/03/11/michigan-romp-shows-biden-could-rebuild-democrats-blue-wall-vs-trump-125489

    This is a rather long article. To me what it says, in essence, is that a hell of a lot of people who were either committed conservatives or pissed off working class folks voted for Trump in sixteen…….. folks who will NOT be voting for him in ‘twenty,for various reasons.
    They like Biden better than they did Clinton, and they like the orangutan not at all , according to the results in the primary, with turnout being up like a rocket, and Biden winning by big margins in counties Clinton lost.

    “The story of The Trump Realignment has been an exchange between the two parties: More of the well-educated suburbanites fleeing the GOP for the Democratic ranks, with more of the blue-collar rural and exurban voters joining the Republican Party. This tradeoff, while unsustainable for the GOP over future election cycles, never figured to torpedo Trump’s reelection. But what Biden demonstrated on Tuesday was an ability to have it both ways—accelerating the GOP’s exodus in the suburbs while stopping his party’s bleeding in the exurban and rural areas beyond. If he can do that in November, he’ll win. ”

    So far what I’m seeing in my fogged up crystal ball is that the orangutan will win the deep south and any other dark red states, but that most of the states and districts that are purplish are looking, to me, like they will probably go to the Democrats.

  30. I have no idea who the guy is who wrote this, but I finf it interesting that he very confidently says the Russians are well prepared to wait out a war of attrition in the oil markets in order to put a serious hurt on the American oil industry.

    His thinking is along the same lines as mine in that I also think the Russians are in a position to deal with low oil prices, at the cost of some serious pain to the Russian people of course, but that’s a price Putin and his guys are willing, and apparently able to pay without worrying about it.

    And I likewise continue to maintain that the Saudi’s are sitting on a powder keg, and that the House of Saud may fall from the inside, or from outside interference.

    Things have to be pretty bad for the boss man to go around arresting his kin folk and accusing them of treason. That sort of shit is more typical of countries such as Nazi Germany or Stalinist Russia or North Korea.

    Many years ago I read everything I could find on the USSR, and what’s in this copied question and answer is consistent with what was written by Western analysts about the ways the soviet propaganda machine worked.

    What is Russia’s end game in this oil war?
    Dima Vorobiev
    Dima Vorobiev, Former Soviet propaganda executive
    Answered 20h ago

    There’s no end game in the current oil war for Russia. It’s because President Putin doesn’t think in terms of a chess game.

    I’m no expert in international petroleum trade. However, my experience with how power works in Russia allows me to make some observations.

    No start, no end

    The world of secret services that shaped Putin’s worldview as a politician has no end games. President Putin’s game is the one that never rests and never ends. It’s all about painstaking accumulation of tactical wins that sometimes result in spectacular breakthroughs—and yet never puts an end to his war.

    Because even if you annihilate one enemy, another one always pops up in his place.

    “Tactical action”

    KGB alumni always think in terms of operatívnye meropriátiya (“tactical action”). That is, a branching, deeply layered set of actions that in the end must lead to a desired outcome. This outcome can be an acquisition of assets, procurement of “information units” (pieces of actionable intel), disruption of a hostile operation, liquidation of a hostile asset etc.

    In terms of OM, the main targets of the what we observe now seem to be:

    Saudi Arabia
    The American frackers

    The objective of the operation appears to be an acquisition of a set of bargaining chips that can later be traded for some concessions on the part of the Saudis and Americans.

    Painstaking preparation

    Russia has entered this game well-prepared.

    Putin’s war chest is now edging toward $600 billion, our external debt is some of the smallest among industrial nations, and since 2014 the policy of our Central Bank has been geared toward minimizing the impact of currency fluctuations on our economy. Even under the most unfavorable conditions, Russia seems to be able to weather the storm for at least for 2–3 years before we start running out of money.

    Trigger

    According to the rumor mill in Moscow, during the last weeks there seems to have happened a major fallout between Putin and the Saudi sheikhs. This was related either to the development in Syria, where Russia expected the Saudis to support us in the standoff against Erdogan, or certain things turning sour in Putin’s joint venture with Saudi sovereign investors.

    In the wake of the fallout, some well-connected insiders in Moscow convinced President Putin that time has arrived to cut the Saudis down to size. In addition, strong actions needs to be taken about the American frackers. Until now, thanks to the self-restraint shown by the OPEC+ producers, over the last decade the cheeky Americans almost doubled their domestic oil output at the expense of the established producers.

    Below, a group of Russia’s powerful allies in the US. The combination of economic pressure on the frackers’ bottom line from low prices and civil activism on the part of American environmentalists might over time break the back of the fracking business. This would return the high ground in the global petroleum markets to Russia, the OPEC members and other traditional players. For the time being, Russia has both the determination and resources to make it a game of exhaustion.
    23.7k views · View Upvoters · View Sharers

  31. Saudi Arabia Prepares To Flood The Market With Even More Oil

    The news comes on the heels of an Aramco filing with the Saudi bourse that it would raise oil production next month to 12.3 million bpd.

    However, the current capacity of the company is around 12 million bpd, suggesting it would take oil from storage to hit its April production target. If it plans to keep the pressure on for longer, it would clearly need to increase production capacity.

    Oil Price War Escalates As OPEC’s No.3 Boosts Production

    The UAE has been pumping around 3 million bpd, in line with its commitment to stick to and even overcomply with the OPEC+ production cut deal, which fell apart last Friday.

    “In line with our production capacity growth strategy announced by the Supreme Petroleum Council, we are in a position to supply the market with over 4 MMBPD in April,” ADNOC Group chief executive, Dr. Sultan Ahmed Al Jaber, said in a statement.

    ADNOC, which pumps nearly all the oil in the UAE, is also accelerating plans to increase its production capacity to 5 million bpd, Al Jaber said.

    I my opinion all this talk is a giant bluff, and that neither Saudi nor the UAE will increase their production by anywhere near this magnitude.

    1. This doesn’t matter in this situation.

      There is so much oil in storage – and if you pump it all into the market, you can heavily oversupply it for 2 years without pumping one extra barrel.

      It’s like a war – you don’t need to produce new granades if there are enough in the magazines.

    2. Frugal

      It is not clear that they are capable of expanding capacity.

      The most that Saudi Arabia has ever produced over a 12 month period is 11Mb/d, so the claim of 12.3Mb/d capacity may be specious. When I see that rate maintained for 12 consecutive months( average output for a 12 month period) only then will I be convinced.

      1. In my opinion it will be shock and awe – throw one big bomb. So, pump 1 or 2 months this much, postpone all maintainance, do tricks with pressure, tap old side fields, overpump here and there a bit … everything.

        And then talk. When the talk is over, they can buy back part of the floating oil for cheap to fasten the price buildup phase.

    1. OPEC MOMR US tight oil forecast growth is 0.62 mbd from 2019 to 2020. I have revised my comparable growth down to 0.29 mbd based on US shale oil press releases this week.

  33. How exactly does one have a price war when the price is determined whimsically on the floor of NYMEX?

    We’ve covered this before. The guy at the refinery placing an order specifies the price he sees on NYMEX. Sometimes this takes place when the shipment arrives but usually when the shipment departs.

    Somehow, with the price being sent by a single entity, this is being called a price war.

    2. Just send a few extra tankers. When their tanks are full, the price goes to 0. Exactly this Saudi Arabia is doing now, they start sending tankers to the USA. And Trump thinks to refill the SPR – he can take 87 million barrels from the market until it is full.

    3. How exactly does one have a price war when the price is determined whimsically on the floor of NYMEX?

      Watcher, why in God’s name are you still singing that stupid song? The price of oil is not determined whimsically and it sure as hell is not determined on the floor of the NYMEX. The NYMEX is a follower, not a leader.

      The price of oil is determined by supply and demand.

      Today, March 12th, there is an oversupply of oil. And it will get worse because the demand for oil is dropping like a rock because of the coronavirus. And on top of that Saudi is threatening to increase the supply of oil even further. Therefore supply and demand will become even more unbalanced and the price of oil will drop even further.

      Watcher, step in front of a mirror and ask yourself his question. How exactly does one have a price war when the price is determined whimsically on the floor of NYMEX? Then scratch your chin and mutter: “Hemmmm… could I be wrong?”

    4. We’ve covered this before. The guy at the refinery placing an order specifies the price he sees on NYMEX. Sometimes this takes place when the shipment arrives but usually when the shipment departs.

      Bullshit. That is not how it works. The price of oil is different for different grades everywhere in the world. The price is negotiated between the buyer and the seller. Everything is taken into consideration. But in a bear market, where there is a glut of oil, the buyer has the upper hand. He can demand a lower price than the seller is asking. And he will usually get it.

      Oil, at any one time and at any particular place in the world, has a different price. No buyer anywhere in the world checks the NYMEX, displayed only in the USA, before he buys oil.

      One more point: The NYMEX is a futures market It tries to predict what the price of oil will be at expiration. It is not a spot market at all.

      1. Ron

        Correct thanks.

        I have stopped trying to convince Watcher that the sky is occasionally blue, that water is usually wet from 1 to 99C at atmospheric pressure, etc.

    5. But we’ve already done this. NYMEX trades Brent, too, though mostly that price is determined whimsically by traders on ICE Futs in Europe. Different guys’ whimsy. And the front month, if you’re nervous.

      As for Urals, of course it’s SPIMEX. For Oman and most Middle East, the whimsy of the DME. KSA has been known to have an official dictated price, the whimsy of their oil ministry, who probably don’t dare depart too very much from DME.

