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OPEC's Worst Nightmare: The Permian Is About to Pump a Lot More

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The map lays out OPEC’s nightmare in graphic form.

An infestation of dots, thousands of them, represent oil wells in the Permian basin of West Texas and a slice of New Mexico. In less than a decade, U.S. companies have drilled 114,000. Many of them would turn a profit even with crude prices as low as $30 a barrel.

OPEC’s bad dream only deepens next year, when Permian producers expect to iron out distribution snags that will add three pipelines and as much as 2 million barrels of oil a day.

“The Permian will continue to grow and OPEC needs to learn to live with it,’’ said Mike Loya, the top executive in the Americas for Vitol Group, the world’s largest independent oil-trading house.

The U.S. energy surge presents OPEC with one of the biggest challenges of its 60-year history. If Saudi Arabia and its allies cut production to keep prices higher, shale will thrive, robbing them of market share. But because the Saudis need higher crude prices to make money than U.S. producers, OPEC can’t afford to let prices fall.

Cartel Squeezed

So the cartel finds itself squeezed between the-sky’s-the-limit U.S. output and softer demand growth. The 15 members, and allies including Russia, Mexico and Kazakhstan, will discuss the possibility of their second retreat from booming American production in three years when they gather Dec. 6 in Vienna.

OPEC helped create the monster that haunts its sleep. After it flooded the market in 2014, oil prices crashed, forcing surviving U.S. shale producers to get leaner so they could thrive even with lower oil prices. As prices recovered, so did drilling.

Now growth is speeding up. In Houston, the U.S. oil capital, shale executives are trying out different superlatives to describe what’s coming. “Tsunami,’’ they call it. A “flooding of Biblical proportions’’ and “onslaught of supply’’ are phrases that get tossed around. Take the hyperbolic industry talk with a pinch of salt, but certainly the American oil industry, particularly in the Permian, has raised a buzz loud enough to keep OPEC awake.

Price Tumble

“You’ve got an awful lot of production that can come in very economically,’’ said Patricia Yarrington, Chevron Corp.’s chief financial officer. “If you think back four or five years ago, when we didn’t really understand what shale could do, the marginal barrel was priced much higher than what we think the marginal barrel is priced today.’’

That shift makes shale resilient to a price tumble. After touching a four-year high in October, West Texas Intermediate, the U.S. benchmark, has fallen by more than 20 percent.

Only a few months ago, the consensus was that the Permian and U.S. oil production more widely was going to hit a plateau this past summer. It would flat-line through the rest of this year and 2019 due to pipeline constraints, only to start growing again -- perhaps -- in early 2020.

If that had happened, Saudi Arabia would’ve had an easier job, most likely avoiding output cuts next year because production losses in Venezuela and sanctions on Iran would have done the trick.

Instead, August saw the largest annual increase in U.S. oil production in 98 years, according to government data. The American energy industry added, in crude and other oil liquids, nearly 3 million barrels, roughly the equivalent of what Kuwait pumps, than it did in the same month last year. Total output of 15.9 million barrels a day was more than Russia or Saudi Arabia.

Rail Cars

The growth was possible because oil traders decided not to be stymied by the dearth of pipelines. They used rail cars and even trucks to ship barrels out of the region. But pipeline companies unexpectedly increased capacity, in part because they added chemicals known as “drag reduction agents’’ to increase flow. A new pipeline came online earlier than anticipated, and with three more expected between August and December next year, production is poised to skyrocket.

“The narrative has shifted significantly,’’ said John Coleman, a Houston-based oil consultant at Wood Mackenzie Ltd. “Six months ago, the market expected the bottleneck to ease in the first quarter of 2020. Now, it expects it in the second to third quarter of 2019.’’
Knowing that more transportation would be available next year, Permian companies are drilling wells but, for now, aren’t fracking many of them. Those wells are becoming a reservoir of ready-to-tap production once the new pipelines -- Gray Oak, Cactus II and Epic -- come online.

