OPEC May Oil Production

Ron Patterson Uncategorized

All OPEC data below is from the OPEC Monthly Oil Market Report. All OPEC data is in thousand barrels per day and is through May 2018.

OPEC 14 Crude oil production was up 35,000 barrels per day but that was after March production had been revised down by 32,000 bpd and April production was revised down by 89,000 bpd.

Nigeria’s April production was revised down by 27,000 bpd and Saudi Arabia’s April production was revised down by 58,000 bpd.

Nigeria’s March production was revised down by 26,000 bpd and their April production was revised down by 27,000 bpd. And still their May production was down by 53,500 bpd.

Saudi Arabia’s April production was revised down by 58,000 bpd. Their March production was unrevised.

Venezuela’s collapse continues.

Equatorial Guinea was not a member of OPEC when quotas were set. Libya and Nigeria are not subject to quotas due to political problems in those states.

Some folks asked for data going back further than I have been posting. So I have posted below, USA, World, OPEC and Non-OPEC data going back to 1973. All data is in thousand barrels per day and it through February 2018 except USA data which is through April. All data below is crude + condensate.

World oil production, since the early 80s has been increasing steadily except for two brief pauses. One in the late 80s to early 90s and again from 2005 to 2010.

The dip you see in Non-OPEC production, late 80s through early 90s, was caused by the collapse of the Soviet Union. Non-OPEC peaked, so far, in December 2015. The spike you see, 2012 to the present, is entirely due to US shale oil production.

This is OPEC crude + condensate according to the EIA. The OPEC MOMR does not report condensate as its production is not counted in the quota system. The highest peak on this chart is December 2016. That was OPEC preparing for quota cuts. But as this chart shows, there were no real cuts at all.

This graph shows the dramatic effect shale oil has had on US production. This graph does not show the first peak in 1970. The second peak in 1986 was when Alaska’s Prudhoe Bay peaked. The current peak here is April 2018 and is an all-time high.

Non-OPEC less USA has been on a bumpy plateau for the last fourteen and one-half years. When shale oil peaks the US peaks and Non-OPEC peaks. Then the “call on OPEC” will be to save the world.

235 thoughts to “OPEC May Oil Production”

  1. We have to discuss Saudi Arabia

    (a) Aljazeera Interview with Mamdouh Salameh

    In video min 16:15

    “Sooner or later Saudi Arabia will need the world to deal with them and help them. The diversification program you referred to is not going to achieve much shortly.When you talk about Saudi Aramco which is main source of income they are talking about the IPO which is the initial public offering of selling 5% of Saudi Aramco, not the productive assets of oil, but different assets for $100 billion. That is not going to happen and I will tell you why. Because the Saudis have valued the IPO at more than $100 billion dollars. _*That cannot be right because based on the proven reserves they have (17: 14) many organizations including Wall Street Journal and the World Bank and many other analysts said that the value could be based on smaller proven reserves. Saudi Arabia says it has proven reserves of 268 Gb. My research shows that this is between 80 and 90 Gb and many other experts also agree with that. If you base your IPO value on that smaller reserves I think the value of the IPO is between 50-75 billion dollars. Still Saudi Arabia with the rising oil prices it does not have to sell any percentage in Aramco. It does not need the money financially with the improvement of oil prices.That’s why I say the IPO is not going to happen.What will happen in diversification is on concentrate (=focus) on adding value to your oil exports. Instead of exporting crude oil export as refined product, more petro-chemicals. Saudi Arabia could within the next 2-3 years dominate the petro chemical industry in the world and become the major producer and exporter. Furthermore, they can use even 5% of their oil revenue to expand full production. That’s an important part. Saudi Arabia imports more than 30 billion dollars for food firstly coming from the US”
    https://www.aljazeera.com/programmes/insidestory/2018/06/drive-modernise-saudi-arabia-wrong-turn-180610170726544.html

    (b) https://oilprice.com/Geopolitics/International/Can-Saudi-Arabia-Prevent-The-Next-Oil-Shock.html

    In this post

    Iraq war and its aftermath failed to stop the beginning of peak oil in 2005
    http://crudeoilpeak.info/iraq-war-and-its-aftermath-failed-to-stop-the-beginning-of-peak-oil-in-2005

    there is a table with 97 Gb cumulative production and 231 Gb original reserves for Saudi Arabia as calculated by PFC Energy for end 2003

    Since then Saudi production was around 48 Gb. So we have 145 Gb cumulative and 231-145= 86 Gb remaining, within the range Salameh mentioned in the above interview

    1. This was a hot topic a decade ago. Everybody looking closely at KSA knows that the official reserve figures are overstated. By how much is more the question that requires expert knowledge and intensive study given the lack of detailed recent data. The 80-90 Gb guess is probably a good one. This notion of reserve capacity is difficult to grasp and I think KSA is conserned about the real production capability being exposed when Mr.Trump asked politely if they could increase production (if he did). Key details about such things as production per field, water cut and number/types of wells would be welcomed. And this kind of information is more or less required if investors are to pay huge money for a tiny piece of Saudi Aramco.

      1. Are big fields like Ghawar more suited to exotic recovery improvements. I haven’t seen news on Ghawar since The Oil Drum and Matt Simmons.

        1. Ghawar doesn’t need exotic recovery, it’s a huge field with 34 APIoil and no nasties, and good reservoir properties. Water flood is giving them 70% recovery – they have the best reservoir models, real time seismic, the ability to drill wells for production, injection and inspection wherever they like; it doesn’t get much better.

          1. So is it possible that it can have a cliff in production, from hero to zero as a pop saying is going.

          2. FWIW: Ghawar has been using advanced Oil recovery for over a decade. Ghawar is using Horizontal drilling as the remaining Oil column has shrunk between 30 feet and 10 feet (depending on the drilling sites), SA has also been using CO2 injection in some parts of Ghawar, since I think around 2007-2009 period (but I cannot recall the actual start date).

            I posted Here some links to SA Annual tech briefings that SA had posted on their website. However those may no longer be available. When I checked back in December they were gone, but it possible they were updating the website at the time. The Tech briefings had a lot of engineering information on new ways SA was creating and using new technology for extraction, locating trapped oil in pockets, etc. From what I read in these briefings, SA left no stone unturned looking to maintain production levels.

            1. But the question said exotic, not advanced. I’m not sure horizontal drilling counts as either as it’s been around since the 30s and really expanded with Troll in the 80s and 90s. They did pioneer intelligent completions / maximum reservoir contact wells but they are not uncommon now, and they probably could have achieved the same, at higher cost, just with more drilling. As to CO2 I thought that was being tried to boost recovery even more and hadn’t made much impact yet – seems more likely to work on heavier oil.

            2. “But the question said exotic, not advanced. ”

              Horizontal Drilling, CO2 injection and other wiz-bang methods is about as close to “exotic”. Or did you mean using exotic dancer to appease the gods to deliver more Oil?

              “As to CO2 I thought that was being tried to boost recovery even more and hadn’t made much impact yet ”

              They are trying everything! It would surprise me that SA is using frack drilling in some special regions where the rock isn’t very permeable. The only thing SA likely hasn’t done *yet* is deploy witch doctors and exotic dancers.

            4. CO2 works better when the reservoir conditions and fluids allow for a miscible front to develop. Heavier crudes are usually shallower and this may make it easier or harder to implement. It depends. However I have seen work done in a very cold heavy oil reservoir where the CO2 worked very well in a model.

              I’m not sure what’s defined as exotic nowadays. The Saudis could try flooding with fresh water plus detergents and that should get them a few percent extra recovery. But they’ll have to bring water from India.

            5. So the question is how much is left, when the remaining colums are under 30 feet (and this is 10 years ago)?

              They then have to activate their reserve fields soon to maintain production.

              Should be no problem since they have constant reserves since more than 30 years of more than 200 GB 😉 .

            6. Given that they export a lot of chaos among the neighbors, it is also a mater of time since this kind of overproduction will affect closer to the “factory”

  2. Production vs export capability.

    At what stage in each of these, do export limitations affect production? The first, I can take wags, based on the fact there is a lot of data. The US increase for a year and a half is limited. But Permian producers are amazingly short sighted, and keep pumping. Still, I see production at, at least, half a million barrels short of projection through 2019. Constraints are the pipelines and port export capability.
    The other two, I have less data on, and my wags wouldn’t come close. They are Venezuela and Iran.
    Venezuela is struggling to get half their production exported, due to losing the Caribbean operations to Conoco. Their production is dropping, but how much faster will their production drop due to storage?
    Iran is still a question mark, but lack of interest by insurers, refineries, and shippers don’t bode well.
    The call on OPEC now sits at somewhere over one million barrels, now, for the next year and a half. And growing. That doesn’t even consider demand for 2019. Just to keep it about the same as 2018. How demand for 2018 matches production is still very much of a question. We already know Iran’s stance on cooperating with OPEC. Now add this one:
    https://oilprice.com/Latest-Energy-News/World-News/Iraq-OPEC-Shouldnt-Heed-Calls-To-Boost-Oil-Production.html

    Not everyone agrees that OPEC (Sauds) have that capability:
    https://oilprice.com/Geopolitics/International/Can-Saudi-Arabia-Prevent-The-Next-Oil-Shock.html

  3. I find it amazing (same comment as last OPEC post), that nobody apart from you picks up on the downward revisions!

    1. Well, nowhere in the MOMR does it say that the production numbers have been revised. What I do is compare the last two months numbers with the current numbers on an Excel spreadsheet. That’s the only way to find out who has been revised and by how much.

    1. MORE OIL FOUND IN NORWEGIAN WATERS OF THE NORTH SEA

      “A Norwegian government regulator said Friday it confirmed an oil discovery was made in untested waters in the central part of the North Sea. The Norwegian Petroleum Directorate, the nation’s energy regulator, confirmed a discovery was made by Equinor in a wildcat well, one drilled in an area not previously known to contain oil or natural gas.”

      https://www.upi.com/Energy-News/2018/06/08/More-oil-found-in-Norwegian-waters-of-the-North-Sea/2551528455982/

      1. About 20 mmbbls in an area with no available hubs – that’s going to need some high prices or more neighbouring discoveries to be developed. The bigger story is that, as marginal as this is, it is still the best oil discovery announced in the last few weeks.

    2. Hmmm, seems like I was highly scoffed at when I postulated a future with continued fossil fuel burning, due to cheaper and more advanced methods of recovery. This has already come true in several areas and is sure to keep going. Scoff back at my scoffers.

      1. I just revised my CO2 concentration pathway, assumed a huge increase in future oil and gas reserves, plus a slight increase in coal, and my model says CO2 will not reach 600 ppm by 2100. Market forces limit how much we can produce. This means the IPCC work to limit emissions is hardly worth it.

    1. 600k additional from the Permian by December? No doubt that is possible to produce, but what are they going to do with it after it comes out of the ground? Or, the other 400k they have by mid year 2019? Ok, I have never maintained that the elevator went all the way to the top with EIA economists.

  6. Consumer confidence must be high in China still.

    China auto sales rise 7.9 percent in May as electrics surge
    Associated Press – Tue Jun 12, 4:08AM CDT

    BEIJING (AP) — China’s auto sales rose 7.9 percent in May from a year earlier as purchases of electric and gasoline-electric hybrid vehicles more than doubled to 102,000, an industry group reported Tuesday.

    Sales of SUVs, sedans and minivans rose to 1.9 million, according to the China Association of Automobile Manufacturers. Total vehicle sales, including trucks and buses, rose 9.6 percent to 2.3 million.

    Year-to-date sales rose 5.1 percent to 9.9 million, rebounding from 2017’s annual growth of just 1.4 percent.

    Sales of electric and gasoline-electric hybrids rose 126 percent over a year earlier. Through May, sales of electrics and hybrids rose 142 percent to 328,000.

    https://www.barchart.com/story/news/load-more-stories/385676/china-auto-sales-rise-79-percent-in-may-as-electrics-surge

    1. “Sales of SUVs, sedans and minivans rose to 1.9 million”
      What about hatchbacks, combis, and cabrios? Let me teach you – everything under 3.5 tons, engine above 500 cc, and with four wheels, is a car.

    2. when you look at the stark numbers its hard to have any solace in a couple of Tony Seba charts or non-stop articles about an EV revolution. Anyone that was waiting for the Chinese to bail out the world vis-a-vis peak oil (or even climate change) needs to meet Gadot.

      To be rich is glorious. And China is filled with millenials and gen-xers that are hyper-obsessed with status symbols like fancy cars.

      1. Through May, sales of electrics and hybrids rose 142 percent to 328,000.

        That’s as good as anyone could expect. Exponential growth always looks a little unimpressive in the short run, because the absolute numbers aren’t that large.

        Casual (popular) forecasters commonly guess too high in the short run, and too low in the long run.

    3. China sold more the 28M new cars & light trucks in 2017. It’s the biggest market for vehicles in the world. EV & Hybrids was 1% of total sales & I would bet 80% or more of the 328K were hybrids. Nobody is buying EV’s

      1. Nobody is buying EV’s

        Apparently you do not understand the meaning of the word “vehicle”, hint, it doesn’t necessarily mean a gas guzzling SUV, PU or even a Tesla Model S or a Jaguar I-Pace. And you don’t seem to understand the exponential function either… There are currently 7.6 billion humans on the planet and they are just getting started with the transition to EVs! That includes electric bicycles, scooters, buses, trucks, trains, ships, ferries and even electric aircraft for mass transport.

        https://www.statista.com/statistics/255662/sales-of-electric-bicycles-in-china/

        This statistic represents the retail sales of electric bicycles in China from 2010 through 2020. In 2015, some 14.35 million electric bikes were sold to customers in China. The country is the most important market for electric bikes worldwide.

        And purely for your entertainment:
        https://www.youtube.com/watch?v=WrKfqIB-xCU

        Fully Charged Live 2018 – Short Highlights

        1. The Wall Street Journal had two related articles this weekend.

          1. Silicon Valley is investing heavily in several electric scooter rental companies. Getting around in urban areas by scooters you can grab and then leave anywhere is popular with people living and working there.

          2. People who buy SUVs and trucks are finding that their vehicles are often too big to fit into parking lot spots.

  7. 2018-06-12 (Reuters) The precise level of spare capacity available depends in part on how it is defined.
    The Paris-based International Energy Agency (IEA), which bases its figures on oil production that can be brought onstream within 90 days and sustained for an extended period, estimates OPEC’s spare production capacity was 3.47 million bpd in April, with Saudi Arabia accounting for roughly 60 percent.
    The U.S. Energy Information Administration (EIA), which defines it as production that can be brought online for 30 days and sustained for at least 90 days, put OPEC’s spare capacity at 1.91 million bpd in the first quarter.
    Consultancy Energy Aspects said Gulf OPEC members would likely add less than 1 million bpd immediately, rising to about 1.5 million bpd in three to six months.
    https://www.reuters.com/article/us-oil-opec-capacity/opec-will-squeeze-oil-buffer-to-historic-lows-with-an-output-hike-idUSKBN1J811H

    1. The limit in Saudi, I am sure, is water injection and produced water handling capacity, not the wells or the reservoirs. They can’t significantly increase production without adding at least twice the amount of new oil in water injection (water cut is over 50% and oil shrinkage is around 20 to 30% I’d guess). I think spare capacity is likely to be highly seasonal so they can increase supply for power generation in summer and I’d guess recent increase is due in part to the Khurais expansion starting up, though I haven’t seen an announcement. I don’t see how EIA can come up with independent assessments of spare capacity so they are taking whatever they are told or simply extrapolating from data that could be 10 or 20 years old.

