Crude Oil -- Peak Demand, Peak Supply -- Which Comes First? -- Morgan Stanley Says Peak Supply -- Result: Significantly Higher Crude Oil Prices Sooner Than Later -- October 20, 2021

Generally, with regard to ZeroHedge, I can take it or leave it. But this particular article, linked here, sent to me by a reader, is a "keeper," and a must-read. I'm not going to cut / paste any excerpt. If interested, one will have to go to the link at ZeroHedge. I have archived it. If the link breaks or the article disappears let me know and I will forward you what I can. 

I read the article very, very quickly. I probably missed a lot and probably misread a lot but bottom line, Morgan Stanly suggests global demand for energy (and percent of crude oil's contribution) will grow more quickly than forecast and current production trends suggest, in Morgan Stanley's estimation, that production will not keep with up with demand.

Short soundbite: peak demand will occur before peak supply. 

Two comments with regard to the article.

First.

The big unknown is exactly of what Saudi Arabia is capable. To what degree can OPEC+ / Saudi Arabia change the equation. Perhaps I should do a poll on this but it's my feeling that readers are pretty much divided:

• half of my readers would say that Saudi Arabia is sandbagging us, purposely under-producing, to drive prices higher;
• the other half would argue that Saudi Arabia may indeed be challenged with greater production to meet increased demand.

Regardless of the correct answer, which may not be known for years / decades, it is the great unknown in the peak demand / peak supply equation. 

Second.

I read the article quickly and I may have missed it but, although I saw China (and Asia) mentioned, I did not see India mentioned. India always seems to be left out of these discussions. 

Bottom line: the tea leaves suggest --

• most conservatively: crude oil will stay in the current trading range through the end of the year;
• increasing number of analysis: suggestions that crude oil will trend toward $95 by mid-2020 if not by the end of this year (2021)
• some options traders are willing to put some money on $200 oil by the end of 2022.

Having said that, some analysts suggest crude oil could drop to $40, and maybe lower. 

Be that as it may, the linked ZeroHedge article is a keeper.

Who's Winning, Who's Losing -- October 5, 2021

Shale, some of those who make money from the US shale oil and gas industry:

• blue collar (roughnecks, drilling and fracking, infrastructure, truckers)
• white collar (geologists, lawyers, landmen)
• CEO, directors, bankers
  
• venture capitalists
• major investors
• mom-and-pop retail investors
  
• mom-and-pop mineral owners
• surface owners (often farmers)
  

So, of the categories above, where is the biggest shift, taking into account the data at this article?

Comments:

• during a boom, the mom-and-pop mineral owners do particularly well, but in the manufacturing stage, their returns may drop a bit;
• in the current situation, when shale operators are refusing to go crazy with drilling, and North Dakota production drops from second place to third place, mom-and-pop mineral owners will see a drop in royalties -- unless the price of oil increases significantly

Derivatives:

• North Dakota dropping from second place to third place is a non-story; but a great story, nonetheless

In other words:

• if one's primary income from shale tends to be from the mineral rights, it might not look so good now, except for the fact that less production is being offset by higher prices;
• if one's primary income from shale is through investing in shale companies like Devon, CLR, etc., now is a pretty good time -- see the linked article above.

Bottom line:

• I'm lovin' it.

Notes From All Over -- Part 1 -- September 25, 2021

Then: just, equitable, affordable --> 

Now: forced priorities. 

Covid-19:

• forced priorities: lockdowns, social distancing, masks, emergency use authorization vaccinations, no antibiotic alternatives.

Renewable energy:

• forced priorities: back to gasoline lines; unaffordable transportation; lack of heating oil for winter; summer grid brownouts.

Two Best Energy Editorials To Read Before You Start Your Day -- September 21, 2021

The two best editorials to read this morning. 

Having scanned 3,456,218 sites overnight and using sophisticated AI tools these are the best of the best:

David Messler: the dangerous rally in natural gas prices. September 20, 2021, 7:00 p.m. CDT.
This is just a very, very small piece, Groningen: 

“The drastic drop in output from Groningen will redefine the European energy landscape. The field, which had a rebound in production at the start of this century, reaching 57 billion m3 in 2013, was for decades the central cog in northwest Europe’s gas system.”

“The phase-out of this giant field will force Europe to expand its gas imports at an even quicker pace. We can already see this drastic shift taking place in the Netherlands, which is in the midst of the transition from being a net gas exporter to a net importer,” says Carlos Torres-Diaz, head of gas markets research at Rystad Energy.”

Charles Kennedy: oil demand set to grown even after 2050. September 20, 2021, 1;00 p.m. CDT.  