“We’re going to see a re-acceleration of well completions in the Permian in the second half of 2019,’’ said Corey Prologo, head of oil trading in Houston at commodity merchant Trafigura Group Ltd. “The pipelines are going to fill up very quickly.’’

The only obstacle for another surge is export capacity, as most of the incremental output will need to ship overseas. With terminals nearly full, Permian barrels could end piling up in the ports of Corpus Christi and Houston.

Transportation Bottlenecks

Even so, few in Houston, or in Midland, Texas, the hub of the Permian region, believe that growth will be anything but gangbusters next year because of the clearing of transportation bottlenecks.

“It will be a series of events throughout 2019 that occur,’’ said Jeff Miller, chief executive officer of Halliburton Co., the world’s biggest provider of fracking services. “But it’d be easy to see, as we finish the year, things being perfectly normal.”

By the end of 2019, total U.S. oil production -- including so-called natural gas liquids used in the petrochemical industry -- is expected to rise to 17.4 million barrels a day, according to the U.S. Energy Information Administration. At that level, American net imports of petroleum will fall in December 2019 to 320,000 barrels a day, the lowest since 1949, when Harry Truman was in the White House. In the oil-trading community, the expectation is that, perhaps for just a single week, the U.S. will become a net oil exporter, something that hasn’t happened for nearly 75 years.

Saudis Concede

Saudi officials concede that the tsunami is coming. OPEC estimates that to balance the market and avoid an increase in oil inventories, it needs to pump about 31.5 million barrels a day next year, or about 1.4 million barrels a day less than what it did in October.

Global oil demand has so far absorbed the extra U.S. crude barrels, limiting the impact on prices. The loss of output from Venezuela and to a lesser extent, Iran, even allowed Saudi Arabia, Russia and a few others to boost production. But for the cartel, U.S. shale remains as intractable as in the past.

In early 2017, Khalid Al-Falih, the Saudi oil minister, told an industry forum that Riyadh has learned the lesson that cutting production “in response to structural shifts is largely ineffective.’’ The kingdom would only make one-time supply adjustments to react to “short-term aberrations,” he said, and otherwise allow “the free market to work.”

Nearly two years later, Al-Falih has lost enough proverbial sleep. He’s about to make a U-turn. He’ll battle what increasingly looks like a structural problem: booming U.S. production.

— With assistance by Kevin Crowley, Catherine Ngai, and Dave Merrill

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MotherHydra
1 hour ago
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Every year like clockwork, I swear this is a thinly-veiled attempt to manipulate Apple's stock price.
Space City, USA
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NASA plans “invasive” review of SpaceX after Musk smoked weed

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NASA Administrator Jim Bridenstine must continue to rely on Dmitry Rogozin of Roscosmos while US commercial crew vehicles remain under development.

Enlarge / NASA Administrator Jim Bridenstine must continue to rely on Dmitry Rogozin of Roscosmos while US commercial crew vehicles remain under development. (credit: Alexei Filippov / TASS via Getty Images)

In addition to spurring problems for the car company Tesla, Elon Musk's puff of marijuana in September will also have consequences for SpaceX. On Tuesday, The Washington Post reported that NASA will conduct a "safety review" of both of its commercial crew companies, SpaceX and Boeing. The review was prompted, sources told the paper, because of recent behavior by Musk, including smoking marijuana on a podcast.

According to William Gerstenmaier, NASA's chief human spaceflight official, the review will be "pretty invasive" and involve interviews with hundreds of employees at various levels of the companies, across multiple worksites. The review will begin next year, and interviews will examine "everything and anything that could impact safety," Gerstenmaier told the Post.

The reviews will come as both SpaceX and Boeing are racing to conduct human test flights of their rockets and spacecraft in mid-2019. Both companies have yet to meet critical milestones, including abort tests and uncrewed test flights, before the first crews fly on SpaceX's Dragon and Boeing's Starliner vehicles.

The "safety culture" reviews are also coming after NASA has worked with SpaceX for 10 years and Boeing for decades. NASA engineers and managers likely already have a deep familiarity with how both companies operate.

