Coronavirus vs Investing

[The_Rural_Juror]

I did my part and bought a 3 pack of Oil of Olay to repair all the sick burns from the conspiracy theorists.

[ExtraSlow]

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We need to force people to buy oil. Cutting drilling means I have to cut back on my own careless spending, and that isn't in my program at all.

China and USA are both filling government storage, plus every trader worldwide is filling tankers, but even all that is probably not enough when we are - 20 million barrels a day of demand. Sorry brah.

[ExtraSlow]

Global oil storage capacity is something like 3.4 Billion barrels. But it wasn't all empty before, probably more than 60% full. So let's say, for round numbers there is 1 billion barrels of "spare" capacity to deploy today. At 20 million barrels a day of excess production, that means global storage will be completely full within 50 days. Now, that should make clear why production needs to fall ASAP.

You can fiddle with the numbers this way and that, but the fact remains that earth doesn't have the ability to store all the oil that's being produced globally. This WILL crash the oil price extremely hard within the next couple of weeks. It'll be a harder and faster crash if OPEC+Russia don't make extreme cuts next week, but the crash will come no matter what. The "big boys" of oil trading around the world have better insights into day-to-day changes in storage than anyone, and they are the ones who (as much as anyone) "set" the price for oil.

I honestly think a harder and faster crash is GOOD for the health of the north american petroleum industry longer term, because it will force the weaker players to capitulate sooner and shut in wells, lay down rigs, and enter bankruptcy without the ability to dither and fuck around for months on end. The faster the crash, the better the chances of a decent recovery for the stronger companies that remain.

[The_Rural_Juror]

I like the way you think. Except we are the weak players due to higher costs and transportation differentials.

[ExtraSlow]

The thing is, not everyone is weak, and those who aren't should keep drilling, and those who are, should stop. Right @killramos ?

[killramos]

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The thing is, not everyone is weak, and those who aren't should keep drilling, and those who are, should stop. Right @killramos ?

Yes. But you got to be pretty not weak to keep drilling into the face of this problem.

I wonder if Canada will drop below 20 rigs turning this summer.

[bigboom]

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What you need to cut is drilling. Decline takes care of the rest.

Drilling isn't really the be all and end all here. A lot of those wells even though they get drilled may not get completed until a later time. If they are drilling just to make expiry deadlines instead of losing the lease that's not always a good leading indicator of production intent.

[ExtraSlow]

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Yes. But you got to be pretty not weak to keep drilling into the face of this problem.

I wonder if Canada will drop below 20 rigs turning this summer.

I meant more longer term, like once the virus stuff is over. Right now, even strong companies should not be drilling.

Canada will probably be under 20 rigs by friday.

[msommers]

The Chinese are buying insane amounts of oil right now that it's so cheap.

[The_Rural_Juror]

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The Chinese are buying insane amounts of oil right now that it's so cheap.

If only there was an easier way to sell it to them.

[arcticcat522]

Is China buying what we produce? I hear lots of people saying how TMX won't end up shipping any oil over seas due to that. Is it all BS or just partially? Also, with how fast China build a hospital, are they slapping together some additional storage?

[msommers]

https://oilprice.com/Energy/Crude-Oi...Price-War.html

The country intends to buy up so much crude oil in the coming weeks that they won’t have enough state-owned storage to hold it all. According to interviews with industry insiders who asked Bloomberg to maintain their anonymity, Beijing has plans to use commercial storage space as well, while also reaching out to the private sector to encourage them to fill their own tanks with cheap gas as part of a nationwide contingency plan.

“The initial target is to hold government stockpiles equivalent to 90 days of net imports, which could eventually be expanded to as much as 180 days when including commercial reserves,” the Bloomberg report continues. “Ninety days of net crude imports is about 900 million barrels [...]. While the current size of China’s state reserves is unknown, and Beijing could use a different method for calculating net imports, oil traders and analysts estimated it could amount to China buying an additional 80 million to 100 million barrels over the course of the year.”

[Xtrema]

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Is China buying what we produce? I hear lots of people saying how TMX won't end up shipping any oil over seas due to that. Is it all BS or just partially? Also, with how fast China build a hospital, are they slapping together some additional storage?

If China is loading up, its likely that they are buying every barrel Iran can produce in yuan at 12% off benchmarks.

https://www.forbes.com/sites/kenrapo.../#570888f9468a

[ExtraSlow]

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Is China buying what we produce? I hear lots of people saying how TMX won't end up shipping any oil over seas due to that. Is it all BS or just partially? Also, with how fast China build a hospital, are they slapping together some additional storage?

So the deal with bulk cargo commodities is that once they are on a boat they can be economically shipped virtually anywhere. So it does not have to go to China specifically. However, the heavy crude that Canada exports is not too different from a lot of middle-east crudes, and that is what's being used in many Asian refineries currently. So yes, there is a profitable market for Canadian oil in Asia and worldwide.

[ThePenIsMightier]

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The Chinese are buying insane amounts of oil right now that it's so cheap.

I don't believe this.
I'm impressed with ExtraSlow's knowledge on storage and I'm a long way from an expert; but, the cost of this commodity has historically been low enough and it's supply been stable enough that the cost of medium-long term storage for it has never made sense. It's a physical product that takes up a shit pile of volume and API tankage is quite expensive and pumping it is costly and cumbersome, and, and, and...
However many weeks of storage they have - fine, top that shit up. But I think we're playing with unicorn poop if we think China can store several months worth of oil at low prices to refine at a later date. Aren't we?
I'm just thinking out loud, here. I'm willing to be schooled if I'm way off base.
Don't most people suspect that the price is dropping farther, as well?

Napkin math. I can't recall what a massive, fuck-off API tank is in diameter but I want to guess it's around 65 feet. Let's say it's 100' and see what it would take to hold Syncrude daily volume. Assuming 450,000 bpd (like ten years ago) and assume that still is only "20% of Canada's energy needs" then we're looking at about ten, 100' tanks at 33' height to hold a single fucking day of their production that still needs another 4x that from somewhere else to feed Canada for one day.
China more people. China more energy. Why would they have so much tankage for something that constantly flows?

[ExtraSlow]

Your napkin math is sloppy but right. It's unrealistic to store months and months of supply.

[The_Rural_Juror]

What's an API tank? Armoured...

[ThePenIsMightier]

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What's an API tank? Armoured...

No. It's just the American Petroleum Institute "standard" for storing comical volumes of hydrocarbon. Tanks above roughly 20' in diameter need to be field erected and that costs a metric butt-tonne of kopecs.

[The_Rural_Juror]

Isn't that more like a safety standard than a set volume?

[ThePenIsMightier]

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Isn't that more like a safety standard than a set volume?

Yes... But it's quite dominant.
Still, let's ignore it an pretend that China has hundreds of acres of massive tanks that aren't bermed and are only made of quarter-inch plate instead of 3/8" or whatever. It still doesn't matter. Oil has always flowed. There is no motivation to construct billions of dollars of tanks to hoard 18 months worth of something that has always been mere days away.