Dwarf is about 2 million barrels per day more than is needed. On a daily basis, the world consumes about 93.5 mil and produces about 95.5. that doesn’t seem like much, but they’ve been at this for well over a year now, so the storage mass is excessive.
Am waiting for the day when the price of natural gas is not linked to oil. This will create new opportunities for individual investors. Currently, gas prices make no sense (maybe this is benefiting institutional investors, not sure ) . Oil is more predictable.
hoping for an oil recovery to help the CAD!!! 
how are nat gas prices linked to oil? nat gas prices in North America are very close to the cost of marginal production. many nat gas shale plays in North America have a sub-$2 cost of production even without incorporating nat gas liquids. in fact, when oil eventually rallies, this will likely have a negative impact on the price of natural gas because the value of natural gas liquids will go from zero today (propane prices in Alberta are actually zero), to something of value (propane prices in Alberta were closer to $0.60/L not too long ago). a similar but less extreme situation exists for natural gas liquids outside of Alberta. maybe, just maybe the price of natural gas will rise if the Montney play gets linked to Pacific LNG, but if not, Montney will continue to aid in depressing the price of North American nat gas. the bottom line is that Marcellus alone is probably enough to keep nat gas under $3 for a very long time.
Thinking HH natural gas would have been close to zero if oil had not crashed.
$3 dollar gas would be great. Sub-$2 not so much. Looks like UPL is BK. Not exactly a fly by night operator, just gambled on the market never getting this bad. They can cover their interest and no near maturity, but those damn covenants. Last month was ugly, this is going to be carnage if supply doesn’t tighten.
^ I mean we’re at 3-4 companies this week alone that skipped their interest payments (SD, EXXI, couple others). Gonna be interesting from now until end of Q2
This week:
US producers are hedging oil in 2017 at 45 USD
Demand is at 8 years high
US rig count is lowest since 2009
US oil production is lower by 475K bpd than its peak in June 2015.
US oil companies are still highly leveraged
US crude stockpile is at record high; maybe plateauing (504 M, vs 502M last week)
Iranians are following the BullSh#@ing strategy; though their production is not expected to increase by more than 700K bpd by the end of 2016
This is well established. Please google “LNG prices linked to Oil”; or any similar search query.
Doesn’t make sense? then search for an arbitrage opportunity.
^ not in north america. there was a strong correlation in north america 20 years ago but the correlation broke down about five years ago, due to shale gas production reaching ever lower marginal cost in the Marcellus and Utica, and the correlation has been a very low positive since then.
platinum and gold are highly correlated. oil and nat gas are not.
the difference between oil and nat gas currently is that the constraint for more oil production is the cost to drill and operate a well whereas the constraint for more nat gas production is distribution infrastructure. there is maybe 2-3% excess global oil capacity at current prices whereas there is 200%+ excess nat gas capacity at current prices. they are completely different beasts. oil is mobile whereas nat gas is landlocked, for the most part. it costs $5-$7/mboe to send gas to Asia relative to a marginal production cost of $1-$2 and it only costs $5-$10/bbl to send oil abroad versus a marginal production cost of ~$35. transport is 80% of the cost of LNG out of North America but only 15% of the cost of oil out of North America.
Now I see the miscommunication, you mean Gas, not LNG. I believe one day LNG will follow the path of Gas and get delinked from oil.
I exited DWTI at 264 yesterday from a purchase price of 250. I thought it was a terrible deal at the time, cuz it had been at 290, and then it got slammed down, so I just sold it off to avoid the possibility of a loss. I guess it wasn’t that bad in retrospect cuz today they [a group of major oil producers] randomly announced some meeting for march to presumably discuss cutbacks. what a croc! they aren’t gonna do squat, even if they come to an agreement, but for whatever reason, the market always does this dance where they pretend it’s viable, and send the price way up - within 30 minutes, the price had jumped about $1.50ish. I’m thinking the price of oil will go to about 34 or 35, but I still won’t have the guts to go short on that because they can keep the rumor mill going and pump it up as high as 40 without fundamentally fixing anything.
My plan is to just sit on the sidelines, and if oil approaches 40 from a substantial rally, then I’ll take a short position. Inventories are still increasing, and I think at some point, you won’t be able to sprinkle any “meeting” fairy dust on it to keep prices propped up. just my take.
Careful dear. Inventories were actually lower last week. Crude was higher (at 507), but if you add gasoline, distillate,… and all the other fuels ; the total was lower.
Where do you find this info?
I think natural gas and crude oil prices are correlated in non-producing regions. In areas where natural gas is produced is where you’ll see the linkage break, as Matt said. Natural gas is a regional commodity. You’ll see vastly different prices for natural gas in varying regions across North America. From a pure economics standpoint, the LNG stuff has always been interesting but I think there’s opportunities to make money on these regional (within the US) price dislocations and potentially overbuilt midstream transportation systems.
Matt is right in natural gas and oil being very different beasts.
inventories are still increasing bud - EIA is about to release their report, but for now, here’s the API report for last week which was released yesterday. I’m in cash right now, but as I said, if crude oil jumps up and approaches 40, even 38 I guess, and that happens without any decrease in inventories, then yeah, I’m going short again. I don’t see a lot of upside beyond 40 because there are too many countries too desperate to unload product for that price to hold, at least until much later in the future.
"U.S. API weekly crude stocks rose more-than-expected last week, the American Petroleum Institute said late Tuesday, up 9.9 million barrels, compared to a 7.1 million barrels build in the preceding week and well above the 2.5 million barrels gain seen.
U.S. weekly distillates stocks rose 2.7 million barrels, while the weekly Gasoline stock dropped 2.2 million barrels."
And now this:
"The U.S. Energy Information Administration said in its weekly report that crude oil inventories soared by a whopping 10.4 million barrels in the week ended February 26.
Market analysts’ expected a crude-stock rise of 3.6 million barrels, while the American Petroleum Institute late Tuesday reported a supply gain of 9.9 million barrels.
Total U.S. crude oil inventories stood at an all-time high of 518.0 million barrels as of last week, underlining concerns over a domestic supply glut."
What effect does contango have on storage levels? Backwardation?
That inventory report is pretty shocking. From what I’ve read, most of the increase is from imports…but i don’t see why that would make a difference. Venezuela just needs to throw in the towel already…