Energy and Metals – Part IV

Posted on May 3, 2022 by Timeless Investor

Energy and metals – Part IV(about GUSH, OXY, etc)

  • Potential future catalyst
  1. FDA approval of Moderna vaccine
  2. FDA approval of child 5 ~12 yrs old vaccine
  3. FDA approval of child 0~5 yrs old vaccine
  4. Delta CV-19 cases bottom
  5. the antiviral pills could come by the end of the year
  6. Covid’s ‘pandemic phase’ ending when antiviral pills, kids’ vaccines available
  7. $3.5 Tril welfare money for huge inflation, US dollar devalued
  8. oil companies Q3 earning and stock buyback
  9. US economy fully reopen, US might be back to normal in one year
  10. stock market rotation due to inflation and interest rate
  11. record revenue and stock dividend and buybacks
  12. demand recovery in China, Europe and world wide
  13. energy crisis in Winter in China and Europe
  14. supply crunch
  15. US infrastructure bill approved by end of Sept What the Infrastructure Bill Would Help Fix First – WSJ
  16. U.S. crude oil inventories fell more than expected
  17. middle east war from Taliban
  18. fall of new energy and EV companies due to China’s RE’s fall and interest rate’s rise
  19. oil demand is on the rise, as international travel restrictions are starting to be loosened
  20. Hurricane Ida have continued a month after the hurricane made landfall, with nearly 300,000 daily barrels of oil still offline – short term effect
  21. U.S. oil/gas companies are still in the early part of an “extended” cyclical rebound with echoes of the mid-2000s. And while valuations have recovered from lows of last year, only a few of the companies are higher vs. their pre-COVID-19 levels.
  22. the real reason that Big Oil won’t raise production is a matter of simple economics. oil explorers in the United States are making more money now than at any other point in the more-than decade-long history of the nation’s shale revolution. “And this may just be the beginning,” Bloomberg Markets reported this week. “Free cash flow, the key metric watched by investors, probably will increase by 38% next year, presuming oil prices remain elevated.”
  23. Dec 23, 2021. This week saw another large oil/oil product inventory draw (NYSEARCA:USO) (CL1:COM) (CO1:COM), bringing the two-week total to ~27mb and resulting in stocks below the 2010 to 2014 average, a period in which Brent oil prices averaged ~$100.
  25. Rystad reported that oil exploration put up its worst year since the Second World War, as majors like Exxon (NYSE:XOM), Chevron (NYSE:CVX), BP (NYSE:BP), and Total (NYSE:TTE) cut budgets and retrench to short-cycle basins.
  26. The IEA said in its monthly oil market report that OPEC+ spare capacity could fall to below 4 million barrels per day (bpd) in the fourth quarter of 2022 from 9 million bpd in the first quarter of 2021. It forecast global demand at 99.6 million bpd in 2022, slightly above pre-pandemic levels. OPEC+ Spare Capacity Is Insufficient Amid Global Energy Crisis; The Myth Of OPEC+ Spare Capacity
  27. Beijing is cutting interest rate to bolster economy, and expediting the rollout of major infrastructure projects
  28. Because US froze Russia’s Central bank reserves, many other countries are thinking about reducing reserves in US dollar, this might reduce the strength of US dollar. In addition, all currencies are inflated due to worldwide monetary easing, US dollar wil not strengthen too much
  29. Huge upside to energy stocks as mean reversion vs the broader market kicks in.Image
  30. Simple chart of oil & gas stocks $xop vs #oil futures vs the s&p 500 $spy since September 2014. There is lots of room for oil & gas stocks to recover just to “catch up” with the price of oil and even more to broader market performanceImage
  31. Perhaps energy is in fact a structural long? I was thinking of it as a multi-year cyclical play.

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33. Josh’s advice: I try to discount short term stuff that’s biased and that’s somewhat unreliable and heavily weight aggregations of that sort of short term information where it starts to become more meaningful signal as well as focusing on sort of medium and longer term effects that.  In aggregate, can end up having a real impact even on the short term

Potential future risks

  1. new CV-19 variant coming
  2. another CV-19 cases wave
  3. OPEC+ and US to significantly increase oil production
  4. watch out the possible oversupply in 2022
  5. Oil price and oil demand will be under pressure due to China housing property crisis (i.e EverGrande)
  6. US and Iran nuclear deal
  7. OPEC to increase production
  8. Iran to increase production
  9. customers do not use oil once price is too high
  10. oil price tends to reverse to mean once increases too fast.
  11. Higher rate will strengthen dollar, and reduce oil price
  12. Russia to invade Ukraine, to strengthen $ and suppress interest rate, the trading algorithm will reduce oil price. World financial market (swift system, oil transfer, sanction of Russia, Russia’s anti-sanction, world economy slow down, etc.) will be in danger – at least in short term, and oil stocks will be dragged down significantly
  13. Oil Stocks Are Nearing New Heights. It’s Time to Be Careful. A surging oil price might correct itself, as consumers back away from spending on gasoline to protect their wallets. The higher prices go, the more incentive oil companies have to extract barrels from the ground, and the more wells that were once uneconomical can be pumped at a profit. Plus, central banks around the globe are set to lift interest rates to combat high inflation across the board, which could cause oil prices to decline by slowing economic growth.

In general, oil supply and demand are driven by a number of key factors:

  1. Changes in the value of the U.S. dollar
  2. Changes in the policies of the Organization of Petroleum Exporting Countries (OPEC)
  3. Changes in the levels of oil production and inventory
  4. The health of the global economy
  5. The implementation (or collapse) of international agreements
  6. Russian/Ukraine war
  7. The ongoing energy crisis is the culmination of years of underinvestment across the oil and gas value chain, combined with bad energy policy, ESG activism and divestment. While energy prices have undeniably been lifted by the ongoing crisis in Eastern Europe, underinvestment in energy supply security were bound to lead to shortages and soaring prices eventually. The current conflict is an unexpected, short-term tailwind; oil and gas prices could correct sharply in the event of a negotiated peace, but will likely rise further over time due to longer term factors. While higher energy prices are a major tailwind for oil and gas equities, they are a bad spell for the broader economy: they disproportionately hurt the poor and middle-class, and they stoke already white-hot broader price inflation. However, soaring energy prices are an early manifestation of a larger under-supply issues and are likely to persist. This may drive additional energy market dislocations, along the lines of those that we previously identified and addressed. from Bisoninterests (Important Off-The-Run Metrics Indicate More Oil Opportunity Ahead)
  8. Interesting analytical approach to implied oil price based on inventory declines. Theoretically SPR releases don’t affect this, and the calculated “fundamental” price for WTI oil is $120. 1Q22 eia data shows largest Q1 total stocks draw since at least ‘12 at -73mmboe or -0.81M b/d.  WTI fair value price sits at 120 or $16 undervalued from current levels.  SPR release is accounted for in this analysis and shift in strategy will have no impact on this calculation.
  9. Josh Young @Josh_Young_1
    “look at these people, wandering around with no idea what’s about to happen” – Margin Call – This is a little how it felt with oil in November 2020. Vaccine roll out, Covid reopening, years of under investment in oil exploration and development. Oil was about to go nuts and almost no one knew
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Go-to website for oil stock investment

  1. Bison Interests Content

From Josh Young: I find that the best way to get good returns is by really focusing on the best opportunities to compound money and be able to earn multiple times return and so over time. And by doing that I am better on my long investments and I just give up the sort of downside protection associated or the whatever people think they are getting from shorting stocks and sometimes that can be really painful because you get squeezed or whatever and it is a big distraction so I am not doing any direct arbitrage, it is more of a if Canadian oil and gas stocks are generally trading at a big premium to US then I will get sell some of my Canadian stocks and redeploy cheaper in the us and vice versa.

“To achieve exceptional returns you have to accept the kind of volatility that’s considered impolite in the hedge fund industry.” – @Josh_Young_1

Josh Young’s twitter: https://twitter.com/Josh_Young_1

Josh Young’s youtube videos https://www.google.com/search?q=josh+young+oil+youtube&oq=josh+young+oil+youtube&aqs=chrome..69i57.9992j0j7&sourceid=chrome&ie=UTF-8

https://www.youtube.com/results?search_query=josh+young

Bison Interests twitter: https://twitter.com/BisonInterests

Josh Young’s seekingalpha articles: https://seekingalpha.com/author/josh-young

2. study of macro conditions

Scott Grannis’s macro analysis: http://scottgrannis.blogspot.com/

  • 05/04/2022 – Tracy thinks it is almost a bigger deal than an oil embargo – target insurers for oil transportation

  • 05/04/2022 – EU member states started discussing the package of sanctions in Brussels on Wednesday. All 27 countries will need to sign off on it. – we will see what is the outcome on Wednesday

EU Proposes Ban on Russian Oil Imports, Sending Prices Higher – WSJ

The European Union proposed a ban on imports of Russian crude within six months and on refined oil products from the country by year-end, prompting a jump in oil prices, while the bloc is set to impose sanctions on high-ranking Russian military officials involved in alleged war crimes and the siege of Mariupol.

European Commission President Ursula von der Leyen outlined the proposal in a speech to the European Parliament, and said the EU’s executive body is also proposing to take Russia’s biggest bank, Sberbank, and two other Russian banks off the Swift financial-messaging system. The commission is also planning to ban three major Russian state-owned broadcasters from the EU.

EU member states started discussing the package of sanctions in Brussels on Wednesday. All 27 countries will need to sign off on it. EU officials are pushing for a decision this week, although differences remain among member states about some of the proposals.

Diplomats said there could be some tough discussions on a number of points in the package although a broad consensus has emerged in favor of an oil embargo.

Hungary has repeatedly warned it could veto an oil package that doesn’t give it enough time and financial assistance to set up the infrastructure needed to wean itself off Russian oil pipeline deliveries. Diplomats said at least two more member states, the Czech Republic and Bulgaria, have argued that if Hungary and Slovakia are given more time to stop buying Russian oil exports, they should be given the same leeway.

Hungary received around 60% of its oil imports from Russia in 2020, according to the International Energy Agency. Slovakia imports almost all its oil consumption from Russia.

A short exemption for the two countries wouldn’t significantly reduce the scope of the ban. Combined, Hungary and Slovakia imported fewer than 200,000 barrels a day of Russian oil in 2021, said Giovanni Staunovo, commodities analyst at UBS Global Wealth Management.

  • 05/03/2022 – it seems like even without the oil/gas embargo from EU, Russia will sanction west and EU anyway. In addition, The European Union hopes to pass the sixth round of sanctions against Russia at the next meeting of the EU Foreign Affairs Council, the bloc’s chief diplomat said on Monday…. Bullish for oil?

Putin Signs Decree on New Retaliatory Sanctions against West

Russian President Vladimir Putin has signed a decree on retaliatory economic sanctions in response to the “unfriendly actions of certain foreign states and international organizations”, the Kremlin said on Tuesday.

According to the decree, Russia will forbid the export of products and raw materials to people and entities that it has sanctioned.

The decree also prohibits transactions with foreign individuals and companies hit by Russia’s retaliatory sanctions and permits Russian counterparties not to fulfill obligations towards them.

The European Union hopes to pass the sixth round of sanctions against Russia at the next meeting of the EU Foreign Affairs Council, the bloc’s chief diplomat said on Monday.

Josep Borrell told a news conference in Panama City, where he is on an official visit, the bloc hopes to curb Russia’s energy exports as part of its efforts to sanction Moscow over its invasion of Ukraine.

The European Commission, the executive branch of the union, is expected to propose the package of EU sanctions this week, including a potential embargo on buying Russian oil – a measure that would deprive Moscow of a large revenue stream, but that has so far divided EU countries.

Borrell, who chairs the Foreign Affairs Council meetings, said he hopes the EU will be able to take “measures to significantly limit these imports” but conceded so far there is no agreement from all the members.

  • 05/03/2022 – Good reminder to be careful out there. Oil and gas prices are very volatile, very hard to predict the short term move.

  • 05/01/2022 – Buffett and Munger on Oil stocks

  • 04/29/2022 – watch out the potential Beijing lockdown. On the other hand, Shanghai lockdown starts to ease. In Shanghai, authorities said more people have been gradually allowed in principle to leave their homes recently. More than 12 million, nearly half the population, are now in that category.

Beijing closes more venues as anger at Shanghai’s COVID-19 lockdown grows

China’s capital Beijing closed more businesses and residential compounds on Friday, with authorities ramping up contact tracing to contain a COVID-19 outbreak, while resentment at the month-long lockdown in Shanghai grew.

In the finance hub, fenced-in people have been protesting against the lockdown and difficulties in obtaining provisions by banging on pots and pans in the evenings, according to a Reuters witness and residents.

Nomura estimates 46 cities are currently in full or partial lockdowns, affecting 343 million people. Societe Generale estimates that provinces experiencing significant mobility restrictions account for 80% of China’s economic output.

In response to COVID-19 and other headwinds, China will step up policy support for the economy, a top decision-making body of the Communist Party said on Friday, lifting stocks from recent two-year lows.

In Shanghai, authorities said more people have been gradually allowed in principle to leave their homes recently. More than 12 million, nearly half the population, are now in that category.

Still, many cannot leave their compounds, while those who can have few places to go as shops and other venues are closed. Often one of the 52,000 police mobilized for the lockdown asks them to return home.

  • 04/29/2022 – according to Davidson, negative GDP growth comes from supply constraints, not indicate recession. The decline reported in Real GDP is a signal of demand requiring more supply. It is not a signal that economic growth is slowing.. Plus, oil E&P is growing very strong. The T-Bill/10yr Treas Rate Spread continues to hover near or over 2.00%. This remains a very strong indicator of economic expansion as capital continues to move from Fixed Income into equity. bullish for both oil/gas and financial (DPST?)

GDP and E&P Give Mixed Signals

The Baker Hughes Rig Count rises by 3 oil rigs leaving the level of gas rigs unchanged. With crude and refined inventories continuing to decline and $WTI holding above $100/BBL providing strong cash flows to the E&P industry one might expect higher pace of production increases and equipment deployment but this is not what we see. There is a clash of perspectives in the market which is defined by the recent release of McKinsey&Co’s report “Energy Perspective 2022”. This report calls for EV(Electric Vehicles) to dominate transport and reduce oil consumption dramatically in 2yrs-5yrs. Counter to this is Exxon Mobil(XOM)’s announcement of 3x increase in their share buyback program yesterday reflecting high confidence in their industry’s future prospects.

 

Market perception of XOM being pulled higher by every financial release. While some will proclaim the co missed recently elevated eps expectations, the whole picture presented by management and their outlook continues to display a deep discount to management’s actions. Management’s commentary provides support for a very positive outlook.

Mixed signals in Real GDP:

GDP was reported as declining and some have jumped to adding their voices forecasting recession. Falling inventories due to issues in air craft and vehicle manufacturing i.e, w/production less than sales, is a negative input for GDP. This link provides a good explanation: https://aneconomicsense.org/2012/01/08/contribution-to-gdp-growth-of-the-change-in-inventories-econ-101/. US Real GDP vs Inv Change uses the auto industry to illustrate this point. In the past this has been one of signs of recession. In today’s supply chain disruptions, a decline in inventory w/o replacement production is a negative for Real GDP and misrepresents the current economic trend. The lack of vehicle and air craft production to offset inventory declines in a period when demand is high misrepresents economic expansion.

The T-Bill/10yr Treas Rate Spread continues to hover near or over 2.00%. This remains a very strong indicator of economic expansion as capital continues to move from Fixed Income into equity. The term equity includes stocks and business ventures. The earnings reports strongly favor investment in core economic businesses and disfavor the COVID-favored stay-at-home issues. The correction occurring today is sharply focused on issues heavily favored 2yrs ago. Amazon, Teledoc, Netflix have corrected sharply with lower share prices likely as investors warm-up to earnings trends emerging as headline stories in companies such as Exxon, Federal Express and issues like Thor Inds and Camping World with solid but ignored business trends.

The decline reported in Real GDP is a signal of demand requiring more supply. It is not a signal that economic growth is slowing.

As everyone knows from their first Econ 101 class in Macroeconomics, GDP is equal to Consumption + Investment + Government Spending + Net Exports (Exports minus Imports), where total Investment is equal to Fixed Investment plus the Change in Inventories.  The change in GDP will therefore equal the change in Consumption + the change in Investment + the change in Government Spending + the change in Net Exports, where the change in Investment will equal the change in Fixed Investment plus the change in the Change in Inventories. – therefore, when inventory drops, GDP might drop.

  •  04/27/2022 – over 1 million barrels per day of lost production in Russia so far, and expects exports to decline significantly going into the summer. The International Energy Agency has said the impact of sanctions and buyers’ aversion to Russian oil would take full effect from May onwards. That would be the lowest since 2003, when Russian oil output stood at 421 million tonnes.- should I position my portfolio for May?

Exclusive-Russia sees its oil output falling by up to 17% in 2022 -document

Russia may see its oil production fall by as much as 17% in 2022, an economy ministry’s document seen by Reuters showed on Wednesday, as the country struggles with Western sanctions.

The United States has banned Russian oil imports, while Western sanctions against Russian banks and vessels had crippled the oil trade, one of Moscow’s key sources of revenue. The European Union is also considering fully banning Russian oil.

The scale of the production decline would be the most significant since the 1990s when the oil industry suffered from underinvestment.

Russian oil output started to decline in March and had fallen by around 7.5% by mid-April.

According to the document, Russian oil output may decline to between 433.8 million and 475.3 million tonnes (between 8.68 million and 9.5 million barrels per day) in 2022 from 524 million tonnes in 2021.

That would be the lowest since 2003, when Russian oil output stood at 421 million tonnes.

  • 04/27/2022 – more stimulus and more demand for oil in China? Chinese government agencies are discussing plans to accelerate big construction projects, especially in the manufacturing, technology, energy and food sectors, as well as to issue coupons to individuals to spur consumer spending, the people said.

China’s Xi Pushing to Beat the U.S. in GDP Growth Despite Covid Lockdowns – WSJ

Topping U.S. economy required to demonstrate superiority of China’s one-party system, Chinese leader tells officials

In meetings over the past few weeks, Mr. Xi told senior economic and financial officials that ensuring that the economy is stable and growing is important because it is critical to show that China’s one-party system is a superior alternative to Western liberal democracy, and that the U.S. is declining both politically and economically.

In response to Mr. Xi’s call to rev up growth, Chinese government agencies are discussing plans to accelerate big construction projects, especially in the manufacturing, technology, energy and food sectors, as well as to issue coupons to individuals to spur consumer spending, the people said.

Beijing is also reversing its policies in other sectors, such as real estate, to prop up the economy. Some local governments have in recent weeks eased their restrictions on home purchases, while China has also put off plans to expand a trial of a property tax, part of a push to restore confidence in the sector.

  • 04/26/2022 -Russia’s crude exports hit a snag when Rosneft struggled to find buyers

Russia Tried to Sell a Huge Slug of Oil. Nobody Wanted It. – WSJ

Russia’s crude exports hit a snag when Rosneft struggled to find buyers

Russia failed to sell a huge batch of oil, a sign that soon-to-be imposed sanctions against its state oil giant are playing havoc with the energy industry that undergirds its bruised economy.

Moscow maintained a brisk pace of energy exports in the two months after the invasion, bringing in revenue that Kyiv says funds the Kremlin war machine. Many U.S. allies left oil and gas shipments out of their harshest sanctions on Russia. Importers in India and elsewhere swooped in to buy cheap Russian barrels at a time of rocketing energy prices.