"For years, our engineers have worked side by side with NASA, creating a strong partnership and guiding the development of Crew Dragon—one of the safest, most-advanced human spaceflight systems ever built," SpaceX said in a statement. "In addition, SpaceX actively promotes workplace safety, and we are confident that our comprehensive drug-free workforce and workplace programs exceed all applicable contractual requirements. We couldn't be more proud of all that we have already accomplished together with NASA, and we look forward to returning human spaceflight capabilities to the United States."

Safe rockets

In justifying the review, agency officials said that NASA must set an example not just for itself but for its contractors. "If I see something that's inappropriate, the key concern to me is 'What is the culture that led to that inappropriateness and is NASA involved in that?'" NASA administrator Jim Bridenstine told the newspaper. "As an agency, we're not just leading ourselves but our contractors as well. We need to show the American public that when we put an astronaut on a rocket, they'll be safe."

This is an interesting posture to take, as NASA has awarded contracts to SpaceX and Boeing in order to end its dependence on Russian Soyuz rockets—presently the only means by which NASA astronauts can get to the International Space Station.

The last two times NASA has put its astronauts "on a rocket" there have been serious problems. Two months after a launch in June, the crew on the space station found a small leak in the Soyuz's orbital module and patched it. Russian officials have been coy about how the leak was caused, even (falsely) intimating shortly after the leak's discovery that a NASA astronaut may have drilled the hole while in space.

Then, in October, a Soyuz rocket failed in flight, forcing the crew to make an emergency escape in a high-gravity maneuver. Less than two months after that accident, NASA says it is confident in the Soyuz rocket for the next crew launch on December 3.

Although it is not clear how such a review would affect the commercial crew schedule, delays seem the most likely outcome. For one, the companies will have to devote time to complying with the NASA reviewers. And second, if any problems are uncovered, the companies and the space agency will have to negotiate means of fixing them.

One source familiar with NASA's motivations said the agency has grown weary of addressing questions about SpaceX's workplace culture, from the long hours its employees work to Musk's behaviors on social media. "SpaceX is the frat house," this source said. "And NASA is the old white guy across the street yelling at them to 'Get off my lawn.'"

Now, NASA appears to have called city hall to enforce its ordinance laws.

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MotherHydra
2 hours ago
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What a ridiculous waste of resources.
Space City, USA
glenn
17 hours ago
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Yes good call Nasa... let's crap on the company that is dragging you kicking and screaming out of the 70s
Waterloo, Canada
MotherHydra
2 hours ago
Your government hard at work!
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MeFi: FDA grants breakthrough therapy designation to psilocybin

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Psilocybin Could Be Legal for Therapy by 2021: The psychoactive ingredient in magic mushrooms could soon be legal to use in a clinical setting. "For the first time in U.S. history, a psychedelic drug is on the fast track to getting approved for treating depression by the federal government. Late last month, Compass Pathways, a U.K.-based company that researches and develops mental health treatments, announced the FDA granted them what's called a 'breakthrough therapy designation' for their trials into psilocybin, the psychoactive ingredient in psychedelic mushrooms. Researchers who pioneered psychedelic science agree — this is a landmark moment for their field."
Meanwhile, a millionaire couple is threatening to create a magic mushroom monopoly ...

Compass Pathways has set itself up to be the first legal provider of psilocybin, having recently launched a massive clinical study across Europe and North America to test the drug as a treatment for depression. Last month, Compass's psilocybin received "breakthrough therapy designation" from the US Food and Drug Administration (FDA) meaning the study will be hastened through the drug-development process. That puts Compass well ahead of other institutions working in this field—and a recently filed patent application could help the company stay ahead.

Prior to founding Compass, George Goldsmith and Ekaterina Malievskaia, a married couple, did not have experience in psilocybin research or working in the pharmaceutical industry. They've made headway thanks to tens of millions in dollars from investors including Silicon Valley libertarian Peter Thiel and former Wall Street-executive-turned-cryptocurrency-investor Mike Novogratz, along with the expertise and guidance of many long-standing psilocybin researchers. (Neither Thiel nor Novogratz responded to requests for comment.)