      You guys are living in a fantasy world.

      Oh, and BTW, at the end of today there will be a quote of WTI. Nobody made 300 phone calls to ask each refinery for their price of transaction today, and then did a by volume weighted average of the 300. What they did was look at the screen showing the NYMEX closing price specified by whimsical trading back and forth.

      1. Watcher, this has become an ideology with you. Reason plays no part in your opinion here whatsoever. You simply do not understand supply and demand at all. You have no idea. You close your eyes and cover your ears to the obvious facts of the market. You deny their existence.

        I will debate this with you no more because your opinion here is totally worthless.

        Bye now.

    6. Watcher,

      Saudi Arabia and Russia set the prices that they sell their oil for. So in a price war, they each lower their prices to take market share from the other. This is really not that hard to understand.

      1. Completely agree Dennis.
        I have seen no compelling analysis, opinion or article to refute the notion that this
        Saudi/Russia price war is anything but a struggle to hold onto
        Asia crude market share (and secondarily Europe), which is in decline due to the virus economic slowdown.
        American shale oil means everything to the USA, but is simply not a significant player in the Asian oil supply market.
        The Asian crude import market is the gorilla in the room.
        http://crudeoilpeak.info/peak-oil-in-asia-where-will-the-oil-come-from-for-the-asian-century

        1. The U.S. gas and oil industry has been carrying the American economy on it’s back for the last 5 years. For economic security and transferring to a fossil fuel free transportation system, America needs a $25 per barrel import tax and stop selling new light weight ICE by 2030.

          Let the Saudi’s and Russian’ s enjoy themselves fighting over the table scraps. Shale is one of the best American jobs programs ever and should continue for the next 20 years with then a termination plan. It’s excess gas production will help eliminate coal use.

          Fossil Fuels Free 2050

  34. We always knew the shale was there. It just didn’t figure into our calculations because it couldn’t be produced economically. No one really figured that we would live in a time where the normal rules of investment would be suspended and money would be lent to producers to develop these fields to produce this garbage at a loss for years with practically zero accountability. This is the piece we missed about Peak Oil around the turn of the century. Looks like that crazy economic period is coming to an end. The resource is still there. It will come back. But only when it is profitable. That could take quite some time. Back in the day we figured this stuff would eventually be used. But long after the peak when prices justified it. I think we are back to that scenario.

    1. SW

      Now that we know how to produce it, at $75/bo or higher for WTI tight oil output can be ramped up quickly. In 2012 I did not think that was possible, I was wrong.

      It is profitable to produce the tight oil at any price over $70/bo iin 2020$ and current costs.

      My guess is that by 2024 oil prices will be higher than $70/bo as we approach peak oil.

    2. It was the same during the first dotcom boom. I was involved in conversations in 1993 and 1994. We were trying to figure out how to use the Internet to create profitable businesses. We were too dumb to realize the eventual plan was to create unprofitable businesses, make them grow, sell stock, and then cash out before they collapsed.

      1. Yep. You can never be cynical enough to understand what is happening in real time.

      2. Boomer,

        You gave heard of a little company called Amazon, and another called Google (or ABC), right?

        Last I heard, they were profitable businesses.

          1. Boomer,

            There are always more failures than successes in capitalism.

            It would have been a good bet in 2003. Roughly a 22% annual return over the 2003 to 2020 period.

            1. There’s a difference between a business failure losing one’s own money versus selling stock and taking out loans (other people’s money) and then cashing out before you get stuck.

              Some markets run on speculation. That was the dotcom boom. And shale, given that most companies have failed to turn a profit and are dealing with a depleting resource (unlike Amazon or Google), have been seen as Ponzi schemes.

              What I am saying is that some CEOs know their companies aren’t going to be sustainable long-term, but if they can get other people to fund them, they will take advantage of it. It was not a business model I considered when developing internet business models in 1993 and 1994. I should have been more open to starting businesses and selling stock even if there never was a clear path to profitability.

            2. Boomer,

              Not very many very large businesses are entirely self funded. My guess is that there are few of these tight oil companies that expected to be unprofitable, their expectation was that oil prices would remain high back in 2014, they were wrong, they dug a deep hole and made the mistake of continuing to dig to get out, there may be a few that were trying to game the system all along, there are always a few bad apples, careful investors watch for those. There will be many of these companies that fail over the next 12 months, this oil price shock will drive them under.

              Higher oil prices and well run companies could make tight oil highly profitable, it could happen at sustained oil prices of $75 to $85 per barrel, especially as debt is written off in bankruptcy court.

            3. I remember the penny stock days in the 1980s very well. Unfortunately I have seen too many companies set up to fleece investors.

              And there was a lot of pump-and-dump activities in the 1990s during the dotcom boom.

              I’ve followed hypes for decades.

            4. Up until a couple of days ago this administration was running The United States of America like a pump and dump operation.

  36. I have had the pneumonia jab a couple of weeks ago, you should all do the same.

    I had one too. But it is totally worthless as far as far as the Covid-19 virus is concerned. Were you under the impression that it might help. Trump thought the flu shot might help. He was quickly corrected by people a lot smarter than he.

    1. The only defense against new viruses is the body’s immune system. The immune system will need all the help it can get. I see lots of “news” suggesting that vitamin C will not help with the COVID-19 but, I have also seen “news” suggesting that it can’t help with ordinary flu and the common cold. My experience has been different so I will be guided by my experience

    2. The thinking is secondary bacterial infection, which seemed to be pretty common in China. Fluid in the alveoli from the virus a good bacterial breeding ground.

      1. I just saw a really good presentation by a hospital head physician. He said that secondary infections have been virtually absent with covid-19. The biggest danger is for older patients with weak respiratory systems. There are virtually no deaths in the under-10 age group.

        Don’t get old.

    3. Ron

      Many people who die after being infected by Covid 19 die from pneumonia.

      So yes it could help

      The only way to know is to do a scientific study in 2 or 3 months to compare death rates between those who had the pneumonia jab and those who have not.

      I do not see why you would put people off getting something that may protect them when you know nothing about it

      1. Wayne, I would not dare try to put people off from getting a pneumonia shot. I get one every 5 years or so. My last one was on February 25th. The point is, it is a fallacy to believe that it will help prevent you from getting the coronavirus. But by all means, everyone should get a pneumonia shot.

      2. The covid-19 pneumonia is a viral pneumonia: the symptoms are a direct result of the covid-19 virus itself, not a separate bacterial pneumonia infection. The vaccine is for bacterial pneumonia, and will not protect you from covid-19 pneumonia symptoms (though it might protect you from developing a secondary bacterial pneumonia infection).

        From https://www.theguardian.com/world/2020/mar/13/coronavirus-what-happens-to-peoples-lungs-when-they-get-covid-19

        How can the pneumonia be treated?
        Prof Christine Jenkins, chair of Lung Foundation Australia and a leading respiratory physician, told Guardian Australia: “Unfortunately, so far we don’t have anything that can stop people getting Covid-19 pneumonia.

        “People are already trialling all sorts of medications and we’re hopeful that we might discover that there are various combinations of viral and anti-viral medications that could be effective. At the moment there isn’t any established treatment apart from supportive treatment, which is what we give people in intensive care.

        “We ventilate them and maintain high oxygen levels until their lungs are able to function in a normal way again as they recover.”

        Wilson says patients with viral pneumonia are also at risk of developing secondary infections, so they would also be treated with anti-viral medication and antibiotics.

        “In some situations that isn’t enough,” he says of the current outbreak. “The pneumonia went unabated and the patients did not survive.”

        2. Can Vitamin C Prevent and Treat Coronavirus?

          In a mad dash to discover effective treatment for the novel coronavirus, doctors and scientists are testing existing antivirals, antimalarials, monoclonal antibodies, and other medications against COVID-19. Now Chinese teams are adding vitamin C to the list of potential therapies.

          ZhiYong Peng, MD of the Department of Critical Care Medicine at Zhongnan Hospital of Wuhan University recently registered a phase 2 clinical trial on ClinicalTrials.gov to test the efficacy of vitamin C infusions for the treatment of severe acute respiratory infection (SARI) associated with the novel coronavirus.

          The study description notes that vitamin C is an antioxidant that may help prevent cytokine-induced damage to the lungs. Cytokines are small proteins released by cells, which trigger inflammation and respond to infections, according to MedicineNet author William C. Shiel Jr., MD, FACP, FACR. Severe lung inflammation with COVID-19 may result in respiratory distress and even death.

          The clinical trial description states that vitamin C reduces the inflammatory response, and both prevents and shortens the duration of the common cold. The description further states that insufficient vitamin C is related to an increased risk and severity of influenza infections. The team aims to see if vitamin C has similar effects against viral pneumonia associated with COVID-19.

          However not all experts agree. MedicineNet content reviewed by Carol DerSarkissian, MD states, “Your immune system does need vitamin C to work right. But extra won’t help you avoid a cold. It may make it go away faster or not feel as bad – if you were taking it before you got sick.”

          1. “Your immune system does need vitamin C to work right. But extra won’t help you avoid a cold. It may make it go away faster or not feel as bad – if you were taking it before you got sick.”

            That alone is a reason to take extra vitamin C now (or always).
            With high doses vitamin C (500-1000mg/day) a common cold lasts about one day shorter.
            And keep adequate vitamin D blood concentrations (enough intense sunlight; if not possible vitamin D3 tablets)

          1. I was referring only to the current situation being experienced with Covid-19, based on the reports in the medical literature posted in the last 6 weeks.

