A fundamental law of nature - Mar 25

[dan_s]

"Something that can't keep happening won't."

WTI cannot stay under $25/bbl. It can stay there for a few weeks or even a few months, but it cannot stay there much longer.
Why?
> This world still runs on oil, like it or not, and there are zero oil projects in this world that are economic at $25 oil.
> There will be NO global oil industry if the oil price stays were it is for a few year.
> Even if oil rebounds to $50/bbl next week, there is going to be a BIG decline in U.S. oil production and in many other areas of the world including a lot of the OPEC cartel countries.
> Based on what I've heard from the upstream companies that I follow a 50% decline in well completions this year is locked in and it might be more than a 70% decline.
> That means U.S. oil production will decline by 2.0 to 2.5 million barrels per day.
> There are hundreds of oilfields that are cash flow negative with oil under $25/bbl. They will be shut in. This will take a lot more supply off-line, maybe even more than 2.5 million barrels per day. A perfect example of "Something that can't keep happen won't" is an oil well that costs more cash to run than the revenue it generates.
> Yes, thanks to Saudi Arabia and Russia we may have a 10 million barrel per day supply surplus today (I doubt it is actually that high), but that will not go on past Q2 unless millions die from COVID-19. Even if we don't come up with a viable treatment for the virus, we must get back to work or the supplies of food and other stuff we need to live will run out and the deaths from starvation will dwarf the deaths from the virus. This is why gun sales are sky high.
> Maybe the biggest reason that oil prices will rebound is that Saudi Arabia is going to loose the oil price war and unless they are suicidal they will work out some kind of a deal of Russia. The Royal Family enjoys a high standard of living as long as they keep throwing money at their citizens. The mob gets harder control when they don't have food to eat.