      1. “The limit in Saudi, I am sure, is water injection and produced water handling capacity, not the wells or the reservoirs. ”

        Its Horizontal Drilling and redrilling them when the water column exceeds the well height. They perodically have to redrill horizontal wells as the water column rises above them. When Ghawar was first drilled it had an oil column of about 2000 ft. Now its between 30 ft & 10 feet Also lots of oil that gets trap in pockets as water column rises, and the have to target those pockets with new wells.

        1. I think not, it’s a lot cheaper to add a few more production wells than to add a couple of million barrels of high pressure water injection capacity (topsides facilities and the wells needed to inject it), and they are particularly careful to control their water injection to ensure they keep an even water contact, that’s why they have the sophisticated models, 4-D seismic and inspection wells, where they can. They have the best control of the sweep of anywhere in the world, which is not to say they don’t get any surprises. The drilling of new oil wells is to maintain current production, not to increase it, that is why I said water handling is the limit, and part of the issue is that as the water cut increases they can’t maintain voidage replacement with current capacity – therefore they drill a new well rather than increase water injection.

          1. Hi George,

            Would maybe about 600 kb/d of spare capacity for KSA sound roughly correct then? Basically this is just bringing output back to the previous peak in Nov 2016.

            1. I don’t know. What do you define spare capacity to mean? They have been continuously drawing down stocks for a couple of years I think, is that just to meet their OPEC commitments or because they can’t do anything else? Has Manifa water injection capacity, and hence production, been, or will be, limited by the pipeline corrosion issues. Do they do all their maintenance in winter so they can crank up in summer? Has Khurais expansion started up yet?

              None of that changes the fact that the ultimate production limit is water, not the reservoir or wells or pipelines. It almost always is with mature water flood fields, if theirs no limit to where you can drill new wells – i.e. what spare capacity they have is limited in the water systems (note to produce 1000 bpd of stock tank oil with water cut 50% and oil shrinkage factor of 20% requires about 2200 bpd water injection, usually at very high pressure, plus the well to inject it).

            2. George Kaplan,

              I am assuming three things.

              Water injection that has already been built as of Nov 2016 will continue to work, Khurais has not started up yet as there would be news on that, and that KSA can bring output back to Nov 2016 levels (about 600 kb/d higher than May 2018 output).

              Any or all assumptions may be incorrect.

          2. “I think not, it’s a lot cheaper to add a few more production wells than to add a couple of million barrels of high pressure water injection capacity (topsides facilities and the wells needed to inject it”

            Water injection isn’t the problem, its water cut. The don’t need to inject more if they keep the water cut stable. In order to keep the water cut, they have to perodically drill new wells to keep the wells in contact with the Oil column. Over time the Water column push up on the Oil column (ie Oil floats on Water). All the CapEx/Opex goes into drilling to keep in the Oil Column Zone as well as add new wells to tap oil trapped in pockets. As the Oil column continues to shrink and and as the water column become increasing contact with the cap rock its going to required more and more drilling to maintain production.

            My guess well know when SA starts running into problems when we start to see the rig count increase and the production dropping over a period of a couple of years.

            “The drilling of new oil wells is to maintain current production, not to increase it”

            SA cannot increase Oil production much. They are working on extracting the remaining cream (oil column) floating on a see of water. Increasing production would just increase the water cut and also increase trapped oil that would later be more costly to extract. The only way SA can increase production is to tap new fields or increase drilling for oil trapped in pockets. But at some point these options will vanish over time as it will be increasing more difficult to squeeze more oil out, like trying to squeeze trapped toothpaste out of a depleted toothpaste tube.

            1. But this can’t be right because it makes so much sense that I understand it.

            2. I didn’t say water injection was the problem I said it was the limit to increasing production. It is. Water cut is the problem that leads to decline unless they keep drilling new wells.

              Two ways that increasing water cut is a problem are: 1) you have to inject more water for the same amount of oil, which they don’t have, 2) you have to treat more produced water, which they don’t have capacity for. Exactly what I said above. The third is that it reduces overall well flow and, more so, oil flow; but that is easily got round if it easy to drill new wells, as is the case for Saudi, even the offshore fields, which are shallow. That also solves the first two problems because the individual field and overall country water cuts are held steady.

              The limits on surface facilities are much more expensive and long term (5 years at least) to get round, but it could be done, therefore it is wrong to say that the only way to increase production is to tap new fields.

              (ps – I worked on water flood oil fields, including some minor studies for Saudi, for at least 15 years through my career, the water is a bigger influence on the design and operation than the oil.)

            3. That all together sounds like it’s completely senseless to keep some spare capacity for fields like this.

              This capacity will cost billions, hold back for not much. A big oil storage is better there for satisfying demand peaks or temporary supply losses.

              Reserve capacity is cheap to have when you are in primary recovery of a conventional (giant) field.

              The only illusion of reserve capacity would be in fields with tertiary recovery would be to postpone maintainance for a few months to get that 5% more production.

              Did I understand it right?

            4. Some spare is always needed, just to maintain production during maintenance or unplanned outages. Sparing doesn’t postpone maintenance, it means maintenance can be done without taking the plant offline, or at least not for too long, so you get maximum returns on your investment (when plants are taken down for major turn arounds it is to do work on items for which there are no online spares).

              Depending on the maturity of the field there is also always different amount of sparage in the different project components – e.g. the wells, compression, power generation, oil processing, export capacity, water injection, water processing – the limit is the component with the least amount of sparage.

              In Saudi also, at least for the heavy fields, they have been known to rest them completely for a time, this allows the water contact to settle out and avoid excessive coning, which provides a much better sweep of the oil and higher recoveries (I don’t think any where else has that luxury).

              So when someone says “we have spare capacity” it can mean almost anything from 2×100% pumps on a particular duty to an entirely unused, ready for action oil field.

              From a modern capitalist approach with everything just-in-time and the next quarterly statement being all important then excess sparing wouldn’t please the shareholders, but Saudi designed facilities with 50 year life times, so it might be different.

              From looking at their recent production profiles, which seem to go up when they report a new start-up and then decline, and stock draws, which have been consistent since January 2016, I find it hard to believe they have a large amount of “real” spare capacity – i.e. that’s easy to bring on line and that doesn’t alter any of the performance of the fields over the long term or compromise planned maintenance schedules – but I can’t say for sure. And, as I’ve said, the limit to expanding production (that means beyond just using up the spare) is almost certainly with the surface facilities for water, so it’s likely that is also the part with the least spare capacity.

            5. Thanks George.

              It sounds like you believe they might be able to maintain a plateau of 10 Mb/d for many years, if they just drill more wells as needed. Though I may not be understanding correctly.

            6. There’s the big question. Once the horizontal wells are at the top of the reservoir then you can’t drill any more and once the water contact hits them, even with intelligent completions, then the decline will be fast (but even that is relative, huge fields take longer to decline than small ones). There was a report in the Oil Drum some time ago that indicated that a lot of Ghawar wells were near the limit but nothing much seems to have happened since to indicate this turned into a problem, but then Saudi has a lot of other fields. On some of their offshore fields they are replacing all the wellheads to add ESPs, that usually means they have run out of new well options. Their rig count is declining, but maybe jus because they are drilling much more productive MRC wells.

              It’s the difference between the size of the tank and the size of the tap (or for water injection more like the size of the vent that lets air in to stop the tank collapsing under suction). Might only know what’s going on well after the fact.

  8. 2018-06-12 – CARACAS/HOUSTON (Reuters) – Venezuela’s state-run PDVSA and partners have halted operations at two upgraders that convert extra-heavy oil into exportable crude and plan to stop work at two others, according to six sources close to the projects, a move aimed at easing the strains from a tanker backlog that is delaying shipments.
    https://www.reuters.com/article/us-venezuela-pdvsa-crude/venezuelas-oil-upgraders-to-be-halted-amid-export-crisis-sources-idUSKBN1J82FX

    1. As I said above, the article points out that if they can’t relieve the bottleneck; they will be forced to slow or shut in production.

    2. 2018-06-12 (Argus Media) So far in June, the outlook for Venezuelan production is grimmer. Venezuela was producing about 1.5mn b/d at the start of May, including roughly about 800,000 b/d in the Orinoco oil belt and a combined 700,000 b/d in the company’s eastern and western divisions. But output in early June has dropped to 1.1mn-1.2mn b/d, according to three PdV officials.
      https://www.argusmedia.com/pages/NewsBody.aspx?id=1697240&menu=yes?utm_source=rss%20Free&utm_medium=sendible&utm_campaign=RSS

    3. They are losing workers especially the technical managers, don’t have money for spares and are going to shut down to repair (I note it says repair not just maintenance for two of them) and restart all four of the most difficult operations in refining, all at the same time. These are high temperature fluidised beds with some pretty horrible waste product (highly viscous, toxic coke in heavy oil residue sludge which can block pipes and burners and corrode all sorts of stuff). Shutting them down fro extended periods is not always a great idea at the best of times. Planned maintenance for such things is usually phased so only one is down at a time to ensure all the planning and purchasing can be completed and the experts are available to go to each plant in turn. The plants need catalyst replacement which costs money, and tends to be more frequent if the plant isn’t in very good condition or isn’t being operated optimally (the operators need to be well trained). Be interesting to see how long it takes and how many come back, it’s quite possible the best case will be cannibalising a couple to keep the others going.

      As to: “If PDVSA cannot alleviate the shipping bottleneck, the company and its joint ventures could be forced to slow or temporarily pause production at some Orinoco Belt oilfields,” that is already happening: they have dropped over half the rigs and might be down to none by September at current rate, without new wells and workovers heavy oil can decline pretty quickly.

  9. Houston, 11 June (Argus) Plains All American Pipeline, a prime mover of crude around and away from the Permian, reiterated last week that there is not enough trucking capacity to address skyrocketing production, and potential rail slots are limited.
    With most material pipeline capacity additions a year or more away, Plains said the logical solution is slowing output
    https://www.argusmedia.com/pages/NewsBody.aspx?id=1696409&menu=yes?utm_source=rss%20Free&utm_medium=sendible&utm_campaign=RSS

    1. That’s really kind of funny. The takeaway professionals have to tell them, “come on guys, put a brake on it. It can’t be moved.” Note, the article stated that the pipeline company said production is already slowing.
      Wonder if EIA will finally read the memo?
      Also, it may result in more little fish, being eaten by the bigger fish.

      Energy News, you constantly amaze me with your finds of information. Everything is extremely pertinent.

      1. The next 3 or 4 months for EF and Bakken might be interesting – they’ve both been steady or slightly declining with no pick up in drilling or, I think, permitting even as the price has risen, and the initial well production and ultimate recovery look to be declining on recent wells. If Permian is closed off I wonder if the operators will bother to move back to these.

        2. Yeah, I think they will. You just won’t see growth just overnight from these areas, and the ones who had good areas in these, never left. EOG, Conoco and others are still doing their thing. Growth will mainly show up the first and second quarter of 2019. Maybe some the last quarter of 2018. My guess. It just won’t ramp up like the Permian, EIA predicts a bunch, but they are smoking some strong stuff. They believe in teleportation of oil to the coast, and further teleportation to VLCCs off the coast.
          That not everyone believes the EIA is evident in the huge, many billions of dollars, losses in stock value of the “Permian pure play” companies recently. EIAs and IEAs fairy tales are coming unraveled. About the only section of the investment community that still believes them, is that percentage of adults that still believe chocolate milk comes from brown cows. What they are still unsure of, is how much excess capacity OPEC now has.
          Wild guess on the 22nd. OPEC releases non-opec from the agreement. Increasing OPEC, at this point, will involve disintegration of OPEC, which it really is, anyway. But, a modest increase may hold them together for a little while. Although, for the Sauds part, I don’t know why they would, except to keep up the illusion.

  10. IEA monthly oil market report for June is out.

    Selected extracts from the report follows.

    About the market in general:
    Rapidly rising prices in recent months have raised doubts about the strength of demand growth, and we have modestly downgraded our estimate for 2018. Prices are unlikely to increase as sharply as they did from mid-2017 onwards and thus the dampening effect on demand will be reduced.

    About Non-OPEC production growth:
    We think that in Texas by end-2019 there will be a net 575 kb/d of additional pipeline capacity beyond our earlier number, albeit with most of it coming on line in the second half of the year. In the meantime, capacity will likely remain tight but production will still be able to grow strongly, by 1.3 mb/d this year and 0.9 mb/d in 2019. Our non-OPEC growth for 2019 includes a modest increase from Russia reflecting a possible contribution to compensating for lost production from Iran and Venezuela.

    About OPEC production:
    To make up for the losses [from Venezuela and Iran], we estimate that Middle East OPEC countries could increase production in fairly short order by about 1.1 mb/d and there could be more output from Russia on top of the increase already built into our 2019 non-OPEC supply numbers. However, even if the Iran/Venezuela supply gap is plugged, the market will be finely balanced next year, and vulnerable to prices rising higher in the event of further disruption. It is possible that the very small number of countries with spare capacity beyond what can be activated quickly will have to go the extra mile.

    As usual I disagree with their views, it seems like they have a stance that the market will be in balance no matter what.

    https://www.iea.org/oilmarketreport/omrpublic/

    1. They now have an estimate (“scenario”) of market balance in 2019. All assumptions are not available in the public version. Deficit (stock draw or call on Saudi et al.) is between 1-1.6 mbd assuming lower exports from Iran and Venezuela. However, current decline in Venezuela looks worse than I think they assumed and IEA continues to assume N America shale oil on full throttle. 2019 is shaping up to be interesting.

      (sorry for cross post)

    2. The most likely trend for Venezuela is surely that it hits zero exports (or maybe total production at worst) sometime in 2019, not that it flattens out or, more miraculously, starts increasing again. Brazil is likely to take longer, and therefore have a lower peak, to ramp-up its planned Santos FPSOs. Kazakhstan looks decidedly peaky (or plateau-y, except in the past they’ve always shown decline after a peak); Tengiz expansion is in 2020 but I think initially it just extends the plant plateau. North Sea will be declining until J. Sverdrup. Nigeria and Angola are definitely showing signs of the big declines you get when deep water FPSOs hit end of life, and not much drilling there showing yet.

      It would be interesting to know how they factor in decline rates (which are accelerating); in-fill drilling (which must be running out of the best prospects); and short cycle developments of new discoveries (few to none of those at the moment). If they are using predictions based on 2005 to 2014 experience the models are going to be a long way out, but what data is available to do something better?

