OPEC April Data + The EIA’s DPR

147 thoughts to “OPEC April Data + The EIA’s DPR”

1. When data is called into question, all analysis falls apart. And should.

2. Ron. Would be interested in your views on OPEC 10 year price scenarios.

   I think they are ridiculous. But I am biased.

   1. A trip down memory lane.

      In early 1999, The Economist Magazine published their $5 oil cover story, where they predicted that oil prices would be in the $5 to $10 range for the indefinite future.

      In late 2004, Daniel Yergin predicted that oil prices would be down to a long term index price of $38 by late 2005 (which caused me to suggest that we price oil in “Yergins” with One Yergin = $38).

      Also in 2004, the Saudi oil minister reiterated their support for the OPEC price band of $22 to $28.

      In August, 2009, Michael C. Lynch predicted that oil prices would soon be back to a long term price in the low 30’s.

      In early February of this year, Ed Morse predicted that oil prices could fall as low as the “$20 range for a while.”

      Note that the annual Brent prices approximately doubled from $13 in 1998 to $25 in 2002, and they approximately doubled again from $25 in 2002 to $55 in 2005, and then doubled again, from $55 in 2005 to an average of $110 for 2011 to 2013 inclusive (and remained in the high 90’s in 2014).

      Assuming that Brent averages about $65 for May, the annualized rate of increase in monthly Brent crude oil prices will have been about 90%/year from 1/15 to 5/15.

   2. I suppose you are talking about this headline in the Wall Street Journal:

      “OPEC Sees Oil Price Below $100 a Barrel in the Next Decade”

      I don’t think that is possible. Of course they are talking about current 2015 dollars. But then it cannot get too high above that amount before it starts knocking down the economy. But I have given up on trying to predict the price of oil. Anything could happen,

      1. Hi Ron World GDP at market exchange rates is about $77 trillion US dollars at market exchange rates, if w assume World GDP grows by 2.5%/year on average for the next 10 years, that oil output remains at 77 Mb/d and that if World expenditures on oil cannot go above 4% without a World recession, then currently we can afford $109/b (2015 $), but in 2025 under the above assumptions we will be able to afford $144/b without a recession. My guess is that we will probably be able to afford up to 5 or 6% over time as we transition away from high oil use. In fact we were above the 4% level over the 2012 to 2014 period when oil prices were around $120/b.

         1. Dennis,

            Have you ever given any thought to the Central Banks use of tens of trillions of Dollars in currency swaps and trillions of monetary printing to keep the world from collapsing after the U.S. financial system died in 2008? How do you think this impacted the economy and the ability for working stiffs to afford $100-$120 oil??

            Does anyone here actually think the U.S. Banking sector is in any better shape than it was in 2008?

            I just wanted to know if there was anyone else out there that might think OUTSIDE THE BOX. And, if anyone disagrees, please make those responses to ELMER FUDD…. thanks.

            steve

            1. Hi Steve,

               Yes I take my cues from distinguished economists such as Paul Krugman and Ben Bernanke.So do you think that oil prices will remain below $100/b for the next decade? I agree with Ron that they will not.

               I also don’t think $110/b will lead to a recession, that does not mean that there cannot be a financial crisis. Probably the biggest near term risk is the problem with Greece, perhaps there are others, but at present inflation is not a big risk, so the excess liquidity that some are concerned with is not an issue.

               1. Dennis,

                  I listen to distinguished economists frequently. The economists are brilliant. Unfortunately many of their models do not apply to the economy. They have made the mistake of not following the Baconian method. They have constructed a complicated theory on false hypothesese. That’s why they can only analyse major economic events in the past. Their predictive ability is extremely limited. For example the rule of Hotelling is completely useless in predicting future nonrenewable resource prices, and yet this is the dominant tool used by economists today to study the extraction of nonrenewable resources. Much of their work involves tweaking the model to explain past price changes.

                  Price changes produce economic events. In the contraction phase of oil production, high prices will decrease the market for oil and low prices will decrease oil production. The market for oil can decrease proactively through substitution of other energy sources, decreased energy use, changes in life style, etc. It can also decrease reactively for example by increased poverty (lower living standards), increased mortality, and decreased natality.
                  In my view the fact that oil prices are below a significant proportion of oil production signals the beginning of the contraction phase of oil production. The price will go back up once production decreases enough. When the price goes back up the financial situation of many oil companies will prevent them from ramping up production quickly. This will lead to higher prices and a decline in the market for oil. The feedback cycle responsible for the increase in oil production will go into reverse.

               2. This is about as good an example of the pot calling the kettle black as one can get.

                  Even if every “distinguished economist” in the world is mistaken (a claim not without merit), this would still not make your speculation correct.

               3. Schinzy said:

                  In the contraction phase of oil production, high prices will decrease the market for oil….

                  [T]he fact that oil prices are below a significant proportion of oil production signals the beginning of the contraction phase of oil production.

                  What a stunning example of circular logic.

                  Can you marshall any empirical evidence whatsoever which shows that the high prices of oil over the last few years caused a “decrease” in “the market for oil”?

                  And when I say “empirical evidence,” I’m not referring to the numerous claims made by the MSM that global oil demand has plummeted, such as this one:

                  CNN: “The Story Behind Oil’s Plunge”

               4. Any body acquainted with a few basic facts must accept the argument that oil demand has or is falling off sharply IN ADVANCED ECONOMIES.

                  I have often remarked here about the way I have changed my personal and business habits and strategies to reduce the use of oil. So is just about everybody else except the handful at the top of the heap – due to regulations if nothing else. I know a guy who has a NEW Corvette automobile that gets BETTER gas mileage than a PINTO I once owned.

                  New aircraft, new houses , new machinery of all sorts is far more fuel efficient- and population growth is slowing dramatically as well.

                  If it were not for the so rapid growth in oil use in the developing countries , the call for it would be falling off even more sharply than at present.

                  It could well be that cash flush China is putting uncountable barrels into storage in the expectation of higher prices later- and actually HOLDING BACK on such purchases of oil to be stored so as to help keep the price down NOW.

                  Demand in countries such as GREECE has certainly fallen off a cliff.

                  I don’t hear about ANY country that is growing like a weed economically these days- at least not one big enough to matter to the price of oil.

                  My IMPRESSION is that in this case the MSM have got it right.Demand has probably fallen off enough to account for most of the crash in the price over the last year or so. The rest of the difference is probably due to production being a little higher.The price of oil in the short term at least is extremely inelastic.

                  In the short term I cannot burn much less – or much more. The long term is a different animal. My next car, if I live long enough to need a new one , will get fifty mpg instead of thirty five.

               5. • old farmer mac said:

                  Any body acquainted with a few basic facts must accept the argument that oil demand has or is falling off sharply IN ADVANCED ECONOMIES.

                  Oh really?

                  The growth in oil consumption in the United States may have come to a halt, but is not “falling off sharply.”

                  • old farmer mac said:

                  Demand in countries such as GREECE has certainly fallen off a cliff.

                  So what?

                  Would you agree that oil is a fungible commodity traded on global markets, and it is goblal demand, and not demand in any country which you wish to spotlight, which influences oil price?

                  

               6. old farmer mac,

                  And you rely almost exclusively on your own personal anecdotes to draw your conclusions.

                  

               7. I do not need empirical evidence to show that the market for oil has decreased in order for my argument to be valid. I said that during the contraction phase of oil production low prices will reduce production and high prices will reduce demand. I believe that the current situation, with oil prices below a significant proportion of oil production prices signals the beginning of the contraction phase because I think that current prices will cause a decrease in production. In general, an unregulated market overshoots. Therefore I think that falling production will cause prices to rise and that the future rise in prices will cause the market for oil to decrease. This decrease will in turn cause prices to fall below a significant proportion of production which in turn will cause production to decrease producing a negative feedback cycle. That’s why I think that peak oil is a low price problem, not a high price problem. I do not think peak oil is an investing opportunity. It is an investors nightmare.

                  There is however some empirical evidence that the market for oil has decreased. The first is that the price of oil has dropped. The data says that 140 mb went into storage in the first quarter of 2015. Oil going into storage is not consumed. Storage damps price swings. Otherwise the drop in oil prices would have been more severe. According to BP oil demand fell in the U.S. by 10% between 2005 and 2013, when prices were relatively high.

                  Rune Likvern has done some interesting work relating oil prices, interest rates, and debt over at fractional flow. It could be that Chindia has decided to pay down debt rather than buy oil.

                  OFM has noted that oil production is like a big ship. It was steaming full speed ahead most of the time between 2005 through Q3 2014 to raise production by 4.5% in 9 years. Lets say that consumption equals production. Therefore consumption has risen 4.5% in 9 years. My guess is that decreasing EROEI means that consumption has been essentially flat since 2005. So I call that stagflation. I’ve been waiting for oil prices to fall since 2012, falling oil prices is the first sign of the contraction period of oil production.

                  Of course my timing could be off. Prices could rise fast enough to get the ship steaming full speed ahead soon enough to fend off a fall in production. But eventually the necessary investment required to maintain oil production will not be profitable.

               8. Schinzy says:

                  I do not need empirical evidence to show that the market for oil has decreased in order for my argument to be valid.

                  Of course you don’t need empirical evidence.

                  Your logic is circular, which eliminates the need for empirical evidence.

                  Can you show me where the high prices over the past few years have caused a reduction in global oil demand?

                  

               9. • Schinzy says:

                  According to BP oil demand fell in the U.S. by 10% between 2005 and 2013, when prices were relatively high.

                  Between 2005 and 2013?

                  Aren’t you leaving something out there, like the Great Financial Crisis (GFC)?

                  Do you think the GFC might have had something to do with U.S., and global, oil demand?

                  Now, on the other hand, if you want to argue that high oil prices caused the GFC, that IMHO could be an interesting argument.

                  Also, do you believe oil prices are influenced only by U.S. demand? Or do you believe that oil is a fungible commodity traded on global markets, and it is global demand which influences oil prices?

                  • Schinzy says:

                  My guess is that decreasing EROEI means that consumption has been essentially flat since 2005.

                  So are you saying that all the increased oil production over the past 9 years went back into drilling for more oil? Or in other words, are you saying that the EROEI for shale oil is 1:1?

                  I’ve seen some studies that put EROEI for non-conventional oil pretty low, maybe 4:1 or 5:1. But 1:0?

                  In the world I operate in, if actual empirical studies exist, “My guess” doesn’t cut it.

               10. @ Glen Stehle

                   If you think my argument is circular, then you have not understood it.

                   You’re probably right about decreasing EROEI not completely explaining the increase in oil consumption between 2005 and 2014. If global EROEI in 2005 were 17, then global EROEI would have to be 10 in 2014 to make consumption of oil flat between the two dates. Murphy estimated EROEI for oil production in the States at 17 in 2011. I know of no estimates for 2005 nor for 2014.

               11. hmmm, I would think oil purchased and put into storage would count as being “consumed”, just not refined or resold.

