Calling It A Night -- But A Nice Essay -- Rigzone -- Janaury 30, 2014

From Rigzone, the conversation begins:

The crude oil price erosion that began in the summer of 2014 is generating a variety of perspectives from analysts following the industry, including two Rice University analysts who talked to Rigzone about the dynamics behind the dizzying drop in prices, and what lies ahead.

The Saudi factor:

Rigzone: Is the downturn anyone’s “fault?”

Arnold: The way I see it is that the United States is the country that’s been increasing production dramatically. Saudi has been maintaining markets, which is not an unreasonable thing for a sophisticated player to do. But they haven’t been dumping on the market, nor have they decided to cut their own production, knowing that OPEC has a history of cheating by their partners. Another thing that’s been in the back of my mind is that there used to be a close relationship between the Saudis and Washington, and through different administrations. I think the Saudis were very mindful of the impact of their actions in the United States in the last couple of decades. And now, you just don’t get the feeling that there’s the sensitivity about that relationship that there had been historically.

Swing supplier. 

Rigzone: The term “swing supplier” has come up more in recent weeks. What is that about?

Krane: Traditionally, the swing supplier in the market has been OPEC, and mainly Saudi Arabia. When there was too much supply or too much production, and the market became flooded with crude oil, prices would start to drop, and OPEC would take some of that production off the market. OPEC could add supply to the market or take supply off the market, as conditions warranted. But the advent of U.S. shale production has kind of interrupted that process. Historically, oil production from non-OPEC countries was not a problem for OPEC because it did not increase quickly enough to threaten Saudi Arabia’s market share. Total production has overwhelmed global demand with the sudden and significant increase in production from the United States amid the fracking boom. Not wishing to give up market share to the United States and North America, OPEC responded in a new way – by not decreasing production.

Caught off guard?

Rigzone: Some analysts have suggested that perhaps OPEC did not intend for prices to fall this much, or this quickly.

Krane: While OPEC acted to weaken crude oil prices, they probably overshot the mark on the way down. OPEC opened the taps, letting more crude oil into the market to lower prices. However, there could have been an overreaction, given how far prices have fallen. By the end of the year, prices might reasonably be expected to be back up in the $70s/barrel, barring a serious geopolitical event. The big change is on this side of the globe, and that’s where production is going to have to fall so markets are balanced again. It’s a rational and reasonable course of action – or inaction – for OPEC. They don’t want to see someone else take their market share. They will have some short-term pain because they won’t have the same revenue from oil, but that’s the price they’re going to have to pay to maintain their share of the market.

Update On North Dakota Plan To Press Ahead With Infrastructure Projects This Summer -- January 30, 2015

Bakken.com is reporting:

North Dakota’s Senate has approved $1.1 billion in special funding so that infrastructure projects can begin by this summer.

Senators voted 44-2 Thursday to approve the “surge funding” bill that would fast-track funding to cities, school districts and communities affected by North Dakota’s exploding growth.

Very, very timely. "Funny" how things work out.

************************************

Not Lost In Translation

Reuters is reporting:

Greece's finance minister said the government would not cooperate with the European Union and International Monetary Fund mission. 

 **************************

What Is This Telling Us?

Reuters is reporting:

Shares of Shake Shack Inc more than doubled on Friday, putting a nearly $2 billion price tag on the small cult hamburger chain, in a huge bet that its growth can match top performers in the crowded "fast-casual" dining space. 

Shake Shack's debut is the latest in a string of blockbuster IPOs from trendy restaurant chains that cater to younger and more affluent diners willing to pay a bit more for fresher and higher quality food. Growth-hungry investors are hoping to replicate the red-hot run of industry darling Chipotle Mexican Grill.

But Shake Shack's own CEO Randy Garutti cast doubt on whether it will do so, calling the chain known for decadent milkshakes and hormone- and antibiotic-free burgers a "very measured growth company."

This was also a major story on ABC News, Friday evening, noting that Shake Shack hamburgers -- just the hamburgers --  cost $5.19. It was also noted that the fast food hamburger industry is now twice the size of the fast food pizza industry.

