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I added another service (TankerTrackers.com, Inc.) which not only tracks the tankers but uses that information to estimate the flow of oil. So picking oil up, dumping it, and coming back for more would be an unusual flow of oil. Particularly if the ship returned to the port it had just departed from, that would look suspicious.
I'm not claiming any of this would be fool-proof, but there are a lot of eyes on what tankers do. Satellite images all the time.
TheTalkingMule
Distributed Energy Enthusiast
They'd have to pay the pirates to take it!
A mid-ocean service would quickly be set up to supply several thousand gallons of that coagulant stuff they used to sink the spilled Deepwater Horizon oil to the bottom of the Gulf.
On a more rational note......WTI is all the way up to $19.50 and climbing. I'd love to jump into DTO(double short crude) soon, but it's unclear if these ETFs are even still attached to the price of crude.
If WTI is over $20 a week from now I'm gonna want to short that fo sho.
Bloomberg - Are you a robot?
Hmm, this article make the point that aviation demand for jet fuel is hardest hit among oil products, while prior to covid19 jet fuel was project to make up 80% of demand growth for crude going out to 2040 (according to BP). Also note that demand growth from petrochem was overblown. Even diesel from crude is not the demand growth engine Art Berman was suggesting the other day.
Basically, the argument for why oil's demand peak was decades away is unraveling in light of Covid-19. Now the question seems to be whether 2019 will stand as the year oil demand peaked.
But looking more closely at what it means for any aging fleet of commercial jets to go into early retirement, we see how depending oil demand is on maintaining fleet sizing and globalization. The global fleet of private passenger vehicles is all marginalized right now. People are learning new ways of living with few vehicle miles. So this temporal dip in replacement of ICE vehicle also spell a smaller and more fuel efficient going forward. This is the same dynamic with jets. Might this also apply to ships too? Anyone want to buy a cruiseliner or tanker (for use other than to store oil)? How about semis and trains? How many of these heavy duty vehicles are gathering rust? A shrinkage of the big fleets of the world locks in lower fuel demand for the longer term.
The second theme here is deglobalization. Tesla, for example, is learning that it preferable to have multiple factory around the world with regional supply chains than to be depending on moving lots of parts all over the globe. To be sure Musk spotted this trend well before Covid-19, but much of the rest of the world is also catching up with this idea. It matters if you can manufacture medical equipment within or near your own borders. The big global supply chain carries with it risks. Viruses can be shared and supply chains can be disrupted. So Covid-19 is driving home the idea that there is limits to the value of deeply interconnected global economy. As we deglobalize, international air travel becomes less important and international shipping becomes less important. The two tough nuts of oil demand, aviation and ocean navigation, simply become smaller, less important economically. So oil demand loses ground. Battery electrification is able to nibble away at shorter routes for air travel and marine transport. Fuels for planes and ships become small niches, so small that renewable fuels can dominate the niche.
Peak oil demand simply means that growth has shifted from positive to negative. We don't need to get hung up on how every fossil fuel niche will be filled. To form the peak, it is enough that a few big markets start to shrink. Beyond that we want to see every fossil market shrink to small niches. Shrinking the big fleets of the world is a huge step forward, and Covid-19 may have given us a kick in that direction.
Hmm, this article make the point that aviation demand for jet fuel is hardest hit among oil products, while prior to covid19 jet fuel was project to make up 80% of demand growth for crude going out to 2040 (according to BP). Also note that demand growth from petrochem was overblown. Even diesel from crude is not the demand growth engine Art Berman was suggesting the other day.
Basically, the argument for why oil's demand peak was decades away is unraveling in light of Covid-19. Now the question seems to be whether 2019 will stand as the year oil demand peaked.
But looking more closely at what it means for any aging fleet of commercial jets to go into early retirement, we see how depending oil demand is on maintaining fleet sizing and globalization. The global fleet of private passenger vehicles is all marginalized right now. People are learning new ways of living with few vehicle miles. So this temporal dip in replacement of ICE vehicle also spell a smaller and more fuel efficient going forward. This is the same dynamic with jets. Might this also apply to ships too? Anyone want to buy a cruiseliner or tanker (for use other than to store oil)? How about semis and trains? How many of these heavy duty vehicles are gathering rust? A shrinkage of the big fleets of the world locks in lower fuel demand for the longer term.