            2. Very few, outside the US and Europe at least, doubt that the global banking system is a criminal enterprise.

               Cristina Fernández, the president of Argentina, was unpolitic enough to state this directly to Obama’s face last month at the Summit of the Americas:

               https://www.youtube.com/watch?v=UYwoMO1KCxI

               This is why the BRICS are working diligently to establish an alternative banking system as we speak.

               This is why Russia, Venezuela, Cuba, Argentina and Brazil have found themselves a new banker: China.

               But despite it all, the demand for petroleum just keeps rising.

               The IEA reports that global oil consumption rose 1.3 mb/d y-o-y in 1Q15.

               In no calendar quarter during the last four years has there been a y-o-y decrease in global oil consumption.

               Speculators, mostly in China, bought another 140 million barrels of oil in 1Q15 and put it into storage.

               A great many people (e.g., Wolf Richter, Gail Tverberg, CNN, Bloomberg, etc.) have evidently all imbibed the same Kool Aid, arguing that demand is weak or even on the wane, an empirical claim which is obviously false.

               I don’t know if these folks are talking their book or are just in love with their own theory and its imagined ability to peer into the future. But as Eric Hoffer warned: “A preoccupation with the future not only prevents us from seeing the present as it is but often prompts us to rearrange the past.”

               

               1. Good analysis.

               2. This is why the BRICS are working diligently to establish an alternative banking system as we speak.

                  Are you joking?! The Brics future banking system is just the same old shit with different flies… Presidenta Cristina talks a good talk but she is part of the past, not the future. As for China they just want to consolidate power but they won’t be able to stop a growing revolution!

                  People, especially in the BRICS, but all over the world as well, are creating totally alternate systems that bypass traditional banks and government restrictions!

                  Case in point:
                  http://goo.gl/go1NIY

                  For Castiglione, however, money-changing means converting pesos and dollars into Bitcoin, a virtual currency, and vice versa.

                  That afternoon, a plump 48-year-old musician was one of several customers to drop by the rented room. A German customer had paid the musician in Bitcoin for some freelance compositions, and the musician needed to turn them into dollars. Castiglione joked about the corruption of Argentine politics as he peeled off five $100 bills, which he was trading for a little more than 1.5 Bitcoins, and gave them to his client. The musician did not hand over anything in return; before showing up, he had transferred the Bitcoins — in essence, digital tokens that exist only as entries in a digital ledger — from his Bitcoin address to Castiglione’s. Had the German client instead sent euros to a bank in Argentina, the musician would have been required to fill out a form to receive payment and, as a result of the country’s currency controls, sacrificed roughly 30 percent of his earnings to change his euros into pesos. Bitcoin makes it easier to move money the other way too. The day before, the owner of a small manufacturing company bought $20,000 worth of Bitcoin from Castiglione in order to get his money to the United States, where he needed to pay a vendor, a transaction far easier and less expensive than moving funds through Argentine banks.

                  The last client to visit the office that Friday was Alberto Vega, a stout 37-year-old in a neatly cut suit who heads the Argentine offices of the American Bitcoin company BitPay, whose technology enables merchants to accept Bitcoin payments. Like other BitPay employees — there is a staff of six in Buenos Aires — Vega receives his entire salary in Bitcoin and lives outside the traditional financial system. He orders what he can from websites that accept Bitcoin and goes to Castiglione when he needs cash. On this occasion, he needed 10,000 pesos to pay a roofer who was working on his house.

                  Commerce of this sort has proved useful enough to Argentines that Castiglione has made a living buying and selling Bitcoin for the last year and a half. “We are trying to give a service,” he said.

               3. Fred Magyar says:

                  The Brics future banking system is just the same old shit with different flies…

                  This is certainly what the Obama administration would have us believe. It’s all part of what Art Berman calls the “beautiful story” being spun by the administration and other American exceptionalists.

                  But there are many, and especially those who live outside the insularity of the United States or within the borders of its NATO allies, who believe something totally different is happening:

                  The spring meetings of the International Monetary Fund and World Bank have filled Washington with motorcades and traffic jams and loaded the schedules of President Obama and Treasury Secretary Jacob J. Lew. But they have also highlighted what some in Washington and around the world see as a United States government…ceding the global economic stage it built at the end of World War II and has largely directed ever since.

                  “It’s almost handing over legitimacy to the rising powers,” Arvind Subramanian, the chief economic adviser to the government of India, said of the United States in an interview on Friday. “People can’t be too public about these things, but I would argue this is the single most important issue of these spring meetings.”

                  Other officials attending the meetings this week, speaking on the condition of anonymity, agreed that the role of the United States around the world was at the top of their concerns.

                  Washington’s retreat is not so much by intent, Mr. Subramanian said, but a result of dysfunction and a lack of resources to project economic power the way it once did. Because of tight budgets and competing financial demands, the United States is less able to maintain its economic power, and because of political infighting, it has been unable to formally share it either.

                  Experts say that is giving rise to a more chaotic global shift, especially toward China…

                  NY Times: “At Global Economic Gathering, U.S. Primacy Is Seen as Ebbing”

                  Here is the slide from Art Berman’s presentation where he delineates the “beautiful story” being proselytized by the Obama administration:

                  http://i.imgur.com/4OoyMKl.png

               4. This is certainly what the Obama administration would have us believe. It’s all part of what Art Berman calls the “beautiful story” being spun by the administration and other American exceptionalists.

                  Ok, if you say so, sure why not?

                  As for me, I really don’t have the slightest clue what the Obama administration would like me to believe. First I don’t even have a TV. Second I couldn’t care less. I follow a different drummer.

                  Though I do spend a lot of time in at least one of the BRICS as I’m trying to set up a business between that country and the US, so I can relate to the article I posted.

                  Banking as we know it today in Europe, the US, in Asia and in the BRICS is pretty much a criminal enterprise. There is nothing that I have seen that puts the BRICS aspirations for an alternative banking system in a more moral or ethical position than the bankers in the US or Europe.

                  To me it’s still all the same shit, different flies. YMMV!

               5. And you believe the techno-utopians have a better alternative?

                  I don’t think so.

               6. .

                  

               7. And you believe the techno-utopians have a better alternative?

                  I don’t believe anything, Bro! I just try to make things happen as best I can. The status quo ain’t working for a lot of people right now, that I know first hand. And that includes most of the citizens of the BRICS.

               8. Hi Glenn,

                  A problem with the chart you posted is that it is done in terms of barrels rather than barrels of oil equivalent. Probably the simplest way to present this data is in terms of energy units such as Joules or barrels of oil equivalent. The LPG and “other” categories often contain low energy NGL and ethanol which need to be reduced by about 65% per barrel to make them equivalent to the average barrel of crude oil. Chart below showing BP and EIA data in millions barrels of oil equivalent per day from 1997 to 2013. Compare to EIA total liquids in 2013 at 91.9 MMb/d and 93 MMb/d in 2014. So the typical total liquids reported in IEA, EIA, and OPEC data overstates actual energy in 2013 by about 10% (92 MMb/d vs 84 MMboe/d).

                  

               9. Are you arguing that the “barrels of oil equivalent” has not grown significanty over the past two or three years?

                  If not, I don’t get your point.

                  Furthermore, I was under the impression that almost all the growth in total liquids production over the past two or three years has been from shale oil, which, even though it is a high gravity crude oil, is not condensate or NGLs.

               10. Hi Glenn,

                   This reply is a long way down thread from your remark about my relying on personal experience and anecdote to make my case. I do that to make the impact more forceful because the typical reader is more likely to connect with his own personal experience this way.

                   Most of us drive- and if we are older we remember just how much gasoline older cars and trucks used compared to newer ones. We remember when reminded that we or our neighbor got rid of the oil furnace and put in a heat pump.

                   Now as to whether demand is falling off a cliff, that expression is somewhat rhetorical , with per capita consumption falling. And total consumption is FAR less than it would be had we kept on using at the old per capita rates.

                   If you are interested you can google the fuel efficiency of new commercial aircraft or construction machinery. Todays full sized pickup trucks with big engines get BETTER economy than the midsize ones I used to drive got.

                   I maintain my 25 year old Chevy meticulously since I am hoping to make it last as long as I do . It burns almost twice as much gasoline as a similar late model Chevy burns diesel now , at the same speed with the same load. The new gasoline model Chevy gets fifty percent better economy. I find it necessary to know in great detail about this sort of thing being a small business man who uses a truck quite a bit.I would of course find it advantageous to trade off my old truck except that in recent years I have been cutting back and am now retired. I can buy all the gasoline I need for the truck for a very minor fraction of the payment on a new one.

                   It is simply not possible to justify the purchase of a new truck on the basis of fuel economy unless you drive it at least fifty thousand miles or more a year, year after year.

                   Ask anybody but be sure he is talking gallons per week instead of dollars per week – anybody who drives a lot and is older.

                   The overall trend is what counts, not minor year to year variations.

            3. My brother works in banquets at a Loews hotel that caters to business groups and weddings.

               He not only sees it with his eyes, but has the hard numbers that say businesses are not only holding more conferences, but are spending more (purchasing more expensive contract options) than even before the recession.

               Same with weddings. More than ever before, and higher tier option choices than before.

               After the recession both nosedived. 2009-2012 were ghost town years. 2013 better; 2014 great; 2015 he says it is too busy. They’re doing so much business they can’t handle it, which generally means hiring more hands.

               It’s slightly anecdotal being that it is one hotel, in one city (although, the weddings and business groups are almost never from in state), but he also attends the EC conferences for corporate and this story is repeated at every Loews hotel.

               I find it to be a great barometer because it measures willingness to spend excess capital by both individuals (weddings) and businesses (conferences).

               Doesn’t matter if it was the Fed “manipulating” interest rates (I used quotes because the Feds sole duty is to change interest rates – conventionally done by directly raising or lowering them). The economy IS doing better.

               It’s obviously more than just record low rates. It is the slow adjustment -by means of efficiency gains and modified behavior – that has allowed the micro and macro economies to adjust to, and blunt, the pain of high oil prices. Even if interest rates rise (as they currently are) those efficiency gains and new learned behaviors (like Amazon shopping at home instead of driving to stores) will not revert backward. They are permanent and make $80 oil less economic damaging than it was 7 years ago.

               That being said, if supply doesn’t budge as demand rises, then these efficiency gains simply mean the next price spike will go to $200 instead of $147. Different price same results, same fate. If there isn’t enough to go around prices will spike until that demand is destroyed.

               1. Brian,

                  “The Economy is doing better.” That’s a good one. You provided some anecdotal data from your brother who works at a hotel. I hear lots of things from lots of people. One fella in my industry I spoke with earlier today, works right outside DC, told me that his younger friends are receiving calls and letters to lend them money for a down payment to purchase a house.

