We Haven't Even Gotten To Hurricane Season Yet, Much Less Driving Season -- March 2, 2022

Before we get started, I haven’t gone through my twitter feed all day. I just went through the feed. Holy mackerel. Every country, every company, with minor exceptions is exiting Russia. Russia’s economy is smaller than Texas so perhaps it’s no big deal, but imagine if Russia becomes a “failed nation-state” literally overnight? Population? One-hundred-fifty million people, just slightly less than half of the US. Germany has 85 million people. This is a big deal. Russia becomes a “North Korea” overnight.

Now, back to the price of oil.

So many story lines:

 

 

Let's go through (some of) the list:

• the perceived shortage is so severe, countries around the world are releasing oil from their strategic petroleum reserves;
• and, yet, if this shortage is so severe, why is the number of days of US crude oil in storage trending up?
  
• "they" agreed to release 60 million bbls; global demand is 60 million bbls every twelve hours or so; 
• everything I've read suggests US refiners don't need more light oil "right now." They've been operating at 87% capacity for as long as I can recall, and have not complained about a shortage of supply.
• those folks who suggest oil should be no more than $30/bbl right now have a pretty good argument; but so far, they aren't winning.
• we haven't even gotten to --
• driving season yet
• hurricane season yet
  
• inflation;
• to explain oil moving from $60 to $120? To say inflation, that seems a bit excessive.
  
• producers from OPEC to Texas are holding the line on production;
• there are three main producers
• Saudi: holding the line; if any increase in production, that increase will be measured and moderate
• US: the current administration is still anti-oil; not one initiative to encourage more production; in fact, quarterly federal lease sales scheduled for 1Q22 will not be held ("someone's dog ate the paperwork"; someone missed the deadline to file the necessary paperwork to hold the quarterly lease sale)
• Russia: we all know that story;
• SOTU address: Covid is over; back to normal; the US is coming out of a two-year lock down; the economy is poised to surge -- think about that, a two-year lock down coming to an end; wouldn't this be like the end of WWII in 1945?
  
• supply chain shortages: I haven't heard that phrase uttered in weeks;
  
• today's job report: absolutely blew the door down; completely exceeded analysts' expectations;
• Jay Powell's remarks suggests he doesn't want to be blamed for upsetting the punch bowl; will raise rates 25 basis points -- yawn.
  
• how did the market react to his comments? Let's just look at one -- just one -- data point suggesting where traders think the US economy is headed: did anyone see this? Did anyone pay attention to this? UNP jumped over 4% today; jumped almost $10 and closed at $252; on a macro scale how much more bullish can one get about the US economy?
• an aside: decades ago I subscribed to an investment letter: "Dow Theory." A jump in transportation like today would have been said to be about as bullish as anything could be
  
• if UNP jumped $10 today based on fundamentals, can you imagine how BNSF is doing, owned by Berkshire Hathaway / Warren Buffett -- if you haven't read his annual letter -- released over the weekend -- well, what can I say? One can lead a horse to water ...

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Sixteen Reasons

Sixteen Reasons, Connie Stevens

Early Evening -- Brent Jumps Another $4 -- Absolutely Ludicrous -- Wednesday, March 2, 2022

Oil:

• Brent: up 7.58%; up $7.96; trading at $112.90; Later, 7:40 p.m. CT: $116.40. Now, 7:57 p.m. CT: $116.90.
• WTI: up 1.56%; up $1.72; trading at $110.90. Later, 7:35 p.m. CT: $113.10. Now, 7:59 p.m. CT: $113.50. Later, 8;46 p.m. CT: someone has a screen shot of WTI at $114.58.
  

So many story lines:

The price of oil is not the price of the first bbls being sold, but the price of the last barrel.

Amazon: shutting down brick-and-mortar; link here.

• shutting down all its Amazon Books physical bookstores, as well as its Amazon 4-star and Amazon Pop Up shops, which sold a variety of electronics and other hot items.

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EOR - NG

Updates

July 7, 2022: approved. The Buddy Domindgo pad in Williams County.

Original Pad

CCS / Harold Hamm / Summit Carbon Solutions: The Williston Herald.

• CLR: $250 million buy-in over two years;
• help fund a project with Summit Carbon Solutions
• gather CO2 from ethanol plants in Midwest (Iowa, Nebraska, ND, SD)
• pipeline CO2 to ND for permanent storage
• comments: 
• if they were to do something with the CO2 (like EOR) it might make sense;
• to simply store it isvirtue signaling when China is building a new coal plant every week, or whatever they're doing
• and, of course, the pipeline is already being "fought" in Iowa
  

Nine DUCs Reported As Completed; Six New Permits -- March 2, 2022

Gasoline demand, link here.

Brent: $112.90.

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Back to the Bakken

CCS / Harold Hamm / Summit Carbon Solutions: The Williston Herald.

