Guest “maybe, maybe not” by David Middleton
- Note: mmbbl = million barrels
OPEC and allies agree to 10 MMbpd production cut
By JAVIER BLAS, NATALIA KNIAZHEVICH AND SALMA EL WARDANY on 4/9/2020
LONDON (Bloomberg) – Major oil producers agreed to slash output as feuding members of the OPEC+ coalition buried differences in an effort to lift the market from a pandemic-driven collapse.
The Organization of Petroleum Exporting Countries and its allies, meeting by video conference on Thursday, now have the outline of a deal to cut production by 10 million barrels a day, delegates said. Importantly, Russia has agreed to make deep cuts, the delegates said.
Oil prices pared gains, trading up 1.6% in London at $33.37 a barrel as of 4:13 p.m. local time. That reflects concern that the volume of cuts being discussed equates to just a fraction of the demand loss, which some traders estimate at as much as 35 million barrels a day.
It’s unclear whether the tentative deal is contingent on the U.S. also committing to curbs at talks on Friday. An agreement from OPEC+ and a broader alliance — including America — is crucial to reviving prices that have sunk to an 18-year low. Not only oil companies, but entire oil-dependent economies need the market to rebound if they’re to balance ailing budgets.
While we still can’t “see the light at the end of the tunnel”… And don’t even know how long the tunnel is… If this agreement holds, it will shorten the length of the tunnel.
Should the US join in? Is it even possible for the US to join in?
Interesting article by Robert Bryce…
Colluding With the (Oil) Enemy
By Robert Bryce
April 08, 2020
On April 2, Ryan Sitton, one of three members of the Texas Railroad Commission, communicated with officials from Saudi Arabia and Russia about coordinating cuts in oil production. Just a few years ago, the notion that an American politician would talk with foreign producers about how to prop up oil prices would have been considered colluding with the enemy. But the coronavirus pandemic, along with the collapse in oil demand and oil prices, requires a rethinking of ideas that have dominated American energy policy for decades.
We have been inundated with predictions about scarcity and societal collapse since the days of Thomas Malthus.
In an essay published in 2015, Stern wrote that continued claims about oil scarcity “both created and met demand for apocalyptic ideas.” He continued, saying that forecasts about peak oil (remember that?) “all of which proved wrong, repeatedly led policymakers to assume that rival powers sought to seize dwindling supplies or that disaffected exporter-states would decline to sell.”
But today’s battered oil industry shows, yet again, that the recurring problem in the global petroleum sector has never been too little oil, but too much. At the end of last month, oil prices collapsed to about $20 for the first time in nearly two decades. The price collapse threatens the domestic oil and gas sector, which over the past few years has created hundreds of thousands of high-paying jobs and dramatically reduced the cost of oil and natural gas for consumers.
For those unfamiliar with the history of the energy sector, putting limits on global oil production sounds absurd. But for eight decades, the industry has relied on limits known as “allowables.” That history can be traced to 1930 when crude oil was selling for about $1.30 per barrel. That same year, an itinerant preacher named Dad Joiner drilled the Daisy Bradford No. 3, and in doing so, discovered the massive East Texas Field. An unrestrained surge in production from the field crushed oil prices and by mid-1931 in parts of East Texas, crude was selling for as little as 3 cents per barrel. That August, to preserve the integrity of the oilfield and save the industry from collapse, Texas Governor Ross Sterling declared martial law in the East Texas Field and dispatched National Guard troops to shut down all production in the region.
In 1973, OPEC imposed an oil embargo and imposed a system of allowables on its members. The cartel’s influence over supplies and prices lasted until 2014, when it was forced to admit that world markets were oversupplied due to the surge in American shale oil production. Since then, global oil markets have been chaotic, with every producer seeking to gain market share at the expense of others.
But the obvious long-term solution to the boom-bust oil cycle is a global system of allowables for the world’s biggest producers. Call it OPEC ++. Enforcing allowables won’t be easy. But oil is a strategic commodity. One third of global primary energy and 94 percent of the world’s transportation fuel comes from oil.
Without such an agreement, the oil market will remain in turmoil and countries may resort to tariffs, price wars, or embargoes to protect their domestic producers – any of which could be more painful than a deal that reduces production across the board.
Robert Bryce is the author, most recently, of “A Question of Power: Electricity and the Wealth of Nations,” which was published last month by PublicAffairs, and the producer of the documentary “Juice: How Electricity Explains the World,” which will be available on iTunes on June 2.RealClearEnergy
With the sudden drop in US oil consumption due to the ChiCom-19 hostage crisis, the US could just about stop importing oil today:
We could actually halt imports for quite a while, if we swapped newly produced light/sweet for SPR sour/heavy crude. But, that won’t work when demand recovers.
Are fixed, but somewhat higher, oil prices the proper cure for periodic spikes of very much higher oil prices? Should/could the US join an OPEC++?
My libertarian/nationalist nature says, “No fracking way!” The Federal government has no constitutional powers to limit oil production. Most onshore mineral leases are private property. Offshore state water leases are owned by the states. The Federal government doesn’t even have the power to directly limit production from Federal leases. Although, it can unlawfully impede drilling operations, as the Obama maladministration did. If foreign powers engage in state-sponsored product dumping, the answers are tariffs and embargoes.
My 39 years as a petroleum geologist/geophysicist says, “No schist Sherlock!”… A production level that keeps crude oil between $50 and $70 per barrel would maintain US energy security, perhaps even dominance, without the price spikes that have contributed to recessions and the price collapses that threaten our energy security. The problem is in allocating the production reductions. Some states, like Texas, have the power to do this. It’s a power that was routinely exercised before the rise of OPEC. However, there really isn’t a mechanism, absent congressional action, by which the states and Federal government could lawfully coordinate such an allocation.
The logical course of action is to use the threat of tariffs/embargoes to end the dumping and allow US oil production to flow with prices.
Day 24 of America Held Hostage by ChiCom-19
There is at least one potential serious problem brewing…
10 Dallas firefighters test positive for COVID-19, 126 in quarantine
10 Dallas firefighters tested positive for COVID-19, while 12 tested negative, 10 are symptomatic and waiting for results, 126 are in quarantine.
Author: Tiffany Liou
April 8, 2020
DALLAS — Updated at 7:14 p.m. with more firefighters who have tested positive.
Ten Dallas firefighters have tested positive for COVID-19, officials say. An additional 10 firefighters are symptomatic and waiting for results as of Wednesday afternoon.
Because they work in close quarters, 126 firefighters with Dallas Fire-Rescue are now in quarantine. These numbers change daily.
The number of firefighters being placed in quarantine is growing at a troubling rate. DFR has less than 2,000 employees, including administrative and support personnel.
|% of population with||0.0543%||0.00083%|
|% with, rounded||0.1%||0.00%|
|% without, rounded||99.9%||100.00%|
|Menodoza Line (.200)||13-Mar-2034||0.200|
On the other hand, the unemployment rate could soon be pushing the Mendoza Line…
New U.S. Unemployment Claims Totaled 6.6 Million Last WeekWSJ
Labor Department reports a record 7.5 million were receiving benefits at the end of March as coronavirus continues to hit job market
This hostage crisis will kill more people than ChiCom-19 if we allow it to go on much longer.