            The information you provided is applicable to influenza.

            I will refrain from further comments here (not oil related).

            1. Hickory

              I replied to Lloyd, I should have said.

              This is Oil related, something that crushes oil demand is oil related

        5. Being a staunch believer in the efficacy of vitamin C in boosting the human immune system, I search for news from different sources. There is the story of a Chinese-American doctor who went to China to visit his parents for the Chinese new year. It so happens that this doctor is a the editor of the Chinese edition of the Orthomolecular Medicine News Service and is a practitioner in this field of medicine that focuses on nutrition rather than prescription drugs for the treatment of illnesses. These are regular medical doctors who have chosen to focus on nutrition and dietary supplements as opposed to prescription drugs. So this doctor ends up at the epicenter of the COVID-19 outbreak in the company of his two elderly parents and decided to stay in China to help set up clinical trials of high dose IV vitamin C.

          Below is a ten minute video from Andrew Saul, editor in chief at the Orthomolecular Medicine News Service, outlining the bizarre situation with vitamin C and COVID-19. It’s on an alternative to Youtube since Youtube flagged it as violating some policy or whatever.

          Coronavirus, VitaminC, Fake News and Censorship

          Next is the Youtube Channel of the physician at the center of this, Richard Cheng:

          https://www.youtube.com/channel/UCASvIerKRpknoJYTSHsitJQ

          Finally the news archive of the Orthomolecular Medicine News Service:

          http://orthomolecular.org/resources/omns/index.shtml

          Below is a picture taken from an article from the news archive, a shipment 50 tons of vitamin C. The banner text on the truck reads “In the fight against N-CoV the people of DSM Jiangshan and Wuhan are heart to heart”. Bet you won’t see that on the evening news!

          1. Islandboy,

            What was on the Dutch-tv evening news, is that in Holland there is a university hospital which is trying vitamin C infuse of 24 g/day. Until now it didn’t produce evidence that it cures (or not) covid-19 infected people different compared to not giving this mega doses vitamin C

  37. Watcher, the flu is a virus but pneumonia is usually bacterial, but can also be viral. Of course you should keep your immune system up and there is no question that this will help you if you do get the covid-19 virus. But no shot will prevent you from getting the virus.

  38. The Great U.S. Shale Decline Has Already Begun

    U.S. shale companies are moving quickly to ax their budgets, hoping to staunch the bleeding as the oil market continues to melt down.

    It has only been a few days after the OPEC+ debacle, but with oil trading at around $30 per barrel, and with good odds of falling even lower, the entire energy industry has little option but to make deep cuts to their operations.

    “Most companies will go into maintenance mode,” Pioneer Natural Resources CEO Scott Sheffield told Bloomberg. Companies will cut down to the bone, hoping to merely keep production from falling. Almost no shale well drilled today makes any money.

    According to Morgan Stanley, the industry needs $51 per barrel just to fund their capex budgets this year, let alone pay off debt or send money to shareholders. Needless to say, WTI is a long way from $51.

    That means spending will have to fall dramatically.

    On Thursday, Apache said it would cut its budget by 37 percent, and notably, would eliminate all of its rigs in the Permian basin. The company also said it would cut its dividend payout by 90 percent. Apache cannot chalk up all of its problems to OPEC and the global pandemic. It was only recently that the company shelved drilling activity in its high-profile Alpine High asset in the Permian because of disappointing results.

    But the market turmoil has already begun to ravage the shale sector. Devon Energy said it would cut spending by 30 percent, with reductions concentrated in Oklahoma and Wyoming. Devon says that it has 40 percent of its oil production hedged, somewhat reducing the pain of the downturn.
    Related: Big Oil Prepares To Suffer In 2020

    Occidental Petroleum also cut its dividend by more than 85 percent, and spending by 32 percent.

    Here are a few other notable announcements:

    Murphy Oil will cut spending by 35 percent
    PDC Energy will cut spending by 20-25 percent
    Matador Resources will cut rigs in half
    Chevron said it is considering cuts to spending
    Marathon Oil will cut by more than 20 percent

    More announcements like these are inevitable in the coming days. Morgan Stanley estimates that the median cut will be about 25 percent compared to prior budget guidance.

    Other market watchers had similar insights. The oil industry could see $380 billion in cash flow “vanish” if oil prices average $35 instead of $60, according to Wood Mackenzie. “Sustained crude prices below US$40/bbl would trigger a new wave of brutal cost-cutting. Discretionary spend would be slashed, including buybacks and exploration. Unsanctioned conventional projects will also be delayed, and in-fill, maintenance and other spend categories scaled back,” WoodMac analysts wrote.

  39. About a month ago some one on this website stated that they could not see why the Coronavirus would reduce global oil demand.

    https://www.dailymail.co.uk/news/article-8109405/BA-ground-aircraft-cut-staff-tackle-unprecedented-crisis.html

    IEA has predicted oil demand would fall by as much as 700,000.

    I think it will fall a lot more than that. Millions of people who go on holiday will not go this summer.
    I am cancelling mine because I do not want to be stranded in a hotel because one person in the hotel has tested positive.

    1. This will be a severe stress test for economies that are heavily dependent on tourism. On the island where I live, thousands of people depend on tourism for their livelihoods, with tourism contributing 34% to the island’s GDP in 2018. It’s not just islands like Jamaica and Hawaii that will be hit hard, cities like New York London, Paris, and Miami have large sectors that depend on tourism as do many other areas like the resort towns in Mexico. Some people will be laid off without pay and others who are small independent operators or who depend on tips will see drastic reductions in their spending power. They won’t be able to buy much fuel!

      Not trying to make anyone fell guilty but, that’s just the way it is. I is the reason why I have always disliked the tourism industry in my neck of the woods. You can be earning a good living one day and be out of a job the next.

      1. Islandboy

        Tourism done properly is a great industry, allowing people to see wonderful countries and cultures. However this is an unprecedented situation, where people can suddenly be imprisoned because someone on the same flight as them was ill.

        https://www.telegraph.co.uk/news/2020/03/08/young-british-backpackers-forcibly-quarantined-vietnam-passenger/

        Governments are not just stopping tourism, football has been stopped, London Marathon postponed, it will be bad for at least 6 months

      2. Speaking as a resident of a tourist town in Mexico – we are going to get hammered! The flu outbreak hit hard, very hard and I was sitting in the dive shop, watching 9/11, knowing ‘bang goes my job’. What concerns me most is that, while there are no ‘official’ cases here, gringos are going to bring the disease to the town. What is worse is that, if it does get into silent circulation, we have semana santa and semana pascua coming up where tens of thousands of Mexicans will come here then return to various parts of Mexico spreading the disease.

        My shopping and trips is now restricted and my main strategy is avoiding gringos.

        NAOM

        1. I lived in PV for a while–
          Avoiding gringos was almost an impossibility.

          1. Ironically, I may switch from Mexican La Comer to USAnian Walmart as the first is full of gringos while the later has very few and its easier to keep space.

            NAOM

    2. I think the IEA announced a reduction in growth by 700 K bpd. I think I did hear that it was revised even further and perhaps to outright 700K reduction in consumption, which would constitute less than 1%.

      Might have been a reduction in growth. Doesn’t really matter. When the measurement is available we will know. That would be June of next year.

  40. Baker Hughes rig count was down one this week, amid the wave of companies reporting large cuts to their capex budget for 2020. The frack spread count dropped 17 to 298 spreads. I suspect US and Canadian oil production will drop pretty fast as the stage had been set due to the spread drop which began last summer. And of course the massive announced cuts in capex budgets. Demand looks like it fell off that Seneca cliff. So we will likely be oversupplied for a while even if KSA and Russia figure out how to resolve their differences.

    GLTA.

    1. dc.

      Not only are we concerned about the price, we are even more concerned about our small workforce becoming ill.

      We are in the middle of nowhere and right now there isn’t a COVID-19 case within 150 miles of us. However, we have to assume it’s headed this way.

      As things haven’t been good since 2014, we have not kept “extra” workers on. We have enough to cover up to two people (out of 8) being off work for vacation – with at least some of the rest working overtime. 3 or more ill, it gets pretty tough.

      Also, we rely on numerous private contractors for things such as electrical, down hole well repair, tubing testing, tank truck, roads and locations and chemical analysis. These are mostly sole proprietor type businesses with 1-3 employees in addition to the owner. Again, there are not a lot of these companies around, given a down turn now in its seventh year.

      Also, as I have discussed many times here before, the oilfield workforce here is older. Most of the sole proprietors of service companies are ages 50-70. Our workforce has just one under age 50, three over 60.

      Everyone has his own truck. The work is outside, and most work is done solo, or two men at most. But people still have to go to the gas station, grocery store, etc. Several of the guys have spouses who work in healthcare.

      We spoke w state regulatory agency about emergency measures in the field. The call seemed to catch them completely off guard.

      Unlike our operations, drilling shale wells is much more labor intensive. Many, many more people come in close contact.

      We are in uncharted territory here. For the sake of our workers, I sure hope COVID-19 doesn’t get here. Hopefully a few weeks of social distancing and warmer weather ends this.

      1. Thanks Shallow sand for the update. Do wells start to get shut in at these price levels? Or does it make sense to store oil and wait for higher prices, if you just shut off the pumps for a while (couple of months) does the well get damaged?

        1. We will wait a little bit before shutting wells in, and we can only shut in the non-waterflood wells.

          The non-waterflood wells can be temporarily abandoned as long as the fluid level in the well stays below the water table, which they generally will. An echo meter is utilized to determine the fluid level.

