Phil Flynn's take on OPEC+

[dan_s]

I understand that Team Biden's Energy Plan is misguided and raising oil prices, but as an American I think energy independence is a good thing. The Climate Change Wackos should not be allowed to control the discussion of where our nation gets the energy that is vital to our standard of living. What Washington is doing (both parties are to blame) is going to lower the standard of living for many people that work hard to make a living.

The Energy Report: OPEC World
By Phil Flynn (Oct 04, 2021 08:54AM ET)

It’s OPEC Plus Russia’s world and they were welcomed to it. The United States has helped make OPEC Plus one of the most powerful and influential economic organizations in the world. By backing away from oil production, canceling pipelines by discouraging oil and gas production, the U.S. has helped put the fate of the global economy in OPEC Plus Russia’s hands. Now the world awaits its fate as they pray that the OPEC Plus cartel decides whether to add oil to the undersupplied global market. < After this came out, OPEC+ announced that they are going to stick with their increases of 400,000 bpd each month until all of their spare capacity is back online. Within nine months there won't be any spare oil production capacity in the world. Owning companies like our Sweet 16 should be very profitable for investors.

The FT reported that Scott Sheffield, chief executive of Texas-based Pioneer Natural Resources (NYSE:PXD), said America’s once-prolific shale producers would keep using their burgeoning cash piles to pay shareholders, not fund new drilling.

“Everybody’s going to be disciplined, regardless of whether it’s $75 Brent, $80 Brent, or $100 Brent.” All the shareholders that I’ve talked to said that if anybody goes back to growth, they will punish those companies. I don’t think the world can rely much on US shale. It’s really under Opec’s control.”

It is under OPEC’s control because the Biden administration wants it that way. The administration has shown disdain for U.S. energy producers and instead they favor begging OPEC to please produce more oil. The Biden administration demonized the U.S. oil and gas industry. Instead of viewing them as an asset, they view them as the enemy. With their fanatical fixation on becoming a global leader fighting climate change, they are willing to sacrifice our economy and our national security.

Oil prices are strong as reports show that OPEC will thumb its nose at international pressure and stay on its course to add just 400,000 barrels a day.

Reuter reports,

“OPEC and its allies are likely to stick to an existing deal to lift output by 400,000 barrels per day (bpd) of oil in November, three OPEC+ sources said on Monday, as they weigh the threat of new coronavirus surges against consumer calls for cheaper crude. Ministers from The Organization of the Petroleum Exporting Countries, Russia, and their allies, known as OPEC+, are due to gather online at 1300 GMT. An OPEC+ ministerial panel that monitors market developments, known as JMMC, meets before that.

“There are calls for more of a production increase by OPEC+,” one of the sources told Reuters. “We are scared of the fourth wave of the corona, no one wants to make any big moves. OPEC+ agreed in July to boost output by 400,000 bpd every month until at least April 2022 to phase out 5.8 million bpd of existing production cuts. The most reasonable is to add 400,000 bpd, no more,” another source said.

A third also said this was the most likely outcome but left room for a possible increase according to Reuters.

But the global energy crunch is spreading. China says they will secure energy supply at any price without regards to the climate. Zerohedge reports that,

“Household electricity bills will rise by 29.8% for the typical family and gas bills will go up by 14.4%, Italy’s energy regulatory authority Arera confirmed in a press release last week. The new national tariffs came into effect on Friday, the start of the fourth quarter of 2021. The increase comes amid surging energy costs across Europe, and beyond."

Bloomberg Reports that,

“As the frontier of Europe’s energy crisis moves north, the Nordic region faces a worsening power crisis with dwindling water reservoirs hampering the generation of hydroelectric power. Nordic power prices were five times higher in September than a year ago. That’s hitting everyone from power-hungry factories and miners, to students struggling with their bills. Inflation is rocketing."

The U.S. natural gas market is being saved by warmer than normal temperatures but if the weather changes we should see a big spike in natural gas. Use breaks to put on hedges. < At the time of this post, the NOV21 NYMEX contract for HH natural gas is up $0.17 to $5.79/MMBtu. I am assuming Q4 gas price of $4.75/MMBtu in all of my models. If the NOV contract closes at today's price I will raise the forecast assumption and all my valuations for the gassers will be going up. Also, propane prices are up $0.04812/gallon to $1.49125/gallon this morning. At $62.63/bbl, propane prices are up more than 500% since October, 2020.