Oil

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tidal
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Re: Oil

Post by tidal » 27 Jun 2013 21:10

Well, let's see what happens this time.

Last time this came up, top mucky-mucks at FWF management apparently decreed it "not finance/economics/investing" or "don't startle the horses" or some such. And it was quietly split-off and relegated off to its own specially-created "Around the Water Cooler - Oil" ghetto... helping ensure that the very serious people would not have to entertain such silly ideas when thinking about oil and investing, presumably.

But now - who'd a thunk? - here is the Globe & Mail rudely and incompetently thrusting it onto its investing pages, via Report on Business magazine. How dare they!:

What happens to Big Oil if we’re forced to cut back on consumption?
Investors adore an oil or coal company that finds as much—or more—oil or coal than it produces. If the company depletes its reserves year after year, they assume it has opted for slow-motion suicide.

[...]

Here’s another scenario: Suppose those reserves, or a big chunk thereof, are never burnt because of global warming?

[...]

How much oil, gas and coal would have to be left in the ground to prevent runaway CO2 buildup? It’s a question that is gripping more than the usual greenies and hapless United Nations climate change officials. The International Energy Agency (IEA), universities and enlightened analysts are sending out dire warnings as the 400 ppm milestone is breached.

The concept of leaving reserves untouched for the sake of the planet became a talking point in capital markets this spring, when a non-profit research group called Carbon Tracker and the Grantham Research Institute on Climate Change, part of the London School of Economics, issued a paper called “Unburnable Carbon 2013: Wasted Capital and Stranded Assets.” The report concluded that if we want to contain the rise in global temperatures to two degrees C or less, the maximum amount of CO2 we can spew into the atmosphere between now and 2050 is 1,075 gigatons of CO2—and even that limit would only give us a 50 per cent chance of success. It would also mean that about two-thirds of the Earth’s estimated oil, gas and coal reserves would have to stay underground. The IEA agrees.

In the foreword to the Carbon Tracker report, Sir Nicholas Stern, the former World Bank chief economist who produced the seminal “Stern Review on the Economics of Climate Change” for the British government in 2006, said: “This report shows very clearly the gross inconsistency between current valuations of fossil fuel assets and the path governments have committed to take in order to manage the huge risks of climate change.…Smart investors can already see that most fossil fuel reserves are essentially unburnable.”

[...]

But the risk profile may be changing already. In May, China proposed banning imports of low-quality coal with a high sulphur and ash content and relatively low caloric value. If that happens, the 55 million tonnes the country imported last year would have to find a new market. If there are no new buyers, the coal could become stranded and therefore unburnable. Could oil that takes an enormous amount of energy to produce, like the goop in Canada’s oil sands, be next?

[...]
Please, make them stop trying to incorrectly insinuate that this has anything at all to do with finance, economics or investing.
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Re: Oil

Post by Wallace » 03 Jul 2013 19:50

The price of oil went up fast after the military takeover in Egypt. :shock:

Time for Obama to have second thoughts about the Keystone Pipeline?
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Re: Oil

Post by JaydoubleU » 20 Jul 2013 07:13

Wallace, other than Egypt, I haven't seen another plausible explanation for the spike in oil prices. By all accounts (that I have read recently), oil should be dropping because of over-supply and weak demand. Can you or anyone sort this out for me?

Another and related thought is that inflation is MUCH HIGHER than authorities are reporting. Heck, prices at the pumps are soaring, and that cruises through the entire economy raising costs everywhere, no :?:

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Re: Oil

Post by newguy » 20 Jul 2013 09:41

If it's Egypt why is the wti/brent spread back to 0? My only guess is unwinding of positions that were short the front and long the back to capture the small differential. Oil a year from now is $15 cheaper, I think that's the biggest dollar spread ever. Egypt could also explain that as well so.... :?: It also started happening around the taper talk so who knows?

WCS is doing good as well but only the front month as I think there's seasonal maintenance closures.

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Re: Oil

Post by tbaylx » 23 Jul 2013 00:58

As i understand it Egypt and the oversupply has very little to do with the run up in oil.

Remember North American oil tracks the West Texas Intermediate crude price. Its a combination of new pipelines coming online (that eat up 8 million barrels to fill before they deliver oil) refinery capacity running at record highs for this time of year and drawdowns in US inventory due to the above reasons. There isn't a shortage of oil per se, but there is a shortage of WTI at the right locations at the right time causing a spike in price. It's cause a backwardation int the oil futures, with the front month contracts trading at a $2+ premium to the back months.

