Open Thread Petroleum, August 28, 2017

D Coyne Uncategorized

Comments related to oil and natural gas should be in this thread.

Thanks.

Non-Petroleum comments should be placed in the Electric Power Monthly thread.

221 thoughts to “Open Thread Petroleum, August 28, 2017”

  1. Still watching the EIA nat gas storage trend. As of last week we are 700 bcf below the 5 year average for this time of year, and net injections are way below normal. It has been a hot summer, so more nat gas is justifiably spent on electricity for cooling. But that shouldn’t account for more than a few percent usage. Should I be concerned about the upcoming heating season?

    http://ir.eia.gov/ngs/ngs.html

    1. If you live in New York State or, especially, New England, things might get a little … interesting … If extended cold snaps occur.

      Otherwise, the buildout of takeaway pipe from the Appalachian Basin should bump up an additional 5 to 6 Bcfd by years end, ensuring a fair amount of supply.

      It sure is a low injection rate, though.

      1. It is low, for the summer months. The lowest end-of-season storage in the last 8 full years was in 2014, to 3611 Bcf. To catch up to that in the 11 or so weeks remaining we’d need to inject about 100 Bcf/week. The average injections for the last 8 years (from this time until heating season) have been closer to 72 Bcf/week.

        I don’t know why I’m wrapped around the axle about this, but it’s concerning. There seems to be plenty of production. Where is the extra gas going?

        1. Likely NatGas Turbines. Power companies are relacing older power plants with NatGas since they are cheaper to operate and more flexible to match demand changes.
          Power Plants Bloom Even as Electricity Prices Wilt
          https://www.wsj.com/articles/power-plants-bloom-even-as-electricity-prices-wilt-1514457002
          “A glut of gas from U.S. shale fields is fueling a power-plant construction boom in several Northeastern states”

          I suspect the trend will continue as more and more NatGas Plants are completed.

          1. I think you nailed it with the power plants.
            I just checked the New England ISO site the past few days and natgas fueled was providing almost 15,000 Mw several hours each afternoon. Heat wave related, I believe. That is way higher than I’ve ever seen.

            In addition, a couple more LNG trains are now taking on gas.
            This is not yet reflected in exports as that is a few months away.
            Still, they are taking in hundreds of millions of cubic feet to be liquified.

    1. That world oil production chart is , sorry, just stupid. They didn’t just offset the scales, they used a scale for ‘rest of world’ that is about double the magnitude of the ‘world’ scale. Useless, IMHO. They ought to fire the guy who made it.

      1. Hickory,

        The chart is fine. If you dont like it present your own chart.

        I am happy Energy. News shares his charts with us. Ignore anything you dont like.

        1. I agree with Hickory, the scale is not just stupid, it’s horrible. It may be “correct” but when the units are the same for the two graphs, what’s the purpose of using different scales left and right? One scale should have been used, min bpd 64.000 and max bpd 84.000 bpd, much easier and more clear for the viewer.

          And of course EN is not to blame, it’s the chart creator who didn’t think before making the chart.

          Olle

          1. Olle,

            I think the purpose is to show more information on a single chart, most of us are capable of recognizing that the left and right axes are of different scales.

            You are welcome to create better charts and post them.

        2. I’m glad for the info supplied by Energy News as well (thank you), just pointing out that the chart scales from EIA are bizarre, and easily misleading.

          1. I may be incorrect, but I think Energy News creates these charts using EIA data.

            I appreciate his/her contribution.

            Thank you Energy News, you make the blog better imho.

        3. It’s difficult to know what people are going to find interesting 🙂

          1. Many thanks for your presentations and news. Great work! It is all noteworthy information.

          2. I agree, very interesting information!
            Thanks, Dean

            P.S. Energy News, do you have an account on Twitter?

          3. Hello, I’m glad that people like the charts 🙂

            I did originally post two separate charts on the 28th
            http://peakoilbarrel.com/mexico-production-and-reserves-1h2018/#comment-650077

            Yes I have a Twitter account. There’s nothing much on it though. There are some new inventories charts from yesterday.
            Twitter: Time for Tea https://twitter.com/Monkey_Charts
            I like Arthur Rackham’s drawings of animals that look like people, or people who look like animals, although I was going to change it for something wider.

  3. North Dakota’s natural gas flaring regulation, stricter by November…

    2018-08-24 (Platts) In June, though, some operators reported voluntary shut-ins of oil production, which were necessary to comply with North Dakota’s gas capture policy.
    Looking ahead, though, by November operators will need to comply with a stricter, 12% flaring regulation, which could put the brakes on both gas and crude oil production in North Dakota.
    By late 2019, five gas processing plant projects currently underway in North Dakota, including Kinder Morgan’s project, should boost total capacity in the Bakken by 815 MMcf/d.
    https://www.spglobal.com/platts/en/market-insights/latest-news/oil/082418-analysis-bakken-drilling-approaches-19-month-high-as-oil-prices-irrs-rise

  5. So the Saudi’s, predictably canceled Aramco’s IPO launch.

    Lots of unknowns, in the biggest producers.

    Ghawar – big unknown / Saudi had a previous peak in the 80’s a decline and now a new peak
    Shale – big unknown/ US had a previous peak in the 70’s a decline and now a new peak
    Russia – big unknown / Russia had a previous peak in the 90’s a decline and now a new peak

    1. Saudi didn’t peak and neither did Russia. Saudi cut production drastically in late 1981 due to the Iran-Iraq war and the subsequent “Tanker Wars” that resulted. They resumed normal production in 1990 and have gradually increased production since.

      The Soviet Union broke up in December of 1991 and Russian production fell as a result, it was not because they had peaked. Gradually things got back to normal and they have, not as yet anyway, peaked.

      1. With respect to the Soviet Union, I think that’s backwards. Soviet oil production peaked in about 1987 which caused the Soviet Union to collapse. Soviet oil production increased after the collapse because foreign investors were allowed in.

        I think the Soviet Union is an interesting case study, like Venezuela. Oil production can fall even though there is a lot of oil left in the ground. Oil production can fall because the feedback loops turn negative.

        1. With respect to the Soviet Union, I think that’s backwards. Soviet oil production peaked in about 1987 which caused the Soviet Union to collapse.

          With all due respect to Schinzy, that is bullshit. How can oil peaking cause collapse? USSR production started to decline in January of 1989 because the USSR was starting to collapse. Neither the peaking or the decline caused the collapse.

          What Led to the Collapse of the Soviet Union?
          A:
          Quick Answer
          The causes of the fall of the Soviet Union were many and included ethnic conflict, a lack of support for the idea of communism and economic troubles caused by a focus on arms. Despite reform efforts by Mikhail Gorbachev, the then leader of the Soviet Union, the country was never able to reorganize and rebuild.
          As a nation that covered more square miles than any other in the world, the former Soviet Union encompassed many smaller republics populated with various ethnic groups. These ethnic groups were not always able to find a way to coexist peacefully, which eventually gave way to a constant state of political unrest that was further agitated by the widespread economic struggles caused by the expenditure of large amounts of money on military and weapons in a competition with the United States to be the world’s most powerful nation. The lack of prosperity made it more difficult to convince citizens to invest fully in the idea of communism. In 1987, the republics began breaking away and demanding to form their own nations. The final straw came after a failed coup in 1991 that involved the kidnapping of Gorbachev himself. The group that kidnapped Gorbachev tried to take control of the military, but the members of the military rebelled, which led to a period of widespread civil unrest. Shortly thereafter, the Soviet Union collapsed.

          The below is USSR Crude + Condensate in thousand barrels per day.

          1. The world went through a period of a decade in the 70’s to early 80’s with high oil prices, and the Soviet economy and budget became very dependent on them. When the prices crashed in the early 80’s the Soviet economy became unsustainable. It was a period when they tried to expand their military budget to match Reagan’s Star Wars and to pay for their very expensive failure at Afghanistan. Their economy gave up and they collapsed.

            https://en.wikipedia.org/wiki/Price_of_oil#/media/File:Crude_oil_prices_since_1861.png

            Pretty much like in Venezuela. They expanded their budget during high oil prices only to become unsustainable under low oil prices.

            1. I have no argument with that assessment. That was definitely one reason for the collapse, perhaps the primary reason. Of course, there were others but economic collapse due to the collapse in oil prices was likely the most important factor.

          2. You are right. Peak Soviet oil was not the reason for the collapse, but I
            believe it was a key symptom of the collapse.

            I think the oil price fall of 1986 doomed the Soviet Union. Most of their
            technology came from the West. Most of it was bought, the largest truck
            factory in the world in 1986 was a Ford factory in the Ukraine. A lot of
            technology was stolen. Oil was the main source of the Soviet Union’s foreign
            currency reserves.

            I think that peak oil is about extraction prices rising faster than market
            prices. Peak oil is about slowing economic growth rates, corruption, and
            lower salaries. People get irritated and start noticing that things are not
            particularly well run. They start looking for alternatives, for example I
            think Trump is a product of peak oil. The mainstream candidates are bought
            by special interest groups, let’s vote for a side-stream candidate.

            I think that increasing oil production is about feedback loops that can go into reverse: if lower production causes economic collapse, workers don’t get paid so they walk off the job, like in Venezuela.

          3. http://www.hubbertpeak.com/reynolds/SovietDecline.htm

            “We believe a more fundamental problem in the economies of Eastern Europe and the Soviet Union was the decline in Russian oil production. Russia was the main oil producer for the communist countries, and its production decline pushed the Soviet and Eastern economies over the brink of disaster, causing the collapse.”

            “It was only the decline after 1988 that caused economic problems and was a true crisis. The fact remains, scarcity caused the Soviet oil production decline, just like it caused the US oil production decline. Whether it was Soviet mismanagement or not that caused the oil production decline, oil production did decline. There was oil scarcity. The economy had to adjust to less oil, which induced economic stagflation.”

      2. I am obviously talking about multiple peaks here and not “the peak”

        We can all agree that US, Russia and KSA are the 3 biggest producers and they don’t follow the standard Hubbert peak curve, and I think they are the main reason why Peak Oil prediction was skewed.

