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PANDORA’S BOX
EVERYTHING GOT OUT. THE HOPE IS AT THE BOTTOM.
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THE ONE-WAY DOOR
Oil Hit Ninety One And The Drillers Cut Their Spending
For twenty years high prices meant more American drilling. Chevron and ConocoPhillips spent a tenth less this half. Occidental cut a fifth.
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Brent went through ninety one dollars this morning. A projectile hit a ship in the Strait of Hormuz. The ceasefire expired with no deal. And the American shale patch is spending less than it did last year.
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That last part is the one that matters. For two decades the shale patch was the world’s shock absorber. Prices went up, rigs went out, supply arrived, prices came down. The cycle ran on about a year of delay and it worked every time.
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Bloomberg counted the first half. Chevron and ConocoPhillips spent ten percent less. Occidental cut its Permian spending by as much as a fifth. APA, HighPeak and Matador all spent less too.
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200,000 BARRELS A DAY
IS ALL THE EXTRA OIL AMERICA ADDS THIS YEAR
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The International Energy Agency has the world sliding into a deficit of one point eight million barrels a day. Between 2016 and 2020 this same patch added over four million. |
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FROM OUTSIDE THE BOX
It’s a ticker you will not find on any top-100 list.
Hardly anyone searches for it, and most investors have never even heard of it.
But when one specific market begins to move, this little-known ticker quickly becomes one of Wall Street’s favorite ways to profit.
Larry Benedict believes a White House plan could soon set that market in motion, creating wave after wave of opportunities.
Today, he’s revealing the overlooked ticker at the center of it all, completely free.
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None of that is new. The industry has run on discipline and shareholder returns for years. What is new is that the worst supply squeeze in modern history did not change it.
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Look at the output instead of the promises. American production hit thirteen point seven million barrels a day in May. October last year was higher. So was November. The Energy Information Administration expects this year to average thirteen point eight.
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There is a second reason, and this one is not a choice. Shale wells deplete faster than conventional wells. Enverus measured productivity in the patch down about fifteen percent. Drillers answered with longer laterals and better efficiency. That worked, and the gains still slowed.
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We graded this CLOSING rather than SEALED because a spending plan is a decision. Decisions get revisited. The rock is the part that does not go back. And the brake that used to cap a fuel spike inside a year has nothing behind it now.
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EVERY LEAD PASSES BEFORE IT RUNS
The One-Way-Door Test
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Can it be undone?
A spending plan can be rewritten at the next board meeting. The rock underneath cannot be renegotiated.
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Who is already repositioning?
Chevron and ConocoPhillips each cut about a tenth in the first half. Occidental cut the Permian by as much as a fifth.
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What does being late cost?
The energy agency has the world short one point eight million barrels a day. The old answer to that used to arrive within about a year.
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THE MOVE · WHILE THERE IS STILL TIME
Stop budgeting on the assumption that fuel comes back down by spring. That assumption had a mechanism behind it for twenty years, and the mechanism is the thing that just went missing. If you have a fuel-heavy purchase or a long trip planned, price it at today’s number rather than next year’s hope.
If Chevron, ConocoPhillips or Occidental raises capital spending at the next quarterly report, the old reflex is back and this reading weakens. We will say so. |
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ALSO GOT LOOSE TODAY
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Government bond yields hit multi-decade highs today, and one of the largest Treasury funds trades at its lowest level since 2004. Cheap money has a closing date on it. |
MONEY |
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Nvidia is backing a hundred five billion dollars of financing for an OpenAI data center in Ohio, days after regulators said sponsors are off the hook for such investments. |
MACHINES |
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A bill was filed to stop Social Security checks being garnished for unpaid student loans. Until it passes, the garnishing continues. |
LAW |
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WHAT’S LEFT AT THE BOTTOM
Rig counts sit forty three higher than a year ago, so somebody out there is still trying. Discipline is a choice, and choices get revisited when a price holds long enough. WE WATCH THE BOX.
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