Teenage Wasteland
“Of course, we know crude did become a teenager - briefly overnight - at $19.92” - Carl Quintanilla
***Editor’s note: One of the contributors to this newsletter is in the hospital - not critical, but almost certainly due to the virus - despite taking precautions. All - please be safe***
I don't need to fight
To prove I'm right
I don't neeeed to be forgiven
- The Who
BABA O’SAUDI.
Saudi Arabia has made it’s position known.
They’re going to pump -
“Saudi Arabia Energy Ministry official said the Kingdom intends to increase its crude oil exports, starting from May, by about 600k bopd, bringing the total of Saudi petroleum exports to 10.6mm bopd” - SPA
And that stance has turned crude markets into a teenage wasteland.
How do we survive teenage crude?
On Monday, Trump played his biggest card - he called Putin:
“Russia's Energy Ministry wouldn't comment on the form or direction of Russian-American consultations after the presidents spoke. Sources told Energy Intelligence that Moscow wants Washington to take part in whatever market management is required” - Energy Intel
Now, free markets & US law won’t let that happen, at least in the long term.
So we’re stuck…
Waiting for marginal, higher cost producers to shut down production.
For months… at least…
Ultimately, the KSA is in control.
And so… everyone else is left, waiting for Saudi to sing:
Let's get together, before we get much older -
*XOP did a 1-for-4 reverse stock split
RAILROAD COMMISSION.
Pioneer & Parsley took the dramatic step to ask the RRC to proration supply.
In this situation, we see 3x groups of E&Ps, with different interests:
Majors probably want free flow - that would eventually bankrupt most independents
Financially weak independents want free flow - otherwise they default faster
Stronger independents - in the game for the long term - want supply regulated
Pioneer & Parsley are in the last camp.
Their request makes sense…
…for them.
6x weeks ago, the Commission was busy responding to pressure from the public about oversupply - specifically, wasteful gas flaring.
[to Pioneer’s credit, they were also critical of flaring; & to their argument’s credit, there are long term energy security concerns here - we care about that]
It’s not even April, and the RRC is facing proration pressure from producers…
6x weeks is all that it took for the world to turn upside down -
CRUDE PRICES.
Yesterday’s posted prices from Coffeyville & Plains…
*KBS is actually a beer.
A great beer.
Actually worth that price.
If these prices make you want to drink, that’s our rec’ -
OTHER NEWS.
A lot’s going on -
We think that Petro-States are going to sell dollars & equities to finance their revenue gaps. And they’re probably not going to pay bills on-time.
Even Canada is seeing weekly declines in USD reserves.
So watch out -
Shell dropped out of Lake Charles LNG project
FT/Kayrros on OPEC+ & Game Theory (an interesting criticism, & our take from 3x weeks ago)
Maduro’s indictment pushes Venezuela closer to the alluring Firebird opportunity
Matt Levine’s newsletter from yesterday is worth a read (finance, not oil)
That’s it for today - ZeroZeroZero was the best show we watched this weekend (perhaps year), highly recommended - catch y’all Friday -