The Shale Daily Update – 4.3.2020

Here are 10 things you need to know about oil and gas for April 3, 2020:

Trump calls on Russia and Saudi Arabia to cut oil production – Excerpt:

The Trump administration is pressing OPEC to hold an emergency meeting as early as next week to try to end the standoff in the oil market that has threatened to cripple the U.S. oil industry, three industry and government officials familiar with the talks said.

The U.S. pressure is aimed at persuading Saudi Arabia — which has also called for a meeting — and Russia to declare a ceasefire and reverse the export increases that have drowned the global market in crude even as the coronavirus pandemic has decimated international demand.

The White House has not yet decided who, if anyone, it would send to a possible OPEC meeting next week, the industry and government officials said. Candidates included Secretary of State Mike Pompeo, Department of Energy Secretary Dan Brouillette and Trump’s son-in-law and adviser Jared Kushner, the people said.

Oil Extends Gains As OPEC Leaders Call Emergency Meeting To Discuss Trump Production Cuts – Well, guess the pressure from the President worked, as OPEC called a special meeting overnight. The cartel will hold its meeting next week via “emergency teleconference,” which one supposes must be more urgent than just your ordinary, everyday OPEC teleconference.

OPEC+ Debates Biggest Ever Cut as Virus Destroys Oil Demand – It’s worth noting that Russia’s oil minister denied the narrative told in this New York Times report, but Russia says all sorts of things that end up not being accurate. Let’s hope this is one of them.

 

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7 thoughts on “The Shale Daily Update – 4.3.2020

  1. phineas gage - April 3, 2020

    The Saudis intend to drive the market price well below $20/barrel to regain control. And during the midst of a global pandemic.

    They are not our allies in any way. Once the Iran nuclear threat is out of the way, they need to be dealt with.

  2. Gregg - April 3, 2020

    Just like disentangling our trade with China, we should also do the same with Oil and Natural gas now that we are energy independent and a net energy exporter.

    Dave, you can help me on this, but as far as I understand it, if we have just become energy independent, and actually an exporter, why can’t we use that equilibrium to simply have the US producers supply the US market at fair market prices? And let the rest of the world get its oil from Saudi Arabia, the OPEC, and Russia et al.

    It would seem like a seamless transfer. How does it make sense to ship our oil to Japan etc. for example, and then have us buy oil from the OPEC, and then ship it back. Seems like a lot of wasted carbon footprinting and potential for oil spills/terrorist opportunities by having all this oil floating on the world’s oceans. Let’s cut out the middle-man and use our own stuff. That policy would seem to dovetail nicely with the Trump foreign trade model.

    1. Jimmy MacAfee - April 3, 2020

      We would be paying much more per barrel if we did that. The rest of the world would get cheap oil, while we paid more? It costs more than $20 a barrel to extract here.

      Now this isn’t to say that someone won’t find yet another, cheaper way to extract oil via fracking; don’t count our oilmen out! But reality is, the cost of extraction is currently well above $20 per barrel.

      1. Gregg - April 3, 2020

        Jimmy,

        I’m talking about the legitimate price oil being around $60.00 barrel, not the artificial and unsustainable price of $20.00 per barrel which is designed to end fracking and American oil independence..

        Part of the whole idea of this price war is to drive American oil production out of business and regain the dynamic that pertained 12 years ago.

        My point being if the US oil producers were profitable at $2.50 gallon gas, and the American market is fine with that – which it was – then we could be self sufficient and our oil companies profitable. A win – win situation. If the outside world wants to then engage in a price war – let them. Sooner or later the oil producers will have to balance out the oil price to market conditions – losses, via undercutting each other would not be sustainable. Obviously there would be differences between the US oil price and the rest of the world from time to time, so what? – as long as the US has a stable, secure supply at reasonable prices we can’t lose in the long run.

        The argument could be made that gas, at $2.50 per gallon, could be temporally high relative to an artificially low price in a (outside the US) worldwide market thereby harming US completeness. Possibly true in the short term, but not really because:

        Most countries way over tax petroleum, which disadvantages their completeness; the price war would be temporary as it will not be sustainable – sooner or later the OPEC and other countries’ dictatorships will have to resume normal pricing, particularly when it doesn’t have its desired effect in bring down American self-sufficiency. America has already dealt with being at a competitive disadvantage via seventy plus years of rotten trade deals and outrageous corporate tax rates.

        Since our country will have become much more production centric and produce product for our own consumption, we will be much better off and stable in both the short and the long run.

        1. Jimmy MacAfee - April 3, 2020

          I agree. And that we cannot afford to allow our frackers to go out of business.

  3. Jimmy MacAfee - April 3, 2020

    The Saudis are aiming at a whole lot of targets:
    Russia
    Iran*
    Venezuela*
    Qatar
    US
    European Union*

    * client states of Russia

    Some might say the movie Alien vs. Predator tagline applies: “Whoever Wins, We Lose.”
    However, Prince Salmon is cutting off the Salafist schools worldwide, or not adding any (this remains to be seen.)

    Energy independence is a given; it is not the same as Venezuela’s means and methods. And Alaska is ours, and China can go bugger itself.

  4. Devin - April 3, 2020

    This just seems too simple of a problem to solve. Place a tariff on all foreign oil to bring the cost back up $30-$40/bbl. Let the Saudis and Russians starve themselves to death. Next!!!

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