Daily Brief - An in-depth look at the global oil and gas industry post-OPEC+


Welcome to the daily brief the world. Oil podcast network daily review of market news emerging trends new technologies and the people who are advancing the oil and gas industry. Here's Cameron Wallace with your top news. Stories of the day afternoon and welcome to the world. Oil Daily brief podcast. I'm Cameron Wallace and today is Friday April the tenth. And as I've been promising all week we are joined by Mr Simon. Watkins analysts investor and author in the United Kingdom and. I'm really excited to have him on the show today to talk about all of the activities that we have seen in the past twenty four hours eight minutes past twenty minutes or so so Mr Watkins. Thanks for joining shorter High Cameron. Thanks for having me back through with a with a play yet I mean things are moving apace. Certainly are in fact. I think it was going to be a different very different conversation just up until about half an hour ago we had learned yesterday. Obviously that Russia and Saudi Arabia decided to bear the hatchet as we see over here Well Russia certainly not see I in some policy Saudi Arabia's national me that's show as historically speaking I mean the fact is if we look at this in broad terms to kick off with and then we can Let me dissect. It's you know we have. We had a situation. That's just that's just go back to where we were in December when we were looking at pre the oil price war so we were looking at a fairly balanced ish markets We were coming up to you. Know and you Opec process agreement. Virtually being ready go Which will keep our balanced. The balanced pricewise was essentially between fifty five zero doors. Power of brands and seventy seven zero Dollars per barrel of Brent with the emphasis really bring on the sort of fifty five to sixty five area and the emphasis even within not being on the low side so that was where we were then obviously Saudi Arabia to drown to Russia. And and essentially we're trying to hijack loam into doing bigger carbs fine have been privately agree between Saudi and Russia and Russia which is not lean does not being threatened by anybody very well at least of all the Saudis for whom I have complete contempt and So they turn around and say well no you do whatever you like and thinking I mean. Presumably dreaming for the Saudis. Wouldn't be enough to do exactly what failed law threatening twenty four tate sixty in but behold. That's exactly what they did forgetting. Seemingly that they have a Brent break even price the Saudis issues of eighty dollars a barrel whereas Russia has forty dollars a barrel Budget break even price and your show producers could manage forty as well for the most part the good produces so that is where we were. Just why we all now? The that was predicated that Barnes was predicated essentially on the global demand of around a hundred million dollars a day as we know which was tight what was coming onto the market was cheating going on with the the OPEC plus steel lost. Aw as but that's that was where the Balance Wall so against that we've had corona virus reduce Demand globally boy around will the estimates are anywhere between twenty five and thirty five percent so obviously even the Saudis were twenty five million barrels a day to thirty five many hours but in response they've caught Tan between them which is ten percent. I'm saying this for the Saudis benefit Broadway camera. No no no you can work this out but ten million dollars ten percents all of the bond as walls and the demand has gone down thirty percent so even if as well as expected. Let's say The other Tangential produces coming in. Add another five million barrels. Perhaps at some point to the carts then you're still looking at fifteen percents The problem is without i. It's nowhere near say to me point of first percent. So it's nowhere near the answers you know. I thought I was GONNA say and also without cheating normally goes on with it and the fact that these much more long drawn out process in the fact that the you know the starting points the baseline of very high. They always all when these things are done and things got more housing than a good Swiss cheese. I'm wondering where that Ten million barrels a day figure came up. Because I know that you know it does from my observation days before the started. Ihs market put out a research report as well you know based upon what we see with you know demand decline in the US particular The market would need to shed ten million barrels a day in production in order to achieve some sort of stability and that number came out and the low behold the next day trump tweeted ten million barrels a day. Did he plugs into that number? Get plucked out of the air to be a fascinating tale behind that specific figure. And I'm sure you're gonNa tell me what it is. Well I mean I can't really I can't definitively throw light on that. I mean I can only go along in the same river Road is you. Which is there was this figure. But this figure this is from you see. I can only shoot the this figure of Ten to fifteen percent right cart would be good enough to rebalance the market but the point is that this figure was taken from the very beginning of the of the onset of the spread of Corona virus outside China. This was the figure that was in January. This was the figure this was the figure. Because if you remember the original figure the the the the Saudis. Let's go back to the the the way we were the previous. Opec plus call. That was going to be just based this was if you remember the beginning of January because they would choose to to announce a new one so at that point remember. The beginning of