Arjun, another great read .. I've got nothing more to add that has not already been said by other readers... other that I'm very grateful you take the time to put your thoughts, time and energy into this... sincerely..
"Quadrilateral of Death", the net of which was that a quintupling in oil prices ($20/bbl to $100/bbl) resulted in essentially no change to profitability and cost of capital returns at best"
Thanks Arjun for another great post! I heard your former partner Jeff Currie interviewed last week and he seems optimistic that prices will come up in the back half of this year. OTOH, I heard Michael Kao in a podcast and he seems a lot less optimistic than he was a year ago and has changed his forecast from having what he was calling an oil "singularity" in 2024, out to maybe 2026 or perhaps never if we have something similar to the grind-it-out scenario that you describe in this post. I think Kao's main concern has been that there is insufficient long term CapEx, which I believe Jeff Currie shares. Also what about CapEx in refining? I saw a story on the EPA enforcement action against Suncor at their Commerce City refinery in Colorado and the author of that piece was blaming some activist hedge fund for forcing Suncor to return more capital to shareholders instead of making the necessary repairs to their refinery (which is the typical spin you see in news stories about oil companies). But I was wondering whether we need more CapEx in refining or not?
Thank you James. Kao has had a great oil call over past year or so...he nailed the lackluster China re-opening. He's another former colleague though one I really know now more through Twitter than GS days. On refining, CAPEX is happening in rest of world, just not here. We likely do need more than we are getting.
Arjun thank you for pointing out phenomena in oil prices that are not obvious to non-experts such as myself. I often tend to think in simplistic and linear terms. This made me pause: "The lack of a major CAPEX boom, thus far, is limiting cost inflation, which ironically has likely helped to keep a lid on long-dated oil."
Thank you Tien. It is the contango'd structural bull market of 2004-7 that I think jumps out most. i.e., inventories built but the long-end of the curve rose overwhelmed front-end weakness.
Always a pleasure to read your Saturday posts. Thank you for telling the Barry story and how cool that your son was involved in Barry’s qualifying. Could you break 80 at the LACC?
Thank you Martin. I think there is no chance I would break 80 at LACC, or at least not with the rough/greens the pros use (even allowing I would hit from Members tees not the pro tee box). Berry is a total class act...basically had my son as part of his crew this week.
Great read - Thanks Arjun! Enjoyed the note on Henson too
thanks so much!
Arjun, another great read .. I've got nothing more to add that has not already been said by other readers... other that I'm very grateful you take the time to put your thoughts, time and energy into this... sincerely..
Thank you so much Adam, very much appreciated.
"Quadrilateral of Death", the net of which was that a quintupling in oil prices ($20/bbl to $100/bbl) resulted in essentially no change to profitability and cost of capital returns at best"
Who were the winners here? OFS?
ultimately the sector will move together. The "winners" was really broader society that benefited from a collapse in commodity prices from 2015-2020.
Thank Arjun... Great higher level look on oil mkts. 😊
Pretty confusing mkt lately!! 😕
Thank you Gary. Yes, near-term, definitely a bunch of cross winds.
Thanks Arjun for another great post! I heard your former partner Jeff Currie interviewed last week and he seems optimistic that prices will come up in the back half of this year. OTOH, I heard Michael Kao in a podcast and he seems a lot less optimistic than he was a year ago and has changed his forecast from having what he was calling an oil "singularity" in 2024, out to maybe 2026 or perhaps never if we have something similar to the grind-it-out scenario that you describe in this post. I think Kao's main concern has been that there is insufficient long term CapEx, which I believe Jeff Currie shares. Also what about CapEx in refining? I saw a story on the EPA enforcement action against Suncor at their Commerce City refinery in Colorado and the author of that piece was blaming some activist hedge fund for forcing Suncor to return more capital to shareholders instead of making the necessary repairs to their refinery (which is the typical spin you see in news stories about oil companies). But I was wondering whether we need more CapEx in refining or not?
Thank you James. Kao has had a great oil call over past year or so...he nailed the lackluster China re-opening. He's another former colleague though one I really know now more through Twitter than GS days. On refining, CAPEX is happening in rest of world, just not here. We likely do need more than we are getting.
Arjun thank you for pointing out phenomena in oil prices that are not obvious to non-experts such as myself. I often tend to think in simplistic and linear terms. This made me pause: "The lack of a major CAPEX boom, thus far, is limiting cost inflation, which ironically has likely helped to keep a lid on long-dated oil."
Thank you Tien. It is the contango'd structural bull market of 2004-7 that I think jumps out most. i.e., inventories built but the long-end of the curve rose overwhelmed front-end weakness.
Always a pleasure to read your Saturday posts. Thank you for telling the Barry story and how cool that your son was involved in Barry’s qualifying. Could you break 80 at the LACC?
Thank you Martin. I think there is no chance I would break 80 at LACC, or at least not with the rough/greens the pros use (even allowing I would hit from Members tees not the pro tee box). Berry is a total class act...basically had my son as part of his crew this week.