But exports hit a snag in recent days when Rosneft ROSN 2.86% Oil Co. struggled to find buyers for enough oil to fill a fleet of tankers, traders familiar with the sale said. The producer, in which the government owns a large minority stake, had invited companies to bid for the oil last week, according to traders and a document seen by The Wall Street Journal.

A Rosneft spokesman had no immediate comment.

The problems with the sale give an early indication that European sanctions targeting Rosneft, and due to kick in on May 15, are starting to disrupt Russia’s ability to move crude from oil fields to overseas buyers.

  • 04/26/2022 – good picture to show the investment in energy. Be aware of the risk in financial sector

Image

  • 04/26/2022 – if there is nuclear war, then even oil stocks will be crushed? do I need hedge?

Russia’s Lavrov Says NATO Is Using Ukraine as a Proxy, Warns Against World War III – WSJ

  • 04/25/2022 – Biden admin’s policy is still hostile to oil/gas industry. Bullish for oil price?

U.S. drops Trump’s Alaska oil exploration policy, restricts North Slope drilling

The Biden administration on Monday overturned a Trump-era policy that would have opened new areas in Alaska to oil development, Reuters reports.

The move resurrects Obama-era policies in the National Petroleum Reserve on the western side of Alaska’s North Slope which allow oil leasing in about half of the 23M-acre reserve while increasing protections for areas considered important to the Arctic ecosystem and to indigenous populations, while the Trump plan announced in 2020 sought to allow oil development on more than 80% of the reserve.

  • 04/25/2022 – Dem starts to realize the need for oil and gas? – how much would it cost to reduce global warming? $131 tril is one answer

Sen. Joe Manchin Pushes for Democratic Compromise on Climate Agenda – WSJ

High energy prices and Russia’s invasion of Ukraine give coal-state lawmaker leverage on measures to promote fossil fuels

Voter unrest over high energy prices and concern over dependence on Russian energy have given Sen. Joe Manchin (D., W.Va.) leverage to press for measures promoting more domestic fossil-fuel production in the Democrats’ new climate legislation and potential executive actions.

Mr. Manchin’s interests include getting financial and permitting help for natural-gas exports and oil and gas pipelines, as well as policies to make it easier for companies to drill more on federal territory, according to lobbyists and congressional aides familiar with the situation.

Some of Mr. Manchin’s efforts are expected to face opposition from some Democrats who say the Biden administration has already retreated too far from its goal of weaning the U.S. off fossil fuels.

Asked for comment, the White House responded with a series of recent statements from administration officials, including comments from principal deputy press secretary Karine Jean-Pierre saying the administration is seeking to increase short-term supplies of gasoline while still pressing forward with the transition to clean energy.

“Addressing the emergency supply crunch while accelerating clean energy efforts is fully consistent with the theory of the case and what we’re trying to do,” she said.

Climate activists are expecting to compromise, said Justin Guay, director for global climate strategy at the Sunrise Project, an environmental group. But they will likely draw the line at gas-export terminals and other big infrastructure that could encourage years of additional fossil-fuel consumption.

“A climate bill can’t be a cover for cynical opportunism and handouts for fossil fuels,” he said.

Democrats could strike a deal that fulfills some of Mr. Manchin’s demands, even help for pipelines, and still make the progress they need if the clean-energy provisions are strong enough, according to Rhodium Group, an independent research firm.

  • 04/24/2022 – CV-19 in China

New Details of Shanghai Nursing Home Covid Deaths Suggest City Is Overwhelmed – WSJ
China’s policy of lockdowns, coupled with low vaccination rates among older people, hasn’t been effective during the highly contagious Omicron wave

  • 04/23/2022 – EU is still going Green?

As Europe Seeks to Move Away From Russian Gas, Which Renewables Will Benefit? – WSJ

As Europe Seeks to Move Away From Russian Gas, Which Renewables Will Benefit?
Policy makers are counting on faster expansion of solar, wind and other technologies

  • 04/23/2022 – here is the story how Shanghai’s covid condition developed like what is at present. But how can Xi end this lockdown? when is the end of the tunnel? or wil it be ever end?

Shanghai’s Omicron Outbreak Corners Chinese Leader – WSJ

Xi Jinping looked to ease China’s zero-Covid strategy until the highly contagious variant forced a return to strict lockdowns

“Fighting all the previous variants was like putting out a forest fire, it can be done,” said Michael Osterholm, director of the Center for Infectious Disease Research and Policy at the University of Minnesota. “But Omicron is like the wind. How do you stop the wind?”

  • 04/23/2022 – Italy believes natural gas supplies from Russia to EU may be cut off in May: Report

Italy Believes Natural Gas Supplies From Russia To EU May Be Cut Off In May: Report
Italy believes that natural gas supplies from Russia to the EU could be cut off in May as paying for Russian energy in rubles violates European sanctions.

Amid the relentless war in Eastern Europe, Italy believes that natural gas supplies from Russia to the European Union could be cut off in May as paying for Russian energy in rubles violates European sanctions. In an interview with Italian daily, Corriere della Sera, Stefano Bessegini, head of Italy’s Regulatory Service for Energy, Grids and the Environment, stated that this can really happen in May and there could also be a risk of not filling the storage facilities completely, RIA Novosti reported.

In response to Western sanctions on Russia, Italian Prime Minister Mario Draghi has emphasised the importance of taking steps to reduce reliance on the Russian Federation in the energy sector. He also advocated for an increase in natural gas imports from other nations, specifically from Azerbaijan, Algeria, Tunisia, and Libya. During Draghi’s visit to Algeria earlier this month, the two nations’ leading oil and gas corporations signed a deal to boost the supply of blue fuel to the Apennines, which will eventually grow by 9 billion cubic metres per year.

EU vows to completely phase out Russian fuel imports

It is pertinent to mention here that the European Union has pledged to completely phase out Russian fuel imports in the coming years. Earlier this month, the 27-member bloc announced its fifth package of sanctions on the Russian Federation. Notably, the package includes a full-fledged ban on Russian coal imports. While the new sanctions came into force on April 8, a total ban on Russian coal imports is expected by mid-August. Meanwhile, Russian Deputy Prime Minister Alexander Novak has claimed that the EU will not be able to fully replace Russian oil and gas in the next five to 10 years.

  • 04/23/2022 – This energy crisis is just the tip of the iceberg for EU countries?

  • 04/23/2022 – “What the Netherlands would actually like to achieve is being independent of Russian gas and Russian oil before the end of the year,” Dutch Prime Minister Mark Rutte said Friday.

Dutch to cut Russian oil, gas imports by year-end: PM

The Netherlands aims to cut Russian oil and gas imports by the end of the year, Dutch Prime Minister Mark Rutte said Friday, but he admitted Europe remained dependent on Moscow’s supply.

The European Union is scrambling to find alternatives to Russian energy after Moscow’s invasion of Ukraine since Russia currently supplies 40 percent of the EU’s gas needs and some 15 percent to the Dutch.

“What the Netherlands would actually like to achieve is being independent of Russian gas and Russian oil before the end of the year,” Rutte said.

“We can achieve this by working hard on a mix of energy savings and sustainability, but it will also have to lead to the import of energy from other countries, including liquid natural gas,” the Dutch leader told journalists at his weekly press conference.

The Netherlands imported some 11 billion euros ($11.8 billion) in oil from Russia in the first 11 months of last year, the Volkskrant daily newspaper said.

Around 3.7 billion euros were also spent on importing gas and coal from Russia, the paper said.

The Netherlands aimed to halt coal imports by 11 August.

But Rutte admitted that even the Netherlands, which imported far less Russian gas than neighbouring Germany and eastern EU countries, remained dependent on Russian supplies.

“It really is a challenge. We are very dependent on Russian gas in Europe and there are not many alternatives to LNG,” Rutte said.

It is estimated that Dutch gas consumption can be reduced by around 9 billion cubic metres by 2025 through sustainable measures, a government statement said Friday.

“That is more than the import from Russia (about 6 billion cubic metres),” the statement added.

Europe’s largest port Rotterdam was expanding its liquid natural gas terminal and a floating terminal was being built in the northern port of Eemshaven.

“Approximately 8 billion cubic metres of extra liquefied gas can be imported before the end of the year,” the government said.

In addition, the Dutch government will try “in the coming weeks” to conclude agreements with other countries to become independent of Russian oil “as quickly as possible,” it said.

  • 04/22/2022 – EU continues to go green? policy makers banking on a faster expansion of solar, wind and other clean technologies to reduce demand for Russian gas while contributing to progress on the bloc’s existing climate goals

As Europe Seeks to Move Away From Russian Gas, Which Clean-Energy Technologies Will Benefit? – WSJ
Policy makers are counting on faster expansion of solar, wind and other technologies

As Europe tries to hasten a push toward more renewable energy sources, and away from Russian gas, which clean technologies are likely to fare the best?

Europe is seeking to swiftly curtail its reliance on Russian natural gas, which last year accounted for about 40% of the bloc’s gas consumption, amid outrage over Russia’s invasion of Ukraine and worries that supplies could be suddenly cut off by Moscow. The European Union says it wants to reduce imports of Russian gas by two-thirds this year and end its dependence on them entirely by 2027.

In the short term, much of the savings is expected to come from a switch to other gas suppliers, along with a greater reliance on coal-fired power plants. But renewables could soon play a bigger role, with policy makers banking on a faster expansion of solar, wind and other clean technologies to reduce demand for Russian gas while contributing to progress on the bloc’s existing climate goals.

“We had a fear for a few days that the crisis would kind of put everything on pause in terms of climate policy,” says Jules Besnainou, executive director of Cleantech for Europe, which advocates for clean tech and tracks venture-capital investment in the sector. “We’ve seen kind of the reverse, which is a real emphasis on the rollout of clean technology.”

  • 04/22/2022 – when can China reopen?

  • 04/22/2022 – the war might drag on

Russian military official says Kremlin plans to take full control of southern Ukraine, state news agency reports
The deputy commander of Russia’s central military district, Rustam Minnekayev, was cited saying that the Kremlin is planning to take full control of Donbas and southern Ukraine as part of the second phase of its operations, according to state-owned news agencies and as reported by Reuters. Mariupol’s city council released satellite images claiming they show mass graves where Russian forces are burying Ukrainians, per the BBC and the New York Times.

  • 04/21/2022 – OilX, a consultancy that uses imaging data from NASA satellites to measure flaring, estimates that Russian output fell to a low of 9.76mbpd. April represents a big drop from the 11.1 million of February, before the impact of the invasion of Ukraine, and the 11 million of March.

  • 04/20/2022 – the momentum of negative narrative on oil industry is still popular

also this one

Mastercard to link all employee bonuses to ESG goals

  • 04/20/2022 – “the US is acting as an oil supplier of last resort” – it’s going to get interesting as DUCs run out and service capacity remains limited. See HAL comments on preference for short cycle development versus long term exploration. More appetite for the former, not so much for the latter. Will further increase the energy resource have vs have nots divide. that is very bullish medium-term as short cycle inventory is developed without longer-term inventory replacement. Kind of burning the furniture.

  • 04/20/2022 – Germany confirms it will stop buying Russian oil by the end of 2022. “We will halve oil by the summer and will be at 0 by the end of the year, and then gas will follow, in a joint European roadmap, because our joint exit, the complete exit of the European Union, is our common strength.” – the longer the war lasts, the more chance Germany will stop buying Russia oil and gas

Germany will end oil imports from Russia by year end, says minister

BERLIN – Germany will stop importing oil from Russia by the end of the year, said German Foreign Minister Annalena Baerbock after a meeting with her Baltic counterparts on Wednesday.

“I therefore say here clearly and unequivocally yes, Germany is also completely phasing out Russian energy imports,” said Baerbock.

“We will halve oil by the summer and will be at 0 by the end of the year, and then gas will follow, in a joint European roadmap, because our joint exit, the complete exit of the European Union, is our common strength.”

  • 04/19/2022 – The relationship between the U.S. and Saudi Arabia has hit its lowest point in decades, with Mr. Biden saying in 2019 that the kingdom should be treated like a pariah over human-rights issues such as Mr. Khashoggi’s murder. The U.S.-Saudi relationship has faltered before. The 1973 Arab oil embargo, led by Saudi Arabia in response to U.S. support for Israel during the Yom Kippur War, sparked the worst U.S. recession in 40 years.

How U.S.-Saudi Relations Reached the Breaking Point – WSJ
The decadeslong alliance is at risk over disagreements regarding oil production levels, security concerns and the invasion of Ukraine

The relationship between the U.S. and Saudi Arabia has hit its lowest point in decades, with Mr. Biden saying in 2019 that the kingdom should be treated like a pariah over human-rights issues such as Mr. Khashoggi’s murder.

The political fissures have deepened since Russia’s invasion of Ukraine, senior Saudi and U.S. officials said. The White House wanted the Saudis to pump more crude, both to tame oil prices and undercut Moscow’s war finances. The kingdom hasn’t budged, keeping in line with Russian interests.

The U.S.-Saudi relationship has faltered before. The 1973 Arab oil embargo, led by Saudi Arabia in response to U.S. support for Israel during the Yom Kippur War, sparked the worst U.S. recession in 40 years.

  • 04/19/2022 – Potential additional oil related sanctions are worth watching closely. Von der Leyen : “The primary goal is to shrink Putin’s income. But oil is traded globally. What shouldn’t happen is that Putin charges even higher prices on other markets for supplies that otherwise go to the EU. That is why we are currently developing clever mechanisms so that oil can also be included in the next sanctions step.”

“Russia’s bankruptcy is only a matter of time” full article is here
EU Commission President Ursula von der Leyen wants to see rapid arms deliveries to Ukraine and wants to tighten sanctions against Russia

Von der Leyen : “No. The sanctions eat their way deeper into the Russian economy every week: exports to Russia have collapsed by 70 percent. 700 Russian aircraft have lost their license due to a lack of spare parts and software updates. Hundreds of large companies and thousands of experts are turning their backs on the country. According to current forecasts, gross domestic product in Russia will collapse by 11 percent. Russia’s national bankruptcy is only a matter of time. With this war, Putin is also destroying his own country and the future of its people.”

They are preparing a sixth package of sanctions. What are the key points?

Von der Leyen : “We continue to look at the banking sector, particularly Sberbank, which alone accounts for 37 percent of the Russian banking sector. And of course there are energy issues.”

Every day the EU states pay Russia 450 million euros just for oil supplies. How long is this supposed to go on?

Von der Leyen : “The primary goal is to shrink Putin’s income. But oil is traded globally. What shouldn’t happen is that Putin charges even higher prices on other markets for supplies that otherwise go to the EU. That is why we are currently developing clever mechanisms so that oil can also be included in the next sanctions step.”

So the federal government isn’t slowing down?

Von der Leyen : “Germany has supported Ukraine for many years and approved all five sanctions packages that we proposed within 48 hours. The EU has never acted as united, determined and energetic as it is now. Germany has its part in that.”

  • 04/19/2022 – And the quote that really stands out. Although they used 2008 and not 2014. We think 2014 is a better comp year for a lot of reasons, including more similar commodity prices, wasn’t the year of a global financial crisis with weird distortions, etc. I hope you’re sitting down for this news: Oil co’s look set to make a lot of money. I know. But trust me, this year, it’s really a lot of money. Their smaller competitors in the U.S. exploration and production business are also in for a big year.

Big Oil’s Windfall Creates a Quandary for the Industry full article is here (oil_cash_flow_blom)

Six of the largest Western oil producers — BP Plc, Chevron Corp., ConocoPhillips, Exxon Mobil Corp., Shell Plc and TotalEnergies SE — are expected to generate free cash flow, after capital expenditure, of $163 billion this year.(1) That is virtually double what they made in 2008, when oil prices hit their all-time peak of almost $150 a barrel, and they actually produced slightly more oil and gas.(2)Their smaller competitors in the U.S. exploration and production business are also in for a big year.

This leaves the industry with an unfamiliar conundrum: What to do with all the cash? First-world problem, perhaps, but at this moment a potential problem nonetheless.

  • 04/18/2022 – Golden Age of Oil and Gas Producers?

  • 04/17/2022 – ESG is failing, like before again?

Sustainable Investing Failed Its First Big Test. A Reckoning Is Coming.

  • 04/17/2022 – Energy markets were facing the biggest supply crisis in decades, which could result in lasting changes, the Paris-based agency said Wednesday in its monthly report. The impact could mean 3 million barrels a day of Russian supply effectively cut off from global markets starting next month, the IEA said. The issue has been compounded by OPEC+’s own inability to meet its supply targets, due in part to ailing oil infrastructure in some member countries. The group’s output lags behind its targets by 1.1 million barrels, the IEA said.

Oil Market Faces Biggest Supply Crisis in Decades Unless OPEC Boosts Output, IEA Says – WSJ
Three million barrels a day of Russian oil output could be lost from April because of sanctions, agency says

Russia’s invasion of Ukraine and Western sanctions on its oil exports threaten a supply shock that will weigh on the global economy and tighten energy markets even further unless major producers increase output, according to the International Energy Agency.

Energy markets were facing the biggest supply crisis in decades, which could result in lasting changes, the Paris-based agency said Wednesday in its monthly report.

Russia’s invasion of its neighbor has prompted Western nations to levy harsh sanctions on Moscow and the Russian economy. While only some nations, including the U.S., have banned Russian oil imports outright, traders, energy companies and shipping firms are shunning Russian crude, fearful of the reputational risk, the IEA said.

The impact could mean 3 million barrels a day of Russian supply effectively cut off from global markets starting next month, the IEA said. The agency slashed its forecast for global oil supply this year by 2 million barrels a day to 99.5 million barrels a day, based on what major producers of the Organization of the Petroleum Exporting Countries have currently agreed to pump.

There were signs, however, that a Western diplomatic effort to urge Gulf oil producers to pump more was working. The United Arab Emirates last week said it would push other OPEC members to pump more oil.

U.K. Prime Minister Boris Johnson traveled to the Gulf on Wednesday to meet with Saudi and Emirati leaders in a bid to convince them to increase oil output.

The issue has been compounded by OPEC+’s own inability to meet its supply targets, due in part to ailing oil infrastructure in some member countries. The group’s output lags behind its targets by 1.1 million barrels, the IEA said.

The IEA has taken its own steps to ease oil-market tightness. Its members agreed earlier this month to release around 60 million barrels of oil from emergency stockpiles, but the amount was seen as too little to have a meaningful impact. The IEA said that its members were ready to release more crude from inventories.

  • 04/17/2022 – Bullish oil – Libyan oil field shut down and production suspended until a political disagreement is resolved

  • 04/17/2022 – This chart from the interview shows $xle performance vs $spy, with under-performance for almost 15 years, from 2008-2021. It shows lots of room for oil and gas and related equities to run.

  • 04/15/2022 – Davidson’s viewpoint – Investors should have equities that respond well during inflationary periods i.e., energy and energy related, infrastructure related, transport and suppliers of other vital goods and services where inflation adjustments are passed through.

Oil, DUC’s, Retail Sales and Inflation

The current rise in M2 2020-2022 from government issuance of debt is guaranteed to be inflationary for several years at best. Those who speak of “peak inflation is behind us” have little sense of history. Investors should have equities that respond well during inflationary periods i.e., energy and energy related, infrastructure related, transport and suppliers of other vital goods and services where inflation adjustments are passed through.

  • 04/15/2022 – IF speaks to the ethos of Bison: we face into the storm. A copy is hanging on a wall of our CIO ‘s home.

  • 04/15/2022 – the sentiment on oil is still hate even the current great run of oil and oil stocks. Does this mean that we have long runway of oil stocks?