                  If you think sub-prime auto and home loans are indicators of an ECONOMY that is doing better… than maybe I don’t understand the fundamentals of economics.

                  steve

               2. http://www.statista.com/statistics/200161/us-annual-accomodation-and-lodging-occupancy-rate/

                  http://www.statista.com/statistics/208133/us-hotel-revenue-per-available-room-by-month/

                  http://research.stlouisfed.org/fred2/graph/fredgraph.png?g=1bdf

                  https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=1bdg

                  http://research.stlouisfed.org/fred2/graph/fredgraph.png?g=1aTt

                  http://research.stlouisfed.org/fred2/graph/fredgraph.png?g=1bdh

                  http://research.stlouisfed.org/fred2/graph/fredgraph.png?g=1bdi

                  The US economy is significantly weaker than is generally assumed or admitted by economists (who aren’t paid to tell us), decelerating to the historical stall speed since Q4 2014.

                  Moreover, US Treasury payroll withholding receipts, real per capita retail sales, disposable personal income and consumption expenditures (PCE) less health care spending, and profits in the aggregate imply that US employment is currently overstated.

               3. To be fair I did explicitly state that it is anecdotal.

                  I will also repeat that Loews hotels are spread around the country and every one is sharing that their experience is the same. So not only is this over 20 data points scattered around the U.S. but the demand they are receiving is from individuals and businesses scattered throughout an even broader range.

                  Is the economy doing better in Houston or North Dakota? I highly doubt it.

                  That is why this anecdotal info is actually useful though. Banquet events don’t cater to a specific sector; they cater to every sector and thus give guidance on a broad scale.

               4. Yes there’s no doubt there are more people than ever before, more energy than ever before, more spending than ever before.

                  But, everything has to do with what you think happens next. What you just said about business activity was even truer in 1999 and 2007.

                  This is it, this is the 3rd and final cycle before the reality of peak oil and decline sets in.

                  Having been burned twice, I have learned my lesson, but giving people the benefit of the doubt, it will probably take a 3rd time for most people. Which is why TPTB are all in, this is it, this is the big final blowoff.

               5. http://www.msn.com/en-us/money/markets/the-trucking-business-is-delivering-chilling-news-about-the-economy/ar-BBjMdjT?ocid=iehp
                  “In reality, over-the-road shipping volumes fell 5% in March from the prior year. It seemed like a fluke. But in April, according to the just released Cass Freight Index, shipping volumes fell again, this time by 2.5%. The index for shipping expenditures fell 3.5% in March and 4.7% in April.”

                  “When the People’s Bank of China spoke of “big downward pressure,” it wasn’t kidding.”

3. “Rarely if ever had a US agency charged with collecting data made a miscue of this magnitude. The EIA administrator should be dismissed immediately for gross incompetency”.

   Hmmm…I can think of at least one other miscue of this magnitude – by the same agency, too.

   From Bloomberg one year ago –

   “The Monterey Shale is now estimated to hold 600 million barrels of technically recoverable oil, down from a 2012 projection of 13.7 billion barrels, John Staub, a liquid fuels analyst for the EIA, said in a phone interview.”

   http://www.bloomberg.com/news/articles/2014-05-21/eia-cuts-monterey-shale-estimates-on-extraction-challenges-1-

   It’s past time for an EIA house cleaning….

   1. Yeah, they are pretty lost in space. I really don’t think it is quite 1.5 million, yet. However, it could be as we are in to May, now. Their main area of weakness seems to be that they can’t adjust close to what Texas actually produces. They were 400k barrels over in December to Texas actual production, and it has dipped since. From their posts regarding Texas production, they seem to indicate that Texas production numbers are not to be trusted, as Texas can keep posting to their records for up to two years. Which is really not a significant factor, unless the production numbers vary greatly from the Texas revised estimates, which they don’t. It appears there is some kind of a emotional disturbance on the part of the EIA to accept reality, probably based upon someone’s emotional balance in the EIA. Someone from Texas did not be nice to them, so nothing from Texas is to be accepted. My guess. So the country suffers.

      1. Hi Guy,

         The EIA tries to estimate Texas production because the RRC does not keep the entire production data query (PDQ) database up to date, for whatever reason the data takes some time to get from the producers to being entered into the system that reports statewide data. If you look at the “final production estimate from a couple of years ago and compare it the the PDQ today you will find that the original estimate by Texas is always very low. For Feb 2013 it was 50,758 kb of crude see link below:

         http://www.rrc.state.tx.us/all-news/042613b/

         Currently it is 54,639 kb from the PDQ, so the original “final estimate” was 3900 kb too low or about 7.7% too low. An EIA estimate from August 2013 for Feb 2013 was only about 1% too high.

         

   2. Highly paid incompetent people? It may be that the individual analysts have gotten orders to distort the truth in order not to create panic in the population. Look at the 2004 prediction. $16.49/barrel in 2025. The EIA makes it as a sport to get the prediction down to the last Cent. Idiotic to do such a thing and lose the last bit of credibility they have. Hold it, its not true! Traders use these data as gospel.
      EIA Oil price projection in 2004:
      http://www.worldoil.com/August-2007-Systematic-bias-in-EIA-oil-price-forecasts-Concerns-and-consequences.html
      “..Crude oil prices are determined largely in an international marketplace by the balance between production in OPEC and non-OPEC nations and demand. In the reference case, the average lower 48 crude oil price is projected to be $23.61 per barrel in 2010 and $26.72 per barrel in 2025 (Figure 93). In the high world oil price case, the lower 48 crude oil price increases to $32.80 per barrel in 2010 and $34.90 per barrel in 2025. In the low world oil price case, the lower 48 price generally declines to $16.36 per barrel in 2010, then rises to $16.49 per barrel in 2025…”

      1. Too many people with the secret. That never flies.

      2. Hi nNgass,

         Oil prices are very hard to predict. The EIA in their 2013 AEO had a low price scenario which I though at the time was ridiculous (only a true cornie would expect prices to ever fall to that level). Boy was I wrong ( the low price was about $70/b). Reference, low and high oil price scenarioes from the EIA 2013 Annual Energy Outlook below in May 2013$.

         

4. The rift at Wafra is between Chevron and Kuwait, I know a few guys that work there for them. They stopped renewing visas for expats last year.

   1. MBP

      I think I saw a report yesterday indicating the recently-removed Crown Prince of KSA is now under house arrest???
      Middle East really startin’ to hot up.

5. The DPR numbers for the Eagle Ford are way off. My estimate has Eagle Ford output at about 1400 kb/d about 300 kb/d lower than the DPR. This is based on Texas RRC percentage of EF C+C to statewide C+C multiplied by Dean’s estimate from Sept to Jan, and EIA data before Sept 2014.

   

   1. That would certainly support Philip Verleger’s recent analysis, linked above:

      US overestimates oil production – top analyst says

      1. Hi Jeff,

         My impression is that he was complaining about the weekly estimates. These are not as bad as he claims unless the monthly estimates are way off, at least through Feb 2015 the estimates are pretty good. I think that if we use the 4 week average weekly data nearest to the end of the month and compare it with the EIA’s monthly data, that the EIA 4 week avg estimates since 2012 have been low more often than high.

         About 21 months are low and 3 months are high over this period from Jan 2012 to Feb 2015, if the EIA’s monthly estimates are correct

         

         1. FYI, Verleger issued a correction, which I emailed to Ron.

            1. Can it be shared with the rest of us?

               1. You have to know the double secret password.

                  Actually, it looks like the original and the correction are in the form of a copyrighted newsletter.

                  But I found some info on his website:

                  http://www.pkverlegerllc.com/publications/notes-at-the-margin/the-data-must-really-be-wrong-may-12-2015-1534/

                  In any case, a continuing reminder that what the EIA calls US “Crude oil” production and the stuff in inventory, actual Crude + Condensate (C+C) are different from what is being priced, i.e., actual crude oil with an API gravity in the high 30’s (Brent & WTI).

                  Let’s stipulate that refineries, in aggregate, have a Minimum Distillate Output (MDO), in order to meet market demand for distillates.

                  Once they hit the MDO, they presumably could not take more very light crude and condensate inputs, because it would drop them below MDO. My thesis is that US refineries, in late 2014, hit their aggregate MDO, as documented in the Reuters article that I have frequently re-posted (about US refiners increasingly refusing to buy more heavy crude + condensate blends).

                  As I have frequently pointed out, the EIA’s own projection showed the US 40 API and lower crude oil production only increased by about 0.3 MMBPD from 2011 to 2014.

               2. A point I tried to make last Ronpost from a tablet and didn’t get back to edit.

                  Saving gasoline doesn’t mean there is more diesel and kerosene. Saving gasoline is supposed to reduce “oil consumption”, but you have to refine that stuff to get diesel and kerosene in sufficient quantities to feed people, regardless of how much gasoline you burn. Saving gasoline may not do anything at all for oil consumption if you MUST have diesel and kerosene in XXX quantities.

                  So it’s better to just burn the gasoline or you’ll run out of places to put it.

                  And the corollary is your presumption, better you not have shale “oil”. The diesel and kerosene (jet fuel) are compelling. They feed people and ship stuff.

               3. Refineries can “tune” their output to some extent between different outputs.

                  Transportation (especially personal) can run on gasoline or diesel. Europeans tend to use diesel for personal transportation – they can reduce that, and use more gasoline and electricity.

               4. You can’t tune diesel to be present in the liquid when it is not.

               5. It might help to have some input from people who actually have some familiarity with refining and chemical engineering. Anyone?

                  Oil can be easily distilled or cracked into some standard products, but in the end we’re talking about hydrocarbons, which can be rearranged reasonably readily. It may take some investment and engineering, but it can be done.

                  And, of course, both Europeans and freight can be moved by gasoline.

               6. Dood, why exactly do you think there are distillate yield charts that differ from oil location to oil location? And more particularly by API degrees.

               7. “Diésel” isn’t present in crude oil as a single product. It’s a collection of molecules. Refineries can change their product slate to maximize profits, if diesel is seen to make more profits they will move to make diesel.

                  But there’s a countermove, an excess in gasoline supplies leads to lower prices, and this moves the consumer to purchase gasoline engine vehicles.

                  Over the long term we can take oil, condensate, coal, methane, propane, old couches, asphalt, or whatever has carbon molecules and make syndiesel.

               8. Reply to NickG & Fernando down the way:

                  http://peakoilbarrel.com/opec-april-data-the-eias-dpr/comment-page-1/#comment-516691

            2. I have removed the article from the post.

               It turns out that EIA is underestimating US oil output. Figure 1 (page 2) shows the volume reported by EIA as well as the volume derived from inventory data, refinery runs, imports, and exports. The lines in the updated graph are closer. The details show the average differences in thousand barrels per day as follows.

               

   2. The DPR has Permian Basin output at 1970 kb/d in February, I do not know how much Permian output is in New Mexico, but this is 470 kb/d higher than Texas Permian basin output using the same method as the Eagle Ford above to estimate Permian basin output in TX (a combimation of Twxas RRC data, EIA data and Dean’s estimate from Sept 2014 to Feb 2015 for TX C+C.

      I checked New Mexico’s output from the EIA and it is 378 kb/d in Feb 2015 and TX Permian basin was 1500 kb/d in Feb 2015, so the DPR is high by at least 90 kb/d if we assume all New Mexico C+C is from the Permian basin.

