MigraineCall wrote: Control would imply
that OPEC+ would have the ability to raise and lower production in order to adjust prices. I think we are now at or very near the point that OPEC+ as a whole can't raise production any more, therefore they have lost control. The OPEC+ meeting and expected announcement of a 400K bbl per day increase ceiling is becoming more and more ignored by the market. Even Russia can't meet it's quota. They might as well rip the band aid off now and announce a full increase to pre pandemic levels, as they can't pump that much anyway. That realization might create a true panic in the oil markets, like when you hear your bank is going out of business and run to the cash machines to get your money out.
As Experienced has pointed out, in a normal economic environment, prices return to the marginal cost of production. However, are we in a normal environment? We can't just go and drill more to get more as we have in the past. The easy oil has been found, and we have kneecapped global producers with regulations, and starved them of capital. Getting the banks off their backs is one thing they are desperately trying to free themselves from, are still caught in the rows of barbed wire of permits, environmental, carbon, and increasing costs.
Recently, looking at share price changes of the oil majors that have reported, clearly, those that have been crippled by the ESG movements forcing change and had their future production constrained by ESG and other factors have lagged (Shell, BP).
Those that have been able to resist ESG to a better extent, having significant reserves and plans in place to try to replace reserves as they deplete, while announcing more dividends, and buybacks, have been the bright stars (Exxon, Chevron).
For me, Suncor's vertical integration with assets both up and downstream give it stability through low price swings, while it's long reserve life ensures future long term cash flow. If we indeed are entering into a multi year super bull oil market, perhaps the need for the low oil price insurance by owning a vertically integrated company is not needed. However, Suncor provides that balance in my portfolio in case of an unexpected downturn. The biggest threat being how badly our own ESG influences and impacts production and future growth.
If current trends continue, there is only one scary direction for oil to go, which is up. As energy becomes the main driver of inflation, there is not much governments could do to fight it. That would be very bad for the world economy, driving costs of everything up, the poor bearing the most of the brunt of it.
Those holding oil stocks will have a hedge on inflation. For the rest of the world, and those on the sideliines, it will suck big time.
mrbb wrote: In brief, bank and hedge funds have met with executives of Majors like exxon, shell, total, bp, etc to push ESG down their throat. Not only threat of capital lending constraint but also adding or replacing with new management moles that are eco leaning at executive level. Exxon and shell have to canceled major gas projects in india and vietnam that could have displaced coal power plants. Yes, it's that bat crazy. The eco zealots know renewables can't compete with hydrocarbon so they will resort to jacking up HC prices up to accelerate renewables adoption. Don't expect production growth from the US and EU majors. Eco terrorists won't address GHG emission from india, africa and china, they are targeting western companies. By end of 2022, I could see world demand might surpass world oil production capacity. Supply chain disruption ain't helping either. Opec would get back in control.