Why is Saudi Arabia doing this?

[Galvestonhorn]

There wont be a lot of innovation come around for anybody to drill a well in the Permian at $30 oil.

stacked and idle rigs are bout the best innovation. Lol

 

[Chop]

As I see it, the cost of production turns largely on two main factors:

1. Character and quality of the geology/field/reservoir/reserves;
and
2. Efficiency/engineering/management skills of the operator.

then you add in:

3. Transpotation costs; and

4. Taxes.

You can have a brilliantly run company producing in a relatively difficult oil field that can’t match the dollar per barrel costs of Saudi Aramco. This is because the pressure, porosity, permeability, amount of oil in place, etc are simply that much better in Saudi than in most of our fields, especially the shale/tight fields.

Now you could have a bloated, inefficient, wasteful company (cough, cough PEMEX, cough, cough...) that has had some pretty good geology over the years, but is still, at times, more costly per barrel than much better run lean US producers operating with somewhat worse geology.

 

[Musburger1]

Markets aren't stagnant. That is the big conceit of Statists and central planners.

Technology will improve to where they can make money at the lower price.

There’s been innovative improvements already but everything has limits. Water, sand, chemicals, tons of steel, cement, and probably more go into each well. That won’t change any time soon. Magical thinking will not reduce extraction costs to zero.

 

[AC]

As I see it, the cost of production turns largely on two main factors:

1. Character and quality of the geology/field/reservoir/reserves;
and
2. Efficiency/engineering/management skills of the operator.

then you add in:

3. Transpotation costs; and

4. Taxes.

You can have a brilliantly run company producing in a relatively difficult oil field that can’t match the dollar per barrel costs of Saudi Aramco. This is because the pressure, porosity, permeability, amount of oil in place, etc are simply that much better in Saudi than in most of our fields, especially the shale/tight fields.

Now you could have a bloated, inefficient, wasteful company (cough, cough PEMEX, cough, cough...) that has had some pretty good geology over the years, but is still, at times, more costly per barrel than much better run lean US producers operating with somewhat worse geology.

I guess I’m jumpy or chipy about non O&G people hypothesising about what WTI is going to do, or how/when the break even point per bbl will change in WTX. I’m out there all the time. I was supposed to go next week, but I can’t now (quarentine). I’ll go in May. WTI will get North of $50 faster than all the non O&G people speculate and small businesses will adjust. I’m almost out of debt. Anyone that is heavily leveraged will have a harder time. However, a lot of majors are heavily leveraged and they will cut Capex projects. To me a sharp WTI increase is more likely now than in 2016. This recovery won’t take as long.

 

[Chop]

I guess I’m jumpy or chipy about non O&G people hypothesising about what WTI is going to do, or how/when the break even point per bbl will change in WTX. I’m out there all the time. I was supposed to go next week, but I can’t now (quarentine). I’ll go in May. WTI will get North of $50 faster than all the non O&G people speculate and small businesses will adjust. I’m almost out of debt. Anyone that is heavily leveraged will have a harder time. However, a lot of majors are heavily leveraged and they will cut Capex projects. To me a sharp WTI increase is more likely now than in 2016. This recovery won’t take as long.

My O&G connection is as owner/investor in working interests, and I offer no speculation as to what WTI price will be or when.

 

[AC]

If I’m right then you’ll be ok in a few months, 4-8 months. This down turn is predictable b/c it’s based less on fundamentals than the last one. Demand went off a cliff around 3/16. I don’t think it will be that long until demand comes back. We just need to drop the storage reserves by cutting imports or cutting production in SA and Russia. There are numerous ways to correct this. Demand coming back sooner than neighsayers predict will help as well.

 

[Chop]

If I’m right then you’ll be ok in a few months, 4-8 months. This down turn is predictable b/c it’s based less on fundamentals than the last one. Demand went off a cliff around 3/16. I don’t think it will be that long until demand comes back. We just need to drop the storage reserves by cutting imports or cutting production in SA and Russia. There are numerous ways to correct this. Demand coming back sooner than neighsayers predict will help as well.

Yep, hopefully so. You come out ahead sometimes, and behind sometimes. It’s the overall/long haul that matters.

 

[Monahorns]

There’s been innovative improvements already but everything has limits. Water, sand, chemicals, tons of steel, cement, and probably more go into each well. That won’t change any time soon. Magical thinking will not reduce extraction costs to zero.

My expectation of future innovation is no more magical than your faith in Russia and belief in market stasis.

