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re: Oil Supply and demand question
Posted on 3/30/20 at 8:39 pm to Jack Daniel
Posted on 3/30/20 at 8:39 pm to Jack Daniel
They can’t run their country on $20 oil for long.
1
Posted on 3/30/20 at 8:48 pm to Macavity92
Image result for saudi arabia oil cost of production
Saudi Aramco, the monopoly oil producer in Saudi Arabia, boasts an extraction cost of about $2.80 a barrel, according to the prospectus for last year's initial public offering of its shares.Mar 16, 2020
Washington Post › 2020/03/15
By Pumping at Will, Saudi Arabia Hurts Oil Investment - The Washington Post
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Your numbers in that article are shite . Up until 10 years ago SA could get it out the ground for under $1.00 . They have the absolute cheapest cost of production on the planet .
Saudi Aramco, the monopoly oil producer in Saudi Arabia, boasts an extraction cost of about $2.80 a barrel, according to the prospectus for last year's initial public offering of its shares.Mar 16, 2020
Washington Post › 2020/03/15
By Pumping at Will, Saudi Arabia Hurts Oil Investment - The Washington Post
Feedback
About Featured Snippets
Your numbers in that article are shite . Up until 10 years ago SA could get it out the ground for under $1.00 . They have the absolute cheapest cost of production on the planet .
Posted on 3/30/20 at 8:49 pm to JayDeerTay84
quote:
They can’t run their country on $20 oil for long.
How long can they? That's the big question. Russia and Saudi Arabia both claim to be "totally comfortable" (their words) at these prices, but we know how honest Saudis and Russians are.
It's only speculation, but I'd bet they can go longer than most US shale producers, unfortunately for us.
Posted on 3/30/20 at 8:49 pm to Boring
quote:
When oil reached $50 to 36 then to 50 from Oct 15 to May 16, SA was burning through $10 billion per month. Just an idea of that burn rate. Reserves fell from its high of $737B in Aug 14 to $529B at YE 2016.
Just did some quick math on this. If you figure they were losing $10B/month when prices averaged ~$40/bbl, and you estimate their 2014-2015 production at about 10MM bbl/day that gives you the following:
- Revenue: $400MM per day
- Net: -$333MM per day
- “Breakeven” point: $73.30/bbl
So not far off from the $80 another poster listed. Certainly within the margin of error for my napkin math.
Posted on 3/30/20 at 8:50 pm to White Bear
quote:
Yes, saw a price sheet today, mid -teens average (per bbl). ?
SE Kansas was around $7/bbl. shite finna get real real.
Yeah it's simple economics. If it costs you $30 per barrel to drill but it's selling for $20 you shut it down. Sucks for everyone impacted though.
This post was edited on 3/30/20 at 8:51 pm
Posted on 3/30/20 at 8:54 pm to Macavity92
quote:
The Saudis need $80 plus a barrel to break even.
Wut wut wut? Saudi has literally the lowest lifting cost of any country. It’s sub-$20 for certain. Posted on 3/30/20 at 8:56 pm to Nosevens
I don’t know about Saudi lifting costs. They definitely have the best carbonate rocks in the world, but the jewel Ghawar is under extensive tertiary recovery operations and cost has escalated there no doubt last several years. Safaniya in a likely similar state. They’re very likely sub 10$ a barrel on total costs to produce but it’s not as easy as the 80’s-90’s for them with the age of the supergiant fields. With brent at $20 they can definitely be the last man standing in the world on economic production but the nation isn’t exactly stable and unlike democracies leaders don’t get removed from power peacefully. The house of saud is in unstable hands with MBs and his failed Yemen war, Aramco ipo, proxy war with Iran, etc.
Posted on 3/30/20 at 8:59 pm to idlewatcher
Their entire social safety net is based on oil revenues, not to mention bin Salman’s fantasies of creating cities out of thin air and hosting all of the top sporting events by outbidding everyone else by 5-10x.
If they want to be a society where no one pays taxes, they’ll need oil in the $70 range.
Russia has higher lifting costs but not nearly the amount of reliance on oil revenues to keep the entire country functioning.
This is a dick measuring contest between Putin and bin Salman, and neither factored Coronavirus properly.
If they want to be a society where no one pays taxes, they’ll need oil in the $70 range.
Russia has higher lifting costs but not nearly the amount of reliance on oil revenues to keep the entire country functioning.
This is a dick measuring contest between Putin and bin Salman, and neither factored Coronavirus properly.
Posted on 3/30/20 at 9:00 pm to Jack Daniel
quote:
Saudi Arabia can still make money at $30 a barrel
Lol. So wrong
Posted on 3/30/20 at 9:09 pm to jeff5891
Some of the oil baws arguing on here don’t realize that SA runs their entire country off the revenue generated from their oil production.
SA played their hand terribly, oil prices will be $65/bbl in the next 18 months.
