Author Topic: Energy Sector  (Read 56382 times)

SharperDingaan

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Re: Energy Sector
« Reply #420 on: April 22, 2020, 05:47:59 AM »
Trudeau and pretty much the rest of Canada (outside of Alberta and Saskatchewan) has moved on from oil. Oil is so hated my guess is completing the pipeline projects will be difficult; more massive protests with many groups doing everything they can to stop it. Meanwhile, the economy is falling off a cliff. But the government is cutting everyone a check so who cares about being ‘unemployed’ or if we have a shitty economy.

Agreed, times have changed, but they have also made a national energy policy more of a necessity than it has ever been.
Lack of money, has a wonderful way of concentrating the minds of everyone,

Like it or not, there will be climate driven constraints, but it can be done intelligently (ie: orphan well clean-up)

The Supreme Court has ruled there is 'duty to consult', not a 'duty to agree'. A sick community cannot veto a pipeline, because it cannot make a decision. The obvious industry 'consultors', are the governments of the day, under a national energy policy.

There will be quasi-privatization. Crown corporation in-ground SPR, pipeline company, oil company, rail (oil/grain car) fleet, tanker (nfld) fleet, supply-chain (medical, food) infrastructure, etc. Most likely as oiligarch, crown corp and 1-2 private corps.

And perhaps one of the biggest lessons from Covid-19.
All of the above are essential services, with immense value-add, and robust . When the sh1te hits the fan, the gig economy, and non-essential services break down.

Interesting times.

SD




wescobrk

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Re: Energy Sector
« Reply #421 on: April 22, 2020, 06:49:51 AM »
USO will have 8 to 1 reverse split on April 28th.
How will this affect puts and calls?

LC

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Re: Energy Sector
« Reply #422 on: April 22, 2020, 07:22:24 AM »
The real unknown here is how various desks will price these assets going forward and the various implications of that (i.e. reduced volumes or higher collateral reqs). Many existing models (e.g. gabillon) do not allow for negative prices. Similarly to negative interest rates a few years back.

FYI this lends more color here:
https://www.bloomberg.com/news/articles/2020-04-21/negative-oil-prices-are-literally-breaking-traders-risk-models

CME Group Inc. said late Tuesday that the clearing house will switch the options pricing and valuation model to Bachelier -- a model named after the famous French mathematician -- to accommodate negative prices in the underlying futures and allow for listing of options contracts with negative strikes for a certain set of crude oil and energy products. The change is effective Wednesday and will remain in place until further notice.

"Lethargy bordering on sloth remains the cornerstone of our investment style."
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Dalal.Holdings

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Re: Energy Sector
« Reply #423 on: April 22, 2020, 09:05:56 AM »
The real unknown here is how various desks will price these assets going forward and the various implications of that (i.e. reduced volumes or higher collateral reqs). Many existing models (e.g. gabillon) do not allow for negative prices. Similarly to negative interest rates a few years back.

FYI this lends more color here:
https://www.bloomberg.com/news/articles/2020-04-21/negative-oil-prices-are-literally-breaking-traders-risk-models

CME Group Inc. said late Tuesday that the clearing house will switch the options pricing and valuation model to Bachelier -- a model named after the famous French mathematician -- to accommodate negative prices in the underlying futures and allow for listing of options contracts with negative strikes for a certain set of crude oil and energy products. The change is effective Wednesday and will remain in place until further notice.


Holy cow--negative strikes.
For analytical eyes only
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Uccmal

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Re: Energy Sector
« Reply #424 on: April 22, 2020, 10:02:05 AM »
Trudeau and pretty much the rest of Canada (outside of Alberta and Saskatchewan) has moved on from oil. Oil is so hated my guess is completing the pipeline projects will be difficult; more massive protests with many groups doing everything they can to stop it. Meanwhile, the economy is falling off a cliff. But the government is cutting everyone a check so who cares about being ‘unemployed’ or if we have a shitty economy.

