Rare Metals Prices Surge

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Video Transcription edited for grammar. We disavow any errors unless they make us look better or smarter.

Michael Tanner: [00:00:10] What’s going on, everybody? Welcome into the Thursday, September 5th, 2024 edition of the Daily Energy News Beat stand up. Here are today’s top headlines. First up OPEC close to delaying oil supply increase, according to Galligan. We’ll talk about a 180 there. Mixed up facts and speculation about the state of the Russian Indo financial ties. Ooh spicy. Ooh. We’ll explain what that has to do with energy. Trust me. Next up rare metals prices surge as China restricts exports. Interesting. Very spicy there. Next up. Efficiency in capacity markets, not capital markets. [00:00:48][38.4]

Stuart Turley: [00:00:49] Capacity. [00:00:49][0.0]

Michael Tanner: [00:00:51] Absolutely. Next up the invasion of the Water Snatchers. Talk about some great headlines this day. Next up, he will then toss over to me. I will quickly cover what happened in the oil and gas markets. Crude oil down again. We’re below $70. Yikes. And then we went ahead and saw a new M&A deal. Strikethrough. Crescent energy buys Cheyenne Petroleum’s Eagle Ford assets for $168 million. I will cover all that in a bag of chips, guys. As always, I am Michael Tanner, joined by Stuart Turley. Where do you want to begin? [00:01:22][31.3]

Stuart Turley: [00:01:23] Hey, we’re just getting started here with OPEC. Michael, this has been fun. The Bulls and the bears have been running amuck. You know who’s going to win. On whether or not OPEC is going to happen I saw this one OPEC plus close to delaying the oil supply at the time we’re recording. This oil has been hammered pretty brutally. The group is scheduled for October production boost or increase of 180,000 barrels. But now they’re rethinking it because of the data from China. I thought that was pretty interesting. Here is a quote from Bob McNally. OPEC is facing a binary choice between delaying, tapering and enduring a disorderly crude price rout, said Bob McNally, president and consultant of Wrap in Energy Group, a former white House official. It appears to be leaning toward the former, as he’s always cautioned it would be the case. [00:02:18][54.7]

Michael Tanner: [00:02:18] Yeah, it’s I mean, we’ve kind of seen the 180 on this. I think it’s because they saw Brant oil prices. You know, as we as we sit here, Brant oil prices have dipped to to pretty low. I mean you’re talking about $73 Brant which is not nearly what they need now. I think the entire breakeven oil price charade that Saudi needs yes, they need higher oil prices. They can also just roll back a lot of their spending, which people don’t know about. [00:02:42][23.9]

Stuart Turley: [00:02:42] Right? You bet. And so now Ananias has been saying that that’s the sweet spot. So it’s kind of funny that they’re rolling right on in the sweet spot. [00:02:52][9.2]

Michael Tanner: [00:02:52] Yeah. But you know, the 180 I think comes which obviously they would like higher prices. I think you know, it’s it clearly shows that the market is on a little bit more of a tenuous situation than I think anybody wants to admit. So it’ll be interesting to see how this plays out. And we will be watching very closely this next OPEC meeting coming up. [00:03:12][19.7]

Stuart Turley: [00:03:12] Oh, absolutely. Four years ago, do you remember the OPEC you and I were pretending we were at that was a funny video that we we made where we were like all in there on the zoom. [00:03:21][8.5]

Michael Tanner: [00:03:21] And we know it was that was great. [00:03:22][0.9]

Stuart Turley: [00:03:23] Anyway, that was that was one of the old fun days. Okay. Facts and speculation about the state of the Russia Indo financial ties. This is from our buddy over there at Andrew Corby. Oh, Substack. He sent this over and it’s pretty interesting. And that Russia and India ways doable proposal on the swift alternative which is the BRICs bring. But this is the first time they’re actually including oil in there. And so that is why that is in here. The first revealed aspirin handled 70% of Russia’s $65 billion worth of trade of India last year, mostly Russian energy exports. This is really huge. [00:04:11][48.2]