      Chart is for the Texas Permian basin only

      

6. Verleger notes that “Economists at the FED found a flaw in our calculations” [of EIA data wrong].
   The sign was wrong – so the EIA is underestimating oil output,
   by a few hundred thousand bpd,
   NOT over by 1.6 million bpd.

   http://www.pkverlegerllc.com/publications/notes-at-the-margin/the-data-must-really-be-wrong-may-12-2015-1534/

   PDFs links for each “Notes at the Margin”,
   you can follow the chain if you wish.

   n.b. Verleger thinks (as of 2013) US Energy Independence is inevitable.
   http://www.pkverlegerllc.com/assets/documents/TIEF13EnergyIndependenceSymp.pdf

   1. Independence is a certainty. America won the global energy lottery.

      That sounds a whole lot like the “beautiful story” which Art Berman speaks of here.

      1. Berman is a great presenter. I love his “American story”.
         The only way for the US to be energy independent is to go on a crash program of efficiency and reduction in oil use. Just reducing oil use will make the US energy independent for a period of time.
         It’s all quite possible but the US and much of the world stopped making sense and went off to the land of Oz which turned out to be the land of the Red Queen. Even with all the price signals, economies faltering and failing, huge portions of the US being taken over to produce energy, huge debts – all this is mostly being ignored or ban-aided to cover the wound.
         So when the mental insanity reverses to some sense, people will be making a mad dash to get away from oil.

         1. Nothing else can do 350 horsepower tractors.

            1. Won’t need them.

               1. Because . . . 8000 acres can be plowed before plowing season expires with . . . what?

               2. You would never believe me if I told you. Let the future unfold on that one.
                  So cover your 8000 acres with PV and/or wind towers, you will make a lot more money than with growing food and no real work to get it.

               3. So people no longer need to eat?

                  What?!?!?!

               4. Wet One, you really think 8000 acres will make any difference in the amount of food we get? With 50 percent of our food being tossed in the garbage (not even being recycled into soil), why have so many heavily mechanized farms. Most of them don’t grow food that is good for us anyway. Foods that make us fat and sick is what they grow. So stop worrying about a heavily subsidized, pesticide and herbicide ridden, dysfunctional farming system. It needs as much of a make-over as the current energy system.

            2. Watcher,

               Don’t get too hung up on diesel. If the demand supply balance gets too out of balance, then there are alternatives. Gasoline can be used in diesel engines. Maybe not 100% but using diesel as an ignition source and gasoline for power. Just like compression nat gas engines work. Or simply use Naptha in a compression ignition engine. There alsorts of things available if diesel gets too expensive compared to gasoline.

               http://www.greencarcongress.com/2014/05/20140502-kalghatgi.html

               http://www.greencarcongress.com/2010/05/dieseline-20100520.html

               http://www.zdnet.com/article/gas-powered-diesel-engine-may-double-fuel-efficiency/

               http://www.wired.com/2010/09/making-diesel-engines-burn-gasoline/

               Plenty of technology waiting in the wings. so we will not starve.

               1. What does expensive mean? Why would it get expensive? Besides the fact the Fed can determine “expense”, there is no issue of it being scarce.

                  The point is reducing gasoline consumption doesn’t increase diesel supply.

               2. Watcher,

                  if diesel gets too expensive compared to gasoline.

                  Expensive is defined by, when it is worthwhile to do something else, rather doing the same thing as before. So by either price differential or supply constraints would be the time when things would change, but we can’t leave our government regulation as well.

7. Who doesn’t believe energy independence is inevitable? I thought ever one knew that. Now as far as how much energy we are talking about, that is another matter. Could be less than we hope it will!

   1. Sure. An EV uses 20-25% as many joules per kilometer (or mile).

      1. Hi Nick G,

         This is off topic. You mentioned in a comment elsewhere that you thought coal supplies were plentiful. There are many analysts that disagree, but the best analysis is Steve Mohr’s thesis, just read the chapter on coal and the supply and demand model that he uses. He makes no assumption of a declining price of coal, it is a depletion model where available reserves will require higher prices to meet demand (though fossil fuel prices are not explicit in the model. Mohr’s model forecasts a peak in 2020 for most of his models with one “high URR” model predicting 2030 for a peak in coal.

         Link to thesis below:

         http://ogma.newcastle.edu.au:8080/vital/access/manager/Repository/uon:6530

         From the abstract:

         Based on the assumed URR values, it is predicted that global fossil fuel production will peak before 2030.

         1. Dennis,

            This is a complex topic, so we’ll have to take it a step at a time, probably.

            1st, did you read the links I provided last time?

            2nd, here are some thoughts:

            there are three main problems with this kind of analysis.

            First, They don’t include price as an important factor. As best I can tell, that’s the case for Mohr’s analysis as well. For instance, the US has roughly 200B tons of coal in the Illinois basin, which are currently not being used because they’re slightly more expensive. If other sources of coal were to increase in price, this resource would become competitive.

            Second, they use historical production curves. These are misleading. For instance, the Illinois basin’s production is now falling.

            Third, they use resource and reserve estimates that were not designed for this purpose. For example, US reserves resource estimates do not include anything significant for Alaska, because production costs would be significantly higher there. On the other hand preliminary estimates by geologists in Alaska suggest there are somewhere between 200 billion and 5 trillion tons of coal in Alaska. These would become competitive, if coal prices were to rise substantially.

            There are other areas, which are similarly underestimated, like Western Canada and the UK, Australia, etc.

            1. Hi Nick,

               There are also coal supplies on the moon, I hear. 🙂

               No I did not look at the links you provided, because you stated up front that Mohr’s analysis does not consider demand, which it explicitly does.

               Reserves in general consider price. Do you think that coal prices are likely to rise to a level that makes the exploitation of coal in Alaska feasible before 2100? I do not, so these resources can be ignored. Also resources below a reasonable depth can also be safely ignored.

               Just as an aside the University of Newcastle is near one of the largest coal mining areas of Australia. My suspician is that Steve Mohr had access to quite a lot of industry resources in Australia along with numerous professors in his engineering department with thorough familiarity with the coal industry.

               Price is implicitly included in resource estimates of coal by excluding those resources which will never be mined. The peak of any resource includes both considerations of supply and demand. The peak in coal output will be the maximum amount of coal that can be produced and sold at a price which is profitable for coal mining companies. The peak in fossil fuels will be 2025+/-5 years, where the peak is the energy in tonnes of oil equivalent of oil, coal, and natural gas added together.
               The order will be oil, coal, and then natural gas in 2018, 2020, and 2035 respectively.

               

               1. Dennis, last time I was in Alaska they had a coal loading station at Seward. You can pull up a satellite view here:

                  60 deg 06 min 54.66 sec North Lat
                  149 deg 25 min 47.04 sec West Long

                  The coal comes by train from Fairbanks. One of the natives told me it goes as far as Chile.

                  I´ve sketched a Coal to Oil facility to be built due E-NE of Sarah Palin´s house in Wasilla. It would take the coal from Fairbanks and convert it to syncrude, using natural gas from the new pipeline for fuel and hydrogen. It´s an environmentally friendly solution.

               2. you stated up front that Mohr’s analysis does not consider demand, which it explicitly does.

                  Sigh. Remember I said this is a long and complex discussion? This is an example.

                  I meant that he doesn’t include a price-based supply curve. This is a basic problem with a HL approach. It’s why Hubbert’s famous forecasts of a 1970’s US peak, and a 2000 world peak, have been disproved: prices rose, and supply rose until we were no longer supply constrained and prices fell.

                  This is much worse for coal, which behaves very differently from oil, and isn’t appropriate for an HL approach.

                  Reserves in general consider price. Do you think that coal prices are likely to rise to a level that makes the exploitation of coal in Alaska feasible before 2100?

                  No, because demand is falling, especially in the US.

                  I do not, so these resources can be ignored.

                  Not if you want to make the argument that supplies are limited.

                  Price is implicitly included in resource estimates of coal by excluding those resources which will never be mined.

                  “Never” is much too strong. That’s why I said that reserve numbers were never meant for this kind of analysis.

                  ——————————————————————————–

                  Here’s what Heinberg has to say: “if Montana and Illinois can resolve their production blockages, or the nation becomes so desperate for energy supplies that environmental concerns are simply swept away, then the peak will come somewhat later, while the decline will be longer, slower, and probably far dirtier.”. The Montana “production blockages” he talks about are relatively trivial, and Illinois doesn’t really have them. The pollution he refers to is CO2 and sulfur – the sulfur costs about 2 cents/KWH to scrub, and the CO2 might cost out at $80/ton of CO2, which IIRC would add about $30/ton of coal, should we choose to internalize this cost.

                  The Illinois Basin has almost 200 gigatons of coal, but it simply couldn’t compete with Powder River coal with a 2 cent premium for sulfur scrubbing – it’s as simple as that. UK and German coal became a bit more expensive, and they couldn’t compete with cheap oil.

                  The same general rule applies to US, UK and European coal: only under Business As Usual is coal declining – people who say otherwise are misinterpreting the data. I discussed this at length with one the often-quoted authors on this subject, David Rutledge, and we came reasonably close to some kind of agreement on this. If there are serious energy shortages, the old reserve numbers will apply, for better or worse.

                  So, a doubling in coal prices would substantially increase recoverable coal reserves. Now, “recoverable” is tricky: the normal distinction used by the USGS is “economically recoverable” – that includes economic assumptions, and Illinois coal (and much other coal in the world), at a slightly higher cost as discussed above, is currently uneconomic. But, that’s under Business As Usual – if we have a true energy scarcity, Illinois coal will very, very quickly become economic.

                  Another example:A recent report by the US Geological Survey looks at the recoverable reserves of the Gilette field in Wyoming, currently the largest producer in the US.

                  It found that at current low prices, about $10/ton, that only about 6% of the coal in the field could be economically produced.

                  On the other hand, if the minemouth cost of coal rose to $30/ton, the retail cost of coal-fired electricity would increase only 10%*, but economically-recoverable coal reserves would increase six times. At $60/ton, 77 billion tons would become economic, enough to singlehandedly maintain US coal consumption for about 75 years. And, that’s without Montana coal (Powder River), or the Illinois basin

8. There has been a large shake up in SA, with the new king appointing his 29 year old son to a number of important positions, few of which he has any training for. One of the them is head of ARAMCO. Could this make for less sensible field management from them?