  • 04/15/2022 – Josh’s quick take on what makes a good oil stock

what to look for in a good oil stock? three primary things and a couple of secondary things

  1. good management team, strong track record, good skills to apply to this particular scenario
  2. strong balance sheet, paid off lots of debt and survive long down term
  3. high quality asset, not measured conventionally in terms of super high rate of return on drilling, but some combined ability to generate free cash flow along with ability to generate growth that maybe access to consensus to expect
  4.  when I am looking for beyond that great set up and of course of discounted valuation, is either some combination of hid assets, or some sort of catalysts that can help to unlock value that help me realize access return relatively just owning an index or some other oil stocks

  • 04/13/2022 – It is too early to tell whether Russia’s energy industry will suffer lasting damage, analysts say. There are signs the country is adapting fast to lost demand in the West, sending more shipments of crude to Turkey and India among other countries. Oil producers in Russia have recovered from setbacks in the past. Output almost halved between 1987 and 1996 during the disintegration of the Soviet Union, according to a book on Russian oil by Thane Gustafson. Russia returned to the top table of oil-market players when Mikhail Khodorkovsky’s Yukos and Roman Abramovich’s Sibneft applied Western production and management techniques in the 2000s.

Russia’s Oil Industry, Linchpin of Economy, Feels Sting of Ukraine War Disruptions – WSJ

Storage facilities are filling up, refineries are cutting output and crude-oil wells are throttling back production

Oil is backing up through Russia’s energy supply chain and leading to a drop in crude-oil production, a blow to Moscow’s main economic engine as the war in Ukraine rages.

Refiners are trimming output and in some cases closing down because of falling demand at home and abroad. Storage space is running low in pipelines and tanks. Wells, which pump from some of the world’s biggest crude reserves, are dialing down production.

The losses so far are modest, and overall the industry continues to generate massive amounts of revenue for Moscow. But the problems of getting crude from the ground to end users are likely to mount in the coming months, traders and analysts say.

In the latest indication of problems ahead, the International Energy Agency forecast Wednesday that starting in May, almost 3 million barrels a day in Russian production will be turned off. That would reduce output to fewer than 9 million barrels a day, a larger pullback than other analysts have predicted.

The space to store oil appears to be dwindling in the state-owned Transneft PJSC pipeline network as less crude flows into refiners, traders and analysts say. Measuring how much crude is housed in the network is difficult. Many storage tanks in Russia have fixed or covered roofs, or are underground, so satellites can’t calculate the oil inside them by tracking the height of the roof, Mr. Joswick said.

It is too early to tell whether Russia’s energy industry will suffer lasting damage, analysts say. There are signs the country is adapting fast to lost demand in the West, sending more shipments of crude to Turkey and India among other countries.

Oil producers in Russia have recovered from setbacks in the past.

Output almost halved between 1987 and 1996 during the disintegration of the Soviet Union, according to a book on Russian oil by Thane Gustafson. Russia returned to the top table of oil-market players when Mikhail Khodorkovsky’s Yukos and Roman Abramovich’s Sibneft applied Western production and management techniques in the 2000s.

  • 04/13/2022 – WSJ’s take on supply chain problem, worth watching

Why Global Supply Chains May Never Be the Same – A WSJ Documentary

  • 04/12/2022 – Remember the adage: there is always a bull market somewhere. But I need to spend time to find it!

  • 04/10/2022 –

https://www.reuters.com/world/europe/chechen-chief-kadyrov-says-russian-forces-will-take-kyiv-2022-04-11/?taid=62538bb18999870001e56a1e&utm_campaign=trueAnthem:+Trending+Content&utm_medium=trueAnthem&utm_source=twitter

People are treating this as though it is some type of momentous determination. For me, it is really just Econ 100. Demand continues to grow, transportation of nat gas is essentially stagnant meaning we will not be able to ship what we need so costs MUST rise.  We then MUST use coal or oil generation to supplement our electric generation as renewables will not even come close to bridging the gap.  This then determines environmental benefits of restricting nat gas transport are minimal if any.

I’m shocked this is “news”

The News:

  • 04/10/2022 – Josh Young: Huge upside to energy stocks as mean reversion vs the broader market kicks in.

  • 04/10/2022 – “Higher for longer” geopolitical case for oil, the Russia edition. the interview from Russian top think tank implies that the war will last as long as either side wins (Russia or Ukraine). If afterwards you still harbor any illusions about sustainable negotiated settlement with Putin’s Kremlin on European security order read it again. And again. Russian believe “We will be victorious because Russians always are in the end.” Russians support Putin at 81% now, people are ready for a rough period».

Sergey Karaganov: «We are at war with the West. The European security order is illegitimate»

Sergey Karaganov has served as a presidential advisor in the Kremlin both under Boris Yeltsin and Vladimir Putin. He is still considered close to Russia’s president and foreign minister Sergey Lavrov. His recent proposals on Russian-speaking minorities in the “near abroad” are known as “Putin doctrine” and Professor Karaganov, who is honorary chair of the Moscow think tank the Council for Foreign and Defense Policy, was first to come out publicly about an all-out invasion of Ukraine in 2019. President Putin has mentioned on Feb. 24 that Ukraine’s accession to NATO warrants Russia’s military intervention to prevent it.

The EU seems to be moving towards cutting dependence from Russian energy – first coal, then oil and finally natural gas. Did you expect that?
«I hope you are not suicidal. Of course that would damage Russia, too, but Europe would undermine its economy and its social situation. I hope it will not happen, because you can calculate your own interests. If you don’t want our coal, we will sell it somewhere else. If you don’t want our oil, after a time and some losses, we will sell it elsewhere. And if you don’t want gas, well, well, we can also eventually redirect it after some suffering. Russians support Putin at 81% now, people are ready for a rough period».

 

  • 04/09/2022 – EU is still dragging their feet on sanction of Russian oil/gas, more to come?

European Countries Debate How to Cut Purchases of Russian Oil – WSJ

Disagreements among European governments make an early decision unlikely, and any exit from Russian oil is expected to be gradual

  • 04/09/2022 – Japan is banning oil/gas from Russia, more strains to the global supply chain, and more tightening on oil

TOKYO — Japan announced Friday it is expelling eight Russian diplomats and trade officials and will phase out imports of Russian coal and oil, with Prime Minister Fumio Kishida saying Moscow must be held accountable for “war crimes” in Ukraine.

Kishida said Japan will also ban imports of Russian lumber, vodka and other goods, and will prohibit new Japanese investment in Russia.

Reduction of fossil fuel imports from Russia is a difficult choice for resource-poor Japan, whose hydrocarbon needs account for about half of its total energy mix. The decision could mean a shift for Japan’s energy policy toward more renewables and nuclear power.

Russia accounts for about 11% of Japanese coal imports and also ranks among the top exporters of liquefied natural gas and oil, according to government data.

Kishida said Russian coal is used industry-wide, from utility companies to cement and steel manufacturers. “We will have to assess the impact first, and will take steps toward Russian coal ban by securing alternatives,” Kishida said, declining to set a timeline for a total ban.

  • 04/09/2022 – the Russia-Ukraine war might become bloodier with this new assignment. NATO must seriously do something to stop this. Unfortunately, it seems like China is still on Russia’s side.

Putin taps ‘Butcher of Syria’ for escalation in Donbas

Russian President Vladimir Putin is reportedly tapping the so-called “Butcher of Syria” to rejuvenate the Kremlin’s offensive amid a string of military setbacks in Ukraine.

Gen. Alexander Dvornikov, who was given command of Russia’s southern military district after achieving infamy for his brutal campaigns in Syria, has now been tasked with conquering Ukraine’s eastern Donbas region as Putin desperately tries to eke out some kind of victory, the BBC reported.

  • 04/09/2022 – another potential geopolitical risk (which is ignoring by the market) might come soon

Libya’s 5+5 JMC wants to stop oil exports and halt domestic flights

Members of the 5+5 of the Joint Military Committee has called on Khalifa Haftar, leader of the Libyan National Army (LNA), to take drastic measures with the goal of enforcing a blockade on the government of Abdul Hamid Dbeibeh.

The LNA representatives accused the Libyan prime minister of corruption, violations of the political agreement and obstructing the committee’w work.

They also denounced his decision not to hand over power to his political rival, Fathi Bashagha, who was designated as the country’s prime minister by the House of Representatives months ago.

In response to “this dangerous slope”, the LNA representatives called on Haftar to shut down oil exports, close coastal road linking the western and eastern regions of Libya, halt domestic flights between the two regions and cease all cooperation with Dbeibeh’s government.

  • 04/08/2022 – this does confirm Josh’s prediction – OPEC does not have capacity to boost production

  • 04/08/2022 – new podcast from Josh Young
  • 04/07/2022 – first step on Russian energy embargo?

Europe Agrees to Ban Russian Coal, but Struggles on Oil, Gas

The European Union nations have agreed to ban Russian coal in the first sanctions on the vital energy industry over the war in Ukraine, but it has underlined the 27 countries’ inability to agree so far on a much more sweeping embargo on oil and natural gas that would hit Russia harder but risk recession at home.

The move is significant because it breaks the taboo on severing Europe’s energy ties with Russia. It’s also certain to fuel already record-high inflation. But compared with natural gas and oil, coal is by far the easiest to cut off quickly and inflicts far less damage on Russian President Vladimir Putin’s war chest and the European economy. The EU pays Russia $20 million a day for coal — but $850 million a day for oil and gas.

Image

  • 04/08/2022 – Germany is still the main block of sanction on Russia. “The problem with Germany is that everything is reactive only, and the first answer to any daring question is always: ‘no, that’s impossible,’”. If Germany starts to embargo Russian oil, imagine what will happen to the oil market

Germany Faces Pressure to Bolster Response to Russian Aggression in Ukraine – WSJ
Complaints rise that Germany is blocking stronger sanctions and refusing to send substantial military aid to Ukraine

Germany is coming under pressure from Western allies to beef up its response to Russia’s aggression, accept stronger sanctions against Moscow and send more weapons to Ukraine.

“It’s Germany that is the main roadblock on sanctions,” Poland’s Prime Minister Mateusz Morawiecki told reporters on Monday. “It is not the voices of German businesses that should be heard aloud in Berlin today. It is the voice of these innocent women and children.”

A German government spokesman said that Germany was working with partners to strengthen the sanctions against Russia and that it would continue sending military aid to Ukraine.

“The problem with Germany is that everything is reactive only, and the first answer to any daring question is always: ‘no, that’s impossible,’” Mr. Gressel said.

  • 04/07/2022 – BUllish for oil – OPEC+ oil production declined in March and substantially missed quota levels

  • 04/06/2022 – the sentiments from US government on oil industry are still very negative

Oil Executives Testify on High Gas Prices
Oil executives from six companies testify on high gas prices before a House Energy & Commerce subcommittee.

Gouged at the Gas Station: Big Oil and America’s Pain at the Pump

  • 04/07/2022 – Josh’s comment: Kind of funny seeing shots fired by analysts and teams who missed the large run-up in oil and gas prices and related equities over the past 18 months. Reminiscent of the pullback in November last year. Lots of victory laps on comparatively small % moves. More to come?

Factbox: Global oil supply disruptions could reach 5 mln bpd

Global oil supply disruptions could reach around 5 million barrels per day (bpd) as Western sanctions in response to Moscow’s invasion of Ukraine cut Russian output and other producers also grapple with production or export challenges.

That is on top of some 2.2 barrels bpd of crude that OPEC+, which groups members of the Organization of the Petroleum Exporting Countries and allied producers, including Russia, have yet to return to the market following record output curbs imposed after the pandemic reduced demand

  • 04/06/2022 – another Podcast from Josh Young

Takeaways from this podcast

  1. there are still lots of bad sentiments on oil industry
  2. current investors are mostly retail investors, institutional investors have not joined yet
  3. still very depressed sector even with the stock rising
  4. oil industry is deleveraging a lot currently, and one day they will back to grow
  5. backwardation will continue to drain the tighr inventory
  6. prefer to focus invest in conventional oil industry than shale companies because the formers can and have lowered debt a lot, while the latter have very difficulty to lower significant debt
  7. Journey energy company has great CEO who multipled the previous stock price >10X. I like good companies with great CEO
  8. Government policies do matter. Alberta in Canada had very tight regulation to deter the oil and gas industry since 2012, therefore, I invested more in Canada than US. US government sets the tone for oil industry including bank lending, environmental, production, etc. Oil industry is therefore not a free market.
  9. US’s windfall tax proposal, SEC’s requirement of ESG disclosure, all these increasing negative regulatory process – maybe the Russia and Ukraine war changes this, US wants more energy and energy security?
  10. how to get the positive narrative back on oil industry? environmental and anti-hydrocarbon – look at what people do and what they spend their money (where their money come from matter a lot too), not what they say. their behavior (they bought a lot on beach front house) show they do not believe climate change. They probably want control more. the news of USSR funded Greenpeace is heavily suppresed in all media, this is amazing for me.
  11. three ways to change people’s minds – ask sequence of questions, make people laugh, scare people.
  12. when the bubbles of alternative energy and tech companies burst, people will look into oil/gas companies and commodities as the percentage of S&P allocated to energy goes to 2% to 4% to 22% as historically high. Policies change will come
  13. We emphasize too much in environmental effects of US and Canadian oil/gas industries, but Russia (oil companies are won by states) and Venatual should polute more
  14. From Josh Young: I find that the best way to get good returns is by really focusing on the best opportunities to compound money and be able to earn multiple times return or so over time. And by doing that I am better on my long investments and I just give up the sort of downside protection associated or the whatever people think they are getting from shorting stocks and sometimes that can be really painful because you get squeezed or whatever and it is a big distraction so I am not doing any direct arbitrage, it is more of a if Canadian oil and gas stocks are generally trading at a big premium to US then I will get sell some of my Canadian stocks and redeploy cheaper in the us and vice versa.
  15. the oil industry can do better by being honest about the why they choose to return cash to investors than reinvest and produce more oil, they need to talk about supply chain constraints, need more people, inventory constraint. More honest, more better equity valuation
  16. try to have constructive conversation and debate than just argument

https://podcasts.apple.com/us/podcast/chuck-yates-needs-a-job/id1536448009?i=1000556434243

this podcast is also on youtube as follow

Josh Young of Bison Interests

paused at 42:00, need to finish the rest 36:15 minutes

  • 04/06/2022 – EU still cannot make the first step to ban Russian coal

Europe Keeps Russian Oil, Gas Flowing Despite Tightening Sanctions – WSJ
Germany resists far-reaching energy boycott as allegations of civilian killings in Ukraine add pressure to increase penalties on Moscow

German officials have privately signaled they might agree to an oil embargo phased in over several months. That could give EU countries that import large amounts of Russian oil time to adjust their supplies and make changes to refineries built to receive Russian crude.

Several studies by economists have found that an immediate embargo on Russian oil and gas could shave 3% to 6% off Germany’s gross domestic product, roughly the same contraction Germany’s economy suffered during the Covid-19 pandemic and associated lockdowns.

German Chancellor Olaf Scholz has dismissed such findings as based on uncertain theoretical models, instead citing warnings by German industry that boycotting Russian gas in particular could cause an economic disaster.

EU diplomats fail to agree on coal ban, new Russia sanctions: sources

European Union diplomats failed to approve on Wednesday new sanctions against Russia proposed by the European Commission, as technical issues needed to be addressed, including on whether a ban on coal would affect existing contracts, sources said.

On Tuesday, the EU executive proposed to ban the import of all types of coal from Russia, as part of a wider package of measures that would further restrict trade with Moscow.

Sanctions need to be approved by EU governments, but concerns were raised in a meeting of EU envoys on Wednesday, three sources familiar with the talks told Reuters.

One key issue was raised by Germany, the EU’s largest importer of Russian coal. Berlin wanted clarification on whether the coal ban would affect existing contracts or only future contracts, sources said.

  • 04/05/2022 – Oil sector on whole market

  • 04/05/2022 – EU TO BAN ALL COAL IMPORTS FROM RUSSIA – EU SOURCE Could be a first step towards sanctions on Russian oil and gas?

EU Proposes Ban on Russian Coal Imports, Ships After Atrocities
1. Sanctions package to include ban on most Russian trucks, ships
2. Bloc will keep discussing how to restrict imports of oil

The action on coal — which von der Leyen said would amount to 4 billion euros ($4.4 billion) a year — would allow for a three-month wind-down before a ban on new contracts, according to two people familiar with the matter.

The EU will also push ahead with a debate on targeting Russian oil, including perhaps an escrow account to freeze extra profits, von der Leyen said.

“We are working on additional sanctions including on oil imports and we are reflecting on some of the ideas presented by the member states, such as taxes or specific payment channels such as an escrow account,” von der Leyen said.

One option short of an outright oil ban would be to phase out Russian oil and use Europe’s strategic oil reserves to cushion the impact, says a senior EU official. Another option would be to put tariffs on the sector, while a third option would be to create en escrow account to freeze the extra profit Russia is making off oil prices rises since the war started, the official said.

Approval of the package and the ban on coal requires the backing of all 27 member states.

Europe, China Are Top Buyers of Russia’s Thermal Coal

Source: International Energy Agency, 2021 Coal Report. Data are for 2020.

As part of the same proposal, the EU aims to expand export controls

  • 04/04/2022 – what a dilemma on energy transition! the transition is very costly (Divorcing the European Union from Russian gas imports would require additional annual spending of at least €170 billion (about $187 billion) on renewable-energy production over six years, or about 1.3% of the bloc’s gross domestic product). will this prolong the time of oil bull?

Will the Ukraine War Push Countries Toward Renewable Energy? Yes—and No – WSJ
Many countries are speeding up plans to transition to green energy, while leaning even more on oil, gas and coal in the near term

Weaning Europe off Russian supplies remains a monumental—and expensive—task. Divorcing the European Union from Russian gas imports would require additional annual spending of at least €170 billion (about $187 billion) on renewable-energy production over six years, or about 1.3% of the bloc’s gross domestic product, researchers at German insurer Allianz SE estimated. Even at that price, it rated renewables as the cheapest path to European energy self-reliance.

  • 04/04/2022 – will we have more oil sanction coming for Russia? A German government spokesperson told reporters Monday that further sanctions would be decided “in the coming days.” Germany’s defense minister has also said the EU must discuss banning imports of Russian gas.

Europe Faces Pressure to Dial Up Sanctions on Russia Over Ukraine Deaths – WSJ
EU leaders consider limits on Moscow’s energy exports following allegations of war crimes in Bucha

French President Emmanuel Macron’s call Monday for sanctions banning imports of Russian oil and coal into the European Union following the weekend’s allegations of atrocities in Ukraine is set to trigger the most divisive intra-EU clash yet over how to respond to President Vladimir Putin’s invasion of Ukraine.

European diplomats said Monday there was now a range of options being discussed. One was to present a separate sanctions package that may include oil and coal sanctions, which could be phased in over time. A second possibility was that European heads of government could be called to discuss energy sanctions and what is possible.

Among the ideas under consideration is the possibility of placing a significant tariff on Russian oil and coal imports in a bid to encourage member states to rapidly reduce their use.

Russia faces barrage of new sanctions after accusations of atrocities in Bucha, Ukraine

A German government spokesperson told reporters Monday that further sanctions would be decided “in the coming days.” Germany’s defense minister has also said the EU must discuss banning imports of Russian gas.

“There has to be a response. Such crimes must not remain unanswered,” Christine Lambrecht said Sunday.

