Sunday Notes -- December 1, 2019

Disclaimer: this is not an investment site.  Do not make any investment, financial, job, career, travel, or relationship decisions based on what you read here or think you may have read here.

Futures: I've long learned that futures the night before (and through the night) often have little correlation with the opening bell, but hope springs eternal. Right now, 7:08 p.m. Central Time, the Dow is up around 100 points. NASDAQ and S&P 500 are also up.

Economy: Black Friday set an on-line sales record, and came close to setting an all-time on-line sales record regardless of the day (i.e., Cyber Monday). It's very possible that tomorrow will set an all-time on-line sales record.

US shale revolution: we're starting to see more and more stories that the US shale revolution is slowing down. Some of those stories have already been posted (linked). Now another one from Bloomberg, dated December 1, 2019: OPEC+ gambles that US shale's golden age is over. But the numbers are not particularly noteworthy:

Vitol Group, the world’s largest independent oil trader, expects U.S. production to increase by 700,000 barrels a day from December 2019 to December 2020, compared to growth of 1.1 million barrels a day from the end of 2018 to the end of 2019.

In fact, it looks like US shale is just one problem for OPEC:

Perhaps the biggest problem for OPEC isn’t American shale but rising output elsewhere. Brazilian and Norwegian production is increasing, and will increase further in 2020. After several years of low prices, engineers have made many projects cheaper, and the results are clear.

Norway’s Johan Sverdrup oil field, the biggest development in decades in the North Sea, started up earlier this year, months ahead of schedule and several billions dollars under its original budget. [And one of the reasons I love to blog; had I not blogged I would have missed this one; tracked at the sidebar at the right.]

And Guyana, a tiny country bordering Venezuela in Latin America, is about to pump oil for the first time. [Another play that turned out to be quite a surprise.]

Everybody keeps talking about how they can't make money at current price of oil, and yet more and more oil is found, and more and more oil is produced. And some folks think supply is much tighter than we are led to believe. This will be fascinating to watch. 2020 might be the year that some things are finally sorted out.

More from the linked article:

The cartel knows well that’s taking a gamble. The group’s own estimates show that if it continues pumping as much as it has done over the last couple of months -- roughly 29.9 million barrels a day -- it would supply about 200,000 barrels more crude daily than the market needs on average next year. The oversupply would be concentrated in the first half, when OPEC estimates it needs to pump just 29 million barrels a day to prevent oil stocks building up.

Still, OPEC officials, speaking privately, believe the world’s supply and demand balance could be tighter than many expect -- a big change from the past three years. They see non-OPEC output growth falling short of forecasts while global demand increases could be higher than expected.

And the crude market is, right now, relatively tight, giving OPEC some solace that it would be able to weather the first few months of 2020 when it will loosen up a bit. The tightness is particularly acute for the kind of oil that most Middle East nations pump: lower quality so-called heavy-sour oil. Riyadh, for example, is selling its flagship Arab Light crude at a premium of 40 cents to the benchmark into Asia, one of the strongest ever levels.

Another article along the same line: from oilprice. Probably a re-write of other stories already published/posted/linked.


WTI, tonight, futures, after a bad week, WTI is up 1.63% tonight, up 90 cents, trading at $56.07. 

Tea leaves: everything suggests a great day for the market tomorrow.