        1. eduard flopinescu wrote:
          “We can all agree that US, Russia and KSA are the 3 biggest producers and they don’t follow the standard Hubbert peak curve, and I think they are the main reason why Peak Oil prediction was skewed.”

          1. Oil Production over the past 50 years expanded beyond conventional (on-shore drilling).
          2. Oil production from older\depleted fields was checked by use of water flooding. Without these improvements most of the large fields would have peaked and declined decades ago, but suffer much greater decline losses in the future. Question is: do you prefer extending BAU, but with a terrible hangover.
          3. Extremely low interest rates, which provided vast capital for unprofitable or barely profitable Oil projects (Tar Sands, LTO, ultradeep).
          4. Most Oil majors have abandoned developing mega oil projects. Most of the big oil majors have switch to drilling on Wall Street (stock buybacks) and replacing reserves by purchasing lesser oil companies or merging.

          If the future production of oil was not of a pressing matter, there would be no need to mine tar sands, Drill for LTO, Artic, etc.

          1. You obviously have no idea what you are talking about with respect to the “tar sands” Do some research as to where cost curves are for Canadian Natural, Suncor, Cenovus.

            1. Tar Sands depends on really Cheap NatGas. Tar Sands is basically a NatGas to heavy Oil conversion plant. If it was a true profitable operation, it would have took off before the price of oil took off in the mid 2000’s.

              NatGas is too valuable for conversion since its difficult to transport overseas & its widely use for heating & industrial processes. It would have made more sense to keep NatGas for long term reserves instead of short term Oil production

    1. Wow, they are running at less than 1982 levels now. That is an amazing feat, considering that population has almost doubled in that period and they have a huge GDP.

      1. This appears to be sources of oil to California oil refineries, and not statewide demand for consumption purposes. I assume statewide demand closely tracks national oil demand in percentage increase/decrease terms.

        I think one of the last oil refineries built in California is Valero’s Wilmington Refinery, which was commissioned in 1969. It produces 15% of the asphalt supply in Southern California and is set up to refine heavy crude (per Valero’s website).

        There has not been a large oil refinery built in the US since Marathon’s Garyville, Louisiana refinery in 1976.

        Since the shale boom, I believe there have been some “splitter” refineries built in Texas to refine condensate, and there was a small refinery built in North Dakota as well.

        In reading the Zero Hedge article, I see it links an article where several California politicians are calling for an end to all fossil fuel production in the state, including existing PDP reserves. Even if all transportation and all electrical production is transitioned to renewables, there will still be a need for fossil fuel based products, such as asphalt for roads, plastics, etc. So a little bit of NIMBY going on?

    1. Normal insaneness on the Autobahn here, sometimes you encounter such a kamkazee driver.
      It’s allowed, but not really safe – and if you create an accident, you have more fault automatic if you are over 130 Km/h.

      But it’s not easy to find an autobahn and a time where you can drive crazy like this. On the last vacation I was happy finding a few km where I was able to go to 160.

      Germany is dense populated, so the traffic is more like Los Angeles than cross Idaho…

      Consumption of this car at this speed can be measured in liters per minute?

  10. https://www.reuters.com/article/us-venezuela-pdvsa-refineries/pdvsa-may-run-foreign-oil-at-largest-refinery-to-meet-export-contracts-documents-idUSKBN1J92SQ

    Must have missed this in June. The interpretation of significance is slanted.

    All we know is Venezuela imported oil to refine and export the refined products.

    Venezuela has imported oil in the past to create a barbell constituent yield, so there’s no aspect of unprecedented action. It is interesting that refineries whose employees allegedly walked off the job are creating exports.

    1. It is interesting that refineries whose employees allegedly walked off the job are creating exports.
      After viewing MSM news sources, anything is possible.
      Of course, anything is possible at Disney (except a non capitalist view) also.

  11. The conditions are now in place for a new global economic crisis in 1-2 years

    1. Periods of oil export increase take place when oil is affordable and abundant, and they signal global economy expansion.

      Oil exports become stagnant when oil is expensive or constrained or both. During the 2010-14 period some countries expanded their economies at the expense of others that contracted. The inversion in renewable energies increased greatly as oil, while abundant, was expensive.

      With the oil price drop of 2014 the global economy started to expand. At the same time investment in renewable energies started to decreased in many countries. The entrance into a period of plateau in oil production is driving an increase in prices that is putting an end to this economic expansion.

      The response to a clear future oil scarcity is to reduce global oil demand. The Federal Reserve has started a tightening policy with the idea of undoing the quantitative easing policies of the recent past. EU, Japan and China will have to follow suit or watch their currencies drop like a stone. Weak developing countries cannot do anything and are seeing the flows of money reverting, sinking their currencies and economies. Turkey is leading the way, but the problems are extending to Argentina, South Africa, and Brazil, and will eventually cause problems in Russia and India. All these economies will be reducing their oil demand when they enter recession, releasing pressure on global production.

      However the economic problems of a part of the world are likely to spread to the rest, as their demand for goods and products decreases. Contagion can affect weak highly indebted economies really fast. Trade protectionism on the rise will make everything worse.

      The chances of a serious global economic crisis in the next 1-2 years are very high. It would have the same trigger as the previous one, the inability to have cheap abundant oil, complicated by a growing difficulty to increase the level of debt in many countries.

      1. Carlos Diaz Wrote:
        “The chances of a serious global economic crisis in the next 1-2 years are very high. It would have the same trigger as the previous one, the inability to have cheap abundant oil, complicated by a growing difficulty to increase the level of debt in many countries.”

        The price of Oil is still low. Baring a new tanker war in the ME, I doubt oil prices will rise enough in the next 2 years to trigger another financial crisis. Recall that in 2014 Oil was over $100/bbl and the economy managed to limp along. The Fed & other Central banks will likely be much quicker this time to ease and renew QE to starve off another liquidity crisis. I am not really sure the Fed is really tighting. The Fed may be selling debt assets it purchased during the QE years, but I suspect the assets are being sold at a discount or below what is currently is considered market value.

        The leading cause will be the mounting debt and pending demographic cliff. What matters is rising interest rates & the ongoing trade war that is likely to drive up inflation. Its also possible the tarriff\trade war trigger another recession. At which time the Fed and other Central banks will step in, postpoing another crisis.

        My guess is that the next major crisis will begin in the mid 2020’s when the full force of the demographics cliff hits. By the Mid 2020’s its unlikely the Central banks will not be-able to postpone a crisis and global Oil production will be the decline.

        1. “The price of Oil is still low.”

          Is that your opinion?
          According to the Fed, the inflation adjusted price of WTI has been more expensive 30% of the semesters since 1986, and cheaper 70% of the time.
          https://fred.stlouisfed.org/graph/?g=rrs

          So no, by objective criteria the price of oil is no longer low. It is actually quite expensive. And nobody knows the oil price the economy can withstand at any point because it is a moving target depending on a lot of other factors. What we do know is that when the oil price rises, prices rise, and businesses do worse.

          “Recall that in 2014 Oil was over $100/bbl and the economy managed to limp along.”

          Not counting the countries whose economy had to be rescued, and all the help from central banks to push up asset prices, depressing interest rates. Very different environment. Unless we want to go through that a second time, but it might not work as well a second time.

          1. Carlos Diaz Asked
            “Is that your opinion? [Low Oil Price]”

            Compared to $100+, yes. Oil would have sustain over $100 to trigger another major crisis. My guess is that global growth will be largely contained and will not have the force needed to send Oil prices skyrocketing as the did in 2006-2008.

            “not counting the countries whose economy had to be rescued, and all the help from central banks to push up asset prices, depressing interest rates.”

            Yup, but CBs will act again, and very likely act much quicker now that the Magically QE genie is out of the bottle.

            My current thought is that the QE Genie probably isn’t going to work when the West (USA, EU) & Asia fall off the demographic cliff (2021-2027). This is when there are likely to be labor shortages & lots of QE needed to pay for unfunded\underfunded entitlements & pensions. Plus we’ll also likely be past peak oil production & global debt will probably be at least 50% higher if not significantly higher. When all three crisis merge: Demographics cliff, Debt & declining Oil production. that will likely be the beginning of the next major crisis. Its possible that if the Debt or Demographic cliff occur before Oil production declines Oil prices will remain below $100.

            Ultimately I think the next major crisis will cause the next global (nuclear) war, as nations blame each other and fight to secure declining resources (Energy, Water, Seafood, Food, etc). Nations will select charismatic leaders that promise the return to better times, but turn to authoritarian socialism which push nations into war.

            I think water is becoming a critical problem as we’ve seen severe issues in the US, South America, Middle East, and Africa. The US may be facing a long term drought in the West, Brazil’s Sao Paulo, South Africa Johannesburg. The Middle East has an excessive population and nations like KSA use a lot of energy to desalinate sea water. The USA Agraculture also depends on depleting aquifiers in the West.

            In my opinion the 2020’s is shaping up to be extremely difficult decade.

            1. “Compared to $100+, yes.”

              That response denotes you are suffering from “Anchoring effect,” one of the strongest cognitive biases that affects humans.

              “It is a cognitive bias which takes place when we consider a particular value of an unknown quantity before estimating such quantity. The value we have considered or that have been shown to us before, strongly determines the estimate we are going to make, which will always be relatively close to that previous value, which is called the anchor.

              Once the anchor has been established, we evaluate whether it’s high or low and then we adjust our estimate to that amount. This mental process finishes early, because we are not sure of the real amount. Therefore, our estimation is not usually far from the anchor.”
              https://facilethings.com/blog/en/anchoring-effect

              Before the price reached >100$ you would have thought that 70$ was very expensive. Once it reached >100$ you adjusted your anchor to that value so you compare any value to it to see if it is expensive or cheap. Now $70 looks inexpensive.

              To avoid the anchoring effect you need a criterion that will objectively compare the price to an average.

              “Oil would have sustain over $100 to trigger another major crisis.”

