Sunday, July 18, 2021

Energy Ramblings On A Sunday Morning -- July 18, 2021

OPEC+: let's make a deal.

WTI: $71.81

Reuters: sees deal as bullish. At least from Iraq's perspective. Link here.  My thoughts:

  • It seems analysts are pretty much evenly divided on whether we will see peak supply (higher prices) or peak demand (falling prices). 
  • OPEC talking its book. Of course, OPEC says supply won't meet demand in 2022 -- sees higher prices. 
  • Market on Monday will tell us what analysts think. Bears will focus on 400K/daily increase. Bulls will counter that this doesn't begin until May, 2022. My hunch: the bears win. Watch for oil to trend down this week. 
  • Saudi Arabia and Kuwait will not do well with $60 oil. Even $70 oil is not all that good for Saudi Arabia. Someone should run the Saudi Aramco numbers to see price of oil required to cover that $75 billion dividend. By the end of 2024, Iraq should pretty much be owned by China. Western oil companies pulling out.

More.

Mideast, my thoughts in reply to a reader:

1. Yes, China has an SPR -- I believe it might be in the same range (volume) as the US, but I've completely forgotten. Easy to find. [Later:
  • US SPR: authorized storage capacity of 714 million bbls.
  • China SPR: estimated capacity of about 500 million bbls.]
2. I mentioned this on the blog some weeks go: everyone talks about peak demand/peak supply. Everyone talks about swing producer. No one talks about swing consumer. Swing consumer is China. If oil goes above $70 or so, China cuts imports, limits what teapot refiners can import, and burns more coal.

3. I agree with you. Regardless of Afghanistan, China is now in the driver's seat in Iraq. China was already keeping Iran alive / solvent. By the end of 2024, Iraq/Iran will pretty much be in China's sphere of influence.

4. Iraq is a huge wild card. With major international oil companies pulling out, Iraq could be in a world of hurt. Iraq knows US won't come to Kuwait's aid if Iraq were to encroach on Kuwait again.

5. One wonders if Iran/Iraq/Russia would like to take over OPEC+. Push Saudi Arabia to #2 behind that triumvirate.

Global energy demand: tell me again, renewable energy will be China's answer to their energy needs. LOL. Link here. Note:

  • China surpassed US energy consumption in 2008.
  • China's energy consumption will trend  toward twice that of the US over the next couple of years.
  • last year for which we have data
  • US: 88
  • China: 146
  • India: not even on the chart in the until the mid-1980s; now #3
  • Russia: actually "backtracks"; corroborates a failing state
  • Germany: 12; falls behind Canada; are you kidding me?
  • Iran: not even on the chart until 2016? Now matches that of Germany. Are you kidding me. 

Kuwait:

  • see note above about Mideast politics;
  • today from S&P Global: Kuwait's oil output to fall in 2021; breakeven at $90 / bbl;
  • the ratings agency downgraded Kuwait's sovereign rating to 'A+' from 'AA-', with a negative economic outlook, citing its budget deficit, lack of funding strategy and sluggish oil sector.

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Grandsons

Our daughter/son-in-law bought new door knob "covers" to keep boys from opening doors.

She says she and her husband struggled to get the "covers" apart to put on the doors. Then she saw this:


Judah, above, one of the twins. I can only imagine what the other is doing while his parents are distracted. Heaven help the parents.

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