Crude Oil at $1.50 a barrel...

VanHalen

...for North Dakota Sour. N. Dakota Sour was selling for $47.60 two years ago.



BloombergBusiness

jmski52

It costs disproportionately more to remove the sulfur from a high sulfur crude than it does from low sulfur crude, and a little sulfur goes a long ways when the refineries are mandated to produce low-sulfur fuels. When all other types of crude are cheap, there's an economic disincentive to stop production just to set up the process to handle high sulfur crude, especially when it costs more to process and to get rid of.

OPA

Originally posted by: VanHalen
...for North Dakota Sour. N. Dakota Sour was selling for $47.60 two years ago.

BloombergBusiness

You did not specify that it applies to: "High-sulfur crude in North Dakota which is a small portion of the state’s production, with less than 15,000 barrels a day coming out of the ground"
I suspect that those wells will be or are already shut down.

CaptHenway

I saw an article that said that their Bid had dropped to a MINUS 50 cents a barrel. You sell them 10,000 barrels, you pay them $5,000 to haul it away.

ricko

Minus .50 a barrel? Now that is weird... obviously just a disincentive to even keep a well

open....Cheers, RickO

CaptHenway

I wonder if those wells had already shot down, and the operators were just looking to get rid of what they already had out of the ground. If you just store it in a tank you have certain obligations and liabilities and, I presume, costs.

jmski52

If the tank size is a nominal 50,000 bbl sized tank and it's full of crude that is essentially worthless at today's market, the owner might be willing to sit on it - hoping for an eventual return to a price of $47.60/bbl. That's about $2 million in sour crude that he's not going to simply dump for nothing if he can help it.



There are other considerations, such as the mandated tank inspection that is required every 10 years, and as you suggest - other cost factors including maintenance on the pumps, valves, piping and controls. The rig count in N. Dakota continues to drop precipitously so you can pretty much assume that most of the crude, both sweet and sour is going to be shut-in before too much longer - until the price comes back up - if ever.



At that point, I would imagine that the current owners have disappeared and new ones will be taking over the reigns with new balance sheets and new business models. The current batch of operators are pretty much screwed already.



If you want to read about the bloodbath in the oil industry, ZeroHedge covers it fairly often, including the impacts on the financial system. They had an article on the Dallas Fed's new paradigm for bookkeeping of bad energy loans just yesterday. It's worth paying attention to these developments.

BAJJERFAN

Originally posted by: jmski52

If the tank size is a nominal 50,000 bbl sized tank and it's full of crude that is essentially worthless at today's market, the owner might be willing to sit on it - hoping for an eventual return to a price of $47.60/bbl. That's about $2 million in sour crude that he's not going to simply dump for nothing if he can help it.







There are other considerations, such as the mandated tank inspection that is required every 10 years, and as you suggest - other cost factors including maintenance on the pumps, valves, piping and controls. The rig count in N. Dakota continues to drop precipitously so you can pretty much assume that most of the crude, both sweet and sour is going to be shut-in before too much longer - until the price comes back up - if ever.







At that point, I would imagine that the current owners have disappeared and new ones will be taking over the reigns with new balance sheets and new business models. The current batch of operators are pretty much screwed already.







If you want to read about the bloodbath in the oil industry, ZeroHedge covers it fairly often, including the impacts on the financial system. They had an article on the Dallas Fed's new paradigm for bookkeeping of bad energy loans just yesterday. It's worth paying attention to these developments.

If one wanted to store oil in barrels, the barrels probably would cost more than the oil.

pmac

I know that this affects the prices of PM, but is this PM?

jmski52

Would you rather cut off a post that could still veer towards how PMs might be affected, or just cut it off right away?



It would be different if there were an abundance of new PM threads, but I don't see that many new ones. Not to be difficult, but do you have some new PM input that might stimulate a conversation?

Baley

Right now, I've got plenty of beautiful, delicious lemons, someone would have to pay me to take any more lemons into my lemon inventory.



Being round, they don't stack too well either.

jmski52

Sounds like a problem in economics to me. You have lemons?

Baley

Yes, there is currently a glut of lemons in Baleyville, and I'm giving away gorgeous lemons to anyone who will take them from me.



Unfortunately, all my neighbors also have more lemons than they know what to do with. Bid price on lemons today is a negative number around here.



But I don't expect it to stay that way forever

jmski52

If there were a Koch brothers enterprise dealing in lemons in your area, at least the bid would be in positive territory.



A Koch bid of $1.50 for sour crude sounds somewhat generous when otherwise the price would be negative. Someone (usually the media) always wants to distort or sensationalize what's going on, and usually it's because they have no idea how things work.




On another note - it looks like they're never going to fix this paragraph thing. Trying to keep the post counts down, I suppose?