Everyone is probably a little excited and relieved that WTI had a nice gain today. Well, even after that gain, it is still just $25/barrel. Saudi Arabia has not yet added any of its production increase, to 12.5 million barrels/day, to the world market. We will find out in the next 2-3 weeks just how much further WTI crude prices can fall. All people employed in the oil industry can only hope (how hollow is that?) that SA and Russia come to their senses soon - and I mean very soon. Tens of thousands of industry jobs are on the line. As for Chevron, the precious dividend is considered a corporate 'Holy Grail' and will never be cut when there is room for additional budget/project/personnel cuts.
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What about the role of the press in all this??
Oil markets will soon be flooded to the rafters. Hello $12/bbl. Goodbye shale revolution. Welcome to the reality of global competition where the power players take the gloves off when they wish to leave a mark on the competition. The major producers don't want to continue cuts when others don't constrain their production (USA). Its our fault not theirs. We (the American oil industry) borrow tons of money and rush to produce every drop we can, as fast as we can to maybe eek out a small profit. Operators press service companies again and again to cut their rates, leaving little on the bone and still struggle to turn a decent profit. Shale production is simply not competitive when you get right down to the facts. Pundits are blowing smoke that Permian oil is competitive on a global scale. Its BS. Its only profitable if large production cuts are enforced, that my friend is called dependence. We are witnessing a recurring lesson in oil market dominance. They are in control and can prolong this as long as they want. Their gov'ts can print money just like our government can.
The world economy as we know it is supported to a large degree by one thing; debt. We live in a global economy created by debt, sustained by debt and controlled by debt. The banks own it all. The debtor is slave to the lender. Today as you see the stock market crashing; well do you think its the average citizen that is causing the crash? Not hardly, its large international banks, massive hedge funds and trillion dollar corporate networks of intertwined financial entities that act together to sell massive amounts of stock to crash the markets at the time of their choosing. Its wealth transfer, wealth destruction, and elimination of perceived financial security in nearly all sectors of society; from the white house lawn to your front door. Money is power and the powers that be have chosen now as the time for another lesson; a simple show of their power / control at a global level. Nothing new to see here. Same old song and dance. Welcome to the greatest show on earth. Financial enslavement of the masses. Yes their will be huge bailouts, massive government loans and trillions of dollars spent, largely vaporized into the system never to be seen again (into the accounts of those in power). Main street will pick itself up by the bootstraps and bear the burden of the taxpayer yet again. Don't kid yourself, this is not about a virus, that is the smoke screen. The show must go on.
The United Arab Emirates announced today that they are increasing oil production by 1 million barrels per day, from 3 million to 4 million. When added to SA increase, this will bring additional daily production increase to 3.6 million barrels. Got that? The DAILY production will increase by 3.6 million barrels. From just these 2 countries.
Is the US cutting back its oil production to ease supply
This is bluff, neither Russia nor Saudis can survive at this price, they did this back in the 80s and the results were devastating, nothing will happen on Apr 1st both will back down and reduce production.
Pay attention to US and global storage capacity. This includes those crude oil super tanker ships. If and when capacity is reached, oil prices could go to $10 or lower.
I retired well from Chevron back in 2016. Nice to hear gasoline might be getting cheaper than water. I think I should postpone my immediate plans to purchase that new luxury motor coach and wait a few months instead. By then, maybe some poor laid off Chevroid will be dying to unload the luxury motor coach he can no longer afford at a fire sale price.
I mostly agree with your insightful post. However, unless the West and the rest of the world can get the Saudis and Russians to play nice (i.e. reduce output), WTI price is very likely to drop into the teens
https://www.marketwatch.com/story/dismal-oil-demand-outlook-saudi-russian-price-war-lead-to-atomic-bomb-like-environment-for-oil-2020-03-18