The gas wars come again

crimson5pheonix

It took 6 months to read my title.
Legacy
Apr 3, 2020
34,640
1,260
118
https://oilprice.com/Energy/Energy-General/Oil-Prices-Crash-20-As-Oil-War-Begins.html

Saudi Arabia is once again glutting the market with crude oil to beat back encroaching non-OPEC producers dropping oil to a 30 year low.

You might remember something similar happening a few years ago in ~2016 which caused Venezuela to collapse and oil prices were nearly this low. But this time it's happening with a different kind of demand drop as coronavirus scares are grounding planes and keeping ships at port. Already stock markets are opening to gigantic crashes.
 

Agema

You have no authority here, Jackie Weaver
Legacy
Apr 3, 2020
6,057
3,155
118
crimson5pheonix said:
Saudi Arabia is once again glutting the market with crude oil to beat back encroaching non-OPEC producers dropping oil to a 30 year low.

You might remember something similar happening a few years ago in ~2016 which caused Venezuela to collapse and oil prices were nearly this low. But this time it's happening with a different kind of demand drop as coronavirus scares are grounding planes and keeping ships at port. Already stock markets are opening to gigantic crashes.
Probably quite helpful for the global economy to at least partly offset virus-inflicted trade decrease.

I'm wondering whether my employer is still going to pack me off to an international conference and recruitment trip in April... I assume so, as the health advice thus far has been something along the lines of "You god damn turn up to work for anything less than having drunk the mucus of a known covid-19 patient".
 

crimson5pheonix

It took 6 months to read my title.
Legacy
Apr 3, 2020
34,640
1,260
118
https://www.npr.org/2020/03/11/814412314/here-we-go-again-dow-drops-700-points-as-stock-market-turmoil-continues

Update, stocks jumped 1100 points yesterday on the DOW, then dropped 1200 points today as the stock markets continue to slide in the face of the COVID-19 pandemic.
 

crimson5pheonix

It took 6 months to read my title.
Legacy
Apr 3, 2020
34,640
1,260
118
https://www.wsj.com/articles/fed-to-inject-1-5-trillion-in-bid-to-prevent-unusual-disruptions-in-markets-11584033537

Wall Street is getting a 1.5 trillion dollar bailout in hopes that the markets stop imploding.

[tweet t="https://twitter.com/PHLBolshevik/status/1238164071305883649"]

It did not work.
 

Saint of M

Elite Member
Apr 27, 2020
800
27
33
Country
United States
Has things getting canceled due to the Corona Virus effected the viruses?
 

Agema

You have no authority here, Jackie Weaver
Legacy
Apr 3, 2020
6,057
3,155
118
crimson5pheonix said:
It did not work.
I'm not surprised. I suspect throwing zillions around this way will mostly end in large companies fucking with the system for their own benefit rather than the system's. Large, healthy companies will use it to buy up shares, and it won't sort out the fact that production is going to slump because workers are ill or at severe risk of illness. Admittedly, holding up share prices will stop some larger companies going under, and I doubt do a damn think for small and medium ones more at risk.

Given that the economy is going to slowdown heavily, what theoretically might be a good idea is temporary debt hold.

So millions of people are getting paid but companies are not earning revenues; this is likely to drive business with shallow pockets to the wall. They could be propped up until the end of the crisis. After all, all those people with regular salaries will still be earning: that money's not going to disappear in a puff of air, so things should pick up again later. The big problem seems to me how to legislate for this.

For low income and gig workers, they'll need some form of benefit support to get them over the hump. Good luck them getting anything suffficient out of certain governments.
 

crimson5pheonix

It took 6 months to read my title.
Legacy
Apr 3, 2020
34,640
1,260
118
[tweet t="https://twitter.com/LadySif_DemCast/status/1239296577761677312"]

The federal reserve has cut interest rates now to actually 0%.
 

Agema

You have no authority here, Jackie Weaver
Legacy
Apr 3, 2020
6,057
3,155
118
crimson5pheonix said:
The federal reserve has cut interest rates now to actually 0%.
I think we've long since reached the limit of monetary policy. Problem is with the national debts of many countries, I'm not sure how much fiscal policy room there is, either.

* * *

Incidentally, one thing not addressed here is that this seems to have been kicked off by Russia. OPEC wanted to reduce oil production to raise the oil price, and Russia decided not. It's thought that Russia's aim of driving the price down was to cause the collapse of a fair chunk of North America's oil industry, which produces at a relatively high cost.

Saudi Arabia, which never likes being messed with over oil, seems to have decided "fuck you" and to drive the price down even harder so that Russia also bleeds, thus teaching it a lesson about who's boss in the oil world. However, from some of my reading around, it seems Russia can actually support a lower oil price than Saudi Arabia can, because Saudi Arabia shunts so much oil revenue into subsidising its populace.