Ukraine War Update: Russian energy sanctions discussed after Bucha killings

Germany is also calling for more consequences for Russia as momentum builds for an embargo on energy imports. Italian Foreign Minister Luigi Di Maio also said the events in Bucha were “unleashing a wave of indignation that will lead to new sanctions” and did not exclude that there “could be a debate on the issue of imports of hydrocarbons from Russia.” “Negative news on the war or a further lift in energy prices could see EUR/USD test $1.0800,” Commonwealth Bank of Australia analysts wrote in a research note.

  • 04/03/2022 – “The current government-made global energy crisis has western countries scrambling for policy options to minimize its impact on their citizens. Unfortunately, most policy-makers refuse to acknowledge that their attempt to force an unnatural energy transition via net-zero policies is responsible for the potentially devastating harm to European and, more generally, Western energy security. Instead, their immediate response is to channel the worst of 1970s policies, doubling down on the destructive “keep it in the ground” approach that got us here in the first place, and rejecting the one strategy that worked in the 1970s: increasing free-world supply.” Well said Tammy Nemeth. Energy policy matters. Current policy is failing, and the current trajectory is counter productive, but oil price positive.

Tammy Nemeth: Back to the worst 1970s energy policies
Let’s use a 1970s policy that actually worked: producing more hydrocarbons, not keeping them in the ground

https://www.bnnbloomberg.ca/video/baytex-and-razor-energy-have-a-lot-more-upside-to-go-bison-interests-josh-young~2194935

  1. As Covid restrictions eased, rebounds in the leisure and hospitality and business sectors continued last month and helped to drive a strong March jobs report.
  2. The March 2022 jobs report showed that the leisure and hospitality industry, which includes hotels, restaurants and amusement parks, added a net 112,000 jobs.
  3. The broad health and social services sector added more than 30,000 in March 2022 thanks to hiring for social services workers, which include child-care staff.

  • 04/02/2022 – good links from Josh Young

https://www.reuters.com/business/energy/ceraweek-energy-conference-kicks-off-ukraine-conflict-leaves-oil-market-turmoil-2022-03-07/

https://www.wsj.com/articles/investors-bet-oil-still-has-room-to-run-after-touching-100-11645957801?mod=e2tw

https://www.bnnbloomberg.ca/video/taking-stock-the-takeaway~2414743

https://www.barrons.com/articles/hangover-from-oils-faded-rally-could-push-new-investors-out-51647447116

https://www.bnnbloomberg.ca/video/baytex-and-razor-energy-have-a-lot-more-upside-to-go-bison-interests-josh-young~2194935?jwsource=cl

  • 04/01/2022 – great comments from Josh Young

  • 04/01/2022 – this might cause further tightening on oil supply, especially if the Russia-Ukraine war continues

Western Nations, Allies to Release Oil From Reserves – WSJ
Most of Europe, Canada, Mexico, Japan and South Korea will join the U.S. in a bid to tame prices that have soared following Russia’s invasion of Ukraine

PARIS—Western nations and their allies have agreed to release oil from their reserves, joining the U.S. in trying to tame oil prices that have soared in the wake of Russia’s invasion of Ukraine.

The International Energy Agency—whose members include the U.S., most of Europe, Canada, Mexico, Japan and South Korea—said it would announce the amount of the release early next week. The IEA said its members have 1.5 billion barrels of oil in reserve.

The U.S., Europe and their allies are looking to replace Russian oil with supplies from other sources, mainly in the U.S. and the Persian Gulf. But the Biden administration says it will take months for U.S. oil producers to increase production. President Biden on Thursday urged oil companies to invest more quickly in new production using the big profits they have earned in recent months because of high prices. The Organization of the Petroleum Exporting Countries, meanwhile, has refused repeated entreaties from Western officials to boost production.

Both Saudi Arabia and the United Arab Emirates have sizable spare oil capacity, but as members of OPEC they are bound by the cartel’s collective output agreements. The two Gulf states have been unwilling to increase supply at the risk of irking their Russian ally in OPEC+.

  • 04/01/2022 – if the war becomes a protracted war of attrition, it might be good for oil industry. Hopefully, Ukraine will win in the end. We will have more clearer picture by near the end of April. “The next three weeks will determine whether Russia’s war of attrition can succeed. If we, the West, have the sense of urgency and can provide Ukraine with what it’s been begging for, then they can break the back of the Russians while the Russians are down, and can win,” said retired Lt. Gen. Ben Hodges, a former commander of the U.S. Army in Europe. “But if we don’t have that sense of urgency, the Russians will have the time to regroup, to re-establish logistics, and to continue grinding down Ukrainian cities and Ukrainian armed forces.”

Ukraine’s counterattacks—including a helicopter strike inside Russian territory—and Moscow’s redeployment toward Donbas in Ukraine’s east suggest that both sides believe they can win, making it unlikely that peace talks will result in a deal anytime soon.

Russia’s “military and political strategy hasn’t changed, it remains to annihilate Ukraine,” said Andriy Zagorodnyuk, a former Ukrainian minister of defense who advises President Volodymyr Zelensky’s government. But he said, “Now, their capabilities no longer match their strategic vision.”

Many Ukrainian officials and military analysts think the conflict is likely to drag on for months, or longer, even as Kyiv and Moscow continue peace negotiations. While these negotiators have made some progress on Ukraine abandoning its aspiration to join the North Atlantic Treaty Organization in exchange for binding security guarantees from the West and Russia, Kyiv and Moscow still remain far apart on the status of Donbas and Crimea, among other issues.

Russian Strategy in Ukraine Shifts After Setbacks, and a Lengthy War Looms – WSJ
Moscow’s new focus on Donbas and retreats from Kyiv set the stage for a protracted war of attrition

Russia’s war on Ukraine shifted gears this week, as Moscow, lacking the strength to pursue rapid offensives on multiple fronts, began pulling back from Kyiv and other cities in the north, and refocused for now on seizing parts of the country’s east.

The pivot, after five weeks of intense fighting, was a gauge of the intensity and effectiveness of Ukrainian resistance and signaled a decision by the Kremlin to pursue what is likely to become a prolonged war of attrition.

For Ukraine, with its smaller military resources, such a shift to a lengthy conventional war heightens the need for shipments of heavy weapons such as tanks and artillery, Ukrainian officials said.

Russia’s declared shift toward trying to seize Donbas could allow it to concentrate firepower on a smaller front, shorten supply lines and make air support easier, giving Moscow a better chance at military success. It would also position Russia to try to encircle some of Ukraine’s best units, which are stationed there.

Igor Strelkov —a former Russian intelligence officer who led a group of Russian military veterans that seized the Ukrainian city of Slovyansk in 2014, sparking the armed conflict in Donbas—complained this week about members of the Russian National Guard refusing Ukrainian deployment and resigning.

“That’s why we need a mobilization. Submitted a resignation? Please proceed right away to the infantry company as a private. Under the convoy of your former comrades,” Mr. Strelkov wrote on his Telegram channel.

Until recently, U.S. and allied weapon supplies to Ukraine were premised on estimates that Kyiv would collapse quickly, and that the war would largely be fought as an insurgency. These weapons, such as Stinger antiaircraft missiles and Javelin and NLAW antitank missiles, can be carried by one person and have been heavily used by Ukrainian troops operating as small nimble units.

  • 04/01/2022 – economic environment is more like 1970s (stagflation) and the best return was oil industry.

Similar thoughts from Summers and Tilson (who somewhat concurs with Summers)

Larry Summers has been a loud voice warning that the spike in inflation is not transitory and that we’re likely to experience a major recession in the next two years. He outlined his latest thoughts in this Washington Post op-ed: The Fed is charting a course to stagflation and recession. Excerpt:

The hope is that the Fed can engineer the proverbial soft landing, whereby inflation returns to around its 2% goal and the economy remains strong without a substantial increase in unemployment. Judging by their statements to date, Powell and his colleagues seem to believe they have a good chance of success.

Anything is possible, and wishful thinking can sometimes prove self-fulfilling. But I believe the Fed has not internalized the magnitude of its errors over the past year, is operating with an inappropriate and dangerous framework, and needs to take far stronger action to support price stability than appears likely. The Fed’s current policy trajectory is likely to lead to stagflation, with average unemployment and inflation both averaging over 5% over the next few years – and ultimately to a major recession.

Indeed, recent research that I conducted with my Harvard colleague Alex Domash shows that overheating conditions of high inflation and low unemployment are usually followed, in short order, by recession.

He further outlines his thinking in this interview on The Ezra Klein Show podcast (transcript and audio here). Excerpt:

I’m probably as apprehensive about the prospects for a soft landing of the U.S. economy as I have been any time in the last year. Probably actually a bit more apprehensive. In a way, the situation continues to resemble the 1970s, Ezra. In the late ’60s and in the early ’70s, we made mistakes of excessive demand expansion that created an inflationary environment.

And then we caught really terrible luck with bad supply shocks from OPEC, bad supply shocks from elsewhere. And it all added up to a macroeconomic mess. And in many ways, that’s the right analogy for now. Just as L.B.J.’s guns and butter created excessive and dangerous inflationary pressure, the macroeconomic overexpansion of 2021 created those problems, and then layered on with something entirely separate, in terms of the further supply shocks we’ve seen in oil and in food.

And so now I think we’ve got a real problem of high underlying inflation that I don’t think will come down to anything like acceptable levels of its own accord. And so very difficult dilemmas as to whether to accept economic restraint or to live with high and quite possibly accelerating inflation. So I don’t envy the tasks that the Fed has before it.

  • 03/31/2022 – ironic to see Biden calls this ‘Putin’s Price Hike’, SPR release and federal land fees might be counter productive, the end result might be higher and higher oil price

Official White House response to ‘Putin’s Price Hike’ – SPR release, federal land fees

A statement from the White House Thursday detailed plans to release 1mb/d of strategic crude oil reserves, in cooperation with allies, for the coming six months. The statement indicated that Russian oil supplies have been curtailed, but provided few details on the quantum of the supply impact. The White House did note that the bi-partisan ban on Russian oil has limited US imports. Year-to-date, Russian oil imports have averaged ~59kb/d, versus US oil consumption of ~21mb/d. The statement made no mention of ongoing Iran negotiations.

The statement indicated that “there is nothing standing in the way of domestic oil production.” The President expects US oil production to grow by 1mb/d in 2022, in line with Citi’s prior estimates, and $60 Brent oil price forecast for year-end 2022.

The statement referred to the 9,000 undrilled leases on federal lands currently being “hoarded” by industry, though failed to mention the 23,803 federal leases which are producing. A fact that has led some to speculate that the 9,000 unused leases are in fact unproductive, and not simply being hoarded in an attempt to corner the oil market. The President’s statement called on Congress to make companies pay fees on public lands “that they are hoarding without producing.”

FACT SHEET: President Biden’s Plan to Respond to Putin’s Price Hike at the Pump

Americans face rising prices at the pump because of Putin’s Price Hike.  Since Putin accelerated his military build-up around Ukraine, gas prices have increased by nearly a dollar per gallon.  Because of Putin’s war of choice, less oil is getting to market, and the reduction in supply is raising prices at the pump for Americans.  President Biden is committed to doing everything in his power to help American families who are paying more out of pocket as a result.  That is why today, President Biden will announce a two-part plan to ease the pain that families are feeling by increasing the supply of oil starting immediately and achieving lasting American energy independence that reduces demand for oil and bolsters our clean energy economy.

Immediately Increasing Supply

At the start of this year, gas was about $3.30 a gallon.  Today, it’s over $4.20, an increase of nearly $1.  And now, a significant amount of Russian oil is not making it to market.  The President banned the import of Russian oil – which Republicans and Democrats in Congress called for and supported.  It was the right thing to do.  But, as the President said, Russian oil coming off the global market would come with a cost, and Americans are seeing that at the pump.

The first part of the President’s plan is to immediately increase supply by doing everything we can to encourage domestic production now and through a historic release from the Strategic Petroleum Reserve to serve as a bridge to greater supply in the months ahead.

Increasing Domestic Production

The fact is that there is nothing standing in the way of domestic oil production. The United States is already approaching record levels of oil and natural gas production. There are oil companies that are doing the right thing and committing to ramp up production now.  Right now, domestic production is expected to increase by 1 million barrels per day this year and nearly 700,000 barrels per day next year.

Still, too many companies aren’t doing their part and are choosing to make extraordinary profits and without making additional investment to help with supply.  One CEO even acknowledged that, even if the price goes to $200 a barrel, they’re not going to step up production.

Right now, the oil and gas industry is sitting on more than 12 million acres of non-producing Federal land with 9,000 unused but already-approved permits for production. Today, President Biden is calling on Congress to make companies pay fees on wells from their leases that they haven’t used in years and on acres of public lands that they are hoarding without producing. Companies that are producing from their leased acres and existing wells will not face higher fees. But companies that continue to sit on non-producing acres will have to choose whether to start producing or pay a fee for each idled well and unused acre.

Historic Release from the Strategic Petroleum Reserve as a Bridge Through the Crisis

After consultation with allies and partners, the President will announce the largest release of oil reserves in history, putting one million additional barrels on the market per day on average – every day – for the next six months.  The scale of this release is unprecedented: the world has never had a release of oil reserves at this 1 million per day rate for this length of time. This record release will provide a historic amount of supply to serve as bridge until the end of the year when domestic production ramps up.

The Department of Energy will use the revenue from the release to restock the Strategic Petroleum Reserve in future years. This will provide a signal of future demand and help encourage domestic production today, and will ensure the continued readiness of the Strategic Petroleum Reserve to respond to future emergencies.

President Biden is coordinating this action with allies and partners around the world, and other countries are expected to join in this action, bringing the total release to well over an average 1 million barrels per day.

Achieving Real American Energy Independence

The United States is the largest oil producer in the world and is a net energy exporter.  Despite that, the actions of a dictator half a world away can still impact American families’ pocketbooks. The President will announce his commitment to achieving real energy independence – which centers on reducing our dependence on oil altogether.

The President will call on Congress to pass his plan to speed the transition to clean energy that is made in America.  His plan will help ensure that America creates millions of good-paying union jobs in clean, cutting-edge industries for generations to come. And it will save American families money in theimmediate future – including more than $950 a year in gas savings from taking advantage of electric vehicles, and an additional $500 a year from using clean electricity like solar and heat pumps to power their homes.  

And, the President will issue a directive, authorizing the use of the Defense Production Act to secure American production of critical materials to bolster our clean energy economy by reducing our reliance on China and other countries for the minerals and materials that will power our clean energy future.  Specifically, the DPA will be authorized to support the production and processing of minerals and materials used for large capacity batteries–such as lithium, nickel, cobalt, graphite, and manganese—and the Department of Defense will implement this authority using strong environmental, labor, community, and tribal consultation standards. The sectors supported by these large capacity batteries—transportation and the power sector—account for more than half of our nation’s carbon emissions.  The President is also reviewing potential further uses of DPA – in addition to minerals and materials – to secure safer, cleaner, and more resilient energy for America.

This week alone, President Biden announced historic efforts to increase energy efficiency and lower costs for consumers.  The Department of Energy opened applications for more than $3 billion in new Bipartisan Infrastructure Law funding—ten times the historical funding levels of the Weatherization Assistance Program—for energy efficiency and electrification upgrades in thousands of homes that will save families hundreds of dollars on utility bills.  The Administration also advanced smart standards that will lower consumer costs, including a roadmap of 100 actions this year that will save families $100 annually through more efficient home appliances and equipment, as well as new fuel economy standards for cars and trucks to save drivers money at the pump.  And the Administration is seeking additional opportunities to ramp up the deployment of heat pumps to displace fuel burned in buildings, as well as programs to drive efficiency, electrification, and use of clean fuels in the industrial sector.

  • 03/31/2022 – “Historically, SPR releases have temporarily sent oil prices lower and are then followed by higher prices as the market prices in insufficient supply,” said Josh Young, chief investment officer at Bison Interests. “It is likely that oil prices rise after an initial temporary pullback, and that the SPR may have to be refilled at even higher prices.” A Reuters analysis of IEA data shows government-controlled oil stocks among members states was at its lowest since 2005 even before the March 1 release. Ramping up production can be slow, however. – six months of SPR release just perfectly times with the midterms 7 months, interesting!

twitter from Josh Young https://twitter.com/Josh_Young_1/status/1509436546482679808

Josh Young  @Josh_Young_1   And some bullish oil thoughts from “Sean M” :

Image

from Josh Young twitter Russia is emphasizing their required payments in Rubles for gas. This is worth watching closely. There is an ongoing energy crisis amidst a war and sanctions.

Josh Young 🦬🛢️ @Josh_Young_1 7h Replying to

@Josh_Young_1

And here is a chart showing operational capacity of the SPR, ostensibly over 4 million barrels per day of capacity. Trafigura says it’s a lot less. It will be interesting to see how this plays out

180M SPR release. Let me see…SPR…S..P..R, ah here it is. What’s 2 come will surprise evn most hardened oil invstrs. Lines, hoarding, soc. instablty, pol. turmoil, anger. Nothing breeds violence like scarcity. Nothing. This isn’t hyperbole, it will be our reality.

Interesting analytical approach to implied oil price based on inventory declines. Theoretically SPR releases don’t affect this, and the calculated “fundamental” price for WTI oil is $120

1Q22 eia data shows largest Q1 total stocks draw since at least ‘12 at -73mmboe or -0.81M b/d.  WTI fair value price sits at 120 or $16 undervalued from current levels.  SPR release is accounted for in this analysis and shift in strategy will have no impact on this calculation

Analysis-U.S. and allies may find tapping stockpiles inadequate to plug Russian oil gap

The 31-member International Energy Agency, representing industrialized nations but not Russia, presided over the fourth coordinated oil release in its history on March 1 of over 60 million barrels of crude – its largest yet.

The United States is considering yet another massive release – of up to 180 million barrels from the Strategic Petroleum Reserve over months – to stave off consumer energy inflation, according to sources.

But the agreements unveiled so far have failed to stop a dizzying climb in oil prices, underscoring the finite power of emergency reserves to address long-term supply problems like those stemming from Russia’s war on Ukraine, strong consumer demand, and capacity constraints in other producer nations to make up the shortfall.

“Historically, SPR releases have temporarily sent oil prices lower and are then followed by higher prices as the market prices in insufficient supply,” said Josh Young, chief investment officer at Bison Interests. “It is likely that oil prices rise after an initial temporary pullback, and that the SPR may have to be refilled at even higher prices.”

Several consumer countries – including the biggest, the United States – have imposed bans on Russian oil imports since the invasion which Moscow calls a “special operation,” tightening global markets already hit by rebounding fuel demand and production limits by the Organization of the Petroleum Exporting Countries.

The IEA expects 3 million barrels per day (bpd) of Russian oil – equivalent to over a third of its exports – to be shut in as sanctions bite and buyers spurn purchases.

Repeated stockpile releases, meanwhile, will further thin the world’s supply cushion. “Each release is likely to have diminishing effect on the oil markets,” said John Paisie, president of Houston-based consultancy Stratas Advisors.

Reuters Graphic

President Joe Biden will deliver remarks on Thursday on his administration’s actions, the White House said.

That news pushed oil prices down more than 4% late Wednesday but was also met with skepticism by some analysts.

Washington had also pledged in November to release 50 million barrels of SPR oil in a coordinated move with China, India, South Korea, Japan and Britain, a deal that also failed to stop oil’s climb above $100 a barrel.

State storage across the Organisation for Economic Cooperation and Development, most of whose members belong to IEA, hit 1.48 billion barrels late last year, down more than 100 million barrels from a 2017 high.

A Reuters analysis of IEA data shows government-controlled oil stocks among members states was at its lowest since 2005 even before the March 1 release.

IT’S NOT WORKING. DO IT AGAIN

Some analysts have called for governments to release even more oil from reserves, with bank JP Morgan suggesting the IEA could commit to release 50 million barrels per month or more for the rest of the year.

