Survive in 2020 to Thrive in 2021

[dan_s]

I know it is very hard to believe today, but unless COVID-19 kills a 100 million people, the global oil market's oversupply is going to become a big undersupply in 2021.

Raymond James Energy Stat 4-13-2020:

"Following last week's OPEC+Russia deal, today we are focusing on the agreed upon production cuts and what it means for the global oil market.
The headline cuts are 10 million bpd in May and June, 8 million for the rest of 2020, and 6 million until April 2022. However, the lack of clarity on
cuts outside OPEC+ and Russia's track record on compliance with past cuts has us only assuming half the announced cuts actually happen.
Given our forecast that COVID-19's impact on global demand is peaking (on a monthly basis) in April at 24 million bpd, even if one assumed 100%
compliance with the largest cut in OPEC's modern history, it still amounts to spitting in the wind in 2Q and does little to change the near-term
outlook. Widespread production shut-ins are still inevitable, as global crude storage is on track to max out in June. While the OPEC+ deal cannot
single-handedly keep oil prices from likely testing the $10/Bbl level over the next few months, it will certainly help in the latter portion of the
year, as COVID-related lockdowns are gradually loosened, global economic activity gets back to more normal levels, and oil demand stages what
should be a V-shaped recovery. Alongside the oil industry's steepest-ever capital spending cuts, 2021 is shaping up to be very bullish for oil prices."

In the U.S., a cratering of capital spending means that oil supply will continue to fall long after demand normalizes.
"With the OPEC+ coalition encompassing more than half of global supply, the largest player outside the coalition is, of course, the U.S. As recently
as the first half of March, when the futures strip was pointing to sub-$40 WTI for the rest of 2020, we were forecasting E&P capital spending getting
slashed by 40-50%, and the rig count cut in half to ~400 rigs by mid-2020. Now, with the WTI strip in the low $30s, we forecast the rig count meltdown
to continue towards ~200 rigs exiting 2020 and average a mere 225 rigs in 2021. The impact of this ultra-depressed 2020 activity hits in full force
in 2021, with U.S. liquids production plunging 2.4 million bpd y/y - five times steeper than in 2016."

"As of this writing, in the U.S. a total is 301 million people, more than 90% of the population have significantly curtailed movement. The worldwide total is 2.8 billion."

MY TAKE: To say these are "unprecedented times" is a gross under-statement. Most of the upstream companies will stop all well completions this quarter. Many oil wells will become sub-economic and will be shut-in during the 2nd quarter. Many of those wells will not ever return. In addition to "economic shut-ins", the pipeline and storage companies will force more shut-ins by refusing to take oil. This is extremely bearish for spot oil prices in the short term. As nation after nation eases up on shutdowns ("2.8 million people can't and won't remain idle forever") economic activity and demand for energy will bounce back. Supply chains are being drained today and inventories will need to be rebuilt."

[dan_s]

Outside of the oil market, the shutdowns are causing serious problems in multiple supply chains. Read this article and after reading it, think about adding some more canned foods to your pantry.
https://theconservativetreehouse.com/20 ... ry-farmer/

With 7.8 billion people on this Earth, we have massive supply chains of stuff we take for granted like food, toilet paper and fuel. A major supply chain disruption like Hurricane Harvey takes weeks to get back to normal. Supply chain disruptions being caused by COVID-19 will be 10X worse because it is impacting the entire world. We will definitely have some interesting stories to tell when this is over.

I'm heading out to buy a few cases of chunky soup.

[dan_s]

Here is a link to an interview that I did last week: https://micklawpc.com/podcast/