6. Oil and Gas trends for 2020s
If there was a big event in 2010s was the rise of Shale Oil
Now US is the worlds largest producer of oil (12 mio barrels per day) ahead of Saudi Arabia and Russia.
This will keep the oil prices capped for the next decade
If there was a big event in 2010s was the rise of Shale Oil
Now US is the worlds largest producer of oil (12 mio barrels per day) ahead of Saudi Arabia and Russia.
This will keep the oil prices capped for the next decade
Saudi Arabia was producing 10% of the worlds oil consumption, and the OPEC was controlling 30%
They could change production and hence influence oil prices.
But US going from 5% to 13-14% of world production - Shale is the swing producer
They could change production and hence influence oil prices.
But US going from 5% to 13-14% of world production - Shale is the swing producer
Oil Demand is very inelastic
1% cut in supply lead to 8% rise in prices.
Thus OPEC could manipulate output to manage prices where they wanted.
That monopoly is broken with US fracking
1% cut in supply lead to 8% rise in prices.
Thus OPEC could manipulate output to manage prices where they wanted.
That monopoly is broken with US fracking
Many thought that US shale would go bust when oil prices went lower (as low as $26/bbl) ... but that didnt happen.
Drillers might go bust, but there is oil under the ground, and technology (horizontal drilling, fracking) to extract it...
Thats where capitalism works
Drillers might go bust, but there is oil under the ground, and technology (horizontal drilling, fracking) to extract it...
Thats where capitalism works
original drillers go bust, but some one else takes over and when oil prices rise - drills again.
Also Fracking has high marginal Opex cost ($40 -50/bbl) vs traditional oil ... but less Capex
This leads to swing production - when oil prices rises, sell futures and drill more
Also Fracking has high marginal Opex cost ($40 -50/bbl) vs traditional oil ... but less Capex
This leads to swing production - when oil prices rises, sell futures and drill more
Ability to hedge the output via futures and financing from US banks should keep oil flowing and prices capped.
Coming to the demand side - more electric cars, storage batteries, war on plastics, ...
And trend of minimalism (consume less), less global trade (less shipping fuel) ... also doesnt see huge demand rise in the world for oil
And trend of minimalism (consume less), less global trade (less shipping fuel) ... also doesnt see huge demand rise in the world for oil
Look at Mukesh Ambani - selling 20% in oil refinery to Aramco
while investing in Jio ... he is walking his talk #DataIsTheNewOil
while investing in Jio ... he is walking his talk #DataIsTheNewOil
Coming to Middle East
They used to have the surplus cash from selling oil in USD, and they invested these 'Petrodollars'
But now they will be net borrowers via bonds ...
Worsening Middle East Sovereign Balance sheets and this will hit their other investments
They used to have the surplus cash from selling oil in USD, and they invested these 'Petrodollars'
But now they will be net borrowers via bonds ...
Worsening Middle East Sovereign Balance sheets and this will hit their other investments
This trend could be for 2020s and who knows next oil spike might be in 2030s.
World isnt going to stop using oil, but the prices arent going to rise massively.
Unlevered Oil producers will do well, but not who are loaded up on debt.
Particularly bearish on Middle East
World isnt going to stop using oil, but the prices arent going to rise massively.
Unlevered Oil producers will do well, but not who are loaded up on debt.
Particularly bearish on Middle East
@threadreaderapp please unroll
