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Page added on April 26, 2020
When oil became waste
The magnitude of how damaged the energy industry is came into full view on April 20 when the benchmark price of U.S. oil futures, which had never dropped below $10 a barrel in its nearly 40-year history, plunged to a previously unthinkable minus $38 a barrel.
In just a few months, the coronavirus pandemic has destroyed so much fuel demand as billions of people curtail travel that it has done what financial crashes, recessions and wars had failed to ever do – leave the United States with so much oil there was nowhere to put it.
While the unusual circumstance of negative oil prices may not be repeated, many in the industry say it is a harbinger for more bleak days ahead, and that years of overinvestment will not correct in a period of weeks or even months.
“What happened in the futures contract the other day indicated things are starting to get bad earlier than expected,” said Frederick Lawrence, vice president of economics and international affairs at the Independent Petroleum Association of America.
“People are getting notices from pipeline companies that say they can’t take their crude anymore. That means you’re shutting down the well yesterday.”
Evidence of the erosion of value for a product that has been a mainstay of global society since the late 19th century abounded across the world last week.
In Russia, one of the world’s top producers, the industry is considering resorting to burning its oil to take it off the market, sources told Reuters.
Norwegian oil giant Equinor slashed its quarterly dividend by two-thirds. Next week will bring earnings reports from the world’s largest oil companies including Exxon Mobil Corp, BP PLC and Royal Dutch Shell PLC. They are all expected to detail additional spending cuts, and investors will be watching closely for how those companies plan to manage dividends.
U.S. billionaire Harold Hamm’s Continental Resources Inc sent servicers out into fields in Oklahoma and North Dakota in the middle of the week to abruptly shut wells, and the company declared it could not make crude deliveries to customers due to poor economics.
Continental’s decision to declare force majeure – usually reserved for wars, accidents or natural disasters – came as a shock, bringing a sharp response from the leading refinery industry group. But some say there is a logic behind it, even if it may not pass muster in court.
“You sign contracts based on the average norms that a society has experienced over the last 100 years. If we have a new event that is not covered by those norms, it goes into force majeure. That’s what Harold Hamm and others are saying – that these are circumstances outside the norm,” said Anas Alhajji, an energy market expert based in Dallas.
Even the long-rumored decision by the White House to tell Chevron Corp last week it could no longer operate in Venezuela, where it has had a presence for nearly 100 years, met with a shrug.
“The global climate is terrible,” said one person close to a Western oil company in Venezuela. “The license almost didn’t matter anymore.”
The market is forcing the hands of all producers. Across the world, governments and companies are preparing to shut down output, and many have already begun.
The Organization of the Petroleum Exporting Countries and its allies had already committed to record cuts of 10 million barrels of daily supply that have yet to take full effect. That commitment was not enough to prevent oil’s fall below zero.
Saudi Arabia has said it and other OPEC members are prepared to take further measures, but made no new commitments. It is a measure of the depth of demand destruction that even if OPEC stopped producing altogether, supply may still exceed demand.
More than 600,000 barrels per day in production cuts have already been announced in the United States, along with another 300,000 bpd of shut-ins in Canada. Brazil’s state-run Petrobras has reduced output by 200,000 bpd.
Azerbaijan, part of the group of nations known as OPEC+, is forcing a BP-led group to cut output for the first time ever. Oil majors in those countries have generally been excluded from government-imposed cuts.
“We have never done it before since they came to the country in 1994 and signed the contract of the century,” a senior Azeri official told Reuters.
That accommodation can no longer be made with the world running out of space to put oil. As of Thursday, energy researcher Kpler said onshore storage worldwide is now roughly 85% full.
Demand is expected to fall by 29 million bpd in April, the International Energy Agency estimated. Paris-based IEA expects consumption to pick up in May, but researchers cautioned that its expectation of a mere 12 million bpd fall in year-over-year demand may be too optimistic.
“I’m sure hearing the same numbers about demand destruction of 20 to 30 million barrels a day,” said Gene McGillian, analyst at Tradition Energy, who was working at the New York Mercantile Exchange when U.S. crude futures were launched in 1983. “Until we see some kind of alleviation of that, you have to wonder what is in store.”
22 Comments on "When oil became waste"
Rick on Sun, 26th Apr 2020 4:27 pm
We need a zero-waste society. Not late-stage capitalism.
makati1 on Sun, 26th Apr 2020 5:22 pm
About time the oily business got a kick in the ribs from reality. I hope it stays negative for the rest of the year and all fraking/tar sands get shut down forever. Go for it!
