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Msg  294745 of 298889  at  10/29/2020 10:08:27 AM  by

ghmndod

The following message was updated on 10/29/2020 10:08:27 AM.

Re: Why is oil crashing?

"The virus is going to cause a huge decrease in oil demand- just like early in the year. As a result of the demand destruction, there will be a surplus of oil."

What if they are crying wolf and this waive is not nearly as virulent. So far that looks to be the case. All of Asia including China & India are running as they had prior to COVID. It seems like the only place COVID is being hyped is within the Wests leftist govts. More control of the populace. Look at Robry's COVID data WW infections have not risen as in the past and have dropped the last couple of days.

That is what the mkt. is saying. WS has said very clearly that oil is dead, uninvestable. Green energy is the future. The problem is other than words they dont explain how. What they do know is there is money to be made from Green Energy investment banking.

I have reviewed research on a number of pipeline cos. following their earnings releases. Volumes have held up for these cos. which has been a pleasant surprise for analysts. The quality cos. all have buy ratings with sustainable dividends and sigificantly higher price targets.

CAPEX has been cut by cos. WW by 50% and greater. Below is the rig count and frac spread.

OIl rigs now 211 down from 875 in January & 675 in March prior to COVID

Frac spread 134 down 240 Y/Y

Production in the US was flat prior to COVID in March. At the current rig count and frac spread it will continue to drop until we see the rig count above 650 for 3-4 months. At $40 WTI and lower that will not happen.

DUC's are being reduced slightly.

Drilled but uncompleted wells (DUC)
wells
Region August 2020 September 2020 change
Anadarko 704 681 (23)
Appalachia 586 575 (11)
Bakken 881 870 (11)
Eagle Ford 1,181 1,166 (15)
Haynesville 317 321 4
Niobrara 454 454 -
Permian 3,546 3,525 (21)
Total 7,669 7,592 (77)

Many of the DUC's are getting close to being able to collect SS so they may never be completed. Although well completion costs have come way down it is surprising that more well are not being completed prio r to this recent sell off. With 15-25% of the cost of the well being expensed prior this has been a surprise.

D&Cing have come way down WW. CAPEX cuts outside of NA have not been as deep since the increase was not nearly as large. We now have CAPEX down WW outside of OPEC+ down by greater than 50%.

The oil service industry including deepwater is in horid financial condition. It is probable that 25% of the deepwater rigs will be scrapped. As this CAPEX reduction continues when the West's economies come back and oil demanf comes back in the latter part of 2021 supply will not be there. Depletion and the resulting production declines never sleep.

As was stated by SA's oil minister the low oil prices prior to 2000-2008 & low CAPEX led to the oil price boom of the 2000's. The same is happening now. COVID and the Wests economic slowdown has prolonged it. The difference though is the move up will vwry likely be higher and last longer.

Green energy will not replace carbon energy for decades if ever. Fusion, hydrogen and advanced nuclear may be the answer but that solution is decades away.








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Replies
Msg # Subject Author Recs Date Posted
294752 Re: Why is oil crashing? armfarmer 1 10/29/2020 10:27:49 AM
294757 Re: Why is oil crashing? This isn't last spring... MontyHigh 8 10/29/2020 10:45:12 AM






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