  12. U.S. Petroleum Balance Sheet, Week Ending 6/8/2018
    http://ir.eia.gov/wpsr/overview.pdf
    Saxo chart summary https://pbs.twimg.com/media/DflCAkpX4AAGGjK.jpg

    A draw of about the same overall size as last weeks build, due to big increase in total products supplied, which is up +3.3 million barrels per day from last week.

    This week’s domestic crude oil production estimate incorporates a re-benchmarking that raised estimated volumes by 55,000 barrels per day.
    https://www.eia.gov/petroleum/supply/weekly/

  14. The bible is out. A few surprises.

    India’s oil consumption growth was only 2.9%. Derives from their monetary debacle early in the year. We should see signs of whether or not that corrects back to their much higher norm before next year.

    China consumption growth 4%. Higher than India. Clearly an aberration.

    KSA consumption actually declined fractionally, which allows Japan to still be ahead of them in consumption.

    US consumption growth 1%. So much for EV silliness.

    1. Drop in the bucket to what is happening right now. US will be about 500k less than their (IEA’s) expectations into 2019 due to transportation constraints. George thinks Venezuela will approximate zero by 2019, as do others. Give them the benefit of doubt and say a one million decrease from 1.6 at the beginning of this year. IEA is still using production vs export capabilities, which has to change. Europe’s refineries have largely stopped buying Iran’s oil, as has India. That’s 1.1 million that has to be sold elsewhere, or not. On shipping, insurance, and financing that is not affected by the restrictions. I count 2.6 million into 2019 that is not on IEA’s plate. Yeah, as said above, 2019 is going to be quite interesting, most of which we will see the end of 2018. None of this takes into consideration any increase in demand for 2019 that is over the US production projection for 2019 (.9). nor any shortage carried over from 2018. Yeah, we should be hunky dory.

      In the investment world, we will still be watching EIA weeklies, to determine what is happening in the rest of the world for awhile. So increased cognitive function won’t happen soon.

      1. 250kbd – not shabby when it’s for longer than a few days. A quarter of the Opec reserve capacity, or all the russian reserve capacity.

        Without fracking, the world would be in deep sh*** already. With e technic not advanced enough and 150$+ oil – and more economic problems and instabilities.

        1. “Without fracking, the world would be in deep sh*** already.”
          Are you kidding? Why? We can’t car share, build vehicles that get 80 mpg or better, can’t conserve, can’t innovate? There is nothing better (sadly) than economic stress to make fast and lasting changes.
          Let the oil go up to $150. All the countermeasures have been developed, in a decade we would be well on our way to not needing oil ever again. Sure the military and some specialized vehicles or systems might need to burn some oil but 90 percent of the demand would be gone in a decade. Bring those prices up and keep them there. Things look ready now for a permanent transistion.

          Here in the US we are so wasteful, we would hardly know the difference if we cut demand by 50 percent. I cut my use of gasoline for transport down to 10 percent already. Didn’t die or anything like that. Many people could cut theirs by 50 percent or more with existing technology. With some planning and minor lifestyle changes, down to 30 percent.
          Businesses would go EV or hybrid with natural gas.

          It’s very dangerous to the oil industry to let the price rise. It’s no longer a kidnapped world, it’s merely a matter of changing production to different types of vehicles and heating systems. Oil lost out in power generation, it will lose out in transportation if prices go high for very long.

          1. Sorry, not buying that.

            People who can afford it will continue wasting gas – and US people have lots of money or credit cards. Some will have to scale back, of cause.

            The break comes in developing countries, where the “Arabian spring” was triggered by high fuel prices, among other reasons. Or in other countries when the goverment can’t keep up fuel subsidis. Modern cities, even in the 3rd world, need gas to function.

            This means public transport and goods transport, not private cars!

            Buying smaller car is an option for developed countries, including China.

            Other things: Lybia – with higher prices, the war between war lords for the oil perhaps heats up more – more weapons available.
            Nigeria: More oil price – more money to get from government, so blow up more pipelines.
            Venezuela: The decline started already at 100$+ due to socialistic waste, so no change here.
            Irak: Perhaps more money for IS & co by selling oil – so less production and more war.
            Iran: More money -> more weapons to shoot out the proxy war with Saudi Arabia.
            Russia: More money -> no really need to increase production, just earn.

            And so on… we need a transition, but not a chaotic one.

            1. Just reading the existent system now. Dependence upon oil is by design and design can now change. Economic stress is the only way to hasten the transistion.
              If Iran wants to spend it’s oil money on war instead of energy transistion, then it will end up back on camels in the long run. Same with some other countries.
              If the people of a country are more interested in war and destruction than helping themselves, that will end badly. Same goes for the US, or any other big country, if it keeps trying to run the world.
              Venezuela is an example of bad leadership, nothing else.

              People and governments often end up where they are aiming.

          2. You don’t understand, that this “wasting” of oil, and other energy sources IS the economy. When your car burns more gas – people in oil extracion, and refining have jobs, and oil exporting countires have revenue to employ it’s citizens, and these citizens then buy iphones, etc.
            Oil can only be scaled down, when other energy source takes over.
            The root of all employment in the world is using of energy sources. More energy used worldwide, means more purchasing power of the population. It’s true since hunter-gather times.

            1. Europe begs to differ. A number of European countries have twice the GDP/energy of the US. The whole world has been increasing GDP/energy used for many years.

              “Oil can only be scaled down, when other energy source takes over.”
              Efficiency and systems management has already scaled down the use of oil, otherwise we would be using more than twice as much now.
              Meanwhile, other energy sources are and have been taking over from oil for many years. From electric trains to electric power, electric cars, gas heating. This trend will only accelerate as oil becomes more expensive and more volatile in price.

              Yep, it’s scary for some. Two days work for a few guys or less puts enough PV on a house to supply it’s power and the power for an EV. Maybe another day or two for maintenance over the next 20 to 30 years. That is all the work that is provided.
              Another day or two to put in a battery backup system. Not much work there.
              However, not to worry. There is a huge amount of work over the next few decades designing, installing new energy systems. Houses and buildings need refits to be better insulated. Water systems will have to be changed. Everything will change, meaning lots of work. Probably too much, so automation will play a big part.
              After that, who knows.

            3. That’s an odd claim for “somebody” pretending to be Polish. Are you saying Poland doesn’t have an economy? Because the last I heard it was booming without an oil industry.

          3. “Why? We can’t car share, build vehicles that get 80 mpg or better, can’t conserve, can’t innovate? There is nothing better (sadly) than economic stress to make fast and lasting changes.”

            An 80 mpg vehicle is called a motorcycle. I don’t expect many people to commute to work in the middle of winter on a motorcycle. Nor can I see granny going to the grocery store on a motor-bike. There are limits to improvement: You cannot squeeze blood from a stone. Law of diminishing returns: further efficiency improvements are much smaller and much more expensive to implement.

            A lot of oil is consume to transport goods to consumers. That salad you bought at your local grocer, likely traveled 1200miles in a refrigerated truck. Pretty much everything you consume includes materials, parts that are manufactured in distant locations.

            Most Westerners are now dead broke. They carry high amounts of debt, and have managed to avoid going homeless because Central Banks dropped the interest rates to nearly zero. Since then People have been increasing there debt and at some point rising interest rates & increasing debt will trigger another crisis. That said, dropping the interest to near zero probably won’t work the second time since when the next crisis starts rates will be significantly lower than during the 2008-2009 (ie law of dimishing returns applies to interest rates too)

            “Let the oil go up to $150. All the countermeasures have been developed, in a decade we would be well on our way to not needing oil ever again”

            It won’t be sustainable. Recall that in 2008, Oil prices peaked at $147/bbl and it triggered the biggest global recession since the Great Depression. Gov’t turned to Money printing (ie QE) to avoid a deflationary spiral. If Oil Spikes near $150/bbl is going to trigger another global crisis. Which will lead to more war, Civil wars, revolutions, & rioting. Recall that during 2009-2012, Developing world gov’t collapsed, and there were widespread riots in Europe (UK, Spain, Italy, Germany, etc).

            “Oil lost out in power generation, it will lose out in transportation if prices go high for very long.”

            Oil was never a major source for generating Electricity. Coal was, but that been outpaced by NatGas. The think is that NatGas is much more valuable to use for spinning turbines. Its used for heating and DHW in urban areas since it does not release emissions like Coal & Oil would. I cannot fathom the costs of retro-fitting every home & business when NatGas depletion hits.

            It took the work about 140 years to build the economy and infrastructure which is dependent on fossil fuels. Any transition off fossil fuels is likely to take nearly as long.

            1. I am taking that rant to my garden to help plant growth.
              Tech guy said:
              “An 80 mpg vehicle is called a motorcycle. I don’t expect many people to commute to work in the middle of winter on a motorcycle. Nor can I see granny going to the grocery store on a motor-bike. There are limits to improvement: You cannot squeeze blood from a stone. Law of diminishing returns: further efficiency improvements are much smaller and much more expensive to implement.”
              No they are called hybrids and EV’s and they are real cars not motorcycles, though EV motorcycles do much better.

              Techguy said:
              “It took the work about 140 years to build the economy and infrastructure which is dependent on fossil fuels. Any transition off fossil fuels is likely to take nearly as long.”
              You are long about 100 years on that one. Most things already depend upon electricity, we already have the tech needed for the transistion which is in progress around the world.
              You think oil is going to last 140 years? Make it 30 to 40 and some people might believe you on this site.

              BTW oil prices did not trigger the global recession, it was a banking failure due to an 8 trillion dollar housing bubble bursting, a stock market descent and the resulting loss of wealth causing a big cutback in consumer spending, then the largest loss of jobs and cutback in business investment since the Depression.

            2. It took the work about 140 years to build the economy and infrastructure which is dependent on fossil fuels. Any transition off fossil fuels is likely to take nearly as long.

              Why would that be the case? There are many examples of leapfrogging over previously existing technology. Third world countries without the existing infrastructure of land lines went straight to smartphones in about a decade.

              Today’s Millenials think very differently about transportation than the old guard. My own son does quite well without owning a car. He is a university student and has a job. If he needs to commute he takes public transport or if necessary a ride sharing service like Uber or Lyft, he has a smartphone and that’s all he needs.

              BTW an 80 mpg vehicle is not a motorcycle, that’s completely obsolete technology. Because there some are European Millenials who came up with this:

              https://www.youtube.com/watch?v=9QVBIiOcIds

              Solar-powered car (4-seater) by Solar Team Eindhoven

            3. Senior communities have embraced golf carts.

              In urban areas, people are using electric scooters.

              For some lifestyles, using vehicles that are low maintenance, don’t require expensive fuels, don’t require insurance and state and local fees, and can be parked or ditched easily are more convenient than owning or operating a traditional vehicle.

              The transportation market may further split into the SUV/truck owners and the small electric device users.

              As the small electric market expands, and communities become more accommodating to their users, a tipping point may be reached.

              Devoting expensive real estate to parking lots doesn’t always make financial sense.

            4. Know what? You’re right! Everything is solved. EVs will save the world! We’ll be driving EVs to Infinity and Beyond.
              Why don’t You two go on a worldwide celebration! You should be awarded the Nobel Prizes for Physics, World peace, Chemistry, and economics.

              We all bow to your great wisdom!

              kumbaya! Now Ron & Dennis can shutdown POB since its really all pointless.

            5. Of course EV’s aren’t about to save the world from oil depletion, demand outstripping supply of crude oil, and the economic catastrophe that a massively overgrown population will experience from the shortfall of energy.

              But that is all the more reason to adopt EV’s as quickly as our economy can do it- because when peak oil becomes apparent, you sure as hell still want to be able to get around, and to market. The more folks and businesses with EV’s/hybrids at that point, the more functional the economy will be. Certainly that holds true for your local community and family.

              I saw a guy driving through the city streets the other day- his vehicle was an electric trycicle that was about as big as a van. It was hauling 4 electric bikes in a rack, and then a separate cargo trailer behind it for tools and such. He was going to next stop on his route, servicing the electric bikes that Ford has put out for rent around the city in huge racks. Maybe this kind of stuff isn’t happening in your town, but it is starting to in hundreds of others. Better than doing nothing while peak oil gets closer. btw- Ford is planning to have battery power in most of their vehicles within 4 years-
              “DETROIT (Reuters) – Ford Motor Co (F.N) will significantly increase its planned investments in electric vehicles to $11 billion by 2022 and have 40 hybrid and fully electric vehicles in its model lineup, Chairman Bill Ford said on Sunday at the Detroit auto show. ”
              https://www.reuters.com/article/us-autoshow-detroit-ford-motor/ford-plans-11-billion-investment-40-electrified-vehicles-by-2022-idUSKBN1F30YZ

            6. Ford is exiting passenger cars. its going to focus on light trucks and SUVs:

              https://www.investors.com/news/ford-motor-exiting-passenger-cars-more-trucks-suvs-new-lineup/

              Cars are becoming unaffordable. Average US auto loan is now over 6 years. Subprime autoloans are avg. close to 10 years. Personal transportion is dying a slow death as the costs for personal vehicle ownership is slowly becoming unaffordable for all but the top 10% of the population. Ford is switching to focus on the high end market which is affordable by roughly the top 10% of the wage earners. GM & Crysler\Fiat are focusing on debt to fuel autosales, which will lead them into default again when the next recession hits.

              Instead of EVs, public rail transportation should have been the focus as well as increasing freight trains instead of trucks to move goods. EVs are a dead end. The USA could have spent the the past 10 years adding more rail to support passenger and freight. As energy prices rise, and demographic problems grip the economy, their won’t be any resources available to increase rail transportation.

              Rail is the most efficient transportation system available and it can be powered by fossil fuels or electricity and isn’t dependent on batteries. It also avoids wasted energy not getting stuck in a traffic jam.

              No way will EVs ever obtain any significant numbers compared to fossil vehicles. Perhaps hybrid will increase, but these are still dependent on fossil fuels & EVs are still dependent of natGas power plants. If there was ever a signifcant transition to EVs the Grid would need a massive investment to permit large numbers of EV to be charged.

              I think that most people will end up holding on to junkers when they can not longer afford to by new vehicles. They simply drive considerable less, until they are no longer able to drive at all. Something like 90% of all new personal vehicles use auto loans. Delinquency rate for subprime auto loans are now at a 22 year high.

              I recall that 5 to 7 years ago, The cornucopians here\TOD believed Wind and Solar would dominate grid power generate by now. They projected that current trends in growth would increase for the forseeable future. It didn’t happen. Today most of new grid power generation is coming from new NatGas plants, which for the time being is the cheapest source (even beating coal).

            8. Except that none of that is realistic.

              For instance, car prices are rising because people are willing to pay more. You can still buy cheap new cars…but no one is buying them.

              I don’t remember anyone here 6 years ago saying Wind and Solar would dominate grid power generation by 2018.

