Thread by @davidgaffen

WEDNESDAY MORNING: Once again. Too much to explain, so best to sum up.

First off, #OPEC and its rapidly disintegrating deal, and Trump's part in that as well. #OOTT #Iran

As is known, #Trump went out again on oil prices this morning - a week before the #OPEC deal that ratchets up, again, the tensions on whether #OPEC will do anything (which they're likely to do).

But figures we have show Saudi Arabia/Russia are already abandoning - or at least pulling away from - the deal. #OPEC #OOTT

13 Jun - RTRS - RUSSIA'S OIL PRODUCTION STOOD AT 11,1 MLN BARRELS PER DAY FROM JUNE 1-12, HIGHER THAN A QUOTA SET BY OPEC+ OIL CUT DEAL - TWO SOURCES

12 Jun -RTRS - SAUDI ARABIA TELLS OPEC IT PUMPED 10.03 MILLION BPD IN MAY, UP 161,000 BPD M/M AND STILL BELOW ITS OPEC TARGET

#OOTT @AlexLawler100 @Rania_ElGamal

So the Saudis have added 160K, Russia bout 100K (ish). #OPEC

Noted here - Saudi Arabia at 10.03 is still below their target:
#OPEC #OOTT

As a reminder, the #Russia role in the #OPEC cuts was 300K barrels a day, bringing them to ~10.95 mln bpd.

Here's where they were in recent mos:
May: 10.97 mln
Apr: 10.97
Mar: 10.97
Feb: 10.95
Jan: 10.95
Dec: 10.95

So moving to 11.1 mln already means they've shifted.

It shows they, and the Saudis, are already moving to accommodate Trump (or because they want to regain lost market share and put the squeeze on the Iranians. These things may be one in the same.) #OOTT @JKempEnergy

Don't forget this as well - the #IEA is worried about oil supply already, largely because of #Venezuela and #Iran - the former, of course, continues to slip into the abyss.

reuters.com/article/us-oil…

I'll update folks on that w stories we have in recent days, but it's all the same plus worse: shipping problems, they owe money to everyone, refining issues, Conoco seeking $2 bln in assets, et al.

And US sanctions, tho on Venezuela so far they've been limited -- #OOTT #OPEC

Iran of course ain't happy: "You cannot place sanctions on two OPEC founder members and still blame OPEC for price volatility," Iran's OPEC governor, Hossein Kazempour Ardebili, said in a statement to Reuters.

#IRan #OPEC #OOTT #Trump

More after #EIA but your moment of Zen in a couple minutes:

Predictions! (Per our poll)
CRUDE: -2.7 mln bpd
DIST: +200k bpd
GASOLINE: +443k bpd

#OOTT #OPEC

Stay hungry.

EIA:

CRUDE: -4.1 mln bpd, big unexpected draws in gasoline/distillates too.

#oott

Notable reaction here from fund manager Pierre Andurand:

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That concern is gaining some currency.

To wit: our nice story the other day from @aghaddar who points out spare capacity drops to about 2 mln bpd on this:

reuters.com/article/us-oil…

#OPEC #OOTT

In a second, I'll look at - using the latest data from Russia, for starters as well, and the OPEC nations - on where we stand on production and the quotas as well. #OOTT

To come back to this as promised. Here's a hastily-made chart of the #OPEC production prior to, the quota, adjustment, and where they are now.

I added Russia, and eliminated Libya/Nigeria b/c they were exempt.

#OOTT

The total deal then comes to about 1.7 mln bpd (ex the rest of "non-OPEC," which didn't amount to as much of the deal).

As of most recently, #OPEC was still cutting supply by 2.26 mln bpd - ex-Libya/Nigeria. Add them back in, and they're down by approx 1.56 mln bpd.

That's even with, if you look at the secondary data, Russia, Iraq and Iran are all now producing above quota - see the last column.

And as we see in the last column, everyone else would essentially be offsetting in terms of production were it not for Venezuela, which is nearly 700,000 bpd under its pre-deal production *and* 580,000 bpd under the quota.

This is, naturally, the source of most worries, along with #OPEC flexibility to just start pumping more because, well, the Venezuelan collapse is going a long way here in terms of deal adherence. #OOTT

Shale we move away from #OPEC for a few minutes here?

Here's our story today from myself and @ayenatM on shale hedging. And specifically, a hint: watch those 10Ks for the 2nd quarter earnings season when they start rolling in.

...we will see if a lot of companies started to ramp up some aggressive hedging against weakness out of west Texas prices (because the pipelines are totally full, and will stay that way).

reuters.com/article/us-usa…

We saw some innneerrrestin' stuff in these Q1 10ks. Namely Cimarex - which had big hedges on for that spread at about 47 cents. (That's good!)

The spread right now - that is, Texas oil to futures - is about $8-$9 a barrel.

So if you don't hedge it, you get screwed.

Cimarex late in the quarter started adding more hedges - except now they're hedging that spread (others did this too) closer to $5 a barrel.

Thing is, RBC's Mike Tran astutely points out that in a few quarters, people are gonna wish they'd hedged at this level.

Meh, screw it, we gotta go back to talking #OPEC

Another nice one from @AlexLawler100 and @Rania_ElGamal on this situation.

reuters.com/article/us-oil…

The early back-and-forth is going to revive memories of what Saudi officials recall of a 2011 meeting they called the 'worst ever.'

You can imagine #Iran is going into this meeting loaded for bear.

#OOTT #OPEC

(I love the "loaded for bear" phrase, if only b/c it reminds me of Meldrick Lewis's joke on "Homicide" - where you only hear his punchline: "So the bear says, 'You didn't come here to hunt, did you?'")

(and yeah, I know that's Pembleton below. Not a lot of Meldrick gifs.)

“Changing the decision is very complicated,” an OPEC source said. “Iran, Iraq and Venezuela and some more countries are going to push for keeping the ceiling for OPEC in place until the end of 2018.” The source did not say which other countries oppose pumping more.

The other thinking is that a supply boost will happen eventually, and it'll be gradual, gradual, gradual. (Remember, they're basically a central bank, and don't want to surprise people.) That won't make Trump happy - unless it's enough to tamp down oil prices. #OOTT #OPEC

Meanwhile, we're still waiting on the better deal on this thing:
reuters.com/article/us-ira…

#OOTT