Agreed, times have changed, but they have also made a national energy policy more of a necessity than it has ever been.
Lack of money, has a wonderful way of concentrating the minds of everyone,

Like it or not, there will be climate driven constraints, but it can be done intelligently (ie: orphan well clean-up)

The Supreme Court has ruled there is 'duty to consult', not a 'duty to agree'. A sick community cannot veto a pipeline, because it cannot make a decision. The obvious industry 'consultors', are the governments of the day, under a national energy policy.

There will be quasi-privatization. Crown corporation in-ground SPR, pipeline company, oil company, rail (oil/grain car) fleet, tanker (nfld) fleet, supply-chain (medical, food) infrastructure, etc. Most likely as oiligarch, crown corp and 1-2 private corps.

And perhaps one of the biggest lessons from Covid-19.
All of the above are essential services, with immense value-add, and robust . When the sh1te hits the fan, the gig economy, and non-essential services break down.

Interesting times.

SD

What this says to me is that if you have pipe already, it will become increasingly valuable.  The repercussions for future supply are interesting to say the least. 

SA, And to a lessor degree the other large Mideast countries are going to be facing revolution if the oil price stays down for very long.  We saw what happened to Libya’s and Venezuela’s supplies when governments become unstable.  Simultaneously we have a virtual elimination of long tail projects by every major player in the world. 

The outcome is likely toppled regimes, and a massive price bounce back, down the road.  It may become more like railroads, with very few players making a lot of money. 

We could speed up the rebalance really quick by turning the gulf fields into glass.  China may take exception but I sure Moscow would be on board. 
GARP tending toward value

LC

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Re: Energy Sector
« Reply #425 on: April 22, 2020, 10:11:30 AM »
The real unknown here is how various desks will price these assets going forward and the various implications of that (i.e. reduced volumes or higher collateral reqs). Many existing models (e.g. gabillon) do not allow for negative prices. Similarly to negative interest rates a few years back.

FYI this lends more color here:
https://www.bloomberg.com/news/articles/2020-04-21/negative-oil-prices-are-literally-breaking-traders-risk-models

CME Group Inc. said late Tuesday that the clearing house will switch the options pricing and valuation model to Bachelier -- a model named after the famous French mathematician -- to accommodate negative prices in the underlying futures and allow for listing of options contracts with negative strikes for a certain set of crude oil and energy products. The change is effective Wednesday and will remain in place until further notice.


Holy cow--negative strikes.
Bloomberg did some lazy reporting to only focus on BS/options pricing. The real problem is use of Gabillon model which is used as a commodities pricer, mainly for collateral purposes. It will throw collateral requirements out of whack.
"Lethargy bordering on sloth remains the cornerstone of our investment style."
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brk.b | goog | irm | lyv | net | nlsn | pm | ssd | t | tfsl | v | wfc | xom

Castanza

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Re: Energy Sector
« Reply #426 on: April 22, 2020, 10:39:33 AM »
How does this work for pricing below 0?

(I couldn't access the article)

SharperDingaan

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Re: Energy Sector
« Reply #427 on: April 22, 2020, 11:38:16 AM »
Trudeau and pretty much the rest of Canada (outside of Alberta and Saskatchewan) has moved on from oil. Oil is so hated my guess is completing the pipeline projects will be difficult; more massive protests with many groups doing everything they can to stop it. Meanwhile, the economy is falling off a cliff. But the government is cutting everyone a check so who cares about being ‘unemployed’ or if we have a shitty economy.

Agreed, times have changed, but they have also made a national energy policy more of a necessity than it has ever been.
Lack of money, has a wonderful way of concentrating the minds of everyone,

Like it or not, there will be climate driven constraints, but it can be done intelligently (ie: orphan well clean-up)

The Supreme Court has ruled there is 'duty to consult', not a 'duty to agree'. A sick community cannot veto a pipeline, because it cannot make a decision. The obvious industry 'consultors', are the governments of the day, under a national energy policy.

There will be quasi-privatization. Crown corporation in-ground SPR, pipeline company, oil company, rail (oil/grain car) fleet, tanker (nfld) fleet, supply-chain (medical, food) infrastructure, etc. Most likely as oiligarch, crown corp and 1-2 private corps.