Once the pipelines are online and refinery's go into maintenance etc the price will drop again.

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Re: Oil

Post by tidal » 04 Dec 2013 09:00

Spidey wrote:
tidal wrote:On the one hand, if we can foist this dog off now on the sly to the Chinese at a 67% market premium before it eventually implodes, it's probably a good thing for pension funds, etc. And, I suppose the Chinese have deep enough pockets that they will be able to just write off $16 billion or so and just shrug about it.
I can't help but believe that there is a great deal of wishful thinking regarding your prognostications for an early death of the oil-sands. The Chinese are not stupid people and have a reputation for making savvy long-term investments.
[/url]Woof Woof.

Nexen deal comes back to haunt CNOOC
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Re: Oil

Post by tidal » 05 Dec 2013 17:16

Buh-bye little oil sands, buh-bye. Who knew? 8)

Worst-Case Scenario for Oil Sands Industry Has Come to Life, Wiki-Leaked Document Shows
Industry consultants said anti-tar sands push could become 'the most significant environmental campaign of the decade' if activists were left unopposed.
By Katherine Bagley, InsideClimate News Dec 5, 2013

According to a 2010 Power Point presentation prepared by Strafor for industry, "activists lack influence in politics." But letting the movement grow unopposed may bring about "the most significant environmental campaign of the decade."

As environmentalists began ratcheting up pressure against Canada's tar sands three years ago, one of the world's biggest strategic consulting firms was tapped to help the North American oil industry figure out how to handle the mounting activism. The resulting document, published online by WikiLeaks, offers another window into how oil and gas companies have been scrambling to deal with unrelenting opposition to their growth plans.

The document identifies nearly two-dozen environmental organizations leading the anti-oil sands movement and puts them into four categories: radicals, idealists, realists and opportunists—with how-to's for managing each. It also reveals that the worst-case scenario presented to industry about the movement's growing influence seems to have come to life.

The December 2010 presentation by Strategic Forecasting, or Stratfor, a global intelligence firm based in Texas, mostly advised oil sands companies to ignore or limit reaction to the then-burgeoning tar sands opposition movement because "activists lack influence in politics." But there was a buried warning for industry under one scenario: Letting the movement grow unopposed may bring about "the most significant environmental campaign of the decade."

"This worst-case scenario is exactly what has happened,"....

Since the presentation was prepared, civil disobedience and protests against the tar sands have sprung up from coast to coast. The movement has helped delay President Obama's decision on the Keystone XL pipeline—designed to funnel Canada's landlocked oil sands crude to refineries on the Gulf Coast—and has held up another contentious pipeline in Canada, the Northern Gateway to the Pacific Coast.

The Power Point document, titled "Oil Sands Market Campaigns," was recently made public by WikiLeaks, part of a larger release of hacked files from Stratfor, whose clients include the Departments of Homeland Security and Defense, Lockheed Martin, Raytheon and the American Petroleum Institute, the oil industry lobby. It appears to have been created for Calgary-based petroleum giant Suncor Energy, Canada's largest oil sands producer.

The company told InsideClimate News that it did not hire Stratfor and never saw such a presentation. Suncor is mentioned 11 times in the document's 35 pages and all of Stratfor's advice seems to be directed at the energy company. For example, one slide says, "Campaign ends quickly with a resolution along the lines Suncor had wanted." In several emails released by WikiLeaks, Stratfor employees discuss a $14,890 payment Suncor owes the company for two completed projects, though no details were provided.

The presentation is the latest in a series of revelations that suggest energy companies—which for most of their history seemed unfazed by activists—have been looking for ways to dilute environmentalists' growing influence...
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Re: Oil

Post by parvus » 05 Dec 2013 21:45

tidal wrote:Buh-bye little oil sands, buh-bye. Who knew? 8)
This is only really true if you consider environmentalists to be part of the government regulatory apparatus. As such, they can block particular projects. But can they block the oilsands as a whole? Not really. There are alternative means to get the product to market.

