RE:RE:A look at the Q1/23 numbersIf you owned several different oil producing properties, and could sell them
1. When oil was trading at $71
or
2. When oil was trading at $100
or
3. When oil was trading at $150
or
4. When oil was trading at $200, or $250 or $300 or $350?
When would you sell them?
If it were me, I would not be selling anything when oil was $71/barrel. I'd be holding on to it for as long as I could. I'd bide my time, knowing that US shale is topping out, and about to go into decline. That global oil inventories are about 3.5 billion barrels, and about half of that is unavailable for sale because its tied up in the supply chain.
1.75 billion barrels of accessable global oil inventory is 17.5 days of global consumption.
Or put another way, with a global deficit of 4 million barrels per day, 1.75 billion barrels will last 435 days.
At a global deficit of 3 million barrels per day, 1.75 billion barrels will last about 583 days.
(A year and a half is about 547 days).
Right now, the world is probably about balanced on oil supply and demand.
By the end of this year, there will be a global deficit of 2-4 million barrels per day. Next year (2024) it gets worse. 2025 will be even worse. Its not until 2027 before some meaningful additions come on the scene - and by then it will be too little too late.
The only thing standing between now, and zero available global oil inventories is about 2 million ish/day of OPEC reserve production, and a year and a half of inventories.
Knowing whats coming, it would be foolish to sell oil in the ground today when oil is $71/barrel, and ESG is all the rage.
Hold off for 2-3 years, then sell it. When the World has a better idea of just how valuable it is.
Remember last Summer, when some people mistakenly thought Europe might run out of Natural Gas? Those fears pushed the spot price of LNG to more than $350/boe in Europe, and nearly that much in South Korea and Japan.
That was $350/boe based on a fear that didn't even exist in reality.
What do you think those traders will pay for oil when they start to see global inventories declining and OPEC producing at their max?
There is a massive oil price change coming. Thats why not sell producing oil assets for chump change today.