          Do not want to shut in waterfloods. Lose the drive. Also, fluid levels may not drop below water table for awhile.

          This is why Russia doesn’t want to cut more, it’s not easy for them to start shutting down their conventional well water floods.

          1. Dennis. I’ll also say where I am, almost all stripper production is now underwater financially. Well head prices are mid to upper twenties.

            I suspect most conventional production in the US lower 48 is at or below the cost of production.

            Also, most of the older shale wells (5 years or older) are also at or below the cost of production.

            Keep in mind prices have been low going on year 7 (2014 was mostly good, but big drop occurred 2 half of year). Only 2018 had a price where much money was made by most.

            Assuming $30 WTI remainder of 2020, many wells will be involuntarily shut in. By that, I mean operators won’t be able to pay the electric bills and will have no choice.

            Maybe shale operators will be able to borrow money to keep the low volume wells going. I assume with many shale wells, a down hole failure will result in leaving the well down rather than repairing it.

            Have you done the math on what percentage of Permian wells can be profitable at $30 WTI, or about $25 at the well?

            1. Is it possible to scale down here?

              So like:
              – if I pump a well daily, I get 5 barrels 7 days a week
              – if I pump only twice a week, I get 2 times 10 or 12 barrels, for much lower cost.

              As you said, with waterfloods there is only all or nothing.

              Kind of emergency mode – big repairs aren’t possible then anyway.

            2. Eulenspiegel,

              Shallow sand runs a very tight ship, I imagine costs have been cut to the bone. Pumps are probably on timers already to minimize costs.

            3. Shallow sand,

              I have not looked at the productivity distribution carefully and only have well data for the average well. My WAG would be 5% of Permian wells might break even at $25/bo at well head, this assumes the productivity distribution in 2020 is similar to 2017 (most recent year I have 24 month productivity distribution).

              In 2017 95% of wells had lower 24 month productivity than 2.2 times the average well (about 63% of wells completed had lower productivity than the average well). Wells with productivity at that high level (top 5% in productivity) would break even at $25/bo at well head assuming $11 million for well cost, $13/bo for operating and overhead expenses, 28.5% for royalties and taxes and a 10% nominal annual discount rate. Payout is reached in 78 months and NGL is sold at 25% of crude and natural gas sold at $1.50/MCF.

      2. I wouldn’t pin much hope on warmer weather, Iran is not exactly cold.

        NAOM

      3. Shallow, I hear you. I have 15 folks in my laundry. We do two hospitals, a nursing home and retail. Infection control has always been a concern but now it is huge. Most of my folks have been with us for several years, up to twenty years. Not only do they depend upon you, you depend on them, and you feel a certain responsibility for their well being.

        We are out on the prairie and it is not here yet. I also hope it will not get here.

        1. dc.

          We have had some darn good people work with us over the years. A couple of them treated me really well in the early 1990s when I worked on a single drum pulling unit in the summers. I also primed and painted stock tanks, plus all kinds of other stuff.

          I made $6 and hour, and thought that was great summer help pay. One of the guys (rig hand) didn’t like me too much at first, and I found out the reason was the other guy (rig operator) told him I was making $8 and hour, and he was making $7.50 as a rig hand. Once he found out I was at $6, everything was just fine. I think minimum was $3.35 at the time.

          That was back when $20 oil was considered a strong price and $15-18 was doable. We are at $24.50 today, just about 30 years later.

          For oil to have been $60-100 all those years, and to have now dropped into the $20s for the second time since 2016 is mind blowing.

          Shale needs to completely shut down. No amount of lying can paper over this oil price rout.

          1. SS,
            I spent some time painting tanks, and running flow lines back in the day, although most of my summers were filled with roofing and framing houses.

            The late 70’s was a good time to be in the oil patch, and I was fortunate to be in management at the time. One of my employer’s was a combination driller and E&P in Midland. They sold limited partnerships to wealthy people looking for tax benefits. One of these was for three 30,000 foot rigs and projected an infinite return on investment to the GP because of how hard they soaked the LP’S. That was when I realized that party was about over, they were BK a couple of years later. Boom and Bust.

    2. Rig Counts from pivot table at

      https://rigcount.bakerhughes.com/na-rig-count

      Chart below has horizontal oil rig counts from Williston, Permian, Eagle Ford, and DJ-Niobrara basins from Feb 2011 to March 2020. I expect in a few months (next 4 to 8 months) we may see a drop similar to the drop in 2015/2016, if WTI oil prices remain $40/bo or less through that period.

  41. Here in Germany we are one week before complete lock down I think. Schools and Universities already closed, all cultural places closed.

    What’s about you in the USA?

    When this happens in the western world, most private gas usage will be locked down, too, together with flights. Business is having a hard time, too – especially I think shop infrastructure won’t survive this without strong damage. Amazon will get world domination.

    I hope they manage to lock down it deep enough, so the ill people can get the good treatment and not only emergency service.

    For oil: It will be easy a -15 mbpd usage reduction during the peak of this – where only trucking and emergency service drives around anymore. I wait for the first factories to have to shut down due to missing pre products with all this china chaos.

    1. Doubt their will be a complete lock down in US. Many will self quarantine which might be enough to be effective, we will know in 2 to 8 weeks.

      1. Schools, universities, factories, public transport (less in the USA) – if this continues it will be difficult.

        Especially schools – you have school busses at the USA, too? Best to spread Corona there with the involuntary help of the kids.

        (Sorry for the questions, we in Europe think in the USA everything goes with the car, most times a pickup truck).

        1. Yes there are school buses in US, many school systems are being shut down, though each locality makes its own decision.

  42. Interesting piece on oil price war at link below

    https://foreignpolicy.com/2020/03/14/oil-price-war-russia-saudi-arabia-no-end-production/

    Excerpt from end of piece:

    In the end, both Russia and Saudi Arabia are gambling that the other will blink first. Both have reasons to think they’re right. There are reasons both, or either, could be wrong. Both are planning for short-term pain to compel the other to submit on their terms.

    “It reminds me of the First World War, when France and Germany went to war thinking they’d be home by Christmas, and spent four years in the trenches,” Seznec said. “That’s why this is so dangerous—it’s a mirror image.”

    1. I’m about half way through “From Russia With Blood” about Putin’s assassination program of Russian defectors, etc. It’s entertaining but given how much attention Putin pays to even small details like defectors in the UK bad-mouthing Russia, I seriously doubt the Russia / Saudi war narrative. Much more likely is they both recognized the impact of Covid-19 during the initial spread in China and realized the potential for pandemic and reduced demand. At any point they can come back to the negotiating table (the blinking). Why fight the trend when you can feed into it. Given the trillions in value lost in global financial markets I would say the strategy is already a success. If they were smart they would have coordinated the tussle by preemptively selling foreign shares.

    2. Yes, and neither France nor Germany blinked at all. The fought like madmen until Germany collapsed. In fact, Germany launched a huge offensive in 1918 that almost won the war. A few months later, the country had collapsed.

      My impression is that the current Saudi leadership tends to do dumb things without considering the consequences. And Russia’s seems more interested in beggar-thy-neighbor policies than in doing good things for the country. So my guess is that the price war will go on for some time.

  43. I see on shale profile a 2016 shale well in the Permian Basin has produced in average 217,000 barrels in 35 months. It looks like well productivity has improved little since.

    At $25 well head, that is just a little over $4 million gross.

    That is before ANY expenses for operating, general and administrative, land, interest, etc.

    Every rig in the Permian should be stacked and every frac spread should be stacked. Same for Bakken, Eagle Ford and Niobrara.

    It appears it takes a 700,000 BO well to break even at $25 well head. How many of those have there even been?

    1. When every rick and spread would be stacked, the spook would be over end of the year when shale production has almost halfed and Corona is gone. A few extra barrel lost on off shore oil, and Saudi Arabia would not long sustain the high speed pumping.

      But they are trying to keep production as high as possible with the rest of their cash reserves – so the pain will go deep into 2021 – just my impression.

    2. shallow sand,

      Roughly 5% of completed wells in 2017 had EUR of about 869 kb over 220 months (assuming hyperbolic profile until annual decline rate reaches 10% and then exponential decline at 10% per year after that). The average 2017 well had an EUR of about 400 kb over 250 months (same fitting of data to hyperbolic with 10% terminal decline).

      Short answer is that since 2017 it has been roughly 5% of completed Permian wells that have productivity above 869 kbo.

      I agree if oil prices remain this low, we will see steep decline in US tight oil, probably 4 to 6 Mb/d over the next 12 to 24 months, lots of rigs and frac spreads stacked, a blood bath in the shale industry, lots of defaults, lots of unemployment.

      Not good for the oil industry.

      1. Dennis.

        How many will hit that in 3 years and 5 years?

        Mike thinks wells need to payout in 3, and I defer to him. We try for payout in 5 or less for low decline conventional wells.

        Break even in 220 or 250 months doesn’t work at all, and I assume you agree.

        I suspect, like us, rigs won’t immediately stack, in hopes the price bumps up a little.

        If all completions ceased for the remainder of 2020, shale drops roughly in half, 4 million BOPD? Looks that way eyeballing US October, 2019 on shaleprofile.

        Again, thanks Enno for making this data free to the public!

        1. shallow sand,

          Yes I agree, payout needs to be at least within 72 months to breakeven and clearly earlier payout is preferable.