January corona virus had only affected China so not a certain areas of China and was beginning to spread into other areas of Asia particularly South Korea of course So it was extremely limited that point and at that point. Saudi was saying well look. Let's Josh cards you know. Say a million barrels per day. Maybe even one point five now. This was before any of this really. The Corona virus really saw it to get to gain momentum and so within not first month of January of this year when it was beginning to spread but nobody had any real consecutive of how contagious it would be on the fake walls. Well hang on. We are losing this amount of armed throw principally from Jibril's s some some key Asian refiners so actually ten to fifteen million ten to fifteen percent should be the toll that was January's figure so I can only assume you that this is the figure that people who've been using because as we all know Anybody who knows anything about what's wrong figure now as well as I say. Anywhere between twenty five thirty five million barrels per day bright now depending on the absent flows market supply and demand so meet point thirty so I my only possible guests on this and that is a gas or just drudge. Now is that it's it's a hangover figure from from late January Because he's not real as you not with nowhere near true that's been the most fascinating thing but all of this and we'll get into a later. I'm sure but you know. Just throwing around of production figures and commitments. What am I? Don't know what the American education system is. One of those educate is one of those in the British education system. When you about twelve and agenda here gender afford US clever. They sought to throw mice questions. I you know I if a train his going at twenty five miles an hour. I'm fifty five passengers on board. It stops altering them. Three passengers get off to own. And then it goes. How far is it going but you know I have no idea? It's really just so many. There's so many variables all of this and this literally. I mean the best. They are guesstimates to degree. When you get to try and precisely now dow but a fat estimates Of the production of the DEMAIM DECLINE. I would say is thirty million by digest based on propriety stuff that I've had to look at and Refinery runs and locking and Lockdowns CHEFS INS. And and all the rest. I think that's a fair fair but even if you even the most moderate of estimates he's twenty five and certainly not Tan. I mean as attentive days. Now any other will. We're racing towards a higher. Figure ourselves here in the states. I know that over the Permian Basin and the Shielfield. Sister having to lay down rigs and shut in production. Because there's no place to put the stuff anymore Even the pipelines are full so What through rates. That's another thing I mean. This is a very good point. You raise which is the even after You know it's very well saying that You know you're GONNA Cup. You know you. You're going to cut production and so on but a lot of his production actually is just GonNa be anyway how it is already being caught by into the fight going. No there's nowhere to go. If the oil has nowhere to go I mean the the. Us is pretty much full. China's full all of the Begum the SPO's they will they will full and Floating storage is nearing capacity the the CC rights or shipping rights through the roof. So you know what I'm trying to say is there is a dividing line between what you're cutting buy into wanting to affect the the demand supply matrix in fact the prize but also as it there's an actual Results of Of just you not being able to send you do that. Well and I think that that is what is causing some consternation. Is that over to round off my point. So it's not real. It's not a real production carthy. It's just it's just a vagary of supply and demand. There is some real action in the cart in this. But it's nowhere near what some you know. What the diminution into Monday's saw you you're gonNA say anywhere not real. It's not real and it is interesting to see how opinions vary on what that means because I know that The Saudis and the Russians are a bit irritated. That trump seems to think that he can just rely on these market factors in that associated production decline to count for Proactive production declines on. Their part is a very good way of putting on because and they're not and they're not satisfied that obviously and understandably so but there's another factor here in the US too where A number of typically the smaller Shale layers and smaller producers are interested in a probation scheme whereby they artificially or you know proactively limit the amount of production. That happens in some of these places so that you know we would indeed have some regulated decline in production and the you know there are two different camps on this players are for it and the bigger companies are dead set against it which is which is Bruce up some interesting conflict over here but it is interesting not so. That's a very interesting point. Seems to be lost on The Century People don't seem to understand that the the the US Secca is Is well dominated. I mean I think ninety percent of nine zero percent of Of all of the total number of shale players in the US already you know they know exactly more empowered. Bryson's an far off you know they've thought that they produce a member of the top of my head I think You know their incomes five million dollars a year or something. I've got you know. It's very small that accessible figuring they just got a handful of people who are who are He will working on that particular site and There was a guy I think. It's bizarre bizarre over there but It's what it is. I mean