              How do you know that? My guess is that you don’t. You assume that to be the case by a superficial comparison to a period in which economic conditions were quite different. Among other things Central Banks were loosening while now they are tightening.

              Usually nations do not go to war when their economy is suffering a meltdown. They usually wait until they are recovering and believe they can pay the war.

            2. Carlos asked:
              “How do you know that? My guess is that you don’t.. Central Banks were loosening while now they are tightening”

              Based upon recent trends. Oil was above $100 roughly from 2011 to 2014. It did not trigger another crisis. If a crisis did start, Central Banks will step in with more QE before there is a major crisis.

              “That response denotes you are suffering from “Anchoring effect,” one of the strongest cognitive biases that affects humans.”

              Nope. You presuming that CB’s will just fold their arms like the did in 2007-2008. I don’t see that happening, and there is no reason why they will simply let the economy implode.

              “Usually nations do not go to war when their economy is suffering a meltdown.”

              Most of the industrialize world is now locked in a arms race again. They aren’t building up offensive weapon systems just to sing kumbaya.

            3. “Based upon recent trends. Oil was above $100 roughly from 2011 to 2014. It did not trigger another crisis.”

              I guess you didn’t look at a great part of the world that was stuck in a permanent crisis during that period. The EU almost failed between 2011-14. They had to resort to intervene countries and undemocratically designate technocratic governments. What they had to do probably contributed to the Brexit, as people all over Europe didn’t like it.

              With oil above 100$ the global economy was on life support, with central banks acting in a way that can’t be considered normal or sustainable. The result was a massive transfer of wealth to the top 1% of the population that now controls over 50% of the wealth in the world. This increase in inequality has not been well taken by the 99% that feel they were cheated by the response to the crisis. Extremist radicalism is one of the consequences, and it leads to political instability. There are many democracies struggling with the loss of support by traditional parties in favor of populist parties.

              “You presuming that CB’s will just fold their arms like the did in 2007-2008.”

              I do not presume anything. Measures destined to restore confidence lose efficacy when they have to be repeated. Never in history the increase of the monetary mass in response to economic crises has solved anything. In fact it leads to worse consequences down the path.

              You make a mistake if you assume you know the price oil can reach before a new global economic crisis is triggered. And an even bigger mistake if you think that CBs know now how to avoid or solve economic crises.

      2. Carlos,

        Flat oil production and high oil prices may have been a minor contributor to the GFC, but it was mainly caused by poorly regulated financial markets. The situation for those in major economies is far better today.

        In short, I disagree a financial crisis is highly likely in 2 years, but by 2030-2035, I think the World may be having problems with declining oil output and declines from other fossil fuels and high fossil fuel prices and a crisis may ensue.

        1. Dennis, putting a qualifier allows you to say that the crisis, when it happens, is not financial.

          An economic crisis is coming and will not wait to 2030. The oil price is a huge factor because it affects most economies in the world and turns highly indebted countries insolvent. It is not a minor contributor.

          The FED’s tightening policy is also a big factor because it turns around the money flows. Money outflow from developing countries and weaker economies is starting a domino effect. We have seen it already affecting the Turkish lira and the Argentinian peso. The Brazilian real, and South African rand, are already starting to notice it. The Russian ruble and Indian rupee will follow suit. But also in Southern European economies the flow of money has already reverted. Their economies will start performing poorly over the next quarters.

          I expect the crisis will be affecting major economies by 2019-2020, unless oil prices start going down again. If interest rates climb enough the crisis will become a full fledged financial crisis and then all bets are off.

          1. Carlos,

            Interest rates will adjust and monetary flows will even out, higher oil prices are less likely to be as important a factor as you imagine. In fact, due to depletion higher oil prices are a plus as those economies will be forced to move to other energy sources. Nations with lower oil prices will not make this adjustment and an oil price spike will it them harder when it occurs as these adaptations take time. At current levels, oil prices are not likely to be a problem for the world economy. The oil price will need to adjust so the World Supply and Demand are balanced over the long term.

            Higher oil prices are likely until 2040, the World economy is likely to be far more resilient than you believe. A major financial crisis at the World level has happened twice since 1870, roughly once every 60 years.

            So even 2030 would be a bit early based on the history of the past 150 years, as it would only be 21 years between major economic crises.

            1. Dennis, do you know the ECRI weekly leading index growth indicator, WLIg? I guess you do. Not every time it turns negative there is a recession, but every time there is a recession it turns negative, and many times it turns negative and there is not a recession in the US, there is an important recession elsewhere affecting the US, like the 2011-2012 European debt crisis.

              Well the ECRI WLIg turned negative the last week of August.
              https://www.advisorperspectives.com/images/content_image/data/3a/3a4fd6157b96ae6626c17e4beadc343e.png

              If I hang around I will be showing you how wrong you are. The last time ECRI WLIg turned negative was in 2016, but at that time oil was very cheap and that is a stimulus to the economy.

              The main inputs to the economy are energy (oil and electricity), labor (demography), and finance (credit). The demography is turning awful, the credit is saturating, and now oil price is becoming expensive. And you think this is going to limp along until 2030.

              Keep dreaming.

            2. Carlos,

              I am talking about a major recession where World real GDP decreases, no doubt there will be a recession between now and 2030, but a slow down in the growth of World real GDP I am less concerned with, the growth rate will increase and decrease just as it always has.

              When the next World recession will occur cannot be predicted, one can say it will be in the next 1 to 2 years from now until 2030 and eventually you will be correct.

              Note that there is more to energy than oil and electricity and eventually electrically driven land transport will replace petroleum and it will be powered by wind, solar, nuclear, natural gas, and coal. Market prices and good public policy will guide the economy from fossil fuel energy to non-fossil fuel energy over time.

              The transition will be difficult and a major economic crisis will result after the peak in fossil fuel output in 2025-2030.

            3. Dennis, peak oil has already taken place.

              If you look at 13-year averaged monthly data from EIA to avoid seasonal effects and the noise, if the average is centered you will see that by August 2015 the amount was 80,768 mbp/day. Latest averaged data 26 months later is 81,250 mbp/day. An increase of less than 0.3% per year.

              Oil production has entered a plateau. There are higher values and lower values than 81 k, but it isn’t going anywhere like it didn’t between 2005 and 2010.

              This is how Peak Oil looks and nobody knows. Date of entering the plateau: second semester of 2015. When it leaves the plateau it will be going down, not up.

            4. Carlos,

              The plateau is due to over supply of oil in 2014 to 2015, output was cut back to reduce excess oil stocks, now that those stocks have been reduced to “normal” levels, C+C output will continue to increase through at least 2023 and possibly to 2027. The peak will be about 84 to 86 Mb/d of C+C output (my best guess) for 13 month average World C+C output, potentially it could be higher, the exact path depends on too many variables (business cycle, oil, prices, technological developments in all energy and transportation fields) that have multiple interactions and feedbacks for any precise prediction.

              True the peak may be now, until next month’s data is available. 🙂

            5. Dennis, the oversupply of oil was enhanced by the price drop as oil producers tried to maintain revenues by increasing oil output, and demand was growing slowly. But by focusing on short-term production they neglected needed investment in long-term production.

              With oil prices increasing and robust demand the problem now is to increase oil production. You think it will happen, I think it will not.

              There is this curious announcement by Saudi Arabia:

              https://www.theglobeandmail.com/business/article-saudi-arabia-cuts-oil-output-as-opec-points-to-2019-surplus/

              The Globe and Mail
              Saudi Arabia cuts oil output as OPEC points to 2019 surplus
              Published August 13, 2018

              “OPEC on Monday forecast lower demand for its crude next year as rivals pump more and said top oil exporter Saudi Arabia, eager to avoid a return of oversupply, had cut production.

              In a monthly report, the Organization of the Petroleum Exporting Countries (OPEC) said the world will need 32.05 million barrels per day (bpd) of crude from its 15 members in 2019, down 130,000 bpd from last month’s forecast.

              The drop in demand for OPEC crude means there will be less strain on other producers in making up for supply losses in Venezuela and Libya, and potentially in Iran as renewed U.S. sanctions kick in.

              Crude edged lower after the OPEC report was released, trading below $73 a barrel. Prices have slipped since topping $80 this year for the first time since 2014 on expectations of more supply after OPEC agreed to relax a supply-cutting deal and economic worries.

              OPEC in the report said concern about global trade tensions had weighed on crude prices in July, although it expected support for the market from refined products.

              “Healthy global economic developments and increased industrial activity should support the demand for distillate fuels in the coming months, leading to a further drawdown in diesel inventories,” it said.

              OPEC and a group of non-OPEC countries agreed on June 22-23 to return to 100 per cent compliance with oil output cuts that began in January 2017, after months of underproduction by Venezuela and others pushed adherence above 160 per cent.

              In the report, OPEC said its oil output in July rose to 32.32 million bpd. Although higher than the 2019 demand forecast, this is up a mere 41,000 bpd from June as the Saudi cut offset increases elsewhere.

              In June, Saudi Arabia had pumped more as it heeded calls from the United States and other consumers to make up for shortfalls elsewhere and cool prices, and sources had said July output would be even higher.

              But the kingdom said last month it did not want an oversupplied market and it would not try to push oil into the market beyond customers’ needs.

              DEMAND SLOWING

              Rapid oil demand that helped OPEC balance the market is expected to moderate next year. OPEC expects world oil demand to grow by 1.43 million bpd, 20,000 bpd less than forecast last month, and a slowdown from 1.64 million bpd in 2018.

              In July, Saudi Arabia told OPEC it cut production by 200,000 bpd to 10.288 million bpd. Figures OPEC collects from secondary sources published in the report also showed a Saudi cut, which offset increases in other nations such as Kuwait and Nigeria.

              This means compliance with the original supply-cutting deal has slipped to 126 per cent, according to a Reuters calculation, meaning members are still cutting more than promised. The original figure for June was 130 per cent.

              OPEC’s July output is 270,000 bpd more than OPEC expects the demand for its oil to average next year, suggesting a small surplus in the market should OPEC keep pumping the same amount and other things remain equal.

