Reflections on Doomberg and Sankey

[ChuckGeb]

Over the weekend Paul Sankey published a piece highlighting the current massive buildout of Middle East production capacity. There are currently close to 1,000 rigs working in the area. Saudi has a program currently moved up to 2027 to reach their goals of taking the country's power needs off oil based energy to 50% gas, 50 % renewables. They have shifted their drilling program to onshore gas development. Success in this program frees up estimated 1 million bbls a day of oil currently used to power the country.

Kuwait has undertaken a significant uptick in drilling and is exploiting its recent offshore discovery estimated to hold 3.2 billions bbls of oil. That and other projects result in an expected drilling of 6,000 wells by 2030 and increase in oil production from about 2.9 million bbls a day to 4 million and natural gas to increase significantly as well.

UAE is looking to increase their oil production capacity from 2.9 mbpd to 5 million bbls/day by 2027 as is currently running 140 rigs to do so.

Today's Doomberg piece is titled "How OPEC Ends". In it he discusses the recent fracturing of the 65 year old coalition some of it attributable to the Ukraine War and sanctions placed on Russia sending shivers thru the global community due to the weaponization of sanctions on monetary reserves. To the rescue comes China, India and others more than willing to take the rogue country's barrels shunned by the West.

And notably he discusses the power switching currently underway in Saudi, China and others converting significant amounts of its power needs from oil to natural gas and nuclear. In China it is estimated that EV's and and LNG powered trucks will replace 10-12% of its previous gas and diesel power needs. And of course Saudi's move from oil power to natural gas and renewables is highlighted above.

If elected look for Trump to quickly learn that drill Baby Drill may turn up oil fields past their prime with an abundance of natural gas and the obvious nuclear solution.

To me this is a bit of a bearish signal on oil while very bullish for natural gas and LNG export as well as longer term nuclear. While oil will remain a dominant energy source look for natural gas and nuclear to become more prevalent.

[dan_s]

Now that most educated people realize that wind and solar aren't going to meet "Future World's" energy demand, natural gas & nuclear are the only two viable solutions. We are one normal winter away from much higher natural gas prices.

Saudi Arabia will defend the oil price, and they want Brent over $80/bbl.

[ChuckGeb]

Further reflections from Paul Sankey on eve of Barcap.

https://youtu.be/AowuxPmKnt4?si=sAZWv6cghrG3Xq9N