On Tankers/Oil: (thread)
Recently, I read sector analyses assuming shut ins of oil wells to be rapid at current prices & storage therefore less acute.
Of course we disagree strongly. As we explained repeatedly, this is a prisoners dilemma which will make shuts ins slow....
Recently, I read sector analyses assuming shut ins of oil wells to be rapid at current prices & storage therefore less acute.
Of course we disagree strongly. As we explained repeatedly, this is a prisoners dilemma which will make shuts ins slow....
...because suppliers maybe hedged, have well cash opex < 20-25 (note that this comes down to product mix; more gas means lower well head price); are offshore & thus incur high shut in/on cost when assumed this is temporary (2-3 months); have strong BS (majors); are badly run etc.
We assume price signal of oil has to be a lot stronger as we run out of storage to force shut ins by May. Assume 12 mb/d demand collapse in Q2: 90 * 12 = 1080 million barrels (mb); Storage capacity: 950 mb! Ergo: Tankers need to provide storage regardless of contango. 
@EnergyAspects agrees: “There will be no give on costs this time, so upstream industry will be ravaged. We staring at huge production declines for years to come. But these will not be immediate & earliest we can expect to see existing wells shut in is still a few months away...”
But we will not have months! Solution: Oil prices have to send an even stronger signal to force shut ins! We think Brent will go below $10.m for a short, but dramatic period...
And if u think (in total absence of any knowledge of the sector) that I am too bearish, study the bear case by BNP Paribas (Bull case is 17 mb/d loss of demand in Q2):
And one more useful addition to add here...(must love Fintwit)
And a bit of theory from our achieve...:-). Old but gold.