I see the guy. was his name. Ryan Fitter. I think yes Yeah he he's. He's in charge of the railroad the Texas Railroad Commission or something. Remember that quaint. And you think anything Shane. Apparently it has yeah. So anyway as you say he was treating. Crc TO I called him manageable. The Saudis Russia's to this. But anyway he was. We've got a call on the line from the Texas Railroad Commission War Water. You talking about how down in Moscow but anyway so he was pledging anyway on a power on on on sort of apropos. What you said on behalf of a group of of the of the shower juices that they would be a cost of I think he's saying a one point about five and five hundred thousand dollars a day something like that. I think he told her. No DOTS and Does not to be sneezed up. Then I think as well that there were other. Tlc members said well actually no is not. There's no There's no consensus for this at all and I think as well Quite shortly afterwards some of the bigger players in the show sector you know Came in and said well we we not cutting production tool so I mean the and and also of course They have a problem there with anti trust. Laws the You know you precisely water. Trump's been threatening the salaries with for some time You know an OPEC with which is You know actually monopoly laws. So you can't really. There's a very small as far as generally very small players All of whom is working for themselves and And also there's no consensus there and on the other side of things the antitrust laws which means that some you know they. They can't really act in any way as a monopoly. Trust as you guys say yeah. Yeah yeah the whole Ryan. Sit thing was interesting because he's been doing some interesting research on what will happen with demand and how long it'll take to return following these. Ron Virus Issues and shut down. But you know Mr Sitton is on the commission but he is not the commissioner is one of three and he is going to be there for humour months. He failed in his shoulder. Actually ask the weekend the only yeah to your to your point I can imagine. It was a humorous Mr Novak's handler. Got Him on the phone and said I want to speak with you out for four months. And in fact he's not really that much part of him with what he wants to offer you so yeah he a pledge five hundred thousand barrels a day caught. So what do you reckon? 'cause it probably was about April the first you may have thought it was an April fools joke because the Russians do of a sense of humor is very underestimate and if they do have one it's is one of subtlety in of nuance and threatening his position nonetheless but no so I mean coming onto this. We are I mean some coming back to the original points We have a a heath discrepancy between the Domon short for the humiliation demand and even even on the basis that everybody is to their Their quotas You're talking about a twenty million dollars a day. in excess supply Well I mean it doesn't take a genius to work out what's GONNA happen to the oil price then. I haven't been in this long enough to really be able to picture what happens one. There's literally no place to put it anymore. I mean I can imagine recent really. I mean. Nobody's really been in. This position actually gives the market tends to balance itself and But the thing is that there's never wore for years really ever since the the rise of China which was soon a long time ago really talking over twenty years when it starts really feel love. You never have thought lack of demand. Now Chinese tamales coming back when he's coming back in patches and You know manufacturing and industry they should be back to normal relatively speaking You know by well certainly by the end of this month or even the quarantine in wine. Which was the epicenter of it. Nope that's being lifted lifted yesterday the day before. So there is there is demand coming back with US going to take alongside field through. And that's just China because You know the rest of Asia remains corona virus bound. They've dealt with it quite well because it's a long history of dealing with these sorts of things solve them and so forth So they got on top of it very quickly but some you know the. Us IS A are big consumers. Of course people tend to forget those massive consumer of oil. And that's You're you're talking about Quite long time with weeks really before you get to the peak Same is in some parts of your pool though Italy and Spain Who will have of course oil consumers they They are probably nearing the peak now but I mean talking weeks really and Lobby for me to throw spanner in the works but Their vaccines Looks like being effective accent. Looks like being at least a year. Away You know who's to say either. We don't get another. Everybody unlocks down. Whatever the opposite of lockdown is whenever anybody. We do that. Who's to say there's not going to be another outbreak? Yeah and he said cheerfully. This is invited to so many dinner parties one of the many reasons. Talk about films or books through things although I do sometimes throw away my My gas and Oil Per barrel linear equations and history of US presidencies elections oil prices. So you know my social diaries. Frankly just it's a desert to be well when your conversation before when you need a Whiteboard to advance your dinner party conversations from time to today but anyway you'll next question. So yesterday we had Russia and Site Arabia decides to on a cut. The no the terms are still bit foggy. I I suppose about the point is they did agree to do something everything. Sailing along night of all people Mexico said they didn't think that it was a great great scheme and then the wheels fell off Look Yeah but Mexico's