   “But generating the most scrutiny is the tremendous power the king has granted his son Prince Mohammed bin Salman, who now oversees some of the kingdom’s most important portfolios. Among his big jobs are defense minister; head of an economic and development council composed of top ministers; and head of the Supreme Council of Saudi Aramco, the state oil giant.”

   http://www.nytimes.com/2015/05/11/world/middleeast/king-salman-upends-status-quo-in-region-and-the-royal-family.html

9. Note that if the DPR is revised downward, and it should be because the EIA’s model is way off, not only will the output be lower, the legacy decline will also be lower. If 150 new wells are added per month from April through June, legacy decline will be between 55 kb/d and 57 kb/d (higher in April and lower in June), not 85 kb/d in June as in the DPR. Pretty much the whole report should be ignored, not just output levels, legacy decline and all the rest are not very accurate. In April there will be about 150 wells completed in the ND Bakken, which will add about 68 kb/d if they are average wells, legacy decline will be about 57 kb/d so output should increase slightly, currently the first month wells (if they produced for the entire month) produce 453 b/d, so for June about 121 wells would be enough to keep output flat. The fact that first month wells on average produce for only 15 days (due to varying start times from day 1 to day 31) makes the comparisons less straightforward to pin down month to month, but over a span of a couple months it all works out and the model performs pretty well. Note that this type of analysis was first done by Rune Likvern in his famous Red Queen series. Thanks also go out to Enno Peters for providing NDIC data in an easily usable form.

   Any mistakes are mine alone.

   

10. ”This sounds like something a lot more serious than maintenance problems. Sounds like there could be a rift between Saudi and Kuwait.”

    The odds are pretty good Ron is right, that they are having a little family argument.If so they will probably want to keep it quiet to the extent they can.

    But the actions of powerful people and organizations and governments are quite often justified in press releases and planted news stories that include cooked up explanations that have little to do with the true reasons.

    Now I do not pretend to know whether there is a problem between the Saudis and the Kuwaitis or either or both of them and any contractors or imported oil field personnel.

    BUT …. The Saudis MIGHT have decided that cutting back production a quarter of a million barrels a day is a good move for them — based on the expectation of getting higher prices for that delayed production later on. It’s not like they NEED the money to pay the rent or buy groceries.

    In that case any plausible reason for cutting back other than just cutting back to take oil off the market is a good cover for them, given that they have said they are NOT cutting back.

    Maybe they are really having problems getting along together. Maybe they really do need to do some extra possibly unscheduled maintenance.

    MAYBE they just want to hold onto that oil to sell later without admitting they are cutting back deliberately for that reason.

    Refusing to renew visas for imported personnel would be a non issue for them or the Kuwaitis if such refusals happen to be part of the cover story.

    My buddy the retired army guy who worked in intelligence says the trick to understanding the enemy – or an ally for that matter – is to consider ALL the possibilities and ALL the reasons why the enemy MIGHT do any particular thing.

    Holding back that much oil for a year or two before selling it could result in their getting hundreds of millions of dollars more for it. Maybe even a billion or more , depending on the price at the time they start producing it again.

    1. MBP said upthread:

       The rift at Wafra is between Chevron and Kuwait, I know a few guys that work there for them. They stopped renewing visas for expats last year.

    2. More news on this subject. Ovi just sent me this.

       Kuwait seeks arbitration in oil row with Saudi

       KUWAIT CITY: Kuwait has requested arbitration in a dispute with Saudi Arabia over shared oil production from the neutral zone between the Gulf neighbors which has completely halted, a newspaper reported Tuesday.

       Kuwaiti daily Al-Jarida said that talks between the two governments on output from the 5,000 square kilometer (1,930 square mile) zone that they exploit jointly under a half-century-old treaty had reached deadlock.

       It said that Kuwait has now requested international arbitration but that the terms of the treaty stipulate that can only happen with Saudi Arabia’s agreement.

       The dispute has seen production from the zone completely halted in a blow to Kuwait, which, unlike its much larger neighbour, has little spare output capacity to compensate.

       The emirate had received half of the more than 500,000 barrels per day output from the Khafji and Wafra oilfields before it stopped.

       The offshore Khafji field was shut in October because of environmental concerns.

       The Wafra field closed Monday for two-week maintenance but industry sources told AFP production would not resume until the dispute between the Gulf neighbours is resolved.

       Industry sources say Kuwaiti authorities were unhappy with Saudi Arabia for renewing an agreement with Saudi Arabian Chevron for 30 years in 2009 without consulting them.

       So it is indeed a row between Kuwait and Saudi. And Chevron’s row with Kuwait only exacerbates the situation.

       1. HI Ron,

          I remarked upthread that you were probably right and so it has proven. But my initial comment was intended to show that in setting larger goals and policies such disputes can be CREATED so as to justify a desired course of action. If the Saudis on the other hand happened to WANT to cut production without losing face by admitting they were doing so to influence the price ( and or their future revenues ) …. Well then, they can use this little lemon to squeeze out a TON of lemonade in terms of increased future revenues.

          What I am trying do demonstrate is that the politics involved are far more nuanced than a lot of people suppose. There are probably as many good reasons for the Saudis to want to maintain production as there are for them to cut it. We can only speculate about which reasons seem to be the most important to the people who are actually making the decision. It could all come down to an internal power play within the royal family.

11. Timely article worth reading, imho.
    http://wolfstreet.com/2015/05/12/oil-glut-not-over-saudi-arabia-russia-out-to-crush-us-frackers/

    regards

    1. Wolf Richter said:

       The recently vaunted decline in US crude oil production, supported by granular estimates, has been used in rationalizing the newly sizzling rally in oil prices.

       I doubt very seriously if the “vaunted decline in US crude oil production” is the primary factor driving the rally in oil prices.

       Much more likely the rally has to do with:

       1) Surging oil consumption, which in Richter’s defactualized world is non-existent
       2) A seemingly unsatiatable appetite on the part of Chinese speculators to buy oil and put it into storage
       3) Speculation that Saudi Arabia and Russia will have a change of heart and will decide to cut production to bring supply and demand back into balance

       1. Glenn, how much of the increase in production is the result of a disproportionate share of the growth of consumption by the energy and energy-related transport sectors in a frantic Red Queen Race running as fast as they can off the Seneca Cliff?

          1. When you talk about “Red Queen,” are you talking about the same phenomenon which Rune Likvern speaks of in Debt, Oil Price and the Bakken “Red Queen”?

             If you are, I have no problem with Likvern’s “Red Queen” analysis.

             And in fact, I’m probably even more skeptical, if not downright cynical, than he is, believing the hallowed “shale revolution” will turn out to be nothing more than a flash in the pan, at least when looked at through the lens of the bigger picture.

             I’m not at all convinced that it’s not just the latest round of what Bill Black calls “bank-led control fraud.”

             I am a little surprised that Likvern’s analysis omits land cost. Don’t hold me to this, but if I recall correctly some of the recent IPOs of west Texas operators put an evaluation of land held-by-production and prospective for shale development at about $36,000 per acre. This is what I believe the acreage in the public offering of the company started and recently took public by Scott Sheffield’s boy calculated out to be.

             If one assumes 140 acre well spacing, that’s a tidy $5 million. And if one includes that cost in one’s analysis it might have just a little bearing on well economics. Of course in the Permian there are multiple target shale zones, and I have no idea what land has sold for recently in the Eagle Ford or Balken.

             But, as Aubrey McClendon famously said: “I can assure you that buying leases for x and selling them for 5x or 10x is a lot more profitable than trying to produce gas at $5 or $6 per million cubic feet.”

             If there’s a change in animal spirits, I’d say “Watch out below!”

             So bottom line? I have no problem envisioning the production from the oil shale plays declining much faster than what the EIA projects.

             Likvern estimates that “If no wells were added the total LTO extraction from Bakken would decline somewhere between 30 – 40% after 12 months.”

             But of course rig counts haven’t fallen to zero. They’ve fallen by about half.

             The only comp I know of where rig counts were halved in an active shale play is the Barnett Shale.

             But even if production from the oil shale plays falls by 20% over the next 12 months, what are we talking about? Maybe 600,000 bopd?

             And how does that compare in relationship to Saudi Arabia and Russia increasing supply by 1 million bopd in March? Or demand increasing by 1.1 million bopd y-o-y over the next 12 months? Certainy what happens to production in the shale plays is important, but is it the most important factor?

             

             1. The shale oil industry has created a lot of new colloquialisms for itself; some of my favorites are down spacing, de-risked and the latest, reserve impairments, all of which are meant to deflect and detract, IMO. I am waiting for it’s new oilfield term for belly up. When it quotes $36,000 dollars “an acre” that would, of course, include the value of existing production in the acquisition, pro rated per acre. I have no clue why they say that (or anything else, for that matter); it is deceiving and in many cases drove late-play lease bonuses way up when Lessors got wind of it.

                There is no leasing occurring anymore in any shale play; most of it is already leased and long HBP. Early in both big plays lots of acreage was acquired for 500 dollars per net mineral acre and as the feeding frenzy increased bonuses went to 2000 dollars an acre, some even higher. With acquisition costs, title runs and curative title work I have always used 1,800-2,000 dollars per leased acre in my economic analysis of the EF. Initially, most one horizontal well drilling “units” in Texas were 800-1000 acres.

                Mike

                1. Well, I recently heard an accountant use the phrase, “substantive-negative-outcome” which, apparently, is a new colloquialism (new to me anyway) for “dead”. Perhaps that would work for your shale guys. Maybe they could go further and say: A SNO Result.

                2. Hey, they are not MY shale guys!

                   So the news will go something like… today Bakkenbacker, LLC announces SNO for 1st quarter 15, maturing 2.9 B debt cycle, and that being USCWP (up shit creek without a paddle) requires the need for immediate operational reconfiguration.

                   I like it.

                3. I am waiting for it’s new oilfield term for belly up.

                   Operational reconfiguration.

                4. When these guys throw out $36,000 an acre, I think that’s what they believe it’s worth, because that’s what Wall Street or some bank appraiser says it’s worth. It’s all about comps, about looking at a history of past sales, just like in artwork, residential or commercial real estate appraisals.

                   And certainly, this is what the McClendons of the world claim their land is worth, not what they paid for it. That would explain why they throw around these hefty land prices, in an attempt to hype up the price.

                   The game here is not rents. It’s land speculation.

                   And of course all these exorbitant land prices are based on the hope of a glorious future.

                   Tulips anyone?

12. You forgot to put ‘summer blends’ on the list. Richter has a good blog.

13. http://portal.ransquawk.com/headlines/china-is-likely-to-export-over-500-000-tons-of-gasoil-in-may-up-nearly-70-from-april-13-05-2015

    That’s 70%. They must have some diesel rich domestic fields.

    1. They may be increasing their gasoline powered vehicle fleet, which may lead to a diesel surplus.

14. I took the data from the OPEC charts included by Ron in this post, prepared a table with the 1Q and 4Q 2015, estimated the decline rate (natural log of the ratio corrected by 0.75 to account for the time interval), and then extrapolated to 2016 using the calculated “decline rate”.

    The extrapolation is a pretty simple minded math manipulation, I tried to keep hands off, didn´t put in any logic such as why would Canada´s production keep on increasing while everybody else decreased. The end point result is 1.8 million barrels per day production drop from 1Q 2015 to 4Q 2016. Remember these are extrapolated figures, there´s no accounting for oil prices. I don´t think Canada can increase production over 2015 and 2016, therefore I suspect OPEC is pointing out that in the current price environment they expect non OPEC liquids capacity to drop about 2 million BPD.

