Idle Rambling -- Day Zero: The Biden Surge -- March 31, 2022

Earlier I said that I would explain later my thoughts regarding Nancy Pelosi and the Biden Surge, why I, as an investor see the Biden Surge as bullish. Well, it turns out I don't have to: a contributor over at ZeroHedge has done an incredible job.

In the near term, expect the price of oil to drop, the sweet spot being $90 - $100 but then to move higher. These buying opportunities don't come around often.

It will be fascinating to watch the price of oil. I never really thought the problem was a lack of oil but having said that, it seems that flooding the US market with oil is going to have a lot of folks saying, "please, no more oil. We don't need it." And prices dropping much farther and faster than we thought likely. Again, I don't know. Are we sailing uncharted seas?

Beyond The Sea, Bobby Darin

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. 

This data has been out for awhile -- US January crude oil production -- but either I was unaware or had forgotten: US oil production fell to its lowest since September, 2021. Source. This particular report was issued today, March 31, 2022. I assume the White House had this data for a few days and may have been the tipping point for the administration -- frustrated with "lack" of US oil production. One wonders.

I didn't pay much attention to the market today; it was looking fairly good earlier in the day, but now I see it had a particularly remarkable sell-off. Last day of the quarter; funds locking in whatever profits they might have. I don't know. Just a thought. Certainly, cheap oil should have been good for the market (other than the oils).

Right now, futures look good for tomorrow.

Oh, back to flooding the market with one million bopd. I wonder what the Saudis think of this? LOL.

Stephen Covey: Seek First To Understand -- March 31, 2022

This is so incredibly cool. Based on source and comments, one gets the feeling that Ms Pelosi is being misunderstood.

This is so incredibly fascinating.

This explains everything. 

The discussions leading up to decision to release a million bbls of oil every day from the SPR must have been absolutely fascinating. 

From social media today with video:

Nancy Pelosi: "We cannot use high gasoline prices as an excuse to produce more American energy."  

That explains why we are emptying our SPR. Emptying the SPR will force faster energy transition to renewable energy. 

I did not listen to the video. I only posted how she was quoted.  

For oil bulls, that is an incredibly bullish exchange. My hunch: Warren Buffett knew immediately what her words meant.

That took a lot a lot of energy out of me (no put intended). I'm not sure I will blog any more tonight. I'm sure I will but for now, taking a break. 

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Take My Breath Away

Take My Breath Away, Berlin

Latest Russian Camouflage Technology Makes Military Vehicles Virtually Invisible -- March 31, 2022

Putin's War is tracked here.

Source:

"Secondary" draft called up. Having lost already more men that Russia did in ten years in Afghanistan, Putin is now calling up more draftees.

• Source: Putin ordering draft of 135,000 amid difficulties in Ukraine war.

Two New Permits; SPR Release: One Big Rube Goldberg Debacle -- March 31, 2022

Union rejected: Amazon workers in Alabama reject unionization for second time.

Auto dealers: not being talked about, but my hunch is that a lot of auto dealers are going to declare bankrupty or "go under" before the year is over. 

I don't get out much any more but driving past one of the biggest Chevrolet dealers in the United States, not just Texas, but in the entire US, the lot is practically empty. They have nothing to sell. There were six new Bolts available but that was it in the EV area which used to be packed. There was no activity; the sales signs were in disrepair; one almost wonders if this section has been vacated for the time being to try to save cash. I don't know but it looked deserted. 

From CNBC earlier today: with few cars on lots, US auto sales likely fell sharply in the first quarter, analysts say. Ya think! I don't need an analyst to tell me that. It's obvious. 

From ArgusMedia: GM, Ford will cut sedan production.

"I don't get out much any more." I'm in excellent good physical shape and no medical ailments, and no aches and pains when I get up in the morning.

I bike as long and as much as I want, but "I don't get out much any more" in terms of getting in my car and going places. The Covid-19 lock down did me a world of good. I've learned that I don't need Starbucks, restaurants, movies, zoos, malls, or anything else to stay entertained. I literally have no desire to go anywhere any more. It's wonderful. I'm getting more done than I ever did.

I'll post my mileage for the two cars I have to corroborate what I've just said. Maybe tomorrow. More on this whole topic later this summer, perhaps.