SA played their hand terribly, oil prices will be $65/bbl in the next 18 months.
Posted on 3/30/20 at 9:14 pm to tigerbaiter1033
quote:
oil prices will be $65/bbl in the next 18 months.
I don't know about that, but all the dummies on here making truck nuts jokes will be whining when they're paying $4/gal. at some point in the future. After all, the cure for low prices is low prices. If KSA and Russia get their way, bankrupt ALL the US shale players (impossible, but humor me) then they'll get together and agree to massive production cuts (because they're a CARTEL and the monopoly/collusion rules in the US don't apply to them) and the price of oil will skyrocket back to $100, then the cycle begins again.
People are short-sighted and stupid.
This post was edited on 3/30/20 at 9:14 pm
Posted on 3/30/20 at 9:18 pm to Boring
So basically bankrupt your competitors and then cut off the supply so the price goes up?
Posted on 3/30/20 at 9:19 pm to tigerbaiter1033
quote:
Some of the oil baws arguing on here don’t realize that SA runs their entire country off the revenue generated from their oil production.
SA played their hand terribly, oil prices will be $65/bbl in the next 18 months.
Stop talking you clearly don’t understand what is going on. The Saudis are playing the long game. Why do you think the price of oil is dropping? The Saudis agreement with OPEC ends April 1st the price is dropping and they have not even started pumping more. The market is saturated and they are planning to pump out more. They are not going to cripple themselves they know exactly who they are going to cripple and fully plan to. They did the same thing several years back to lean on the oil sands out and now they are trying to put the smaller Frac and Shale oil guys out and dare them to get back in. They are after market share and in several months likely 6 months they will bring the price back up to what they would like.
Posted on 3/30/20 at 9:20 pm to Mud_Till_May
quote:
So basically bankrupt your competitors and then cut off the supply so the price goes up?
That's the assumed plan, yes.
Posted on 3/30/20 at 9:26 pm to Boring
What happens now on supply is secondary to the demand shock. Storage will fill and shut ins will happen. Shale oil didn’t work at $55 and this ensures only the majors will hold shale. It will be a part of their portfolio only to be used in the event of high enough prices to justify returns. Even if price responds there will be no capital available to the current shale oil drillers to develop more reserves. We are headed back to days of conventional oil mainly. The storage overhang will have to be worked off before price responds, likely best case to $30’s or maybe $40ish by 4q but it could last longer than that depending upon recovery. In the meantime all producers will feel pain and lots of wells are going to get shut in, some possibly for good in places.
Posted on 3/30/20 at 9:40 pm to TigerDog83
No offense, but speaking in broad generalities like this doesn't really help for a clearer understanding. Shale oil absolutely DID "work" at $55. Lifting and break-even prices varied significantly by play and by operator. Several of my clients were popping bottles at $55 and set their annual budget based on exactly that figure...they were projecting to turn a nice little profit.
Shut ins will definitely happen, but it doesn't happen quickly. As for storage tanks filling...many producers were actually stacking rigs and laying people off in the second half of 2019, watch the API and EIA weekly reports, we've actually seen a draw-down the past couple of weeks (some raw, some refined - mixed results).
For the current shale oil drillers? Maybe not, but there will always be new players that enter into the market, usually splintered off from companies that went bust or got "merged" - then they get some fresh private equity dough and we start all over again.
quote:
Storage will fill and shut ins will happen
Shut ins will definitely happen, but it doesn't happen quickly. As for storage tanks filling...many producers were actually stacking rigs and laying people off in the second half of 2019, watch the API and EIA weekly reports, we've actually seen a draw-down the past couple of weeks (some raw, some refined - mixed results).
quote:
Even if price responds there will be no capital available to the current shale oil drillers to develop more reserves
For the current shale oil drillers? Maybe not, but there will always be new players that enter into the market, usually splintered off from companies that went bust or got "merged" - then they get some fresh private equity dough and we start all over again.
Posted on 3/30/20 at 10:06 pm to Mud_Till_May
quote:
What is the reason behind the supply being increased?
Price war between Saudi and Russia.
Posted on 3/30/20 at 10:33 pm to Boring
I’ve been on the working interest side and the shale guys just flat aren’t making money. Some individual wells make some money but the drilling programs as a whole have never made sense. Look through any financials you want and it’s hard to find more than a few examples of actual profits without leveraging and borrowing more money to keep the treadmill moving. Core bakken and karnes county Eagle Ford wells are done, and loving county and the Permian best are dwindling rapidly too. Some of the infill wells have been way over spaced and are a disaster. These reservoirs get brought down to the bubble point and then they are hard pressed to make much more meaningful production past that point. 90% plus of these guys are done and the losses will be staggering this time, from private equity all the way through almost every public company and no mountain of new investor money will be on the horizon to save them. This one is permanent for lots of them.
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