Russia -- Junk -- On Brink Of Insolvency -- Day 10 Of The War -- March 9, 2022

Tea leaves: Russia is starting to feel the effect of "going broke":

• it's day 13 of the invasion
• Russia desperately wants NATO to get involved
• direct hit on hospital hoping to drag NATO into conflict
• so far, NATO holding firm: "we" don't want to get involved officially

Russia: Fitch Ratings -- junk (Russia, not Fitch);

• on the brink of defaulting on its debts
• invasion: February 24, 2022
• data as of March 6, 2022, or thereabouts, 10 days after invasion
• ratings released by Fitch, March 9, 2022 -- 13 days after invasion
  

OPEC, spare capacity:

• the quota is an additional 400,000 bopd/month each month going forward
• OPEC members raised their production in February, 2022 by a collective 480,000 bpd -- a headline story;
• combined, OPEC+ produced 560,000 bpd more in February than it did in January
• although this report generated a headline, 560,00 bpd is not enough to offset months of the group's underproducton
• Russian crude oil exports is around 7 million bopd (fact-check me on this) -- Washington Post;
  
• Russian crude oil exports to US is around 600,000 bpd; ban kicks in, May, 2022
• mostly to California, Washington State, and Hawaii;
  
• fourteen members of the group underproduced their quota for the month

US SPR: to the previously announced 32-million bbl SPR release, the US will release an additional 18 million million bbls bring total to 50 million bbls to current program. That works out to 12 hours of global supply/demand. Meanwhile the BLP (Biden Leasing Permitorium) remains in effect. In round numbers the SPR is currently running about 600 million bbls (link here);

• it appears 590 million bbls is the historical average
• we can easily go to 250 million bbls -- that would be very low, but it's war --
• so, 600 - 250 = 350
• 350/50 = 7 more 50 million-bbl releases certainly very doable.
• let's go Brandon

Germany: won't extend nuclear plant lifespan to combat energy concerns. 

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Back to the Bakken

Active rigs:

$109.80	3/9/2022	03/09/2021	03/09/2020	03/09/2019	03/09/2018
Active Rigs	32	15	55	67	59

Two new permits, #38821 - #38822, inclusive:

• Operator: Grayson Mill
• Field: Camp (McKenzie)
• Comment: 
• Grayson Mill has permits for two Ron wells in SWSW 21-152-101; 
• to be sited 300 FSL and between 570 FWL and 600 FWL

Fourteen permits renewed:

• Zavanna (6): six Shorthorn permits in Williams County;
• Hess (6): six BB-Federal A-LS permits in McKenize County;
• Liberty Resources (2): two Elroy permits in Williams County;

Buffett Keeps Chipping Away At His Pile Of Cash ...

 ... seeing BRK-B, a "value" / conservative mutual fund / insurance company spiking $8 / share (up 2.4%) was not on my bingo card today. 

BRK-B won't close at a new new 52-week high today but it will come close.

Just think ... from an earlier post ... had Buffett not pulled the trigger on this purchase how much worse  would BRK-B be doing today: 

On Friday, March 4, 2022, Berkshire Hathaway disclosed a purchase of almost 30 million additional shares in Occidental Petroleum Corp., a Houston-based oil and gas company. The deal, worth roughly $1.6 billion at midday Monday, helped draw down his company’s near-record $146.7 billion pile of cash.

Risking $1.6 billion of his $146.7 billion cash hoard. Oh. My. Goodness. 

Posted, 12:20 p.m. CT, March 9, 2022. 

Holy mackerel, for inexplicable reasons, even SRE is up today. OKE is flat. 

Later, March 12, 2022: it's being reported that Warren Buffett has bought another $1.5 billion worth of OXY. Link here.  Another $1.5 billion off that $147 billion hoard of cash. OXY has a market cap of $55 billion; why doesn't BRK simply buy OXY? The fund would still have $100 billion in cash.

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A Musical Interlude

If there is such a thing as reincarnation, I want to come back as a lip-reading specialist. I would start with this video:

I Do x 5, ABBA

EIA Weekly Report -- No Surprises But Distillate Fuel Is Going To Be A Problem For Farmers And Truckers -- March 9, 2022

Distillate fuel: it's gonna be a problem for farmers and truckers. So, what's UNP doing today? Up another $1.25, trading at $254.65, still well below its 52-week high of $270.

The EIA weekly report, link here:

• US crude oil in storage dropped to 411.6 million bbls; 13% below the five-year average.
• days of supply: a more-than-comfortable 27.1 days
• it needs to get below 21 days of supply to even begin to be a concern 
• hey, when that dreaded "demand destruction" kicks in, the number of days of supply will increase significantly
  
• US crude oil decreased by a moderate 1.9 million bbls. Yawn.
• US crude oil imports averaged 6.3 million bbls per day last week; which was an increase of 0.6 million bbls per day from the previous week. Yawn.
• can hardly wait to see next week's numbers after the Biden ban of Russian oil; 
• by the way, the Biden Russian oil ban won't even go into effect until May, 2022.
  
