RE:RE:TOTAL ENERGYFrank, OK so let's see how my thesis plays out. My thesis is that oil prices will decline over an extended period of time as the slope of the slope (second derivative) of the supply curve gets more positive like walking up a hill where the slope gets steeper as you climb while the second derivative of the demand curve decreases like walking up a hill where the slope starts to level or flatten out. I read that oil traders work off of the second derivative of the supply and demand curves. So I learned a bit about it.
The curve is 2D with bbl/day on the y-axis and days on the x-axis. So as you go out from the origin in days on the x-axis the corresponding y-axis point is higher than the previous day for both the supply and demand curve. When you connect the points together the supply curve is some sort of an exponential function like a parabola that gets steeper as you move to the right of the origin. The demand curve while rising up is starting to level out. Currently demand is rising by about 1.2 million bbl/day (year on year) meaning that by June 2025 consumption will be 1.2 million bbl/day more than right now. But that year-on-year increase in demand is starting to decrease in that the increase in daily demand between June 2025 and June 2026 may only be 800,000 bbl/day. I've read projections where they said that it'll drop to 200,000 bbl/day year-on-year daily increase in demand flattening out by 2027.
So I'm betting that Venezuela, Guyana and Canada will ramp up to boost daily supply much more than the increase in daily demand. Oil prices will decrease because oil futures traders on the NYMEX see the trends and will not lock into contracts at high prices. So the companies that will still enjoy healthy netbacks are those which can lower their break even costs. XOM is shooting for below $30 per barrel breakevens in the Permian. One poster sent me a great blog, kind of like a Reddit things of what's happening in the US. Lots of great smaller companies with great upside potential because they have figured out how to decrease their breakevens producing healthy netbacks. Btw, thsnks again for the link poster x. It is fantastic. Oil patch people who know whar they're talking about.
So Frank, my point is that there are too many great opportunties in the US, Canada where the investment ecosystem is more secure and the risk much lower than to be worried about some small caps that can't even find debt financing from tier-1 lenders.