role was before we get into what happened next. How could that have done first? Place puzzled me. Well Matt you see As it stands right now to the best of my knowledge on this changing situation so essentially. What's happened is this. Which is this basic deal first with Mexico Adam and then we can move onto if you like how it really is just ridiculous because but yeah well I mean okay so really. So this is actually. What's really great which is essentially Russia and Saudi Arabia Wichita In order now the number two and then number three oil producer in world after the. Us which is now wants the US producers well scoring thirteen million barrels a day Russia about we'd have an off call it twelve and Saudi Arabia realistically ten while they pretend it's twelve but is so. That's that's where we also Russia and Saudi Arabia agreed to cuts between them ostensibly even so two and a half million dollars a day. Age is apparently while they agreed. So it's five million outing together so other OPEC which uses were to all in five to to remove another Five million bows and these. Are you know people like us? Canada and the US which that was a completely different story for the reasons outlined but fath- mish old but also Mexico. Of course he's warm because a whole the whole a burgeoning oil industry. I'm very rich failed so any white. Mexico was due to caught Well they were asked to Kutchi not cut four hundred thousand of barrels a day And the and and then I was taught in Mexico. A three part turned around and said well. We don't want to do that because Actually we had only planned at a maximum on doing a hundred thousand absolute maximum because we need revenues to you know for the for the the The the economy for economic for economic measures have already been planned laid out in the budget. So that is what? That's what happened there then. Apparently They they have as we speak now. They have been persuaded to increase finally modified by trump saying that the US might actually be able to Help we say two hundred fifty thousand dollars a day although frankly where are they going to get that? From given the fact that they're all the anti-trust measures against the The Shale Producers. And there's a complete lack of consensus with us. Shell Jay says. Frankly anybody's guess. So that is where we. That's where we are. Yeah well and that goes back to what we were saying a little earlier about you know. What do you consider a cut to be a proactive cut? Which you tell people to stop or is this well the not gonNA produce it anyway so good and put that on my tab a thing. Yeah exactly wing. What's what's two hundred fifty thousand barrels among friends? Yes walk as that. I mean she really thought just. That's just not true. People are not going to produce anyway. Because it's so big. It's not just it's just not worth it so so. Yeah the Energy Secretary of Mexico said That's No they needed to keep to the production spending plans so they've been pursuing Despite despite that yeah yeah and and their plans were exceptionally aggressive. Before any of this and then they decided to expand their drilling program for this year. thing that said they're gonNA try to add as many as four hundred plus new wells this year really. I didn't know that figure but it doesn't surprise me because I have a very aggressive singer. Yeah they do. And unfortunately there The aggressiveness of the strategy is not on par. With the success of the execution they had A good number of programs. They're trying to use local in indigenous companies to Mexico. You're twenty two new drilling programs at the second. Half of last year ended up having to rebuild almost all of them to foreign companies because they just weren't getting done Schnur that There's a bit a bit of puckering going on over there as we say. Well yeah I mean so. It's what goes around comes around is now sure I they they they. They haven't forgotten the trump war. I don't it's not not way to win friends and influence of support but on this will go on. I do want to give them credit because every year they do some very aggressive. Hedging the yeah. Well it's the the the town. Yeah that's why they call it over here the Hacienda. It's fantastic. Yeah well screw thing to do. No absolutely and they they Well this year's absolutely paid off. This is be honest but I'm ready to this camera. Right into this This deal you've got to remind not only I mean you will remember you do remember the the fact that there is rampant cheating on on these quotas. Anyway I mean Iraq never takes any notice. Iran's nor in the anyway is is not included. Libya now included Nigeria does what he wants Ecuador. Of course I can't even remember whether officially no out now days but whatever is I never took getting ours. Anyway and Russia's he got what he wants so it generally fall to the Saudis two Two cards but then they're lying anyway because the amount and then to be cussing from they've never produced in their lives so it's all just as I was saying is angels on the head of a pin is just fantasy fantasy land really but anyway having said that despite this this a bizarre fantasy world that is is this. Dale even within that. There's more which I don't know if you've heard this but this is this is true as well. Which is the the ten million dollar day cards may shrink? This is in the Dayo? Incidently may shrink to walk. I know it sounds like a few drinks. Perhaps making up a really isn't I haven't been out to the public tool for a long time will tell you that dances the lockdown. But so this this is actually true. The ten million dollars a day cards may shrink eight million barrels a day from July and then six million barrels a day from