• US refiners are operating at 89.3% -- trending up. Will "we" go above 90% next week. We haven't hit the "9-handle" in a long time. When I say "9-handle" it makes me feel like I know what I'm talking about. I don't. 
• US distillate fuel in storage decreased by 5.2 million bbls; distillate fuel in storage 18% below the five-year average; farmers take note.
• jet fuel supplied was up 35.4% from same four-week period last year;
• gasoline demand graph will be released later today;

Russian crude oil imports, link here:

• December, 2021: 12,569,000 bbls or 405,000 bopd
• December, 2020: 12,898,000 bbls or 429,933 bopd
• December 2019: 21,589,000 bbls or 696,419 bopd
• December 2018: 8,409,000 bbls or 271,258 bopd (no typo) -- the dreaded demand destruction?
• given the right incentives, North Dakota and Saskatchewan Spearfish could probably make up the impending Russian shortfall
  

First group "financial / economic" indicators:

• 10-Year Treasury: link here. Trending toward 2% again. Yield at 1.913%.
  
• DXY: link here. Dollar down almost one percent; now at 98.21. This is not why WTI is selling off. Someone suggested the strong dollar caused WTI to sell off today. The dollar was stronger yesterday, weaker today.
  
• Silver: link here. DOWN over 2%; trading at $26.35.
  
• Gold: link here. WAY DOWN; down over 3%. Trading well below the high of $2,056 yesterday; now trading at $1,991.
  
• CBOE volatility index: link here. Explained at Investopedia.VIX drops 7.2%.

Rod Stewart, an acoustic set, just posted last year:

Biden: Well Played -- It's All Russia's Fault -- March 9, 2022

From The Los Angeles Time today:

California to experience high gas prices from the Russian oil ban.

President Biden said the U.S. will ban the importing of Russian oil, liquefied natural gas and coal, broadening the economic sanctions leveled against Moscow over its war in Ukraine. California drivers will be uniquely squeezed at the fuel pump with this ban because West Coast oil refineries are Russia’s best U.S. customers.

Russian oil is only a small piece of the U.S. energy picture. But nearly half of Russian oil shipped into the U.S. last year, or close to 100,000 barrels a day, ended up primarily in California, Washington and Hawaii, refinery consultant Andrew Lipow said. And the amount of Russian oil imported into the West Coast has been on the rise.

Of course, taking a hard stance against Russian President Vladimir Putin’s invasion of Ukraine was never going to be cost-free. But many people have been surprised and concerned at how quickly those costs have hit home — especially after gas prices jumped almost overnight.

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Bacon

Wow, for those with money, life can be great. I don't have an oligarch's yacht, but I have bacon. LOL.

Seriously.

We live next door to thirty-seven incredible restaurants. We can walk to most of them, and if too far to walk, I can bike, and, for those that are one-half mile away, we can always drive. 

Yesterday we took our home-from-college granddaughter to brunch at "Morning Watch." My wife and Arianna had a very, very nice full-brunch-entree. Me? An English muffin and a Bloody Mary. I don't recall the price of the English muffin; it was relatively "free." It was certainly way less than the tax on the whole meal. 

The Bloody Mary, $8.19. 

But, wow, the bacon that garnished the Blood Mary was worth $10. LOL. The Bloody Mary, in other words, was free.

So, when we got ready to settle the bill, I ordered a side order of bacon to take home. We would have it for tomorrow's (which is now today's) brunch: a tomato-lettuce-and-bacon sandwich. 

And we did. Four huge slices of bacon. My wife and I each had one slice, cut in half, leaving two slices again for tomorrow.

The four slices of bacon cost $5.89, but we will get four BLTs out of it. The restaurant BLT at "First Watch" is $9.99. Four BLTs would run us $50 in the restaurant -- at home, about $2/sandwich.

I've talked about this often. 

I asked the waiter, Philip, why their bacon was called "Million Dollar Bacon," because it tastes so good or because it costs so much?

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A Musical Interlude 

Woodstock, 1969

 

This was not part of the film. John Fogerty did not want it to be included in the film. 

Put A Spell On Me, CCR

EIA Weekly Report Pending -- March 9, 2022

First group "financial / economic" indicators:

• 10-Year Treasury: link here. Trending toward 2% again. Yield at 1.913%.
  
• DXY: link here. Dollar down almost one percent; now at 98.21. This is not why WTI is selling off. Someone suggested the strong dollar caused WTI to sell off today. The dollar was stronger yesterday, weaker today.
  
• Silver: link here. DOWN over 2%; trading at $26.35.
  
• Gold: link here. WAY DOWN; down over 3%. Trading well below the high of $2,056 yesterday; now trading at $1,991.
  
• CBOE volatility index: link here. Explained at Investopedia.VIX drops 7.2%. 

EIA weekly petroleum report out later this morning.

WTI Plunges; No Wells Coming Off Confidential List; RBN Energy Has It Exactly Right -- March 9, 2022

Things are not going all that badly for Europe with regard to the war in Ukraine. Exhibit A? Kamala Harris is in charge of US affairs regarding this war. 