 “The impact of climate change policies on oil demand are highly exaggerated – The impact is mostly on demand growth, not on demand itself,” Alhajji said during a keynote speech at the event focused on the impact of the energy transition on oil-dependent economies. 

First geopolitical "region" mentioned: Africa. Oh, give me a break.

“African countries can reduce their carbon footprint by focusing on energy efficiency and the low hanging fruits, save oil & gas for exports or value added industries and place solar and wind projects strategically.”

Biden Administration: Will "Investigate" Why Gasoline Prices Are Not Falling -- I Can't Make This Stuff Up -- September 16, 2021

Updates

September 22, 2021: I wonder if there has been any progress?

Original Post 

Link here.

Link here.

Link here.

Link here.

State Of US Shale -- Irina Slav -- September 15, 2021

Link here to Irina Slav.

It would have been unthinkable a few months ago: ramping up production was the last thing U.S. shale drillers would do amid a hesitant price recovery and heavy uncertainty around demand recovery. In these few months, however, a lot has changed. Now, U.S. shale drillers may be ready to get back to drilling. The current situation in U.S. oil is one that shale companies must have dreamed about during the worst of the crisis. Inventories are down considerably, thanks to recovering demand. But they are also down due to the recent shut-ins of offshore production thanks to Hurricane Ida.

On top of that, the shale industry's own inventory of drilled but uncompleted wells (DUCs) is also down considerably, Reuters has reported, citing analysts and industry insiders.

This means that soon, we could see a more sizeable increase in the U.S. rig count as shale producers seek to avert a decline in production. It also means that shale companies might see some renewed investor criticism because drilling more would require higher spending, and investors have been extra-sensitive towards spending recently.

Entire article is archived.

Oil Prices Climb On Shocking OPEC Report -- Sources -- September 13, 2021

Link here to Tsvetana Paraskova.

This article is exactly in line with what the "tea leaves" are telling me. 

This is huge.

One can argue "it's just talk," but for those following global events the past two years, this article seems to fall right in line.

From the linked article;

The surge of the Delta variant around the globe is set to partially delay oil demand recovery into the next year when robust economic growth and stronger recovery in fuel consumption will see global oil demand averaging 100.8 million barrels per day and exceeding pre-COVID levels, OPEC said on Monday [September 13, 2021], raising its 2022 demand forecast by a shocking 900,000 bpd.

Next year, oil demand worldwide is now expected to jump by around 4.2 million bpd compared to 2021, an upward revision of 900,000 bpd compared to last month’s assessment, OPEC said in its closely-watched Monthly Oil Market Report (MOMR) today.

This year, total global oil demand remains unchanged at 96.7 million bpd for the whole of 2021. But the fourth-quarter demand was revised slightly down, by 110,000 bpd from the August estimate of 99.82 million bpd to 99.7 million bpd now, OPEC said in its September report.

“Oil demand in 3Q21 has proved to be resilient, supported by rising mobility and traveling activities, particularly in the OECD. At the same time, the increased risk of COVID-19 cases primarily fuelled by the Delta variant is clouding oil demand prospects going into the final quarter of the year, resulting in downward adjustments to 4Q21 estimates,” the cartel noted. Demand for 2022 was revised up by 300,000 bpd for OECD and by 600,000 bpd for non-OECD countries compared to last month’s outlook.

Last week, reports emerged that OPEC could cut its 2022 demand forecast, but the organization now says it believes that the Q4 2021 weakness in demand would only delay the recovery to next year.

900,000 bbls/day is very, very close to a cool one-million bbls. 

All Those Job Openings -- Commentary -- September 8, 2021

I get a kick out of all that (faux?) hand-wringing over eleven million job openings, an all-time record, up from ten million anticipated. Numbers rounded. 

Instead of an excess of ten million jobs, would one rather have a deficit of ten million jobs? To put this in perspective, from the internets:

In the United States, unemployment rose to 25 percent at its highest level during the Great Depression. Literally, a quarter of the country's workforce was out of work. This number translated to 15 million unemployed Americans.

And not much of a safety social net.

 
My thoughts, not ready-for-prime-time.

 

The way to have prepared for this -- this lack of workers -- more automation. And that's why I have suggested 2020 - 2035 would be squeezed into 2020 - 2025 due to Covid.

Second, the companies with deep pockets will be able to pay more for workers.

So, those companies with deep pockets and those that prepared for this during the plague year (2020) will do quite well.

I don't think "they" could have predicted the magnitude of openings vs workers, but certainly they had to imagine there would be a huge need for workers when the global economy opened up again. And they all knew the economy would eventually open up, again. So, there was no excuse, at least from my armchair in the ivory tower.