But many of those psilocybin experts now regret having helped the couple. Quartz spoke with 9 psilocybin experts who advised Goldsmith and Malievskaia, but today express concerns about the company's motives and aims. These experts worked with Compass in different professional capacities: some had individual contracts, some were invited to attend Compass-hosted conferences or trips, and others worked (and some still do) for psychedelic research organizations that collaborate with Compass. All 9 raised questions about Compass's intentions and professionalism, and worried that the company's rush to bring the drug to market would create risks for patients. "You build this tower in a rush...and before you know it, it's on fire and we can't put it out," says one academic, who requested anonymity for fear of retribution from Compass. Six had opportunities to work further with Compass but turned them down as a result of their concerns.

These experts are further troubled by the company's business structure: Having first registered as a charity, Goldsmith and Malievskaia set up a for-profit corporation working towards the same ends just one year later, and closed their non-profit less than two years after that. And all 9 of these critics charge that Compass Pathways has relied on conventional pharmaceutical-industry tactics that could help them dominate the field, including blocking potential rivals' ability to purchase drugs, filing an application for a manufacturing patent, and requiring contracts that give Compass power over academics' research and are restrictive even by pharmaceutical-industry standards.
Scientists Cook Up Magic Mushrooms' Psychedelic Recipe
Farming or genetically-engineering fungi is difficult, so mass-producing psilocybin with the kind of quality controls demanded by the drug industry has never before been feasible. Now that the pathway and ingredients are known, the process could potentially be applied on an industrial scale. For their study, the researchers engineered bacteria to reproduce some of the steps involved in synthesizing psilocybin as a test of the process. They ended up with a simplified approach to producing the compound that could be applied on a larger scale in the future.
Magic Mushrooms Can Chemically 'Reset' A Depressed Brain
Researchers from Imperial College London studied the effects of psilocybin on 19 individuals who had treatment-resistant depression. The researchers looked at the before and after changes to the individual's brains as they were treated with psilocybin. They gave the individuals 10 mg of psilocybin and then 25 mg one week later. The researchers found that there were decreased depressive symptoms in all 19 individuals a week after the treatments. After 5 weeks, they found that 47% of the individuals met response, which was their criteria of relatively high depressive recovery.

The authors noted that is merely a preliminary study because the group size was very small and more precise data would require a larger pool of individuals to test. The also noted that this was done with individuals who had tried other means of treatments and did not succeed. Despite the reality, Dr. Robin Carhart-Harris, Head of Psychedelic Research at Imperial, who led the study, remains optimistic about the progress of psychedelic research in treating depression. In a statement made at Imperial College London, he said "We have shown for the first time clear changes in brain activity in depressed people treated with psilocybin after failing to respond to conventional treatments."

Magic Mushrooms Are Weirdly Effective at Making Cancer Less Miserable
New research published in the Journal of Psychopharmacology shows that a single dose of mind-altering psilocybin, in conjunction with psychotherapy, reduces depression, anxiety, and other emotional distress in patients with advanced cancer, while increasing feelings of well-being. Importantly, these effects lasted for months.

It's a potent example of how psychedelics could be used to treat various illnesses, and how the medical community's squeamishness about these drugs—not to mention the various government agencies which have banned them—is in need of a serious re-think. Small trials have shown psilocybin's promise in treating alcoholism, opiate addiction, and depression. This latest research offers some of the most compelling evidence yet for the use of psychedelics to treat complex and profound emotional disorders, particularly in patients with life-threatening illnesses.
Microdoses Of Psychedelic Mushrooms Could Help Stimulate Creative Thought
Microdosing—taking fractional doses of psychoactive compounds—has gained popularity recently as a way to lessen anxiety and stimulate creative thought. Some believe that taking small doses of psychedelic substances can enhance a person's cognitive flexibility, allowing them to think of problems from different perspectives and create novel solutions.