The second theme here is deglobalization. Tesla, for example, is learning that it preferable to have multiple factory around the world with regional supply chains than to be depending on moving lots of parts all over the globe. To be sure Musk spotted this trend well before Covid-19, but much of the rest of the world is also catching up with this idea. It matters if you can manufacture medical equipment within or near your own borders. The big global supply chain carries with it risks. Viruses can be shared and supply chains can be disrupted. So Covid-19 is driving home the idea that there is limits to the value of deeply interconnected global economy. As we deglobalize, international air travel becomes less important and international shipping becomes less important. The two tough nuts of oil demand, aviation and ocean navigation, simply become smaller, less important economically. So oil demand loses ground. Battery electrification is able to nibble away at shorter routes for air travel and marine transport. Fuels for planes and ships become small niches, so small that renewable fuels can dominate the niche.
Peak oil demand simply means that growth has shifted from positive to negative. We don't need to get hung up on how every fossil fuel niche will be filled. To form the peak, it is enough that a few big markets start to shrink. Beyond that we want to see every fossil market shrink to small niches. Shrinking the big fleets of the world is a huge step forward, and Covid-19 may have given us a kick in that direction.
Why not just short some of these oil companies that are forced to cut dividends?
TheTalkingMule
Distributed Energy Enthusiast
Mader Levap
Member
TheTalkingMule
Distributed Energy Enthusiast
In fairness to me, I thought we'd have taken some rational mitigation measure by the end of April!
In oil news.....Chevron just posted a great quarter and reiterated the dividend as a priority. CVX is somehow down today, though only 20% from pre-corona. Macro headwinds I guess.
WTI hovering around $20.
SmartElectric
Active Member
The oil producers already flare perfectly good natural gas into the atmosphere because it's too inconvenient to store and sell it, and that commodity has a price (not negative). IMHO you're worried about the wrong problem, the pollution from just producing oil and venting or flaring the gas is a tragically sad element and far more important.
adiggs
Well-Known Member
For those interested, a more detailed / engineering look into what can happen to a shut-in well.
The Oil Wells That Will Never Recover | OilPrice.com
I find this sort of stuff fascinating. Sort of like the internal combustion engine, the engineering behind making it happen is amazing. Good stuff for a museum.
The Oil Wells That Will Never Recover | OilPrice.com
I find this sort of stuff fascinating. Sort of like the internal combustion engine, the engineering behind making it happen is amazing. Good stuff for a museum.
"Why the coronavirus crisis won’t mark a peak in oil demand" -- Financial Times
Ok, so, here's an example of someone trying to argue that 2019 will not stand as the peak for oil demand. I was hoping to find some insightful counter-arguments, but really this is pretty weak. It is little more than an assertion of belief in pre-Covid-19 BAU.
Here is an example of how insipid the reasoning is here:
The author goes on to claim that cheap oil will mean driving will go up. Leave aside disincentives to travel places where you can pick up Covid-19, this does not square with the assertion of cash strapped consumer not being able to buy new cars. Older cars are more expensive to operate from a maintenance point of view. So this cuts into the benefit of cheaper gas. Besides older vehicles have less hedonic value to make driving around a pleasurable experience. An aging fleet is itself disincentive to driving more miles per vehicle, even if gas is cheap.
The author also thinks that online shopping increases demand for diesel. We'll maybe, but it also decreases demand for gasoline and private autos used to "go shopping." Commercial delivery is able to realize logistical efficiencies not available to private vehicles used for shopping. The likely impact of online shopping on oil demand is likely a net negative. It is disingenuous to focus on diesel demand gained to the exclusion of gasoline demand lost.
Was there anything here that made me think that covid might boost oil demand? Well, the author suggests that single use plastic for PPE could be on the upswing. Uh, huh.
The author still believes the demand peak will be sometime after 2030. Good luck with rainbows and unicorns loading up on cheap gasoline.
Ok, so, here's an example of someone trying to argue that 2019 will not stand as the peak for oil demand. I was hoping to find some insightful counter-arguments, but really this is pretty weak. It is little more than an assertion of belief in pre-Covid-19 BAU.
Here is an example of how insipid the reasoning is here:
While it is true that newer vehicles are more fuel efficient, that does not mean that an aging and shrinking ICE fleet is good for long-term demand creation. Each new vehicle locks in about 100 barrels of demand for the next 10 or more years. Vehicles not sold this year need not be made up for in subsequent years. Moreover, many fuel efficiency standards increase from year to year, as well as EV are becoming more desirable and affordable each year. So the vehicle sales that are delayed this year will more likely be filled later with either a more efficient ICE vehicle or an EV. So the financial difficulty of consumers to buy new cars this year sets up for either lower motorization later or even more fuel efficient alternatives in the futures. This cannot be good for oil demand over the next 10 years.