What really counts, I would think, is the economics of shale gas and light tight crude production. Assuming we live in a quasi-market economy.
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Re: Oil

Post by AltaRed » 05 Dec 2013 22:34

tidal wrote:Buh-bye little oil sands, buh-bye. Who knew? 8)
At worst Tidal, future environmental constraints will slow, or cap, production growth from current levels. Maybe that is a good thing to sort out what is really value added stuff from indiscriminate unbridled growth. Technology will find a way to move incremental product, just as US refining capacity continues to grow incrementally (growth creep) without building new refineries and the closing down of others. Debottlenecking projects at production and pipelining facilities, lower emissions through technology allowing more throughput at less total emissions, friction reducing additives in pipelinable product, value added refining, e.g. an additional coker or hydrotreater in an existing refinery, etc. Softening product prices will likely do more to stunt oil sands growth than anything else.
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Re: Oil

Post by adrian2 » 31 Dec 2013 17:08

Warren Buffett's Portfolio Reshuffled in 2013 and is Betting Big on Oil
Unlike a test in high school, copying the answers from the smartest student in the class is actually a good practice in the investment world. So which energy stocks is Buffett adding to his portfolio? Let's take a look at three of his most recent purchases.

[...]

Why does Buffett like Exxon so much? They're the best capital allocator in the business.

[...]

Berkshire Hathaway disclosed that it had accumulated a 17.8 million share stake in Canada's largest oil producer, Suncor Energy

[...]

Phillips 66 (NYSE: PSX ) is vital to our day-to-day lives. The company owns 15,000 miles of oil and gas pipelines -- more than enough to circle the planet -- that move millions of barrels of valuable oil and gas around the country, daily.
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Re: Oil

Post by Shakespeare » 15 Oct 2014 09:50

Oil producers face price war over slowing global demand - The Globe and Mail
The Paris-based agency said some Canadian oil sands producers are particularly vulnerable to lower prices, including existing producers who upgrade their bitumen and companies planning new projects. Existing producers of diluted bitumen virtually all have break-even points below $80 per barrel, it said.

Tight oil producers in the U.S. Bakken and other fields are also vulnerable, though they typically can earn a commercial return at $80. However, the U.S. producers have to constantly drill to keep their production flowing, and lower revenues will strain their ability to maintain that activity.

Some analysts believe Saudi Arabia is prepared to drive prices down further to disrupt production and investment in North America.

“I’m describing this as a price war of necessity,” said Philip Verleger, an independent oil consultant based in Colorado. “And the Saudis are doing it because their market share is threatened. And I think their target is Alberta."
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Re: Oil

Post by AltaRed » 15 Oct 2014 13:27

I disagree to some extent. The slump is more supply driven than demand driven. The world is awash in oil. If the Saudis are targeting anyone and I am not convinced they are (think it is more a case they no longer want to be the swing producer), I suspect they would more likely be targeting the shale oil industry not wanting the US to keep increasing production and Canada's oil sands industry is more likley collateral damage.

In the overall scheme of things, Canada's production levels and ability to increase production is really not all that significant. Those with major capital programs well underway (not in early stages where postponement/cancellation are viable options) and those that must keep drilling to maintain production are the most vulnerable to a prolonged slump in the $80 range.

There will be a lot of pain for countries like Russia, Venezuela, Mexico, Nigeria whose national economies are shaky to begin with and oil production declines there will accelerate.

Added: Per http://www.eia.gov/forecasts/steo/report/global_oil.cfm Canada's contribution to global supply growth pales in comparison to US supply growth. What is not happening is assumed demand growth of circa 1 million bpd is not happening as predicted. Ideally, global demand growth should stop increasing at all.
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Re: Oil

Post by Springbok » 15 Oct 2014 15:30

AltaRed wrote:I disagree to some extent. The slump is more supply driven than demand driven. The world is awash in oil. If the Saudis are targeting anyone and I am not convinced they are (think it is more a case they no longer want to be the swing producer), I suspect they would more likely be targeting the shale oil industry not wanting the US to keep increasing production and Canada's oil sands industry is more likley collateral damage.
There was something on BNN about this. I wasn't really paying attention. I think they said that although cost of production from Texas shale was lower than Alberta heavy oil and Tar sands oil, the cost of bringing on incremental new production was higher in Texas. They felt that if OPEC cuts production, it will benefit Canada, but only in the short term. Analysts apparently almost universally agreed with this.

However, I may have got that a bit mixed up.