    They fudge the data by lumping in non crude and condensate, therefore this information has to be used with extreme care.

    Note: I can´t get the post to show up, it seems to be rejecting the table, so I loaded it in my blog here:

    http://21stcenturysocialcritic.blogspot.com.es/p/the-opec-may-2015-data-extrapolated-to.html

    (This is the only public link to this page, it doesn´t show up in my blog anywhere else)

    1. Hi Fernando,

       I saved it in gif format to see if that would reduce the file size enough, I also tried to reduce the pixels in the chart. Hopefully it works.

       

       1. Thanks! So the trick is to use GIF and shrink it. I tried jpg, png, and got tired of it. I don´t think OPEC´s forecasts are untainted, seeing how they have crisscrossed the information and mixed up NGL, biofuels, etc. But they do send some sort of message, I guess.

15. Ron,

    Thank you again for your interesting post. As the situation for oil signals peak production, the situation of natural gas presents an explosive situation. At first sight, the DPR report shows just a decline of 112 mmcf per day, this seems just a minuscule decline. However, over the last six years we have seen a nearly complete substitution of conventional natgas production through shale gas. Shale gas stands now at 46 bcf per day versus around 26 bcf per day for conventional gas. Shale gas has grown about 6 bcf per day and year over the last eight years at the same time as conventional gas declined about 5 bcf per day. As shale declines, conventional gas still declines 5 bcf per day and year. So, if this situation continues, we have at least 5 bcf per or a deficit of over 1500 bcf less production by the end of the year. Needless to say that this will leave the US without gas storage by February 2016. Of course there will be a reaction from the market by sharp price increases and imports. However, import capacity is limited and very expensive and the production increase from shale gas when prices are higher will take at least half a year. I look forward to an at least tenfold increase of natural gas prices over the next year.

    1. A ten fold increase in the price of natural gas will bankrupt every power company using natural gas to generate electricity.

       Calpine was forced into bankruptcy because of high prices for natural gas.

       A return to the use of coal to generate electricity will be what will happen.

       It’ll be deja vu all over again.

       1. Ronald Walter,

          This is exactly what I mean. The period of 2000 to 2003 brought down the goldilocks of HighTechs. Even Greenspan made some remarks about natgas as he knew that natgas increased inflation expectaions and brought down the bond market. We are here again. And this time there is the leverage of shale gas, which makes the situation even more explosive. Of course we will not get permanently high gas prices as high prices will incentive new production which will eventually bring down prices again.

       2. Ron W., I don’t think the prices will really rise that dramatically but they will rise. You are right they will put a pinch on the natural gas power production that has not hedged or long term contracted it’s supply. The resulting problems and electric power cost rises will certainly promote PV, wind power and efficiency changes.
          Each time the cost of fossil fuels rises, it sets up scenarios for it’s own demise.

    2. Heinrich, relax. Try to get the natural gas production by type of reservoir, then lump them into these classes:

       1. Conventional
       2. Tight Sands
       3. Coal degas
       4. Shale, Barnett
       5. Shale, Other

       The decline rates are different for each of these groups. When I lump the first three I get about 6.5 % decline per year, with a production capacity of 29 BCFD. Shale gas has a highly variable rate. What companies do is watch the market, as soon as it starts climbing they´ll start drilling for gas. Also, newer gas wells tend to have extra capacity, it´s fairly easy to pull on them a bit harder. If you see gas prices go over $7 per MMBTU then I´d start worrying.

       1. As I have frequently noted, Citi Research put the overall decline rate from existing US natural gas production at about 24%/year, and this estimate is supported by the observed 20%/year decline rate in Louisiana’s natural gas production from 2012 to 2014.

          The Louisiana decline rate was the net decline rate, after new wells were put on line. The gross decline rate from existing wells in 2012 and 2013 would be even higher than 20%/year.

          In any case, at 24%/year, we need about 17 BCF/day of new production every year, just to maintain current production. This would require US operators to replace the productive equivalent of almost all of the 2013 natural gas production from Canada + Mexico (18 BCF/day), every single year, just to maintain current US production.

          1. Jeffrey,

             A decline of 24% for natgas was last year. This year it is over 30% and next year it will be over 40%. It is important to realize the dynamics of the substitution of conventional gas through shale. What makes the situation even more explovive is that most shale gas companies are hedged (RRC is hedged through 2016 at 3,5 per mmcf). So natgas companies are very unlikely to increase production in the short term.

          2. Jeffrey, I´m an engineer. I don´t use Citi Research to estimate decline rates. Let me explain how I do it: I segregate the different classes and look at their decline rates. I also have a pretty good insight as to how they OUGHT to look, just in case I blew it on the way from a to b.

             The key is to understand that decline rates tend to change when you are mixing up different vintages and types of reservoirs. Also, as I wrote above, gas wells are usually produced on choke, which means there´s a little slack, and also one can put on compression, put a well on pump, and do other tricks (if the price is high enough). There isn´t going to be a gas panic or anything like that. But we will hopefully see gas prices go up in the future. It´s good to have high gas prices to get President Obama to understand the gas reserves aren´t going to last forever.

             1. But I assume that you would agree that Louisiana*, with a mix of shale gas and conventional gas, represents a reasonably representative sampling of overall US gas production.

                *With a 20%/year net decline rate from 2012 to 2014, the net decline rate being the decline rate after new wells were added, which puts the gross decline rate from existing wells probably somewhere in excess of 30%/year

                1. Jeffrey,

                   I agree with the decline of the conventional/shale mix. The key issue here is that the mix is changing rapidly towards shale only. This is not our grandfathers natural gas market anymore.

       2. Fernando,

          Thanks for your comments. The overall numbers show a very clear picture as conventional gas declines by closed to 20% and shale has this year a legacy decline of over 30% increasing to 40% by next year. These are huge numbers. The dynamics of the natgas market have changed over the last five years. Obviously nobody does realize this. Let us just wait until fall. Then we will see I am on the right track.

          1. Heinrich,I don´t see conventional declining that much. I think you must be looking at the free fall decline. I´m looking at the actual decline, with new wells added and everything.

             1. Fernando,

                Over the last seven years conventional gas decelerated by at least 35 bcf per day (this is 5bcf per day and per year) as shale gas increased from nothing to 46 bcf per day during the last seven years. Total net production increased over this time period by over 11 bcf per day, which is very high, yet much lower than the increase of shale production alone.

    3. Yes, I think you have a really good handle on the natural gas situation Heinrich. For those businesses and residences tied to natural gas, it is going to be a real roller coaster ride. The good news for them is that there is still a lot of room to punch holes in the Marcellus, I don’t know about the other fields. Once prices rise the drilling will make a run. I gauge the drilling activity by the railroad activity since most of the materials are brought in to transfer stations by railroads. Only been moderate to low activity this year.
       There are a lot (and I mean a LOT) of older homes to the east of me crowded into towns and cities. They are generally not well sealed or insulated compared to newer builds. If people would use their heads they would be insulating and sealing their homes right now instead of watching their money leak out into the pockets of the fossil fuel providers. Even a three fold increase in gas prices would make insulating an older home a real bargain. Industry and businesses will have to develop more efficient processes and buildings to cut down on use. No way can a tenfold increase of price be compensated for in an industrial process but it can be in a residence or building.

       1. MarbleZeppelin,

          The real problem for the economy will be the high volatility of natgas prices as the US market is very tight and import as well as export capacity is low. So prices will eventually come down again in 2017. So it will be difficult to develop strategies for alternatives.

          1. Really, then why am I putting time, money and my personal energy into reducing my fossil and external electrical energy use to zero within three years? Already more than half way there. Guess I just don’t know as much as you and didn’t see the difficulties developing my strategy.
             Heinrich, it’s intuitively obvious that the volatility forms the strategy. That and we know nat gas, oil and coal are limited and very bad things to use. I just am too dumb to see the problems you do.

16. Reply to NickG & Fernando

    Link to top of thread above:
    http://peakoilbarrel.com/opec-april-data-the-eias-dpr/comment-page-1/#comment-516600

    My point for a while has been that globally actual crude oil production production (45 and lower API gravity crude) and especially what I call quality crude oil production (40 and lower API gravity crude) have almost certainly been flat to down since 2005.

    As noted above, my thesis is that US refiners, in aggregate in late 2014, probably hit what I am calling Minimum Distillate Output (MDO), which would be the MDO necessary to meet distillate demand. In other words, they could not process more very light crude (40 to 45 API) and condensate (45+ API), without falling below the aggregate MDO. This would of course presumably result in a build in US C+C inventories.

    In effect, NickG & Fernando both noted that we can synthesize distillates from other carbon sources, and of course this is what companies do in a gas to liquids (GTL) plant. In addition, Fernando pointed out that if refiners are producing an excess supply of gasoline, the mix of vehicles sold would adjust to take into account lower gasoline prices. This is all true, but I would submit that all of this misses the point.

    Years ago, I prepared a chart showing fossil fuels as a continuum, with the fossil fuel categories on the horizontal axis, going, from left to right, from Methane to NGL to Condensate to Light/Sweet Crude to Heavy/Sour Crude to Bitumen to various grades of Coal. Carbon content increases from left to right. I also showed a qualitative curve showing that we obtained Liquid Transportation Fuel (LTF), for the least expenditure of capital & energy, from Light/Sweet Crude, although we can produce LTF from any fossil fuel (or in fact from any carbon source)–but at increasing expenditures of both capital & energy (and synthetic LTF from water and CO2 would of course be a huge net negative energy process).

    Therefore, it stands to reason that Light/Sweet Crude would be the first fossil fuel to peak, and globally it appears that is exactly what happened in 2005.

    In addition, the tight/shale plays in the US have so far tended to be gas prone, with a very slight increase in what I call quality crude oil production in the US (40 and lower API crude). As I have frequently pointed out, the EIA’s own data indicate that it took about half the global oil & gas rig fleet to show an increase of only 0.3 MMBPD in 40 API and lower crude oil production in the US from 2011 to 2014. And it remains to be seen if wells like the ones in the Bakken Play–rapidly declining wells with an average production rate of a little over 100 BPD and with a median production rate of less than 100 BPD–will work in higher cost areas around the world.

    In any case, if Light/Sweet Crude oil production has almost certainly peaked globally, isn’t a question of when, not if, that other fossil fuels peak too? And remember, when we talk about the price of oil, we are talking about crude oil with API gravities of less than 40 API gravity.

    A note to NickG:

    It seems to me that you have something of a split personality regarding the Peak Oil debate, to-wit, you argue we have to get off oil ASAP, while you also seem to argue that there is no sign of a near term peak.

    Your post up the thread is a case in point, where you seem to argue that we have no short term worries, since we can, with sufficient capital and energy expenditures, synthesize the distillate product that the market wants from fossil fuel sources other than actual crude oil, which seems to be an argument in support of the current oil powered Happy Motoring lifestyle.

