I’m expecting some kind of OPEC+ deal on Thursday. It was all fun and games to decide not to cut in March but it’s a whole different world now for Saudi and Russia and I think they understand that. The demand destruction is such that without a cut Brent prices will drop to 20, could drop to 10, and I’ve seen some articles suggesting that prices could go negative at a few hubs which would be unheard of. That’s obviously a scenario everyone would want to avoid. However, a cut from OPEC won’t be like the cuts that ushered in a mini boom from 17-19,it’s an emergency cut to keep Russia and Saudi from getting completely ####ed. Their goal would be to put prices in a range that’s still devastating to shale but tolerable for them, only now they’re pushing the price up into that range instead of down. The US might try to argue that their falling rig count and soon to be falling production counts as a de facto cut but I don’t think it’ll be enough to convince Saudi and Russia to do a mega cut.
For us here it’s pretty bleak. The “best case” scenario is that our companies lose money with OPEC+ cut deal keeping prices in the shale death/OPEC tolerable pain zone at $25 WTI. The worst case scenario is somehow OPEC can’t come to a deal which almost guarantees negative WCS pricing. The silver lining is we share a common goal with OPEC of wanting is shale production to go away, which it eventually will, but how many of our companies go down in the process. Companies in the US have the advantage of selling to the strategic petroleum reserve, but we don’t have one of those in Canada. Companies in the US don’t have a massive discount to WTI, but thanks to Justin and the gang we do. Companies in the US have the option to put oil in floating storage because they have access to the ocean, but again thanks to Justin and the gang we don’t. Turns our building critical infrastructure was important. Whoopsies
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