Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (156394)	4/12/2020 8:13:25 PM
From: sense	Read Replies (1) \| Respond to of 217656

Which ? How much ? When ? You can easily see how, if OPEC had done the stage management better... oil would have had a very nice Thursday... an event which many issues anticipated... Monday ? Who knows now. I might have expected a partial collapse following a strong move Thursday... but a more positive zeitgeist anyway. Now, instead, the collapse happened on Thursday afternoon... and nothing since has done much to alter the confused state of affairs, at least as far as stories in the media. The market got what it wanted in "coordinated reductions in production"... sort of... but the market has roundly and rightly panned the presentation. Underlying the theater... there is still a market reality... where there is also much uncertainty about actual production... which might actually be being over-stated for purpose, now ? I don't for a minute believe any of them are going to keep pumping when the tanks are full. The choice of when to quit pumping... is all that's in play ? So, the "theater" has mostly been something of a distraction to focus on, giving a reason for upside optimism, while what is going to happen anyway burns clock. At this point, there's essentially not enough time differential left between the staged perception and the reality to make much difference. Tanks will be full by mid May... and then pumps turn off... and some of those wells are destroyed and will never pump again. The consequence of reducing output before the tanks fill... is that it preserves headspace in the tanks, flattens the curve on the fill rate... to keep the marginal wells producing optimally longer... in the hope a rebound in demand will save them having to be turned off... which makes a lot of the oil still in those wells become unrecoverable. Coordinated production cuts... would thus also flatten the curve of future price rebounds... when demand picks up again. As we get closer to tanks all full... we also get closer to larger future shortages as the wells damaged by being turned off... won't be returning to contribute supply when demand exceeds supply again. The weak points in the market are... those with tenuous cost structure AND tenuous financial capacity. That applies to companies... but also OPEC members... nations... The U.S. has higher cost structure, but has enormous financial capacity to bridge the risks. Most higher cost producers prices are hedged out to Dec 2021... so the market noise right now isn't that big a deal for them ? If they wobble and fall... someone else ends up owning the assets... but the assets don't go away ? Among companies, too, those with lower costs of production aren't much at risk from a short downturn in prices... or from having finance walk away from the risks. Tanks full... makes the best of them better buys... with more future upside... with that caveat: No one knows yet what the upward sloping curve of demand growth after the virus is going to look like ? And no one knows yet... when it actually starts to slope back up ? I do think when it does... oil positions should be in hand for a hold... but that's perhaps not until mid May... and lots of things can still happen between then and now... So, as in the markets, so in oil... maybe too soon to buy and hold... but fun trading opportunities abound. Monday will be interesting... but "more of the same"... could see oil rebound off the deflation of Thursday... depending on the news of the day... or just bounce along where it is now... or get ugly... We'll find out. One on my midstream short list for a trade that I failed to act upon... only as busy and let it slip past me... Notice the focus controls the result ? Buy it at $0.55. Sell it at $0.95. All good. But, note the MACD is pinching hard... and -DI is saying "peak" will happen soon...

To: TobagoJack who wrote (156394)	4/12/2020 8:41:21 PM
From: sense	Read Replies (1) \| Respond to of 217656

Note, also, that keeping the oil price higher, now... is an inducement to the sustained production from lower cost wells ? What's the impact of that ? Oil operators are used to having price volatility happen... so you often end up making choices that have you continue pumping, even though losing money by pumping, because its better to lose money in the short term, than lose a well's production for years into the future in the longer view... Either you hedge the price risk away... or you just accept it... and manage around it. If I owned a couple of oil wells... I'd have to make that decision for each one... based on its unique characteristics ? What I would most want to avoid.... was turning them off... which I would be forced to do when the tanks are all full. But, a lot of low rate wells might take months to fill a tank anyway... so if they empty the gathering systems now... they'll buy more time... potentially a lot more time. If I were deciding ? I'd manage my local storage keeping it as close to empty as I can... and gain time by controlling the local fill rate. Throttle a well back from 50bbbl/day to 10 bbl/day... and it might go back to 40 bbl/day when I need it to. Throttle it back from 50bbl/day to 0... and I'm lucky if it comes back on at all, but maybe luck makes 10 bbl/day ? Then, I'm going to have to spend money I don't have now on work overs to try to get them going again... which I should do only if that's the best use of the money I have at the time. That will probably happen at some point, if wells are shut-in... but likely not until the price of oil is high enough to help cover the large costs of the work-overs needed to restore a shut-in well to whatever potential it has... Some won't come back even after you spend the $... so that cost structure controls the time lags... Both sustained higher prices now... and failure to coordinate production restrictions... works to foster a larger swath of destruction in the well bores of marginal wells when all the tanks are filled... Ignore what they say, watch what they do... but you still have to understand the impact of what they do ?

To: TobagoJack who wrote (156394)	4/13/2020 12:18:46 AM
From: sense	Respond to of 217656

Oil having a good day, so far... but only up $1 and steady around $24, after having traded up at $26 to $27 on Thursday, before dropping tall the way down to $23... with a clear lack of interest after noon in NY... So, "nothing to see here"... ? Still waiting on Aramco pricing announcements... which weren't put out Friday... Nothing from Russia yet, either... Market speculation is still that "set" prices are going to be around $30... Oil Price War Ends With OPEC+ Deal to Cut Output