What I guess Saudi Arabia might be relying on is that Russia has limited access to global financial markets and/or a smaller cash reserve and thus believes that it can win a battle of attrition.
 

crimson5pheonix

It took 6 months to read my title.
Legacy
Apr 3, 2020
34,640
1,260
118
Agema said:
crimson5pheonix said:
The federal reserve has cut interest rates now to actually 0%.
I think we've long since reached the limit of monetary policy. Problem is with the national debts of many countries, I'm not sure how much fiscal policy room there is, either.

* * *

Incidentally, one thing not addressed here is that this seems to have been kicked off by Russia. OPEC wanted to reduce oil production to raise the oil price, and Russia decided not. It's thought that Russia's aim of driving the price down was to cause the collapse of a fair chunk of North America's oil industry, which produces at a relatively high cost.

Saudi Arabia, which never likes being messed with over oil, seems to have decided "fuck you" and to drive the price down even harder so that Russia also bleeds, thus teaching it a lesson about who's boss in the oil world. However, from some of my reading around, it seems Russia can actually support a lower oil price than Saudi Arabia can, because Saudi Arabia shunts so much oil revenue into subsidising its populace.

What I guess Saudi Arabia might be relying on is that Russia has limited access to global financial markets and/or a smaller cash reserve and thus believes that it can win a battle of attrition.
I don't know how well it will work out for Russia. SA might subsidize it's people through oil, but it still only spends a portion of it's money doing so, SA has fat stacks of cash it just sits on and can spend from if needed. It's the other OPEC countries that will crack, this is what happened to Venezuela in the first place for example.

As for America what this hurts is fracking and offshore drilling, as those aren't really profitable until about $80 a barrel.
 

Agema

You have no authority here, Jackie Weaver
Legacy
Apr 3, 2020
6,057
3,155
118
crimson5pheonix said:
I don't know how well it will work out for Russia. SA might subsidize it's people through oil, but it still only spends a portion of it's money doing so, SA has fat stacks of cash it just sits on and can spend from if needed. It's the other OPEC countries that will crack, this is what happened to Venezuela in the first place for example.

As for America what this hurts is fracking and offshore drilling, as those aren't really profitable until about $80 a barrel.
From what I understand, SA's government budget break-even oil price is upwards of $70 a barrel, Russia's is about $40, (although SA had already started cutting its budget, so it might not be that bad for them.) On the other hand as you say, SA may well have a big fat war chest that Russia does not. Russia has also had a relatively poor economy for quite a few years, probably due to sanctions. It should have growth approaching 5% GDP/year, but has less than 2%. On its plus side, we know Russia tolerates poor economic performance in a way many other countries don't.

I believe Russia is a poorly-run country. Sure, they love their local power games in Ukraine, Syria etc. but for all the showy global accomplishments in that regard, I think it masks neglect of and disorder in what it should really be looking after. International exploits provide headline patriotic popularity to cement Putin's place (together with internal repression) as leader, but without substantial internal human and economic development, the nation's place is cemented as a second rate power.

I totally agree that this is going to mightily screw a lot of the oil producers, like Venezuala. Although... can Venezuala itself be more screwed?
 

crimson5pheonix

It took 6 months to read my title.
Legacy
Apr 3, 2020
34,640
1,260
118
Agema said:
crimson5pheonix said:
I don't know how well it will work out for Russia. SA might subsidize it's people through oil, but it still only spends a portion of it's money doing so, SA has fat stacks of cash it just sits on and can spend from if needed. It's the other OPEC countries that will crack, this is what happened to Venezuela in the first place for example.

As for America what this hurts is fracking and offshore drilling, as those aren't really profitable until about $80 a barrel.
From what I understand, SA's government budget break-even oil price is upwards of $70 a barrel, Russia's is about $40, (although SA had already started cutting its budget, so it might not be that bad for them.) On the other hand as you say, SA may well have a big fat war chest that Russia does not. Russia has also had a relatively poor economy for quite a few years, probably due to sanctions. It should have growth approaching 5% GDP/year, but has less than 2%. On its plus side, we know Russia tolerates poor economic performance in a way many other countries don't.

I believe Russia is a poorly-run country. Sure, they love their local power games in Ukraine, Syria etc. but for all the showy global accomplishments in that regard, I think it masks neglect of and disorder in what it should really be looking after. International exploits provide headline patriotic popularity to cement Putin's place (together with internal repression) as leader, but without substantial internal human and economic development, the nation's place is cemented as a second rate power.