Rick on Sun, 26th Apr 2020 5:24 pm
You are right, Makati1.
Rick on Sun, 26th Apr 2020 5:36 pm
People die every day from automobile accidents, suicides, cancer, substance abuses, pneumonia, heart attacks, natural disasters, war, violent crimes and so on.
makati1 on Sun, 26th Apr 2020 6:11 pm
US ‘supposed’ COVID-19 deaths to date: ~55,000
US TOTAL deaths from ALL causes to date: ~860,000
Does anyone ever actually think? Perspective! Always perspective!
makati1 on Sun, 26th Apr 2020 6:13 pm
REFs for above:
https://www.worldometers.info/coronavirus/#countries
https://www.google.com/search?client=firefox-b-d&q=total+annual+deaths+in+the+us
Do they have lock0downs for car deaths? Heart attacks? Suicides? …
Newfie on Sun, 26th Apr 2020 8:50 pm
Without REAL GREEN’s ID theft and socking, this side is actually quite pleasant.
Bo on Sun, 26th Apr 2020 9:08 pm
在最高层次上，美国制造这种隐秘的生化武器的目的/意图是煽动并引起一种普遍的“去全球化”“……当美国掌权时，全球化是“好的”，早在尼克松时代，他们就以利用中国填补美国霸权这样的心态来向中国敞开大门……现在，美国认为（正确地）中国已经威胁到了它自己的生存，因为一旦他们不能保持石油美元的霸权地位，美国不可谈判的生活方式/生活方式标准就会消亡。基本上，现在中国和东方在这场比赛中处于领先地位，突然之间“全球化”就变得很“糟糕”，且美国正准备通过执行一种“如果我们不能成为第一，也不能让其他人成为第一”这样的焦土政策来摧毁/扭转全球化（因为他们已经意识到这场比赛他们不可能赢得胜利，至少没法以公平竞争的方式来赢得胜利）！”并利用冠状病毒猛烈攻击中国（武汉）、伊朗和意大利的腹地……这是一次战略上的精准打击，当时正值美国对华贸易战的高潮、地球上最大规模的人类迁徙高峰（农历新年）和中国中部交通枢纽“一带一路”等城市（武汉）迁移，并巧妙地运用武汉拥有BSL4设施（将受害者归咎于自己的罪行的标准西方模式）双管齐下自圆其说的推诿，达到摧毁中国经济、减缓中国经济增长、遏制中国崛起和影响力的目的，而美国无需部署一场动态战争的公开敌对行动，而是躲在暗中进行的秘密生物战争的背后，这样美国就有了貌似可信的推诿之辞，也有了模棱两可的灵活立场…
就目前影响美国的冠状病毒而言，任何实际的反击都被认为是可接受的间接伤害，美国因冠状病毒而死的人都被贴上战争死难者的标签，这与美国明知故犯地允许日本攻打珍珠港以获得进入二战的借口无异，911/WTC7上的假旗行动杀害了成千上万的美国人，所有这些都被认为纯粹是战争伤亡和可接受的损失。毕竟，作为一个正在衰落的大国，美国将不惜一切代价来保持这种力量，为了战胜“我们时代的中心威胁”，美国早就决定，它所遵循的唯一规则是物理定律本身的物理约束……如果他们能够通过暗杀伊朗将军来摧毁伊朗，那么他们就会去做。如果他们能通过将冠状病毒释放到武汉，将中国经济放缓十年，他们也会这么做…
在贸易战、关税战、科技战（华为/5G）后，一场秘密的生物战是美国“没有留下任何武器”的武器库中仅存的最后一次重大行动。美国佬期望习/中国共产党像日本人在广场协议期间那样卑躬屈膝，看到中国站起来反抗他们，他们感到震惊。他们意识到，如果保持现状，意味着美国很快就会把榜首位置让给中国，所以他们必须采取行动，这样一来就有利于他们加速对抗中国，因为时间是站在中国这边的，美国失去主动权，他们等待的时间越长…
生物战是最后仅存且唾手可得的一次机会，如果它不能逆转趋势，使中国与世界贸易脱钩的话，美国别无选择，只能最终被迫付出更高代价，那就是在南海与中国正面对抗，或者用脉冲炸弹摧毁中国的基础设施，更有甚者，可能是像战略第一次打击(核打击)那样大胆的尝试，企图一举将中国共产党斩首，并诉诸核全面屠杀/种族灭绝，以恢复其霸权，并在下一个美国世纪中保持其全方位的统治地位。
whoa on Sun, 26th Apr 2020 9:28 pm
ong decided that the only rule it follows is the physical constraints of the laws of physics itself … If they can destroy Iran by assassinating an Iranian general, then they will do it
above is muzzie lovin since everyone knows US navy retrieved muzzie carcass and gave to french navy to bury but then transfered to dutch navy and then to phils navy which lost custody
Abraham van Helsing on Mon, 27th Apr 2020 7:06 am
“Yabut, everything is an extension of oil!”
