Hello!
Oil and Gas Prices
Oil and gas prices stabilized last week in the face of lingering headwinds.
Globally, Russia cut 500k BPD, but OPEC is not on the same page as they continue to produce enough oil to keep prices at lower levels.
Here at home, there are several factors creating headwinds. The economy is still in a hangover from a pair of recent bank failures. And the Fed hit us with yet another interest rate hike.
It doesn’t seem Biden is in a hurry to replenish our Strategic Petroleum Reserves, either. US reserves need to be replenished, but the money needed to refill would put the US further in debt.
Couple that with the approximate $1 TRILLION they doled out to cover the banks, I’m sure Biden doesn’t want to add this on the $31 Trillion National Debt.
All of these things, particularly the last one, contributed to the EIA reporting a continued surplus in supply.
In case you are wondering, the delay to refill the SPR is how this Administration has artificially capped, temporarily, prices to combat economic factors they don’t like from a political perspective.
Rig count was up a tick, but not enough to make it meaningful relative to this topic…at least right now.
In “better” demand news for those of us who like higher oil prices, China is using more oil than previously discussed at 16 million barrels of oil as they move out of Covid and this could put the markets in disarray pretty soon since the US needs to buy the same oil as China for our supply.
The US continues with its demand “ADDICTION” (quoted by George Bush in the 2006 State of the Union Address) to oil…20 million barrels a day compared to our current production of 13 million barrels a day.
By comparison, Russia produces over 11 million barrels a day and consumes less than 4 million a day, therefore selling 7 million barrels of oil per day. This is a HUGE business for Russia as they have huge surpluses, as do Iran, Iraq and other OPEC nations.
All in all, we could see prices move up this summer and through the end of the year as our economy catches up, but I’m not sure of the $100 per barrel we discussed in past newsletters.
Where are prices right now? WTI is a tick above $70 per barrel. That’s still represents profit opportunity for King and it’s partners.
Similarities in Real Estate and Oil/Gas
I have been traveling this month, and as I was looking out the window of the plane on one flight, I noticed new housing developments all over Texas.
These developments create signs or trends in new growth and new opportunities for growth around the area.
I think about this because it is relevant in how best to approach oil and gas development. To mitigate risk and maximize reward, you don’t necessarily want to be the first person in a county to drill. But you don’t want to be last.
Joe Simo, a past President of King used to always say, “WE GO WHERE OIL HAS ALREADY BEEN FOUND”.
Joe was with me for a number of years, and when he was searching for prospects, his geological mind would lead him to oil fields that were maybe drilled vertically but still had lots of untapped horizontal or infield drilling opportunity.
As I looked out the window and continued thinking, the Acquire Develop Divest model of King is right. It’s working. It takes time, but it’s working.
Recommended Reads
The Expert Who Pioneered Quantitative Easing Has Seen Enough…
Biden’s SPR Strategy Has Capped Oil Prices
Natural Gas Prices See Yet Another Weekly Decline
Beyond taxes, there are some outstanding results beginning to come in with the current KOPX Program 4. If you are not in it, and you are accredited, it’s a good time to have a conversation. You can schedule a Zoom here.
