Trump-Saudi and Russia
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Started by Jim_M - April 2, 2020, 11 a.m.

Trump riled up oil and products today saying he has talked to Saudi and supposedly they talked to Russia and Trump is saying that they are discussing reducing production 10mbbls - 15 mbbls.  

Thoughts?  I'm thinking no way are they doing that without US involvement.  And from what I've read it's hard to just shut off fracking wells.  

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By metmike - April 2, 2020, 1:11 p.m.
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Thanks Jim,

There have been recent articles discussing oil going to $0 and even negative that shocked me. 

One would think that the forward looking market seeing that shutting down oil production because of anything close to that........ would anticipate that causing higher prices.............in advance. 

This would keep it from happening.  

The COVID-19 panic will be ending(the worst of the panic in the markets is over I believe) .

Things won't just go back to normal, that will take a very long time but we've dialed in the worst case scenario and most extreme possible outcome and read the most extreme bearish projections(oil going to negative pricing from storage filling up) that market expectations...........are the absolute lowest they have been in history by a very wide margin.

Under those conditions, everybody that was going to sell or cover longs has already done so.


Out another way.

What would be needed for crude to trade sharply lower than $20 right now?

We were getting forecasts for $1 crude and even negative prices earlier this week. Do we need projections of crude trading -$20/barrel???


I'm not saying it can't go lower but its almost impossible to go much lower here........because its impossible to exceed the most extremely negative market expectations in history.

Good analogy:  We don't have many droughts anymore in the Cornbelt thanks to the benefits of climate change but during the last one in 2012 and the  previous one, 24 years prior, 1988 the soybeans soared higher as the drought got worse and worse.  Every day we came in and expanded the length of the dry spell another day, the market went higher because the market dialed in more damage and less supply at harvest time in the Fall.

This goes on for awhile, with the forecast getting worse and some extreme moves/volatility are you approach the top with panic buying/short covering from traders crying uncle or getting margin calls. After awhile of this on the upside, you've wiped that source of buying out. Anybody that was going to buy...........has bought already.

At that point, the forecast would need to be 120 degrees for the rest of the Summer to cause another leg higher............and that will not happen.

What does happen is the forecast continues to get hotter and dryer every day like it has..............but the market won't go higher anymore.  The top always happens BEFORE the most bullish news comes out because the market already dialed in the MOST EXTREME bullish news possible, so more bullish is not bullish enough.

I think that crude has been trading that way this week. The API and EIA numbers this week were extremely bearish...........but not bearish enough for us to settle below $20 or the recent lows.

We have run out of sellers at $20 that were thrilled to sell at $40 or $30 when the market had not dialed in the most extreme bearish scenario yet.


In this situation, with the market trading the most extremely bearish scenario, any news that is less bearish or possibly bullish-like Trumps tweet, compared to expectations is very bullish. 

I still can't imagine big traders putting on short positional trades to hold for months when the price of crude is $20.


There's a  chance the news today causes just a spike higher and we drop down again or it could mark the bottom and all those that were thinking about selling crude at $20, just got lesson of the hazards to being short at $20 if ANY bullish news comes out.

The risk/reward seems so one sided to the bad side to me vs crude at $40 for instance. 

Most important of all. I think the Coronavirus panic part of the reaction has peaked.

The news on COVID-19 will be getting better and better.


   

                Profound evidence that things are getting better            

https://www.marketforum.com/forum/topic/49867/


Tracking the Coronavirus#2-NEW THREAD-WED #'s

https://www.marketforum.com/forum/topic/49863/



By metmike - April 2, 2020, 1:11 p.m.
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Trump Tweet Sends Oil Soaring 25%

https://oilprice.com/Energy/Oil-Prices/Trump-Tweet-Sends-Oil-Soaring-25.html?utm_source=browser&utm_medium=push_notification&utm_campaign=vwo_notification_1585867634&_p_c=1


Oil prices spiked on Thursday morning after U.S. President Donald Trump said that he spoke with the Saudi Crown Prince, and hoped and expected that Saudi Arabia and Russia would “cut back approximately 10 Million Barrels, and maybe substantially more,” sending oil prices soaring by 20%.