    1. Jeffrey: In general, I agree with your comment, and you sure write it up much better than I can.

       I do however want to suggest the proper name for the crude that peaked in 2005 is simply conventional crude oil. This includes sour (with sulfur), sweet (no sulfur), heavy, medium, and light. I use the term extra heavy for anything under 10 degrees API, which includes the Canadian oil sands as well as the Venezuelan Orinoco and some other extra-heavy-high-asphalt-content crudes some people erroneously label “tar”.

       Also, althought I´m pretty sure you know about this item, I want to clarify that we tend to target tight reservoirs able to produce “commercial” volumes. Tight of course means low permeability (low permeability means low flow capacity). This means it´s practical to go for very low viscosity fluids (we try to maximize permeabilityXcontact surface divided by viscosity). Reservoir energy also helps, and this is expressed by compressibility, gas has a much higher compressibility than oil. This means the best “shale” reservoir has a light fluid (very light oil or a gas condensate), some sort of connected flow system (fractures, natural pores), and pressure. The very best Bakken wells are drilled into rocks where the rocks, fluids, and pressure cooperate to produce high rates. And I expect that future “shale” production will emphasize gas (if the rates are very high), gas condensate, and very light crude oils.

       Which brings us back to the refinery side of things. The best option for the USA is to allow oil exports. But if they want to be stupid about it, as governments tend to be, then I expect oil producers elsewhere to start stripping the light ends off their USA bound loads. These stripped crudes will make a nicer fit with the USA native oil and condensate production.

       1. I do however want to suggest the proper name for the crude that peaked in 2005 is simply conventional crude oil.

          I would disagree on this point. In my opinion, 45 API gravity and lower global crude oil production has been basically flat to down since 2005. And I think that this is the only reasonable explanation for the following chart.

          2013 and 2014 Global C+C, as percentages of 2005, were 103% and 105% respectively.

          2013 Global Gas and 2013 Global NGL were at 123% and 122% respectively, based on BP + EIA data.

          

          1. Jeffrey, I was referring to this quote:

             “if Light/Sweet Crude oil production has almost certainly peaked globally”

             I wouldn´t call that Light/Sweet. Do you think 24 degree API sour hasn´t peaked? Or do you call 24 a light crude? I would just lump them all together from say 10 to 45. As long as they are CRUDE OIL (not the light condensate and NGL the government agencies love to lump as “petroleum”), either they peaked or they are mighty close to peaking right now. I think they peaked.

             1. I was actually making two different arguments: (1) Looking at the gas to coal fossil fuel continuum, that light/sweet crude would be the first fossil fuel to peak (given that we get the most Liquid Transportation Fuels for the least expenditure of capital & energy from light/sweet) and (2) That global crude oil production (45 and lower API gravity crude) probably peaked in 2005.

          2. Hi Jeffrey,

             I think your chart does not reflect the trend over the longer term.

             If we look at C+C less extra heavy oil (similar to Fernando’s lumping and Jean Laherrere’s as well) over the 1985 to 2015 period, there was an anomolous increase over the 2002 to 2008 period as oil prices increased by a factor of 4, but the general trend (dotted line) is fairly linear over that period.

             I do not expect that rise to continue and show how C+C-XH oil may decline in the future, increased output from extra heavy oil in Canada may be able to offset this conventional oil decline for 5 years before overall C+C output starts to decline in 2020.

             

             1. In any case, for the last year with complete data (2013), we have global gas up by 23%, global NGL up by 22% and C+C up by 3% (all relative to 2005). Not much mystery as to the reason for the discrepancy. Note that the EIA shows that global NGL production was up by 26% in 2014, relative to 2005, versus 22% in 2013.

                One interesting point is that the 2005 to 2013 rate of increase in Texas condensate production* was significantly in excess of the rate of increase in Texas NGL and Texas gas.

                *I haven’t found RRC data for Texas NGL production, but the (not updated) EIA data show that Texas NGL production approximately doubled from 2005 to 2013. However, RRC data show that Texas condensate production more than tripled from 2005 to 2013 (with 2013 Texas condensate production 3.3 times 2005 production). Texas dry gas production (EIA data) was only up by 39% from 2005 to 2013. So the rate of increase from 2005 to 2013 for Texas gas production was 4.1%/year, NGL production was up at 8.3%/year, while condensate production was up at 15%/year, from 2005 to 2013. Of course, globally, all we have are the gas and NGL data, plus the slow increase in C+C production.

                1. Hi Jeffrey,

                   We do not have very good condensate estimates for the World.

                   We really only have data for Norway, Texas, and OPEC that is easily accessible. It just seems easier to me to focus on total C+C output. You may be correct that crude output with an API below 40 (though I would use 45) has fallen, but it requires too much digging to pull out the data, at least for me.

       2. Hi Fernando,

          If the owner of a refinery were to make the decision to do so , could an existing refinery be economically modified to manufacture diesel fuel out of very light oil?

          Or would it be more economical to just build a new refinery from scratch?

          Once permits and financing are in place , how long does it typically take to build a new refinery?

          I gather that some of the oil output of tight oil wells is even too ” light” to be used in manufacturing gasoline….It seems logical that this extremely light oil could still be manufactured into gasoline more cheaply than starting with methane or other gases.

          Has anybody yet built a refinery designed to manufacture diesel and gasoline using very light crude as the primary feedstock?

          1. OFM,

             At least one of not two 20,000 barrel refineries have been/are being built in North Dakota. The are designed to skim off the diesel and possibility gasoline and then send the rest onto more complex refineries.

             Delta airlines bought a near bust oil refinery in the North east. They converted it to maximize jet fuel. The North East has been a large user of Bakken oil, so I assume the Delta refinery will also be using Bakken oil.

    2. From my comment:

       As noted above, my thesis is that US refiners, in aggregate in late 2014, probably hit what I am calling Minimum Distillate Output (MDO), which would be the MDO necessary to meet distillate demand. In other words, they could not process more very light crude (40 to 45 API) and condensate (45+ API), without falling below the aggregate MDO.

       Excerpt from today’s EIA report. Note difference between gasoline and distillate inventory numbers, for this time of year:

       Total motor gasoline inventories decreased by 1.1 million barrels last week, but are well above the upper limit of the average range. . . . Distillate fuel inventories decreased by 2.5 million barrels last week and are in the lower half of the average range for this time of year.

    3. something of a split personality

       I try to be realistic about what’s going on, even when it’s not what I would like to see. If I see a plateau in oil supplies, or abundant coal supplies, I say so even if I wish that both would peak and decline.

       you argue we have to get off oil ASAP

       Yes, and only partly because of PO. Oil is simply not as beneficial as we once thought: we need to transition away from it to reduce oil wars, reduce climate change, etc.

       you also seem to argue that there is no sign of a near term peak.

       While I would guess that we’re looking at a long plateau, that’s a distraction here, because that’s not what I was arguing above. “Watcher” was arguing that a decline in gasoline consumption wouldn’t help with the need for transportation fuels, due to a lack of fungibility between gas and diesel. Fernando & I disagreed. That’s a somewhat different discussion from what you’re talking about.

       you seem to argue that we have no short term worries

       I would never say that. I was simply saying that reductions in fuel consumption for personal transportation would be a likely and very useful response to the first phases of PO.

       I think we face many short term worries, including a major disruption in oil exports – who thought it was sane to rely on M.E. dictatorships for oil supplies??

17. U.S. set to get more accurate oil production data

    “Figures on U.S. oil production are subject to much more uncertainty than the numbers for oil stocks, refinery throughput and imports because the Energy Information Administration (EIA) has to rely on state-level data rather than its own surveys. That could be about to change, however, because the EIA has received approval from the White House to launch its own mandatory monthly survey of oil and condensate production. The first of the new survey forms have gone out and respondents are beginning to submit data. It will take a few months for the agency to vet the results for quality but the first survey figures could be published in the next few months.”

    http://www.reuters.com/article/2015/05/13/eia-oil-data-kemp-idUKL5N0Y42T220150513

    1. Sounds a bit goofy for the states. All they have to do is have OPERATORS (anybody who operates a well and measures its production) to report their estimated crude oil, condensate, and NGL production for the previous month, and the estimated API for their sales, by the 15th of the month, and a forecast of what they expect to produce in the current and next month. They should also be able to correct the previous months´s figures back, up to six months. The operator should register in the system, include the API number for the operated wells, and the government can catch if some of them are double counting wells.

18. We’ve just downloaded the North Dakota well data afresh, and it suggests that even I was too pessimistic in predicting 1.18 million b/d – looks like coming in only just below last month (1.199 million b/d Feb vs 1.195-7 March), which also suggests upward revisions of Dec, Jan and Feb data.

    1. In fact, North Dakota have just this second published: 1,190,583 b/d in March. That’s up from a revised figure of 1,178,082 b/d in February – weird, cos their own well data now says 1.19, unless I’ve done something strange.

       Edit: I have done something strange – counted the wells that are no longer confidential twice.

       1. https://www.dmr.nd.gov/oilgas/directorscut/directorscut-2015-05-13.pdf

          1. Indeed. You think Lynn Helms will eat some crow for predicting a 1% decrease? Hate to say it, but I’m the only analyst I’m aware of who said it would increase in March.

             1. Hi Gwalke,

                Great job!

                Yes I was too conservative and predicted 1.15 MMb/d for Bakken/Three Forks output because my model was running higher than the recent NDIC output data. The model predicted 1.17 MMb/d for March 2015 so this month it was a little on the low side. I did not expect the upward revisions.

                I am such a pessimist! 🙂 Just kidding, but I have made wrong predictions in the past, I expect that trend may continue.

                Edit:

                I just checked the NDIC data and they are reporting 1.13 MMb/d for the Bakken/Three Forks, this is the only number I follow. My prediction was 1.15+/- 0.02 MMb/d, so my forecast was actually a little on the high side, but in the right ball park. Basically I thought output would be flat to up slightly for the Bakken/Three Forks. Model is too high by 3.4% for March 2015 (about 40 kb/d too high).

                1. Data vs Bakken/Three Forks model from Jan 2007 to March 2015,
                   with model extended to Jan 2017 assuming 150 new wells per month added each month from April 2015 to Jan 2017.

                   

       2. Per today’s Director’s Cut, ND producing well count went up 240 wells (12,199 to 12,439)
          Well completions went up from 42 to 189. That would explain the production increase between Feb and March. But why are so many wells being completed, given the low market price? Cash flow maintenance? Contractual obligations? Future oil price leaps of faith? Discounted completion prices? I anxiously await Ron and other’s detailed reports and analyses.

          1. Bakken added 250 wells, however production per well per day dropped to 120 for Bakken wells, which is the lowest since 2009.