The author goes on to claim that cheap oil will mean driving will go up. Leave aside disincentives to travel places where you can pick up Covid-19, this does not square with the assertion of cash strapped consumer not being able to buy new cars. Older cars are more expensive to operate from a maintenance point of view. So this cuts into the benefit of cheaper gas. Besides older vehicles have less hedonic value to make driving around a pleasurable experience. An aging fleet is itself disincentive to driving more miles per vehicle, even if gas is cheap.
The author also thinks that online shopping increases demand for diesel. We'll maybe, but it also decreases demand for gasoline and private autos used to "go shopping." Commercial delivery is able to realize logistical efficiencies not available to private vehicles used for shopping. The likely impact of online shopping on oil demand is likely a net negative. It is disingenuous to focus on diesel demand gained to the exclusion of gasoline demand lost.
Was there anything here that made me think that covid might boost oil demand? Well, the author suggests that single use plastic for PPE could be on the upswing. Uh, huh.
The author still believes the demand peak will be sometime after 2030. Good luck with rainbows and unicorns loading up on cheap gasoline.
SmartElectric
Active Member
+1 !!!
Amazon and others will be laser beam focused on reducing costs to deliver, and one of those is fuel. Logistics is ready for disruption, I only wish we had even more than a few delivery EV offerings available today (2021 deliveries of Tesla Semi notwithstanding).
Nissan To Cancel Diesel NV200, Only Electric e-NV200 Remains
Frankly, Nissan should focus on this vehicle and let the leaf die a sad death, focus all battery production to this vehicle and sell the hell out of it rather than the Leaf (a short range EV with woeful tech and poor market position compared to much better competition IMHO).
mspohr
Well-Known Member
Bloomberg - Are you a robot?
Three of the biggest oil explorers in the U.S. -- Exxon Mobil Corp., Chevron Corp., and ConocoPhillips -- plan to curb as much as 660,000 barrels a day of combined American output by the end of June. Across the county, crude production by all companies has already tumbled about 1 million barrels a day since mid-March, when OPEC and its allies clinched an historic deal to trim global supply.
Almost 40% of oil and natural gas producers face insolvency within the year if crude prices remain near $30 a barrel, according to a survey by the Federal Reserve Bank of Kansas City. Production shut-ins aren’t just a U.S. phenomenon: wells are being turned off from Scandinavia to Brazil as crude producers wilt under the crash.
Three of the biggest oil explorers in the U.S. -- Exxon Mobil Corp., Chevron Corp., and ConocoPhillips -- plan to curb as much as 660,000 barrels a day of combined American output by the end of June. Across the county, crude production by all companies has already tumbled about 1 million barrels a day since mid-March, when OPEC and its allies clinched an historic deal to trim global supply.
Almost 40% of oil and natural gas producers face insolvency within the year if crude prices remain near $30 a barrel, according to a survey by the Federal Reserve Bank of Kansas City. Production shut-ins aren’t just a U.S. phenomenon: wells are being turned off from Scandinavia to Brazil as crude producers wilt under the crash.
TheTalkingMule
Distributed Energy Enthusiast
June WTI contract shorting window update....
May the 4th and WTI stands at $20.
April 4th had WTI at $27.
By April 16th we'd drifted down to $20, then the next day $18, then Off the cliff by Monday 4/20
.
Two simple questions from here:
1) Why on Earth would the same thing not happen again in 10 days if demand is even lower and supply has shown no signs of real slowing?
2) How can we best capture this potential 100% downward swing in WTI? Sub-question.....Which ETF(or other vehicle) is most likely to capture that drop "accurately"?
May the 4th and WTI stands at $20.
April 4th had WTI at $27.
By April 16th we'd drifted down to $20, then the next day $18, then Off the cliff by Monday 4/20
.Two simple questions from here:
1) Why on Earth would the same thing not happen again in 10 days if demand is even lower and supply has shown no signs of real slowing?
2) How can we best capture this potential 100% downward swing in WTI? Sub-question.....Which ETF(or other vehicle) is most likely to capture that drop "accurately"?
adiggs
Well-Known Member
June WTI contract shorting window update....
May the 4th and WTI stands at $20.
April 4th had WTI at $27.
By April 16th we'd drifted down to $20, then the next day $18, then Off the cliff by Monday 4/20
Two simple questions from here:
1) Why on Earth would the same thing not happen again in 10 days if demand is even lower and supply has shown no signs of real slowing?
2) How can we best capture this potential 100% downward swing in WTI? Sub-question.....Which ETF(or other vehicle) is most likely to capture that drop "accurately"?