              And the higher prices that have followed the OPEC-led deal have prompted growth in rival supply and a surge of U.S. shale. OPEC expects non-OPEC supply to expand by 2.13 million bpd next year, 30,000 bpd more than forecast last month.”

              The entire article makes no sense. It is full of reasons to increase production justifying a decrease in production. OPEC and Russia agreed to cuts in production, they decrease production by 130% of the agreement (I know, quite fictitious), and KSA says it is no longer needed because price has recovered so they are going to… cut production further.

              This is when the surprise hits you. You are following 101 resource economics that say an increase in price is met by an increase in production. What happens when it doesn’t happen?

              Welcome to Peak Oil. Post-Peak Oil era will be inaugurated shortly.

  12. More “hand waving” from the Society of Petroleum Engineers regarding declining “productivity” in the Permian Basin: https://www.spe.org/en/jpt/jpt-article-detail/?art=4532

    Then there is this: https://www.msn.com/en-us/news/us/water-use-for-fracking-increased-767-percent-in-the-permian-from-2011-to-2016/ar-BBM3KdJ
    and this:https://www.bloomberg.com/news/articles/2018-08-29/drowning-in-dirty-water-permian-seeks-a-22-billion-lifeline
    and this: https://www.wsj.com/articles/in-americas-hottest-drilling-spot-vast-volumes-of-gas-go-up-in-smoke-1535535001
    and this: https://wolfstreet.com/2018/08/15/shale-profits-remain-elusive/
    and this: http://www.msn.com/en-us/news/msn/federal-reserve-chief-defends-raising-interest-rates-signaling-trump-cant-pressure-him/ar-BBMp41V with over $80 billion of debt maturities coming up soon and hopefully some independent reserve audits that will begin to prove how overblown reserves are in America and essentially how insolvent the majority of shale oil companies are.

    What’s the solution? More pipe? More rain? More sand? More internet based exuberance about how shale has forever changed the world? Shall we ignore the highest level of household/consumer debt in history, its role on hydrocarbon consumption/demand, and just bank on higher oil prices? Or print some more money to throw at it? Money fixes everything. What else? Oh yeah, denial works too.

    Fernando, if you want to invest in the American shale oil phenomena (Oxford, noun, an event or occurrence of extraordinary circumstances that can’t be fully explained), knock yourself out, brother. Y buena suerte.

    1. Good articles, thanks Mike. 100k EUR drop is more than somewhat significant. That’s over a 5 million dollar drop on each well. As a comparison Eagle Ford tier one wells usually produce over 600k barrels, not 500k and below. They can’t keep up with these rates of decline, and produce what they expect. At some point, they will only be keeping up with declines, because the area and resources will not support the higher activity levels. They might get another 1.5 million a day out of it, but I think that is pushing it.

      I think that shale oil will never be the answer for oil declines, with that part, I agree with you, Mike. But, there simply is no answer, at this point. Some shale companies will make money, many will not, because as the song goes: “stray dogs that live on the highway, walk on three legs, because they move too slow to get the message”. Whose going to wind up plugging all these holes?

      On another note, recent changes like this and Iran, makes me think 2018 may wind up being the Peak year. So far, Iran is still producing. That won’t last. At this point, Batman is useless, we would need Superman.

      1. Oh no, no super powers.

        Have you seen the oil tanker scene from Superwoman?

    2. Hi Mike.

      I’ve nothing to add, just saying hello.

      Things going well down San Marcos way?

      1. Hotter than Hadies, Syn. I got in my truck the other day on location and it said 123 degrees; my iPhone was fried. Nobody has to convince us about global warming in Texas, not in August. I understand the little boy is visiting again this winter; that will be good anyway. I hope you are doing well, sir.

        1. I’m still shambling into my Sunset Years, Mike. Nothing new on this end.

    3. Mike,

      Thanks.

      From your first link:

      Duman said feedback from those in the field has been positive, but engineers have questioned whether the sample includes wells that are not yet in terminal decline, which could inflate the rate.

      The decline curve for tight oil wells can be broken into three parts: early peak production where the declines are steepest, a transition period where production and declines slow, and terminal decline where the decline rate goes down a bit and the curve flattens.

      “We are not putting a stake in the ground and saying everyone should be modeling a 14% decline rate,” Duman said. But the consultancy advises that “there are risks in using a shallow (low) decline rate.”

      I use a 9% annual decline rate for terminal decline of Permian tight oil wells.

      Using Enno Peter’s data for 2010-2011 wells from month 60 to month 78 for 840 Permian wells suggests a 15% annual decline rate (and a 1.27% monthly decline rate). It is not clear if the decline rate will remain at that level over future months (it might decrease or it might increase).

      Looking back at older Bakken wells from 2005-2006 (using data from shaleprofile for 105 wells) from month 60 to month 120 the decline rate is about 12%, so it would seem a terminal decline rate of at least 12% is reasonable and of course it may be higher for the Permian Basin as every basin is likely to be different.

  13. Thank you, Guy. Observations about current terminal decline rates do not address increasing GOR and a poll of SPE members working in the Permian suggest those decline rates will increase. Costs are going up and as you know, W. Texas is NOT water wealthy. WOR is increasing also and as some of the links infer, at a horrendous burden to incremental lift costs per BO. That in turn will cause wells to reach economic limits much quicker, further reducing UR. “Extenuating circumstances,” even politics and public sentiment, have historically always affected lofty recovery predictions and shale oil will prove no different. Elsewhere in the world governments control their hydrocarbon resources; in America right now its a wide open race to drain America’s remaining oil resources as fast as possible, to give it away to others or waste in into thin air. Time will prove that to be a grave mistake.

    1. It’s intersting to note that Magellan has already sold off its existing pipeline, from what I remember reading. Why would they sell it off, if they continue to expect the Permian to meet the ridiculous expectations. Or, have they finally read the handwriting on the wall?

    2. Hi Mike.

      Who would have thought, over 100 years after Spindletop and over 80 years after discovery of the East Texas Field, that once again we would be crowding oil wells as close together as possible?

      I am relieved that we have no shale wells being drilled and completed near us. Cannot imagine having our economic conventional wells destroyed by frac hits, which are very common in both the Permian Basin and in the OK shale regions.

      1. Does this frac hits destroy the well? I thought you could be able to tap into the frac oil then via the artificial shortcut… would be cool for the first years…

        1. Frac hits describe a problem that occurs when a new well is fraced too close to another well. It causes a loss in output from the old well.

        2. Check out okenergyproducers.org. Some information as to what conventional producers are dealing in areas where high volume frac horizontal wells are being drilled and completed nearby.

          1. Shallow, you are of course referring to frac ‘bashing’ shallower wells in areas where deeper shale frac’ing is occurring. There are, as I am learning, a lot more of those than, of course, the shale oil industry wants us to know. They imply that frac’s do in fact migrate up, out of zone into…well, we’re not suppose to talk about that, are we? Nor water scarcity, nor drowning in ever increasing produced/flowback water with TDS that is going thru the roof, can’t be treated, and where injection pressures are going thru the roof because the places to put the stuff are filling up.

            Listen, mate; time is going to prove this shale shit was really good for a brief moment in time, but for debt reasons that taxpayers WILL deal with, for lack of conservation and reservoir management reasons, for water reasons, that it sucked ALL the air out the rest of the worldwide oil industry, and for stupid political reasons associated with pissing the rest of the world’s oil producing countries off with tariffs and sactions, history will show it was a great opportunity that America screwed the pooch on, trying to make a quick buck on.

  14. Exploring a possible connection between U.S. tornado activity and Arctic sea ice

    https://www.nature.com/articles/s41612-018-0025-9

    On a side note, I did dolphin charters in Micronesia for a while (95% Japanese clients).
    Spinners, which were great dolphins.
    However, there is more to the game than meets the eye—–

    1. Does it appear Canada will be stuck as well into late 2019? If that’s the case we need the Saudi’s to step it up…lol…Seems like a prolonged period of 82 mbd of worldwide production, one hell of a plateau. I guess 83 is possible if a lot of things go right.

      1. Yeah last I read, Canada is plagued with pipeline problems, with no immediate end in sight.

          1. BC will not take it currently.
            In a few years, it will be a moot point.

    2. Ok, I was just a little off. Texas increase was 165k and NM 5k, total of 170k. My total was 150k. See EIA 914 report.

    1. Eno does good work. After seeing what’s happening in the past two years in the Eagle Ford, I imagine it is the same in the Permian. Twice the lateral length as before, and more frac stages. The frac stages may add more EUR, but the length is only noise. You have used up two areas to drill on. It should be twice the oil, duh. I will throw a wag out, and say 20% more efficiency from the additional frac stages, and zero for the lateral length. You may save money by longer laterals, but you have no drilling efficiency from the rock.
      It is the first time I have looked at this, and definitely am less impressed with the Permian after seeing results. The impression I first received from articles were that the Permian wells would pump with a lower decine rate for longer than a typical Eagle Ford well, but don’t see that here.

    2. Wow, 2016 wells from almost 500 bpd to under 100 already. The ones from 2017 on the same path.

      So essential, the whole inventory has to be redrilled and fracked every 2 years.

      Another thing – if the production profile of current wells is like the profile of the oldest ones, 2017 wells won’t reach 400k barrel in average. Hard to make money at current prices with this, since drilling + fracking is not the biggest cost block in the whole life time.

      1. Yeah, at 400k, it would probably make some money, but later in the life of the well. Means you are financing the damn thing, and Mike’s arguments take more meaning. At $80, you are probably recovering capex, the first year, and it would do fine. As long as the declines don’t keep progressing.

        Looking at Eno’s data, the average Permian well is doing pretty close to tier two Eagle Ford wells, when you consider the cost of the well. They would get about 300k, but they are cheaper to drill. Of course, averages don’t tell the whole story. Some are better than others.

    3. I notice that shaleprofile now works very well on a smartphone. Or at least it is now for the tech challenged people like me.

      I suspect the combination of very high well costs plus Midland WTI discount is slamming the economics.