              And you might want to take a look at the latest post: http://peakoilbarrel.com/eias-electric-power-monthly-may-2018-edition-with-data-for-march/#comment-642876

              for stats on new capacity for natural gas vs wind & solar.

    2. Could be the first sign of things kicking off again – wasn’t the chap who was supposed to be holding it together reported as having a stroke some time recently?

  16. Saudi Arabia – Manifa – I’ve not seen anything more recent but this article from last year suggests that they’re building a new water injection system in parallel with the original corroded one, while still producing oil.

    KHOBAR, Saudi Arabia, July 20 (Reuters) In August, service companies are expected to receive tender documents to bid for work related to laying a new pipeline to replace the one hit by the corrosion, but is still in use, other industry sources said.
    https://af.reuters.com/article/africaTech/idAFL5N1KB6G7

  18. World desulphurization capacity is at 60%, with another 3.9 million b/d of capacity being added by 2021

    OPEC World Oil Outlook 2016. Capacity by process and region
    At the global level, today’s refineries are increasingly ‘complex’ – that is, more refineries today have more secondary processing per barrel of primary distillation capacity than was the case in the past. The trend has been for most new large refineries to be built with high levels of upgrading, desulphurization, octane and related supporting capacity from the outset. Recent examples include new refineries in India and Saudi Arabia. Thus, base levels of secondary capacity are now substantial. As a percentage of crude (atmospheric) distillation capacity, vacuum distillation stands at an average of 38% worldwide, upgrading at 41%, gasoline octane units at 19% and desulphurization at 60%.
    http://www.opec.org/opec_web/en/publications/340.htm

    US EIA 2017 Table 1. Desulfurization capacity is 17,621,484 barrels per stream day
    https://www.eia.gov/petroleum/refinerycapacity/refcap17.pdf

    Futures prices for 3.5% sulphur fuel oil
    https://pbs.twimg.com/media/DfsLIiBW4AALxhu.jpg

    1. Isn’t another factor for the IMO rules that the shipping industry has decided to switch to marine diesel, rather than desulphurised bunker oil. I don’t know why – maybe they thought it would be more readily available; so they could switch back if it turns out not to be.

      1. Yes “thought it would be more readily available”. No doubt they prefer fuel oil as it costs less than diesel (gasoil) and their fuel systems are designed to use it. I guess the story is that, so far, there isn’t enough low sulphur fuel oil available.

      2. George

        I suspect this is the thin end of the wedge. I can only comment from the perspective of the trucking industry but when the legislators turned there sights on us some years ago sulphur was the first target. But very soon oxides of nitrogen were also included. Thus moden truck engines are now all electronically monitored and controlled, catalytic converters, particulate filters and exhaust gas after treatment (adblue) are all in common use. Non of which work atall well with bunker fuel.

      3. I guess regulators don’t like heavy fuel oil all together. Too much metals, NOx in addition to high natural sulphur content if the feedstock has a decent amount of sulphur in it. Some crude oils have low enough sulphur content to not need further treatment, for example some Algerian/Nigerian crude types and some of the tight oil as well (e.g. Eagle Ford). It is usually more the case for the high API crude though. It doesn’t solve the problem as some refineries have a strategy buying low sulphur oil even today.

        Found an article where the authors think the refiners have the following options:

        • Investing to reduce the sulfur content of produced fuel oil to continue serving the bunker fuel market. Investments in process options should be carefully evaluated based on differentials in pricing of low-sulfur fuel oil (LSFO) vs. HSFO.

        • Exiting the fuel oil market completely. Many refiners are considering implementation of bottom-of-the-barrel upgraders to produce more low-sulfur distillates, including marine diesel.

        https://www.ogj.com/articles/print/volume-116/issue-4/processing/study-evaluates-refiners-options-to-meet-2020-bunker-fuel-sulfur-rules.html

        For the second option investing in delayed cokers seems to be a good idea (that was what Exxon did in Rotterdam). It is a costly investment, but must be worth it given diesel prices at the moment.

        If all refineries chose to exit the fuel oil market I can’t help thinking this will create some problems as what was bunker fuel oil before now ends up in a range of distillate products and some (maybe 5-10%) could also end up as gasoline after cracking. So it is difficult to replace bunker oil with marine diesel 1:1.

        It is also kind of worrying that marine diesel as an alternative is a lot more expensive than bunker oil. This is an inflation trigger for the global economy and a hurdle for the shipping industry.

        1. Maybe the world economy will be so far in the tank by 2020 we’ll be seeing general deflation amid low demand for fossil fuels.

          1. There sure seems to be a lot of factors pointing to a rather hard landing for this long business cycle (10 years is a really long boom period). The central banks have a tendency to print money when things go wrong; or use the low interest weapon if they have it. Where all this will end up is difficult to predict just because of how complex it is.

          2. To be more precise, after some reflection, what I fear is more stagflation. A rare historic incidence which combines inflation with negative economic growth. That is what happens when pouring money into an economy with scarce resources where oil is one of them. What is coming is typically not like 2008-09 just because black swans are everywhere, and higher inflation is the surprise coming forward in my opinion. Prices for fossil fuels will stay pretty high in such a scenario, e.g. with the decline rates for oil overall rising steadily. Which I think is a good thing due to the energy transition that has to happen. I think it is realistic that we can come up with a halfway of a solution for our energy problems and that it is good enough to secure a decent standard of living (or maybe halfway decent or okish ;-)) long into the future. But not an affluent one and it will be highly country specific. Unless some kind of technology breakthrough is coming, but that is certainly a long time project.

        2. At the same time, a lot of shipers are investing in two fuel engines (nat gas and fuel oil) to comply with sulfur rules

  19. 2018-06-14 (RBN Energy) Cushing Pipelines Filling Up And The Impact On Price Differentials
    U.S. production has been growing consistently and demand for crude at the Gulf Coast for exports and refinery inputs will remain strong. With no new projects in the works to transport additional crude volume from Cushing to the Gulf, space on Marketlink and Seaway should remain a valuable commodity, at least until several new pipes are built out of the Permian to the Gulf. . And if those two lines remain full, pipelines and production further upstream of Cushing could start to see differential swings as well.
    https://rbnenergy.com/oklahoma-breakdown-cushing-pipelines-filling-up-and-the-impact-on-price-differentials

    1. That’s a very interesting look, and something I have been wondering about for awhile. Cushing is not filling up, now. It is at a very low point relative to the past few years. Still, an almost $8 discount to MEH means MEH is only a coulpla bucks less than Brent. Which I view as very positive for demand. Most of the Eagle Ford goes directly to MEH, involving only transportation costs and whatever other arbitrage they throw in. So, Eagle Ford is getting the best rates, as of now. That traveling from the Permian to Cushing, are subject to two big discounts before sale. According to the article, it may have a delay in sale, too. Stuff coming from north, and from Okla. have the same constrictions to MEH. But, they have some other alternatives to MEH, at least. Cushing would have been completely overflowing without the 300k a day pipeline to Nashville opened last year. I read they are looking at other re-works to get it to East Coast refiners. All the new pipelines I read about from the Permian are headed to the Coast, not Cushing. I haven’t read about any new lines from Cushing to the Coast. But, if there is demand, we may be hearing about it soon.

    1. It has an odd emphasis on debt. It’s true that debt is a claim on the future. But…everything is a claim on the future. A mortgage is, and so is a lease with promised rent payments. Bonds are, but so are stocks with dividends.

      He implies that rising debt is *necessary* for economic growth, but doesn’t make that explicit. It’s a key assumption that’s not spelled out, perhaps because it’s not supportable.

      And this idea that debt pulls forward energy consumption is odd. You can’t borrow energy from the future- it’s either physically here today or it’s not.

      Finally, he make some dubious criticisms of renewables-am I right in my vague memory that he denies climate change?

      1. Hello everyone.
        Recently I have been lurking around POB due to other pressing engagements, but the comment from NickG prompted me to respond.
        …
        Troll alert!

        First of all Nick G do you have courage enough to introduce yourself by your full given name?

        1.” It has an odd emphasis on debt. It’s true that debt is a claim on the future. But…everything is a claim on the future. A mortgage is, and so is a lease with promised rent payments. Bonds are, but so are stocks with dividends.”
        Mortage is DEBT!
        How is (all) rent payments DEBT?
        Are dividends DEBT?

        2. ”He implies that rising debt is *necessary* for economic growth, but doesn’t make that explicit. It’s a key assumption that’s not spelled out, perhaps because it’s not supportable.”

        If NickG had taken the time to read my article before commenting he would have found that figure 6 shows how world total debt grew from 2002 to 2017 while figure 1 also shows development in world GDP. To help him; figure 6 shows world total debt grew by $131 Trillion and world GDP by about $35 Trillion for the referred period.

        NickG, please explain how economic growth is facilitated.

        3. ”And this idea that debt pulls forward energy consumption is odd. You can’t borrow energy from the future- it’s either physically here today or it’s not.”

        DEBT pulls forward demand/consumption, also for energy.

        4. ”Finally, he make some dubious criticisms of renewables-am I right in my vague memory that he denies climate change?”

        NickG, show where in my article that I make some “dubious criticisms of renewables”?
        NickG, I resent your thinly veiled comment (rather attempt to smear) regarding what I mean or not mean about climate.

        I demand NickG either provides evidence supporting his comment or retract the comment in full.

        1. Rune,

          I’ve been here and on TOD for more than 10 years – I think its quite clear that I’m serious about this stuff, and not interested in creating unnecessary, personal, unsupported arguments (which I think is what you were suggesting).

          Yes, I challenged your article quite strongly, but…that’s because I disagree with it, quite strongly.

          So, there’s a lot of material here for a very long discussion. let’s limit it to one issue at a time, and start at the end: do you agree that climate change is anthropogenic, primarily caused by fossil fuels, and a very serious risk to humanity?

          1. I never discuss matters related to climate in the public.
            And my article was not about climate, it was primarily about energy. In other words you are trying to discuss something that is not related to my article…that is what trolls do.

            No, you did not challenge my article, you simply revealed your ignorance.
            I am still waiting for your explanations and documentation.

            And btw why do you, NickG (still waiting to learn your full given name) not have the courage to take your comment to my site?

            1. Rune,

              “No, you did not challenge my article, you simply revealed your ignorance.”

              Yes, that pretty well sums it up.

            2. Well, I find it useful to know, when discussing biology, whether the person agrees with the theory of evolution.

              Similarly, when discussing energy, I find it helpful to know the person’s views on climate. That’s not trolling – it’s pretty basic when it comes to energy. And, sadly, I find that people who defend fossil fuels, and makes dubious criticisms of renewables, almost all of the time don’t accept the scientific consensus on climate. I can’t think of a good reason not to discuss climate – such discussions do attract comments from climate denier trolls, but you can delete them on your own blog.

              Okay, I guess that’s enough on climate – readers can draw their own conclusions from your unwillingness to discuss it.

              Now, let’s go to the off-topic things that you’ve offered: I don’t give my name for reasons that I can’t discuss, and because it’s irrelevant – authority doesn’t matter. Only good logical arguments, and evidence matter. On the internet, you can be a dog, and it doesn’t matter – the question is, does what you say make sense? Why don’t I go to your site? I don’t know – I don’t really see a reason to. POB uses the time I have available for such things, and I don’t have time to go to more sites to engage in long arguments – I have enough of them here.

              So…let’s tackle one more topic – the first one, debt, looks good. You said:

              Mortage is DEBT!
              How is (all) rent payments DEBT?
              Are dividends DEBT?

              I didn’t say rent payments or dividends are debt. I said that they’re claims on the future. If you sign a 5 year lease, you’ve made a promise to make those payments, just as if you’d signed a 5 year mortgage note. Similarly, people who buy stocks are getting the promise of dividends: they’re a claim on the net profits of the company. And a claim that’s enforceable in court.

              So, if a country’s housing stock is shifting from rental to owned (e.g., apartments are converted to condominiums), then debt will rise, but does that mean anything? Not at all. The “claims on the future” are no greater than they were before.’ Similarly, if corporations are shifting to financing capital investments through debt rather than through stock issuance, it doesn’t mean anything at all about the “claims on the future”.

              Does that help?

            3. NickG, you are still way off in the wilderness relative to the content of my article.

              ”Now, let’s go to the off-topic things that you’veoffered: I don’t give my name for reasons that I can’t discuss, and because it’s irrelevant – authority doesn’t matter.”

              NickG, your reply is what to be expected from a troll.
              Again I urge you to provide references to my official stances on climate. Alternatively retract your statement.

              Nick wrote;
              ”Only good logical arguments, and evidence matter.”

              Yes, hard facts, data and logic matters.
              So where did you apply those in your initial comment directed towards my article?
              Hint, reread your initial comment which was designed to create doubt without providing for an alternative explanation.

              ON THE SUBJECT ON DEBT.
              Have the world’s debt/credit grown in recent years?
              (Note I provided documentation for this from several sources in my article and my point was about the growth in stocks of the worlds currencies and you provided a non relevant reply.)

              NickG, I will give it to you straight. Your comments/replies reveal you are a financial illiterate.

            4. Rune,

              It looks like we’re still have to talk about Climate. I regret that it has upset you so much, but I can’t imagine how we can ignore it. I think we can all agree that if Climate Change is as important as the IPCC suggests, that it’s a very large cost for fossil fuels. Also, almost all world governments are shaping their energy-related public policy with Climate Change in mind. That means that Climate Change has to be a very large factor in any analysis of energy costs, and the relative growth of fossil fuels and renewables.

              So, whether one includes Climate Change is important. It’s highly relevant to the accuracy and realism of any analysis or projection of our energy future.

              So…do you include Climate Change in your analyses and projections?

            5. Nick, not to worry. Growth based on a declining energy system is a fatal direction. Fossil fuels, besides their many horrible present consequences, have no long term future. Thirty to 100 years at most and declining during that period. To even try and compare fossil fuels to solar and wind energy which has an unlimited timeline is just silly. Continuing to base a civilization on FF technology and use is deadly in the near term.
              The total useful energy available from solar and wind is vast compared to the total useful energy available from fossil fuels and the timeline of FF use is a mere point compared to the timeline for solar and wind energy availability. With a limited amount of energy and an extremely short timeline, FF are not comparable to soalr and wind power.
              FF use is a dead end. Solar and wind are continuous sources over geologic time.
              I see no point in the discussion considering the current state of technology and knowledge.
              Unless of course it is to point out that FF is a large economic drain on the system and the funding should be shifted to developing a long term energy system.

            6. There are other sources not yet tapped:

              Geological energy – or fusion energy.

              But both require more time to be developed in a safe and economic way.

              The next source is water power (already tapped but can be advanced – wave energy) and bio mass energy (problematic but possible as a gap filler).

              Bio mass has the advantage to be storable just like a heap of coal – so it can bet a good gap filler with little extra cost.

            7. The problem facing any energy source other than solar is that solar is going to be free during the day in a decade or two. That makes investing a chump’s game.