January two eight four from January. Twenty one eight twenty two. This is according to the OPEC statement with the actual deal in it and that depends on how people think the deals going to say yeah. They meeting all of viral video conference on June. The chance to discuss how the deals going And they may then cut it to two ten to two eight. Well I suppose in their defense would expect such a thing. We written in there that way this very much. A temporal sort of a project working on and maybe that's g twenty is getting together tomorrow to to go into politics. Cameron bigly definitely you. You're very diplomatic person. That's one way of putting it. Yes almost twenty years. That's about saying you were very very well. Bought up young boy. I'm sure mother be very proud now. But back to these as well. These baseline levels. Incidentally they're crazy is of course because the Russia's GonNa have reduction applied From the baseline level of around eleven million barrels. A day which is exactly I mean Russia vast exactly what their previous essentially that baseline level wars for the previous Carson. Nothing's changed at all and they'll still produce eleven in half anyway absolutely no difference whatsoever. Saudi Arabia you know what they do of course normally when they're setting bent Ah benchmark Bait Baseline level is that Saudi Arabia ramps up production so that can just cut back without actually doing anything. It's base it's production baseline seriously. It's eleven million barrels a day. Well as I pointed out lawful which seems to escape the nose. Most people do seem to regard. Saudi is an oil powerhouse which it is to a degree. We're nowhere near what he thinks is nowhere nowhere near what anybody else. It is is the average amount per day. The Saudi Arabia has produced every day on average since one thousand nine hundred. Seventy three to the beginning of this year is eight point. One five million barrels. It's nowhere near so the point is he's production by slice of nonsense will they? Weren't they amusing getting to the eleven number by counting dumping there Yeah Yeah Yeah. Yeah no way your guy without interrupting. Yeah no infantry. Surprise really haven't going nuts destroyed factored in there destroy. How smart I am well. We're not that snow ridiculous so that so that's that's nonsense as well. Basically they're just going to. This is when I say this is if you take all of this nonsense right. So we've got a a a theoretical figure of ten million barrels a day. If you take this out even vesa site stick with the tank because that's what it is currently if you take out if you check out all this nonsense which you know. Unrealistic never seen production levels the baselines. Are you really and what they were gonNA call anyway because of the technical factors you'll probably looking really six or seven million barrel per day cards at most because it's not none of it's true if there's no point in saying I'm GonNa cut from twelve to ten when you've never never had twelve anyway. You can't count as part of a cost because you've never done it. It's a bit like when women say I'm going to save you. A thousand pounds stalling you go. Oh that's good yes. This dress is on sale for five hundred dollars. That saved you sa- say because it was on sale for thousand five hundred so I've saved thousands. Go no you really haven't. I'm not gonNA go anywhere near the out false false. It's IT'S NOT REAL. You can't say cart is from something that you've never or you've done for like ten minutes you you know for once in your life you can't say that's the that's the level and we're gonNA cut from that we're GONNA cut two million from that because it's not a card. Yeah Yeah that's what I say. Absolutely don't look at it is. It's all just storytime it is that Simon why we've seen the oil price actually go down since since the the plan with announcing go down even further after they ever. Mexico said that they will go ahead and comply. Yeah always setting in. Is that what's going on? I mean there are two reasons technical and one's fundamental technical reasons as the CIA. He'd markets as always a There's a saying as you know by the rumor. Sell the facts. So the rumor wars they'd be caught So people buy that on that basis. Then there is a car so they sat on that prices but vast technical reasons sway mortgage work. But the second reason fundamentally is people have you know people are not you know people are not idiots in this in this business and they look at the details and they look at the details in you know infinitesimal. Infinitesimal Gile If you will and you people I've come to the conclusion right lay in my opinion that it's it's just full of holes and it's It's dead on arrival really technically speaking as well Won't I mean I mean the day was basically done the the daily five outline the dawn? There's not really going to be anything tonight as far as I can see. So you're looking at this level of inverted commas carts and so really. There is no reason. Why brench shouldn't go down too twenty again if not lower and why WTI you know. That's a huge premium with them. I went between brands and Wti like the old days seven or eight dollars. But I mean really speaking. You know. There's no reason why. Wti shouldn't track down towards the fifteen told about every if not lower before demand really starts to kick in. But you've got to bear in mind what I was saying about Chinese demand coming in. That's true Asian demand will lag slightly. But we'll also. Roy is but the point is is concomitant with a massive overhaul of stock in in storage. Yeah so you see what I'm saying is you've got weeks and weeks of storage now. Well many many weeks facts