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Re: Oil

Post by schmuck » 15 Oct 2014 20:27

AltaRed wrote: There will be a lot of pain for countries like Russia, Venezuela, Mexico, Nigeria whose national economies are shaky to begin with and oil production declines there will accelerate.
Heard a warning from John Zechner on BNN about a month ago that Russia will be forced to pump a lot more oil onto world markets when sanctions over their Ukraine involvement start to bite their already shaky economy.
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Re: Oil

Post by AltaRed » 15 Oct 2014 20:39

schmuck wrote:Heard a warning from John Zechner on BNN about a month ago that Russia will be forced to pump a lot more oil onto world markets when sanctions over their Ukraine involvement start to bite their already shake economy.
With what? They don't have the money to re-invest* in a big way due to sanctions, oil revenues are already down, more supply drives prices even lower, and they are shut off from importing key equipment to drill. John should perhaps stick to what he actually might know :lol:

* not unlike other countries almost wholly dependent on siphoning off oil revenues to fund state economies.
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Re: Oil

Post by Shakespeare » 15 Oct 2014 23:08

In Alberta, anxiety grows over declining oil prices - The Globe and Mail
A recent study by BMO Nesbitt Burns pegged the average cost of developing an oil-sands mine and operating it profitably at about $90 per barrel, well above the current price of crude. For example, the study said, costs at CNOOC Ltd.’s Long Lake project are well over $100 a barrel, and costs for the Suncor Energy Inc.-Total SA Fort Hills development, now under construction, are above $90....

However, many well-established oil projects remain profitable at current or lower prices. The core operations of Suncor and Syncrude Canada Ltd. have costs of less than $50 a barrel. Some steam-driven oil sands projects, such as MEG Energy Corp.’s Christina Lake development and Imperial Oil Ltd.’s Cold Lake venture, have costs under $65, according to the study, giving them breathing room.
(COS, which I picked up 100 shares of a couple of days ago, is Syncrude.)
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Re: Oil

Post by Bylo Selhi » 16 Oct 2014 08:37

schmuck wrote:filling up the car at 125.9/litre (North Vancouver). What a steal! :D
The oil industry certainly thinks so. Oink. Oink. The price of crude has dropped by almost 40% recently but the price of gas at the pumps has dropped by less than 10%.

Yes, I realize the pump price also includes the cost of refining, transport, etc. But the optics at least aren't very good. When crude prices go up there seems to be a much closer linkage to pump prices.
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Re: Oil

Post by biker » 16 Oct 2014 08:46

Shakespeare wrote:[(COS, which I picked up 100 shares of a couple of days ago, is Syncrude.)
Do you plan to buy more to reduce your average costs?
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Re: Oil

Post by Shakespeare » 16 Oct 2014 08:55

Probably. No hurry.
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Re: Oil

Post by ig17 » 16 Oct 2014 08:58


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Re: Oil

Post by biker » 16 Oct 2014 09:01

I fill up abut twice a month in Lewiston NY. Prices yesterday $3.56/US gal
Price a year ago $3.67.
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Re: Oil

Post by Shakespeare » 16 Oct 2014 10:04

Alberta bumper sticker:

"Lord, give me another oil boom and I promise I won't piss it away this time."

Popular every few years.
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Re: Oil

Post by Norbert Schlenker » 16 Oct 2014 13:14

Bylo Selhi wrote:The price of crude has dropped by almost 40% recently but the price of gas at the pumps has dropped by less than 10%.

Yes, I realize the pump price also includes the cost of refining, transport, etc.
Don't forget taxes. At least 28¢ in Ontario, 41¢ in metro Vancouver. There's your reason for price stickiness right there.

Even at US$80/bbl, the raw oil is about 75¢ Canadian per litre. In Vancouver, governments add 41¢. That's $1.16. And schmuck is buying at $1.26. So the refiners and the truckers and retail delivery together get about a dime gross out of every litre. And that's who the fingers get pointed at. :roll: :o :shock: :roll:
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Re: Oil

Post by IdOp » 16 Oct 2014 13:38

C$/U$ has also dropped; price of oil <--> U$; price at pump <--> C$ (default assumptions).

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Re: Oil

Post by FinEcon » 16 Oct 2014 14:39

Norbert Schlenker wrote:
Bylo Selhi wrote:The price of crude has dropped by almost 40% recently but the price of gas at the pumps has dropped by less than 10%.

Yes, I realize the pump price also includes the cost of refining, transport, etc.
Don't forget taxes. At least 28¢ in Ontario, 41¢ in metro Vancouver. There's your reason for price stickiness right there.

Even at US$80/bbl, the raw oil is about 75¢ Canadian per litre. In Vancouver, governments add 41¢. That's $1.16. And schmuck is buying at $1.26. So the refiners and the truckers and retail delivery together get about a dime gross out of every litre. And that's who the fingers get pointed at. :roll: :o :shock: :roll:
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