              Solar is already the cheapest form of energy. If prices for solar equipment fall at 10% a year for the next 15 years, they will hit 20% of current prices.

              For reference, prices fell by about 25% last year, and are expected to repeat that this year. The switch from polysilicon to monosilicon is expected this year, so panels should produce a lot more energy as well.

              We are nowhere near the bottom. Whether or not you believe solar can supply all our energy needs, it’s hard to deny that selling energy at a profit is going to be much harder in the 21st century than it was in the 20th century.

            8. Maybe we will stop investing in things so much and invest more into ourselves and the natural world. Bringing the world back toward life could be the best investment we have ever made.

            9. I found Rune’s article very relevant to the world we live in today; debt affects financial systems, the price of hydrocarbons and its use in the future, even how alternatives to hydrocarbons can be developed going forward. I note Rune did not post his article on POB, someone else did, and did so under discussions related to petroleum.

              The criticism the article received is simply directed at the author, not the topic, and is an effort by the same 2-4 individuals on POB that always try and control its content and otherwise promote their irrational, radical agenda against all hydrocarbon use, starting tomorrow. If you see no-point in discussing fossil fuels anymore, then don’t. Stay on the non-petroleum side of the tracks to discuss ice and rail on Trump. And since when does one have to declare one’s position on climate change before offering insight into oil and natural gas issues critical to the near term future of the world? That’s some pretty narrow minded stuff.

              Does that help, Nick?

            10. Some people who post comments here are desperate for pushing their vision of a future that ‘works’, smoothly and cleanly, without coal and oil. All of their comments are in support of trying to convince all readers that this can happen, if only they agree. Pleae ‘drink the coolaid’, they say.

              I am sorry to say to them that it is merely wishful thinking. Worth working towards certainly, but a massive depression and demographic chaos is already baked in the cake, with a very high degree of certainty. This is due to the combination of a massive global debt accumulation peaking at the same time as fossil fuels (within the the next 7 years) Catastrophic, imho.

            11. GF, sounds to me like you might just be one of those so called financial illiterates. 😉

              Jeez, next thing you know you’ll be trying to convince people that physical laws trump neoclassical economic thinking… Good luck with that!

              Maybe you need to post that youtube video of Jeremy Rifkin’s talk on the third industrial revolution, here on the Petroleum side of POB, not that I think it will change any of the deeply entrenched views of anyone on this side of the aisle.

              I’m sure things will be much better when we have 9 billion people vying for the limited resources of an overheating and dying planet circa 2040. /sarc!

            12. I now see more than 5 cars when I walk the paved roads near me. It’s absolutely horrendous.
              I have seen traffic jams at the 4 way blinking light stop in the town center, sometimes involving up to 6 to 8 cars stopped at once. What a nightmare.

              I find it hard to imagine what will happen here when there are lots more people in Africa.

            13. Hi Rune,

              China’s debt to GDP to the non-financial sector is only about 160%, so there is likely room for growth in Chinese debt. For the US the Debt to GDP has stayed pretty consistent ay 250% from 2010 to 2017 based on BIS data.

              As long as World debt grows at about the same rate as GDP there may not be a problem, I agree the World Debt to GDP ratio cannot grow without limit, probably 3 to 1 is roughly the limit (Japan’s ratio) or possibly the G20 current ratio of 2.45 to one.

              Much of the World debt increase from 2004 to 2017 has been from emerging market economies (46% of the total debt increase of $97 trillion from 2Q2004 to 4Q2017) where the debt to GDP ratio increased from 120% to 194%.

              Also much of the growth in World energy consumption since 2013 has been from energy sources that are not fossil fuel (coal, oil and natural gas.)

              Chart below uses BP data to compare fossil and non-fossil fuel growth from 2013 to 2017. Fossil fuel growth was about 370 Mtoe and non-fossil fuel growth was about 310 Mtoe (consumption in both cases).

              Surprising that nonfossil fuel growth nearly equaled fossil fuel as the base was over 5 times smaller (1800 vs 11000 Mtoe in 2013).

            14. http://instituteforenergyresearch.org/analysis/snapshot-bp-world-energy-outlook-2018/

              A Snapshot of BP’s World Energy Outlook 2018

              Renewable energy (excluding hydro) is the fastest growing fuel source, increasing five-fold and providing 14 percent of primary energy in 2040.

              Though many here may disagree with Tony Seba’s future scenarios regarding multiple converging disruptive technologies, the one think I take away from his talks is that the supposed experts, the ones in the know are the least likely to see the writing on the wall.

              Cases in point, automobiles disrupting horse and buggy transportation in a little over a decade, IBM missing the boat with mass penetration of PCs and AT&T assuming there would be a market of only 900,000 cell phone users by 2000! There were actually 109 million, just a wee bit off, eh?

              So I’m going to bet BP is being ridiculously conservative because of its own expert blinders, and will be proven massively wrong!

              If BP’s prognostication holds even remotely true then by 2040 the world will have 9 billion inhabitants, climate change will have pushed temperatures to over 3°C which will have exacerbated the sixth mass biological extinction event, sea level rise will be devastating coastal cities like NY and Miami, food production and agriculture as we know it will be in shambles and the social and economic consequences of all of those things will certainly have destroyed industrial civilization as we have known it!

              BP is dead wrong and so is anyone who thinks we are not transitioning to an economy that isn’t burning fossil fuels before 2040. If we don’t it is game over!

              Cheers! 😉

            15. Silicon based PV just hit 25% efficiency. That means in the half cloudy mid north a panel will produce about 15,000 kWh over 30 years. For under $300. That is 2 cents per kWh. Just the local distribution charge on my grid is 5 cents per kWh.
              We have better than grid parity, better than distribution parity.
              If economics is any driver then PV should deploy fast.

            16. If economics is any driver then PV should deploy fast.

              Even though resistance is futile it still exists. Don’t forget, something like 62 individual humans control as much wealth and resources as 3.2 billion humans. How do we round them up and take that control away from them and distribute it equitably?

            17. They are extremely outnumbered and surrounded. Not a good position to be in. 🙂

            18. I wish the extinction, climate change, and destruction stuff would stay in the non-petroleum threads. That’s what they are for. On the petroleum side, that material should be considered spam.

            19. Let’s see now, burning petroleum products releases, CO2, which in turn causes climate change, which is a major contributing factor to the sixth biological extinction now ongoing, which is a game changer for industrial civilization and could possibly end it.

              You may not like it but everything is connected! My comment was on why I believe BP’s World Energy Outlook 2018 with respect renewable energy growth by 2040 was way too conservative.

              If you don’t agree with my position argue against it. Otherwise take your thinly veiled ad hominem remark and bug off!

        2. Rune, this secion contains several fallacies:

          Simplistic explained is GDP a monetary measure of the annual volume of transactions.
          These transactions involve the exchange of products and services which require some input of ENERGY and in recent years growing amounts of DEBT allowed for this to happen.
          This illustrates that money/currency is a claim on ENERGY.
          The orderly retirement of the growing DEBT is a claim on future ENERGY.

          First GDP is not monetary, since inflation is usually removed from the calculations.

          But ignoring that, the amount of energy needed to produced goods and services (per unit) has fallen dramatically in recent years. There is nothing magical about energy. It’s just like any other input, we use a lot of it because we don’t have a better plan, but when we get a better plan we stop using so much.

          For example, the amount of energy needed to make steel has fallen by about 60% since 1960

          https://www.worldsteel.org/en/dam/jcr:f07b864c-908e-4229-9f92-669f1c3abf4c/fact_energy_2018_.pdf

          Meanwhile, the steel has gotten a lot better, as have designs, so the amount of steel needed to make a car (ceteris paribus) has fallen as well.

            1. Correlation is not causation. Lots of things correlate with GDP. Heck, Coca Cola correlates with GDP: does Coke cause economic growth?

              No, you have to make a better argument than just identifying a correlation. That’s part of the problem with Rune’s analysis.

      2. “You can’t borrow energy from the future- it’s either physically here today or it’s not.”

        Of course you can. It’s physically here, but at a cost. And it’s that cost (the amount of energy and other inputs you need to consume to extract that new energy) that can be borrowed and consumed. Consumption almost always means that you take the consumed stuff “from the future”. You can today use 2 BOE of “borrowed” energy to extract 1 BOE of energy. By doing that, you have effectively “taken energy from the future” by consuming the 1 BOE that was “lost” in this negative EROEI process.

        1. Borrowing from the future can be a useful metaphor. Like not repairing your house is borrowing from the future.

          But…you can’t actually pull energy out of the future. You can import oil from Saudi Arabia, and go into debt because of it. But, the whole world can’t import oil from anywhere else, and it can’t go into debt: every debt creates an asset for someone else. Debt imbalances between people, companies and countries are important. But, don’t confuse the micro with the macro – the picture for the world overall is different.

  21. Rig count down slightly. The monthly completions initially reported in June for district 8 is down about 30% in comparison to the last three months. Think the slowdown is starting. It won’t stop, as they have to continue to keep production from falling. It’s going to be four months before EIA picks it up.

  22. Hi. Here are my updated Bakken graphs.

    There were 97 new wells in April. Those wells had high initial production. At the same time, production by 2007 to 2016 wells declined by less than 8000 bpd. So the large increase in total Bakken production was both because of many wells in March and April with very high initial production and small declines in old wells.

    1. Big increases in GOR for 2016 and 2017 and also for 2007 and 2008 for some reason. The other ones seems to have entered some sort of plateau. However worth remembering is that this is the average. So it´s not at all for sure that this is typical individual well profiles. Some wells may have declining GOR while others have increaseing.

    2. Here is the 1 month after first production graph. The March wells had very high production as you can see, new record. The 0 month after first production for April was higher than for March (which was high, however not record high), so they will probably be high for the 1 months data too.

      So no signs of peaking yet. This is surprising as I thought higher oil price and more wells would result in more wells outside the sweet spots. But of course this is only one month of data, so we have to wait and see.

      1. I had a look at the non confidential data for the March wells in April and what stands out are 8 wells by Marathon in Antelope McKenzie with a production of 1500 to 2600 bopd and 8 wells by WPX in Reunion bay Mountrail with a production of 1100 to 2300 bopd. There were also 2 wells by Petroshale in Antelope McKenzie with a production of 1250 bopd and 1000 bopd and one well by Whiting in East Fork Williams with a production of 1050 bopd. The rest of the wells had a production of less than 1000 bopd.

      2. Freddy W,

        The chart showing 2nd month average production may simply be showing a move of all new completions to sweet spots only. Although this does not coincide with the price drop in late 2014, it may have taken some time for producers to react as there may have been a number of wells in less productive areas in early 2015 that were in different stages of the completion process and it may have taken 12 months or so for most of these wells to be completed.

        By 2016 the focus was probably 95 to 99% on the sweet spots for new well completions so the average new well output increased. In addition there may have been some gradual changes in the amount of sand, the number of frac stages per 1000 feet of lateral and perhaps some other technical improvements that have boosted peak monthly output marginally. A more interesting stat might be the 5 or 3 month centered average of the 3 month cumulative output from 2016 to today as the 2nd month output looks quite volatile from month to month.

        When we consider that wells which started producing after 2013 have lower output than the earlier wells (which started producing before 2013) after month 35 and that the increase in output over the earlier months (from first month to month 35) only amounts to about a 20% increase over the life of the well (even if we ignore the fact that later months are lower than before and assume after month 36 output will be equal to the older wells), it will not be long before sweet spots are exhausted and new well productivity starts to decrease (my guess is 2019 to 2020).

        Chart below looks at North Dakota 3 month cumulative (in barrels per day per well), based on quarterly data from shaleprofile.com

        https://shaleprofile.com/index.php/2018/05/17/north-dakota-update-through-march-2018/

    3. Here is a graph for 6 months after first production with gas and water data aswell. Here I use water to oil ratio instead of water cut as I usually do.

      1. I don’t recall if we supported or rebutted the theory that gas capture and liquids associated with it adds to oil collected for the total quoted. Gas capture was way behind until recently.

        This would affect the decay rate of production and certainly boost IP numbers.

        Of course, we don’t know the stage count on these wells (or maybe we do). That would be the most likely explanation — longer horizontals.

        1. Watcher,

          The lateral length has been about the same (10,000 feet on average) in the Bakken since 2008. There have been changes in the number of stages per 1000 feet (they have increased) and in the amount of proppant used per well.

          In addition the drop in prices led to a focus on the tier one areas (so-called high grading) which tends to increase average output per well completed.

    4. Thanks for the graphs FreddyW. For clarification, when you calculate average production grouped by year for the first graph , does the number of wells for each group decrease over time if wells are abandoned (so the average production is the average production of the wells still producing), or does the number of wells stay constant (with wells no longer producing adding 0 barrels to that year’s production but still counted in the number of wells)? If the average is the first one, do you have the data to graph the percentage of wells still producing for each group? I’d be interested to know the rate of abandonment with time, and if it is significant in the the earlier years, whether that is changing between years. Cheers, Phil

      1. Abandoned wells are included with zero production. I don´t track how many wells are abandoned, but I track how many wells have zero production. They could also be offline because of other reasons. I have a graph but it´s very messy. They typically start around 97% producing. 2008 is down to 87%, 2009 to 2010 around 90% and 2011 to 2017 are around 95% +-2%. So most wells are still producing.

        1. Thanks! After 10 years, 10% of wells going to zero production (since 3% never started) including ones that are temporarily offline doesn’t sound too bad, but not great either. I’ll have to ask again in another 5 years 🙂

    5. Older wells are declining at about 8% per year. A 25 BOPD well with a 10 BOPD economic limit should have 70,000 barrels of oil left to produce in about 12 years.

      1. Hi Fernando,

        Is it safe to assume that newer wells will behave the same as older wells?

        Some petroleum engineers that have commented at shaleprofile.com (Enno Peters wonderful resource) that the high level of extraction from newer wells will likely lead to a thinner tail.

        Chart below from

        https://shaleprofile.com/index.php/2018/06/19/north-dakota-update-through-april-2018/

        illustrates this, notice how the 2014 and 2015 wells fall below the 2010 well profile after 24 months, the same is likely to occur for 2016 and later wells. Also note that the 2010 well profile is representative (close to the mean) for 2009 to 2012 average well profiles.

        1. Dennis, i would say the decline rate (8%) is very safe to use for all LTO wells, i would definitely apply it after the 6th year of well life, because by then what counts is rock quality and fluid type. This is only good for a bulk projection.

          By the way I tweaked my price model when I was preparing my CO2 pathway. I took into account the Venezuela crash, the difficulties the Canadians have moving their crude, etc. The price projection is $88 per barrel Brent for evaluating projects which start spending in 2019. I also prepared a different look for very long term projects which start spending in 2023: $110 per barrel.

          Don’t forget these aren’t prices predicted for those particular years. They are prices one can use to evaluate long term projects such as exploring in the Kara Sea, offshore West Africa deep water, the African rifts, Venezuela heavy oil developments, etc. These prices are plugged in and escalated with inflation for the 20-30 year project period. Real prices should oscillate back and forth around these values.