“Just spoke to my friend MBS (Crown Prince) of Saudi Arabia, who spoke with President Putin of Russia, & I expect & hope that they will be cutting back approximately 10 Million Barrels, and maybe substantially more which, if it happens, will be GREAT for the oil & gas industry!” President Trump tweeted on Thursday.



https://twitter.com/realDonaldTrump/status/1245726411526221824



@realDonaldTrump

.....Could be as high as 15 Million Barrels. Good (GREAT) news for everyone!

9:54 AM · Apr 2, 2020·Twitter for iPhone

10K Retweets50.9K Likes

By metmike - April 2, 2020, 1:26 p.m.
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                       Opinion(not mine):                   By Tom Kool - Apr 02, 2020, 12:00 PM CDT

Why A 15 Million Barrel Per Day Cut Will Never Happen

https://oilprice.com/Energy/Energy-General/Why-A-15-Million-Bpd-Cut-Will-Never-Happen.html?utm_source=browser&utm_medium=push_notification&utm_campaign=vwo_notification_1585867634&_p_c=1


According to Dow Jones, Riyadh is willing to reduce output to 9 million bpd, roughly what it produced in February before the OPEC+ deal fell apart. It also seems that the Kingdom will only be happy to cut production back to 9 million bpd if Moscow agrees with the 500,000 bpd production reduction it rejected at the previous OPEC+ meeting in Vienna.

Even if Saudi Arabia gets Russia to agree to the 500,000 bpd cut (which remains unlikely), this means that the markets will see a production reduction of only 3.5 million bpd – a far cry from the 10-15 million bpd that President Trump claimed in his tweet this morning.

Even if Saudi Arabia gets the UAE, Iraq and other non-OPEC members such as Brazil, Canada, Kazakhstan, Norway, Mexico, and Azerbaijan to make additional output cuts, this will still not be enough to counter the coronavirus impact on the markets in the short term. All of this seems highly unlikely unless US producers will agree to force production cuts upon themselves (like Canadian producers did last year), something that US President Trump did not mention in his tweet.

Some smaller and larger US producers are happy to voluntarily cut back production, but oil majors such as ExxonMobil and Chevron have shown no interest in reducing production. Industry organizations such as the API and TXOGA also remain opposed to forced output cuts.

With global oil demand potentially crashing 30 million bpd in April/May, every producer is feeling the pain, but even a multilateral output cut that would involve all G20 producers isn’t likely to keep inventories from ballooning and prices from falling.

The oil rally caused by Trump’s tweet is likely to fade.

By metmike - April 2, 2020, 6:57 p.m.
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Benchmark Brent’s record $10 discount gives oil market reality check

https://www.oilandgas360.com/benchmark-brents-record-10-discount-gives-oil-market-reality-check/


LONDON – U.S. President Donald Trump’s confidence he can get a deal to limit a global oil glut has driven world crude futures higher.


Source: Reuters

But he cannot talk up the underlying physical market that shows the full extent of the demand destruction following the coronavirus outbreak.

The Brent crude oil benchmark, used to price more than half the world’s physical crude cargoes, has dropped to a record discount to Brent oil futures of about a $10 per barrel.

Whatever oil producers decide on supply, demand destruction caused by lockdowns to contain the novel coronavirus is so significant the world will soon run out of storage space for millions of barrels of surplus oil.

Estimates of oil demand destruction range between 20 million and 30 million barrels per day (bpd), or roughly a third of global daily oil demand.

Physical dated Brent was priced at $15 a barrel on Wednesday after the Brent futures contract, a financial instrument used to price oil for future delivery, settled at $24.74 a barrel, Refinitiv data showed.

By metmike - April 2, 2020, 7:03 p.m.
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Shale-well frackers grind to a halt as oil prices collapse


https://www.oilandgas360.com/shale-well-frackers-grind-to-a-halt-as-oil-prices-collapse/

Fracking companies, which pump water, sand and chemicals into wells to release trapped oil and gas, helped turn the United States into the largest oil producer in the world. The business became despised by environmentalists and politicians who called for fracking to be banned.

Now, with oil prices falling below the cost of production, oil and gas producers are canceling contracts and forcing providers to idle their giant pumps and vats of chemicals.

An estimated 31 hydraulic fracturing fleets, or 11% of those currently operating, were turned off in the last week, according to data from consultancy Primary Vision, and more than 40% of the 421 operating a year ago have been side-lined.