SPR release: biggest on record. One million bbls / day for the next six months. Observations:

• several market participants suggest the maximum flow rate from the SPR is around one-half million bopd; source; 
• the SPR and drawdown rates; source;
• folks forget that the price of oil is not determined by the first bbls released by the SPR but the last bbl produced by oil companies.
  
• even if cavern pumps can support it, takeaway capacity -- pipeline, truck, rail, ship -- is grossly inadequate to take away an additional one million bopd; think about it; this will be the next story;
• how bad is it? The administration is going to have suspend the Jones Act; source; the administration says they will process Jones Act waiver requests within two days to get oil to refiners from the SPR if necessary.
  
• how much will consumers save at the pump? From President Biden himself: "The SPR release could cut anywhere from 10 - 35 cents a gallon, but it depends on how much allies release." The allies can't come close to releasing anything like the US promises to release.
• even if oil can get to the refineries, they are already operating at 92% capacity; not much room for additional oil;
• in round numbers, the SPR has 450 million bbls of crude oil; if 180 million bbls released by mid-term elections, will still leave the SPR in great shape;
• punitive actions on oil sector will cause smaller, under-financed operations to go out of business; Big Oil to do just fine; expect more consolidation;
• one would assume drillers would cut back on CAPEX, take SPR oil at cost; save on CAPEX;
• bottom line: when one looks at all this "stuff," the only way one can read this is that the White House is absolutely in a panic. Will it really matter if they are able to get price of gasoline at the pump down from $4.50 to $4.10 / gallon? 
• worse, everything suggests the SPR can't possible replace the Russian oil affected by sanctions;
  

President Biden: to paraphrase, "energy transition is dead."

• drill, drill, drill; source;
• "The bottom line is, if we want lower gas prices, we need to have more oil supply right now."

Nancy Pelosi: "We cannot use high gasoline prices as an excuse to produce more American energy."  

That explains why we are emptying our SPR. Emptying the SPR will force faster energy transition to renewable energy. 

Mexico:

• taking advantage of high-priced oil;
• will "temporarily" suspend self-sufficiency goal;
• will refine 850,000 bopd daily instead of one million; export the rest; source;

Investment portfolio:

• my oil-overweighted portfolio outperformed all my other portfolios; corroborated here;
  
• I don't buy oil; I buy shares in oil companies; big difference;
• from Dan Pickering:
• front month WTO down 3.5%
• FY23 and FY24 is up 0.6% and 1.8%
• more supply near tear but more demand (SPR refill) down the road:

Julianne Geiger over at oilprice.com:

• "I don't see it, I guess."
• "Calling on Congress to levy on US oil companies for land they are hoarding and not drilling on."
• "Calling on Congress to speed up the energy transition."
• I didn't care much for the tweet itself, I'm just glad to see Julianne Geiger tweeting.

Oil, sweet spot:

• WTI: $80 - $90

Is the SPR release more valuable to drillers than "Alpine High"?

• memo to self: take another look at APA
• source: APA raised to buy;
• I am not directly invested in APA and am diversifying out of energy, but once the dust settles from today's SPR announcement, it make be time to take another look at APA; compare P/E with others;

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.

Rubles or roubles, who will blink first? Putin says natural gas flow will halt tomorrow, April 1, 2022, if consumers refuse to pay in rubles. Get out the popcorn.

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Back to the Bakken

Active rigs:

$100.80	3/31/2022	03/31/2021	03/31/2020	03/31/2019	03/31/2018
Active Rigs	33	14	43	66	60

Two new permits, #38862 - #38863:

• Operator: Sinclair Oil & Gas
• Field: Little Knife (Dunn)
• Comments:
• Sinclair has permits for two Hovden Federal wells in NENE 29-146-97; 
• to be sited 1186 FL and 821; and, 1163 FNL and 854 FEL;

Destination Of US Crude Oil Exports

Destination of US crude oil exports, EIA link:

Baseline, December 2021, monthly, in 1000's of bbls: more complete list here; top ten destinations:

• Brazil: 11,944
• Canada: 26,436
• China: 14,345 
• France: 5,766
• India: 25,061
• Japan: 18,538
• Korea, South: 18,082
• Mexico: 43,160
• Netherlands: 16,082
• UK: 10,725

March 31, 2022:

The Biden Surge -- Refined Products; Refineries; Where Will Product End Up -- March 31, 2022

The Biden Surge is tracked here.  