And perhaps one of the biggest lessons from Covid-19.
All of the above are essential services, with immense value-add, and robust . When the sh1te hits the fan, the gig economy, and non-essential services break down.

Interesting times.

SD

What this says to me is that if you have pipe already, it will become increasingly valuable.  The repercussions for future supply are interesting to say the least. 

SA, And to a lessor degree the other large Mideast countries are going to be facing revolution if the oil price stays down for very long.  We saw what happened to Libya’s and Venezuela’s supplies when governments become unstable.  Simultaneously we have a virtual elimination of long tail projects by every major player in the world. 

The outcome is likely toppled regimes, and a massive price bounce back, down the road.  It may become more like railroads, with very few players making a lot of money. 

We could speed up the rebalance really quick by turning the gulf fields into glass.  China may take exception but I sure Moscow would be on board.

Existing pipe will behave, on pain on nationalization. Keep renewing the social license, or lose it.
Most long-tail projects are now stranded, but regimes will continue to produce as they need the FX. Without tariffs, others will shut-in.
Agreed, regime change in most places unless they can collectively raise price, and keep the price up.

Game changers
Covid-19 demand destruction is enough to permanently shut-in sizeable global production.
Global agreement to lock up the global inventory, then bleed it out slowly.
Post Covid, demand rises, supply remains constrained, and price rises to some set-point [USD 62/bbl?]
Thereafter all incremental demand supplied from inventory.
Stability for a long while.

SD



TwoCitiesCapital

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Re: Energy Sector
« Reply #428 on: April 22, 2020, 12:00:47 PM »
USO will have 8 to 1 reverse split on April 28th.
How will this affect puts and calls?

It's my understanding the number of shares underlying each option contract will change to adjust the new share ratio  (i.e. 12.5 shares instead of 100).

So both your strikes and underlying # of shares per contract get adjusted, but you will own the same number of contracts.

BG2008

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Re: Energy Sector
« Reply #429 on: April 22, 2020, 06:40:18 PM »
Trudeau and pretty much the rest of Canada (outside of Alberta and Saskatchewan) has moved on from oil. Oil is so hated my guess is completing the pipeline projects will be difficult; more massive protests with many groups doing everything they can to stop it. Meanwhile, the economy is falling off a cliff. But the government is cutting everyone a check so who cares about being ‘unemployed’ or if we have a shitty economy.

Agreed, times have changed, but they have also made a national energy policy more of a necessity than it has ever been.
Lack of money, has a wonderful way of concentrating the minds of everyone,

Like it or not, there will be climate driven constraints, but it can be done intelligently (ie: orphan well clean-up)

The Supreme Court has ruled there is 'duty to consult', not a 'duty to agree'. A sick community cannot veto a pipeline, because it cannot make a decision. The obvious industry 'consultors', are the governments of the day, under a national energy policy.

There will be quasi-privatization. Crown corporation in-ground SPR, pipeline company, oil company, rail (oil/grain car) fleet, tanker (nfld) fleet, supply-chain (medical, food) infrastructure, etc. Most likely as oiligarch, crown corp and 1-2 private corps.

And perhaps one of the biggest lessons from Covid-19.
All of the above are essential services, with immense value-add, and robust . When the sh1te hits the fan, the gig economy, and non-essential services break down.

Interesting times.

SD

What this says to me is that if you have pipe already, it will become increasingly valuable.  The repercussions for future supply are interesting to say the least. 

SA, And to a lessor degree the other large Mideast countries are going to be facing revolution if the oil price stays down for very long.  We saw what happened to Libya’s and Venezuela’s supplies when governments become unstable.  Simultaneously we have a virtual elimination of long tail projects by every major player in the world. 

The outcome is likely toppled regimes, and a massive price bounce back, down the road.  It may become more like railroads, with very few players making a lot of money. 

We could speed up the rebalance really quick by turning the gulf fields into glass.  China may take exception but I sure Moscow would be on board.

Are you saying to Nuke the oil fields in the middle east?