Everything has limits. I never stated there weren't any and never stated costs would go to 0. I merely take notice of the trend of progress and see more opportunities to improvement.

 

[Monahorns]

If I’m right then you’ll be ok in a few months, 4-8 months.

I think all that happens if the economy opens back up in May/June.

 

[AC]

And you live in West Texas and work in the Industry. So we all agree. Early May should be fine if not sooner. IMHO were all getting played. I just don’t know how. Exactly.

 

[iatrogenic]

And you live in West Texas and work in the Industry. So we all agree. Early May should be fine if not sooner. IMHO were all getting played. I just don’t know how. Exactly.

Revenge of the Capitalist

 

[Austin_Bill]

and 9.2 trillion cubic feet of total gas.

Hell, that is just taco Tuesday in my neighborhood.

 

[AC]

Revenge of the Capitalist! I like that! It could be a book title.

 

[Joe Fan]

Mexico flip-flopped in about an hour -- jaja

 

[Musburger1]

OPEC agreed to make cuts, but not enough to raise the price. The US is debating options.

If no action is taken, half the industry dies, Exxon and the big boys pick up the scraps for pennies on the dollar, massive unemployment hits the oil industry and effects downstream industry and state tax revenue as well.

Another possibility would be (mandatory?) production cuts. Who determines how much and which companies comply I have no idea.

A third possibility is a taxpayer multi-billion dollar bailout.

Maybe there are other possibilities?

Shale Drillers Warming to a Once-Unthinkable Idea: a Cap on Oil

 

[Galvestonhorn]

Im much more concerned about oil prices than the Chinese Virus. And it looks like Russia and Saudi have made a deal.

Those guys don't want to sell oil for $20 anymore than we do. They're actually getting about $5-$10 bucks a bbl when they do.

 

[Galvestonhorn]

Musburger Im not trying to be wise butt, BUT that info is not accurate. And I can tell you're not in the oil business.

 

[Musburger1]

Musburger Im trying to be wise butt, BUT that info is not accurate.

Which part(s) are inaccurate? Currently there is over 20M barrels per day being produced over consumption. OPEC is offering to cut 10M. Oil has fallen back to $23 after today’s announcement.

 

[Galvestonhorn]

sit tight

 

[AC]

Everybody’s an epidemiologist and an O&G expert nowadays!

we need to get back to freaking work!! Something actually meaningful will happen with oil prices AFTER the quarantine. Right now prices remain depressed due to demand down 80% plus the SA/ Russia BS. We drop the first shoe and the other may fall too because we will know there is a path forward to higher prices!

 

[Joe Fan]

... that info is not accurate. And I can tell you're not in the oil business.

he is in the Russian propaganda business

 

[Musburger1]

he is in the Russian propaganda business

And you are in the dumb **** propaganda business.

 

[iatrogenic]

You must be his easiest client.

 

[Musburger1]

And you are in the dumb **** propaganda business.

And you, mine.

 

[iatrogenic]

I don't believe any of your commie propaganda, or how you see total disaster in every situation. Business must be tough for you.

 

[Musburger1]

I don't believe any of your commie propaganda, or how you see total disaster in every situation. Business must be tough for you.

Commie propaganda? You are the one who praises massive government control of the markets and bailouts to the highly connected. However, I’d classify you more as a fascist than a communist, since you seem to believe big government should intervene on behalf of the corporate structure (but allow private owners to run companies and reap profits) whereas communists do the same except they want to run the companies too. I advocate neither approach, but simply point out to people that the US isn’t the free, market-driven economy that they want to believe it is.

Small, community centered economies which balance capitalistic profit motive with collectivist participation that benefits everyone is a mix that is potentially more sustainable. Big centralized economies, especially globalization as now practiced, has proven to be non resilient, consolidates wealth, and increases dependency.

 

[iatrogenic]

Wow. You finally admit you are a commie. Good for you. Unfortunately, communism is non-resilient, consolidates wealth, increases (i.e. requires) dependency, and kills people. Congratulations on picking a socio-economic system that has failed repeatedly. What a loser.

 

[Musburger1]

Wow. You finally admit you are a commie. Good for you. Unfortunately, communism is non-resilient, consolidates wealth, increases (i.e. requires) dependency, and kills people. Congratulations on picking a socio-economic system that has failed repeatedly. What a loser.

Your reading comprehension is quite low.

 

[AC]

 

[iatrogenic]