Neil Atkinson, an oil analyst and former IEA senior official, said only big releases will be enough to make a difference in a 100 million bpd global oil market.

“This time it will have to be, by comparison, a big bazooka,” he said.

Ramping up production can be slow, however.

A shale boom roughly doubled U.S. oil output since the 2000s, boosting the country to the world’s top producer spot. But after oil output fell during the coronavirus pandemic, the U.S. Energy Information Administration now forecasts the United States will return to being a net importer in 2022 before returning to net exporter status in 2023.

Meanwhile, OPEC and ally producers including Russia, a group known as OPEC+ that cut output after demand slumped due to the pandemic, will likely stick to plans for a modest uptick in production in coming months, according to sources, as the group’s kingpin Saudi Arabia continues to reject calls from consumer nations for quicker increases.

But longer-term, the key to rebalancing the market is increased commercial production, not stockpile drawdowns.

  • 03/31/2022 – President plans to use up to 180 million barrels of reserves over six months in an unprecedented government intervention in oil markets. In addition to the release, the administration also called on Congress to pass legislation requiring companies to pay fees on wells from their leases on public lands that they have not been using in years. Mr. Biden will also invoke the Defense Production Act to boost domestic production of minerals used in batteries needed for electric vehicles and other clean-energy technology, said people familiar with his plans. A 180-million-barrel release would leave U.S. government reserves at their lowest level since 1984, according to data from the U.S. Energy Information Administration. As of last week they sat at 568 million barrels, down from a peak of roughly 700 million. The scale of the reserve release could have unintended consequences for oil markets, such as creating logistical bottlenecks at the U.S. oil industry’s export hubs on the Gulf Coast, according to a research note from Goldman Sachs. That could also make it harder for U.S. shale oil producers to increase their own output, the bank’s analysts said. Another question is whether the U.S. could meet a target to release 1 million barrels a day from its reserves, said Joel Hancock, lead energy analyst at Natixis. The administration announced a release from the reserve in November and again in March. Since November, the reserve has pumped out an average of around 300,000 barrels a day, according to Energy Information Administration data. – all these mean that we probably will have higher and higher oil/gas price

Biden to Tap Strategic Oil Reserves, as Crude Prices Drop – WSJ
President plans to use up to 180 million barrels of reserves over six months in an unprecedented government intervention in oil markets

President Biden is expected to tap up to 180 million barrels of government oil reserves over the next six months to address the rise in energy prices following Russia’s invasion of Ukraine, the White House said Thursday.

The decision to release oil from the U.S. Strategic Petroleum Reserve—an expected average of 1 million barrels a day—was made by the president after consulting with allies and partners, the White House said.

“These barrels will be a wartime bridge to additional U.S. production,” a senior administration official said.

In addition to the release, the administration also called on Congress to pass legislation requiring companies to pay fees on wells from their leases on public lands that they have not been using in years.

Mr. Biden will also invoke the Defense Production Act to boost domestic production of minerals used in batteries needed for electric vehicles and other clean-energy technology, said people familiar with his plans.

Crude prices plunged more than 4% in morning trading Thursday on expectations of the announcement for the third decline in the past four sessions. But gasoline prices, which lag the crude market, have barely budged.

A 180-million-barrel release would leave U.S. government reserves at their lowest level since 1984, according to data from the U.S. Energy Information Administration. As of last week they sat at 568 million barrels, down from a peak of roughly 700 million.

Mr. Biden has been trying to help consumers, whom polls show are frustrated by rising prices at the pump. Some Democrats in Congress face a difficult reelection and have pushed for legislation to suspend the federal gas tax.

Mr. Biden’s economic advisers have privately discussed a gas-tax holiday, people familiar with the conversations said, but some have raised doubts that it would be an effective way to lower prices.

The Organization of the Petroleum Exporting Countries—which the administration has repeatedly asked to speed up production increases—decided again Thursday to reject such calls. It voted to stick with a production plan it has arranged with Moscow to raise their collective oil output by a modest 432,000 barrels a day.

Analysts said it is clear Mr. Biden is taking a novel, aggressive path to drive down prices even before there is an actual shortage in the market. Rising demand has outpaced supply this year and the U.S. has banned Russian oil, but that oil is largely still making its way to market. Prices have been rising on fears of potential shortfalls to come, either from war-related disruptions or expanding economic sanctions against Russia.

It is “a break from prior policy of using stockpile releases to backfill a major supply disruption or refinery outages,” Helima Croft, head of global commodity strategy at RBC Capital Markets, said in a note to clients. “The (reserve) release is being used as a tool to blunt the impact of these foreign policy decisions for U.S. consumers.”

The strategic reserves have been falling since 2017. At the peak of the shale drilling boom in the U.S., Washington lawmakers decided to start selling some of the reserves as a source of cash to balance budgets and modernize the reserve’s infrastructure, leading some analysts to warn that it could weaken the reserve if it is eventually needed.

And analysts are also widely skeptical of Mr. Biden’s new moves. The injection of oil into the market could ease some of the inflationary pressures on economies from high gasoline prices and soaring energy bills. But the impact, like past releases from the reserve, could end quickly or create worse problems later.

The government would need to buy new crude eventually to replenish its reserves, which could itself cause prices to rise or become an expensive proposition if the war lingers on. Some analysts have predicted worst-case scenarios of crude prices hitting near or beyond $200 a barrel if conflict with Russia keeps its oil off the market.

“It is a loan of oil to the market rather than a new source of supply,” said Callum Macpherson, head of commodities at Investec, noting that the U.S. would need to replenish its spent oil reserves at a later date, driving up prices for longer-dated oil contracts.

The scale of the reserve release could have unintended consequences for oil markets, such as creating logistical bottlenecks at the U.S. oil industry’s export hubs on the Gulf Coast, according to a research note from Goldman Sachs. That could also make it harder for U.S. shale oil producers to increase their own output, the bank’s analysts said.

Another question is whether the U.S. could meet a target to release 1 million barrels a day from its reserves, said Joel Hancock, lead energy analyst at Natixis. The administration announced a release from the reserve in November and again in March. Since November, the reserve has pumped out an average of around 300,000 barrels a day, according to Energy Information Administration data.

  1. Shares in Asia-Pacific were mixed in Thursday trade.
  2. U.S. President Joe Biden’s administration is considering a plan to release 1 million barrels of oil per day from the strategic petroleum reserve for about six months, a source told NBC News.
  3. Chinese factory activity shrunk in March, according to official data released Thursday. The country’s official manufacturing Purchasing Managers’ Index for March came in at 49.5, lower than February’s reading of 50.2.
  • 03/30/2022 – Nord Stream 2 “will not be re-launched or approved unless the Ukraine war comes to a conclusion that ensures Ukrainian territory and peace in a way that future Russian aggression is perceived as having been eradicated,” Henning Gloystein, director of energy, climate and resources at Eurasia Group, told CNBC Wednesday. “Even in case of a ceasefire or some form of settled conclusion, it seems unlikely that a peace would be seen as so stable that no Russian threat existed anymore, especially while President Vladimir Putin is in power,” he said.

Nord Stream 2 cost $11 billion to build. Now, the pipeline lies abandoned and its fate is uncertain

  1. One of the early casualties of Russia’s territorial ambitions in Ukraine was the Nord Stream 2 gas pipeline, a massive energy project that cost $11 billion.
  2. The 1,234 km offshore pipeline was designed to double the flow of gas between Russia and Germany.
  3. The pipeline was completed last September but the German energy regulator temporarily halted the certification process last November, and froze it altogether in February.
  4. The U.S. has long been an opponent of the pipeline, fearful of European energy insecurity.

“Even functioning pipelines have a shaky future in Europe,” Berzina noted, while for Nord Stream 2, “the pipeline is frozen in its inactive state. Besides ensuring the safety and stability of the structure, I do not anticipate other uses for it.”

Russia has responded by threatening to halt gas exports to perceived “unfriendly” countries if payments for gas are not made in rubles as opposed to euros or dollars. The Group of Seven industrialized nations has rejected this demand.

Against this backdrop of bitter geopolitical tensions, the future of the Nord Stream 2 pipeline is now very much in doubt, energy analysts say.

“We don’t believe Nord Stream 2 will ever be commissioned,” Kateryna Filippenko, principal analyst for European gas research at Wood Mackenzie, told CNBC Wednesday.

“Europe’s attitude to Russian gas has changed irreversibly, and it is now determined to diversify away from Russian gas. Meanwhile, Russia is threatening to halt gas flows to Europe if payments are not made in rubles. It’s hard to see a rapprochement between Europe and Russia that could facilitate a green light to Nord Stream 2, even years from now.”

Richard Gorry, managing director at JBC Energy Asia, described the project as being “dead in the water” when he spoke to CNBC in February, saying that “it was never really alive because it was always in some sort of limbo whether it was political or bureaucratic.”

Nord Stream 2 “will not be re-launched or approved unless the Ukraine war comes to a conclusion that ensures Ukrainian territory and peace in a way that future Russian aggression is perceived as having been eradicated,” Henning Gloystein, director of energy, climate and resources at Eurasia Group, told CNBC Wednesday.

“Even in case of a ceasefire or some form of settled conclusion, it seems unlikely that a peace would be seen as so stable that no Russian threat existed anymore, especially while President Vladimir Putin is in power,” he said.

Given Putin seems pretty safe in his position, Henning noted, the German government does not expect a revival of Nord Stream 2.

“The only conceivable scenario for revival – and probably why NS2 is officially suspended, not canceled – seems to be under a totally reformed Russian government. Even then, I suspect Germany would be reluctant to just revive NS2 in its past form. I suspect Germany would probably seek to transform it into a hydrogen pipeline. But that all seems a bit farfetched at this stage,” Gloystein noted. CNBC has asked for further comment from the German government and is awaiting a response.

  • 03/30/2022 – On Friday, a U.S. source said the Biden administration was considering another release of oil from the SPR to help stabilize global energy markets that, if carried out, could be bigger than the sale of 30 million barrels earlier this month. – this might drag down oil price in the short term, but squeeze up oil price in the long run.

Biden administration weighs massive draw from emergency oil reserve – sources

The Biden administration is considering releasing 1 million barrels of oil a day for several months from the Strategic Petroleum Reserve (SPR), three U.S. sources said, as the White House tries to control gasoline prices.

President Joe Biden deliver remarks on Thursday on his administration’s actions, the White House said, as Russia’s invasion of Ukraine and sanctions on Moscow have driven up the price of oil.

Russia is typically one of the world’s top producers of oil, contributing about 10% to the global market. But sanctions and buyer’s reluctance will remove about 3 million barrels per day (bpd) of Russian oil from the market starting in April, the International Energy Agency has said.

The sources did not say how long a 1 million bpd draw from strategic reserves being weighed would continue.

On Friday, a U.S. source said the Biden administration was considering another release of oil from the SPR to help stabilize global energy markets that, if carried out, could be bigger than the sale of 30 million barrels earlier this month.

High gasoline prices are a political liability for Biden and his Democratic Party as they seek to retain control of Congress in November elections.

U.S. crude futures fell $4.36 to $103.346 a barrel and Brent futures fell by $4.36, or 3.84%, to $109.09 a barrel on news of the potential release.

The White House said Biden will deliver remarks at 1:30 p.m. ET (1730 GMT) on “his administration’s actions to reduce the impact of Putin’s price hike on energy prices and lower gas prices at the pump for American families.” It did not give additional details.

International Energy Agency member states agreed to release over 60 million barrels of oil reserves earlier in March, with 30 million barrels coming from the U.S. SPR.

The Biden administration is considering temporarily removing restrictions on summer sales of higher-ethanol gasoline blends as a way to lower fuel costs for U.S. consumers, three sources familiar with the matter told Reuters.

Adding more ethanol to gasoline blends could potentially reduce prices at U.S. gas pumps because ethanol, which is made from corn, is currently cheaper than straight gasoline.

The US has 48.5 days of domestic oil production in its Strategic Petroleum Reserve

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5:56 PM · Mar 30, 2022Twitter Web App

Biden planning to tap oil reserve to control gas prices

High oil prices have not coaxed more production, creating a challenge for Biden. The president has seen his popularity sink as inflation reached a 40-year high in February and the cost of petroleum and gasoline climbed after Russia invaded Ukraine. Crude oil on Wednesday traded at nearly $105 a barrel, up from about $60 a year ago.

Still, oil producers have been more focused on meeting the needs of investors, according to a survey released last week by the Dallas Federal Reserve. About 59% of the executives surveyed said investor pressure to preserve “capital discipline” amid high prices was the reason they weren’t pumping more, while fewer than 10% blamed government regulation.

The steady release from the reserves would be a meaningful sum and come near to closing the domestic production gap relative to February 2020, before the coronavirus caused a steep decline in oil output.

The Biden administration in November announced the release of 50 million barrels from the strategic reserve in coordination with other countries. And after the Ukrainian war began, the U.S. and 30 other countries agreed to an additional release of 60 million barrels from reserves, with half of the total coming from the U.S.

According to the Department of Energy, which manages it, more than 568 million barrels of oil were held in the reserve as of Mar. 25.

  1. President Joe Biden is preparing to order the release of up to 1 million barrels of oil per day from the nation’s strategic petroleum reserve.
  2. The announcement could come as soon as Thursday, when the White House says Biden is planning to deliver remarks on his administration’s plans to combat rising gas prices.
  3. The duration of the release hasn’t been finalized but could last for several months. The people spoke on the condition of anonymity to preview the decision.
  • 03/29/2022 – Such a great mini documentary on fracking history! The biggest problem with Shale is the cost is so high that it can hardly make money if oil price is low. that is the main reason lots of shale companies were killed in 2020. Previously investors did not care about “short term profit” and they only wanted production growth, therefore, more and more money were poured into shales but no investor return. This was like the 2000 tech boom and bust. This could be the reason at present investors demand return on profit and no much production growth.

How Fracking Became America’s Money Pit

  • 03/29/2022 – here is the reason why Canadian oil stocks are rallying

As Trade With Russia Halts, Countries Turn to Canada – WSJ
Canada produces many of the same commodities as Russia and countries are lining up to broker deals

Buyers seeking replacements for commodities that are restricted in Russia are also looking to Brazil for oil, to South Africa for platinum and Argentina for wheat.

Canada, which shares similar climate and geographical features, produces many of the same commodities as Russia. Both countries are among the world’s largest producers of crude oil, uranium, nickel and potash. Along with Ukraine, they are among the world’s largest wheat exporters. Buyers are turning to Canada to replace the energy, food and minerals that are being blocked because of the war and international sanctions on Russia.

The province of Alberta, which receives most of its revenue from the oil-and-gas industry, expects a budgetary surplus for the coming fiscal year, its first in eight years, as revenues are boosted by higher oil prices.

Increasing demand for Canadian resources prompted Pavilion Global Markets, a Canadian investment advisory firm, to tell clients in a note last week that it expects Canada’s stock market, which lists many materials and commodity stocks, to emerge as one of the biggest beneficiaries from global efforts to isolate the Russian economy.

The S&P/TSX Index, which tracks 239 companies listed on the Toronto Stock Exchange, has risen 3.5% this year. The S&P 500, on the other hand, has dropped 4.6%.

Last week, Mr. Wilkinson said Canadian oil and natural gas producers could raise production by 300,000 barrels a day, adding to supplies that have hit record levels in recent months.

Sonya Savage, Alberta’s energy minister, said Friday that Canada could produce even more, but only if the federal government changed policies that have emphasized greenhouse-gas reductions and reducing reliance on fossil fuels.

“We need to be doing more than 300K/day and faster,” said Ms. Savage, on Twitter. “And we can, if the federal govt will get out of the way. It’s time to start treating our oil and gas reserves as a strategic asset to be proud of, rather than a liability to be phased out.”

  • 03/29/2022 – When oil industry is back, we need E&P to be back, then services to be back. Background knowledge of E&P

Exploration & Production (E&P)

What Is Exploration & Production (E&P)?

An exploration & production (E&P) company is in a specific sector within the oil and gas industry. Exploration and production is the early stage of energy production, which includes searching and extracting oil and gas. An E&P company finds and extracts the raw materials used in the energy business. However, E&P companies typically do not refine or produce energy but merely find and extract raw materials to be shipped to other oil companies within the production process.

KEY TAKEAWAYS

  1. Exploration and production is the early stage of energy production, which includes searching and extracting oil and natural gas.
  2. After identifying potentially viable fields, a well is drilled to test the findings by collecting samples.
  3. If there are both the quality and quantity needed to produce and sell commercially, the production of oil wells begin.
  4. The oil and gas deposits are extracted from the wells, stored temporarily, and eventually shipped via a pipeline to a refinery.
  • 03/29/2022 – it seems like Biden is still continuing with his climate/clean energy policy, might be good for the oil industry to sustain its bull’s run?

Biden’s proposed budget includes nearly $45B for climate and clean energy, a 7% increase for DOE

  1. President Joe Biden on Monday proposed a $5.8 trillion budget for fiscal year 2023 that includes $44.9 billion for clean energy, electrification and other programs to help cut greenhouse gas emissions and prepare the U.S. for the effects of climate change.
  2. Biden’s budget request includes a placeholder for clean energy tax credits and other energy provisions in the Build Back Better legislation, which are still being negotiated.
  3. Biden proposed increasing the Department of Energy’s budget 7.1% to $48.2 billion, up from $45 billion enacted in fiscal year 2022, partly to reflect spending required by the bipartisan infrastructure bill. The proposal includes $200 million for a new Solar Manufacturing Accelerator program to help spur domestic solar equipment production.

In a press briefing Monday, Biden said his budget request would reduce the federal deficit, help fight crime and boost spending on national security while providing energy-related benefits.

“My budget lowers family energy costs with tax credits to help people make their homes more efficient, research and development to broaden the reach of solar and build a clean energy future,” Biden said.

The proposal sets the table for the House of Representatives and Senate to draft the next federal spending plan in the months leading up to a mid-term election.

The proposed budget lacks measures found in the Build Back Better bill, which included about $550 billion in energy-related provisions, such as tax credits, supply chain incentives and electric vehicle spending. The bill passed the House in November but stalled in the Senate, where it was opposed by Sen. Joe Manchin, D-W.Va.

  • 03/28/2022 – Putin might not want the peace negotiation to easily go through because that will be the end of his regime. Even though Zelensky is willing to compromise on Donbass?

If Putin  can’t win, it’s going to be very tough going for him. You can see the beginning of the debate here. Much more to come.

The downside of being a strongman is that once you’re no longer strong, you’re useless, and your competitors will take you down.

Roman Abramovich and Ukrainian Peace Negotiators Suffer Symptoms of Suspected Poisoning – WSJ
The Russian oligarch and others developed symptoms they blamed on hard-liners in Moscow who they say want to sabotage talks to end the war

Ukraine is willing to compromise on Donbass to end war: Zelensky

Ukrainian President Volodymyr Zelensky said Sunday he is willing to compromise with Russia on the Donbass region — because to try to force Russian forces completely from Ukraine would lead to World War III, according to Reuters.

The stunning reported development came as Ukraine’s top military-intelligence official said he believes Russia is backing off taking the country’s capital of Kyiv to instead focus on the southern and eastern portions of the country — to try to split the nation into two.

Pentagon official says Russian ground forces no longer advancing: Live Ukraine updates

Russian troops have ceased making advances on the ground toward the Ukrainian capital of Kyiv and appear to have refocused their aims in eastern Ukraine, a senior U.S. Defense official said Monday.