Most of these claimed effects of psychedelics are anecdotal and there is a distinct lack of quantitative experimental data on the matter. Psychedelic compounds tend to be either illegal or extremely controlled, so it is hard to run controlled clinical trials to test their effects. Now, in the first study of its kind, a team of scientists based in the Netherlands has run controlled experiments investigating the cognitive effects of ingesting psilocybin, the active component in "magic" mushrooms.

In the study, the researchers investigated the cognitive effects of psilocybin on a group of 36 subjects. They found that taking small doses of mushrooms (~0.37 grams) improved the subjects convergent and divergent thinking process on a number of tasks, allowing them to both more quickly identify a single solution to a task and dream up potential alternative solutions. The results seem to imply that microdoses of psilocybin compounds can give a person more cognitive flexibility and allow them to engage in thought patterns they would otherwise be unlikely to engage in. The researchers' findings can be read in full in the journal Psychopharmacology.
Michael Pollan: What It's Like to Trip on the Most Potent Magic Mushroom: "I felt as though I were communing directly with a plant for the first time."
When at last I arrived at the writing house, I stretched out on the daybed, something I hardly ever took the time to do in all the years when I was working here so industriously. The bookshelves had been emptied, and the place felt abandoned, a little sad. From where I lay, I could see over my toes to the window screen and, past that, to the grid of an arbor that was now densely woven with the twining vines of what had become a venerable old climbing hydrangea, a petiolaris. I had planted the hydrangea decades ago, in hopes of creating just this sort of intricately tangled prospect. Backlit by the late-afternoon sunlight streaming in, its neat, round leaves completely filled the window, which meant you gazed out at the world through the fresh green scrim they formed. It seemed to me these were the most beautiful leaves I had ever seen. It was as if they were emitting their own soft, green glow. And it felt like a kind of privilege to gaze out at the world through their eyes, as it were, as the leaves drank up the last draughts of sunlight, transforming those photons into new matter. A plant's-eye view of the world—it was that, and for real! But the leaves were also looking back at me, fixing me with this utterly benign gaze. I could feel their curiosity and what I was certain was an attitude of utter benevolence toward me and my kind. (Do I need to say that I know how crazy this sounds? I do!)

I felt as though I were communing directly with a plant for the first time and that certain ideas I had long thought about and written about—having to do with the subjectivity of other species and the way they act upon us in ways we're too self-regarding to appreciate—had taken on the flesh of feeling and reality. I looked through the negative spaces formed by the hydrangea leaves to fix my gaze on the swamp maple in the middle of the meadow beyond, and it too was now more alive than I'd ever known a tree to be, infused with some kind of spirit—this one, too, benevolent. The idea that there had ever been a disagreement between matter and spirit seemed risible, and I felt as though whatever it is that usually divides me from the world out there had begun to fall away. Not completely: The battlements of ego had not fallen; this was not what the researchers would deem a "complete" mystical experience, because I retained the sense of an observing "I." But the doors and windows of perception had opened wide, and they were admitting more of the world and its myriad nonhuman personalities than ever before.

Pertinent Pollan post: The Spirit Molecules

Ed Yong: How Mushrooms Became Magic: Did they evolve a powerful hallucinogen to stop insects from getting the munchies?
These genes seem to have originated in fungi that specialize in breaking down decaying wood or animal dung. Both materials are rich in hungry insects that compete with fungi, either by eating them directly or by going after the same nutrients. So perhaps, Slot suggests, fungi first evolved psilocybin to drug these competitors.

His idea makes sense. Psilocybin affects us humans because it fits into receptor molecules that typically respond to serotonin—a brain-signaling chemical. Those receptors are ancient ones that insects also share, so it's likely that psilocybin interferes with their nervous system, too. "We don't have a way to know the subjective experience of an insect," says Slot, and it's hard to say if they trip. But one thing is clear from past experiments: Psilocybin reduces insect appetites.