Some observations:

• red meat; hamburgers; fast food; there has been a big push for the past seven years, and perhaps the last twenty years for healthier food, and red meat/hamburger is now bigger than ever
• one can buy a value-meal hamburger for a buck at McDonalds (a company that is doing badly, sacks their CEO), and yet premium hamburgers at high prices are all the rage; there's a lot of folks out there willing to spend big money on premium hamburger; $5.19 is just the hamburger -- add in $2.50 fries, $2.50 drink and we're talking a $10 hamburger meal
• makes Omaha Steak hamburgers a bargain; twenty years ago Omaha Steak offerings were seen as high end; and now I love Omaha Steak products (in fact, I have a Omaha Steak filet mignon on the grill now, while watching The Big Lebowski again)

Or, more succinctly:

• home delivery: pizza; dining out: hamburger 
• healthy food fad is just that ... a fad
• the economy is doing a lot better than folks think .... willing to spend $5.19/hamburger

When we were in Boston off and on for the past four years taking care of our granddaughters, I was amazed at all the hamburger restaurants, especially so many on Harvard Square, and they don't even have an In-N-Out there, nor a Whataburger.

Gutterballs, The Big Lebowski
Julianne Moore is ... well judge for yourself.

Biblical themes and tropes in The Big Lebowski. 

A Very, Very Short Daily Activity Report Today -- January 30, 2015

Active rigs:

	1/30/2015	01/30/2014	01/30/2013	01/30/2012	01/30/2011
Active Rigs	146	190	186	204	163

Wells coming off the confidential list were posted earlier; see sidebar at the right.

Five (5) new permits:

• Operators: Sinclair (2), Slawson, Hunt, XTO
• Fields: Sanish (Mountrail), Robinson Lake (Mountrail), Big Bend (Mountrail), Parshall (Mountrail), Midway (Williams)
• Comments:

One permit was canceled:

• 18813, PNC, KOG, Sorenson Federal 4-9H,

Random Look At US Crude Oil Imports Over Recent Six Months -- January 30, 2015

The data is a full two months old so it's not particularly helpful. We really won't know what the slump in oil price was all about and what the results were until late this summer, maybe not until the end of the year when we have the August "high-driving" data in.

Having said that, it's interesting to look at recent history.

October 1, 2014, was the beginning of the slump in oil prices.

With that date in mind, look at the numbers. These are the millions of bbls of oil imported into the US broken down by country.

Despite the increasing amount of oil produced INSIDE the United States, the amount of oil imported
 into the US -- between June, 2014, and November, 2014, actually increased, from 264 million bbls to 269 million bbls/month. Interesting, huh?

Saudi Arabia worried about losing its fair share? For the US, no change: 30 million bbls/month.

Venezuela on the ropes? For the US, Venezuela actually shipped MORE oil into the US, from 22 million bbls/month to 24 million bbls/month.

So, who were the losers?

• Iraq went from 16 million to 13 million bbls.
• Kuwait went from 11 million to less than 4 million bbls.
• Although they don't account for much American imports, Algeria and Nigeria took major hits.

Again, I don't think this snapshot tells us much. It's too brief a period; the data is two months old; and, the price slump had just begun.

I don't think we will have a better feeling for all this until late 2015. At the end of October we will have the results of the high-driving month of August. Should be interesting.

Source of screenshot above: EIA, a dynamic link.

Something Surprising From CNBC: Lousy Economic Recovery Under Current Administration -- January 30, 2015

From CNBC, something we would not have seen if the president were up for re-election:

After a deep recession, Ronald Reagan posted 4.7 percent annual growth over 22 quarters and employment jumped 13 percent, whereas President Obama's recovery has accomplished half that progress. 

"Half that progress...." Has employment under this administration come anywhere close to jumping 13%. I don't know. The numbers don't make sense to me any more.

Even the vice president agrees: "the past six years have been really, really hard on this country."

And that's despite a gazillion dollars in various stimulus programs including Solyndra and wind energy tax credits. I guess killing the Keystone pretty much set the tone for the Obama administration's feeling about the blue collar set. Wall Street has done very, very well, and with the Yellen/Fed announcement yesterday, it looks like Wall Street will keep doing well -- at least for another year. The only fly in the ointment: the energy sector. Note to investors with long horizons: not to worry.

See disclaimer.

Speaking of politics, let's turn to another waste management issue.

I don't know if it's just me but there's something about a city like Phoenix hosting a "Waste Management" tournament. That seems better suited for Washington, DC. Be that as it may, for at least one golfer "Waste Management" probably lived up to its name. The leaderboard is too long for one screen shot, so the top nine and the bottom ten:

 It's still possible for Tiger to score better than Michael Hopper but it's going to be close.