The Russians appear intent on cutting off Ukrainian forces in the Donbas region, according to the official who discussed intelligence assessments on condition of anonymity. The Russian move could also be aimed at establishing authority there to gain leverage in negotiations for a cease-fire or peace deal, the official said.

Russia has been backing separatists in the Donbas region of eastern Ukraine since 2014. Last week, a high-ranking Russian military official claimed the “main tasks” of the invasion that began Feb. 24 was successfully completed.

“The combat capabilities of the Ukrainian armed forces have been substantially reduced, which allows us to concentrate our main efforts on achieving the main goal – the liberation of Donbas,” Sergei Rudskoy said.

  • 03/28/2022 – Premium buyouts of junior oil and gas companies are back! Congrats to Leucrotta! Almost 100% premium to share price 30 days ago, 100% cash purchase. I’m not involved. Vermilion is the buyer. – from Josh Young’s twitter

Vermilion Energy to Acquire Leucrotta Exploration for C$477 Million

  • 03/28/2022 – Now that COVID isn’t much more serious than the flu, we should treat it as such. don’t expect it to be anything like the first omicron wave, so don’t be surprised or worried. – From Whitney Tilson

The COVID case, hospitalization, and death numbers for the U.S. continue to trend sharply downward (data here), which is great news, but we should prepare ourselves for the BA.2 wave, which is hitting us now (having already hit and mostly passed through Europe). It will likely lead to a decent-sized spike in cases and a modest increase in hospitalizations and deaths (as always, highly concentrated among those who haven’t had COVID and aren’t vaccinated), though I don’t expect it to be anything like the first omicron wave, so don’t be surprised or worried.

For more on this, see this insightful Twitter thread, which starts:

 

 
Here’s a related article in the Washington Post: A new COVID wave may be coming. Most Americans shouldn’t worry. Excerpt:

Two other factors provide reassurance despite BA.2’s transmissibility. One is that it does not cause more severe disease as compared to the original omicron strain, known as BA.1, which is a milder variant than some previous strains such as delta. The other is that BA.2 is not so substantially different from BA.1 that it escapes immunity from vaccines or prior infection. A New England Journal of Medicine paper reported that people with booster doses produced equally effective antibodies against BA.1 as BA.2. And researchers from Britain and Qatar have found that vaccines provide excellent protection against severe illness due to both omicron subvariants.

Furthermore, people who were previously infected with omicron are unlikely to be reinfected with BA.2. A preprint study from Denmark found only 47 instances of BA.2 reinfection following infection of the original omicron strain, out of more than 1.8 million recent cases of Covid-19.

On a population level, the combination of recovery from omicron and vaccination means that the United States has high rates of immunity against BA.2. The influential Institute for Health Metrics and Evaluation has estimated that as many as 80% of Americans have some immunity that will protect them against a new omicron wave. This may be enough to successfully decouple infection from hospitalization such that a rise in cases does not overwhelm hospitals.

  • 03/28/2022 – China’s worst Covid outbreak in two years poses an increasing threat to the demand of commodities. Crude consumption this quarter to be hit by lockdowns.  Oil refiners, dubbed teapots, have cut processing to ~50% capacity as demand slips. In addition, Houthi-led attacks on Saudi Arabia took a pause. Could this a good buying opportunity?

China’s Worsening Virus Threatens Commodities Supply and Demand

Almost 80% of the Chinese economy has been affected in some way by the worst outbreak of Covid-19 in two years, straining the supply of commodities and posing an increasing threat to demand.

Oil Demand Independent oil refiners clustered in Shandong province have been forced to resell crude cargoes and cut operating rates as demand has slipped. Industry consultant OilChem estimates these refiners, dubbed teapots, have reduced processing to around 50% of capacity. That’s the lowest level in more than five years if you exclude the plunge caused by the pandemic in early 2020.

Independent oil refiners clustered in Shandong province have been forced to resell crude cargoes and cut operating rates as demand has slipped. Industry consultant OilChem estimates these refiners, dubbed teapots, have reduced processing to around 50% of capacity. That’s the lowest level in more than five years if you exclude the plunge caused by the pandemic in early 2020.
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Dongying, a refining hub in Shandong, imposed traffic controls on some highways on March 16 for an indefinite period, slowing the delivery of fuel. Crude inventories at 20 sites in the province — where half of China’s teapots are based — have risen over the past two weeks, compared with the overall national trend of falling stockpiles, according to Ursa Space Systems. Goldman Sachs Group Inc. t

Metals Supply This week’s lockdown of the key-steelmaking hub of Tangshan has resulted in the idling of some blast furnaces due to tight supplies of vital inputs like iron ore and coking coal. Traffic controls are disrupting operations at some mills in the northern city, which has long played a pivotal role in the world’s biggest steel industry. Tangshan churned out over 130 million tons of steel

Coal Disruptions The epidemic is disrupting coal production by slowing mining activity and stalling transportation from mines to factories. Queues of trucks waiting to pick up and deliver the fossil fuel are growing longer as they’re forced to navigate lockdown requirements.

China’s Worsening Virus Threatens Commodities Supply and Demand

another news

Oil Opens the Week Lower as China’s Covid-19 Lockdowns Tighten

Oil declined at the open in Asia as a virus resurgence in China worsened, and Houthi-led attacks on Saudi Arabia took a pause.

Futures in New York and London lost more than 3% in early trading before paring some of those losses. Shanghai will lock down half of the city in turns to conduct a mass Covid-19 testing as authorities try to staunch an outbreak in the financial hub and beyond. Houthi rebels announced a halt to hostilities toward Saudi Arabia after a series of attacks, according to a TV report.

  • 03/26/2022 – “I don’t think the severity of the supply-demand mismatch and the likely longevity of that mismatch is well understood,” Bison’s chief investment officer Josh Young said in an interview. “We are in the early innings of a generational investment opportunity,” wrote Soroban founder Eric Mandelblatt in an annual letter to investors dated Jan. 20.

Hedge Funds’ Commodity Bets Soar After Russia’s Invasion of Ukraine – WSJ
Soroban Capital notches hundreds of millions of dollars in gains since February, and some commodities-focused funds post gains, too

Hedge funds that placed bullish bets on commodities are notching sizable returns from the biggest rally in decades following Russia’s invasion of Ukraine.

Soroban Capital Partners LP, a $10 billion stock-picking hedge fund in New York, is one of the biggest winners, making at least several hundred million dollars on the trade since February, a person familiar with the matter said. Other winners include New York macro fund Castle Hook Partners and value investor Pilgrim Global. The bet was that a yearslong drop in spending on new commodity supply and efforts to limit carbon emissions would push up materials prices and shares of producers, according to people familiar with the firms.

After a decade of distress, energy has become one of the biggest winners on Wall Street, supercharged in the last two weeks by Russia’s invasion of Ukraine. The S&P 500 energy sector has recently outpaced the broad index by the largest margin on record in data going back three decades, according to Dow Jones Market Data. The energy sector is up 37% so far this year, while the broad index has slid 12%. U.S. crude recently topped $130 a barrel, its highest level since 2008, after briefly dipping below zero two years ago after the onset of the coronavirus pandemic.

“We are in the early innings of a generational investment opportunity,” wrote Soroban founder Eric Mandelblatt in an annual letter to investors dated Jan. 20.

Commodities-focused funds that made similar wagers are posting outsize returns—about 30% in the first two months of the year in some cases—after years of poor performance.

Russia accounts for more than 10% of the globe’s oil, natural gas and wheat supply. It is also a major source of potash that fertilizes crops around the world. Ukraine is a key exporter of agricultural crops as well.

Russia is a major producer of fertilizer; a phosphate operation in Cherepovets, Russia.

PHOTO: ANDREY RUDAKOV/BLOOMBERG NEWS

Traders say replacing materials that have been removed from global markets through sanctions, export bans and the war itself will be difficult. Reserves are low after years of dwindling capital expenditures, and it can take years to permit and develop new, large-scale projects.

  • 03/26/2022 – Russian is retreating?

Russia Refocuses on Ukraine’s East After Month of Heavy Losses – WSJ
High casualties and stiff resistance prompt a shift by Moscow, while Biden visits Poland, signaling U.S. support for Ukraine

Russia said it was refocusing its mission in Ukraine on the country’s east, a shift from its initial attempt to capture the capital, Kyiv, and swaths of the country after meeting relentless resistance and suffering heavy losses.

The military pivot came as Moscow more than doubled the tally of its service members killed since its invasion and as President Biden traveled to Poland, signaling U.S. support for Ukraine in the form of high-tech weaponry. Mr. Biden also met with troops and with Poland’s president, a day after a North Atlantic Treaty Organization summit at which members pledged further military backing of Ukraine.

Western officials said that Russia is pausing its operations around Kyiv. “They don’t appear to want to pursue Kyiv aggressively or frankly at all. They are focused on the Donbas,” the senior U.S. defense official said. Russia is continuing to pound the capital from the air, though, he said.

“It looks as though they are settling on one center of gravity, given inability to achieve other objectives,” said Michael Kofman, an expert on the Russian military at CNA. But, he added, “That doesn’t preclude pursuing those goals in another phase of the war.”

  • 03/24/2022 – Putin will be defeated soon? probably in a matter of weeks. To save face, Russia might just claim they have succeed in limited goals (Donbass)

Putin will soon have ‘no choice’ but to stop his invasion of Ukraine, former US general says

  1. Putin will likely be forced to stop his war against Ukraine, a retired US general told Insider.
  2. It’s “not because he wants to halt his military operation but because he has no choice,” he said.
  3. Putin “has basically reached the capacity of what his military can do for him in Ukraine,” he added.

“Putin will have to halt his war in Ukraine sooner or later and probably in a matter of weeks,” Ryan, who served as the defense attaché to Russia for the US, among numerous other roles, told Insider on Thursday.

Russia states more limited war goal to ‘liberate’ Donbass

  1. Military official says focus is on breakaway eastern regions
  2. Russia says Ukraine’s combat potential ‘considerably reduced’
  3. Russia says 1,351 soldiers dead, Ukraine says real number higher

LONDON, March 25 (Reuters) – In a scaled-back formulation of its war goals, Russia said on Friday that the first phase of its military operation was mostly complete and it would focus on completely “liberating” Ukraine’s breakaway eastern Donbass region.

  • 03/24/2022 – Josh Young from Houston hedge fund Bison is the best investor on oil industry on seeking alpha so far – Q1: Is there a specific catalyst that can lift energy more now, or is it simply that we’re in a long secular bull market. Ans from Josh: We’re in a multiyear bull market for oil. And that should translate to even better performance for oil equities, which have lagged behind. Q2: The price of oil is now hovering around $100. It’s come down a little, but obviously is high in historical terms. Do you see this strength continuing for a long time? Do you see it surpassing previous highs, going into the $150s? Ans: In the short term, there’s just too much complexity to accurately forecast. I think there’s a really good case that in the medium term, let’s say in the next six to 24 months, that prices will rise to their inflation-adjusted all time high. – Josh made great return on small oil stocks, should I invest in small stocks and also more LEAPs for mid and large oil stocks?

Oil Investor Who Made 390% Last Year Explains 3 Stock Picks

Oil and gas stocks outperformed the market in 2021, but a few energy-focused firms saw returns well above the norm.

Investments by Houston hedge fund Bison Interests rose 390% last year and have kept ripping higher in 2022. Net of fees, the fund rose 349% last year and is up 27% through February, according to a disclosure obtained from an investor in the fund.

Bison invests in small oil-and-gas stocks in the U.S. and Canada, and owns several stocks that have multiplied many times over since 2020. Chief Investment Officer Josh Young, who founded the firm, tells Barron’s that he has found success by investing in small stocks that other investors have ignored.

Bison may be outperforming its peers, but attracting capital has been a challenge. In November 2020, Bison lost its biggest investor, an endowment that Young believes pulled its money because of the environmental social and governance (ESG) movement. The endowment, which he would not name, told Bison “this was part of a divestment strategy.” Bison now has $50 million in assets under management.

Young spoke recently with Barron’s about how Bison chooses investments, and why he thinks politics has gotten in the way of smart energy policy and investing. The interview has been edited for length and clarity.

Barron’s: The ESG movement has had a big impact on oil and gas investing. From things you’ve written, you seem to think that ESG is both bad for investors, because they’re missing out on gains, and misguided societally. Can you explain your thoughts?

Josh Young: I think that there’s been a lot of misinformation. You have a starting point, which is that there were terrible environmental practices by many industries for way too long. And that’s a kernel of truth. And then that somehow gets warped. Solar, wind, et cetera, weren’t really ever replacements, at least in their current form. They’re very low EROI [energy return on investment, which measures how much energy is used to create energy infrastructure, versus how much is generated]. And somehow there’s a story that they’re going to replace everything. So you end up still burning a ton of coal and oil and natural gas to manufacture and transport and install and maintain and then decommission these things. It was just this wrong story that’s made a lot of people a lot of money, but also resulted in a material shortfall that we’ve been talking about for years and just no one cared. Or they didn’t believe it, because the price wasn’t moving.

Is this a moment of reckoning for energy policy—both from a geopolitical perspective, because so much of Europe and the world is dependent on Russian energy—and also from an environmental perspective?

I think we’re getting there, but we’re not there yet. Some participants and some policy makers have had their “aha” moment. But most are still doubling down on failing policies. The valuations of producers of oil and gas and other commodities are indicative of this kind of consensus view that this is temporary, without an understanding of what’s actually happening. We’re not there yet. I don’t think we’re even close. And I think that’s part of the opportunity.

What about the argument that climate change is an existential issue—that to drill new wells now will lead to temperatures rising more than 1½ degrees Celsius and mass casualties and displacements in 15, 20, or 30 years from now.

There have been catastrophic predictions made of this sort many times in history, and they have almost never happened. So that’s the starting point. I’m not saying that there isn’t global warming—there is good data that shows that there has been warming and it is associated with some of these activities. You look at a reasonable case for what might happen. What we’re doing right now may be substantially worse. And it’s definitely happening, versus there being a lot of model uncertainty and huge one-sided errors in that modeling so far. There have been many catastrophic predictions that have not happened, and they generally don’t get covered in the news. They just get updated and pushed 10 or 20 years further out and then renamed. So it was global cooling, global warming, climate change. The renaming often is indicative of a failure of a theory. I think energy security and available low cost energy for the incremental user is a bigger factor than climate change.

We have had the hottest years on record by far in the past decade. And there is evidence of real impacts, like the melting of glaciers in Antarctica. Is your issue about that data, or the predictions about the future?

When you back up to the models that alarmed everyone, and generated various documentaries, and billions of dollars for the people that made them and then became venture capitalists and so on. The predictions that were made in those about how much temperature would change did not happen. So yes, there’s been change, but the modeling has all been wrong, all one sided. It was similar to oil demand modeling by the EIA [U.S. Energy Information Administration]. It was all also wrong over the last 18 months, all one sided. So when that happens, that tells you there’s something else going on, besides the honest attempt to forecast something.

Whose predictions are you referring to?

Like the IPCC [Intergovernmental Panel on Climate Change] I think. I don’t remember. It’s been a minute since I went back through these models.

The price of oil is now hovering around $100. It’s come down a little, but obviously is high in historical terms. Do you see this strength continuing for a long time? Do you see it surpassing previous highs, going into the $150s?

In the short term, there’s just too much complexity to accurately forecast. I think there’s a really good case that in the medium term, let’s say in the next six to 24 months, that prices will rise to their inflation-adjusted all time high.

Because there’s underinvestment in supply?

There’s structural underinvestment and there’s still a kind of political punishment. It’s very weird. Various governments are trying to coerce producers to magically produce more, but they’re not facilitating it from a regulatory perspective, and they’re threatening additional taxes. There’s a supply-demand imbalance. It’s evidenced by rising demand despite rising prices. And it’s evidenced by supply not responding how it has historically to rising prices.

There are various problems when you underinvest in an industry for too long. And then when you punish it from a regulatory perspective for too long, you can end up with persistent undersupply. And that’s where I think the 1970s is a good analogy. It’s different because this time, there isn’t that significant OPEC capacity there was, and they just chose to withhold it. Now, it looks like they’re out or close to out [of capacity]. And we also have been dumping our strategic petroleum reserve for political reasons and balanced budgets and stuff. And so the cushions are not there for the market.

In the U.S., analysts are saying we’re a year away from record oil production again. Do you believe that we’re still underproducing dramatically, despite the fact that we’re likely to hit a record next year? What more could be done?

If you just look at rig activity versus price, there’s just way less activity than there would be. And many of the claimed efficiency gains [in the oil market] are turned into dis-efficiencies as stacked rigs [rigs that were not being used] are coming back to market. It’s not just a supply chain issue. You fire all the lowest performing people in a down market and get your hyper-efficient staff on crews and on rigs. And then when you staff back up, you have all kinds of problems. Then there’s also inventory degradation.

Part of the problem with having a negative regulatory environment and having investment leaving a sector is you end up not investing enough in exploration. There’s not enough good new inventory being discovered.

Oil and gas were up a lot last year, but Bison was up much much more. How did your fund beat the industry? Can you give me a sense of what names really stand out and how you found them?

Sure. I’ll share two Canadian ones and one U.S. one. We’re pretty balanced between the U.S. and Canada. On the Canadian side, there’s a company called Journey Energy (ticker: JRNGF), which is actually one of our largest positions. There were a few things that people didn’t understand about them that allowed for extra return beyond just oil beta. One was that they had already paid off a lot of their debt and so deleveraging has been a material excess return factor. When you look at the average oil company, ones that were punished for being considered overlevered that paid off a disproportionate amount of their debt did best. So that was just a very simple factor. Another thing that’s been working is companies that discovered big fields, and also companies that have been acquirers of distressed assets have outperformed as well. So Journey had too much debt going into 2020, they restructured their debt, and were able to pay down. At this point, they’re on track to pay down potentially all of it by the end of this year. And then they did a couple of acquisitions.

What’s the other Canadian stock?

The other Canadian one, which actually has substantial U.S. assets too, is Baytex Energy (BTEGF). Baytex got delisted from the New York Stock Exchange because their stock went below $1 In the U.S. during the downturn. They’re still listed on the Toronto Stock Exchange, but that killed a lot of the retail interest. And you killed off a bunch of the institutional interest as the company got close to a potential insolvency event in 2020. We owned a little bit before and then bought a lot when they were already paying down a bunch of their debt. Similar to Journey, it’s a big deleveraging story. And then they had a big discovery in the [Canadian] Clearwater oil play. [The economics there] from my calculation are as good or better than the very best wells in the core of the [U.S.] Delaware Basin, where companies have much higher valuation multiples and where there’s very limited remaining inventory.

And you said you had an American name, too?

Yeah, it’s SandRidge Energy (SD). It’s been negative for Bison to own Sandridge and talk about them because people have so many negative associations with them. [Sandridge filed for bankruptcy protection in 2016 and emerged later that year.] Even now, after it went through its pit of despair and is flourishing, you still get funny looks. There’s still people that will post anonymously on various websites about how the company is going bankrupt.

But Sandridge is in a material net cash position. And they’ve been growing their net cash by about $1 a share per quarter. It’s a $14 stock today. Their production is flat, and they’re building $1 a share per quarter plus or minus a little bit, and they’re sitting on $4.50 or something in net cash per share and they don’t have material negative working capital. I struggled with the bankruptcy thing, but I also get excited when I hear that. If things are heated because of past management and historical problems, that often yields extra potential returns.

Is there a specific catalyst that can lift energy more now, or is it simply that we’re in a long secular bull market.

We’re in a multiyear bull market for oil. And that should translate to even better performance for oil equities, which have lagged behind.