      Do not forget that some companies also paid extremely high land prices to get into the Permian.

      Also, to figure the true cost of these wells, in addition to land, seismic, etc., the pipelines and water supply and disposal infrastructure cost must be included.

      In years past we have mentioned the effect that inflated EUR’s have on shale company earnings. If EUR is being overstated on the books, GAAP earnings per share is being overstated because depreciation, depletion and amortization expenses are being understated.

      Shale companies in the Permian operate a lot of 8,000-10,000+ vertical stripper wells, as almost all of the acreage already contained these wells. Furthermore, almost all horizontal wells 5+ years old can pretty much be considered stripper wells. Given the costs associated with operating horizontal wells with TD 15,000-20,000+, I argue that if a vertical well producing under 15 BOPD is a stripper well, these horizontals should be considered same at at least 30 BOPD, maybe higher.

      Mike posted an article which indicates that older wells are still declining at 14% per year on average. This is a very big deal.

      1. Lol, can you imagine an Exxon, or even an EOG running stripper wells? Cost them more than it could make. They could not do it as efficiently as you can.

          1. I have no idea, but the mineral rights belong to the Mexican government.

        2. Guym.

          Actually they do operate a lot of stripper wells US lower 48.

          And in 10 years they will be operating thousands of shale stripper wells, unless they divest them first.

          1. There are over 180k active wells in Texas. They are currently plugging them at close to a rate of 10k wells a year. They are almost plugging the same amount of wells that they are currently completing. Don’t know how much will be left to operate. Currently, about 127k wells are producing less than 10 barrels a day. So, they operate them for awhile, but I have no idea what their cutoff rates are to plug them. I have no idea how much of these plugs are vertical or horizontal.

      2. Shallow sand,

        The well profile I use for the Permian has EUR of 436 kb for the average 2017 well with terminal decline rate of 9% per year. When the assumption is changed to 14% annual decline rate the EUR is reduced to 396 kb. In both cases I assume the wells are abandoned at 7b/d.

        1. Not sure what point they are plugged (not “abandoned”). But, if we got rid of those 127k wells that are producing less than 10 bd (say 7), then we give up close to 889k a day in Texas production, or almost 25%. I’m sure it is much lower than 7bd. 7bd would gross about $169k a year. If it required extensive cost to upkeep, yeah, plug the thing.
          But, you have to weigh potential short term negative income against plugging costs:
          http://www.rrc.texas.gov/media/2142/plugprimer1.pdf

          1. Guym,

            Often state agencies use TA for temporarily abandoned (not producing) and PA for permanently abandoned, the PA wells are indeed plugged and then “abandoned” in the sense that they are no longer producing oil or natural gas. I use 7 b/d for tight oil wells because based on comments by Mike Shellman and Shallow sand, the horizontal tight oil wells may no longer be profitable at output levels below 7 b/d.

            For conventional vertical wells that are below 10 b/d of output in the US the average output per well is under 2 b/d based on 2016 EIA data.

            https://www.eia.gov/petroleum/wells/

            301,740 US oil wells with output of 10 b/d or less, this is 79.4% of all oil wells and they produced 10.9% of US oil output in 2016. Of the group at 10 b/d or less 271,539 of them produces at a rate of 6 b/d or less and 196,860 of those wells produced 2 b/d or less, those wells as a group produced 2.1% of total US oil output in 2016 and account for 51.8% of all US oil wells producing in 2016.

  18. https://de.reuters.com/article/russia-gazpromneft-shale/russias-gazprom-neft-sees-bazhenov-shale-oil-commercial-output-in-2025-idUKL8N1QI7OA

    KHANTY-MANSIISK, Russia, March 1 (Reuters) – Russia’s Gazprom Neft expects to start commercial production from Bazhenov formation, the world’s largest shale oil resource, in 2025 provided it can reduce lifting costs from current estimates for the project, company officials said.

    The International Energy Agency describes Bazhenov as the world’s largest source rock, a bed of ancient organic matter dating back to the Jurassic period which has given rise to most of the crude oil pumped from the fields of West Siberia.

    Production of such oil is more costly than the extraction of the oil from conventional reservoirs.

    $151 per tonne is their cost of production target.

    1. $22 a barrel. Not as expensive as US shale. 2025? Not so far away. Just need to remove those skeletons around the pumps.?

    1. “More than any time in history, mankind now faces a crossroads. One path leads to despair and utter hopelessness, the other to total extinction. Let us pray that we have the wisdom to choose correctly.”
      — –Woody Allen

    2. What is not so common to think about is the theory I mentioned a few times before, Iran is going to let their production slide. Why not?; they have increased production before they knew the sanctions would hit and gained some buffer cash; they have all to gain by playing by the book (respecting the preceding nuclear agreement and letting their exports slide as punishment for.. something); and they could also get back at Trump by pressuring the oil price up before the mid term election. Not saying the regime is great in total, but they would likely play a game to survive. That is what I would have done in their situation. They could start their smuggling game when they want to – but that would work better if the oil price is first at an uncomfortable high level. They could wait at least 1/2 a year.

      How that leaves oil supplies going forward is pretty significant. Either a shit storm in the form of world wide recession is going to hit (due to high oil prices primarily) before easing of pipeline restrictions in Permian are allowing DUCs to increase world production in late 2019. That is my primary view. Or the US shale will save a world plateau in 2019 until the red queen shortly thereafter would hit – and then the recession is going to be very hard and long; just because it was artificially postponed for so long.

      And that would serve to let the young generation to get their head straight. To have enough energy per capita is more vital than improving information technology. At first by replacing oil with natural gas, and with as much renewables as economically possible. Too little energy, and living standards would reside. My little rant, but still convinced this view is more the right one than most want to admit.

      1. The Central Banks of the world can create money that might suddenly be lacking in some world wide recession and erase any such recession instantly. Reluctance to do this sort of thing is gone forever. They know the formula now.

        Scarcity has to be geologic to be seen.

        1. Yes that is the big question. When recession hits, central banks will print all the money necessary like in 2009-2010. But if oil production declines instead of increases what would then happen? Big time increase in inflation everywhere and currency crisis. Pressure on banks and interest rates. This problem is more urgent than the sleeping pill of 10 years of economic growth would suggest imo.

          There are wast oil resources in the earth no doubt, but they are not as easily available as before.

          1. Why would there be inflation?

            If CBs create money essentially on a whim, it makes clear there are no economic laws. Period. Scarce oil doesn’t have to increase its price. Just decree a lower price.

            Whimsical money was the signal flag that capitalism had failed. So all “rules” associated with it are no longer applicable.

            1. Just economic theory really. If a resource is scarce, money supply increases and if the demand still is stubborn like for oil; it is not possible to manipulate the price unless someone has near total control of the market. The price has to go up; if not black market emerges and ensures it goes up. With increased oil price, how can there not be high inflation? Look at what happend in the 80’s.

              If we are talking about a global market with a lot of options to be clear. In the oil market, the storage situation confuses about everyone. There are a lot of buffers.

            2. No. “Price” is a word describing the amount of a substance created from thin air.

              The price doesn’t have to go up for consumers. Governments can decree a lower price and pay the exporter whatever number they demand from the cash pile created by the local central bank.

              Of course, the oil exporter will want to balk at some point, but given that the central banks will all act in unison, the exporter may have no way to balk, other than leave it in the ground. One would expect all countries will remove their currencies from FX trading, too. The central banks can do a Chinese style peg, just as was done with mortgage backed securities. The “price” becomes what they say it is.

              Bernanke destroyed all economic theory. There is a global effort underway now to pretend it all still matters, but oil scarcity will make the silliness clear. The actions above are not extreme or convoluted. They would be somewhat the obvious thing to do.

      2. I think the world could use another oil price shock to speed up developing away from oil. Or at least use it more efficient – a mixture from driving less and using smaller cars can easy free several mb/day without giving much of living standard.

        Hey, we have apps – why not use a car pool app and halve your car weardown and gas costs.

        1. Yes, most likely we could actually reduce oil consumption 30% in developed countries by reducing luxury consumption. And as long as increasing production of natural gas and NGL are available and presumably will be exploited for this reason for the next 1-2 decades, the recession would not be permanent.

          1. Note the magnitude of oil consumption decrease during 2008-2009.

            Almost no decrease. Luxuries could not be afforded, and there was no signif decrease.

      3. Lol, I don’t see any option of the cutting back, after awhile, if they can’t export it. You can only fill up so many tankers as floating storage.

        1. Guym,

          Agreed. Iran is using its tankers to carry oil to India, providing insurance itself since the US is preventing usual insurers from doing business with this trade.

          Tankers for storage are becoming fewer and fewer.

          1. Not quite the right read. And the tankers go to Shanghai more than India.

            The right read is . . . how are the tankers at risk that they would have such a significant need for insurance and have to mention it. If you’re buying no insurance, and self insuring, you would ordinarily just not mention it.

            Maybe the worry is seizure by the US Navy.

    1. Interesting. In Texas, royalty (landowners) and over riding royalty owners are exempt from the cost. It is the operators, and bonding companies that bear the cost.

        1. Not sure, but I think they may be. They are not the actual operator, but they are participating with it. Think they would be down the line, after operator and bonding company.

  22. 2018-08-31 EIA-914 report – US June crude oil production up +231 kb/day to 10,674 kb/day from 10,443 kb/day in May (May revised from 10,442 kb/day)
    Texas +165 to 4,410
    Gulf of Mexico +154 to 1,658
    https://www.eia.gov/petroleum/production/#oil-tab

    Prior US crude oil production forecasts for June were
    EIA weeklies average: 10,897 kb/day
    EIA (STEO August) 10,721 kb/day
    IEA (OMR August) 10,571 kb/day

    1. Texas is up 165k, which is 45 more than my estimate, but NM is not showing the 30k I guessed. So, pretty close there. GOM is not quite up to the 1700k I expected (and may never get there, George would know better), and Alaska is still down some. So, my Permian guess was pretty close, but my 10.8 estimate missed by about 100k, because of GOM and Alaska, and some adding apples and oranges.

