Oil Prices

[CY09]

Shale companies will go bankrupt but not en masse. Occidental petroleum etc will survive, however not thanks to brilliant management but government intervention through bailouts and cheap financing.

My view

[Barefoot]

There is some difference- shale oil.

The life span of a drilling rig is only 1-2 years. For that, the shale oil drillers are price sensitive creatures

So do u think shale companies gonna bankrupt en masse causing some serious effect on American banks??

I was also curious but have checked that most American banks have just a 2-3% exposure to oil and gas industry.

[davidoh]

In my humble opinion, the world economy dynamic has changed significantly.

In the past, world or local finances were left to market forces but today, since QE we had too many government intervention. In reality we should have been in the thick of a deep recession or even depression now, and if not for the injection of billions by government all over the world.

Fall short of unforeseen disasters like Covid and etc back to back, printing press around the world breaks down, then only will we be seen the full blown recession / depression.

It would snowball as just unimaginable how does America going to repay her 3.7 Trillion dollars debt to the world. The shift of economic strength and military power is becoming very visible from the West to the East. This is accelerated by the West particularly the Americans alienating the rest of the world with their "selfish" me first me win policies.

My take on CoVid-19. It is a virus that is not going away by the observation of its length and breath including the speed of spread. It is going to stay. Compared to other pandemics of the past, it is not the world BUT yet governments all over the world are pumping in extraordinary amount of money into their economy. Is the amount befitting of the crisis or excessive? I fear we are using a sledgehammer to drive a tiny nail into a wooden frame as far as the financial commitments including the use of reserves. The pertinent question is: how are we going to repay the humongous amount of money spent and what if there is another but worse pandemic around the corner? Large amount of money are going into places not needed and highly disproportionately.

I believe it is overdone. Attritions are inevitable and on a personal level there should not be any entity that is deem "too big to fail". Look at the big financial houses which were deem to big to fail, they are back to their "nonsense" and how to they contribute to society as a whole. Some may not know this, but I am in an industry where they manipulate the strategy of companies to extract the most returns for their benefits.

My 2 cents worth of nonsense rambling. Hope I don't get banned for life.

[weijian]

One for the small boys?

The Essex Boys: How Nine Traders Hit a Gusher With Negative Oil

News of the win has been met with a mixture of incredulity and pride among London’s trading community—and has even led to a new nickname: “the fifth Beatle,” for Vega co-founder Gaunt, who left the firm a few months before the big day. “It’s funny how if it was BP or Goldman Sachs that made the money, no one would bat an eyelid, but when it’s a bunch of working-class lads, people say they’re cheating,” says one trader who knows them, expressing a widely held sentiment. “I say good luck to them.”

https://www.bloomberg.com/news/features/...rs-pounced

[cyclone]

Oil rises to 11-month high after Saudi Arabia pledges unilateral output cut

By Reuters Staff
JANUARY 6, 2021 9:19 AM

TOKYO (Reuters) - Oil prices rose on Wednesday to their highest since February 2020 after Saudi Arabia agreed to reduce output more than expected in a meeting with allied producers, while industry figures showed U.S. crude stockpiles were down last week.

Brent crude rose as much as 0.9% to $54.09 a barrel, the highest since Feb. 26, 2020. It was at $53.82 a barrel at 0757 GMT after jumping 4.9% on Tuesday.

U.S. West Texas Intermediate (WTI) futures climbed as much as 0.6% to $50.24 a barrel, also the highest since Feb. 26, before slipping to $49.96. The contract on Tuesday closed up 4.6%.

Saudi Arabia, the world’s biggest oil exporter, agreed on Tuesday to make additional, voluntary oil output cuts of 1 million barrels per day (bpd) in February and March, after a meeting with the Organization of the Petroleum Exporting Countries (OPEC) and other major producers that form the group known as OPEC+.

The reductions agreed by Saudi Arabia were included in a deal to persuade other producers in the OPEC+ group to hold output steady.

With coronavirus infections spreading rapidly in many parts of the world producers are trying to support prices as demand takes a hit from new lockdowns being put in place.

More details in https://www.reuters.com/article/us-globa...SKBN29B07P

[¯|_(ツ)_/¯]

Oil Price
Traditionally, PIL would benefit from raising oil price.
I wonder whether this is the same?

For the record, yesterday close at 62 cents.

Incidentally, Macro Polo Annual Report is out early in the morning.
https://links.sgx.com/FileOpen/Marco%20P...eID=644502

Stay home and stay safe, everyone.

[weijian]

VBs know that looking at the supply is more important than the demand from the standpoint of the capital cycle. This is a form of value investing at work.

Rosneft Warns of ‘Severe’ Oil Shortage Amid Hasty Energy Shift

Russian oil giant Rosneft PJSC warned of an impending shortfall in supply as global producers increasingly channel funds into a “hasty” energy transition.

“The world risks a severe deficit of oil and gas,” Rosneft Chief Executive Officer Igor Sechin said Saturday at the St. Petersburg International Economic Forum. “The world consumes oil, but isn’t ready to invest in it.”

https://finance.yahoo.com/news/rosneft-w...29190.html

[weijian]

There are many interactions and how exactly the future will pan out, will be 1 of the (or combined) scenarios currently been panned out. There will probably be 2nd order (unintended consequences).

For the ignorant, it is always good to hedge.

Could Green Energy Fuel a Bull Market in Commodities — and in Oil and Gas?

According to Montreal-based BCA Research, the commodities required for the transition to a low-carbon energy future — particularly the base metals copper, aluminum, nickel, zinc, lead, and tin — will be in high demand in the coming years, but increasing the supply of these metals is proving to be a challenge. 

Producers seem reluctant to commit to higher capital spending, most likely because they’re waiting for demand to actually go up rather than just responding to forecasts. This despite the best efforts of politicians and investors to convince them that the energy transition is real.

Meanwhile, these same actors — along with legal systems worldwide — are discouraging the development of current energy sources, particularly oil, gas, and coal. In the medium term, this will likely translate into a contraction in supply of these traditional energy sources that will be sharper than the decline in demand for them. 

https://www.institutionalinvestor.com/ar...il-and-Gas

[BlackCat]

Could Green Energy Fuel a Bull Market in Commodities — and in Oil and Gas?

This article makes the same point abt oil, but is better written

https://adventuresincapitalism.com/2021/...an-moment/

Copper is a tough one to invest in.  Chile and Peru are looking to increase their tax on copper miners from 30% to 70%.  Try to find a listed copper miner that dosen't mine in those 2 countries!  Also, when energy (oil) costs rise, mining costs go up, since their main business is excavating and crushing rocks.

[weijian]

This article makes the same point abt oil, but is better written

https://adventuresincapitalism.com/2021/...an-moment/

To be entirely honest, I can't see how the memes helped in that.   (although reading more of his posts, i realize the memes are a feature, not a bug)

In the history of mankind, boom and bust are common. Without dreams, mankind wouldn't take the risk to act on the "impossible (or abstract)" and then progress. Of course with dreams, it tend to go to excesses and the residual is the bust. This is a feature, not a bug.

That said, It does make a lot of sense to understand the capital cycle based on supply.

O&G have deep cycles. The current bust started at around ~2015 but the memories of negative spot prices for oil are still fresh (April 2020). With the oil majors doing a lot of asset rotation, the Korean and Singaporean yards themselves merging, I do tend to think we are "very close" to the end.