Part #1 if you missed it

Drill Baby Drill !

How we got to oil glut and was not unexpected by me since the US put sanctions on RU for the war.

As the war moved on and RU was under more and more financial pressure, oil is the fastest way for them to raise funds.

They needed more and more and were getting less and less for it.

After all, it was this war that spiked the price in the first place.

Then you have one other element.

Saudi Arabia who was cutting opec production to support the price level of about $85 bl and you had many 3rd world nations who produce that had been off-line for one reason or the other (more can be said about this and the timing)

Then the Biden admin started using the strategic oil reserve to offer up sales to efforts to spike the price when those came around and actually created a profit for the US while they replaced the offerings when the price came down. More often they did not have to actually sell it as it just became downward pressure and capped the rise.

For much of the pricing is based on future production and spooking the market that it can be at risk will change today’s price.

So eventually the Saudi’s were at odds with Russia who they generally use to price fix as RU is overproducing in a way they can not control and the Saudi’s are suddenly loosing market share.
China, one of the big benefactors of all this, began building out new storage for this cheap oil from RU.

When all of that was full, the demand side came way down.
Production levels still increase because of RU and all those nations whose production has been offline and the general slow increase of US production.

And real use demand really has not changed all that much but the stock market does not read it that way. They gauge economic activity on oil consumption and are not looking at vast new storage in place now. It’s all consumption to them. Changing the futures market.

So, just what part of this is going to change ?

Russia years ago wanted Iranian oil off the market and used T-Rump to execute that to support a price they could manage a war from. They knew what they were about to do even if we didn’t.

But all of that is at an end. Who is going to cut production ?

If the price goes below wti@ $62, it will be the US.
Meanwhile they will slow drilling new wells anyway.
And many of those will be drilled and capped, not producing as they just wait on older wells to expire for the cut. They rarely stop production in favor of this method.

These 3rd world nation are not going to cut for they are starving and will over produce to make up for previous lost revenue.

RU is not going to cut because it funds their war.

Does anyone think it wil be the Saudi’s or Venezuela, Brazil, Mexico ?
Perhaps those in the North Sea ? This is revenue for all those nations. And they spend it as they make it.

It is possible with this complicated mess, we see a lot of smaller oil co’s sink and/or be bought out. All the old oil money is now in Investment banking and they finance all this stuff. They have ultimate control and have been waiting for this opportunity.

If you like big energy, you are going to love this consolidation as they get even bigger picking up the pieces.

Drill Baby Drill was an answer to a problem that did not actually exist. But it sounded good didn’t it.

But no sympathy for the Saudi’s who teamed up with Russia for this and were sold down that river for it. Never make deals with Putler.

How do you get OPEC to cut production when RU is not following the rules ?

If the price sinks below $62, it will end RU’s war much quicker as they would be lucky to end up with something less than $50 after the sanctions.

And the sanction bypassing adds additional costs of about $3-5 bl for them. So $47 ? Need to sell a bunch more for the cash flow adding to the problem.

So the Saudi’s now have an interest in ending this war as well as other oil producing nations and US energy giants. But not before they consolidate.

Just what will they scare you with to convince you to turn your back on Ukraine and end this ?