I totally agree that this is going to mightily screw a lot of the oil producers, like Venezuala. Although... can Venezuala itself be more screwed?
I think the bedrock for the bottom is when you hit subsistence farming, if your people make it there they've hit rock bottom because you can't do anything to them anymore.

As for the crisis, I predict SA will back off before Russia cracks. Not because they run out of money but because the rest of OPEC will be begging them to ease off.
 

Seanchaidh

Elite Member
Legacy
Apr 24, 2020
2,891
1,432
118
Country
United States of America
Agema said:
I totally agree that this is going to mightily screw a lot of the oil producers, like Venezuala. Although... can Venezuala itself be more screwed?
Yes. Indeed, it's questionable whether it's even the most screwed in the region right now; what it is is a regime-change target of the neocons in Washington D.C.
 

crimson5pheonix

It took 6 months to read my title.
Legacy
Apr 3, 2020
34,640
1,260
118
https://www.washingtonpost.com/business/2020/04/02/stocks-markets-today-economy-coronavirus/

And the gas war might be coming to a close, with Russia and SA agreeing to cut production again.
 

SupahEwok

Malapropic Homophone
Legacy
Apr 3, 2020
4,028
1,393
118
Country
Texas
crimson5pheonix said:
https://www.washingtonpost.com/business/2020/04/02/stocks-markets-today-economy-coronavirus/

And the gas war might be coming to a close, with Russia and SA agreeing to cut production again.
The WP wants me to subscribe to read the article. Do you mind injecting more detail in your summary? I'm hoping for a job that'd do a lot of work for oil rigs and pipelines offshore, so this stuff is directly relevant to me.
 

crimson5pheonix

It took 6 months to read my title.
Legacy
Apr 3, 2020
34,640
1,260
118
SupahEwok said:
crimson5pheonix said:
https://www.washingtonpost.com/business/2020/04/02/stocks-markets-today-economy-coronavirus/

And the gas war might be coming to a close, with Russia and SA agreeing to cut production again.
The WP wants me to subscribe to read the article. Do you mind injecting more detail in your summary? I'm hoping for a job that'd do a lot of work for oil rigs and pipelines offshore, so this stuff is directly relevant to me.
Most of the article details the economic impact of the deal, the real meat and potatoes of what you care about is in the first paragraph.

U.S. stocks vaulted to big gains Thursday on word that Saudi Arabia and Russia may slash crude output by 10 million barrels a day. The cuts could chart a path toward restoring the hardest-hit sector of the economy, and the news came as markets were digesting bitter unemployment numbers.
Looking deeper into it, it might just be Trump blowing smoke and the economists buying it because they want it to be true.

https://www.cnbc.com/2020/04/03/oil-markets-donald-trump-saudi-arabia-russia-in-focus.html

Wapo neglects to mention the news came from Trump saying it.

EDIT: Well I take that back somewhat, if you're looking for offshore drilling jobs, those do tend to need high oil prices to be sought after, and it's likely you would be working for a smaller company contracted out to the leaseholding companies that own the oil rigs and such. And those are the companies that tend to get fried during these gas wars. For offshore drilling the economic viability depends on just how far offshore and deep the oil is, but I think generally oil needs to be at least $60 a barrel to make deep drilling viable and $80 a barrel for fracking. Oil is trading at less than $30 a barrel currently.
 

SupahEwok

Malapropic Homophone
Legacy
Apr 3, 2020
4,028
1,393
118
Country
Texas
crimson5pheonix said:
SupahEwok said:
crimson5pheonix said:
https://www.washingtonpost.com/business/2020/04/02/stocks-markets-today-economy-coronavirus/

And the gas war might be coming to a close, with Russia and SA agreeing to cut production again.
The WP wants me to subscribe to read the article. Do you mind injecting more detail in your summary? I'm hoping for a job that'd do a lot of work for oil rigs and pipelines offshore, so this stuff is directly relevant to me.
Most of the article details the economic impact of the deal, the real meat and potatoes of what you care about is in the first paragraph.

U.S. stocks vaulted to big gains Thursday on word that Saudi Arabia and Russia may slash crude output by 10 million barrels a day. The cuts could chart a path toward restoring the hardest-hit sector of the economy, and the news came as markets were digesting bitter unemployment numbers.
Looking deeper into it, it might just be Trump blowing smoke and the economists buying it because they want it to be true.

https://www.cnbc.com/2020/04/03/oil-markets-donald-trump-saudi-arabia-russia-in-focus.html

Wapo neglects to mention the news came from Trump saying it.