Michael Tanner: [00:04:12] Yeah, it’s it’s really big. I mean, the fact that this is you know, I it again it comes back to it’s clear sanctions don’t work. [00:04:19][6.8]

Stuart Turley: [00:04:19] No. Especially because people need oil and they’re going to get it by hook or by crook. I’m happy for them. And they’re buying it, you know, below or outside of sanctions. More power to them. Power to their people. [00:04:32][12.8]

Michael Tanner: [00:04:32] What a novel cause. Countries looking out for their own interests. [00:04:35][2.7]

Stuart Turley: [00:04:36] Yeah. Wow. Let’s go to the next one here. Rare metals price surges China restricts exports. Now Michael this is in the critical minerals area. You being a mines guy antimony is not what you pay after you get divorced. Antimony is actually what they use for military, automotive and solar applications, with China producing nearly half of the global supply. Michael, that is not now they’re going. To say this is quote from London. It’s a sign of the times. Military uses of SB antimony are now the tail side, the tail that wags the dog. Everyone needs it for armament, so it’s better to hang on to it than sell it. You don’t want your other your opponents having it. [00:05:26][50.4]

Michael Tanner: [00:05:27] No, absolutely. I mean, I love first off this this article is titled correctly, Rare metals not critical metals because right. There’s there’s a difference. There is it’s really critical minerals versus metals per se. But you know, it’s it’s absolutely going to be pretty crazy when China and now Russia who have both gone in to all of these countries, including now Afghanistan and hoovered up all of the critical mineral minerals and metals that are needed to make EVs and selling it to us as a premium. And then we all turn around and say, look how green we are. [00:06:00][33.5]

Stuart Turley: [00:06:01] And we’re not used to this. Last year, China issued three batches of rare earth output quotas, the first time it issued that more than many quotas in a single year since it started the quota system. It’s pretty nuts. Yeah, and it just means that if we don’t get our regulatory issues, we our regulatory issues cost us over $1 trillion this year, because if we don’t get our regulatory mining issues under control, we won’t have an energy transition. [00:06:34][33.3]

Michael Tanner: [00:06:35] Yeah. I was listening to a podcast this morning with Cash Patel, who’s an adviser to President Trump and somebody who’s a former chief of staff to the secretary of defense. And he said, it’s the model. You know, these minerals, lithium, cobalt. And they’re all the modern day blood diamonds. [00:06:49][14.0]

Stuart Turley: [00:06:50] That’s exactly right. And but you gotta have it for energy because. [00:06:53][3.4]

Michael Tanner: [00:06:54] It’s necessary, don’t get me wrong. [00:06:55][1.2]

Stuart Turley: [00:06:55] But and you’re not going to grow the grid twice. I mean, we’re supposed to double the the Texas grid in five years. Without this, it takes 20 to get a mine open. It ain’t going to happen. All right, all right, what’s next? Let’s go to. Are you ready for this Substack author? Okay, this one is the electric grandma. I swear I’m not making this up. Meredith Angwin I love Meredith. And when she is now the electric grandma on her Substack. Yeah. Let’s go to this efficiency and capacity market. On July 29th, Ethan Howard at the Utility Dive looked at the probable outcome of the next capacity auction. PJM capacity prices could jump 157%. Morgan Stanley the price raise in the auction started at a low base, starting at $29 per megawatt day, the $270 per megawatt day. Holy smokes. [00:07:57][61.6]

Michael Tanner: [00:07:58] It’s it’s absolutely insane. I mean, you’re talking about a that’s 157% increase. [00:08:05][6.5]

Stuart Turley: [00:08:05] It is. It’s just nuts. You know PJM is just sitting there. You’ve got it. When energy efficiency was added to the forecast and E was removed from the capacity market, PJM should have simply followed the tariff, recognize that E was not capacity, and recognize that E sources do not meet the definition of E resources filed in it. Instead, PJM recognizes that E resources are not capacity stopped, including E resources in the capacity act, and and began to pay e resources on uplift payment. I would I mean the accounting on this thing is just absolutely hilarious. Way to go Meredith thing when in a way she explains this out. [00:08:52][46.5]