https://www.wattisduurzaam.nl/24798/energie-besparen/transport/liebherr-brengt-elektrische-beton-vrachtwagen-op-de-markt/
German-Swiss company Liebherr brings this year a concrete-mixer to the market with an e-drivetrain. Concrete mixers don’t want to drive too far anyway, the range of 50 km back-and-forth suffices. Capacity 12 ton concrete.
Abraham van Helsing on Mon, 27th Apr 2020 7:08 am
Correction: 40 ton or 10-12 m3 concrete.
I AM THE MOB on Mon, 27th Apr 2020 2:37 pm
Mak
This is total insanity. You were so fucking rite about getting out of this crazy fucking land,; Its like i am in a horror movie.
Way to be bold and be right.
SocialRevolutionComing on Mon, 27th Apr 2020 2:50 pm
Total insanity in what I called Whites Western nations: US, Canada, France, Germany and so on.
Notice how we have barely no COVID panic Africa,South America, India, Bangladesh.
I AM THE MOB on Mon, 27th Apr 2020 3:06 pm
Government: “This rock is magic, it will protect you from dinosaurs!”
The People: “But we don’t see any dinosaurs…”
Government: “That’s because it’s working!”
Sissyfuss on Mon, 27th Apr 2020 3:17 pm
Oil is becoming waste because the Ponzi bubble was pricked by the virus thanks to the lax CCP motivation strategy on it’s lab workers. It could have been locust, doesn’t matter. What matters is we don’t have a workable economy and a mass of really hungry citizens. And that is worldwide.
I AM THE MOB on Mon, 27th Apr 2020 3:50 pm
Young people, teens, babies, pregnant mothers, exhumed bodies from decades ago—whatever the WHO/CDC need to do, to expand the meaning of COVID, whatever they need to invent, they’ll be there with “alarming findings.”
After all, the authorities must somehow convince the dumbed-down public that the “epidemic” is alive and spreading.
aldoludup on Mon, 27th Apr 2020 4:19 pm
“When oil becomes waste” Something like a panty waste?
Duncan Idaho on Mon, 27th Apr 2020 4:29 pm
Trump does sleep:
https://i1.wp.com/digbysblog.net/wp-content/uploads/2020/04/unnamed-29.jpg?w=928&ssl=1
Sometimes has a snack
makati1 on Mon, 27th Apr 2020 5:35 pm
MOB, it’s all a power grab and I doubt it will ever go back to like it was even last year. It is a little better here as the emphasis is on helping the poor and the ones who have lost their jobs temporarily, not the rich corporations. Money, free food, free medical help, etc. began only a week into the lock0down.
In fact, the corporations are also helping the poor in many ways. The local electric co-op is giving the poor 20kw/mo free. That is about $5 but covers most of their use. Can you see Amerikan companies even giving that much? I expect them to have their hands out to the taxpayer for support.
I am glad to be here, even if they are mirroring the US response to this flu bullshit in part. We have a similar lock0down, but it is not rigidly enforced and no one would think of ratting on a neighbor. Meanwhile we are helping our farm neighbors and others when possible. Different culture here, and a much nicer one than in Amerika. Good Luck!
BTW: $5 is about a days wages here for a laborer.
I AM THE MOB on Mon, 27th Apr 2020 6:41 pm
Wanna know the ending?
We collapse the US economy which collapses the dollar and Europe. And the whole world will be leveled off. And living on 10k year per capita.
A NWO is within reach! FINALLY ITS HAPPENING AND ITS HAPPENING EVERYWHERE!
I AM THE MOB on Mon, 27th Apr 2020 7:43 pm
god help us all I guess…
The “Thinning” is coming!
makati1 on Mon, 27th Apr 2020 9:18 pm
MOB, the “Thinning” is underway now. Those killed by the virus will be small numbers compared ot the coming deaths by suicide, starvation and vaccines. I sit back and watch the future unfold and it ain’t pretty. i prepped for this time and can relax as it happens. The world will never be the same. I hope you can adjust and do well.