Energy Prospectus

Thanks for posting that article. EVERYONE should read it.

Why? Major Paradigm Shift: Investors and the Wall Street Gang believes that OPEC+ has a lot of spare oil production capacity. Reality: They have some, but likely not as much as expected. From the article: "OPEC Production Continues to Disappoint: Politicians, industry analysts and news reports continue to cite substantial OPEC+ spare capacity. Even US president Joe Biden has called on the cartel to increase its production. Yet despite pleas from global leaders, OPEC+ production has languished, with all but 5 member countries missing their production quotas in September."

MY TAKE: As I will discuss in my Saturday podcast, OPEC+ "Officially" has enough spare capacity to increase production by 400,000 bpd through August, 2022. What happens if the really don't have that much spare capacity???

From the Bison report at the link above > Findings: OPEC+ Spare Capacity is Likely Overstated by 1.8 Million Barrels/Day

The IEA estimates that the OPEC+ cartel has 6.5MM bbl/d of spare capacity as of 2021 (heading into the year on January 1), including quota-exempt Libya, Iran and Venezuela. Bison estimates that the OPEC+ cartel has anywhere from 3.8MM – 5.2MM bbl/d, well below the IEA estimate.

While OPEC+ has some spare capacity, it is overstated in OPEC+ documents and IEA estimates. We also see that Iran may have approximately 1-1.5MM bbl/d of spare capacity, but its effect is uncertain as there is little visibility on when US sanctions may be lifted or how much oil may already be on the market through undisclosed means. This means the bulk of the overstated spare capacity comes from the core OPEC 10 countries—specifically Saudi Arabia—which aligns with conclusions in Bison’s “The Myth of OPEC+ Space Capacity” white paper.
----------------------------
MY TAKE: Per OPEC itself, they had 4.56 million barrels per day of spare or untapped production capacity on 10/1/2021. So, if they continue to add 0.4 per month, they will have zero untapped capacity by mid-September 2022. If the Bison report is correct (and I think it is), OPEC+ will run out of production capacity in April, 2022. KEEP IN MIND THAT THIS HAS NEVER HAPPENED.
In a world with no remaining spare capacity, guess what will happen as we approach summer, the peak demand period of the year?

Bison Takeaways

With less OPEC+ oil production spare capacity than claimed by OPEC+ and estimated by the IEA and others, the world oil supply is less certain and potentially closer to insufficient versus rising demand. With observed low elasticity of demand of oil consumption, a tighter oil market than consensus could result in much higher prices if supplies were to be disrupted or demand were to grow more than expected. Having seen this already with European and Asian natural gas and coal, and with a potential surge of oil demand for power generation this winter, the risk of an oil price shock is real and worth serious consideration.

I realize this is off topic, but I am on the Amtrak, coming back from vacation,
and have no clue if the energy stink bids I put in before were good or bad.
What about Cheniere? I went in and out of it before pan for a small gain.
You were luke-warm on it in past years.. (Where did that expression come from?)

Now I'm hearing some chatter about them making deals with foreign countries for long-term commitments.
Is that good or bad?
JH

Cheniere is probably a good bet. I just don't cover it. I need to clone myself.