I can't wait to see some analysis of this in a year or so.

This is very, very different when there are not enough jobs and too many unemployed during a recession (or a depression).

We have 5.2% unemployment; folks are getting great unemployment benefits; and all these job openings.

The bigger question and this is where the analysis will help: how much are companies really hurting? Mom-and-pop retail, restaurants, etc., are definitely hurting but earnings in publicly traded big companies seem to be doing very, very well.

So, we see a lot of stories about all these job openings, but I'm not reading any great analyses.

I would love to see where all these job openings are. For example: in the weekend edition of the Dallas newspaper -- two full pages of job openings for software engineers -- the folks that write software for video games. Nothing else even came close to two full pages of job openings. So, does it matter that there are a gazillion job openings for software engineers writing code for video games?

Somehow, the US economy seems to move along quite nicely.

In fact, the story that CNBC will start addressing over the next few weeks: the job openings were not due so much to that extra Covid unemployment insurance but rather due to the mismatch in skills. There are simply not enough software engineers to meet the demand.

**************************
Speaking of Hand-Wringing

There's a news report that Covid-19 cases are up 30%.  

For the record, I don't pay much attention to the number of cases any more. I follow the number of cases, but I don't put much stock into those numbers any more. I don't know the definition of "a case" -- if it's simply a positive test -- all the increased testing easily explains much of the jump.

Our local elementary school is now averaging one new case / day and the school has not yet shut down. Yesterday, there were eight new cases reported: four second graders (Sophia's grade); three fourth graders; and, one staff member (probably a teacher). It was the first day after Labor Day weekend, and the number of cases was from around September 2. 

I did not ask Sophia; I was curious if she would bring it up. She said not one word about Covid. Speaks volumes.

The school e-mails the number of positive cases to all parents (and grandparents, in our case).

The metric, for me, that replaces the number of Covid cases? The number of college students in the 100,000-seat-football stadiums on the weekend. Our oldest granddaughter, a college freshman, went to a sold-out college football game on opening day this past weekend. 

Wanna bet the Dallas Cowboys - Tampa Bay Buccs will be sold out tomorrow night? And no masks?

Taking Inventory -- Where Are We Today? -- Commentary -- September 2, 2021

Overnight:

• most under-reported number: implied US oil demand has surged -- EIA; not yet seeing the analysis
• pay attention to the chart at this post -- it's more than remarkable;
• 2019, pre-pandemic record: less than 22 million bpd; but the norm was around 20 mbpd
• September, 2021: trending toward 23 million bpd; huge jump started with summer driving, but recent surge is unprecedented (fact-check please)
• incredibly interesting data point, which I will come back to later: OPEC+ crude exports fell 1.1 million bpd in August m/m; link here;

Energy:

• Europe in deep doo-doo: energy prices rising faster than ever expected
• Russia controls natural gas, Nordstreeam 2
• Groningen days are coming to an end;
  
• US:
• current administration hates fossil fuel
• even as fossil fuel demand is soaring in the US
  
• OPEC / Russia in control (again)
• Keystone XL killed; this will come back to haunt us; no one will connect the dots;
  
• Russia becomes second biggest source of imported oil for US
• did we mention: even as fossil fuel demand is soaring in the US
• obvious that wind / solar can't possible meet demand

War is over

• we'll give this one more day, then time to move on
• that's a biggie; it's not Vietnam but it's still a biggie; in some regards it might be bigger than Vietnam:
• US intel community: circular firing squad
  

Hurricane Ida:

• we'll give this one more day, then time to move on
• a regional story, that's all

Covid-19:

• things are starting to become clear;
• the Dakotas are in panic mode: both governors tell us their hospitals are overwhelmed
• South Dakota's largest hospitals bracing for huge Covid-19 flow;
• North Dakota's governor Doug Burgum pleads;
  

Investors:

• the bull market continues; maybe more than ever
• NASDAQ up 116 points; Dow and S&P 500 up a bit, not much
• AAPL: hits an intra-day high; still lags the market
• trading
• tax plan in Congress hits obstacle; Heidi Heitkamp leading opposition charge;
• if they can't pass this tax bill, nothing much will pass?