Michael Tanner: [00:08:52] Yeah. No. That’s awesome. All right, let’s go to this last one, invasion of the Water Snatchers. [00:08:56][4.2]

Stuart Turley: [00:08:57] You’re gonna love this one. Speaking. We’re having a trifecta. Today is Substack trifecta. This is from Robert Bryce, and he brought it up on his Substack. This is about stealing land for hydrogen in Texas, where they need the water, and they’re going to absolutely obliterate the water in order to get the hydrogen. I mean, you can’t make this up. It’s your county known in the side. Read on on County Road 339. Apex Clean Energy, a subsidiary of Areas Management Corporation, a publicly traded firm based in Los Angeles, would then please go back to Los Angeles and leave Texas alone if the project is known as Big Trail reportedly aims to lease 280,000 acres of land and install also 3200MW of alt energy capacity. This is actually out of the the hydrogen and wind energy as well too. Robert brings us up a great point. Hydrogen is so much more expensive than natural gas. You’re wasting money by doing this and trying to pretend that you’re bringing in a natural gas plant. [00:10:16][78.2]

Michael Tanner: [00:10:17] I mean, I love this quote here from that image. Show me the incentives and I’ll show you the outcome. [00:10:21][3.9]

Stuart Turley: [00:10:21] And then. Great. [00:10:22][0.3]

Michael Tanner: [00:10:22] It’s really great. [00:10:23][0.9]

Stuart Turley: [00:10:24] They’ll produce less energy than a single new barrel of oil in the Permian Basin. [00:10:28][4.5]

Michael Tanner: [00:10:29] I mean, it’s it’s it’s pretty, it’s pretty. It’s pretty insane. That’s a great quote, by the way. [00:10:34][5.7]

Stuart Turley: [00:10:35] Do I know. [00:10:35][0.4]

Michael Tanner: [00:10:36] That? Show me the incentives and I’ll show you the outcome. That’s a Charlie Munger quote. [00:10:39][3.3]

Stuart Turley: [00:10:39] Okay. Love it. But I’ll tell you when you sit back. And Robert Price on his his Substack and Martha Ng went on her Substack, she has referred a lot of people to our Substack. So we love her Substack, and that’ll be in the show notes. So shout out to all three of our Substack authors today. [00:10:57][17.5]

Michael Tanner: [00:10:57] Yeah. No. Absolutely. Well, let’s go ahead and jump over to the broader markets, guys. Before we do that, as always, we got to pay the bills. Thank you for checking us out on the world’s greatest website. energy news beat.com. The best place for all your energy and oil and gas news doing the team do a tremendous job making sure that website stays up to speed. Everything you need to know to be the tip of the spear when it comes to the energy and the oil and gas business. Hit that description below for all links to the timestamps links to the articles. Check us out on Substack. The Energy News beats substack.com, and you can also check out Invest in Oil.energy News beat.com. If you want to get involved in an awesome oil and gas direct working and just projects that we are partnering up with the team over at Pecos Operating. So hit us up. That’s invest in oil dot energy news b.com or hit the link in the description below. [00:11:44][47.0]

Michael Tanner: [00:11:45] I mean pretty market’s again a pretty tough stew. We’re talking you know overall markets were still down S&P 500 down about a quarter of a percent. Or about you know a 10th of a percentage point Nasdaq down about a quarter of a percentage point two year yields actually up a quarter of a percentage point ten year yields basically flat dollar index down about a half a percentage point. Bitcoin up about a four percentage point still under 60,000 58,000. Even right now. Crude oil not a great day. Down another 1.2 or down another 1.6 percentage points at 6920. Brant oil down about a full percentage point 7360. Natural gas down two percentage points $2 and 40 or $0.14. So pretty unbelievable. I mean obviously, you know, you’ve got what’s going on with OPEC. You know a lot of this now comes back to the demand issues. You know obviously Libya coming back online. But again as we covered yesterday that’s all smoke and mirrors from the fact that it was never going to be off line fully in the first spot. So why would they be. Why why would they be I again it’s, it’s, it’s, it’s it’s what concerns and always bugs me a little bit with what a lot of what people talk about when they try to say where prices are going is they pick a narrative that they already have, and they all sit out there and say, well, this is why it’s going down. I say, let’s, let’s actually think for a little while. Let’s use our noggins. Let’s think before we just blather out the answer. I thought the interesting side of the coin. AP estimated crude oil inventory reserves at a 7.4 million barrel draw, and oil prices haven’t changed much. So it goes to show you right, there is a pretty, pretty interesting correlation where the amount of inventories we have is being is is currently less and less correlated with where prices are going. And I saw an interesting post over there from Eric Patel on Twitter. I don’t have it up in front of me, but he basically showed the historical yearly averages of where inventories are and what the oil price was, where the at, what levels those inventories was at, and we were at the lowest level of inventories we have been in five years, and the price is lower than it has been in any of those five years outside if you remove Covid. So obviously the amount of inventories is becoming less and less correlated to where prices are going. [00:13:57][132.7]