          Very few would pay out in 36 months, perhaps 2% of wells completed. Note the 220 or 250 months is not the breakeven point, it is the point that the well reaches end of life in my model, where net revenue is less than operating expense. The well reaches payout at about 67 months for wells that are in the 95th percentile (better than 95% of all wells completed). At that point, the well has cumulative oil output of 635 kbo, natural gas cumulative of 2364 MMCF, and cumulative NGL output of 164 kb.

          Yes if completion drop to zero over next 2 months then output falls to about half (4 Mb/d) by May 2021. This assumes no completions from April 2020 to May 2021, which is not a likely scenario in my view. It will drop a lot, but not to zero. Note that if the zero completion assumption is extended to Dec 2021, tight oil output falls another 1 Mb/d to about 3 Mb/d in early 2022.

          I doubt low oil prices will continue with such a steep drop in World output and I doubt OPEC/Russia will be able to fill this gap especially as the World economy recovers from the current crisis in 2021/2022.

          Note that I define breakeven oil price as an oil price that results in the discounted net revenue over the life of the well being greater than or equal to the full capital cost of the well (including land, facilities and abandonment cost). I use a nominal annual discount rate of 10% (a real annual discount rate of 7.5% assuming an annual inflation rate of 2.5%). The oil price is a real oil price in constant 2020 US$.

            1. shallow sand,

              Should have been net revenue is less than zero rather than “net revenue is less than operating expense”, sorry.

        2. Thank you, Shallow; those payout periods are MY minimum economic requirements for infill development, along with 300% ROI’s, and why I am still going after a half century. I am still profitable at $30 and have no intention of abandoning my employees after 40 years. That’s what fellas like Hamm do, let people go while they whine to OPEC about not cutting production. I was here before shale oil urped and I will be here after it croaks.

          ROI, or IRR (a much worse metric) is exactly why the shale oil phenomena can NEVER stand on its own financial feet, without credit. 130% ROI’s after 15 years, even at $60, does not allow sufficient return on CAPEX, fast enough, to function without credit. That is a key metric, maybe the most important metric in shale oil development; its OK to have to wait 4-5 years to reach payout if you know at current price decks you’ll make 3 times well costs over 20-25 years. That’s how you grow reserves without debt. Its very similar to risk analysis in wildcatting. Add the burden of old debt, of old wells you are carrying on your books that are down to 20 BOPD, and still have not been paid for, and you are walking dead. Hope (for higher oil prices) is not a plan. It’s the ONLY plan the shale oil industry has and so far, its failed, miserably.

          Nobody in the shale oil industry can muster more than 150% ROI’s over 10-12 years, even in the best of price climates. A percentage of exceptional wells within a big inventory of piss poor wells, is meaningless.

          1. Mike. I sure wish our costs were as low as yours.

            We are $4 below WTI on price. LOE in $33-37 range field wide. So no muy bueno for us.

            I happened to pull out 2004 P/L. We still own all the same leases. For the year we sold oil at $36.77, LOE was $16.52. Those were the days. When I say LOE I mean everything except income taxes and interest.

            Our wages and workers comp are a little more than double 2020 v 2004. Electric is right at double. A drum of scale and corrosion inhibitor cost $452 a drum in 2004, now costs $993. A 950’ tubing job cost $350, now $635. It was around $800 before prices crashed.

            This can’t last. The whole industry worldwide has to stack them.

            OPEC is losing $750 million a day? Russia is losing $250 million a day (from where we were two months ago oil price wise).

            We laid off in 2016. Was very hard. They found jobs quickly in other fields, although one since went back to work in the oilfield. We lay can’t lay off now. No extra help.

            This is ALL on shale IMO. Hasn’t been a profitable business since 2014.

            I also looked at an XOM statement from 2005. Was $63 per share.

            Shale has done XOM a world of good, no? How can people at the top make so much $$ and be that bad at their jobs?

          2. Thanks Mike,

            Definitely does not work at these oil prices, at $70/b the average 2018 Permian well (388 kb EUR and 240 kb at 36 months) pays out in 36 months, assuming $1/MCF for natural gas and $17.50/b for NGL, well cost assumed to be 10.5 million. Natural gas cumulative is 798 MMCF over first 36 months, NGL cumulative is 60.5 kb.

            New well completions in the tight oil basins should stop until oil prices rise to levels that are profitable, in my view.

  44. A week or so , talking to Dennis, I posted that I couldn’t even make a good guess at the likelihood of an economic breakdown between now and election day.

    Now I’m thinking the odds of the same are getting pretty high.

    1. OFM,

      I would put the odds at about 99:1 that there will be a recession lasting 6 months or longer starting within 6 months. I also think it will be short-lived, lasting between 6 and 24 months, odds about 7:1.

      All WAGs as usual. My chances of being correct, approximately zero.

      1. A serious economic recession is unquestionably baked in now.

        And since it is, I’m thinking the sooner it arrives, the better, in terms of the health of the country as a whole, long term.

        One thing I’ve noticed is that the voting public never fails to take out it’s frustrations on the incumbent in the WH, when there’s a sharp economic downturn.

        So at least there’s a silver lining in this recession cloud.

        1. How bad does it have to be to justify tar and feathering the entire Trump administration? Surely not too much more.

          1. Not really the time to be assigning blame. Better to work on reducing the extent of the crisis as best we can.

  45. I guess the decline in demand hasn’t hit our little burg today. People driving around all over the place.

    Walmart packed. All TP gone. All paper towels gone. All bottled water gone. All hand sanitizer gone. All hand soap gone. All masks gone, and they limited one per customer.

    Same deal at both groceries. Masks at hardware store also all gone.

    Friend is driving masks to the city for his kid, who works at a hospital and can’t get any. 7 hour round trip in a 3/4 ton truck. That will offset the airlines. Lol.

    Shouldn’t joke at a time like this. Just found out about a case of COVID-19 70 miles away.

    1. The situation is starting to get a hideous. A health care worker here in Maine told me her clinic was being stolen bare of masks, sanitizers, and thermometers–by patients.

    2. Toilette paper jokes are common here, too.

      Looks like the people want to sit out the crisis on the toilette – since this is the article gone first. Masks and sanitizer long gone anyway.

  46. Peak Oil math, but y’all won’t accept that, either. Watch the Recovered number.

    Rather a lot waiting for a vaccine. Germ is 20X more deadly than flu and typical flu vaccine is only 50% effective, even changing strains in the syringe each year. Society won’t accept an upwards growth curve that is 1/2 as steep as it was if it still kills so many.

    Vaccine won’t be the answer. Gotta have a treatment, not a vaccine. Or a magical seasonal solution.

    1. The flu vaccine is only 50% because it’s a guess. Fle changes so fast, so the vaccine is almost always against an old version of it and helps only partly.

      A vaccine must only be good enough to stop the spreading. Germ doesn’t change so fast as flue anyways, so the vaccine will be more exact.

  47. Now in France, we are at the stage 3 of epidemia (so it has been decided). Therefore, everything is closed except : administrations, pharmacy, commercial establishments for food, tobacco and press offices, banks, places of worship and gas stations. We are asked to limit our travels to only what it is necessary as going to work if it is impossible to work at house. Weirdly, the elections of tomorow have been maintained. The oil price drop has good days ahead.

    1. Italy. 368 deaths on Saturday 14 March.

      South Korea appear to have the best policy. Test, test test, trace contacts isolate them.

      US policy will not isolate people who do not display any symptoms but can still infect other people.

      I think many many people will die in the States.

      1. How many deaths from the virus and how many from “home defense”

      2. It’s been said that the big differences between S. Korea and Italy are not their relative responses to the virus but demographics. The virus seems to prefer to attack older people more than young and women more than men. Italy has one of the oldest populations in the world, Korea is relatively young. Italian woman smoke at a rate 5x that of Korean women. Lastly the Italians are much more “touchy-feely” than the Koreans. Only the last one is amenable to short term mitigation.

  48. Aramco to slash capital spending in 2020, posts drop in 2019

    Saudi Aramco on Sunday said it plans to cut capital spending in the wake of the coronavirus outbreak, as it posted a 21-percent decline in 2019 net profit due to a drop in oil prices and production, its first earnings announcement as a listed company.

    And at the same time, they’re planning to increase production by several million barrels/day?

  49. It looks to me as if the strange oil price war declared by Muḥammad bin Salmān bin ‘Abd al-‘Azīz Āl Sa‘ūd in retaliation for Novak (Russian oil minister) refusal to go with oil production cuts, will actually move forward Dennis Coyne’s Oil Shock Scenario (see last September’s post). Strange things happening related to it–
    –The U.S. President suggesting some form of bailout for U.S. shale producers, in the face of what looks like a guaranteed wave of new bankruptcies.

    –Saudis promising to “produce” 13 million barrels of oil per day when almost all mature observers of Saudi Arabia deny that they have much “spare capacity,” and that Matt Simmons’s book may have been correct, although a bit premature. Can they even produce 11 million per day, sustained for more than a couple months?

    –A pause in production won’t show in the Drilling Productivity Report from EIA for months, but one thing that doesn’t pause, is the “legacy decline” always published in the DPR along with prior month’s production and next month’s prediction. The legacy declines in some of the fields such as Anadarko, the Niobrara, maybe even Bakken, could begin to eclipse monthly additions, if rig counts start falling.