even before. So that's going to be Taken out of the system before you know before any of these cuts can be whatever comas cards could be factored in. That's the incredible thing in all. This is even a period short as a week. Means is the meaning so plastic now it. Could you know only matter of weeks until the you know? Demand goes back up from. We're awful lockdown. Oh let's one meeting of a week conversely you know we've only got two weeks left until there's no place left to put oil. Yeah I mean basically if the only I mean really speaking as a world stop producing oil today and you you would probably only see Brent go up to fifty in about a September assuming production from now from the Second. Yeah because so much if I go ahead no I was just going to say. It's amazing because you know as you were talking about by the rumor and sell the fact. We're all looking forward to this. This big announcement came and my goodness provide website. Traffic didn't go through the roof. But that was like okay but there. But there's really nothing else after this you know. There's nothing there no more no more buttons to press. I think is kind of what what what my sinking feeling is. Yeah I may not absolutely true. The only thing they can do I mean bear in mind the only bought. And they're actually considering pressing as I mentioned is reducing the cards in July. So but that's a great idea. Yeah the only thing they could possibly do. Let me. You've got to bear in mind that the the the really we're back to where we were in terms of geopolitics rushes absolutely fine the US we find the US has got a viable me. Whatever gives about share. It's nimble it can turn around quickly you know the best players and You know they'll be fine The battle you Saudi. Because what is it? I mean there. Virtually they're like Forty fifty over fifty dollars per barrel away from what they need to be on. Barra on that budget break-even price and not just that they also look while the problem. I mean the oil market now's the NBA hasn't a clue so he hasn't actually lost any further ground. More stupid than people thought he wants to school so that is not of France. The boy is that you know. He has damaged even further. Always looking quite tenuous with the various things that Saudis up toward Yemen Kashogi kidnapping for Lebanese Prime Minister. During aim to resign. And all the rest of it. So you know hanging up your Your own relatives and arresting people arrested at home but you know not just out but they went after he won his only real ally You know which was The US and has been since the agreement is in nineteen forty five. Yeah you know. And he's managed bewilderingly. People would think the impossible he's managed to actually make. Russia look quite benevolent because but Russia agreed they said yeah okay. We're big hostage will will as well obviously no. Yeah so they might. Well be trump of the deal under the table might well be be relax on on sanctions against Russia. You know maybe Rosneft will be allowed to reengage more fully in Venezuela and maybe Nordstrom to won't be quite as a talk sake for America is If in fact it really is. That's probably the only thing that would interest either. Those parties is is Nord Stream because I know that They did a pretty good end around on trump done Venezuela by just nationalizing whose businesses are getting sanctioned Very funny was that game over there as well where you try and follow the queen that with it doesn't it doesn't sound familiar. Well you've got three cops on a table three three cups and you've got a you've got one. She's the Queen Colder Mo Monty. Something Not Free Card Monty. Try to follow where you you try to follow where the Queen is yes. Yes that's like trying to follow. Ross trading I do want to point this out for our listeners. When last we spoke you you really get into some excellent detail on the history of the United States relationship with Saudi Arabia. To go over that again. I'm going to know. Oh no iota on tourism letting. Everybody know that you did the do that. I'm going to put in today's show. Notes a link to that show because if that is of interest to you than that other program will be exceptionally instructive tells you everything. I mean the full basis of of the of why the relationship between the US and Saudi is as is and it also explains fully why the US does expect Saudi Arabia to carves. I'm properly carters well whilst losing money And allowing US show producers to make money from higher prices. It's basically it's a tariff on the relationship to keep the house of Saudi empower. That's what it is right. So I'm sure that after listening to to you and I for forty four minutes and seventeen seconds at this point everyone chomping at the bit to go and listen to us. Another forty more so we'll But the full serialized in the in the offering. I'm show or remind me about your new book Yes thank you. It's Actually that's a good point because there's lots of Lots of stuff that we've preempted and Sort of pre analyzed a it's called an insider's guide to trade in the oil markets. that's available on Amazon Kobo and ATF as published by UVF and valuable in that all normal usual places appeals aspects up literally tabs on on the show for that as well and they can check that out so with that Mr Simon Watkins on this. Good Friday. You're a good sport for taking my call in the late evening. Like this so Thank you Sir for being on the show a real pleasure and so we've always a pleasure. I'm sure we'll speak again soon greg. Thank Cameron thank you all right so we just got done. Hearing from Mr Simon Watkins over in the United Kingdom always a real pleasure to have him on the show and I had hoped