You invest mostly in small-caps, but most investors are more familiar with the large-cap names. Larger oil stocks appear to have stalled out a bit in recent weeks. Do you think they have another leg up ahead?

Some of the large-caps might require much higher commodity prices to move higher. With the mid-caps and large-caps, there are some that are value-priced but many of them are at valuations that are well in excess of what it would cost to buy similar assets and piece them together. And my strategy is to buy assets through the public market at a large discount to their private replacement costs.

  • 03/24/2022 – how should I prepare for this to happen if it happens? What is the best leveraged tool I should use on this?

Putin at Risk of Coup by Security Services?

Vladimir Putin faces a growing risk of a coup by the Federal Security Service, London newspaper The Times reported, citing a whistleblower in Russian intelligence. Chaos “and discontent have engulfed the security services after the botched invasion of Ukraine,” according to the paper.

Nuclear Comments

National Security Adviser Jake Sullivan said Vladimir Putin’s references to nuclear weapons at the beginning of the war are “something that we do have to be concerned about,” adding that Biden would be discussing “potential responses” with allies if the Russian leader takes that step. “This war will not end easily or rapidly,” he told reporters. “For the past few months, the West has been united. The president is traveling to Europe to make sure we stay united.”

  • 03/24/2022 – A great interview by Secretary Rice

Geopolitical Perspectives: A Conversation with Dr. Condoleezza Rice, 66th U.S. Secretary of State

  1. not sure about the end game of the war, hopefully Putin will be taken out by his own allies or generals
  2. the possible escalations of the war – chemical warfare, cyber attack, small scale dirty nuclear bombs (to warn western world)
  3. Rice does not think there will be nuclear war, because Russian generals will not side with Putin, US/NATO will eliminate Putin quickly
  4. look at the positive side of the war
  5. the war reveals the short comings of authoritarian political system, no check in power
  6. US makes mistakes in the mideast and needs to repair the relationships
  7. US will still lead the world 25 years from now, US will win contest with China because of our democratic system
  8. Three major takeaways from the war – we need to continue to populate the democratic system, we now know that very bad thing can come out of  authoritarian political system, we need to strengthen our educational system – only after all three, we can then continue to lead the world

The Biden administration is sending mixed messaging to the oil and gas industry as it seeks to boost oil output while also keeping the industry at arm’s length.

The administration has asked U.S. oil and gas producers to drill more as Russia’s invasion of Ukraine has pushed gasoline prices higher. But it has also taken a somewhat hostile tone, blaming the industry for not bringing prices down quickly enough.

  • 03/24/2022 – chemical warfare possible in the war?

White House sets up team to plan response if Russia uses chemical weapons in Ukraine
The United States and allies have said they are concerned the Kremlin might resort to such a move as its invasion struggles against Ukrainian resistance and Moscow’s own issues.

BRUSSELS — The White House has set up a team of national security officials to plan for what happens if Russia uses chemical or biological weapons in Ukraine, a senior administration official said.

The United States and allies have said they are concerned the Kremlin might resort to such a move as its invasion struggles against Ukrainian resistance and Moscow’s own issues.

White House national security adviser Jake Sullivan sent a memo Feb. 28 detailing how the so-called “Tiger Team” would look at what might happen over the next three months of conflict, the senior administration official told NBC News.

NATO Sending Weapons to Fight Chemical, Nuclear Warfare in Ukraine

  • 03/23/2022 – less Russia oil, higher oil price?

Biden, Allies to Discuss Reducing Europe’s Dependence on Russian Gas (wsj.com)

The White House said it expects to make an announcement Friday during President Biden’s trip to Europe on ways to reduce Europe’s dependence on Russian gas.

White House national security adviser Jake Sullivan told reporters aboard Air Force One that Mr. Biden expected to hold discussions with his European counterparts to develop a roadmap on European energy security. Mr. Sullivan suggested the announcements Friday morning would take place along with European Commission President Ursula von der Leyen.

Mr. Sullivan said the U.S. will “look for ways to increase LNG supplies, surge LNG supplies to Europe, not just over the course of years but over the course of months as well.”

The U.S. and the U.K. have imposed bans on Russian oil imports. There is growing support in the European Union for a ban on the purchase of Russian oil inside the bloc, but some members, including Germany, have been reluctant to take that step.

The Biden administration said ahead of the president’s trip to Belgium and Poland that there would be joint actions announced on enhancing European energy security and reducing European dependence on Russian gas.

A broader energy embargo

There are growing signs this week that Europe and the United States are prepared to go farther than ever before towards an embargo on Russian oil and gas, but it was unclear Wednesday what would be announced while Biden is in Brussels.

“The most important step in terms of sanctions is also the most complicated, and that is that the West needs to cut off all purchases of oil and energy supplies from Russia,” said Durlauf, of the University of Chicago.

The United States already banned imports of Russian oil and gas in early March, a decision made much easier by the fact that America is a producer of oil and gas. Few European countries can say the same.

On Monday, EU foreign ministers reached an impasse over a full embargo on Russian oil, with Germany reportedly leading the bloc of hesitant countries.

  • 03/23/2022 – a very deep discussion on the current Russis-Ukraine war’s effects on oil industry – How Energy Markets Are Shaping Putin’s Invasion — and the World

Transcript: Ezra Klein Interviews Daniel Yergin (full transcript here Daniel Yergin on energy industry)

  1. How does a war halfway across the world result in me paying higher gas prices in California? – Ans: a global system that moves about 100 million barrels a day of oil around the world. And it’s fairly finely balanced. And if you start to have disruptions in one place, it shows up quickly in another. scramble to get other oil to replace oil that they can’t ship, then you get to the refineries.

2. why the invasion of Ukraine has done so much to change the oil price. Because I mentioned it’s shot up in the U.S. about 22 percent. But Russia only accounts for 11 percent of the world’s oil output, and their oil output is still flowing. It’s even making them more money, as we’ll talk about, than it did before. So why is this changing prices so much? – Ans: Russia exports 7 and a half million barrels a day of oil. But as you say, it’s 11 percent of the production. But some of that stays in Russia, of course. About half of that goes to Europe. And what’s happening, we see now, is that one or two million barrels a day of Russian oil that would normally be loaded into tankers is not being loaded. Because the tankers aren’t there, because people won’t take the oil. Then there’s the additional thing that there’s Russian oil that’s on the seas in tankers, but can’t find a port, because it’s being rejected. this self-sanctioning that’s going on.

3. if we’re a net exporter, then, of course, when a time of global turbulence, we can just turn more of our energy to domestic usage and keep prices low. And presumably, politicians would do that if they could. And it seems like they can’t. So why, despite our tremendous amount of energy production now, can we not protect ourselves more from global market fluctuation? – Ans: we are certainly protected more on natural gas. People are noticing their natural gas bills are going up. But they’re going up maybe 20 percent, 30 percent. But they’re not going up like in Europe, where they’re four or five times higher than normal. On oil, a lot of the shale oil we produce is not suitable, particularly for making gasoline, because of the quality of it. So that gets exported. we import other oil that is more conducive to our refineries, which have been set up to process what are called heavier oils. that’s how you get us to being a net zero importer. But you have to net it out. So we are still — and particularly, gasoline markets are very connected worldwide.

4. a real dramatic shift in the energy production markets from it being OPEC, the oil production cartel, basically, and non-OPEC, to what you now call the big three. Tell me about the big three and the shift there. – Ans: the number one big three is the United States. And that is the huge turnaround. In 2008, the U.S. imported on a net basis 60 percent of its oil. Today, we’re basically self-sufficient, if you look on a net basis. And we’re the world’s largest oil producer. And this was unthinkable a decade and a half ago. The other two big three are Russia and Saudi Arabia, who trail the United States a little bit. And they’re roughly tied in terms of their production. And so the arrival of the United States has really changed the global market.

5. The oil business is always cyclical. But this has been a really big — the sharpest cycle I know of. And what happened is that coming out of the pandemic, oil demand was much higher than many people had anticipated, with the recovery, with people going out. The world — suddenly, you went from having a lot of extra oil around the world, that you could put into production if you needed it, to a very tight balance. And so even before the crisis, oil prices were getting high. Because the world didn’t have enough supply or seemed to be headed to a place of not having enough supply. And the same thing happened with natural gas, particularly in Asia and Europe, where again, the demand was much stronger than people thought. And so supply was struggling to keep up. you basically had an energy crisis in Europe, which has really been hit hard by rising natural gas prices, much more so in the United States, where we are more separated. And then on top of it, you have one of the big three in oil production and one of the big three in natural gas production, the same country, Putin’s Russia, going to war on a whole series of miscalculations. And that’s what’s further disrupted the market.

6. Putin’s miscalculations – he looked and said, “boy, it’s a tight oil market. It’s a tight gas market. It’s a tight coal market. So that gives me a high card. And then I have another energy card to play. Europe is so dependent on oil and gas, that they’ll do what they did after I took Crimea,” he says to himself, “which is they’ll say, protest and say oh, no, this is bad. And then they’ll say, well, we have to look after our energy supplies, and well, we’ll just stand aside.” And he got completely the opposite reaction. One of the other things he wanted to do was undermine NATO. He strengthened NATO. And he’s done this remarkable thing. He’s changed the policy of Germany. Chancellor Scholz, a couple of weeks ago, basically said, we’re going to back away from Russian energy. We’re going to build terminals to receive U.S. L.N.G., and this relationship with Russia is over. – is it a great investment opportunity for US LNG companies?

7. now not just Germany, but Europe is saying, we’re going to use a lot less natural gas from Russia than we’ve used in the past. And we’re going to find a way to use less oil from Russia. Russia is going to pay a price. It’s not a price that they’ll pay tomorrow, but it’s a price over the next few years. And Nord Stream 2 now is going to be in suspended animation, lying at the bottom of the Baltic Sea, that’s never going to be filled.

8. I want to talk about one specific example of where the U.S.’s rise in gas production gave us maybe foreign policy leverage we wouldn’t have otherwise had. I’m typically, relatively skeptical of sanctions and how will they work. But whenever I talk to people who work on sanctions, the example they give me of them working is Iran.

9. today, China is in the position of importing 75 percent of its oil. And they see that as a huge security problem. they have gone around the world to try and diversify their sources. And that’s one of the bases of the relationship that Putin and Xi and China and Russia have. Because Russia is one of China’s major suppliers, along with the Middle East and along with other Asian countries and Africa. But they regard that as a strategic vulnerability. In fact, despite the fact that U.S.-Chinese relations are in a pretty rocky state, China is signing up long-term contracts to buy U.S. L.N.G. as part of their diversification strategy.

10. one geopolitical consequence of that shift, which you gestured at there, is a stronger Russia-China alliance. One of your quotes in the book is, “a relationship that was once based on Marx and Lenin is now grounded in oil and gas.”

11. When you look at the trade flows between Russia and China and the energy flows, they’re big, and they’re important. So in 2005, 5 percent of Russian oil exports went to China. Now it’s about 30 percent of Russian oil exports before the war here. Russia passed the Saudis as China’s top oil supplier.

12. We’re in a different era with China, for sure. For “The New Map,” I went back and looked at the National Security statement, the last one from the Obama administration. And it talked about engagement with China, working with them on global issues. And then I looked at the First National security documents from the Biden administration. Didn’t have any of that language. It was strategic competitors, great power rivalry, very different language. And by the way, it’s written by, more or less, the same people.

13. Putin’s assumption that in five days, Ukraine would collapse — it would be like Crimea part two and just take over the country — Russia supplies 29 percent of Russia’s gas and 35 percent of its oil, a high degree of dependence. And he thought that was locked in, and it wasn’t going to change.

14. he Europeans have said, we’re done. We’re out of Russia’s oil. Now, they’re not going to get out of it as fast as they think. But we do not want to depend upon Russian gas to the degree we have. We’re going to bring it way down, and we’re going to try and do the same on oil.

15. Putin’s taken steps to impoverish Russia from here on by what he’s done. Russian oil and gas was sometimes as high as 46 percent of his budget, and he’s just not going to have those earnings in the future. It’s going to be rocky. It’s not going to be smooth. And I think consumers are beginning to see that right now. But Russia’s role as — days as an energy superpower, I think, are over. And he’s really signed a death warrant for that.

16. To replace Russia oil, It depends how quickly you can get additional oil from the Middle East. The U.S. sent a delegation to Caracas to talk to Maduro to see if, can we make a deal? Maybe we can get some more oil. Canada, which is actually our largest supplier of oil, can produce some more oil, too. the Europeans are going to do a lot of other things, including be more energy-efficient, build more wind turbines, in order to generate additional electricity with wind rather than natural gas. And I think we’re going to see them burning more coal, at least for the next couple of years. Russian oil is 35 percent of European consumption. If you can’t replace it, the economy is not going to work.

17. there’s going to be economic disruptions that are flowing from this. I mentioned before what’s happening with wheat prices. Boeing depends upon Russia for titanium. Ukraine produces neon that’s used for making computer chips. So there are going to be a lot of disruptions. But the biggest are going to be involving oil and gas, and that, of course, goes right to Putin’s pocketbook.

18. On March 8, the European Commission outlined this plan to make Europe independent from Russian fossil fuels well before 2030. That required tripling renewable energy capacity. Germany’s finance minister recently called renewable energy “freedom energy.” I think it’s accelerating down a track that they’ll put additional resources into it. Now we get into the nitty gritty of, are the supply chains there? How fast can you build big offshore wind turbines permitting? I was told, last week, by one of the top manufacturers of wind turbines in the world, at least in the Western world, that it takes seven years to get a permit for an onshore wind turbine in Europe, onshore not offshore.

19. Permitting is a real problem everywhere for building everything. But I think no question, that will speed up. So now, by the way, renewables is not only about climate, but it’s also about energy security. And that’s a different imperative that had been an amnesia about energy security in the Western world, including in the United States. Because we just assumed it’s all OK. So I think that will happen. They’re going to scour the world for more L.N.G. They will burn more coal for a couple of years so they can reduce gas imports from Russia. They’ll accelerate energy efficiency. They’ll accelerate the rollout of electric cars. they’ll also focus on yet to be developed natural gas reserves in the North Sea and around Cyprus, which is part of the E.U., that I think that will step up as well. So they’re going to move on a lot of fronts. But I think your focus on renewables will be at the very front of what they’re going to do so they don’t have to use as much gas for electric generation.

20. Has there been a big divergence between the U.S. and Europe on this? I’ve seen some argue, working, I think, more off rhetoric, that Europe is taking this as an opportunity to accelerate decarbonization. And in America, the pressure and the policies have been towards more global oil supply, in particular. Is the U.S. more fossil fuel-oriented in this moment, or is that just a visual difference? Most countries in Europe don’t produce oil and gas. The United States does. And so one of the changes we’ve seen, and we’ve heard it from the U.S. administration, is that we are committed to our decarbonization goals. But at the same time, we’re in an emergency right now. This is an emergency. Can we increase our production to take barrels away from Russia and asking other countries to do that, too? Pretty intense negotiations going on with the Middle East to try and get them to step up production as well.

21. They have a historic memory of World War II in a way that we don’t in the United States. And so they just want to unhook from Russia, and renewable generation is a very important way to do it. So they’ll step on the gas in terms of solar and wind.

22. so the big impetus was energy security. 

23. A lot of the 2050 goals have been shifted to 2030. And I think we were starting to see in that energy crisis in Europe, before the invasion of Ukraine, that it could be disruptive of trying to do it really fast and that you get reactions against it. Prices go up, and you get what in France were called the yellow vest protest against it. And I think that one of the unsaid worries about completely shutting Russian oil out, when you don’t have replacement, is that it would be such a shock to the economy, that you might get a backlash in Europe, saying, well, why are we standing so strong against Russia? Let’s think about ourselves. So there are a lot of ramifications of it. But I think higher prices, basically, will drive in that towards decarbonization. But it’s not a smooth road. It’s not only a smooth road economically and for consumers. It’s also not a smooth role for politicians.

24. Gasoline prices are sensitive everywhere in the world. When there was this upheaval recently in Kazakhstan, it started because the price of fuel went up. And so in all different societies, but we certainly know, in the United States, that it is a incredibly sensitive politically, understandably so, because people drive a lot. And it’s very painful for a nurse or schoolteacher driving to work to suddenly see how much they’re paying — how much of their income is suddenly going into gasoline.

25. Senator Joe Manchin said that, quote, “I’m very reluctant to go down the path of electric vehicles.” He continued that, “I’m old enough to remember standing in line in 1974, trying to buy gas. I remember those days. I don’t want to have to be standing in line waiting for a battery for my vehicle, because we’re now dependent on a foreign supply chain, mostly China,” end quote. And what he’s referring to there is that China does dominate the global lithium ion battery supply chain. They control a lot of raw material refining. when Senator Manchin made that comment. And it certainly did stand out.  the Chinese have been out there in front, as you say, 80 percent of the lithium ion batteries. China dominates about 80 percent of the solar panel business as well.

26. there’s going to be a new geopolitics around these new supply chains that you’re describing. And where are they going to be mined, the demand for lithium will be enormous — I mean, maybe a 4,300 percent increase, by one estimate. Copper — electric cars really use a lot more copper than your normal internal combustion engine. So I think securing these supplies to support the pace of decarbonization that people want to achieve, that’s going to be a new challenge. And there’s going to be a big focus on that.

27. we talked about permitting before. It’s hard to open a new mine in the United States. It’s estimated by one estimate, 16 years to open a new mine from discovery to production. In the United States, the permitting process alone can take 16 or 20 years.

28. You did a study recently with the former Energy Secretary Ernest Moniz, looking at potential breakthrough technologies that could accelerate decarbonization. Tell me a bit about what you found. What are what are the possible technologies that you’re most excited about right now, that you wish we were investing more in? – Ans: Some of it is actually digital, becoming much more efficient in how we use energy and how we manage buildings which use a lot of energy. I would say that what’s big on the agenda now, almost dramatically from nowhere, is hydrogen. And the Europeans are now talking about getting 25 percent of their energy by 2050 from hydrogen. So that’s a top one. The other is batteries and energy storage.

29. The system that supports the global economy today, our $90 trillion economy, is very big. And so you need things that are very big. But I think I would put those as some of the top things, and a lot of people working on batteries and trying to find different chemistries for batteries that would make them more efficient and store electricity for far longer periods of time.

30. three books you would recommend to the audience? “Putin’s World,” by Angela Stent,  “The Power Law.” And the subtitle is the “Venture Capital and the Making of The New Future,” by Sebastian Mallaby. “The Cloud Revolution,” by Mark Mills.

Excerpt:

Nearly every dimension of the Ukraine-Russia conflict has been shaped by energy markets.

Russia’s oil and gas exports have long been the foundation of its economy and geopolitical strength. Vladimir Putin’s decision to invade Ukraine – like his annexation of Crimea in 2014 – coincided with high energy prices. While Western sanctions have dealt a major blow to Russia’s financial system, European carve-outs for Russian oil and gas have kept hundreds of millions of dollars flowing to Moscow every day.

As a result, energy policy has become foreign policy. European countries are doubling down on their commitments to decarbonize in order to reduce their dependence on Russian energy as quickly as possible. The United States has banned Russian oil and gas imports, and in the wake of spiking gasoline prices, the Biden administration is looking for any opportunity to increase the world’s oil supply, including the possibility of normalizing trade relations with previously blacklisted countries like Venezuela and Iran.

But the intersection of energy and geopolitics extends far beyond this conflict. Energy is the bedrock of nations’ economic prosperity, military strength, and geopolitical power. Which means energy markets are constantly shaping and reshaping global dynamics. You can’t understand the way the world operates today if you don’t understand the global flow of energy.

