Bonjour Volatility – Reasons to be Cheerful 1 2 3…

More musings on the oil price, I know, I know – it’s a mug’s game…

Part 1: Short Term

Somehow, oil is holding above $40.   Notwithstanding the details, the US continues adding oil into storage (+3mmbbls yesterday) – and we have several ephemeral events taking production offline and propping up the price (Kuwait strike, Forcados down and now issues at Escravos, Libya, etc)…  But fundamentals are really no different now than they were in February (albeit with even more in storage).  Now, I fully buy into the narrative around the coming rebalancing – and am more and more convinced it will result in a big overshoot in the other direction (hence a recent public utterance of mine of $85-90 in Sept 2017).  But today (and in the next few months) I don’t see that rebalancing happening in this time span… so am back to fundamentals and scratching my head why we are at $45 today…  
That being said, the whole situation is becoming pretty unstable – the outages in Nigeria don’t look like random events.  

How about this for one coming out of left field: Venezuela which produces just under 2.5mmbbls/day produces roughly 70% of its electricity from hydro power.  Their dams have, along with everything else been poorly maintained and managed, and are currently drought affected – the key Guri dam is 3ft above its minimum water level – so pretty soon the lights will start to go off.  Now how many of Venzuela’s 15,000 wells have electrically driven pumps?  I don’t know the number, but I’ll bet it is a huge proportion…   and when the grid fails, Venezuela will resort to generators to power the wells and to power homes and businesses, so we can expect domestic consumption to increase and exports to decrease.  

Continue reading “Bonjour Volatility – Reasons to be Cheerful 1 2 3…”

Witnessing History Happening

On April 8th – two weeks ago, SpaceX landed the Falcon 9 rocket on their drone ship out at sea.   This is a huge landmark in space travel – probably bigger than anything since the moon landings.   It is worth watching the video also – this was no benign bit of sea either (OK so its not the North Sea in winter), but there is clearly some swell and some strong cross-wind…  (obviously this is not an easy exercise)

But why all the hyperbole about this landing – after all the space shuttle landed many times?

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