Data points of interest to be followed monthly for the next six months:

• days of supply of US crude oil;
• amount of distillate in storage;
• refiners percent of operating capacity;
• US exports of crude oil; refined products;
• destination of US crude oil exports; refined product exports;

If the one-million-bopd-SPR-release is announced, data points that will be of interest:

• refiners operating at 92% operating capacity; will that percentage increase?
• what product is most critical right now? diesel fuel
• will refiners get the "right" oil to optimize diesel fuel production?
• I don't think it's a zero-sum game, but some suggest refiners could produce more diesel at expense of gasoline
• currently there's a 26.6 day supply of crude oil; at the mid-point

First Quarter Closes Out -- March 31, 2022

Jobless claims:

• weekly
• remain at 50-year lows, but rose "modestly"
• 202,000 vs 196,000 expected
• 188,000 previous week -- lowest level since September, 1969
• continuing claims
• 1.307 million vs 1.340 million expected

Insulin: US House votes to cap price. About time. True travesty. 

• Senator Joe Manchin clearly on wrong side on this one. 
• opponents call it government price fixing. 
• my suggestion: release one million doses daily from the insulin strategic reserve for the next six months. 
  

Amazon: sticks with Jamie Dimon, JPMorgan after flirting with AMEX.

Open book test: Walgreen's beats earnings expectations; omicron-fueled demand for tests, boosters.

Putin's War: head fake. Those who thought Putin was withdrawing ... never mind.

• ruble: has recovered most of its losses 
• following the ruble and ignoring the bigger picture
• having said that, Russia likely to "miss" it's April 4, 2022, debt payment
  
• I'm sticking with Zeihan.

Nord Stream 2:

• $11 billion to build;
• now unused and abandoned.

The "slap":

• Smith Will facing suspension, expulsion from the Academy;
• my hunch: a one-year suspension
• Chris Rock: ticket prices soaring; he's coming out looking pretty nifty

Augusta, next weekend:

• Tiger?

No Wells Coming Off Confidential List; Tellurian's Driftwood LNG -- March 31, 2022

Putin's War:

• misled;
• Switchblades;
• hybrid war: wiki entry;
• hybrid war: Small Wars Journal;

Amazon: union vote, Alabama. Matches Biden's polling numbers.

Chips: Apple considering more chip suppliers, including China;

• NAND flash memory chips made Yangtze Memory Technologies.

Cramer: flashback from social media today. 

Biden Surge: unlikely to be enough. Reuters.

• the Biden Surge is tracked here.

Oil:

• Brent: down 5.64%; down $6.40; trading pre-market at $107.00
• WTI: down 6.4%; down $6.90; trading pre-market at $100.90
• sweet spot: $90 - $100

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Back to the Bakken

Active rigs:

$$100.90	3/31/2022	03/31/2021	03/31/2020	03/31/2019	03/31/2018
Active Rigs	34	14	43	66	60

No wells coming off confidential list today.

RBN Energy: with construction beginning, is Tellurian's Driftwood LNG a done deal, part 3. Archived.

Russia’s invasion of Ukraine has pushed U.S. LNG into the spotlight as Europe seeks to wean itself off Russian natural gas. In the short term, U.S. LNG to Europe is constrained by liquefaction capacity on the LNG output side but also by Europe’s own import capacity and pipeline grid. Very little can be done to quickly increase global LNG production, and while many export terminals will operate at peak capacity for longer to boost output, LNG terminals take time to build, so capacity for this year and the next few years is already set.

Further out, however, there is no shortage of new projects hoping to capitalize on the current clamor for LNG and reach a final investment decision (FID), and the U.S. could be headed toward its biggest year for new LNG capacity ever. In today’s RBN blog, we continue our series examining key U.S. projects, turning our lens to what is arguably the most discussed and reported-on project on our list — and one that is moving forward potentially without a formal FID — Tellurian’s Driftwood LNG.