Taking Inventory -- Where Are We Today? -- Commentary -- September 1, 2021

Energy:

• Europe in deep doo-doo: energy prices rising faster than ever expected
• Russia controls natural gas, Nordstream 2
• Groningen days are coming to an end;
  
• US:
• current administration hates fossil fuel
• even as fossil fuel demand is soaring in the US
  
• OPEC / Russia in control (again)
• Keystone XL killed; this will come back to haunt us; no one will connect the dots;
  
• Russia becomes second biggest source of imported oil for US
• did we mention: even as fossil fuel demand is soaring in the US
• obvious that wind / solar can't possible meet demand

War is over

• that's a biggie; it's not Vietnam but it's still a biggie; in some regards it might be bigger than Vietnam:
• US intel community: circular firing squad
  

Hurricane Ida:

• a regional story, that's all

Covid-19:

• things are starting to become clear;

Investors:

• the bull market continues; maybe more than ever
• NASDAQ up 116 points; Dow and S&P 500 up a bit, not much
• AAPL: hits an intra-day high; still lags the market
• trading
• tax plan in Congress hits obstacle; Heidi Heitkamp leading opposition charge;
• if they can't pass this tax bill, nothing much will pass?

Notes From All Over -- Evening Edition -- July 22, 2021

Jim Cramer: like him, or hate him, you have to listen to him. Tonight's opening monologue on today's market and Covid-19 was excellent. I think he's got it right. Too long for me to paraphrase, but bottom line (my takeaway, not Jim's words):

• the market is being held back by those who fear the "delta variant";
• the delta variant won't affect the economy to the degree many fear;
• the CEOs are either talking their book or are inappropriately exuberant, but after seeing earnings reports today, I don't think these CEOs are inappropriately exuberant; 
• these CEOs are looking out one year, not one month
  
• the fear of the delta variant explains the "money market fund" graphic I've now posted several times (and posting again below); and,
  
• the market will do just fine.

This leads me to suggest: I've said a gazillion times, the gap between investors and non-investors will continue to widen. 

However, there is a new wrinkle. Within the "investor"group, there have always been two major groups: bulls and bears. Both can make money. But now there's a third group -- some would suggest they are bears but they are not "traditional" bears. These are the folks that are so afraid -- so terrified -- of the delta variant they can be neither bears nor bulls. They are frozen in time. Their feet are held in cement. They are parking their money in money market funds rather than investing. Folks have always done this, but clearly it's now excessive. This graphic blows me away; all that money not working, sitting in money market accounts doing nothing. [But I guess it's better than the negative returns in Europe. Don't get me started.]

Below this graphic is a graphic of the Dow for the past year, the year in which the money market funds surged.

The Dow -- ONE YEAR: 

Graphic above:

• A: trajectory when folks thought we were coming out of the pandemic; extend line A and we're easily at 36,000 for the Dow;
  
• B: trajectory when vaccinations slowed down; and delta variant emerged.

*****************************************
Back to Reality

Natural gas fill rate, FWIW, link here.

Oh-oh-OPEC: link here.

The Unemployment Numbers Were Reported Today -- Yawn -- July 2, 2021

 I doubt anyone really cares but the mainstream media certainly thinks the weekly and monthly jobs reports are important. And, wow, the media can certainly spin that story. 

When I saw the numbers for June, 2021, I was not impressed. It looked like a pretty dismal report, and the market apparently agreed -- the US equity market surged, knowing that the jobs numbers -- not being good -- would allow "the Fed" to maintain the course. And that was great news for the market. 

The only number folks really follow -- the unemployment number -- actually rose from 5.8 percent to 5.9 percent, but worse, analysts had expected the unemployment rate to drop to 5.6 percent. And yet, the mainstream media universally praised the jobs report. LOL. Had this been a GOP administration, the mainstream media would have skewered the administration for a rising unemployment rate. 

But it's all hypocrisy. No one really cares. At least not in the way we would want the government to care. 

Yesterday, in an extended CNBC interview, the Commerce Secretary said the answer to unemployment was .... drum roll ... education and training. 

And we move on. 

*****************************
Flathead Lake

What Is This All About -- Anas Alhajji -- June 20, 2021

Link here. 

If it's a rhetorical question, and I'm sure it is, fine; but if Anas really does not know, he's not reading the blog. LOL. Yes, he knows. 

But there are at least two story lines in that graphic. An answer with "restraint" in it is not an answer at all. If true, that this is due to "restraint," why the "restraint"?

Additional observations:

• the first trend back in 2016 - 2017:
• whatever the reason, it came after the trillion-dollar-Saudi mistake, the Saudi surge, 2014 - 2016, and then Saudi's response
• one can argue that the first trend identified is simply nothing more than it takes a bit of time for the rig count to catch with reality
• same thing with the 2020 - 2022: it takes awhile for the rig count to catch up with reality, and there are multiple reasons why it takes awhile for the rig count to catch up
• apparently, the difference between the two periods; the price of oil plateaued before the rig count caught up; in the second period, the current period, the price of oil continues to rise quickly despite the rig count rising, and then inexplicably (for some) the rig count seems to be plateauing

Gasoline Tax To Pay For That Trillion-Dollar Green Energy Infrastructure Bill? June 18, 2021

Have the Dems finally found a tax they don’t like?