    –Art Berman’s “Berman Dumbass Case” could be moved closer to now by these events, unless the White House decides to miraculously intervene to the point where $10 or $15 per barrel from the shale fields will have U.S. taxpayers’ subsidies incorporated into the price…

  50. I assume we’re now on a good path to reach a 10-20mbpd demand destruction, maybe more if US follows Europe.

    Opec+ couldn’t cut themselves out of this mess, but now made it worse, so low oil prices are given for 2020 and with storgae filling to the limit, maybe 2021 as well – depends on cuts by commercial producers, but shale bosses still try to maintain as much production as possible, while a full stop would be the best.

    But – in contrast to former Oil crash, this one could fall within the end of the oil dominance in energy.

    EV demand destruction will kick in with higher gear after 2021 – because of the low carbon reglemenations worldwide and shifting in the model mix of the major producers.
    Demand from the customers already there, but enough right models missing,
    however Volkswagen goes “All In” on EV, lots of others are following since Tesla is the coolest kid in town.

    Shale is done, maybe we never reach 60 WTI again in the next 2-3 years, every $ drilled and fracked now is wasted money and their debt will never payed back.

    1. +1. The oil story is officially over. There will no longer be enough sustained interest AND economic growth for oil prices to recover long enough for a large amount of lending to propel the industry forward. Work force is retiring in droves with this price collapse. Peak oil was 2018.

  51. Ron is dealing with complications and will not have Computer access for a ~week or so the new post will be delayed. Dennis or Avi can you email me at my handle at Google mail.

  52. Covid-19 will not be a short hit. I’m not aware of any reports of humans developing immunity after being infected, so it can hit you again and again. I know where I am in the triage series – I get to be left out in the rain to die.
    The result could be sustained suppression of economic activity, with poor recovery of any business which involves travel or large gatherings. A complete upheaval of typical down-town commerce and social activities.
    People will adapt to a more isolated physical life, using Skype and other tools for social interaction. We have a Skype dinner planned with friends – with our laptops at the far end of our tables, in houses 400 metres apart! Home deliveries of groceries are now routine here, and social distancing practiced with care.

    Freight haul of essential commodities will continue, but a lot of luxuries will stay on the factory floor. The numerous failed businesses will see millions upon millions of people reduced to poverty incomes, with minor prop up by state coffers – while the state of course suffers the hit of reduced income from taxes.
    That will trickle up and down through the economy. Much money printing will occur, as the value of the currency declines by the hour.

    Demand for fossil fuels will fall as economic activity slows (witness reduced air pollution), but we will barely be able to afford to pay for it at any price – no matter how low.
    Watch for oil-producing countries corralling production to meet essential internal demands (subsidising or even nationalising best producing areas to sustain essential services), while oil importing countries struggle to pay their oil suppliers.

    Very interesting times.

    1. Estimates of reduced oil consumption seems to be underestimated by wide margin. We are just at the start of the curve where I live and traffic is already affected as those who can work from home. Trips are cancelled, planes grounded, airlines, restaurants and hotels lay off employees etc.

      I usually order my groceries online and pick them up at the store when I pass by. But the online system went down last week, perhaps due to too many new customers? Anyhow, had to visit the store and it was getting low on all sorts of items: pasta, toilet paper, frozen veegies etc. However, still lots of ice cream left… Am I the only one resorting to ice cream when having a cold?

  53. There’s a credible report out of a couple of ER physicians in ICU with CV19 here in the states. One is seventy, the other is only forty.

    I’m thinking the vultures are going to have all they can possibly eat….. the sort of vultures I have in mind being people with ready cash willing to take a chance on buying cheap and prices of everything from antique furniture to cars to houses going back up after crashing, including stocks of course.

    I don’t have much cash myself, and I’m not the kind to take an old widow’s family silver for five cents on the dollar, but if I don’t get sick myself, I’m going to be keeping an eye open for a really good deal on a car to put in the barn, for the day the one I have now finally dies on me.

    I’m too old to be interested in more machinery , etc, and I have everything already I can use in the house, to the point I have to dispose of something to make room for anything new that won’t fit in a closet.

    Anybody in a position to be looking for a super deal on a house ought to keep his eye peeled. There will be some available without going the usual bank route.
    In most states for instance you can have an attorney draw up a long term rental contract, and record it, that guarantees you get the house, once an existing mortgage is paid off, so long as you yourself make the payments piti and maintain the house.

    The KEY to such a transaction is that the documents be drawn by a local attorney who does real estate, and that they be properly witnessed, the title properly searched, and the documents promptly recorded….. the SAME day they’re signed.

    My guess is that there will be a lot of properties available at fire sale prices within the next year or so.It’s hard to even guess at when the market for such properties will hit bottom,but in past crashes, some vacation properties and good houses in my area have gone as cheap as fifteen or twenty cents on the dollar, cash with no guarantees other than that you get a good deed.

    The houses generally needed some relatively minor work, the sort of thing that costs a lot for labor, if you hire contractors from the Yellow Pages, but easily taken care of by a competent handyman.

    A friend of mine bought one within a mile of me for twenty thousand and she fixed it up in two months with her husband and son working only on Saturdays using a couple of thousand bucks in materials. It’s worth ninety now, even way out in the boonies in a relatively poor part of the country…… or it WAS, a few weeks ago. She’s netting over five hundred a month on it, and got all her cash back within five years. Management, if you know how to manage, takes only a couple of days a year, average.

    It’s hard to say what will happen in the housing market. Everything depends on how long business stays in the pits, and the depth of the pit.

    2. “There’s a credible report out of a couple of ER physicians in ICU with CV19 here in the states”
      Yes, this was indicated in a letter sent out by the president of the
      Amer College of Emergency Physicians yesterday.

      I had also seen a report that about half of the corona virus ICU patients in the netherlands are below 50 yrs age.

      1. Hickory,

        Age does not tell us enough. Those patients under 50 may have underlying respiratory conditions or may be immuno-compromised.

          1. Adam,

            Possibly younger people are not following social distancing guidelines because they believe the virus will not affect them.

            So it is the death rate for various age groups that is the issue, most healthy young people so far, that have been infected have recovered.

            That is why the death rate in South Korea have been relatively low so far, most of the infections were among a younger age group (under 50, I believe) who attended a megachurch.

            https://www.sciencemag.org/news/2020/03/coronavirus-cases-have-dropped-sharply-south-korea-whats-secret-its-success

        2. Yes Dennis, perhaps that may be a big part of it. We don’t see enough published info yet.
          But keep in mind, even asthma is enough to push a young person into a high risk situation with any resp infection., and may need ICU level care to survive illnesses that other young people may handle with less degree of severity.

          1. Hickory,

            I agree, note that I know some science, but life science and medical is not my area, my wife is a physician so I hear stuff, but she tells me to shut up because sometimes people are foolish enough to listen to me, and I know nothing about medicine.

  54. And the Dow Jones Industrial Average fell by over 10% in the first minutes of trading before they shut down the market.

  55. Saw an interview with Kevin Hassett [is an American economist who was the Chairman of the Council of Economic Advisers and former member of Trump economic team] on CNN this hour.

    He said 2nd qtr. GDP in the USA will -5% and job growth will be – 1M.
    To early to project 3rd qtr.

    Buckle up.

    2. If brent closes between $30-31/b we are going to see more downside, next level is ~ $25, which hasnt been seen since 2002-2003. Quite an unbelievable situation.

      1. Then again:
        VelocityShares Daily 2x VIX Short-Term ETN (TVIX)
        NasdaqGS – NasdaqGS Real Time Price. Currency in USD

        553.56+218.16 (+65.04%)
        As of 2:57PM EDT. Market open.

      2. Iron Mike,

        The lower the price goes, the faster we will see US tight oil output decrease. I now expect a very steep drop in US tight oil output, probably to about 4 Mb/d over the next 18 to 24 months, a drop of about 4 Mb/d.

        If that guess is correct, and the Global economy starts to recover after 2 years, we may see oil prices start to rise, once oil prices rise to $60/bo in 2020$, we may see some recovery in the tight oil industry. If and when this will occur is unknown. My guess is 2022 to 2023.

    1. Freddy.

      An example of how messed up this whole shale thing is.

      Nabors Industries has 21 of the 57 rigsrunning in the Bakken. NBR has more land rigs running in the US than anyone else. However, NBR stock has been sinking throughout the shale boom.

      NBR is at 36 cents per share. It’s all time low had been 75 cents per share in 1986, when oil was $8.

      Keep in mind, the above prices are not adjusted for inflation either.

    2. Freddy,

      That article is BS. Average is about $56/bo for hedges and only 50% of production is hedged. Let’s assume production remains flat and oil Price average s $35/bo, that gives us and average price for oil sold at 56+35 divided by 2 or $45.5/bo. No tight oil producer is profitable at that price, they lose money on every barrel sold. In fact, just to break even the average Permian well needs about $55/bo at the wellhead and to make a decent profit they need about $70/b at the wellhead, note also that the Permian basin is likely the highest profit basin, so other tight oil basins would need higher oil prices.

      1. they lose money on every barrel sold

        Hedges are in the past: they don’t affect drilling/completion decisions going forward, so income is based only on actual market prices and very few new wells are likely to be drilled/completed. On the other hand, the same applies to expenses: existing wells also are not affected by past drillling/completion costs, so every barrel will make money, (unless actual lifting and transportation costs are higher than market prices, which seems unlikely), so few wells will be shut down.

        I think you’re thinking more about company viability: how long can companies hold out before bankruptcy and sale to a vulture ( or sale at pennies on the dollar to a vulture?)? That all depends on assessments by investors on the length of low prices. If they decide low prices will last a long time, the rational economic decision will be to pull the plug immediately. Are investors rational??