By evolving the ability to make this chemical, which prevents the munchies in insects, perhaps some fungi triumphed over their competitors, and dominated the delicious worlds of dung and rotting wood. And perhaps other species gained the same powers by taking up the genes for those hallucinogens. It's not clear how they did so. Some scientists think that fungi can occasionally fuse together, giving them a chance to share their DNA, while Slot prefers the idea that in times of stress, fungi can soak up DNA from their environment. Either way, the genes for psilocybin have spread.
More: Magic Mushroom Drug Evolved to Mess with Insect Brains. For that matter, so did most natural recreational drugs

7 mind-bending facts about magic mushrooms: "From ancient shamans (and Santa Claus?) to scientists studying mental health, humans have a long fascination with 'magic' fungi."

Beyond Psilocybin: Mushrooms Have Lots of Cool Compounds Scientists Should Study

In other news: Competitive Psychedelic Users Are Chasing 'Ego Death' and Losing Their Sense of Self: More and more psychonauts are looking for the ultimate high, but some are ruining their minds in the process.
First written about by LSD advocate Timothy Leary in 1964, he defined ego death as "complete transcendence—beyond words, beyond space-time, beyond self. There are no visions, no sense of self, no thoughts. There is only pure awareness and ecstatic freedom."

Fifty years later, there is an ego death arms race of sorts among the kind of people who like to write about their psychedelic experiences online, with hundreds on Reddit and YouTube boasting about their latest transcendence of self. On message-boards like Reddit's r/Psychonaut, a lively hub of 175,000 subscribers, posts about ego death are often and, in many cases, used to assert dominance. "Ego death is the ultimate goal of life," reads one. "I think [it's] a fair statement that if you've experienced ego death that you're a superior psychonaut," reads another.

Bradley, who's experienced ego death "a handful of times," made a thread on r/Psychonaut a couple of months ago called, "Does anyone else feel like there is a massive ego-death circle jerk on this [forum]?"

Mushroom! Mushroom!
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MotherHydra
2 hours ago
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Holy shiy, I never thought this would happen in my lifetime.
Space City, USA
sirshannon
1 day ago
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finally
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How to Accept Your Partner’s Flaws | The Art of Manliness

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Once you recognize that someone’s flaws are just a different manifestation of the same energy in them that you love, these faults become easier to accept.

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MotherHydra
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Space City, USA
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Poorly built iOS Shortcut designed to ruin your life needs testers

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MotherHydra
17 hours ago
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Nice :D
Space City, USA
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Travis Scott Plans to Produce Astroworld-Themed Jewelry

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Travis Scott is a child of the bling bling era. Now that he has established himself, it looks like he will be getting into the jewelry business himself.

According to documents obtained by TMZ on Sunday (Nov. 18), La Flame has filed trademark paperwork to lock down the use of "Astroworld" on "jewelry, clocks, watches, key chains, jewelry cases and even dog chains."

This move is part of Travis' big plan for new lines of merch for his new store he is opening in Houston. Back in September, he filed trademark paperwork to make clothing and accessories under the names S.P.A.C.E., S.P.A.C.E 1991 and S.P.A.C.E 2001.

On Saturday (Nov. 17), Scott gave an update on the store and directed fans to show up during his 2018 Astroworld Festival. "Me @ogchaseb always had this dreaming of opening a store in the city," he wrote on Instagram. "We finally here SPACE 2019. Go by there before the festival 12-5."

Scott's first-annual festival took place at Houston's NRG Park and featured performances from Young Thug, Post Malone, Lil Wayne, Trippie Redd, Rae Sremmurd, Metro Boomin, Gunna, Sheck Wes, Smokepurpp, Tommy Genesis, Paul Wall, Lil Flip and more.

Travis is in the midst of his Astroworld: Wish You Were Here Tour with Trippie Redd, Sheck Wes and Gunna. He recently had to postpone four tour dates in December due to production issues.

See Photos of Travis Scott's Different Looks Over the Years

Frederick M. Brown, Getty Images

Travis Scott (2013)

Frederick M. Brown, Getty Images

Travis Scott (2013)

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MotherHydra
2 days ago
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Nice!
Space City, USA
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