“It’s a bit of a panic in the oilfield,” said Artem Abramov, head of shale research for consultancy Rystad Energy. Work is declining faster now than during the 2014 oil downturn because oil and gas producers have no financial backstop.

“Many firms are stopping all activity right now,” Abramov said.


“The rug got pulled out from under the pressure pumpers in the back half of March and it’s about to get bloody,” analysts at Tudor, Pickering, Holt & Co wrote on Monday.

The backlog of uncompleted wells will grow, said Bernadette Johnson, a vice president at researcher Enverus. They could be fracked to produce oil if prices rebound.

At the end of February, there were 7,637 wells drilled but not completed in the United States, down about 60 from the prior month, according to the U.S. Energy Information Administration.


By patrick - April 3, 2020, 1:11 p.m.
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Putin denies this
Nobody confirms it
No evidence of production cuts
The rally continues
Because of course it does

By metmike - April 3, 2020, 4 p.m.
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I know that you know this  patrick(you've demonstrated a clear understanding of how the markets work) but am saying it as a general comment, not directed at you. 


FUTURES markets trade based on speculation of the FUTURE.


Whether that gets confirmed or not does matter a great deal.................down the road/in the future but what people THINK will or MIGHT happen on any one day or time frame determines where the price trades then.

2 months ago, traders thought that crude was worth double what its actually worth. 


We always here that the market is always right because the value of something is only worth what buyers and sellers agree to pay at any moment in time.


However, I contend that the market is almost always WRONG.

If that was not the case, then the price would stay the same every day.   An astute trader tries to figure out if the market is wrong and maybe  how wrong the market is and takes a position based on speculating that they are more right than the market about the future price. 

If one thinks that this rally/spike to $29 is not based on fundamentals...........that will unfold to be more bearish than the market is hoping for right now and you are right, then being short will make money.

Being long will pay off if the opposite happens. 

As we've seen, the news every day or even sometimes every minute often determines the price of crude.

I sure can't tell you what the news about crude will be but felt earlier this week that the bad news and panic over the  pandemic  had peaked.

Instead of getting bombarded with bad case scenario's  and increasing shutdowns and continued increases in infections and deaths, next week, the top story, at times will be that the rate has SLOWED DOWN. 

A leading indicator, very reliable in the past for predicting the flu has been suggesting that all week.


COVID-19 has a longer incubation and illness time, so there should be a longer lag before we see infections drop vs flu cases drop.  # of deaths will be the last thing we see falling.

https://www.marketforum.com/forum/topic/49867/

https://www.marketforum.com/forum/topic/49863/





By metmike - April 3, 2020, 4:38 p.m.
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By Jim_M - April 5, 2020, 7:08 p.m.
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Trump's meeting with oil CEO's didn't go well on Friday.  He muttered something about the market might have to decide how oil cuts are done and it is up to Russia and Saudi.  I firmly believe Russia isn't going to lift a finger if the US doesn't.  Why would either Saudi or Russia cut output when the US is still pumping around 13 mbbls a day.

News stories pop up about China trying to get things going again and then they shut down a part of the city.  From the news tonight NYC has some encouraging signs that they might have reached the apex, but resumption of demand is going to take months.  I still don't think we have seen the wave of oil in US stats yet.  


By metmike - April 5, 2020, 7:47 p.m.
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The rate of increase in new COVID-19 cases clearly peaked and it appears that the market has already contemplated much of the demand destruction worst case scenarios from this element. 

Unleaded spiking below 38c just over 2 weeks ago on Monday seemed like capitulation of the panic selling to me. WOW!

Not saying that crude can't get back to $20 but panic selling from the coronavirus getting worse, that led to the 38c UNL is NOT going to be the main driving force anymore.

https://www.marketforum.com/forum/topic/49863/


https://www.marketforum.com/forum/topic/49867/


By metmike - April 6, 2020, 1:18 p.m.
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U.S. energy secretary hopeful Saudi, Russia to end oil row this week

https://www.oilandgas360.com/u-s-energy-secretary-hopeful-saudi-russia-to-end-oil-row-this-week/


Breaking news on this or a tweet by Trump could cause crude to spike $2 in a few minutes, the way that this market has been trading lately.