

Deep Basin – Oil Price War and Its Implications - [Invest Like the Best, EP.160]
Mar 11, 2020
Matt Smith and Kobi Platt from Deep Basin Capital join the discussion, bringing sharp insights into the turbulent oil markets. They delve into the recent price war ignited by Russia and Saudi Arabia, exploring its profound impact on U.S. shale producers and broader equity markets. The duo analyzes supply and demand shocks and the challenges facing energy companies. They also discuss the long-term implications for company valuations, stressing the importance of sustainable cash flow over outdated metrics. Get ready for a riveting exploration of the energy sector's future!
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Global Oil Market Overview
- The global oil market is a massive 100 million barrel a day market.
- The US is currently the largest oil producer, surpassing Saudi Arabia and Russia.
Oil Demand Shock
- The coronavirus caused a significant demand shock in the oil market, initially impacting China's refinery runs.
- The decentralized spread of the virus makes assessing the magnitude and duration of the demand shock more difficult.
OPEC+ Breakdown and Price War
- Russia's decision to stop supporting OPEC's production cuts triggered Saudi Arabia to initiate a price war.
- This was unexpected, as Russia hadn't signaled an intention to increase production, just a refusal to cut further.