    2. US Ending Stocks – June
      Crude Oil: down -18.44 million barrels
      Oil Products: down -2.54 million barrels
      Total: Crude Oil & Oil Products: -20.98 million barrels
      SPR (not included in total above) down -0.15 million barrels
      https://pbs.twimg.com/media/Dl8vbJkX4AEP90z.jpg

      Natural Gas (ethane, propane, butane) up +17.89 million barrels in June
      https://pbs.twimg.com/media/Dl8v06cWwAMOIT4.jpg

      Total crude oil & products inventories at the end of June are down -16.4 million barrels from the end of 2017. Lower than 2017 for the first time in 2018
      https://pbs.twimg.com/media/Dl8yMjNW4AAvquf.jpg

        1. Your figures do not include floating inventory, which dropped during August, and wound up as the increase you show, before this week’s decline. Most of that is gone, so we may see a more steady decline, now.

  23. Why do they publish this shit??
    https://oilprice.com/Energy/Energy-General/Texas-Oil-Production-Drops-For-First-Time-Since-February-2017.html

    It’s the editors’ fault, they don’t have the knowledge to tell her she is reporting incomplete data????

    Lol, he did it too!! Texas production was up for June by 165k, and both of these genius are quoting incomplete State data.
    https://oilprice.com/Energy/Energy-General/Oil-Posts-Second-Consecutive-Week-Of-Gains.html

    1. I guess I should not complain, so much. Any news that points out EIA is off track is probably beneficial. Even if it is not technically correct.

      1. EIA still projects an average of 10.8 for 2018. Actual monthlies through June average 10,382k. To get to 10.8, the remainder of the year would have to average over 11.2 from a starting point of 10,674. Yeah, pretty impossible. Something less than 10.6 is more likely. 11.1 for next year vs their estimate of 11.7. Their only adjustment, so far, has been to go from 11.8 to 11.7 for 2019. Hard headed, mathematically challenged, or politically motivated?

        Canada is going nowhere, US may average 500k more a day from 2018, and if OPEC can’t make up for Venezuela, Angola, Iran, and possible short term outages, elsewhere, then 2018 may be the Peak. Non-OPEC declines will mostly offset US increase. Escalation between Iran and SA would probably guarantee that. Or, the sanctions on Iran could end, and Peak would be a little further down the road. Stay tuned, it getting close.

        1. “EIA still projects an average of 10.8 for 2018. Actual monthlies through June average 10,382k. To get to 10.8, the remainder of the year would have to average over 11.2 from a starting point of 10,674”

          Last year, I was also tracking the EIA forecasts. It was the same situation, production was not increasing much (average of 9.06 Mb/d for the first 6 months) while the forecast was quite high (9.3 Mb/d) for the average of the year. Then came a surge in production between sept-nov.

          My guess is that EIA just rely on 2017 production profile to forecast 2018. But I have doubts that the 2017 surge can be reproduced this year with the pipeline bottleneck.

          BTW, the 2018 average forecast, one year ago, was at 9.9Mb/d…

          1. You have a point. It may well be that whoever is in charge of the weeklies does not follow the news much, and relies on numbers, mostly. That did show up last year, and they may be relying on history and numbers, rather than keeping up with what is happening. Yeah, I get that. Someone who just lives in their cubicle.

  24. Hello
    What do you think about the last document of Laherrere?

    https://aspofrance.files.wordpress.com/2018/08/35cooilforecast.pdf

    Peak year
    All liquids 2020-2025
    russia 2017-2018
    Saudi arabia 2016
    USA 2015
    iraq 2030
    iran 1974
    china 2014
    canada 2030
    uae 2030
    kuwait 2016
    brazil 2030
    venezuela 1998 venezuela orinoco 2080
    mexico 2004
    nigeria 2005
    angola 2008
    norway 2002
    kazakhstan 2025
    qatar 2011
    algeria 2007
    oman 2016
    lybia 1970

    1. Unfortunately, it’s mostly useless for a lay person. Perhaps the experts can chime in. I’ve spent a couple of hours looking at the paper, and several features impede my comprehension:

      He writes in huge blocks of text w/ no indents for paragraphs.

      His English is frequently incomprehensible, sometimes abandoning capitalization and punctuation.

      He frequently fails to explain what acronyms and abbreviations mean.

      His charts are small and jam a lot of data into a confined space.

      There are pages of equations & shit that fly over my, and it’s like trusting a magician to convey reality to you.

      That being said, the takeaway message (for me, anyway) is this: The oil situation is farcical. No one can agree on what “oil” is or how to define it, let alone how to report it.

      What is reported varies by method from country to country. In other words, no one fucking knows how much oil is left to produce.

      Besides, this hardly matters, given that different “oils” have different energy contents and vary by weight and volume. (Wanna prove that a pile of pennies is more valuable that a pile of quarters? Weigh them and report the weights.)

      Laherrere expresses his exasperation with this state of affairs many times over. The effect is very unsettling, as if we’re driving very fast, with a broken fuel gauge.

      His sample charts on Pennsylvania anthracite always floor me when I see them. That’s our future right there, folks. I’m interested in this because we buy pallets of anthracite to heat our farmhouse in the winter, and do all our cooking and hot water heating with it. We’re burning up the remaining crumbs. I wonder if in my lifetime I might see the total abandonment of anthracite–a good quality fuel, high heat, low smoke.

      Shockingly, the geological estimates of ultimate recovery of anthracite from the 1950s turned out to be three times higher than what history ended up showing us, through Hubbert linearization.

      On oil: there are as many production forecasts as there are forecasters. Compare this with the science involved in climate change, where agreement is almost unanimous. Peak oil forecasting is kind of a joke, but it’s not all the fault of the forecasters, who work with appalling data. Yet I’m tempted to dismiss them all because they work with fucked data knowingly instead of saying, “We can’t know. The data be fucked.”

      The oil charts are kind of cool to look at, and there are lots of them. We seem to be at about peak right now–but that’s what we’ve been hearing for, what, decades now?

      If you look at “all liquids,” you want to sit back and relax and just burn more oil and ruin your neighbors’ peace and quiet with ugly loud boats and trucks.

      Here are his Understatements of the Year:

      “It will be interesting to see the evolution of such graph in 5 years.”

      “There is confusion in forecasting future production because of the numerous problems.”

      OK. Now the shock.

      “The main conclusion of this study is: only 6 countries have not yet reached peak: Brazil, Canada oilsands, Kazakhstan, Iraq, UAE, Venezuela Orinoco.
      –
      “19 countries (out of 35) have or will have a decline rate of 5 %/a. It means that, excluding the 6 countries before peak, the best and the simplest way to forecast future production is to decrease present production by 5 % per year.”

      Bye bye.

  26. Alberta’s total production is near record highs in July even with the Syncrude outage, due to an increase in non-upgraded bitumen +123 kb/day m/m.

    Canada, Alberta AER, Total Crude Oil and Equivalent Production at 3,485 kb/day in July, up +96 month/month
    (2017 average 3,184 kb/day)(2017 July 3,199 kb/day)
    https://pbs.twimg.com/media/DmCeKF0WsAEh2gq.jpg

    Canada, Alberta AER, crude oil closing stocks at 68,457 kb in July, down -1,937 month/month
    (2017 average: 58,923 kb)(The high was May 2018: 72,362)
    https://pbs.twimg.com/media/DmCFKPmWsAEvHNQ.jpg

    2018 June 25th – A transformer blew up at the Syncrude Canada oil-sands upgrader in Fort McMurray, Alberta, last week. The 350,000 b/d facility could remain down until end-July.

    1. Line 3 upgrade should be operational by this time next year, doubling capacity to almost 800,000, bbld.

      Controversial Keystone XL could actually start to break ground within a year with additional 800,000 bbld capacity.

      Canadian oil industry has been rocked for several years and the political repercussions continue to grow.

      Lottsa hard feelings all across the political spectrum.

  27. I guess, no more rides from the Russians?

    “The Us cannot even get to the space station after April next year (2019). It seems that the US cannot build a shuttle of their own that is reliable. No surprise. Look at the F35 for an example of corruption, greed and lack of expertise.

    All the WW2 German rocket scientists are dead. They were the ones who gave the Us the space capability in the first place when they were brought to the Us after WW2.”

      1. They better hurry!
        2019 is fast approaching———
        Don’t think private enterprise pulls this off very well– we will see, but better keep Russia’s phone number.
        Lets hope it is better than those cars.

  28. The Next Financial Crisis Lurks Underground
    NYT: Fueled by debt and years of easy credit, America’s energy boom is on shaky footing

    Amir Azar, a fellow at the Columbia University Center on Global Energy Policy, calculated that the industry’s net debt in 2015 was $200 billion, a 300 percent increase from 2005. But interest expense increased at half the rate debt did because interest rates kept falling. Dr. Azar recently called the post-2008 era of super-low interest rates the “real catalyst of the shale revolution.”

    . . . The best-run companies, which often focus on the Permian, are now making some money. “Their rates of return are still below levels that will sustain the industry in the long run,” says Brian Horey, who runs Aurelian Management, but “they are trending in the right direction.”

    And yet only five of the top 20 fracking companies managed to generate more cash than they spent in the first quarter of 2018. If companies were forced to live within the cash flow they produce, American oil would not be a factor in the rest of the world, an investor told me.

    It wasn’t just the rediscovery of the Permian that helped restart the oil boom after plunging prices almost killed it. The most important factor is the one that started the boom in the first place. “It came back because Wall Street was there,” Mr. Chanos told me. In 2017, American frackers raised $60 billion in debt, up almost 30 percent since 2016, according to Dealogic. . . .

    For a long time, the public markets have been valuing fracking companies not based on a multiple of profits, the standard way of valuing a company, but rather according to a multiple of the acreage a company owns. As long as companies are able to sell stock to the public or sell themselves to companies that are already public, everyone in the chain, from the private equity funders to the executives, can continue making money.