There are few people who have studied energy markets as closely as Daniel Yergin has. He is an economic historian and writer who has been called “America’s most influential energy pundit” in the New York Times. And he’s the author of numerous books on the intersection of energy and geopolitics, including the Pulitzer Prize-winning The Prize: The Epic Quest for Oil, Money, and Power and, most recently, the best-selling The New Map: Energy, Climate, and the Clash of Nations.

We discuss how Putin’s invasion halfway across the world caused gasoline prices to rise in California; what would happen to European economies if they decided to cut off Russian gas; how the U.S. shale revolution has transformed the global political landscape; why, when it comes to China and Russia, Yergin believes that “a relationship that was once based on Marx and Lenin is now grounded in oil and gas”; whether Donald Trump was right to be skeptical of Nord Stream 2; why decarbonization is not only beneficial for the climate but also crucial for national security; whether the Biden administration’s response to spiking energy prices is putting its climate agenda in jeopardy; why Yergin thinks hydrogen power could become central to combating climate change; and much more.

  • 03/23/2022 – If escalation of war (by Russian using chemical, biological and nuclear warfare) sinks the whole stock market, I need to prepare to buy more GUSH and DPST

NATO Expects to Provide Ukraine Cyberdefense, Aid Against Chemical, Bio, Nuclear Threats (wsj.com)

NATO Secretary-General Jens Stoltenberg says allied leaders Thursday are likely to commit to providing Ukraine with additional military support, including cyberdefense, and to helping the country protect itself against chemical, biological and nuclear threats.

“We are determined to do all we can to support Ukraine,” Mr. Stoltenberg said on the eve of the meeting of North Atlantic Treaty Organization leaders, including President Biden.

Ukraine’s President Volodymyr Zelensky is due to address the leaders.

Mr. Stoltenberg said Ukraine joining NATO wasn’t on the agenda.

Mr. Biden, as he departed Washington for Brussels, said chemical warfare in the conflict in Ukraine represented “a real threat.”

Mr. Stoltenberg said chemical weapons would “totally change the nature of the conflict” and represent “a blatant violation of international law.”

NATO leaders will also take decisions to further protect alliance members closest to Russia, Belarus and Ukraine. “We face a new reality for our security so we must reset our deterrence and defense for the longer term,” the NATO chief said.

  • 03/23/2022 – Even with the rally of 37% in 2022, the energy sector’s influence on the broader stock market is limited, even after the recent rally. The group’s weighting in the S&P 500 is 3.9%, down from more than 15% at its peak in 2008 before demand for oil and gas started diminishing and technology emerged as the economy’s dominant industry. we might still have more room to run in energy sector (3.9% to 15%). Energy companies have also resumed buying back their own shares at a brisk pace after that activity ground to a halt in 2020. Buybacks in the sector nearly tripled last year, according to S&P Dow Jones Indices, outpacing the S&P 500’s 70% increase. Investors rushed into energy-focused commodity mutual funds and exchange-traded funds for the sixth consecutive week in the period ended March 16, according to data from Refinitiv Lipper. That marks the longest streak since a 11-week run that ended in May 2020. Investors also poured $1 billion into energy equity funds in a single week earlier this month, the largest inflows in a year.

Energy Stocks Are This Year’s Hottest Trade – WSJ.

‘The new FANG is going to be fuel, agriculture, natural resources and gold,’ one investor says of the energy sector’s rally

Energy is one of the two sectors in the S&P 500 in the green for 2022, up 37%. The benchmark itself is down 5.3% with investors worried about the pace of the Federal Reserve’s plan to increase interest rates to curb inflation. Financials are up a modest 1% in 2022.

Of the 25 best-performing stocks in the index this year, 17 sit in the energy sector. Occidental Petroleum Corp. OXY +2.16% has more than doubled, Halliburton Co. HAL +2.43% has surged 62% and Chevron Corp. CVX +1.13% is up 40%.

The gains in the stocks track the climb in oil prices. Brent crude, the international benchmark, has risen 48% this year to $115.48 a barrel and briefly eclipsed $130 earlier this month. U.S. crude is at $111.76.

The rally has also coincided with a decline in the big technology shares that powered the market higher for much of the past decade. Investors have sold shares of tech and other growth companies with lofty valuations, concerned about how they will fare in a rising-rate environment. The S&P 500’s tech sector is down 9.8% this year.

Mr. Giacoumakis said his firm is invested in energy through equities and exchange-traded funds; he estimates oil will trade above $120 a barrel during 2022.

To be sure, the energy sector’s influence on the broader stock market is limited, even after the recent rally. The group’s weighting in the S&P 500 is 3.9%, down from more than 15% at its peak in 2008 before demand for oil and gas started diminishing and technology emerged as the economy’s dominant industry.

Excess drilling by shale producers and sliding energy prices prompted many investors to trim their positions in energy stocks years ago. A wave of climate-conscious investing further added to the pain. Money managers shunned fossil-fuel producers, while adding green-energy companies to their portfolios. The Covid-19 pandemic delivered another blow when demand for energy evaporated during the shutdown.

The tide began to turn last year as the economy recovered and oil producers kept supply in check. Energy was the best-performing sector in the S&P 500 last year after lagging behind the index in eight of 10 years through 2021.

The energy sector has been through boom-and-bust cycles in the past. If oil prices climb too high, consumers are likely to adjust their habits, lowering demand for energy and sending prices tumbling once again.

As the broader stock market struggles, many investors are turning to energy stocks for their outsize returns. The sector offers a 2.9% dividend yield, versus the 1.3% offered by the S&P 500 as a whole and the 2.375% yield on the benchmark 10-year Treasury note.

Energy companies have also resumed buying back their own shares at a brisk pace after that activity ground to a halt in 2020. Buybacks in the sector nearly tripled last year, according to S&P Dow Jones Indices, outpacing the S&P 500’s 70% increase.

Investors rushed into energy-focused commodity mutual funds and exchange-traded funds for the sixth consecutive week in the period ended March 16, according to data from Refinitiv Lipper. That marks the longest streak since a 11-week run that ended in May 2020. Investors also poured $1 billion into energy equity funds in a single week earlier this month, the largest inflows in a year.

“Quite honestly unless somebody can predict how the future is going to play out—in terms of Russia and Ukraine, or we’re looking toward some kind of resolution in the near future—I can’t say I expect commodities to stop climbing,” said Oktay Kavrak, product strategist at Leverage Shares.

  • 03/22/2022 – relevant news

Russia exploring options for potential cyberattacks on U.S. energy sector, FBI warns

USA Condemns Attacks Reportedly Targeting Saudi Oil Site

U.S. National Security Advisor Jake Sullivan has announced that the U.S. condemns the Houthi attacks over the weekend against civilian infrastructure in Saudi Arabia.

“These attacks reportedly targeted water treatment facilities as well as oil and natural gas infrastructure,” Sullivan said in a statement posted on the White House website.

“The Houthis launch these terrorist attacks with enabling by Iran, which supplies them with missile and UAV components, training, and expertise. This is done in violation of UN Security Council resolutions prohibiting the import of weapons into Yemen,” Sullivan added in the statement.

Bullish Weekend For Oil: Russia Divestment, Middle East Attacks, Strong U.S. Gasoline Demand

  1. Oil production in the short and longer term threatened due to geopolitical events.
  2. Oil services contractors withdrawing from Russia for new work.
  3. Multiple oil sites attacked in Saudi Arabia.
  4. Very strong US gasoline demand despite the rise in price.

Front Month WTI Oil at Risk of Melt Up

Front month West Texas Intermediate (WTI) oil is at risk of a “melt up” in the first half of 2022, according to a new BofA Global Research report, which was sent to Rigzone on Monday.

With inventories at very low levels there is likely a reduced ability to make delivery against the WTI contract, the report noted, adding that inventories will likely scrape along at low levels “as a result of limited U.S. supply growth over 1H22 and limited incentives to send barrels to Cushing”.

“Given the market is desperately short barrels in the near term, we see increased risk of a short squeeze as WTI moves towards expiry each month,” the report stated.

“Furthermore, we see risk that WTI strengthens relative to other North American grades to encourage more oil to flow to the hub,” the report added.

In its latest energy report, BofA noted that it previously highlighted that Cushing balances would be tight in the first half of this year due to limited crude oil production growth and strong refinery and export demand. “Now, the Ukraine conflict presents the risk of even greater tightness,” the report stated.

Energy (NYSEARCA:XLE +3%) was the easy winner of Monday’s S&P sector standings, with crude oil prices climbing to their highest finish in nearly two weeks as European Union foreign ministers considered a ban on Russian energy.

April WTI crude (CL1:COM) closed +7.1% to $112.12/bbl and May Brent crude (CO1:COM) also settled +7.1% to $115.62/bbl, with both benchmarks closing at their highest levels since March 8, when prices ended at their highest since 2008.

Marathon Oil (NYSE:MRO +8.5%) and Occidental Petroleum (NYSE:OXY +8.4%) rocketed to the top of the S&P leaderboard, with other strong gainers including HES +6.6%, FANG +6.4%, EOG +5.7%, DVN +5.4%, PXD +4.7%, XOM +4.5%, APA +4.5%, RIG +4.4%, VLO +4.2%, HAL +4.2%, KMI +4.1%.

ETFs: NYSEARCA:USO, UCO, SCO, BNO, XOP, VDE, OIH, DRIP

“Optimism is seeping away about progress in talks to achieve a ceasefire in Ukraine, and that has sent the price of oil on the march upwards,” Hargreaves Lansdown analyst Susannah Streeter told Reuters.

The U.S. and U.K. have both banned Russian oil, but the European Union is much more dependent on Russian oil, “covering almost 30% of its import needs with crude oil from Russia… In the case of diesel, Russian oil even accounts for as much as 80% of its net imports,” Commerzbank’s Carsten Fritsch said.

Over the weekend, attacks by Yemen’s Houthi rebels caused a temporary drop in production at a Saudi Aramco refinery joint venture in Yanbu, prompting Saudi Arabia to say it would not be responsible for any global oil supply shortages.

Although the attacks caused no serious damage, they “make it clear that supply outages are also a distinct possibility there, which would be virtually impossible to offset in current environment,” Fritsch said.

The three biggest oilfield service providers said over the weekend that they are scaling back work in Russia.

  • 03/21/2022 – Shale Companies Drilling More, but Oil Output Growing Little – WSJ. Following calls by the Biden administration and others to raise production and help quell rising oil prices following Russia’s invasion of Ukraine, shale executives have pointed to a number of bottlenecks that limit their ability to increase production quickly this year, including supply-chain issues, wary investors and limits to their remaining drilling inventory. Another significant constraint is the loss of thousands of ready-to-go wells, known as drilled but uncompleted wells, or DUCs, which companies had amassed last decade, then used up to survive the pandemic. If Russia’s oil production and exports are curtailed to the tune of two million to three million barrels a day, Diamondback’s Mr. Van’t Hof said, “shale’s response is a garden hose trying to fill up an Olympic swimming pool.”

Oil companies are putting more rigs back to work after depleting their stockpiles of previously drilled but untapped wells

American frackers are raising the number of drilling rigs in oil fields by more than 20%, but don’t expect a similarly sized increase in production.

Though the number of active U.S. oil-directed rigs has grown by roughly one-fifth in the past six months, much of the new activity is to make up for a depleted inventory of wells drilled before the pandemic, executives said. Frackers brought the best of those online last year instead of drilling new ones and will have to drill more than usual this year to offset those lost wells.

Following calls by the Biden administration and others to raise production and help quell rising oil prices following Russia’s invasion of Ukraine, shale executives have pointed to a number of bottlenecks that limit their ability to increase production quickly this year, including supply-chain issues, wary investors and limits to their remaining drilling inventory.

Another significant constraint is the loss of thousands of ready-to-go wells, known as drilled but uncompleted wells, or DUCs, which companies had amassed last decade, then used up to survive the pandemic. Those wells could have helped speed the industry’s response to high oil pricesby several months, executives and analysts said.

The DUC backlog, which peaked at more than 8,800 wells in June 2020, was down to fewer than 4,400 wells in February. That is a lower figure than the industry had at the end of 2013, according to the Energy Information Administration.

Many of the wells left behind will likely never be put into production because some were likely less prolific to begin with, and others were impacted by the drilling of other wells nearby, as some companies pursued tight spacing plans that proved overly optimistic, analysts said.

from Davidson: Oil has fallen from the highs and settled ~$110/bbl.  Many think the worst is behind us here but as the global economy recovers, we think the current supply will prove to be woefully inadequate. Do not be surprised to see gas prices start to rise as air travel, as well as the summer driving season kick into high gear in the next few months.

This of course assumes no deterioration in the Russia/Ukraine situation.

Commentary by Diamondback’s Pr Van’t Hof:

“The industry has now worked off all of the voluntary DUCs,” said Diamondback President Kaes Van’t Hof, referring to wells companies intentionally left dormant.”

https://www.wsj.com/articles/shale-companies-drilling-more-but-oil-output-growing-little-11647855002

This means the general assumption many have all these DUC (drilled but uncompleted) wells we can just plug into a begin pumping oil quickly is simply false. It’s going to take time to bring more supply to the market.

The biggest risk given this is significantly higher prices over the coming months vs lower.

“Davidson” submits:

Baker Hughes Rig Count Unchanged-3 fewer oil/2 more gas and 1 more other. The rig count appears to only be offsetting natural well declines and continue to remain uncorrelated to $WTI. The SPR continues its decline the last 12mos at ~3mil BBL/Week. Declines in inventories provide the perception for many analysts the basis for predicting not only adequate supplies but expectations that rising prices and the rise in the rig count could create a glut by end 2022.

In my estimation, true supply is well below the demand anticipated once the global economy normalizes. The recent $WTI surge connected to proposed sanctions against Russia has settled $30/BBL lower causing some to announce the peak in inflation and $WTI is now behind us. Inflation and the oil supply/demand situation have deeper roots and investors should be allocated to hedge these issues for several years.

  • 03/21/2022 – Support for a European Union-wide ban on the purchase of Russian oil is growing inside the bloc. Germany, current head of the club of the world’s rich economies, has invited leaders to a summit in Brussels on Thursday on the sidelines of the EU meeting with President Biden and a gathering of leaders of the North Atlantic Treaty Organization. “Through receiving energy from Russia we continue to…provide funds to Russia. This must be stopped,” said Slovak Foreign Minister Ivan Korčok. “I expect an open discussion about that when President Biden comes.” “It is absolutely obvious that the rejection of Russian oil will lead to catastrophic consequences for the world market,” In addition, oil price will drive up all other major costs and inflation.

EU Support Grows for Russia Oil Ban for Ukraine War – WSJ
As Moscow’s assault continues with no peace deal in sight, European capitals consider a move that was once off the table

Support for a European Union-wide ban on the purchase of Russian oil is growing inside the bloc, according to diplomats involved in the discussion, representing a significant shift in the continent’s stance toward how to ratchet up economic pressure on Moscow.

Agreement on any EU ban of Russian crude is far from locked in yet, and a rapid decision to move ahead isn’t likely, diplomats said.

The U.S. and U.K. have already banned Russian oil imports, and British officials said that Prime Minister Boris Johnson’s government has been pushing for a Group of Seven-wide ban. Germany, current head of the club of the world’s rich economies, has invited leaders to a summit in Brussels on Thursday on the sidelines of the EU meeting with President Biden and a gathering of leaders of the North Atlantic Treaty Organization.

“Through receiving energy from Russia we continue to…provide funds to Russia. This must be stopped,” said Slovak Foreign Minister Ivan Korčok. “I expect an open discussion about that when President Biden comes.”

An EU ban would constrain European supplies—and global markets. Russia represents around 28% of the bloc’s overall crude oil imports. While oil can flow more easily around the world than gas, a ban of Russian oil to the EU would likely send a supply jolt across global markets.

A ban could, at least temporarily, take out around 3 million barrels a day from a global market of around 100 million barrels a day—a significant chunk in an already tight market, analysts say. Oil prices have soared amid the Ukraine crisis over worry about Russian supply.

The EU also imports from Russia some 15% of its oil products, such as diesel, naphtha and fuel oil, Bruegel said.

  • 03/21/2022 – Buffett now comes back to oil companies (OXY) in big time? Should I follow and add in my position? remember: Buffett exited all of his OXY holdings shortly after the plunge in oil prices & drop in OXY share price in 2020. The position WB has in OXY today is completely new & the price paid is much higher than what WB sold his OXY shares in 2020.

Buffett Buys Again: Berkshire Hathaway Boosts Its Stake in Occidental Petroleum to 14.6%

Berkshire Hathaway continued to add to its large stake in Occidental Petroleum in recent days and now holds a $7.2 billion interest in the big energy company, according to a filing late Wednesday.

Berkshire Hathaway (ticker: BRK/A, BRK/B) purchased 18.1 million shares from Monday through Wednesday to bring its stake to 136.4 million shares, a 14.6% interest in Occidental Petroleum (OXY).

Berkshire, led by CEO Warren Buffett, has been on an uncharacteristically aggressive buying spree involving Occidental. Berkshire has bought more than 100 million shares since March 2. The buying has spurred speculation that Buffett may ultimately want to purchase the entire company.

Buffett, who oversees Berkshire’s $350 billion equity portfolio, normally accumulates stakes in companies quietly over time.

It’s unusual for Buffett to be so aggressive and public about his purchases. As a holder of more than 10% of Occidental, Berkshire must report any changes in its stake publicly within two business days through a Form 4 filing with the Securities and Exchange Commission. Berkshire paid in a range of about $53 to $55 a share for the latest batch of Occidental stock, which ended Wednesday at $52.99, down 2.8% on the day.

Berkshire shares hit a record Wednesday with the Class A stock ending at $504,036, up 1.2%, in the first close above the $500,000 mark. The stock stood at around $20 when Buffett took control of the company in 1965. Berkshire’s Class B shares ended at $336.11, up 1.1%.

Buffett knows Occidental well. Berkshire bought $10 billion of Occidental preferred stock paying a lush 8% dividend in 2019 when Occidental CEO Vicki Holub was seeking quick financing during a bidding war with Chevron for Anadarko Petroleum. Occidental won due in part to the Berkshire financing.

Berkshire got 83.9 million warrants to buy Occidental stock as part of that deal. They have an exercise price of $59.62 a share.

Occidental produces about 1.2 million barrels of oil equivalent daily and has been an industry leader in carbon capture. The company was burdened by high debt from its 2019 purchase of Anadarko Petroleum, but it has been rapidly paying that down thanks to the rally in energy prices. Occidental CEO Holub said in February that the company aims to get its net debt down to under $25 billion by the end of the first quarter. The shares are up from a low of under $10 in 2020.

Buffett doesn’t tend to like pricey stocks. Occidental trades for around 11 times projected 2022 earnings, but the company’s profits are highly sensitive to energy prices. He also has no qualms about owning energy companies, unlike some socially conscious investors.

03/17/2022 –

Oil Market’s Big Winners: ‘Little Guys’ Who Are Eager to Drill – WSJ
Autry Stephens and other small operators race to produce more crude with big players on sidelines; ‘almost too good to be true’

Frackers Say Bottlenecks Impede Output Boost as Oil Prices Soar – WSJ

Shale companies say they are trying to help to fill a gap in global oil supplies after Russia’s attack on Ukraine, but wary investors, supply-chain issues crimp output

About Timeless Investor

My name is Samual Lau. I am a long-term value investor and a zealous disciple of Ben Graham. And I am a MBA graduated in May 2010 from Carnegie Mellon University. My concentrations are Finance, Strategy and Marketing.
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