Investing in oil

[Sijoittaja-alokas]

The Kauppalehti article below reports how Opec+ has agreed to significantly increase oil production.

The decision comes at the same time as President Trump is tightening diplomatic pressure on Russia. Trump has threatened Moscow with imposing secondary tariffs on its oil customers unless a rapid ceasefire is reached between the warring parties in Ukraine.

Disruption to Russia’s oil exports would threaten to raise crude oil prices and would contradict Trump’s repeated demands for cheaper oil.

The article is not behind a paywall, at least not yet at the time of writing.

Öljynviejämaat sopivat merkittävästä tuotannon lisäyksestä syyskuulle

[Sijoittaja-alokas]

The article below discusses, among other things, how oil prices rose as uncertainty over Russian supplies and the impact of U.S. policy on India further increased.

OPEC+ countries will meet soon, and the markets are also, of course, following the Fed’s interest rate decisions.

"Key Points

• Oil prices picked up on Tuesday amid questions over the stability of Russian oil supplies.
• Investors are also following the impact of U.S. pressure on key Russian oil consumer India.
• A subset of eight OPEC+ members is due to meet to assess market conditions this upcoming weekend."

https://www.cnbc.com/2025/09/02/brent-oil-futures-climb-2percent-as-russia-flows-us-policies-in-focus.html

[Sijoittaja-alokas]

China Opposes Trump’s Proposed Biofuel Policy Change Along with Major Oil Companies.

The U.S. Environmental Protection Agency’s plan reduces subsidies for biodiesel made from foreign feedstocks, which would limit imports and benefit domestic farmers.

According to opponents, the change jeopardizes trade, small businesses, and emissions reductions.

https://finance.yahoo.com/news/china-joins-big-oil-opposition-214213925.html

[LimpD]

Here are a few charts related to oil.

The markets don’t see light at the end of the tunnel.

Oil companies are trading near all-time low figures relative to the SP500.

Correspondingly, the Oil/SP500 ratio has been as low as it is now twice, in 1999 and 2020.

~30% of global energy demand is still covered by oil.

The most significant oil reserve, the US SPR, is still emptier than usual, drill baby drill.

I am ~60% weighted in oil, and the share is currently growing monthly. The dividend yields are very juicy while waiting for the next bull run and exit.

[LimpD]

US producers are having difficulty breaking even at recent oil barrel prices. The US oil industry is cutting thousands of jobs and reducing spending by a couple of billion dollars due to low oil prices.
Cuts to US oil jobs and spending threaten output growth | Reuters

Below is a table created by Grok with estimates of oil production break-even levels in different locations; the figures should be viewed critically. Note that bringing new oil fields into production costs extra, so the current price level logically slows down investments in additional production, e.g., in the United States, whereas the break-even price level for oil fields already harnessed for production is lower.

Russia was left out of the above, so it’s added separately

The discussion title focuses on oil, but gas is a byproduct. European countries’ gas storages with the upcoming winter in mind. Depending on how storage fill levels and winter temperatures develop towards peak consumption, gas and oil prices may rise (or fall). The graph below takes into account the entire EU. Off-topic: that dip downwards in the graph looks unpleasant. Will we in Finland get to be outraged by electricity prices this coming winter due to Europe’s unified electricity market, as in winter 2022? I guess those storages will fill up before the frosts…

More sanctions on Russia from Trump/the United States, if other NATO countries agree to give up Russian oil. The focus is on Turkey, which is the largest buyer of Russian oil after China and India.
Trump ‘ready’ to impose sanctions on Russia if Nato nations stop buying its oil | Donald Trump | The Guardian
Looking at the European Union, Russian oil imports have been cut by about 90% compared to the time before Russia’s full-scale war in Ukraine. Before the war, just under 30% of the oil used in the EU came from Russia; today, it’s about 3%. Russian oil in the EU has so far been covered, for example, by increased US imports.

Let’s now add an image showing who buys Russian oil and other fossil fuels and for what amounts:
July 2025 — Monthly analysis of Russian fossil fuel exports and sanctions – Centre for Research on Energy and Clean Air

[LimpD]

International Energy Agency (IEA) today published a report “The Implications of Oil and Gas Field Decline Rates” / executive summary, warning that:
“Without sustained investment in existing fields, the world would lose the equivalent of Brazil’s and Norway’s combined oil production each year, with implications for markets and energy security.

Decline rates are central to all discussions about oil and gas investment needs, and our new analysis shows they have accelerated in recent years.”