Wow: one British speech, and oil prices plummet! Biden bans Russian oil, natural gas, and coal. Everyone panics (including me) and oil prices plummet. It's a fool's errand to predict oil prices. I can't wait to fill my car with gasoline today. So much for all the renewable energy talk. Right now:

From yesterday: wow, well played by the Biden team. Huge head fake. 

President Biden announced the ban on Russian oil, natural gas, and coal and then flew to Ft Worth, Texas. It was rumored that he was going to Texas to talk oil, which, of course, made no sense at all (see original post: going to Ft Worth to talk oil? Oh, give me a break). 

He kept to his schedule. Following the SOTU speech in which he spent a good deal of time talking about curing cancer and medical care for veterans, where does he go? He heads to a VA hospital in Texas to talk, not about oil, or Ukraine, but about curing cancer and providing better medical care for veterans. Wow, huge head fake. Well played.

Just like that, there's no oil or gas shortage. Biden announces that the US will ban all oil, natural gas, and coal from Russia, the markets panic, the price of oil surges. This morning, the price of oil dropped back significantly. What happened. Some Brit made a speech saying they would have enough natural gas to get them through the winter. Just like that, no oil or gas shortage. One speech. And just like the market (actually, pre-market) surges.

As I've said before, I would prefer "a Biden" in the White House right now than "a Trump." 

Hey, by the way, why is the pre-market surging? The market does not react this way to Ukraine or the price of oil. 

The market reacts to the Fed. Right now the Dow is up almost 600 points, and this despite shares in oil sector plummeting. What's up. Is the market trading on a bet that Jay Powell doesn't raise rates this month, or that he sticks to 25 basis points which is, like, still free money? Perhaps the market is simply "up" because it was oversold. If so, there is still a lot of time to get in. Ford is still trading below and $17, and up 4% in pre-trading it's still below $17. ATT (T) is perhaps the most interesting. Despite all the headwinds it has really held up. The six-month high was $28 back in September, 2021. It slumped to $22 in December, 2021, but is now back to $23 after some wild gyration but still in a trading range. 

And it's paying 9%. Are you kidding me. Of course, that's an "accidental yield." Not only will the yield come down as the price of T comes back up, but the dividend will be cut in half when TimeWarner is spun off.

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.

$150 oil: that's what Yahoo!Finance "morning brief" is calling for. 

Like me, Yahoo writers panicked when Biden made "the" announcement to ban Russian oil. Now, less than 24 hours later, never mind. WTI and Brent slump. Britain now says they have enough natural gas to get through the winter. And just like that, thee panic is over.

The big news, of course: Kamala Harris is going to Poland (?) to sort out this mess. No one takes her seriously, of course, but it doesn't matter. I saw this all the time in the military. Everyone shows up at the meeting; everyone listens to the "big guy" in the room, and then we all went back to our offices and continued to do what we were doing before the meeting.

Oil: "way down" this morning, but nothing has really changed. Nice sector rotation in the market.

Pretty amazing: oil is "way down" and energy stocks (equity) have dropped significantly in pre-market trading, and yet .... drum roll ... WTI is still more than $120. I'm lovin' it.  I was thrilled to see oil drop overnight, while noting that fundamentally nothing has changed. Or has something changed?

Is GasBuddy gaslighting us? 

Pet peeve: all this talk about "demand destruction" -- a concept that is undefined, and has no metrics. A worthless meme. Was that "demand destruction" when gasoline demand in 2020 bottomed out? 

First group "financial / economic" indicators:

• 10-Year Treasury: link here. Trending toward 2% again. Yield at 1.913%.
  
• DXY: link here. Dollar down almost one percent; now at 98.21. This is not why WTI is selling off. Someone suggested the strong dollar caused WTI to sell off today. The dollar was stronger yesterday, weaker today.
  
• Silver: link here. DOWN over 2%; trading at $26.35.
  
• Gold: link here. WAY DOWN; down over 3%. Trading well below the high of $2,056 yesterday; now trading at $1,991.
  
• CBOE volatility index: link here. Explained at Investopedia.VIX drops 7.2%.
  

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Back to the Bakken

Active rigs:

$120.7	3/9/2022	03/09/2021	03/09/2020	03/09/2019	03/09/2018
Active Rigs	32	15	55	67	59

Wednesday, March 9, 2022: 10 for the month, 118 for the quarter, 118 for the year

• None.

RBN Energy: a reality check on energy prices and their impact. 

WTI is selling for north of $120 a barrel, gasoline and diesel are retailing for more than $4.10 and $4.80 a gallon, respectively, and, with Russia continuing its unprovoked war against Ukraine, it’s hard to imagine prices for hydrocarbons easing by much anytime soon.

As startling as the recent spikes in crude oil and refined products prices may be, however, it’s worth keeping in mind that, in real-dollar terms, prices for these commodities have been considerably higher in the past, including through much of the 2006-14 period and back in 1979-81.

And don’t forget, the car, SUV, or pickup you’re driving today consumes about two-thirds as much fuel per mile, on average, as the vehicle you (or your parents) drove back when Ronald Reagan was running for president and Pink Floyd’s The Wall was the best-selling album. In today’s RBN blog, we put today’s “record-breaking” prices for crude oil and motor fuels in perspective.