EDIT: Well I take that back somewhat, if you're looking for offshore drilling jobs, those do tend to need high oil prices to be sought after, and it's likely you would be working for a smaller company contracted out to the leaseholding companies that own the oil rigs and such. And those are the companies that tend to get fried during these gas wars. For offshore drilling the economic viability depends on just how far offshore and deep the oil is, but I think generally oil needs to be at least $60 a barrel to make deep drilling viable and $80 a barrel for fracking. Oil is trading at less than $30 a barrel currently.
Yeah, I dunno how well the guys I interviewed with are doing. They're only a year and a half old, I was gonna be a part of their first big expansion.

They do a lot of work internationally, not just the Gulf. I'm hoping they'll pull through, and be in a position to hire me on. I think that's low odds, though. Thanks for the update.

Edit: I don't know how accurate "offshore drilling jobs" is for me. It would be a job in hydrographic surveying, scanning the seafloor and the underwater portions of rigs and such. All done from a boat, don't think we'd actually go onto the rigs. But I imagine the more rigs and pipelines shutdown, the less volume of work there is for that part of the industry.
 

crimson5pheonix

It took 6 months to read my title.
Legacy
Apr 3, 2020
34,640
1,260
118
SupahEwok said:
crimson5pheonix said:
SupahEwok said:
crimson5pheonix said:
https://www.washingtonpost.com/business/2020/04/02/stocks-markets-today-economy-coronavirus/

And the gas war might be coming to a close, with Russia and SA agreeing to cut production again.
The WP wants me to subscribe to read the article. Do you mind injecting more detail in your summary? I'm hoping for a job that'd do a lot of work for oil rigs and pipelines offshore, so this stuff is directly relevant to me.
Most of the article details the economic impact of the deal, the real meat and potatoes of what you care about is in the first paragraph.

U.S. stocks vaulted to big gains Thursday on word that Saudi Arabia and Russia may slash crude output by 10 million barrels a day. The cuts could chart a path toward restoring the hardest-hit sector of the economy, and the news came as markets were digesting bitter unemployment numbers.
Looking deeper into it, it might just be Trump blowing smoke and the economists buying it because they want it to be true.

https://www.cnbc.com/2020/04/03/oil-markets-donald-trump-saudi-arabia-russia-in-focus.html

Wapo neglects to mention the news came from Trump saying it.

EDIT: Well I take that back somewhat, if you're looking for offshore drilling jobs, those do tend to need high oil prices to be sought after, and it's likely you would be working for a smaller company contracted out to the leaseholding companies that own the oil rigs and such. And those are the companies that tend to get fried during these gas wars. For offshore drilling the economic viability depends on just how far offshore and deep the oil is, but I think generally oil needs to be at least $60 a barrel to make deep drilling viable and $80 a barrel for fracking. Oil is trading at less than $30 a barrel currently.
Yeah, I dunno how well the guys I interviewed with are doing. They're only a year and a half old, I was gonna be a part of their first big expansion.

They do a lot of work internationally, not just the Gulf. I'm hoping they'll pull through, and be in a position to hire me on. I think that's low odds, though. Thanks for the update.

Edit: I don't know how accurate "offshore drilling jobs" is for me. It would be a job in hydrographic surveying, scanning the seafloor and the underwater portions of rigs and such. All done from a boat, don't think we'd actually go onto the rigs. But I imagine the more rigs and pipelines shutdown, the less volume of work there is for that part of the industry.
Exactly. It's companies like that that tend to flounder when oil prices drop. The big companies like Exxon and Shell don't care all too much, but the people who do the work around them fall apart. And yes, if offshore drilling isn't profitable, there's no need to hire surveyors, so a startup surveying company would need work outside the oil industry to survive right now, and that's not even a guarantee because of COVID.
 

crimson5pheonix

It took 6 months to read my title.
Legacy
Apr 3, 2020
34,640
1,260
118
https://markets.businessinsider.com/commodities/news/oil-price-war-ends-saudi-arabia-russia-opec-production-cuts-2020-4-1029081080

Alright, now there are actual concrete details of an agreement. The agreement was announced jumping the prices of oil, and then the details released causing the prices to fall again, because it's a half-assed cut.
 

crimson5pheonix

It took 6 months to read my title.
Legacy
Apr 3, 2020
34,640
1,260
118
https://markets.businessinsider.com/commodities/news/wti-oil-price-fall-negative-100-barrel-next-month-mizuho-2020-4-1029118352

Oil is in the negatives, the literal negatives. There's nowhere to store it anymore, so now you have to pay people to take useless oil off your hands.
 

Agema

You have no authority here, Jackie Weaver
Legacy
Apr 3, 2020
6,057
3,155
118
crimson5pheonix said:
Oil is in the negatives, the literal negatives. There's nowhere to store it anymore, so now you have to pay people to take useless oil off your hands.
I'd be interested to see what the economic rationale is for that when they could, y'know, leave it in the ground and drill it out later.