Here are a few screenshots of the report’s graphs:

In a report published by the IEA earlier this year in June, which discusses oil demand, it is written as follows:

”Global oil demand is projected to grow by 2.5 million barrels per day between 2024 and 2030, reaching a plateau of around 105.5 million barrels per day by the end of the decade, according to the latest estimates from the IEA.

Annual global growth will slow from around 700,000 barrels per day in 2025 and 2026 to “just a trickle in the following years, with a slight decline expected in 2030 based on current policy settings and market trends,” the IEA stated.

According to the agency, economic growth will remain slower than the trend, weighed down by global trade tensions and fiscal imbalances, as well as the accelerating substitution of oil in the transport and energy production sectors.

At the same time, global oil supply growth is expected to “exceed demand growth in the coming years,” the agency notes.”

Contradictory, will we have an oil production surplus or deficit in the coming years?

[Pohjolan_Eka]

OPEC+ has taken excess capacity offline, and new significant sources are coming online, e.g., in Guyana and Argentina, so we will have a surplus this year and next year, especially as China buys oil for storage rather than consumption.

In the long run, investments are not enough to sustain supply, with India growing and Russia under-investing in production, especially if industrial demand starts to recover globally at the same time. However, it will take years for this phenomenon to materialize.

This is at least how I interpret the current data. Of course, oil outlooks must adapt to the macroeconomic situation, and Trump’s tariffs and other surprise factors may change the situation drastically and quickly.

[Jummijammi2]

This era is dividing the world into blocs. Resources are at the heart of conflicts of interest. And at the heart of conflicts of interest (wars) are fossil fuels, which still account for the lion’s share (50+%) of the energy needs for economic growth and production.

Regarding oil and gas, the balance of both production and consumption should be examined by blocs, e.g., the deep south, the east, and developed Western countries. Trump needs oil from elsewhere (as his own production declines), as do other developed countries that do not have significant domestic production. So South America and the Middle East as producers are in a pivotal position – who will buy these fossil fuels and at what price? Who will buy Africa’s growing fossil resources and at what price? In my opinion, price changes and sharp volatility are currently etched onto the world map. It’s hard to believe in a deep slump in this energy category, also because other countries besides China are hoarding oil & gas – for strategic reasons.

[Sijoittaja-alokas]

The story below tells how oil prices have fallen in recent days, as expectations of excess supply in the markets shifted attention away from geopolitical concerns.

Brent fell below $67. According to the story, OPEC+'s production growth and the IEA’s estimates of a surplus next year are keeping prices in check, although Russia-related attacks provide temporary support.

https://finance.yahoo.com/news/oil-dips-surplus-outlook-outweighs-094631340.html

[Sijoittaja-alokas]

Oil prices rose in Asia as markets reacted to Ukrainian strikes on Russian refineries and new EU plans to restrict, among other things, Russia’s energy revenues.

The EU also wants to tighten sanctions on companies operating in third countries and additionally bring forward the ban on liquefied natural gas imports. The strikes weaken supply and support price increases.

https://www.investing.com/news/commodities-news/oil-prices-rise-on-prospects-of-fresh-eu-sanctions-against-russia-4247810

[Pohjolan_Eka]

The markets, at least for now, are not yet pricing in oil overproduction, for an unknown reason

Currently, the leading explanation seems to be “Market participants are stupid”:
![image|690x

[Sijoittaja-alokas]

This tweet says that in the Permian oil fields, the number of drilling rigs has dropped sharply, which usually foreshadows a decline in production.

According to Otavio, this could raise the value of oil and energy companies.

https://x.com/TaviCosta/status/1970661132089336160

[Pohjolan_Eka]

@Sijoittaja-alokas

In the Permian oil fields, the number of drilling rigs has dropped sharply, which usually foreshadows a decline in production.

At this point, it’s probably necessary to clarify that the Permian Basin is not full of water, but sand, so drilling rigs don’t operate there

That drop in the number of drilling rigs in the Permian doesn’t look quite as dramatic if you remove ancient history from the curve:

The data also clearly shows that the productivity of oil wells increases as drilling decreases, because weaker wells are left undrilled, so the impact is not very dramatic, at least not immediately:

It’s also important to know that the depletion of the Permian is a kind of meme among oil investors, which the bulls believe will lead to the end of US shale oil dominance and a new long-term surge in oil prices. I personally haven’t found very convincing evidence for this, but it seems they’re still trying hard to pump it on Twitter

[Sijoittaja-alokas]

@Pohjolan_Eka

At this point, I probably need to clarify that the Permian Basin is not full of water, but sand, so drilling rigs are not used there

Otavio doesn’t have a mistake here, but it’s my mistake, as you probably guessed, but I said it just in case. And yesterday I confused sea freight with truck transport - thanks to the word “shipment”.