Active rigs:

$110.90	3/2/2022	03/02/2021	03/02/2020	03/02/2019	03/02/2018
Active Rigs	31	14	53	67	59

Six new permits, #38799 - #38804, inclusive:

• Operators: CLR (4); Hunt Oil (2)
• Fields: Jim Creek (Dunn County); Ross (Mountrail County)
• Comments:
• Hunt has permits for two King wells in SESE 5-156-90, 
• to be sited 265 FSL and between 570 FEL and 540 FEL;
• CLR has permits for four Medicine Hole wells in SESE 27-146-96, 
• to be sited between 485 FSL and 468 FSL and between 1220 FEL and 1086 FEL

Nine producing wells (DUCs) reported as completed:

• 38046, 2,302, Slawson, Muskrat Federal 3-28-33H, Big Bend, minimal production;
  
• 38352, 1,171, CLR, Bice FIU 10-32H, Chimney Butte, minimal production,
  
• 38353, 986, CLR, Bice FIU 11-23HSL1, Chimney Butte, minimal production,
  
• 38156, 822, CLR, Kukla 10-16HSL1, Chimney Butte, first production, 11/21; t--; cum 23K 1/22;
  
• 38358, 1,104, CLR, Dolezal FIU 7-5H, Chimney Butte, minimal production,
  
• 37244, 2,574, MRO, Colgrove 14-34TFH, Bailey, huge well, first production, 12/21; t--; cum 49K over 47 days; neighboring older wells off line;
  
• 37245, 3,860, MRO, Armstrong 14-34H, Bailey, huge well, first production, 12/21; t--; cum 74K over 52 days; neighboring older wells off line;
• 38076, 112, Slawson, Muskrat Federal 7-28-33TFH, Big Bend, minimal production,
  
• 38077, 402, Slawson, Vagabond Federal 1 SLH, Big Bend, minimal production,
  

Apple Page -- March 2, 2022

 This was posted earlier this week:

The Apple Page

 News and rumors:

• Apple Lightning Port: will we see a "portless" iPhone? Only way to charge an iPhone, with wireless charging? The EU may force Apple's hand.  
• A really inexpensive iPhone? We should know next week if Apple will drop the price of the current iPhone SE to $199 while introducing a new iPhone SE priced at $399.  
• A two-fer: Apple will halt all sale from online store in Russia. Link here. A "two-fer" is when a company does one thing but benefits for at least two reasons. In this case, Apple couldn't afford the sanctions on Russia to continue online sales; and, Apple will now have more chips available for products for other countries. Win-win for everyone. 

Now this, today, from Reuters: Apple to host spring event next week, low-cost 5G iPhone in focus.

• March 8, 2022
• expected to launch a low-cost version of its popular iPhone with 5G: the 5G iPhone SE;
• my current iPhone SE no longer holds much of a charge
• if this rumor turns out to be true, I will be upgrading to the new iPhone SE;
  
• the new phone would be the first update to the iPhone SE model in two years
• rumored to come with an improved camera and a faster processor
• if true, this speaks volumes about Apple on many levels
• also: a new version of the iPad Air and a high-end Mac Mini

Three Dow stocks set to soar in 2H22: The Motley Fool --

• AAPL, WMT, and DIS

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.

Russian Urals -- From A Reader -- March 2, 2022

With regard to my notes regarding Russian oil (Urals, specifically), a reader responds:

Urals is more of a medium grade, about 31 API gravity. Comparable to Mars grade from US GOM or Alaskan North Slope. Nothing like Canadian or VZ grades that can be 10 API or lower, and are usually around 17 API during transport. (California crude is also about 17.)

The sulfur content of Urals has been creeping up lately, from 1.3% towards high 1s or even 2%. But that's really still comparable to Mars grade or ANS and still less than classic medium grades like Basra. And it's not like the 4% in Canadian, VZ, or California heavy crudes.

Also, note that the world is NOT short of medium, heavy, or light grades. This is all silliness from reporters and analysts that have never really worked in refineries or traded oil globally. Mixing, moving crudes is very normal and has been something the industry has done for last 100 years as new fields of different grades came on line.

Also, FWIW, medium sour grades like Mars, Urals, ANS, Basra still trade at LOWER prices than WTI/Brent (classic light sweet). And heavy grades have even lower prices than medium. Yes, the world got a lot of light sweet from West Texas and the Bakken, but it just (slightly) shrunk the advantage of light sweet. It has not reversed the advantage.

Also, Bakken oil is near perfect, like WTI, in terms of API and sulfur content. Gets premium pricing AFTER reaching its destination. So, if you're trading in Houston or Rotterdam or Singapore, WTI/Brent/Bakken (all very similar) get the premium price. Only reason you see lower sometimes is because of transport (pricing them in the field, versus at the customer).

The reader follows up with these comments (see comments below):

But another issue is some stories talking about the big discounts Urals crude is getting lately.

Over the last month (and mostly last few days), Urals has moved from Brent-$2 to Brent-$12. So you see a lot of posts about Russians hurting on oil prices. But this ignores that Brent itself moved from $90 to $110 over the last month (mostly last few days). So actually Urals is up about $10: from $88 to $98.

Oil tankers are still moving Urals in both the Baltic and Black Seas. However, much of it is now going to Asia (longer transit, more expensive) and there are also risks associated with each of those routes (and to financial payments with Russia). So that's why Urals has moved from -$2 to -$12. It's just needed to compensate the Asian buyers for a longer trip and higher risks.

But net/net: oil is still flowing. And Russians actually getting more per barrel, when you do the math for the Brent increase along with the diff increase.