  25. Pollyanna speaks:
    https://www.eia.gov/todayinenergy/detail.php?id=36493
    Permian continues to grow when they have no capacity to move it until late 2019.

    Predicated on info from Pollyanna two:
    https://www.iea.org/oilmarketreport/omrpublic/currentreport/

    Says OPEC 90 day excess capacity is 3.47 million barrels a day. EIA says Sauds part of that is 1.5 to 2. Not sure where IEA is saying the other 1.5 is coming from. Ok, we will soon see the truth in that, over the next year.

    The real Pollyanna lunacy, is that the Sauds want to see oil prices in the sixties. Lip service, yes. Actually, why????

    Or, come on guys, help us keep the prices down until election time, at least.

    The real story:
    http://www.petroleumworld.com/story18061505.htm

  26. Permian crude oil pipeline capacity – The Goldman Sachs version
    I guess what they mean by “call on trucks” is trucking all the way out of Texas, to Cushing or the GoM.
    chart: https://pbs.twimg.com/media/Dfv4H_rW4AAGGXF.jpg

    The futures show the Midland spread at a maximum in Oct & Nov 2018. But if the trucking forecast is right then the spread should stay wide into 2019.
    WTI Midland (Argus) vs. WTI Financial Futures Settlements
    chart https://pbs.twimg.com/media/Df6CsxcW4AAcAIX.jpg

    TankerTrackers are saying that Middle Eastern crude oil exports have increased in June (first half)
    chart: https://pbs.twimg.com/media/Df2YNZyWsAIYdFh.jpg
    But I guess that as the prices of both Brent and OPEC Reference Basket Price are still over $70 then the demand must be there or prices would fall more. Or maybe OPEC is more worried about fuel price protests than it seems?

    1. Well, you posted earlier that the WTI to MEH is right at $8. So, the expense for oil from Midland to Cushing to MEH would be 8 plus 18, or thereabouts. So, that route would be expensive, but I bet the route directly to MEH, would not be vastly different. They may find 3 to 4 thousand trucks, but they won’t find the drivers. But if they do, they would have brand new CDLs driving 4 thousand hazardous material trucks along I20. There obviously be no desire to truck to Cushing. Makes the movie Maximum Overdrive sound tame. You’d actually have to double the driver number to the number of Trucks. 4 thousand trucks, to 8 thousand drivers. Nothing bordering on realistic in using trucks. So, what trucking company is going to buy 4 thousand brand new trucks, when they know the usage time would be about a year? Plus, their rail takeaway has serious questions.
      I have been watching the OPEC basket to Brent spread. Steadily narrowing.
      Some floating inventory of around 24 million barrels has been reported in the European area from Nigerian and Angolan oil that has not been sold yet. So, it’s not as tight yet, as it is going to be. We may see some more build up from the Iranian oil that is losing exports to Europe, India, and some other Asian countries. That won’t last, either. If necessary, they will slap another flag on the containers. I believe the terminology they use is that oil prices are now “volatile”.

      If you compare what banks and other analysts have on takeaway capacity to Plains American who is tasked with providing takeaway (in a previous article you posted), I would much prefer Plains opinion. All the others provide fancy charts explaining how the oil could possibly get out if they keep producing, all Plains provided was a statement of sorts. Paraphrased, it said we are against the wall, trains and trucks won’t provide much, so cut back now. Otherwise, it is going nowhere.

      1. Guym,

        Mike Shellman said trucks are too expensive and won’t be used. The reality is that if there is not adequate pipeline, rail, and/or refinery capacity that wells will be choked and the completion rate will slow down to the point that output is equal to pipeline plus rail plus local refinery capacity in the Permian basin.

        It is possible I did not understand Mike correctly, hopefully he will correct my errors.

        1. No, I think you understood him, and I think he is mirroring what Plains American said. Trucks are not really an option, and slowing production is the only option. I was just trying to elaborate why it’s not an option.

          1. Guym,

            Thanks. It was pretty clear that you would agree with Mike on this. As do I, generally you and he know what’s going on in Texas better than most of us. Generally the bankers at Goldman Sachs wouldn’t know which way the bit turns, I was suggesting somewhere that maybe oil would be moved by truck and Mike quickly set me straight. It might be moved short distances by truck, but not from the Permian basin to the big refineries near Houston or to the Gulf Coast, too expensive and as you suggested probably not enough trucking capacity.

    2. There are some rumors that KSA has increased exports starting in May (about 0.5 m b/d more than prior months) by drawing even more from storage. If we are to believe OPEC production numbers from May which are steady, that must be the case. OPEC has essentially flooded the market with exports before the meeting on Friday. The nearest month Brent future changed to contango compared to closest month some weeks ago, but it has now all changed again to backwardation. Point being, it seems the physical market is getting tighter again and that the export flood may have something to do with the meeting. Or it could be that reduced exports from Iran, Venezuela and Libya are starting to impact the market.

      If the market balance overall is to change from a a deficit to near balanced, production within OPEC has to be increased with almost maximum of whatever spare capacity available in my opinion. The assumption is that spare capacity in reality is smaller than stated by the agencies.

  27. The Libyan National Army are preparing to retake the oil ports

    2018-05-17 BENGHAZI, Libya (Reuters) – An oil storage tank at the Ras Lanuf port in Libya was ablaze on Sunday amid fighting between rival factions for control of the terminals in Libya’s oil crescent, a firefighting official said.
    LNA sources have said they are preparing a counter-offensive, and there have been daily air strikes in the area since Thursday.
    https://www.reuters.com/article/us-libya-security-oil/second-oil-storage-tank-on-fire-in-fighting-at-libyas-ras-lanuf-idUSKBN1JD0DW
    oil map https://pbs.twimg.com/media/DOqlrtuWsAAyF3L.jpg

    1. I don’t know about the price as it depends on the demand side and the global economy looks to me increasingly rocky, but the supply side analysis looks pretty good, except as you say a bit conservative. One thing missing was consideration of increasing decline rates on mature fields, especially offshore, partly a result of accelerating production in the high price years and partly because of an increasing ratio for deep and ultra deep water. Additionally I think the lack of increase in non-US drilling rigs as the price has risen is relevant and partly represents a shortage of in-fill prospects and short cycle appraisals.

      If they are relying on GoM to add the 300 kbpb (or more into 2020) that EIA are predicting then I think they are going to be short by 400 to 500 kbpd for a 2020 exit rate.

      (I don’t follow the chart showing new OPEC developments, the numbers can’t be number of projects, probably kbpd added, or maybe mmbbls reserves, and I’m betting they’ve mixed in gas with the oil.)

      As in all these investment type analyses they don’t look too far ahead and there’s a kind of tacit assumption that everything will be sorted out with more investment later on, but five years of low discoveries and accelerated development of the good ones means there’s actually not that much new to invest in, and if there is then ExxonMobil will be looking to buy it.

      1. Yeah, demand is always a big question. Hard to measure, even in the rear view mirror. However, their constant increase of 1.2 million barrels in the US over a three year period, should offset any question of demand. While 1.2 in 2020 is something I can’t predict, 1.2 million for 2018 and 2019 is impossible without increased pipelines long before the second half of 2019. So, I think it is way conservative.

    2. They say “We believe we are 6-9 months ahead of consensus with our oil forecast. Why is no one else seeing what we see?.” Obviously they haven’t been reading POB for the last two years.

      1. SLB seems to agree with Simmons, that outside of OPEC & the USA overall World oil production is going to continue falling

        2018-06-12 Schlumberger Investor Presentations – Wells Fargo West Coast Energy Conference
        …aggregate base decline, which increased from approx 5% in 2015 to around 7% in 2017. Given this acceleration, it is probably not realistic to expect the new projects slated to come online during the next few years to be enough to reverse production decline outside of the US and Middle East.
        Some slides on Twitter
        https://pbs.twimg.com/media/DfgLlUHV4AEqYOl.jpg
        https://pbs.twimg.com/media/DfgLlUHVAAAx_l8.jpg
        Simmons charts https://pbs.twimg.com/media/DfcPDiBV4AMwNH2.jpg

      2. POB made it possible to piece together in my own way, otherwise I would be like most. Staying confused with constant conflicting info. Predicting price is virtually impossible, as is demand to a large extent. But, when supply is ready to fall off a cliff, then being exact is not required.

        1. Guym,

          A simple way to think about C+C demand is to assume over the long run that supply and demand will be roughly equal (though of course there will be short term imbalances which changes in the oil price over the short term will try to correct). From 1982 to 2017 C+C output grew at an average annual rate of about 800 kb/d. It is probably safe to assume that oil demand will continue to grow at roughly that pace in the absence of a severe global recession and those are pretty rare. I define a “severe global recession” as one where real World GDP (constant prices) based on market exchange rates decreases over an annual cycle for one or more years. Since 1900 there have been two cases where this occurred, the Great Depression and the Global Financial Crisis (GFC) in 2008/2009. These have been on roughly a 60 to 70 year cycle (a previous crisis occurred in 1870, but this might have only been a US crisis and possibly not a global one.)

          In any case, my guess is that a Global economic crisis may result a the World tries to adjust to declining (or stagnant) World Oil output after 2025, probably hitting around 2030 to 2035. If economists re-read Keynes General Theory and respond to the crisis with appropriate policy recommendations, the economic crisis may be short lived. On the other hand a World response similar to the European response to the GFC, where fiscal austerity is considered the appropriate response to a lack of aggregate demand (this was also Herbert Hoover’s response to the 1929 Stock Crash), then a prolonged deep depression will be the result.

          Hopefully the former course will be chosen.

    3. I note in the article that 1 million electric vehicles on the road has displaced just 14,000 BOPD.

      Is this accurate?

      1. Gives about 8000 miles per year per vehicle with average of 37 mpg. Oil is a pretty useful fuel.

        1. I guess assuming this, even with widespread adoption of passenger EV, will the world see peak oil demand, unless it is supply driven?

          1. There’s no such thing as a non-demand oil peak and never has been. The recent use of the term is at best just meaningless jargon or at worst deliberate obfuscation. What would a non-demand peak look like: “nobody wants our stuff, but we’re going to keep it flowing so we can watch it gradually decline”? It’s ridiculous. Hubbert’s peak assumed demand would fall because of nuclear, demand for oil as power generation peaked and fell because gas and coal are cheaper, initial demand for oil as lamp fuel peaked and fell because electricity was better and cheaper.

            The term grew to kind of imply a peak while prices decline because of cheaper alternatives reducing demand and with BAU carrying on as before, to differentiate from the previous peak which was demand declining because of high prices and BAU going into a swan dive with all that implied. But they are both driven by price which is a balance of supply and demand.

            Personally I think all the conventional oil in the ground will eventually be used, it’s just too useful, though maybe not all the XH stuff. It’s just a matter of how long it takes. It would be better if it was used for chemicals and something else used for fuel but at the moment the priority should be replacing coal with renewables, EVs are a bit of a distraction to that and mostly irrelevant at the moment, but it’s all part of the BAU continuation feel good story, more so in USA than elsewhere I think.

            1. There is a narrative that oil demand will soon begin dropping due to widespread use of EV.

              1 million EV just replaces 14,000 BOPD of demand. Conservatively assuming those one million EV require $40K per unit of CAPEX, just to replace 14,000 BOPD of demand took $40 billion of CAPEX.

              Likewise, to replace 1.4 million BOPD of demand via EV would take $4 trillion of CAPEX.

              Worldwide demand has been growing somewhere between 1.2-2.0 million BOPD annually, depending on who one believes.

              See where I am going with this? How do the EV disruption proponents explain away the massive CAPEX required just to cause oil demand to flatten, let alone render it near obsolete?

              I’d like to see some explanation with numbers.

            2. The average US car gets 25 mpg and travels 12,500 miles per year for 500 gallons of gasoline per year.
              Refineries in the US produce 20 gallons of gasoline per barrel of oil.
              That gives 69,000 BOPD per day reduction per million EV cars in the US and 110,000 BOPD oil equivalent energy due to the multiple energies put into gasoline and distillate production.
              At current rates of EV sales growth the US will reach 50 million EV cars by 2031. That should put he US to being mostly independent of external oil for gasoline by mid 2030’s and
              It’s tough to predict a complete transistion in the US since cars as a service could greatly reduce the numbers of cars needed, especially in dense population areas. That would mean a much earlier transistion.

              If US ICE cars trend upward in mpg during that time, the demand for oil could be quite low by the early 2030’s.
              All depends on continuation of trends, for which the auto manufacturers seem to be on board. Just have to get the public charging infrastructure out ahead of the trend.

              Here is an interesting article, from a couple of years ago, showing the trend and sales at that time.

              https://www.nanalyze.com/2017/03/electric-cars-usa/

            3. Superficial Treatments and War Economics

              When I have mentioned some of the myriad of other issues with EV’s (to say nothing of PV’s for example, and the sociopolitics of technology in general) and nudged the topic further, I seem to recall some the response’s gist, at least in part, being ‘modified’ along the lines of, ‘Oh, well, EV’s don’t have to mean full-size cars like Teslas, and so could be EV bikes and ‘golf carts’, (and/or, [Teslas, etc.] presumably, only for some segments of the global population, given the relative costs of living, increasing socioeconomic/wealth disparities, limits to mining, resources and energies in their access (etc.), limits to infrastructural support (and questionable taxation to pay for it), (resource, etc.) wars and general social unrest, the dynamics and interplays of socioeconomic perturbations, and being captured and/or locked into and/or buying into and/or being ideologically-indoctinated into the crony capitalist plutocracy (which, according to many, isn’t actually working, and likely cannot work, for people and planet), etcetera.
              Somewhat IOW, when some concepts and/or some people’s ‘perceptual schemas of reality’, so to speak, are nudged along, we may start to see the forest some are missing for the trees, or the pointillist painting for the points, which can be glaring.

              Some might argue that some people in ‘socioeconomic positions of privilege’ have some blind spots, such as for a lack of walking in, or sufficiently considering walking in, others’ shoes.

              Perhaps some hereon can do much more than the superficial treatements they give many topics on POB, even if they don’t.

            4. Shallow sand,

              Cars get replaced all the time and the cost of new EVs will fall over time to the same price as ICEV, so it’s simply a matter of replacing the ICEV currently sold with EVs over time, in addition cars can get better gas mileage (50 MPG in a Prius vs 35 MPG in a Toyota Corolla or 25 MPG in a Camry.) There’s also plug in hybrids like the Honda Clarity (47 miles batttery range) or Prius Prime(25 mile range on battery) these have an ICE for when the battery is used up.

              If oil prices rise in the short term to over $100/b (probably around 2022 to 2030), there will be demand for other types of transport besides a pure ICEV.

              EVs and plugin hybrids will become cheaper as manufacturing is scaled up due to economies of scale.