        1. An example of what the market thinks of hedges is SM Energy.

          SM Energy has 80% of projected 2020 production hedged at an average price in the high $50s WTI.

          SM Energy’s share price has fallen from $12-13 to currently $1.54.

          The wells don’t payout in a year. It takes many years. If oil stays here through 2021, they are all toast. Even the majors will be in serious trouble.

          KSA and Russia appear willing to each take a $100 billion hit to reserves to see shale drop 4+ million BOPD. They are playing the long game, hoping that in 2021 and beyond we go back to 1 million + BOPD demand growth. That is likely in the event the world population keeps growing.

          A lot of wildcards with this COVID-19. But, if it does die out in the summer, I don’t think it will have a major impact on world population growth.

        2. Nick,

          Correct, I am thinking about the company as an ongoing business, so what is the total cost of a barrel produced, including historical capital costs and ongoing operating expenses.

          I agree wells will not be shut down (except perhaps low volume wells), and I also agree few new wells will be completed at current oil prices as those wells are likely to lose money.

      2. Dennis, thanks for the info. I also tought 35 was BS , Mark Papa told they could not see an increase with oil price below 70 usd WTI. Guess hedging is a instrument where tjey borrow future production to invest in other stocks , currency and hope that value will grow more than the value of oil goes down. There are exsamples they fault, go bancurupt that might happen again espesialy in this situation for the world. But think Mr. President emention.there would ve helikopter money…

        1. Freddy,

          Mark Papa seems to be one of the few who is involved with large tight oil companies and is truthful about the prospects. His $70/bo sounds very similar to what equates to a 36 month payout for average Permian wells, this coincides nicely with what Mike Shellman has been telling me for 5 years or more. That is, for a well to be profitable it needs to pay out in 36 months.

  59. (Gail Tverberg says:
    March 16, 2020 at 8:26 pm
    People don’t understand that it is the collapse, more than the Coronavirus, that will kill us. Of course, we don’t really have a choice. We are already close to the edge.). I suspect this could be true.

  60. Airlines are asking for $50B for the industry. No reason shale can’t ask for some, too.

    Though I did hear the loyal opposition committed to not allowing any drilling of any kind in debate.

    The Fed will print $750B for QE5. It’s a good thing we’re running $1T+ in deficit this year or there might not be any bonds for them to buy.

    1. Shale is a jobs program and national security. Americans can afford $60 oil. The U.S. should buy up enough to fill the national reserve now. Then add a $25 tariff and regulations to end light weight ICE by 2030.

      A planned transition

        1. The stimulus bill should include billions for charging stations and grid improvements.

          1. Batteries don’t scale yet- Global Production only ~150 GWh/year = a tiny fraction of Gawar Production. We are just now wheels up. Charging should be Locally invested Behind the Meter PV. That’s the Disruption PV does not fit the Return on Capital Invested Model well.

    2. >Airlines are asking for $50B for the industry.

      They need to be nationalized. They spent all their cash on stock buybacks, so the government should take company shares in exchange for cash.

  61. Now the demand forecasts are getting more realistic:
    https://oilprice.com/Energy/Oil-Prices/Oil-Demand-To-Plunge-By-10-Million-Barrels-Per-Day.html

    I guess it is even more – looking this morning out of my window where I see the morning traffic jam, I see a few cars, a lazy sunday afternoon traffic.

    Half driving, or even worse. Almost all business travel canceled. When this comes to the USA, too, it get worse.

    All in the oil business should consider hedging even at these prices for a few months – there is more to come. Even 10$ oil is possible. And at -10 mbpd even filling the SPR at full pipeline speed won’t remove the glut.

    Edit: Now here in Germany VW is closing it’s factories. So even industry is coming to a full stop.

  62. This is a US dollar shortage event. People got their margin call and now need cash. It is a collateral issue as well. Doesn’t matter how much REPO the FED offers if you don’t have the right collateral you can’t borrow.

    Which is why everything is getting sold at any price to get cash in order to buy T-bills so they can borrow at REPO. FED doing 700 billion in QE takes collateral out of market that could be used by those that need to borrow from the FED REPO.

    Only real way to solve the collateral issue is for US government to crank up deficit spending. Add another 10 trillion or so to the national debt. Create a massive amount of new T-bills. But that wouldn’t turn the market around as those in need of that collateral would have to sell something to get it.

    Corporate bonds will be one thing that gets sold in a hurry in order to get cash.

    Everybody assuming that things are going back to normal after the virus is mostly over is in for a rude awakening.

    And i’m pretty sure i called $20 oil just on the technicals of the charts back last April. Doesn’t matter what it took to get there the way the chart read was right.

    1. Sorry to say this: The chart didn’t see corona, it’s by chance as all crash predictions.

      And I think it’s not 20$ oil it’s 10$ oil soon if nothing happens. And it’s a pure supply / demand thing: High supply (all out OPEC price war) hits demand on depression level. Even a 0 is possible here on the spot market when tanks are full and no one flinches.

      1. I’m willing to give HHH some props for this. The chart didn’t call the virus but maybe looking at the system externally there may be clues as to its pattern. That is to say the chart couldn’t know what the disruptive event would be, but that we were due for a big one.

        1. The chart depends largely on fundamentals. If the virus wasn’t around it would be BAU with the FED injecting liquidity in the repo market and making the equity markets hit infinity.

          We might have hit crisis at the end of the year, where we might have possibly hit the limits of central bank policy.

      2. I can’t see it hitting $10 dollars, let alone 0. That is an ‘end of the world’ scenario.

        1. Not end of the world, and only short lived – that’s why I said spot price.

          We have not much demand here in Europe at the moment – my guess is only half of normal or less. And the OPEC+ trying to bash down the price as hard as possible, by talking and making additional delivery from storage tanks, beside opening the chokes next month. And shale still drilling as much as their reduced mony supply allows.

          If they stop doing this and talk again, the price will gather somewhere in the 20s.

          But this is only my guess.

    2. HHH,
      a few weeks ago you wrote that the market (S&P, Dow et al.) would go higher in response to all the CB stimulus. It was a “buy opportunity”. It has so far declined faster and deeper than most would ever imagine.

    3. HHH,

      Who in their right mind would want to purchase corporate bonds?

    4. Well, you were “right”, but right in the same way that your daily horoscope might be right. See how right this one is?!

      Capricorn (Dec. 22-Jan. 19)

      Home, family and your private life will be your primary focus in the next four weeks. In fact, many of you will be involved more than usual with a parent. Respect your need for peace and quiet and rest at home, which means cocoon whenever you get the chance.

    1. Laherrere has a white paper on how to apply Hubbert Linearization to coronavirus contagion growth modeling. Much like it can be applied to estimate URR if a Hubbert-like logistic model is assumed, here it can be applied to estimate ultimate cases before herd immunity sets in.

      https://aspofrance.files.wordpress.com/2020/03/hlcovid19-16mars.pdf

      Because herd immunity may not set in for awhile, the HL prediction will likely be wrong, but it’s still interesting to try.

  64. What I notice with respect to current responses to covid 19 is that the goal is not to reduce the number of cases (the virus seems impossible to confine), but to reduce the number of deaths by spreading the number of cases over a longer time frame so as not to overwhelm health services (see https://www.fox2detroit.com/news/why-canceled-events-and-closed-venues-will-slow-the-spread-of-coronavirus). An immediate implication of a longer time frame is that oil prices will remain low for longer as the responses reduce demand.

      1. Part of the strategy is ‘buying time’ to develop medicines (virustatica, antibodies) and a vaccin.

        1. And that’s really the important part. It’s also much easier for people to understand: delay infections and find time to actually save lives though better medical care (not just avoiding rationing).

  65. There has been in the past here uncertainty concerning the oil consumption floor. That means what is the minimum oil consumption civilization requires to avoid starvation. If the starvation floor is high, then loss of economic activity will not reduce oil consumption by very much. So we’re going to learn something about that.

    Do not overestimate the effect of loss of business travel. Jet fuel is only about seven or eight percent of global oil consumption.

    We are about to send out checks to every American household. We can do that because we can borrow that money. Who will lend it? The Federal Reserve, of course. The opposition to the idea will be American oligarchs, British oligarchs, any oligarch who does not want to see the concept of money itself exposed. All it took was a virus with a 2 to 3% kill rate to rip the cover off of what money really is.

    Do you folks see now how you have over focused on money? It is a substance that comes from nothingness. If you have to have oil, and you DO have to have oil, then you’re going to get oil if it geologically exists.

    Any opposition to a shale bailout will fall apart as scarcity of all sorts of things appears. Scarcity has a way of cutting through obfuscation and agenda. You bail out oil or you nationalize it.

    1. Watcher,

      In 2018, World jet fuel consumption was 7814 kb/d of 83161 kb/d of World C+C production, about 9.4% of World C+C production was jet fuel consumption. Data from BP Statistical Review of World Energy.

      Let’s say Jet fuel use falls by 75%, that would be nearly 6 million barrels per day. When we include fewer people travelling to work, school, etc. and the drop in gasoline and diesel fuel use associated with that, I could easily see a drop in demand of between 10 and 20 Mb/d at the peak of the crisis.

      So perhaps we may see $10 to $15/bo for WTI and/or Brent at the peak of the crisis.

      As I write this the April 2020 futures quote for WTI is about $22.86.