From Charles Kennedy:

Democrats in Washington have become opponents of a possible gas tax increase to pay for the infrastructure bill as the Biden Administration is vowing not to raise the tax burden on households earning less than $400,000 annually.

"When you have Jeff Bezos making as much money as he is, it is not fair for us to then raise the gas tax," Congressmember Pramila Jayapal of Washington state told The Hill.

Progressive politicians and environmental campaigners want the U.S. to "tax the rich" and not burden the working Americans further with taxes such as a gasoline tax.

Jayapal tweeted last week, "There's NO reason why billionaires like Jeff Bezos should be paying LESS in taxes than working Americans — or paying NOTHING at all. We're going to pass a wealth tax, level the playing field, and make sure the ultra-rich pay their fair share."

Many lawmakers in Washington have realized that increasing the gas tax to pay for the infrastructure plan is not the right course or right decision now, according to The Hill.

"Now"? Is increasing the national gasoline tax ever the right thing to do when the richest folks are not paying federal income tax and are now buying federally-incentivized EVs which pay no road tax at all.

"The ultra-rich"? That would be a start. But how about the simply "rich" also paying their "fair share"?

"Democrats" are becoming opponents of a possible gasoline tax increase to pay for this infrastructure bill. I'm curious: do the Republicans support an increased federal gasoline tax? Asking for a friend.

It's being reported that eight famous US billionaires paid no federal income taxes...

In 2018, Tesla founder Elon Musk, the second-richest person in the world, also paid no federal income taxes. Michael Bloomberg managed to do the same in recent years. Billionaire investor Carl Icahn did it twice. George Soros paid no federal income tax three years in a row. The list includes Warren Buffett, Bill Gates, Rupert Murdoch and Mark Zuckerberg.

We already have a wealth tax on middle class investors. It's called RMDs.

One Or Two Or Three E&P Companies Weren't Simply Lucky Finding The Best Spots In The Bakken -- June 18, 2021

This post is not ready for prime time. 

See this note from earlier today.

The reader's note allows me to post something I have thought about for years but have not previously posted. 

It is conventional wisdom there are sweet spots in the Bakken Basin. Years ago I posted those "heat maps" and they remain linked at the sidebar at the right. 

Sweet spots are determined by a host of factors, some theoretical, but at the end of the day, are confirmed by actual results. 

Exhibit A: we have great "heat maps" for the middle Bakken but not similarly great "heat maps" for the second or third bench of the Three Forks. We have "heat maps" for the first bench based on limited completed well information. 

The way the Bakken is administratively "organized," one often finds E&P operators drilling just one or two miles from each other and yet the results among operators can be incredibly variable. Across the basin, the results are fairly consistent for the same operator. If given the timeline, the IP, the first six months of production, and cumulative production after three years, it is generally possible to identify a BR well from a CLR well from an MRO well from a Petro-Hunt well. 

On that continuum, Slawson wells look more like MRO wells than CLR wells. Oasis wells look more like CLR wells than MRO wells. 

If, as a mineral holder, you disagree with me, ask yourself, whom would you rather have to drill "your" well in the Bakken: MRO, Petro-Hunt, CLR, Oasis, BR, Chesapeake, or OXY? 

I agree that some locations in the Bakken are (much) better than other locations in the Bakken. But I don't think the geology alone explains some of the huge differences we often see in the Bakken.

Break, break.

Most analyses and discussions about tight oil field are very similar to that of conventional oil fields. There's a huge different between shale/tight/unconventional field development and conventional oil field development. 

A lot of folks seem to think that the oil industry does not "learn" over time. These folks seem to think that E&P operators don't spend more on improving technology. There seems to be no talk about the expertise, experience, track record of the geologists and the guys and gals actually doing the drilling. 

Thesis.

I think the emphasis on "sweet spots" and "heat maps" is over-rated. 

My hunch is that over time as there is more consolidation in the Bakken, we will see more "Tier 3" and "Tier 2" drilling locations be re-classified as Tier 1 locations. The reclassification, of course, is based more on price of oil than anything else but if prices stay level or decrease, historically better operators acquiring "bolt-on" acreage will result in reclassification of these tiers. 

Exhibit A: if a well's production is simply based on the geology, why do wells re-drill right next to a well that is plugged and abandoned for economic reasons? 