19. http://ir.eia.gov/wpsr/wpsrsummary.pdf

    Summary of Weekly Petroleum Data for the Week Ending May 8, 2015

    U.S. crude oil refinery inputs averaged 16.0 million barrels per day during the week
    ending May 8, 2015, 379,000 barrels per day less than the previous week’s average.
    Refineries operated at 91.2% of their operable capacity last week. Gasoline production
    increased last week, averaging 9.7 million barrels per day. Distillate fuel production
    decreased last week, averaging 4.9 million barrels per day.
    U.S. crude oil imports averaged 6.9 million barrels per day last week, up by 340,000
    barrels per day from the previous week. Over the last four weeks, crude oil imports
    averaged about 7.2 million barrels per day, 2.2% below the same four-week period last
    year

    snip

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum
    Reserve) decreased by 2.2 million barrels from the previous week.

    decrease in refinery input 379,000 x 7=2.6m
    Increase in imports 340,000 x 7 =2.38m
    decrease in crude storage =2.2m
    So all other inputs to the crude storage number must have decreased by 7.2m for the week or 1 million barrels of oil per day.

    The only other input I know of is the US oil production.
    Does this mean the expected drop in US oil production is starting to show itself????

    Disclaimer: I do know the weekly numbers are very noisy, but this maybe the canary starting to tweet, or should I say keel over.

    1. Hi toolpush,

       Net crude imports were 6414 kb/d, crude inputs to refineries were 15,968 kb/d, US production was 9374 kb/d for the most recent week, this implies a reduction of crude stocks by 180 kb/d or a 1.26 MMb draw for the week. (180*7/1000). The crude stock draw was larger than this at 2.12 MMb so like you suggested these numbers do not line up very well. I think we cannot draw any firm conclusions from these weekly reports.

       The weekly numbers are pretty bad, but if you use four week averages some of the mistakes cancel out and the estimates end up being a little closer to reality.

       Using the most recent 4 week averages we have
       net imports of crude 6682 kb/d
       production_______9371 kb/d
       crude inputs to refin._16,099 kb/d
       stock draw_______46 kb/d * 7 days=322 kb* 4 weeks=1.288 MMb.

       Over the last 4 weeks the stock data shows a crude stock build of 1.149 MMb.
       So somewhere we are off by almost 2.5 MMb over a 4 week period.
       Although this sound huge, it only amounts to 89 kb/d over 4 weeks.

       Any of these numbers could be wrong, perhaps production should be lower by 89 kb/d, but there could be errors in imports, exports, refinery inputs or stocks, it is hard to know where the source of the error lies, very possibly I am missing something. I used data from the page linked below:

       http://www.eia.gov/dnav/pet/pet_sum_sndw_dcus_nus_4.htm

       both the 4 week average page and the weekly page were used.

       Actually if we subtract the 89 kb/d from 9371 kb/d (most recent 4 week average) we get about 9.3 MMb/d, so perhaps US output has been flat for March and April from the February level of 9.24 MMb/d. The 4 week average data shows output up by 100 kb/d since the end of Feb, in reality output may not have risen at all but remained about 9.24 MMb/d for the past 2 months. Time always tells us.

20. “I lean Libertarian to a substantial extent myself but that does not mean I am so ignorant as to think we can have a world like the one Caelan Mc Intyre envisions. ” ~ Old farmer mac (quote from previous thread)

    Like what?

    I doubt I expect anything like what Old farmer mac might envision Caelan Mc Intyre envisions.
    (Who’s Caelan Mc Intyre anyway?)

    But I do expect to attempt to leverage groups (‘off-the-shelf parts’) that already exist. (Wimbi might appreciate the off-the-shelf component.)
    I suspect there are already enough of them to overwhelm your leviathan.
    Just take a look at how masses of ants, by their sheer numbers, overwhelm much larger creatures.
    Fuck your leviathan.

    “There are a number of steps that need to be taken to successfully reapply the wisdom of the tribe:

    1 ) Individuals must re-establish a sense of deep connection and bondedness to the whole (in this case the planet). This is a process that is… fortunately already occurring. It is especially important that people build direct human connections around the globe. Since the nation-states are today’s bullies, we can not rebuild the peace of the tribe unless we build a global community that stands independent of these nations, as William Ellis argues so well in the Summer 1983 issue of IN CONTEXT. It is also essential that these connections be ‘real’, based on meaningful ties of economics and common personal interest, and not just a technique for peace.

    2) Our societies need to decentralize to remove crucial pressure points. We need to replace brittle systems of hierarchical power with resilient systems of ‘network semi-dependence.’ ” ~ Robert Gilman

    If there is a vision, it is more about a process.
    If humans end up still around after the dust settles, decentralized tribes, our natural makeup, will likely return anyway.

    1. Our societies need to decentralize to remove crucial pressure points. We need to replace brittle systems of hierarchical power with resilient systems of ‘network semi-dependence.’ ” ~ Robert Gilman

       This very thing is happening in Mexico, big time. If you speak Spanish, I can send you some examples.

       As local communities increasingly take things into their own hands, the US’s client state here in DF (Mexico City, Distrito Federal) views this as a challenge to its authority. It is trying to stamp out any outbreaks of local initiative, governance, independence or sovereignty by using a great deal of state, or proxies of the state (corporate private security forces, paramilitaries, the US deep state, drug cartels), violence.

       But as you say, there is a limit to what the federal government can achieve with violence.

       The neocons in the US who call the shots, however, accept it as an article of faith that any and all social problems can be solved with violence.

       This is not going to end well.

       1. “Behind Boetie’s thinking was the assumption, later spelled out in great detail by David Hume, that states cannot rule by force alone. This is because the agents of government power are always outnumbered by those they rule. To insure compliance with their dictates, it is essential to convince the people that their servitude is somehow in their own interest. They do this by manufacturing ideological systems…” ~ Llewellyn H. Rockwell, Jr.

          One so-called ‘problem’ is that the ideological manufacturing is increasingly bumping up against both natural constraints (resources, energy) and competing ideologies (decentralized, local/translocal, networked, anarchic, egalitarian).

       2. ”This is not going to end well.”

          I am thoroughly convinced that WHOEVER Caelan McIntyre is , he gets his conclusion right at least.

          Otherwise in my estimation he has a totally unrealistic and unworkable vision of the future- any short to medium term future at least, meaning for the next generation or two of men. Longer term almost anything that is physically possible might conceivably come to pass.

          I am not so ignorant ( repeating myself ) as to believe that cultural progress is not possible. While the problems we face as a species are almost beyond count, we are at the same time making progress on some fronts in solving them. Outright slavery for instance is probably at its lowest ebb in recorded history.In most countries now some education at public expense is available to almost everybody, excluding the countries in the Middle East that are culturally equal to our own according to the PC liberal agenda. ( I can talk trash too.)

          At some point in time the population density of our species may fall to the point that we can live and thrive WITHOUT LEVIATHAN. IF that happens then it seems pretty likely that the population will start to grow again, and Leviathan will emerge again.

          Anybody who thinks we can manage without big government for the FORESEEABLE FUTURE is living in la la land.

          In a hundred years such a thing might CONCIEVABLY be possible.

          LEVIATHAN in the world as it exists right now is our ONLY FUCKING HOPE- or perhaps I should express myself differently and say Leviathan is a necessary factor or ingredient in any possible stable near to mid term future.

          I have never argued that Leviathan, the nation state, in and of itself is SUFFICIENT to the future , but only that it is a NECESSARY part of it- if we want it to be reasonably safe and stable.

          Without Leviathan dozens of people I know personally would be dead within a year -Leviathan keeps them alive via Medicare and Social Security and the provision of police protection.

          One reason – the primary reason in my case and in many THINKING conservative minded folks case – that I believe in owning weaponry at the personal level – is that Leviathan scares the living hell out of me TWO WAYS – just as nuclear power plants scare the hell out of me two ways. I am scared as hell that one of them is eventually going to kill a few million people – and afraid that more millions will die due to the lack of electricity due to their NOT being in service when the coming EVENTUAL coal and gas supply crunch hits.

          ONE way is that Leviathan simply scares the hell out of me PERIOD. I know about Hitlers and Stalins and Pol Pots and Idi Amins and King Leopolds. I also know about Somalias and an estimated five thousand boat people starving and dieing of thirst RIGHT THIS MINUTE in an effort to make their way to western Europe.

          I know about rednecks and thieves and murderers and psychopaths.There is a goodly assortment of them in my own family and neighborhood. The sight of a pistol or double barreled shotgun affects me about as much as the sight of a credit card does the average member of a forum such as this one.Generally speaking I find it prudent to keep one of each handy. I credit the fact that nobody has killed ME and that I have not had to kill anybody myself to LEVIATHAN in the form of the sheriffs department locally right on thru to the Pentagon at the other end of the spectrum.

          Take away Leviathan for a MONTH and the POPULATION problem would be well on its way to being HISTORY.

          The trick, if we can manage it collectively, is to restrict government to those functions that can only be managed BY government so that it does not eventually grow so big and powerful it dominates us rather than serves us. Government in my estimation is way too big already in a lot of respects.

          We shouldn’t have a million people in jail for in essence smoking pot. Nor should we have people dumping poison into the air and water with impunity.

          We aren’t going back to the days previous to the emergence of Leviathan so long as we exist by the BILLIONS.

          When the population of North America falls back to what it was five hundred years ago, Leviathan will fade away.

          Beyond everything else we must remember that we live in a Darwinian world – and that organized people can and do dominate people that are not organized.

          The ultimate form of organization , up until the present day at least, is the nation state-Leviathan.

          Some other form of organization may eventually supersede the nation state but so far I see extremely little evidence of this actually happening.

          1. As someone who remembers the 1960s and who was a big fan of The Whole Earth Catalog, I was very interested in the various experiments in intentional communities and the like. I didn’t become part of any, but I followed their progress.

             Unfortunately, many of the communes and other utopian communities didn’t last that long. That was the case with many experiments in the 1800s as well.

             I’d still like to see more peaceful, environmentally friendly small communities develop. These days, co-housing projects are trying to avoid the problems that plagued the communes, while taking embracing of some of the advantages of shared community ownership.

             I’d like Caelan to provide us with more details about how we get from where most of us are today to where he thinks we’ll (or our offspring) will end up in the future. How do you avoid some of the problems that have torn apart similar community experiments in the past?

21. surge of completions in dec come through.platts article says it takes three months for the figures

22. april will show a sharp fall (bakken figures) or a continuation of the fall, any case.

    1. Hi pete mason,

       There were about 150 wells completed in the Bakken/Three Forks in April, this will be enough wells to keep output either flat or rising slightly, my prediction for April 2015 for North Dakota Bakken/Three Forks oil output is 1.15 MMb/d +/- 0.02 MMb/d.

23. http://www.upi.com/Top_News/World-News/2015/04/01/US-Navy-commander-Chinas-artificial-islands-violate-international-law/1401427899005/

    Speaking of China…LOL.

    If this isn’t the most obvious posturing for a resource war, then I don’t know what is.

    If the US starting building islands near the Strait of Hormuz the screams would be deafening!

    Hardly a peep on this!

    If the global oil export market’s future looked secure (not to mention fishing)….China wouldn’t be taking these risks!!!

    love,
    Boltzmann

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