            5. The Double-Edged Swords of Scale

              Dennis, I question your economies-of-scale as you seem to especially lean on in your arguments, since, in part, it appears increasingly that the world cannot assimilate some at the levels and scales we might like to insinuate. (Just imagine the dinosaurs for a fun example, or the larger fauna as apparently the most threatened by extinction for another.)
              There appear no real economies-of-scale at some critical thresholds on a finite, non-manmade-based planet– many that we’ve already apparently transgressed.
              That said, and now that I think about it, peddling some so-called ‘economic’ notions in those regards could be seen as flirting with a certain level of disregard, even contempt, for people and planet.

              There are lots of other surrounding issues too of course, including for example, predatory car loans.

              “Hey, Dennis, try this ‘hit’. The first one’s on the house. You can pay us later– through the nose.”

            6. Caelan,

              Demographic transition will bring population down and reduce environmental impact.

              I suppose everyone could walk or ride a bike, but until that occurs an EV car, or motorcycle, or bike will have lower environmental impact than a similar ICE alternative. Economies of scale are real, costs per unit are reduced when output per factory increases.

              Note that these factories could be owned by the workers in an anarchic society where people are “free” to do as they wish with no governmental oversight. This society would be made up of perfectly behaved people who are never violent and of course of all neighboring anarchic tribes would be similarly well behaved. The larger scale facilities would result in more efficient use of resources which might be favored by those who prefer more free time outside of “work”.

            7. Don’t forget to add that real cheese pizza with mushrooms and ham would be delivered free of charge by electric drones courtesy of Elon Musk.

            9. Hold The Holes

              “Don’t forget to add that real cheese pizza with mushrooms and ham would be delivered free of charge by electric drones courtesy of Elon Musk.” ~ Fernando Leanme

              Customer: “…and hold the bullet-holes.”
              Pizza Guy: “Ok, that’s extra: We have to make a detour around the East Side ghetto.”
              Customer: “Yes I know, but I have the home-charge discount swap-battery from the last time.”
              Pizza Guy: “Oh, ok, then of course you know you don’t get charged for the detour if there’s enough juice to make it back.”
              Customer: “Yep… Oh, and add a Koch Brothers soda to my order, please.”
              Pizza Guy: “That will take another drone, unless you send back your home-charge discount battery.”
              Customer: “Cancel my order please. I’ll make my own pizza.”
              Pizza Guy: “Fair enough. Just a reminder that your home-charge discount battery will have to be returned if you do not place an order within a month, or you will be billed accordingly.”

            10. Caelan,

              Your right, there will be limits to cost reduction for EV’s. The bottleneck with be the batteries, since Lithium batteries are become more widely used and production constraints originate with the raw materials (ie sourcing Cobalt). Lithium battery recycling still costs 5 times more than new mined raw materials.

              EV sales will peak with the next pending recession. Already Tesla is running into financial problems. I think Manufacturers will eventually ditch EVs and focus on Hybrids which are much easier to sell, and don’t have the same limitations & technical challenges.

              My best guess is that there will be another global recession starting between this fall and 2020. After 2022, thats when the industrialized world will begin to face the demographics wall as boomer retirement taxes Pensions, entitlements & healthcare funding. The West never funded pensions & entitlements and funding existing retirees becomes more difficult month by month. not a week goes by without an article about a failing pension fund.

              Once the recession hits, car sales will fall if not collapse. It will be much more difficult for a world wide recovery (we barely recovered from the 2008-2009 crisis).

            11. Fernando says: Don’t forget to add that real cheese pizza with mushrooms and ham would be delivered free of charge by electric drones courtesy of Elon Musk.

              No! No! No! The pizza delivery drones are not from Elon, they are from Ehang!

              https://www.youtube.com/watch?v=id5ybErD9hY
              Chinese jumbo drone flies humans

              Since Trump is putting tariffs an everything from China, pizza delivery by drone is going to be very expensive in the US! But cheap in communist China and the rest of the world… 😉

            12. Hi George,

              The idea behind peak demand is simply that oil supply may at some point become relatively abundant relative to demand in the future (date unknown). When and if that occurs, OPEC may become worried that their oil resources will never be used and will begin to fight for market share by increasing production and driving down the price of oil to try to spur demand. That is the theory, I think we are probably 20 to 40 years from reaching that point for conventional oil.

              Oil still contributes quite a bit to carbon emissions and while I agree coal use needs to be reduced (as carbon emissions per unit of exergy is higher for coal than oil), I would think it may be possible to work on reducing both coal and oil use at the same time. Using electric rail combined with electric trucks, cars and busses could reduce quite a bit of carbon emissions from land transport, ships and air transport may be more difficult.

            13. Why making a fire sale?

              It’s better to sell half of your ressources for 90$ / barrel than all at 30$ / barrel.

              The gulf states will always have cheap production costs at their side, they will earn more at each price of oil. Why not make big money, especially when at lower production speed the production costs are much lower (less expensive infrastructure).

              And in the first case you can sell chemical feedstock for a few 100 years ongoing for a good coin. Theocracies and Kingdoms plan sometimes for a long time. When you bail out everything at sale prices, you end with nothing ( and even no profit).

            14. Eulenspeigel,

              You assume half the resource can be sold at $90/b, at some point in the future oil supply may be greater than demand at a price of $90/b, so at $90/b no oil is sold and revenue is zero.

              In a situation of over supply there will be competition for customers and the supply will fall to the point where supply and demand are matched. Under those conditions OPEC may decide to drive higher cost producers out of business and take market share, oil price will fall to the cost of the most expensive (marginal) barrel that satisfies World demand.

              I don’t think we are close to reaching this point, but perhaps by 2035 or 2040 alternative transport may have ramped to the point where World demand for oil falls below World Supply of oil at $90/b and the oil price will gradually drop to a level where supply and demand match.

  29. Got time to go thru the bible more carefully.

    Surprising stuff. Huge oil consumption growth rates in Eastern Europe. 8+% growth %s in Poland, Czech Republic and Slovakia. Something weird going on because Romania and Slovenia didn’t show the same thing.

    Western Africa grew consumption of oil 13% last year. I’ll add a !!!!. East Africa about 6%. Both are over 600K bpd, so that growth rate is not on tiny burn.

    World oil consumption growth 1.8%.

    (population in africa . . . . . .)

    1. Poland’s official oil consumption growth is caused by better fighting with illegal, and unregistered fuel imports since mid 2016. When taxes are 50% of fuel price, there is big incentive for illegal activities. Real oil consumption probably didn’t increase much.

    2. Poland, Czech and Slovakia are going through a huge economic boom now (I live in Slovakia and party in Czech Republic). It’s visible everywhere, there wasn’t this much spending and employment ever in the last 28 years.

    3. Cliffhanger

      Africa appears to be in the midst of some sort of new (and/or kind of ongoing) waves of (‘economic’) colonization, with the homies typically getting their asses kicked around in different ways no doubt.

      “I’ll add a !!!!.” ~ Watcher

      (shrug) Ok.

      Maybe Captain White Rhino, superhero, can save Africa before it’s too late! Or is it already too late?! Stay tuned!

      This fine comment has been brought to you by ©South Africa Sparkling Water

      1. South Africa grew at 0.6%.

        Middle Africa is listed as growing at 0.4%. North Africa is divided up Egypt, Morocco and “Other North Africa”. Other was +4.7% consumption growth.

        It’s gotta be Nigeria west and Angola east.

    1. I have not requested and received the pending data file for April, yet. However, Dean has already sent his projection for April, and he has it pretty flat, to down for April. The pending data file can hide a small increase, overall. Even if the initial production is down, like in April.
      EIA was pretty close on the ending weekly for March, in comparison to the monthly they posted last month for March. I don’t think it will be close for April. They went up 160k barrels on their weeklies during April. I could have to correct myself in about a week, but first perusal is that EIA is overstating weekly production for April, and probably later.

  32. Pssssst.

    Oil consumption 2017 increased 1.8% from 2016.

    Oil price 2016 about $41/b. Oil price 2017 about $55/b.

    hahahahhaa

    1. Oil demand is mostly determined by GDP growth, oil price has a minor influence on short term demand. World GDP grew by about 5% from 2016 to 2017 according to the IMF, so oil demand increased by 1.8% possibly less than one would expect. Real GDP (at market exchange rates) grew by about 3% in 2017.

  33. Drilling Productivity Report – what we need is a Permian Plumbing Report.
    EIA – NOTE: Productivity estimates may overstate actual production which could be limited by logistical constraints.
    https://www.eia.gov/petroleum/drilling/#tabs-summary-2

    Goldman Sachs: Executive summary for oil
    https://pbs.twimg.com/media/Df95qylXcAA00EK.jpg
    https://pbs.twimg.com/media/Df95qymXUAEU7bx.jpg

    Bloomberg: Saudi Arabia, crude oil export increase in early June
    https://pbs.twimg.com/media/Df_B5DmXUAAZTUN.jpg

    Saudi Arabia, some export charts for April – JODI Data
    Product exports: https://pbs.twimg.com/media/DgAOnCMXkAAaDYS.jpg
    Long term exports: https://pbs.twimg.com/media/DgAOYJOXkAEssEk.jpg
    Domestic demand (they raised product prices): https://pbs.twimg.com/media/DgANzp-XkAAr_PN.jpg

    1. Thanks for providing a lot of info!

      Regarding Saudi Arabia, what seems certain is that they have increased crude exports in parts of May and early June by either activating “spare capacity” or withdrawal from storage. Coming into peak domestic demand season it will be hard for OPEC to compensate for Iran, Venezuela, Libya and any other negative “surprises” coming along in 2H2018. It would be a real surprise if not the solution is to agree to a moderate production increase due to quite a few reasons (I can think of at least 5 reasons for this on top of my head). I can imagine OPEC/Russia want a somewhat controlled price increase to let us guess 90-100 dollars before the low demand season kicks in 1H2019. If demand growth is still not impacted too much the supply problems start to become unsolvable in 2019 and in any case 2020. There is both a potential for a great price spike and recessions in 2019 imho.

      1. Is it spare capacity or is it 300 kbpd from Khurais expansion start-up (which was due in May and even then was a year later than planned)?

        1. I don’t think it is Khurais. The project is delayed, but for how long is uncertain.

          A quick search on the internet:

          “We see Opec building capacity over the coming five years, largely driven by Saudi Arabia where we see the Khurais expansion in 2019 and the Marjan field start-up by 2021. Saudi Arabia is pressing ahead with upstream investment as part of its Vision 2030 strategy,” BofAML said.

          https://www.hellenicshippingnews.com/oil-prices-to-average-50-70-till-2023-bofaml/

          No timeline given here either (if someone is a contractor and signs up here, maybe there are some details):
          https://www.protenders.com/companies/saudi-aramco/projects/khurais-oilfield-expansion

      2. I was thinking that the price of WTI is still cheap. But then countries such as Russia have been complaining that product prices are too high and that their refinery margins are too low, and so I don’t know. I still think prices could spike higher, sometime, due to outages and lack of long term investment.

        It seems that OPEC is looking to prevent supply shortages during peak demand

        2018-06-19 OPEC technical panel sees strong oil demand in H2 2018, implying that the market could absorb additional production, according to 3 OPEC sources

    1. read deep into the article — the best oil goes to China. Europe gets only what is left. Haven’t needed it, but the North Sea is dying. Iran is the next supplier but if sanctions eliminate them, Russian oil of whatever quality will be the only choice.

      Or Europe could ignore sanctions, if they have the courage.

      1. Yes, for some reason Russia seems to want to be a Chinese province. I think Europe’s best bet is to raise taxes on oil, since they are a net importer. Or switch to electric cars altogether, following China’s lead.

  36. BP’s Proven Reserves tab, historical says some interesting things:

    US reserves did not grow or shrink last year 50B.

    Canada reserves shrank about 1%. Weird.

    Brazil reserves grew 1% but are down a lot from 2014.

    KSA flat. Venezuela Orinoco reserves slight uptick 0.4%.

    The somewhat vast majority of countries say their reserves are flat in 2017 vs 2016. They pumped billions of barrels, but no change to reserves for . . . lemme count . . . 36 countries (of which the US was one).

    World as a whole reserves total declined 0.03%.

    BP’s flow report is “all liquids”. Dunno if that is consumption, too. And if reserves . . . reserves are in a footnote. Crude, Condensate AND NGLs. Probably excludes algae.

  37. Where Will U.S. Frackers Drill Next?
    By Tsvetana Paraskova

    https://oilprice.com/Energy/Crude-Oil/Where-Will-US-Frackers-Drill-Next.html

    With WTI oil prices staying above $60 a barrel for several months, U.S. drillers are breaking production records each week, mostly thanks to the Permian in West Texas and New Mexico.

    In recent months, however, some companies have started to test their fracking capabilities on oil fields that most agree reached their peak production decades ago.

    Drillers believe that it’s a winning bet. Analysts say it could be a breakthrough for the more challenging chalk formations in East Texas and Louisiana. Authorities and industry officials in Louisiana believe there’s a resurgence in one of the old oil-producing areas in the state and want to support investment in the region.

    The Austin Chalk, which stretches from Texas to the Gulf of Mexico and cuts through much of central Louisiana, is one of those formations that was ‘hot’ back in the 1990s, but has been forgotten since then, especially after hydraulic fracturing shifted the industry attention to other areas in the United States—the Bakken in the north and the Eagle Ford and the Permian in Texas.

    Companies have started to drill frac wells in the Austin Chalk, where the number of drilling rigs has doubled over the past six months to 14, and oil production surged to 57,000 bpd last year from just 3,000 bpd five years ago.

    While companies test the geology and production/decline rates of old fields drilled with new technology, Louisiana hopes that the Austin Chalk resurgence could revive its economy.

    “Anytime you mention the Austin Chalk, the committee room lights up,” the Chairman of the House Natural Resources and Environmental Committee, State Representative Stuart Bishop of Lafayette, said in an April article by Gifford Briggs, President of the Louisiana Oil & Gas Association (LOGA).

    “My community was brought to their knees in the recent oil down turn, and the uptick in Texas activity has many of our families heading to work in the Permian. The Austin Chalk will bring much needed relief and opportunity for my constituents. I would rather send our workforce somewhere in Louisiana than anywhere in Texas,” Rep. Bishop says.

    1. A couple of years ago, EOG came out with the statement that they “unlocked” the secret to drilling in the Austin Chalk. They believed it could be duplicated anywhere within the Eagle Ford area. Future tests of that disproved their theory. They had some magnificent results around the Karnes fault. There is a similar fault in Eastern Louisiana which could produce similar results. Fault areas have natural fractures. I don’t think the Austin Chalk will be good in any area without the natural fractures. It will produce, but sparingly. They are still expensive horizontals. Austin Chalk is just above the Eagle Ford in Texas, and the Eagle Ford is considered the primary source rock for the Austin Chalk here. My guess is that there will be some winners, but many losers in this game. As per the last 50 years. Mostly pushing the nickel on shale plays left in the US, at this point.