Thoughts:

I have trouble believing that MRO and Slawson just "happened" to find the "best" areas in the Bakken. I think operators like MRO and Slawson are doing something others are not doing. Petro-Hunt in the Charlson may be an exception. The Charlson hseems really, really interesting, and Petro-Hunt doesn't drill many wells. But every Petro-Hunt well is watched with great anticipation.

Reader Comments On Consistently Spectacular MRO Wells And The Role Natural Gas Injection Is Playing -- June 18, 2021

See #37403 below and also look at the other wells on that pad (see link below). After posting that data below, a reader who knows this and follows this a lot better than I do, wrote:

Going over the production numbers from several of these MRO wells reveals some interesting data, specifically that gas lift is being used right at the outset. 

While there still seems limited info available online as to the 'nuts and bolts' of latest gas lift implementation, a few take aways may be of some interest ... 

Those MRO wells use about 135,000/145,000 cubic feet of gas per day that is not - originally - sold. 

This gas is being re-injected back down the wells to - at a minimum - boost the 2 mile vertical lift that the oil needs to make it to the surface. 

As this recovered gas is both counted as production and then re-injected downhole, it is essentially being recycled, not consumed. (I imagine much of the surface hardware is being powered by the natgas which, naturally, is being consumed).

Of interest, perhaps, is that well #37403 does not seem to have any of its own gas re-injected. However, two of the other wells show a differential of ~177,000 cubic feet per day, implying that some of 'their' gas is going down #37403. [Reader is referring to the wells at this link, also linked below.]

Some ripple effects from this gas-lift-from-the-start approach should be ...

• slightly higher well costs to incorporate the 'jewelry' (hardware/valves that make up the gas lift system)
• much higher initial oil recovery
• much lower operating costs as expensive, chronic  ESP problems are eliminated
• and, as seems to be the case with older gas lift wells, the combined use of the traditional pumpjacks with gas lift offers much better (aka shallower rate at a higher volume) production profiles.

All this (virtually ubiquitous gas re-injection) may pave the way for the Next Big Thing in the Shale Revolution ... EOR by way of natgas-induced formation pressure increase/miscible 'sweeping' that will simply rock the Peak Oilers on their collective butts.

 LOL. Well said.

Re-posting:

One well coming off the confidential list -- Thursday, April 1, 2021: 1 for the month, 1 for the quarter, 82 for the year:

• 37403, A/AL, MRO, Standfest USA 42-8H, Reunion Bay, first production, t--; cum 190K 2/21; the "Standfest pad" wells are tracked here. Even the skeptics / cynics are admitting these are pretty awesome wells.
  

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	2-2021	28	37394	37356	18144	67384	65089	2057
BAKKEN	1-2021	31	37512	37486	19975	47976	45692	2077
BAKKEN	12-2020	21	30168	30189	17736	36569	34745	0
BAKKEN	11-2020	11	25088	25173	19693	32424	30871	0
BAKKEN	10-2020	20	59973	59501	49539	71840	63257	5026

Notes From All Over -- Mid-Day Edition, Part 2 -- Bloomsday -- June 16, 2021

GM: with regard to my earlier note regarding GM, a reader wrote:

We use GM pickups for our shop truck. Plain, simple 2 door , 8 ft bed.

Found out today GM has stopped producing them.

They won’t say it’s permanent. They want to build and sell only high-end (high-margin) trucks since there is a “shortage” of components. Makes sense to maximize profit but we are not buying Denalis to go get parts.

My reply:

One gets the impression that GM is using high-margin vehicle sales (like Hummers) to pay for their pivot to EVs, particularly batteries. 

Canadian pipelines: this unsolicited note (with minor editing) from a reader --

The Trans Mountain expansion will increase the capacity of the pipeline from 300,000 barrels per day to 890,000 bpd, nearly tripling it.

The driving force behind it is that Alaska oil is running out and production is only 1/4 of what it was at its peak (Biden is going to make it worse by banning Alaska oil leases), and California oil is doing a similar thing because of state policies. 

California used to be the 2nd largest producing state, and now it is about 6th.

This leaves refineries in Washington state and California dependent on expensive imported oil from OPEC+ since the only pipeline bringing cheap domestic oil from the interior of North America to the West Coast is the Trans Mountain through BC. 

The US has no similar pipelines. New shale oil from North Dakota and Texas has to go to refineries in Washington and California by railroad.

The US West Coast is cut off from the big shale oil producing fields and refineries in Texas and other states, for those Californians who are wondering why their gasoline is so expensive. Don’t blame the domestic oil companies, blame OPEC and the California government’s environmental policies for the cost of fuel there.