to have Our editor in chief cred Abraham Join US on a three party call but technology being what it is in the days of Corona virus. We just couldn't make it happen so I have Mr Abraham with us right now to talk to us about where the oil prices ended for the week. And kind of what we can expect coming up here domestically in the face of all this. So Mr Abraham thanks for being with us well thank you Cameron and Finally were at the end of another tumultuous week I couldn't be happier to see the end of the week. Quite frankly with everything that's gone on it all of this whole thing with this OPEC plus deal. It seems to me to be so tenuous and it doesn't seem to amount to enough To put it in shorthand here and I think that the market yesterday reacted accordingly. You know at one point. The price was up. Oh goodness about three dollars. A barrel all the way up to twenty eight something. We're talking for West Texas intermediate and before everything was was done yesterday when people began to figure out that this deal isn't the greatest thing since sliced bread after all that Oil wound up two dollars and thirty three cents. A barrel down Finishing at twenty two seventy six and actually Although the Dow Jones The stock market managed a gain of two hundred eighty. Five points yesterday. That to eighty-five could have been a lot more. In fact it had been well over five and six hundred but The oil sector really brought that back down so obviously a lot of folks in a financial community like ourselves. I would say at this. Point are not impressed with the OPEC plus deal. That does seem to be the consensus worldwide unfortunately there is so much going on so many machinations that even got us to that point. Kurt that I think that's kind of what took the wind out of the sales. It was so much effort to get not very much return and it didn't help. I mean ten million barrels a day normally would seem like an awful lot but in the context of where we are right now It's not that much I mean. I've seen estimates as high a for demand destruction as thirty five million barrels a day. But even if it's only twenty or twenty five ten million is not going to be near enough to have any major effect and then of course you've got these nasty irritations like Mexico at the last minute Saying they were going to raise their output nat lower. It you know. You have to wonder what they're thinking down there that that wasn't a very coherent thought but then again you have to look at. Who'S PRESIDENT DOWN? There are dear friend. Anglo Anglo is Obviously more bent on getting some attention for himself than he is Doing something rational in terms of oil production levels. So you had that going on then then you've got President trump almost like a magician. I guess today was not trying to waive his hands around saying Oh. I'm going to get the Mexicans to cooperate. No we'll take some of their burden. So if that's true what we heard About trump's oil the US will take two hundred thousand barrels. A day of Mexico's Commitment problem and and we'll be responsible for it. I don't see how he can do anything with that and enforce it to you. Well I think that's kind of the catch. Is that when the president thinks about a cut? He's thinking about you. Know natural decline due to reduce demand. So he's that's what he thinks about things about just the gross number of barrels produced whereas the Saudis and the Russians want expect a proactive reduction of barrels produced. So that an something. Simon I just talked about was that is probably where a of uncertainty in the market comes from. And it's GONNA come to a head real quick because they those are two completely different ways of looking at reducing global production. Well and in something to keep your eye on in the meantime in terms of whether this is going to work at all is that the Texas Railroad Commission on. I believe it's Tuesday. The fourteenth is going to have an electronic version of an open meeting in all kinds of strange scenarios are going on due to the corona virus. So they're going to try to do this in some kind of video conference mode. I guess similar to what OPEC plus just did and they're going to have What amounts to an open discussion per the open meeting requirements of the commission about what to do about a output levels in the state. And whether or not to bring back per rationing and you know there's all kinds of problems Caught up with that. You've got A Commissioner Ryan Sitton who obviously would be in favor of that because he's the one who went over to OPEC and talk to OPEC about you know five hundred thousand barrel a day cut right. That's right that's right. Yes you've got the appropriation topic. And then you have the tariff topic which had kind of fallen out of the news for a while until Alberta Premier Jason Kenney said that you know he was in favour of tariffs for North America to include the US and Mexico. And that he'd been in some conversation with counterparts in the US and Mexico on a tariff. So that's why I tend to. I tend to believe Jason Kenney unfortunately more than I do a few of our own officials in the US. The track record to me speaks to that. And so Jason Kenney this coming out saying that there's going to be some kind of deal between the three countries to reduce production. I believe that that's got some legs to it. And a May also account for the fact that the Mexicans Waffling back and forth possible that they got confused and weren't sure what to do either. I'm going to try to give them the benefit of the doubt on that but Yeah so so hats off to Jason Kenney. Because he's one of the few that I think is looking at the situation. Rationally and I believe his