RE:This is what blood in the streets looks likeflanter wrote
When i want to catch on what is going on in the oil market, I visit www.oilprice.com
Tonight, the website published an article with the title: "Could Oil Really Fall To $0?" which you can see here:
https://oilprice.com/Energy/Crude-Oil/Could-Oil-Really-Fall-To-0.html
For those that don't visit links, the following is a small cut-and-paste from the article:
In early March, a few forecasters suggested that oil demand may be slightly negative in 2020, dipping by a mere 220,000 bpd. The call was somewhat provocative at the time.
By the middle of the month, some forecasters said the demand hit could be as large as 10 million barrels per day (mb/d) in the second quarter. A few days later, another set of analysts put it at 13-14 mb/d. By last week, the IEA warned demand could fall by 20 mb/d.
The article suggests that storage tanks worldwide are going to be filled to capacity in a few weeks. When that happens, there is no place for oil to go. Refineries are beginning to shut down. Pipelines are demanding take-away receipts from shippers to guarnatee that the pipes won't be used as storage because that is the next step.
The article suggests that producers can't just shut off production at the snap of a finger and it will take at least until the third quarter before any significant reduction will take effect. In the meantime, oil prices only have one way to go. The article infers that prices are headed to cash cost. Without the article saying so, the implication is that anything below cash cost would result in a shutdown decision by producers.
The worst part of all of this is that we can't control the Covid19 "demand" side of the equation. Despite Mr. Trump's chest pounding, his ability to control the "supply" side is very much up for debate. The article suggests that the oil market expects both the demand and supply sides of the equation will be normalized in the next 3-4 months.
The article finishes with: "However, if either shock (or both) last for 12 months or longer, the gigantic surplus could keep oil prices below $30/bbl for an extended period.”
I don't know what an "extended period" means, but t can't be good. If Brent is trading at $30/bbl for years, I don't care what the pipeline companies are telling us, all future earning and cash flow projections are worthless.
Everyone worries about FOMO (the Fear Of Missing Out). Me too. While the press is trying to pump the market these days, the reality is that oil prices are going lower to the point of crushing companies and by extension pipelines. Don't let the press deter you from learning the facts.
I hope I'm wrong about all of this and that all of the articles about the supply and demand for oil are mistaken. I'm old and I only play the market for sport so it doesn't really matter to me what happens to share prices.
If you are reading this, you are probably loyal to IPL. I get that. Knowing that whatever I say won't influence the share price in any way, I urge you to take a defensive position when it comes to anything to do with oil until at least until Covid19, which controls the supply side, has been neutralized and people get back to their normal lives. Even when the supply side begins to recover, we still have to keep an eye on our Russian and Saudi friends.
Sometimes you just need to be out of the market, or out of a specific industry. This is the time!
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Good post. Yes the problem that many seem to be missing is that we have a likely 20 million barrels per day less demand for the next few months at least. Russia and Saudi knew that doing another cut of 2 or 3 million barrels per day would not make any differance when the demand was that much less. They are also tired of cutting only to have US shale laugh at them and pump more. Looks like the laughing is over now. Russia and Saudi mean business and are taking advantage of the current situation which they cant control anyway to crush as many oil producers as possible.
And once that happens and things stabillize in the world i would not be surprised to see a deal between Russia, Saudi and the US with possibly some other large oil producers such as Canada which would have everybody control their production to allow oil prices to go back to a reasonable level.
It will take many months for the Corona virus to be brought under control worldwide. Then the huge surpluses of oil need to be used up. The world economy will likely be in a big recession for some time which would also limit demand.
Things will eventually stabilize but it will take a long time for everything to get back to some kind of normal in the oil business.
At the same time the current shareprice of IPL is aprox. one third of where it was a few weeks ago so a lot of that is already built in to the shareprice.
I am just wondering as refineries slow production and oill storage tanks fill up how that will effect IPLs pipeline business and revenue if the oil is sitting in the pipelines as their is no use for it at the other end.