The Trans Mountain also is a mixed crude oil and refined products pipeline that brings 70–80% of the gasoline, diesel fuel, and jet fuel to BC from Alberta’s big refineries, since BC basically has no oil refineries left except for a little teakettle thing in Vancouver that produces only premium gasoline and jet fuel. And people in BC are wondering why their fuel is even more expensive than California.

Note: I don't know about protocol for sharing this, but I've had a hard time getting info. about Trans Mountain. I was of the mind that Canada wouldn't do it unless they could export to Asia via a port in BC, now I'm doubtful.

My thoughts:

• in almost complete agreement with the reader's analysis
• California oil: holds my interest as much as the Libyan oil story, in other words, not at all; when New Mexico and North are running neck and neck at #2 and #3, for California to be #6 tells me all I need to know about the oil industry in California; good, bad, or indifferent, the state has learned to live with this fact;
• Biden's action on Alaskan leases will have no short-term impact on gasoline prices in California;
• gasoline prices in California are determined by policies set in place over the past decades; nothing will change this overnight;
• no mention of Canadian oil coming to the US east of California but it's very, very clear, that's the really big story -- and "Canada" must like what they see;

Now That TC Energy Has Abandoned The Keystone XL, Some Observations -- June 10, 2021

This page is not ready for prime time. 

See this post, also. 

Also, activists are targeting Big Oil; why that could backfire. 

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.

Headlines:

• TC Energy cancels critical Keystone XL pipeline (it couldn't have been too critical; we've lived without it for two decades)
• Canada's oil industry optimistic as prices rebound

Now that TC Energy has abandoned the Keystone XL, some observations.

• the Keystone XL, two arenas: the political arena, and the non-political arena
• with regard to the political arena, the faux environmentalists won
• the Keystone XL was the pipeline story that spawned all the rest, including the Enbridge pipelines, lines 3 and 5; the DAPL; the natural gas pipelines in the northeast; etc. The Keystone XL "win" was huge; hard to say whether it will affect outcome of existing pipeline fights;

The rest of the observations will address the non-political arena:

• headline above: "TC Energy cancels critical Keystone XL pipeline": it couldn't have been too critical; it was on the drawing board in the early 2000s', probably as early as 2005 with the US shale revolution; "we've" lived without it for almost two decades; the pipeline couldn't have been too critical;
• there is no evidence that Gulf Coast refiners will re-configure/optimize their operations for light oil as long as heavy oil is available;
• most surprising: Canadian oil sands operators have survived some of the most brutal economic impacts over the past few years;
• many thought that oil from the Canadian oil sands was landlocked; absolutely not true
  
• headline today: western Canadian operators optimistic about the future -- this is the day after the Keystone XL project was finally abandoned; the western Canadian operators knew this was coming years ago;
• but the US is still going to need lots of heavy oil
  
• group-think: 
• the big loser: Canada
  
• the big winners: Saudi Arabia, Russia, Latin America
• to some extent that's true, but it's all relative
• in reality, with regard to this very small piece of the oil pie:
• the big loser: US consumers (price of oil / price of gasoline goes up slightly)
• safety and efficiency: CBR is so much less efficient and so much more dangerous than pipelines; and all those traffic crossings in Kansas and Nebraska -- they've just gotten a whole lot worse; 
  
• the big winner: investors; CBR; every other pipeline operator; the Permian;
  
• a number of readers are very, very aware of this and have written me to tell me how they are "playing" this story
• the big winner: investors. If you don't agree, ask yourself two questions:
  
• as an investor, ask yourself, where would you be investing had the Keystone XL been in operation today?
• as an investor, ask yourself, where should I be investing now that the Keystone XL project has been abandoned, once and for all?
• the answers to those two questions are fascinating
  
• the Keystone XL -- other than transiting the Bakken -- had absolutely nothing to do with the Bakken; the Keystone XL was going to transport heavy oil, not light oil
• add up the "negatives" and the "positives" and the demise of the Keystone XL was a net win for Bakken operators;

Bottom line:

• in the political arena, all sentient Americans should be upset that the Keystone XL was killed;
• in the investment arena, where I now live, we should all be happy that the Keystone XL was killed -- perhaps not happy, perhaps "neutral" at best, but taking advantage of this new reality, in our investment decisions.
  

I have flip-flopped on this. for the past ten years (?) I was in the political arena when it came to the Keystone XL; for over ten years I have been steadily moving from the political arena to the investing arena; I still have a long way to go, but I'm getting there.

