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The global oil market is broken, drowning in crude nobody needs

bloomberg.com

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Re: The global oil market is broken, drowning in crude nobody needs

#111

Post by Majromax »

hackeraccount wrote: post #92
gonehome wrote: post #55

Earlier quoted context omitted.

I think I read they were doing this in part to hurt Russian producers who would not cooperate with OPEC (KSA wanted to reduce production in a coordinated way). As a side effect this hurts American producers too and could drive them out of business. Which would be bad for energy independence and in the end give more price control back to OPEC.

I'm unclear how that's supposed to work. Oil goes below $30 for an extended period of time. So long that all the shale producers go bust. So long that no one buys up all those assets but instead just lets them go fallow. After all that time Saudia Arabia now lets the price rise. How much time will it be over $30 before the shale producers start up again? Will it really pay off compared to the amount of time they had…

> How much time will it be over $30 before the shale producers start up again?

I think that depends on how expensive it is to "start up again." If it costs $10mil to turn the taps on, then it won't be economic to do so unless the operators expect oil prices to stay above the $30 level long enough to make up the startup cost in operating profit.

From that perspective, an oil cartel could keep unconventional oil out of the market by holding out a credible threat that they'll crash the prices if ever unconventional oil becomes too big.

Re: The global oil market is broken, drowning in crude nobody needs

#112

Post by eyegor »

axus wrote: post #46

The market is broken because demand is way down, but production isn't being lowered to match. Saudi Arabia intends to keep their production high. The other producers are losing money but haven't reduced output, because changing output levels is more expensive than taking the loss.

It's not that changing output levels is too expensive, it's that shutting down/starting up is too expensive. The fixed costs are so high that it's far cheaper to produce at a loss (and stockpile if needed) than to shut down.

Re: The global oil market is broken, drowning in crude nobody needs

#113

Post by mordymoop »

throwaway_pdp09 wrote: post #73
Arnt wrote: post #44

Earlier quoted context omitted.

The $10 barrels are for delivery now, not next year. If you can store the oil you can earn a lot of money now. But most people can't store much oil, compared to the volumes that are being pumped out of the ground. And for many of the producers, slowing down production by more than a few per cent is also difficult — once you turn off the tap you don't really know whether the oil is going to start flowing again later.…

> once you turn off the tap you don't really know whether the oil is going to start flowing again later You mean it can actually physically stop if the flow from the ground is blocked for a while? Can you expand if possible. Edit: I understand it comes out of the ground quite hot (I've heard of 200 C) and if it flows into cool pipes and stays still maybe it would 'congeal'.

It’s simply not true that you don’t know if the oil will flow again. It will. The subsurface pressure and fluid behavior is well understood.

One of the only scenarios that might lead to wells failing to flow when reopened would in wells that were freshly tracked without flowing back the frack water. In this case the frack water will soak into and damage the clay-like minerals in the rock and damage the permeability of the rock.

Re: The global oil market is broken, drowning in crude nobody needs

#114

Post by slfnflctd »

Waterluvian wrote: post #41

Despite Canada's dollar doing terribly, gas stations are selling it for $0.64/Litre where I live. I haven't seen it this low in maybe 20 years.

It allegedly hit $0.99/gal somewhere in the U.S. midwest. Driving through Oklahoma last week, I saw it as low as $1.28/gal.

I don't exactly have much sympathy for the fossil fuel industry, but like it or not they're deeply entangled with our economy, and these prices indicate a lot of upheaval.

Re: The global oil market is broken, drowning in crude nobody needs

#115

Post by wyxuan »

bpsh wrote: post #79
praptak wrote: post #60

That's another piece of good news. Two countries with a particularly shitty track records are in a lose-lose situation.

Unfortunately the goal is to drive out US Shale ...

No. This is a nice benefit but this war just isn't about shale like the 2012 flooding was. This conflict originated from a spat between Russia and Saudi Arabia and will end when they settle their differences.

Re: The global oil market is broken, drowning in crude nobody needs

#116

Post by eyegor »

bpsh wrote: post #79
praptak wrote: post #60

That's another piece of good news. Two countries with a particularly shitty track records are in a lose-lose situation.

Unfortunately the goal is to drive out US Shale ...

I believe it's more to bankrupt Alberta's oil sands. US shale is barely a competitor on a global scale.

Re: The global oil market is broken, drowning in crude nobody needs

#117

Post by amiga_500 »

9nGQluzmnq3M wrote: post #15

Serious question: how do I invest in some of those $10 barrels of oil? It seems like a contract to deliver oil at $10 in 2021 is likely to be worth more than by next year.

This doesn't directly answer your question, and many have replied already, but I thought you might like this:

https://www.bloomberg.com/news/articles/2015-11-03/that-time...

Re: The global oil market is broken, drowning in crude nobody needs

#118

Post by eyegor »

9nGQluzmnq3M wrote: post #15

Serious question: how do I invest in some of those $10 barrels of oil? It seems like a contract to deliver oil at $10 in 2021 is likely to be worth more than by next year.

Instead of directly trading oil barrel options or futures, I'd suggest picking a long etf tracker. It's much lower risk to achieve the same goal.

Re: The global oil market is broken, drowning in crude nobody needs

#119

Post by wyxuan »

syshum wrote: post #104
CydeWeys wrote: post #81

Earlier quoted context omitted.

So fracking stops in the US. Win-win-win?

Only if you have a 5th grade understanding of Geo-Politics, and Macro-Economics do you believe that is a Win-Win. US Production of Oil and Nat Gas provides for the opportunity to the US to be less dependent on Mid East oil, which is WONDERFUL for Global Peace. Also because the value of the Dollar is tied to Oil being traded in Dollars, reliance on Mid East oil puts the US in a HUGE economic Liability. So sure from a…

The Petro dollar isn't necessarily a bad thing. It doesn't necessarily require us to continue our presence in the middle East, and it ( among other things) ensures that that the dollar system is the most important system. Global dollar system is what allows the us to print so much money: there isn't any alternative safer currency.

Re: The global oil market is broken, drowning in crude nobody needs

#120

Post by zozbot234 »

axus wrote: post #46

The market is broken because demand is way down, but production isn't being lowered to match. Saudi Arabia intends to keep their production high. The other producers are losing money but haven't reduced output, because changing output levels is more expensive than taking the loss.

> The market is broken because demand is way down, but production isn't being lowered to match.

Given these prices, shale oil and tar sands production is going to shut down at some point. This is good news in a way, because these are among the dirtiest sources of oil in terms of environmental impact. Saudi Arabia extracts "light" oil and it's a frickin' desert, so the environmental impact of that extraction is quite a bit lower all things considered.

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