And indeed, I wouldn’t have noticed the error if you hadn’t said that my own mistake went completely unnoticed by me

__

@Pohjolan_Eka

One also needs to know that the depletion of the Permian is a kind of meme among oil investors, which the bulls believe will lead to the end of US shale oil dominance and a new long-term surge in oil prices. I personally haven’t seen very convincing evidence of this, but it seems they are still trying hard to pump it on Twitter

So, in short, one should normally treat such writings with great caution?

[Pohjolan_Eka]

@Sijoittaja-alokas

@Pohjolan_Eka

It is also important to know that the depletion of the Permian is a kind of meme among oil investors, which the bulls believe will lead to the end of US shale oil dominance and a new long-lasting rocket rise in oil prices. I personally don’t think I’ve seen very convincing evidence of this, but it seems they’re still trying hard to pump it on Twitter

So, in short, one should normally approach such writings with great caution?

Yes, for example, Göring’s news agency has been writing for years that oil will run out in that critically important area very soon:

The Permian Basin Is Depleting Faster Than We Thought

If your income depends on inventing bullish investment tips for investors and on the price of a commodity rising as high as possible, then smart, experienced, and even well-read people can be made to believe all sorts of improbable things. Data and statistics can also be quite easily twisted to show truths that one believes in.

The clearest signs that the bulls would be right would be a decrease in well productivity simultaneously with drilling volumes, whereas normally the productivity of an oil well always increases the less you drill, as weaker wells are left out of the drilling program. So far, technological development has also increased drilling productivity every year, which has easily allowed for smaller drilling volumes. There is no evidence of this decrease in productivity yet, so I would take these depletion claims quite calmly

[Pohjolan_Eka]

The Kurds will add about a quarter of a million oil barrels per day to the market, which is already on the verge of overproduction:

Vitol Nears Deal to Sell Iraqi Kurdistan Oil Exports | OilPrice.com

[Sijoittaja-alokas]

Larry Berman näkee öljyn hinnan laskun inflaatiolle hyväksi ja sijoittajille ostopaikaksi. Tuottoa hakeville hän suosittelee jotain Kanadan ja Yhdysvaltojen öljyosakkeita tms.

From an investment standpoint, most of the leverage comes from the exploration and production companies that mostly focus on the development side versus the fully integrated companies that refine and sell the end products. Since the Russia-Ukraine war spike in early 2022, the sector has been range bound. We do not see this changing, and investors should be focused on buying into periods of weakness, not chasing strength and looking for a breakout. For the yield seekers, if the sector is likely to remain range bound, have a look at Canadian and U.S. equities, Canadian and U.S. equities and Canadian Equities only.

Larry Berman: Low Oil Prices Good for Inflation and a Buying Opportunity

[Sijoittaja-alokas]

The news below reports that OPEC and its allies decided today to moderately increase oil production by 137,000 barrels per day in November. The group aims to increase revenue without prices collapsing. The decision was made because the markets were nervous, expecting an even larger increase.

Oil prices have fallen by over 13 percent this year, but have remained in the $65–70 range. OPEC aims to increase market share at the expense of U.S. shale oil, Brazil, and Guyana, and to foster discipline among member countries. New arrangements will be decided at the beginning of November.

Brent crude and West Texas Intermediate have both retreated by more than 13% this year thanks to the cartel’s production increase and concerns over a looming global oil supply glut.

OPEC and Allies Agree to Boost Oil Production

[Anssi2]

I wrote a short article about one of the cheapest oil companies on the market, which also has an investment in a mining company on its balance sheet, accounting for 65% of the oil company’s market value.

Deutsche Rohstoff - a German oil company with significant "hidden" balance...

[Sijoittaja-alokas]

The linked article reports that oil prices fell slightly because Middle East tensions eased slightly and US inventories also increased. Brent fell below $66 and WTI dropped to $62 a barrel.

The market is weighed down by rising production expectations, although OPEC+ flexibility and geopolitical risks otherwise curb downward pressure.

https://finance.yahoo.com/news/oil-declines-gaza-peace-plan-001736277.html