1/THREAD: Ok MAYBE THIS "CUT" NARRATIVE HAS FARTHER TO RUN...

Having been outspoken on why I didn't think a big KSA/Russia production cut would ever happen, I'm going to take the other side of the argument in this thread. As Keynes said, when the facts change....

#OOTT

2/ First of all, there is NO WAY that Russia and KSA will agree to any serious cut unless there is participation from USA as well. Just ain't gonna happen.

That led most of us to conclude the whole thing was a non-starter. No way to legally force private US companies to join in.

3/ But now the idea has been floated to shut in all Gulf of Mexico offshore production in the name of protecting workers from COVID risk in the confined quarters of offshore oil rigs.

For the record, I have exactly no clue how hard it is to do that or how much it would cost.

4/ But to my thinking the key is this is something they could find legal basis for. In the interest of worker health, no working on offshore rigs due to infection risk is something the U.S. Gov't could get away with claiming was necessary for public health.

5/ Securing cooperation from the owners of those rigs would be easy: Just give them massive federal bailouts and cover all their shut-in and restart expenses with freshly printed government bailout money.

That takes care of big oil and screws the independents. Check.

6/ KSA and Russia won't like it because they want the shale boys to be the onces forced to shut in, but that could be negotiated past.

This could possibly bring about a 6-8mmbpd global cut pact, which would only delay the inevitable storage crisis but could work for a while.

7/ Most importantly, even if doing this is not viable for practical reasons, TALKING ABOUT DOING IT as if it were viable could easily keep the oil price rally going for another week or two before it eventually becomes clear no cut is big enough to avert running out of storage.

8/ I still think prices collapse in the end once stoarge is overwhelmed, but this could delay that process by a couple weeks if not more. That gets us past peak infections in USA, creating a light at end of tunnel for sentiment.

9/ I'm still VERY skeptical that a serious cut deal will actually happen, but there's enough here to keep the jawboning festival going a while longer before gravity sets back in on oil prices.

CRITIQUE WELCOME!