  38. 2018-06-19 Norwegian crude oil & condensate production (without NGLs) at 1,321 kb/day in May, down -223 m/m, down -297 from 2017 average or -18%. The main reasons that production in May was below forecast is maintenance work and technical problems on some fields.
    http://www.npd.no/en/news/Production-figures/2018/May-2018/
    Almost down to the Sept 2012 low at 1,310 kb/day

    1. Big unplanned outages coming on the gas side for June numbers as well.

    2. This is what happens when there are no sizeable new fields coming online for 1/2 year and as G.Kaplan has mentioned not enough allocation for supply disruptions are included in the forecast.
      A brutal decline, even if this month is an anomaly as NPD say.

      1. Looking at the field numbers (only through April) it looks like Troll Oil is in decline a bit earlier and a bit steeper than expected. It’s the biggest oil producer still bu has dropped fairly consistently and slightly accelerating from 161 kbpd in October to 121 in April. It’s all horizontal wells and requires continuous drilling to maintain production, it’s close to exhaustion with only 10% remaining at the end of 2017 (about R/P of 3 years) and had been holding a good plateau around 150 for a few years. The gas is due to be developed starting in 2021 so the oil rim would need to be depleted by then, but maybe dropping a bit sooner than expected – is a reservoir not behaving as modelled a “technical problem”?

    1. There’s lots of exciting things happening in the Bakken again with production on track to almost double in the next decade. Also it’s worth noting the next US House member from North Dakota is likely to be Kelly Armstrong of the family who runs Armstrong Operating, which has had success drilling conventional Lodgepole Formation wells in the Dickinson area. In other words, Kelly would know what to do legislatively to get the most favorable business climate for Bakken producers. He also has Harold Hamm and Todd Slawson looking out for him by donating tens of thousands for the election. Furthermore, if the next US Senator winds up being Kevin Cramer (who Trump is going to hold a rally for next week), that would also be very good for the Bakken since it was Harold Hamm himself who decided Cramer would be the best Senate candidate.

  40. Permian pipelines and steel tariffs – it’s a good update but the article doesn’t give any clues as to how long it might take for US steel mills to make the type of pipes that are now being imported.

    HOUSTON (Reuters) – Major U.S. energy companies including Plains All American Pipeline, Hess Corp and Kinder Morgan Inc are among many seeking exemptions from steel-import tariffs as the United States ratchets up trade tensions with exporters including China, Canada and Mexico.
    The pipeline industry could face higher costs from tariffs as about 77 percent of the steel used in U.S. pipelines is imported, according to a 2017 study for the pipeline industry. Benchmark hot-rolled U.S. steel coil prices are up more than 50 percent from a year ago, according to S&P Global Platts.
    https://www.reuters.com/article/us-usa-trade-tariffs/u-s-oil-pipeline-companies-producers-seek-relief-from-steel-tariffs-idUSKBN1JF0DZ

    1. Significant. It may not prevent the pipelines being built, but it will, no doubt, delay the timing of the start to completion timeline. Extended starts and stops on construction would be extremely expensive. A 25% tariff on oil to China is also a game changer. That’s about 600k a day that now has questionable outlets. India is going to have about 600k a day it won’t buy now from Iran, so that’s a possibility. Not as big of a game changer as in the future, when US production begins increasing, again. I could speculate that there is some timing connection between India foregoing Iran purchases, and the China tariff decision. Whole Permian scenario keeps shifting down. Pipeline completion dates are more questionable, and the future export capabilities have a bigger question mark.

      Goldman states that most of the producers have no plans to cut back in the Permian. What else would they tell the investment bank who helps determine their stock price? Yeah, we are screwed, and currently looking for a buyer?

      1. Yes I guess that the increase from Russia will only show up in June’s production number and Saudi Arabia is still below their OPEC cut agreement level.

        2018-06-09 (Reuters) Russia’s oil output at 11.1 million bpd in early June, which is above quota: IFX

        1. They will still have to pump a bunch to keep up with Venezuelan and Angolan drop. Other non-OPEC areas are not fairing too well either. Iran is a pretty big question mark, although with the tariffs, I imagine China will take up most of that slack. The big game changers are Venezuela and the Permian problems, which both appear to be getting bigger.

    1. Pretty much, when you consider the extra taxes they added on when oil was cheaper. Of the bigger markets, it is probably the most vulnerable to demand drops from price increases.

    1. Out of 1 trillion barrels of yet undiscovered oil globally, shale oil makes up close to 300 billion barrels, according to Rystad Energy’s database. Some 78 percent of these yet-to-be-discovered oil resources are in non-OPEC countries.

      With current reserves, undiscovered oil and a steady reduction in demand there could be 100 years of oil left globally. Whether we use it or not is yet to be seen.

  44. I put Trump as a negative benefit for oil. Yes, he did sign the corporate tax decrease, but that was not due to his effort. He has opened up some areas to drill in that mostly have no interest. On the negative we have steel tariffs and export tariffs from China. Overall, I’d say his elevator does not go all the way to the top.
    Ok, one article says China has started the oil tariffs, another article says they have hinted to impose it. Who knows with such shoddy reporting?

      1. As each one has slightly less than a thousand barrels, you’d need 400 of these behemoths traveling to and from the coast, daily. An additional amount of 400 would be needed for half a year in 2019. Plus, some company would have to be willing to buy them, and use them for only about a year, or six months.

  46. Continued from here…

    Dennis,

    The limits of economies-of-scale(/economic theory) and their technological dependencies are as real as, in context with, and dependent on, the limits of a dead or dying (debt-based) economy, a finite/depleting/toxified planet, population overshoot, and an increasingly material-/energy-entropic culture.

    Same idea with demographic transition, as well as with, incidentally, some naive notion of a government that exists to in part protect the good people from the bad, as opposed to creating, protecting, aiding and abetting an elite/plutarchy in its criminal rape, plunder and pillage of people and planet under the ideological guises/operating systems of economics and law.

    Why we can’t rely on corporations to save us from climate change

    “…despite operating in different industries… we found a common pattern in which initial statements of climate leadership degenerated over time into more mundane business concerns…

    These case studies, on top of our previous research, show why corporations are particularly unsuited to tackling a challenge like climate change.

    Businesses operate on short-term objectives of profit maximisation and shareholder return. But avoiding dangerous climate change requires the radical decarbonisation of energy, transportation and manufacturing on a scale that is historically unprecedented and probably incompatible with economic growth.”

    Getting Crony Capitalism Half Right
    The solution to government interference isn’t more of it.

    “The friends of state power have found it entirely too easy to treat the government as the defender of ordinary people’s well-being, their protector against entrenched interests. Lindsey and Teles undermine that convenient fiction. To read this book is to understand that the state is not the people’s tribune. In fact, it ends up championing the very interests that many people expect it to restrain.”

    1. Caelan,

      I have never claimed we live in a perfect world. One needs to come up with a better system to replace the current one, when you have a plan let us know.

      It has to work for World population of 7 to 10 billion people which eventually declines to 2 billion people over the next 150 years, fantasy systems based on a World population of 10 million people will be ignored. We might eventually reach 500 million in 300 years or so and maybe even less in the future depending upon the free choices of individuals over time.

      The technology of modern birth control freely chosen by empowered women who are educated in this regard may make this possible.

      So government cannot help with climate change and corporations can’t, so it’s up to the individual or their tribes.

      Basic economics are likely to take care of it, when fossil fuel depletes it will be much more expensive than less ecologically damaging alternatives, including using less energy through smarter choices.

      Note that individuals should be free to make their own personal choices, though I would disagree that government is always the problem.
      Good environmental policy and regulation helps a lot.

      1. It’s the most easy thing for Religions to get new follower just to promote as much children as possible. So more believers for the respective god – in the evolution of gods the number of followers is the most important thing.

        So there will be no voluntary birth control as long as religion is very important. Only in educated and somewhat prosperous countries this can happen – or in complete autocratic and non religious (China).

      2. Death-grips Despite Change

        “I have never claimed we live in a perfect world.” ~ Dennis Coyne

        “This society would be made up of perfectly behaved people who are never violent…” ~ Dennis Coyne

        First you are talking about economies-of-scale in the context of ramping up EV production and when I question it in the contexts in which we see ourselves, off you go to some society of perfectly behaved people tangent, etc….

        The issue is not about a perfect world, Dennis. Let’s not be silly. The issue is about a better world and in a true sense, which includes critically questioning our preconceptions and with a view to their new and changing contexts– including, as you just wrote, ‘basic economics’, which includes economies-of-scale and in the contexts, again, of increasing material/energy/societal-cohesion entropy, etc..

        Sometimes we have to let go of our death-grips on some things, perhaps like anthropogenic climate change denial or basic so-called economics (and/or aspects thereof) (and embrace certain kinds of change) before they kill us, including you, and the rest of the world.

        “One needs to come up with a better system to replace the current one, when you have a plan let us know.” ~ Dennis Coyne

        There’re plenty of ideas out there for better systems, or at least plenty of better ideas toward them, including from me, but you have to actually be interested in them beyond lip-service or mock interest and, ideally, with an interest in supporting and defending them, rather than the current system and/or aspects thereof.

        1. “Lead was recently blamed for Trump’s election ”

          Who says capitalism doesn’t function?

  47. Pioneer CEO Scott Sheffield talking about Permian pipeline capacity (Pioneer has takeaway capacity sorted until 2021)

    2018-06-20 (Bloomberg) “We will reach capacity in the next 3 to 4 months,” Scott Sheffield, the chairman of Pioneer Natural Resources Co. said in an interview at an OPEC conference in Vienna. “Some companies will have to shut in production, some companies will move rigs away, and some companies will be able to continue growing because they have firm transportation.”
    Total pipeline capacity is 3.6 million barrels, so the region will reach capacity in the next three to four months and the bottleneck isn’t likely to ease for at least a year, he added.
    The warning about shut-ins comes as some small companies move oil rigs away from the Permian into other shale basins that still have pipeline capacity. Oil services companies have also started to reduce the number of fracking crews they offer to drillers.
    https://www.bloomberg.com/news/articles/2018-06-20/shale-giant-says-permian-oil-faces-shut-ins-on-pipeline-shortage
    https://pbs.twimg.com/media/DgICaRRXUAY5JT4.jpg

    1. US oil production will reach 15 million b/d by 2025 as shale adds another 5 million b/d, Scott Sheffield of Pioneer Natural Resources tells Opec Seminar

    2. I don’t have a subscription, but I assume he is including local refinery capacity in the 3.6 million figure. The local refinery capacity has been purported to be around .5 million, but I doubt it is going to be able to absorb all high API gravity oil that is mostly being produced. When he says 3 to 5 months, I assume he is referring to the company’s capacity, and not everyone. Pioneer has been reported to have a lot of pipeline access.

      OXY is not increasing production, and has about 175k of excess pipeline capacity. They are receiving about 7 to 8 a barrel for the use of that. May be a different circumstance than Pioneer, as OXY is also part of the takeaway system.

      I also assume, that part of the capacity that Pioneer still has unused, is actually being used by the pipelines. So, when Pioneer starts using it, I guess they bump off the other?

      Chart has discount to Cushing of close to 12.5. There is a further discount from the Cushing price to Gulf WTI (MEH) of 7 to 8. Meaning a decision to complete now vs. waiting a year may cost you close to 20 a barrel. Due to the steel tariffs there is a possibility that may be extended over a year. Some may have derivatives that partially cover this spread for 2018, but I doubt little exists for 2019.

  48. I wanted to make a comment about the OPEC(and Russia) meeting coming up and a possible production increase. The speculation going around is that OPEC and Russia might increase production up to 1.80 mbpd. The minimum production increase would be around 500kbpd. What is the most likely production increase based on past production?

    The only four countries that have any ability to increase production are

    1) Russia: Current production 10.9mbpd. High production 11.3mbpd Difference -400kbpd
    2) Saudi Arabia: Current production 10.0mbpd. High production 10.6mbpd Difference -600kbpd
    3) UAE: Current production 2.9mbpd. High production 3.10mbpd Difference -200kbpd
    4) Kuwait: Current production 2.70mbpd. High production 2.8mbpd Difference -100kbpd

    The high watermark in production for these countries happened from Mid 2016 to Mid 2017. Currently these four countries are producing about 1.3mbpd below their all-time high production limits. Ask yourself…what is the likelihood that these four countries will increase production to all-time highs and potentially surpass their highs which would be required to increase production to 1.80mbpd? When OPEC did announce production cuts at the end of 2016 many believe they had increased production to unsustainable levels to give each country a higher quota from the production cuts. The guys a Core Labs believed they had to cut because it would have threaten the long term integrality of their fields.

    My guess is that the most OPEC and Russia can bring back for a sustainable period is about half of the 1.30mbpd they reduced from their production highs….maybe about 600kbpd

    1. good guess!

      OPEC eyed 1 mb/d increase, but couldn’t agree. OPEC’s technical committee recommended a supply increase of about 1 million barrels per day, although press reports widely noted that such an increase would likely only be nominal, and actual barrels put onto the market would reach only about 600,000 bpd because several countries have no ability to boost output. The recommendation came even as Iranian oil minister Bijan Zanganeh walked out of a meeting on Thursday night, although he met with his Saudi counterpart Friday morning. The discord likely led to the vague decision on 100 percent compliance, rather than on country-specific increases.

  49. Another perspective on Permian takeaway.
    https://www.spe.org/en/jpt/jpt-article-detail/?art=4321

    Future pipeline updated list.
    https://napipelines.com/oil-pipeline-report-new-administration/

    I think I would look at steel tariffs and exemptions in the next couple of months. Currently, 77% of pipelines are purchased from tariff countries. US does not have the capacity for timely production of the pipes. In other words, are the completion timelines subject to change due to this?

    1. As I read the first report, the growth speed of Permian is at a hard wall anyway – road / truck capacity for everything.

      Adding even more trucks to a traffic jam only leads to more breakdowns and even slower speed at a certain point. And I don’t think things get cheaper from this. When you try to pay the trucks per mile and the traffic gets worse, drivers will leave for other shale plays with better earning.

      1. From bits and pieces, I’m pretty sure the slowdown in growth has happened, already. Especially, when I read about decreases in completion crews. Drilling is not a very good indicator. DUCs produce little oil.

    2. Tariffs increase the cost of steel, but pipeline developers can still buy the steel. And, the cost of the steel is just one of many components of their cost structure. I’d guess the tariffs won’t make a big difference to pipeline construction.

  50. Those waiting to see the big jump in April from EIA for Texas production will be in for a disappointment. I think the slowdown started in April. Dean has his projection going sideways to a little down, and that’s what I got from the pending data file, too. March was 4161 for EIA, for April I expect 4140. EIA and mine were both 4161, but actual Texas production for March was 4177 for both the regular production plus pending data for the second month’s reporting. My expectation of 4140 includes that underestimation. EIA weeklies are probably massively overstated.

    The more I look at Dean’s estimation, I am pretty sure he is going to be closer when the “final” count is eventually made by RRC. I think both EIA, and myself are slightly under what the final count will be. Dennis, if you have the time could you post Dean’s latest chart?

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