    It’s all a bit reminiscent of the dot-com bubble of the late 1990s, when internet companies were valued on the number of eyeballs they attracted, not on the profits they were likely to make. As long as investors were willing to believe that profits were coming, it all worked — until it didn’t.

    These days, the rhetoric of “energy independence,” meaning an America that no longer depends on anyone else for its oil, not even Saudi Arabia or OPEC, is in perfect harmony with “Make America Great Again.” But rhetoric doesn’t produce profits, and most things that are economically unsustainable, from money-losing dot-coms to subprime mortgages, eventually come to a bitter end.

    1. The better use of our time, materials, labor, and money would have been to invest in energy sources not involving fossil fuels. It is the best course of action today. FFs are finite and each day we extract more and fewer resources are left in the ground. We should use our current energy and materials to develop solar and wind energy and to implement technologies to reduce our energy use. Throwing money down the shale oil fracking rat hole only gives us less time to develop post-FF energy sources and technologies and less energy and materials with which to do so when we finally get serious…we are jamming humanity into a corner.

    2. Only a few companies are making cash flow that will enable them to reinvest capex to continue drilling at a reasonable level, which does not include the huge growth than is envisioned. The rest will need to be borrowed, or more questionable stock issued. As price increases, a few more will become able to be cash flow positive. The rest will become abysmal failures, because the reason for their operations is living on OPM. You can’t borrow yourself into profits, it has to be there independent of borrowing. So, the article is on point.

    3. So. There it is.

      And all that oil & gas from the Permian & the Bakken–up in smoke, without a thought for the future. Just a lot of big, ugly, noisy-ass trucks and boats, pissing away humanity’s energy capital.

      1. So if they were small, attractive and more quiet, that would be okay?

    4. Sub Prime Mortgages didn’t come to a bitter end. They were funded by the infinite source of money, a central bank. Similarly, nothing else systemic and vital to society will ever come to a bitter end because of numbers on a screen. The numbers will just be changed.

      If you have to have the oil, and you DO have to have the oil, money is not going to stop it flowing. There is no choice.

      1. Watcher, there appears to be something very fundamental about the financial world that you do not understand. The money supply is increased by loans, not by the Fed just printing more money, as you and a lot of others seem to think. There is no infinite source of money.

        How Central Banks Influence Money Supply
        The Fed can influence the money supply by modifying reserve requirements, which generally refer to the amount of funds banks must hold against deposits in bank accounts. By lowering the reserve requirements, banks are able to loan more money, which increases the overall supply of money in the economy.

        The statement was: things that are economically unsustainable, from money-losing dot-coms to subprime mortgages, eventually come to a bitter end.
        And the subprime did come to a bitter end, it collapsed! and that collapsed almost collapsed the world economy. There could be another subprime mortgage crises in the future but that would be a different crisis.

        Money is simply a call on energy. And when the energy required to extract the oil is greater than the energy supplied by the oil recovered, it will come to a bitter end.

        1. “Money is simply a call on energy. And when the energy required to extract the oil is greater than the energy supplied by the oil recovered, it will come to a bitter end.”
          I agree w the gist of your statement Ron. I think that a geopolitical storm will happen early in that phase, when the market starts to make a big adjustment for a decline in output from one of the big exporters, like Saudi or Russia.
          There will be a big shuffle among countries vying for the declining fossil energy. That shuffle will likely include war, and will likely be severely disruptive to economic stability and world trade. Within the decade. Even before global fossil energy output declines much. IMHO.

        2. Ron,

          EROEI does not determine profits, and money is not simply a claim on energy.

          Profit is revenue minus cost, full stop. Energy is just not part of the equation.

          EROEI is only relevant on a society wide level for all the energy produced and consumed by society for every conceivable type of energy.

          Utilizing the concept of EROEI for single products (oil products for example) would only make sense of all of the energy used in the production refining, and distribution of oil products was provided by oil.

          Clearly this is not the case.

          1. EROEI does not determine profits, and money is not simply a claim on energy.

            I made no claim that EROEI determines profits. I simply made the common sense statement that when it takes more energy to extract a barrel of oil than is supplied by that barrel of oil, it will no longer be economically extracted. Then it will stop then or stop when those doing the extraction goe bankrupt.

            As for money being a call on energy, I can quote you about a hundred economists who say it is. Just one:
            “Money is simply the transfer of energy”

            Many misunderstand what money truly is; an exchange of energy. It is the exchange of one service for another. Money is a valid form of exchange which is equal to any other form of abundance on your world.

            Just google it Dennis. “Money is energy” and you will get about a hundred hits. And the authors of almost all those web pages will be economists. Then you can argue with every one of them.

            1. Ron,

              First, not all energy is oil so it does not matter exactly the ratio of energy in to energy out from the perspective of a business.

              Oil is a particularly convenient form of energy storage, it has a high energy content per unit volume and per unit of mass.

              So certainly one could imagine that energy inputs from less convenient sources such as nuclear, coal or natural gas could be used as inputs to the production of oil. These other types of energy inputs would be less expensive than using oil as an energy input.

              For a business only revenue minus cost matters, so your “common sense” suggestion that energy in must be greater than energy out is just wrong.

              If it is not can you explain why energy is produced when obviously energy in is greater than energy out for most forms of electrical generation (natural gas, and coal for example).

            2. If it is not can you explain why energy is produced when obviously energy in is greater than energy out for most forms of electrical generation (natural gas, and coal for example).

              Oh my goodness! You are confusing energy efficiency with energy recovered, or more precisely return on investment. There is always a loss of energy or efficiency in any and all energy conversion systems. There is never an energy gain. That would be free energy and there is no such thing. Coal plants are only about 35% efficient in converting coal to electricity. Automobiles are only about 35% efficient, or somewhere near that, in converting gasoline to axle torque, or horsepower.

              That is not the same thing as energy return on investment. If you invest 10 million dollars in an oil well and get 9 million dollars worth of oil back, you are losing money and will go bankrupt if you keep trying such things. That’s like buying watermelons at $2.00, hauling them 20 miles and selling them for $1.50. Getting a bigger truck won’t help.

              Some people think EROEI doesn’t matter. They think it doesn’t matter if it takes 10 million dollars worth of energy to get 9 million dollars worth of oil. But that is the same thing as ROI, return on investment. Most people can understand ROI but when you throw in those damn Es, they get all confused. It’s the same damn thing.

            3. Ron,

              The concept is energy return on energy invested.

              So if I use 1 unit of energy in the production process for oil I will produce oil that has more energy embodied than the energy I used to produce it.

              And you are correct the energy return on energy invested does not matter for an individual business because the aim is to produce profits, not energy.

              Again a lot of time is spent finding EROEI for oil (used to be about 30 now it’s less maybe 15 or even 10).

              Do you think EROEI for an electric power plant is greater than 1?

              If not, how is it that they make a profit and why do they bother to produce electricity?

              And no I am not confusing energy efficiency with EROEI. Do you believe an electric power producer has a positive EROEI? If not, then your assertion that oil companies must have a positive EROEI is false, they can make a profit even if their EROEI is less than one, just the same as an electric power company because their product can be sold for more than the cost to produce it.

              As before this does not mean EROEI does not matter for society as a whole, system wide it is important, just not at the individual business level.

            4. Do you think EROEI for an electric power plant is greater than 1?

              Dennis, an electrical power plant is an energy conversion plant, not a source of energy. Just as a car converts gasoline to horsepower or axle torque, a power plant converts coal, or natural gas, to electricity.

              Power plants are fuel intensive. That is the primary cost in producing electrical power is the cost of fuel, not labor or the cost of plants and parts. They must sell the electricity for more than they paid for the fuel to produce it. Power plants are only concerned with ROI, the price they sell their product for versus the price of coal, equipment, and labor to produce it. So your question is pure nonsense.

              That being said, the price they sell the electricity for must exceed the price of everything upstream, the mining of the coal, the hauling of the coal, to the conversion of coal to electricity. The energy return on investment starts at the coal mine, not at the power plant.

              Likewise, drilling companies are only concerned with ROI. If it cost more to produce a barrel of oil than the price they can sell it for, then they either go bankrupt or try to keep getting other peoples money to produce it.

              One more very important point. EROEI on oil is totally different for every field location and method of recovery. The EROEI for fracked shale oil in the Bakken is nowhere near 10. If shale oil producers sold every barrel of oil for 10 times what it cost to produce it every shale oil company would be rolling in dough instead of going broke.

              Again, think dollars, not joules of energy.

            5. As for money being a call on energy, I can quote you about a hundred economists who say it is. Just one:

              I think you might want to check that idea. For instance, the source you provided was this:

              “Author: taryncrimi
              Taryn is an internationally acclaimed channel, who has spent over 8 years channeling the Angelic Realm. It is her wish as well as theirs to share this gift with as many people who are in need of their assistance with this Angelic Guides website.”

              Not really authoritative…

            6. I said google it and you will get hundreds of hits. I was not aware that one was a nutcase. But it was really funny. Thanks for the laugh.

            7. I said google it and you will get hundreds of hits.

              Well, yeah, but…they all appear to be nutcases.

              Seriously – any vaguely serious, mainstream economist will tell you that money is a call on a WIDE variety of resources, including energy.

              I think TOD and POB etc., have done a real service by highlighting the importance of energy – it’s been neglected. But…let’s not go overboard. Energy is not the only essential resource, by a long shot.

            8. Well, yeah, but…they all appear to be nutcases.

              Now you are just making shit up Nick.

              Energy is not the only essential resource, by a long shot.

              Of course not. You need air, water, food, clothing, and shelter. That has been the case since the dawn of man… well except for clothing. Early man just went naked. But other than that energy is the most important… by a wide margin,

            9. Now you are just making shit up

              Well, no. Do that google search, and really take a close look at the results. You’ll get a lot of very…soft results. A lot of “spiritual energy” and vague financial discussions. Nothing solid, nothing from any kind of serious economist.

              Just take a look. And, if you can find a single result from a serious economist (someone with an economics PHD, who publishes in professional peer-reviewed journals, not a popular blogger or journalist), bring it back here.

              Just take a look.