quote was yesterday. Somebody has to stop the madness of OPEC plus cannot and I think that adequately Describe the situation and the other thing going back to the commission to talk about is the fact that in the middle of all this craziness About whether or not the. Us is going to participate in the OPEC. Plus deal you. You have to have some kind of output reduction in the State of Texas for that to work if that became necessary and yet we've got individual companies and mostly the very largest operators who've got integrated operations who are benefiting shall we say from the very cheap crude on refining end and they're writing letters to the commission. Say Oh no no no please. We must not have preparation and all that would just be horrible. And yet you've got other what I call pure producers who don't have integrated operations of larger independence. Same please please do something to cut the production it. It's it's very untidy right now and then of course we have our friends at Occidental. You just really have to wonder what is going on at Occidental and and what really annoys me. It should annoy everyone. Who likes to think that they're thinking about this in a clear-headed fashion as that you've got Occidental on one end of the equation saying writing a letter to the commission saying Oh no no please. We don't want any parading. Then we go to the other side of the equation and their Sending Communications to the federal government saying. Oh you've got to give up some relief money. You've gotTA GIVE US relief money to keep paying our employees now. You know how. How crazy is that you know? They WANNA have their cake and eat a to the they want the the overproduction to continue an estate. Because they're sure that it will not out some smaller producers in the Permian and then they can go and enhance their leading acreage position in Permian even further at pennies on the dollar. But they don't want to Endure any financial cost on the front end of this because of the lower prices so they go to the federal government said. Ooh please please give some money. Cover our our risk. You cannot do that. You cannot have it both ways. And it's as if Vicki Hallam over at Occidental wants a federal government to bail her and her team out for making some bad decisions on financial end. Well it's Kinda hard to look at what she's asking for a not come to that sort of a conclusion. Honestly I mean why else would you expect the government to give you money so that you can keep your powder dry to buy out these other players that have been driven out due to the low production but that's the fallacy with all this free market. Talk these folks like throw that term around but in reality Their motives you really do have to question last year. The last topic that you mentioned Than we want to go back to just a second is the whole question of an imported oil tariff and while there was a lot of excitement about this OPEC plus deal at first now. The reality has set in. And I would say to you and I think you would agree that the issue of an imported oil tariff is still very much alive. Obviously Jason Kenney things up in Alberta but just looking at the reality Something's going to have to be done or you're going to see some real carnage In in the equipment service sector among the medium and smaller independence for sure Potentially on the drilling contractors etc so I think the issue is very much alive. The question is exactly where it is a fit in the current Scheme of things. That's a good question. I don't really have an opinion on it yet I am sure that Mister Kenny will be pushing for that. And as you stated I look forward to his leadership on this issue. Because he's a he's a strong leader and I think that he's got a very set position is going to pursue it The whole notion of the service companies and the equipment providers and everything being driven out of business. I've been trying to think of what the analogy would be. I think it's kind of like the ant and the grasshopper maybe Come to the point to where the market eventually recovers and then Gee whiz nobody left to help me. Drew my wells. There's no one to know one to hire the decisions were made that we are making today will determine whether or not we have any sort of success a couple years from now well exactly that. That is the crux of the matter and We just don't know how some of these things are going to settle out over the next few days but is going to be interesting for sure. I would say to our friends who might be listening to this from Norway from Canada from Brazil From other places like Australia and in any other places got some significant production. That could be jeopardized By the current situation I would say to you That it is in all of your best interest for the United States to do something to get the price up whether it's through production cuts or they're through an imported oil tariff or perhaps a combination thereof and. I would hope that they would be supportive of that and would actually communicate that to people here. Yeah all right then with that Kurt. I think we'll Let everyone get back to enjoying their three-day weekend in a home isolation or wherever they happen to be and prepare for what was is bound to be an exciting week next week. So occurred Abraham. Thanks very much for being on the show today. All right. Thank you Cameron. And we'll see what develops all right. Thanks for listening to the daily brief on the world Podcast network if you have any questions or comments on the program please. Email editorial at world oil DOT COM and. Check the show notes for more information about today's episode. 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