Stuart Turley: [00:13:58] Exactly. In fact, Josh Young and David Blackman and I had a podcast where we talked about that and we were kind of like the old pricing matrices is changed. It’s not just supply and demand anymore. [00:14:09][11.3]

Michael Tanner: [00:14:10] No, it’s absolutely true. Other thing that happened today, guys, Crescent energy announced a acquisition in the Eagle for Eagle Ford, a traditional quote unquote bolt on acquisition. They go ahead and swoop up Cheyenne Petroleum’s Eagle for two assets for a cool $168 million. You know, it’s directly offset from its current existing Eagle Ford stuff and also builds upon the acquisition that they made with in buying Silver Bow. I remember that happened at the beginning of the year. Pretty interesting. They decided to use a mosaic or multiple on invested capital as their main, you know, main financial metric to evaluate this deal. They did that at a 2.0, which is interesting. Usually we’ve seen EBITDA being used, but they go ahead and use mosaic or see as the specific thing. You know, it’s a bunch of low decline current producing stuff in Rio at a I’ll, I’ll Tosca, LaSalle and McMullen counties with about 30 quote unquote locations of. I love how they say oil weighted core development locations. There’s also about 5300 net royalty acres available with that, so you get a little bit of both. You know they they’ve got a really nice this this kind of keeps their their balance sheet where it’s at. Cheyenne Petroleum. This is a nugget that good old our friend on Twitter Clint Barnett, figured out he was the one that actually figured out that Cheyenne Petroleum was the one shedding these assets. He also chose to point out, if we can bring this tweet up here that looks like it looks like Cheyenne is also trying to shed its Oklahoma stuff to Valdez. So we’ll see if that goes ahead and takes place. Valdez has been pretty active in the space as of recently. They went ahead recently and just swooped up a Citizen Petroleum that took place at the end of 2023. So M&A you know nice little M&A deal for us a little bit smaller. Again this is a complete acquisition. Get Cheyenne Petroleum who’s based out of Oklahoma City been around since 1973. So good for them for going ahead and getting out of there. But nice to see the M&A market still still hopping and hollering like it did. What else do you have for us? [00:16:08][118.4]

Stuart Turley: [00:16:08] Oh not much. Just buckle. [00:16:09][1.0]

Michael Tanner: [00:16:10] Up. It’s going to be great white guys. Well with that we appreciate you sticking with us this entire week. Who do you got on the show tomorrow? Who you dropping? [00:16:17][7.0]

Stuart Turley: [00:16:18] Oh, it’s going to be savage, Mr. Savage. The love, the savage path. He is a cool cat. I had a great conversation with him, and he’s a energy guy out of Houston, so it’ll be rolling out in the morning. [00:16:33][15.2]

Michael Tanner: [00:16:33] Absolutely. Love that. Love us some good. David Savage, you’ll hear the weekly recap. Then on Saturday we’ll take Sunday off and we’ll be back in the chair come Monday morning. So guys with that have a great week and we appreciate you sticking with us for Stuart Turley I’m Mike Tanner. We’ll see you next week. [00:16:33][0.0][958.9]

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