      1. “Let’s say Jet fuel use falls by 75%,”

        The good news is that none of this jet fuel consumption is necessary for the full function of a modern and vibrant civilization. The other 25% is far more than enough for any important air transport requirements.

      2. Bible, Regional Consumption tab, World, Middle Distillates of which JetFuel/Kerosene. 7.8% share 2018.

        I didn’t pull it out of the air. 7.8%. Something amiss in tab/report definitions. Probably severe since not all kerosene is jet fuel.

        7.8% is the number there.

        The Air Force and Navy will still fly, probably Army and Marine Corps too. Proficiency hours/month safety regulations. US domestic hasn’t halted yet.

        Delta website allows reservations tomorrow with return Saturday. Still flying domestic as best I can see. Might fly empty, but flies. Fuel consumption empty is lower than full, but not by a whole lot.

        1. Watcher,

          You are including LPG as petroleum so you have a bigger denominator. I used BP regional consumption tab as well for Jet Fuel in 2018 and used C C output in the denominator. In any case 75% of 7850 is 5887 kb/d lass jet fuel used. That is a big drop in demand, gasoline is about 25 Mb/d, if that drops by half that’s another 12.5 Mb/d plus 5.9 Mb/d for jet fuel so about 18.4 Mb/d, about 22% of World C C output (roughly 83 Mb/d).

          Most fuel is used by airlines, they have cancelled about 70 to 80% of their normal flight schedule.

          Current futures price for April 2020 WTI is $20.11/bo

          1. Southwest, as of today, has cut capacity 20%, not 70-80%.

            United has cut 50%, not 70-80%.

            American has cut international capacity 75%, domestic only 8%.

            Delta will cut 70% globally.

            Alaska Air is cutting 15%. Govt contracts as I recall.

            1. Watcher,

              What is the cut in flights Worldwide?

              The cuts in flight are likely to become more extensive as it is not profitable to fly empty planes.

  67. btw I have discovered a way this current problem will increase oil consumption.

    You head on down to Walmart or Target and find a lot of empty shelves. You buy some stuff and then next day or the one after, you go back hoping one of those shelves filled up. May make 3 trips a week or every 2 weeks, instead of 1.

    1. Nah, a family of two that both work and commute will cut their trips by a large %. A few extra trips to the store won’t make anything up.

  68. WTI at $25.19, almost a dollar below its February 2016 low….

    1. This is not avoidable. It will get deeper.

      When we compare not to 2016, the damand destruction now is much deeper, and the oil price war much more bigger. Saudi Arabia has chartered 31 additional super tankers to flood the market. They still haven’t arived. They have enough reserves in their tanks to flood Trumps SPR and the markets alone. In the meantime the Russians start pumping, too.

      The last days I said who is dependend of oil prices for his business should consider to hedge even at these prices.

      And I don’t argue with chart. I argue with supply and demand. The charts are in doom mode anyway – last support taken out.

      2. If this thing is as bad as the worst case suggests- say, 18 months or more of social isolation and a massive economic slowdown- we’re looking at a depression, and rejigging the entire global economy.

        My guess is that there will be some kind of international summit on oil production and prices leading to a global version of the Texas Railroad Commission.

  69. From Auke Hoekstra’s Twitter page (Hoekstra is the creator of one my favorite graphics of all time, at the top of the screenshot below):

    1. The same here when I look out of the window and should see a busy afternoon traffic.

      Construction and factories mostly still working, but much much less travel. Round about the half of normal.

      1. In the US a lot of people are working from home where possible, most schools and universities are shut down, fewer people going to restaurants, movies, museums, etc.

        Will be interesting to see what happens to oil stocks.

        1. Canadian oil is at 10$ now – I think the companies there have deep pockets to survive this.

          Does somebody knows something about this midstream company:
          Western Midstream Partners, LP (WES)
          https://finance.yahoo.com/quote/WES?p=WES&.tsrc=fin-srch
          ?
          They are going down hard – last year they payed a 2.5$ dividend, now the stockprice is at 3.7 falling fast. A chapter 11 in midstream industry complicating everything even more?

        2. D C,

          Off Topic:

          I sent a reply, quite a long one, to Caelan MacIntyre’s post of 9:28 PM on the 15th and it didn’t post. Is that something you can find and bring up?

          Thanks.

        3. D C,

          OT again: I should have said it’s on the other thread. (Apologies for the assonance.)

            1. D C,

              I re-typed and sent and it happened again.

              This is most provoking; it hasn’t happened before.

            2. D C,

              Now they are both posted. Where have they been all this time?

              If you found them and posted them I thank you.

    1. The highest posted price on Plains Marketing, LP website for 3/18/20 is $16.75. Sour crude postings are $4-8 per barrel.

      Everything posted in Kansas, Nebraska and Colorado is in single digits.

      We are getting $16.25 today.

      Took a half hour drive today in the field. More shut down than I thought there would be.

      1. shallow, really appreciate your perspective. What are your thoughts for the near future is oil stays sub- $25?

        1. If this lasts awhile it will be a bloodbath.

          Keep in mind prices haven’t been very good since 2014, with the possible exception of 2018. So most producers aren’t very solid financially going into this.

          Having said that, many. producers without debt could go BK if they want to, if they decide they don’t want to borrow to pay operating expenses. That is if this thing goes on for months and prices stay this low.

          I’d say at the posted prices I saw, most wells are operating in the red in the United States. Probably 95% of conventional wells, 95% of shale wells completed prior to 2018, and over half the shale wells completed in 2018 and 2019. I am just referring to LOE, not to G & A or anything else. The high volume 2019 wells really skew LOE lower than it is for most older shale wells. Also, keep in mind LOE in the SEC filings is per BOE.

          I was arguing with Nony on SA about areas of the PB being profitable at $40. Nony said that PXD’s very best wells have LOE of $5–10 per barrel of oil. Not sure how accurate that is, but it’s from someone who loves it when the industry suffers like it is now.

          At $16 oil a shale well in the Permian would need to have cumulative oil of over 1 million to payout. I don’t think there are any that have hit one million BO yet in the Permian Basin. There have been a couple in the Bakken I think.

          I think a lot of Bakken producers were getting around $10 for their oil today. That is below LOE for almost all Bakken wells on a per BO basis.

          This is way worse for us than 1998 and early 1999. We got $8.50 one month for oil then, our all in operating was around $12. It’s now triple that.

  71. I am in a zone that has mandatory slowdown in the economy in an attempt to slow the spread of this virus, before it cripples the healthcare system. Probably too late for that, but every day of action is probably a huge win in degree of severity.
    This is the greater SF Bay Area. Restrictions are only mildly enforced at this time.
    I can report that roads are pretty quiet. The real estate market has ground to a complete halt. It is not legal to have an open house, and the sales lock boxes for agents have all been removed, for example.
    Store shelves are more than half empty of food.
    The sheriff of Alameda county had a confrontation with the Tesla factory, with an agreement to allow only 1/4 normal workforce on site, for the moment.
    The port of Oakland is quiet. Cranes are motionless.

    I give these examples to show that extent of slowdown that will be widespread and long lasting. Longer lasting and more severe given the very poor response of this country compared a few who reacted quickly. Most have not.
    Don’t test, don’t tell. No we are starting to get serious, but the damage is baked in the cake.
    3 days ago we saw former trump economic advisor indicate a 5% neg GDP for 2nd qrtr USA GDP.
    Now- “The U.S economy will contract by 13% on an annualized basis in the second quarter because of disruptions from the coronavirus outbreak, according to a new Deutsche Bank forecast on Wednesday.”
    Too early to comment on the 3rd qrtr.
    Petrol demand is not going to bounce back quick here.

    1. Hunkered down here too. Looks like traffic here is about 25 to 30 percent of normal. The little league in the park behind the house shut down Saturday. I stopped visiting the gym early last week and now shut down. Must have a few months of food in the kitchen. The next month would be a lot more challenging without electricity. Makes for justification of a battery back up solar system.

      Some major sections of the supermarket cleaned out, but still open with some basics. Lots of neighbors out walking. I’m guessing millions have the virus and 10s of thousands will die. No norm until a vaccine next year.

      Cheers to house chores, Keep safe

  72. Russia Needs Higher Oil Prices, But Won’t Surrender

    On Wednesday, Russian President Putin’s Press Secretary Dmitry Peskov stated that Russia would sure like to see oil prices improve, but that his country has not yet reached out to OPEC to discuss measures.

    In my opinion, Russia’s economy is hurting and will agree to output cuts in the near future.

    1. The problem they have it that cuts will reduce their income even more.

      A lot of careless behavior in recent years may come back to haunt the world. Putin trying to destroy Western democracy and economies to get revenge for the breakup of the Soviet Union. Boris quitting the EU. Trump handing out vast tax cuts when the economy was booming. Companies blowing their cash on stock buybacks. Banks bending the rules. The lack of reforms in oil exporting countries in general.

      I’ve seen a lot of talk about how resilient Russia is in social media. It is being driven by Russian government outlets like RT. Russia will muddle through, somehow, but the question is whether Putin will. He is not the only person who’d like to rule Russia, and he has plenty of enemies. He has been using his “victories” against the Ukraine and his humiliation of Trump’s America to steady his grip on the country. If he ends up taking the heat for this terribly timed price war (not really his fault of course) he may fall.

      1. Cut’s won’t cut their income when synchrone with OPEC+.

        The day they cut Brent will shoot up at least 10%, so even a 10% cut of 1mbpd will be financed automatically.
        Additional, they can reduce capex for a year – that’s additional money.

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