Saudi Arabia Foreign Exchange Reserves -- June 10, 2021

The biggest story -- okay, maybe not the biggest story -- that honor might belong to the cicada flying into President Biden's right ear and then as if that was not enough -- a swarm of them shutting down Air Force 1 --  but I digress -- where was I? Oh, that's right -- the biggest story this month (so far, and there's a lot left of this month) was the announcement that:

• Saudi Arabia
• was selling
• dollar-denominated
• bonds
• to cover the ungodly annual $75 billion dividend
• for holders of Saudi Aramco stock.

By the way, another digression:

• the annual dividend is $75 billion;
• the tranche: $5 billion
• tell me again, how $5 billion in bonds will make any difference when the requirement is $75 billion?

We're back.

I thought with the price of oil surging and after the robust numbers in March (2021), Saudi Arabia was rolling in dough. 

Wow, was I wrong. Link here.

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The Oil Embargo Of 1973

Wiki entry here. 

Bottom line: biggest mistake Saudi Arabia ever made -- the embargo. Saudi's embargo was akin to shutting down 1,000 Keystone XL pipelines -- perhaps some hyperbole -- and what happened? Alternate solutions were found, including alternate sources of crude oil.

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US Crude Oil Imports

Link here, from all sources. The most interesting thing about this graph? How really little has changed from 1980 to 2021. Sure from 200 to 400 and back to 200 is a doubling and then a halving, but it's not like there's an exponential change in any part of that graph.

What is staggering to me, is the amount of oil "we" have come to depend on. This is simply not going to change any time soon. 

From wiki, the increase in US crude production and imports from 1969 to 1974 is staggering:

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Huge Disconnect

Those who think policies to cut CO2 emissions, including bans on new and existing fossil fuel pipelines, will end global demand for oil are simply out of touch with reality. Really out of touch with reality. Elizabeth Warren's press release today on the death knell of the Keystone XL is the best example of group think in an echo chamber devoid of any understanding of reality.

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Back to Saudi Arabia

Monthly production was way down, despite the headline: Saudi Arabia reports May crude oil production of 8.544 million bbls per day, above target. The next question, question: how much oil did Saudi Arabia use domestically for air conditioning?

The kingdom said it would pump 8.482 million bbls/day; the delta? Less than a percent. 

But it probably explains why Saudi's foreign reserves are trending so low. Whatever.

Let's see what happens when Iran re-enters the market. Biden presses to re-open the fossil fuel market for Iran and accepts Russian Nord Stream 2 and kills the Keystone XL. Must have played very, very well for his well-heeled political donors. Hey, by the way, the buzz in Washington is that President Biden putters around the White House every day while the real business of the Oval Office is being accomplished by a former president.

We're Going To Get To 2035 Ten Years Early -- Thank You, China -- June 5, 2021

PTI: before we get started. Wow, am I angry! The big, big, big story in sports today -- Jon Rahm, third round, PGA, Memorial Tournament, running away with the lead, six ahead of whoever was in second place ... and then he tested positive. And had to withdraw at the end of three rounds.

No alligator tears for him. Just plain anger. Aren't sports figures supposed to be role models? Haven't they learned anything this past year? Aren't they giving PSA's encouraging Americans to get vaccinated?

It turns out the threesome in which Rahm was playing, none of the three were vaccinated. Link here. 

In case that article is edited or removed, I've copied and pasted the key paragraphs and posted them elsewhere. 

Memo to self: file under self-made idiot.

Now, back to what I was going to say. Sorry for the interruption.

One of the themes of the blog: the Covid-19 pandemic compressed 2020 - 2035 into 2020 - 2025. 

Where "we" would have been in 2035, the pandemic accelerated things and by 2025 -- maybe sooner -- we'll be there (2035), ten years early. 

I've provided examples for weeks now. Here's another.

Retailers know that some customers want to "get in, get out" to minimize exposure. And sure enough, I saw it in action today at Target.

Every other week or so I stop by Target to pick up a bag of candy to give to one of our apartment managers as a "thank you" gift for all they do to make my life wonderful here in the complex. 

Target was as busy as I've seen it. Really, really busy. The check out lines were moving fast; I had no complaints. Then "Valerie" walked up to me, saw me with a single bag of candy, and asked me if I was paying "by card." I said, "yes," and she invited me over to her "pop-up" table where I swiped my credit card through the little smart-phone-device. I said, "no receipt, no bag" and simply walked out the door. 

Target has it figured out. They're taking a page out of the Apple store. Color me impressed.  

"Get in, get out." And that mindset will continue long after Covid-19 is in our rear view mirror.

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2035 Will Be Here Ten Years Early

If you can accept that, it changes everything.

Including investing. 

I don't know if folks have been following their mutual fund investments, but my hunch is some folks have never seen their investments grow so fast. 

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