If you're referring to last month's drop into the negatives, that was at least as much of USO being unable to take delivery PLUS owning 25% of the outstanding contracts. They ended up needing to pay people to take contracts off of their hands (so they bought into the position, and then had to pay to get out of the position, due to the volume).
Previously USO only invested in the front month contracts as a mechanism for tracking WTI as closely as possible. (All of this is my understanding).
USO has changed their investment approach due to how disastrous the previous month's expiration was. They've already exited the June contracts completely, plus they've spread their holdings out over the next 12 months (weighted towards the near months).
So I think that the last month monumental swing is off the table - the primary driver has already moved their holdings out further. They've also indicated that they won't be accurately tracking WTI in the short term, and possibly for a long time.
My best guess is that there's a WTI futures market rather than the USO ETF (which I believe invested in those futures). I think that's what you'd be looking for to short WTI, but really I don't know.
Not sure I agree with some of what you write, although I readily admit you know much more about this stuff than I do. I refer to USO. I think that like all futures contracts, there is a builtin time premium, which is bigger the further out you go. USO got caught in a squeeze because they were overexposed in the immediate future, and they bought their way out of it by spreading the exposure over time, but independent of anything that actually happens with the price of WTI, the spread itself is expensive. USO survived by leveraging their future, which is often a bad idea.
I think I just talked myself into shorting USO... note, the fund, not WTI.
TheTalkingMule
Distributed Energy Enthusiast
I don't anticipate another dive into deep negative territory, but I don't think that was entirely paper trader's doing either. At some point there is no one to take actual delivery of oil and nowhere to put it. That should also be driving us toward zero or even slightly negative as storage fills up.
We're either full or 2-4 weeks from being full and demand is still down ~25-40% with no end is sight. Shouldn't that drive WTI to $5 for like 6 months, even without any increase from Saudi Arabia?
Here's where total capacity stands as of Apr 24, including strategic reserve:
That's 63M barrels from all-time peak glut, which can be filled in what...18 days at this rate? I feel like we're walking around ignoring the entire demand side of the equation as if we're gonna flip a switch in a week. We'll top that chart peak with a jetpack strapped on and plenty of fuel to burn higher.
I don't think that paper WTI event was anything compared to what's coming next.
We're either full or 2-4 weeks from being full and demand is still down ~25-40% with no end is sight. Shouldn't that drive WTI to $5 for like 6 months, even without any increase from Saudi Arabia?
Here's where total capacity stands as of Apr 24, including strategic reserve:
That's 63M barrels from all-time peak glut, which can be filled in what...18 days at this rate? I feel like we're walking around ignoring the entire demand side of the equation as if we're gonna flip a switch in a week. We'll top that chart peak with a jetpack strapped on and plenty of fuel to burn higher.
I don't think that paper WTI event was anything compared to what's coming next.
adiggs
Well-Known Member
Two recent articles that I encountered talking about what happened with USO. This is really what my information comes from - I don't trade the oil market and after reading about the USO experience, I learned that I don't want to. I don't trade commodities more broadly either, and one key takeaway for me is to be really clear about what specifically is being traded.
One of the points made in both articles, is that USO has redefined itself pretty dynamically the last few weeks.
The big problem I see with USO is two fold:
1) it's huge relative to the market (25% of open contracts in the May expiration
2) it's trades are programmed and published, so the rest of the market uses that information to front run USO
Spreading out the contracts / underlying financial instruments that the ETF holds will undoubtedly help with both of these by lowering the footprint within any individual contract. But both are still issues - maybe not negative pricing for barrels of oil issues, but still issues.
Both of these DO sound to me like reasons to short USO itself, given that can be done
But my conviction for doing that trade is too low to attempt it. I'd be more likely to short Chevron "our first priority is protecting the dividend" Inc. I'd think that the better first priority is "avoid bankruptcy and maintain liquidity"; which is roughly what the rest of the majors are doing (my interpretation).
EDIT: argh - the links didn't come through. I'll update again with the links.
EDIT 2: links updated. Plus a bonus link!
Could Brent Crude Oil Prices Ever Fall Into Negative Territory? | OilPrice.com
I remember another article, but I'm not finding it.
adiggs
Well-Known Member
This is a fun article that's a week or 2 old:
Caves, Cars, & Clogged Pipelines - Oil Traders Turn To "Oddball Storage Locations" As Demand Hits 30-Year Lows
The ending quote:
Caves, Cars, & Clogged Pipelines - Oil Traders Turn To "Oddball Storage Locations" As Demand Hits 30-Year Lows
The ending quote:
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