          2. “EROEI does not determine profits, and money is not simply a claim on energy.Profit is revenue minus cost, full stop. Energy is just not part of the equation.”

            Ron, has it right. Energy runs the economy. Even in the pre-industialized world, energy dictated the economy. The horse or Ox needs energy in the form of food. Same with human manual labor: food energy. With out a source of surplus energy (ie EROEI) there is no profit.

            Also consider that oil & natgas is far more efficient than food energy. Most of the food produced today is reliant on fossil fuels (Petro to run Ag equipment & transport crops to market, Petrochemicals for fertilizers, pesticides, & herbicides). Diesel or NatGas to run pumps to irrigate fields or extract water from aquifers.

            It takes less energy to drive a car to work than it does for a person to walk or bike to work, considering all of the fuel needed harvest\transport\process\cold storage\packaging for the food consumed to supply the energy need for a person to walk or bike.

            1. I’m not sure if your claim is completely accurate unless you’re driving an extremely efficient vehicle. Associate Professor Tom Murphy calculates the following figures in his post ‘MPG of a human’,

              https://dothemath.ucsd.edu/2011/11/mpg-of-a-human/

              “Walking consumes 18–34 MPG of oil equivalent, and biking comes in at 70–130 MPG.”

              So unless your car gets more than 70-130 MPG it’s probably more efficient to bike then drive.

            2. Its flawed because it does not include the energy inputs of the food itself. It takes fuel to plant, irrigate, Fertialize, harvest, transport, process, prepare, package. For every 1 kcal of food delivered, it takes at least 10 kcal to produce and deliver it to you to consume. Thus walking consumes about 1.8 to 3.4 MPG.

              https://blogs.scientificamerican.com/plugged-in/10-calories-in-1-calorie-out-the-energy-we-spend-on-food/

              This of course does not include real world since usually 1/3 of food is disposed and not consumed, ie spoilage. Energy consumed to refrigerate in the store\restaurant\home refrigeration & cooking.

            3. These 18-34 MPG already includes production of food.

              I myself need around 300 cal for an hour of walk which is 5Km – so 6000 cal for 100KM.

              This is about 0.66 litres of (any vegetable) pure oil , that’s 430 mpg bio diesel fuel – in raw data.

              When you fill this fuel with Mac Donald hamburgers, you come to these 34 Mpg.

            4. Tech guy,

              For society as a whole you are correct, but for an individual business you are wrong.

              For a company that produces only electricity and uses only natural gas as an input, is EROEI>1?

              QED.

        3. Ron Wrote:
          “Watcher, there appears to be something very fundamental about the financial world that you do not understand. The money supply is increased by loans”

          Banks can borrow money from the Central Banks. There is also a loop between the Banks and central banks. Banks buy gov’t debt and borrow the capital from Central Banks.. They profit from the interest rate spread. Gov’t spends the money creating new money via Central Bank indirect purchases of gov’t debt.

          Also Central Banks do QE which is essentially Money printing. CB buy worthless assets or gov’t debt and simple electronically “print” new money. Japan has been doing QE nearly constantly for 20 years. The ECB is still doing QE (planning to end in Decemeber but I have my doubts they will end it). The Swiss National bank buy stocks. IIRC, SNB held close to $100B in US Stocks in Dec 2017. I am pretty sure China CB does lots of indirect money printing. I think the only major industrial power that isn’t currently doing QE is the US, but would resume if there is another recession.

          Ron Wrote:
          “Money is simply a call on energy. And when the energy required to extract the oil is greater than the energy supplied by the oil recovered, it will come to a bitter end.”

          The global economy runs on credit. I believe around 2006-2007 it takes more than a dollar of new debt to create one dollar of growth. Credit of course is a claim on future productivity. Borrow & spend today, and promise to pay it back with interest in the future. Take away credit or just reduce it, and the global economy would collapse. Of course a lot of money is borrowed today which the borrower has no intension of paying back, or little or no hope of ever paying it back. Does anyone here believe that the US gov’t will pay back its $21.5T it owes? The US gov’t will go on borrowing until until it can’t, but never pay back a dime its borrowed. The US gov’t technically defaulted in 2009 when it started QE to buy US gov’t debt.

          I think Watchers point on Oil, is that Central Banks & gov’t will make easy for energy companies to produce more energy. Consider that if real interest rates were normalized (+5.5%), There would not been a LTO/tar sands boom. It would have been too expensive for Shale\Tar Sands companies. A lot of gov’ts also provide subsidies to energy companies (low interest loans, seed money, etc).

          Not disagreeing with what you said, but consider that Tar sands probably has a negative energy recovery. They use low cost natgas for Tar sands. This is basically like a NatGas to Heavy Oil production plant.

          Hickory Wrote:
          “There will be a big shuffle among countries vying for the declining fossil energy. That shuffle will likely include war, and will likely be severely disruptive to economic stability and world trade. ”

          Already started. Every thing you stated already has happened: The US energy war began in 2004 when the US seized control of Iraq. The only remaining ME player that the US does not control is Iran & the US is applying economic warfare against Iran. The US would also like to control Russia if it could, and is slowly trying via Proxy wars (Syria, Ukraine)

          1. Not disagreeing with what you said, but consider that Tar sands probably has a negative energy recovery. They use low cost natgas for Tar sands. This is basically like a NatGas to Heavy Oil production plant.

            No, there has to be a positive energy recovery in there somewhere. It could be negative to the energy in the natural gas required to recover it but the natural gas has to cost less than the oil recovered. So the whole scheme, natural gas recovery then natural gas to oil, must be energy positive.

            1. Ron Wrote:

              “So the whole scheme, natural gas recovery then natural gas to oil, must be energy positive.”

              Agreed, but just pointing out that not all energy extraction has to positive.

              Boomer II wrote:

              “I suspect future wa[r]s will be fought via digital disruption rather than with troops and bombs.”

              China, Russia, India, EU, & the US are all locked into a new arms race. Perhaps the first direct shots between major powers will be digital, but it will become hot war shortly after.

              “I think the nature of war is changing and the US will be on the losing end.”

              In my opinion, everyone is on the losing end of war, except perhaps the military contractors that rake in billions selling arms to nations.

            2. Ron,

              I agree at the society wide level EROEI must be more than 1, but the rule does not apply to individual businesses (which includes the oil industry). As long as it is profitable (in terms of money) to produce a product, it will be produced.

              One can think of it as a microeconomic vs macroeconomic disparity.

              A macroeconomist will tell you EROEI must be greater than 1 (or 3 or possibly 6), a economist focused on microeconomics will tell you that it is primarily profits that drive an individual business, energy in vs energy out is just not part of the equation at the business level.

          2. I think the nature of war is changing and the US will be on the losing end. Maybe the US would like to control Russia, but appears Russia might be better able to control the US.

            I suspect future ways will be fought via digital disruption rather than with troops and bombs.

            1. I can’t seem to edit. That was supposed to say future wars, not ways.

  29. Ohio’s Utica production just passed the 6 Bcfd threshold in the second quarter, 2018, according to results just released the other day.

    This is just a tiny bit less than the Haynesville.

    3rd quarter could well see the Utica – in Ohio only – outproduce the Haynesville.

    1. Wow! I don’t follow the resource plays that closely, but those Utica numbers are quite impressive.
      I thought the Utica was supposed to more of a liquids plays.
      How much gas is coming from the Marcellus?

      1. Virtually no Marcellus production in Ohio (only about 30 wells compared to 2,000 targeting the Utica).
        Utica production is up about 40% year over year primarily due to new pipelines being put into service.

        With the Rover and Atlantic Sunrise ramping up to full capacity next week, an additional 2 Bcfd might be realized.

        By year’s end, Nexus, Mountaineer Xpress, some regional pipes, and several huge CCGT plants could boost Appalachian Basin output to the 32/34 Bcfd range.

        The Ohio Utica has become primarily a gas play, although it still produces about 50,000 bbld earl.
        Most noteworthy aspect these past 6 months, perhaps, is that the productive footprint has expanded significantly to the north and west.

        For comparison, over on Pennsylvania, 2nd quarter 2018 was just under a trillion and a half cubic feet – 1,455 Bcf.
        This is almost all from the Marcellus, but a tiny bit comes from the Utica and several of the Upper Devonian formations.

        Pennsylvania should be producing over 6 Tcf per year by next year.

        1. Do we need that much production or will it just suppress prices further?

          1. Well, with the 80 something billion c.f. per day right now, the injection rate is still well below the historical norm … meaning the gas boys are able to sell all that they are producing.

            One of the bigger issues – and there are plenty – is how the downstream markets and competing industries/countries will respond to this new reality.

            Example, the Barnett.

            Recently tagged by the USGS as having 52 Tcf technically recoverable.
            Located right in the heart of Texas.

            Virtually NO new development of this massive resource as there is too much gas more cheaply available elsewhere.

            Likewise oil centric applications will be facing economic pressure from gas possible alternatives.

            Competing industries like nuclear, coal and renewables will need to overcome gas’ advantage or suffer the market induced consequences.

            It seems to be slowly dawning upon a growing audience that the US has an unfathomable amount of inexpensive natgas.

            1. Coffeeguyzz,

              USGS estimates about 1050 TCF (trillion cubic feet) of shale gas technically recoverable resources at the end of 2017. The most recent 12 months of dry gas output was 28 TCF. If there was no further increase in output that would be 37 years of output.

              Note that the AEO 2018 reference scenario for dry natural gas has 1257 TCF of natural gas output from 2018 to 2050, about 200 TCF more than the shale gas TRR. There are also 300 TCF of proved natural gas reserves and the USGS estimate is for undiscovered TRR (and does not include proved reserves). There are also about 900 TCF of conventional natural gas TRR for a grand total of 2462 TCF of natural gas resources at the end of 2016.

              The 2017 to 2050 AEO reference cumulative natural gas output is 1285 TCF, if the EIA’s estimate is correct (I believe it is quite optimistic) it is likely 2050 would be the peak in US natural gas output, if the EIA’s reference scenario is correct.

              If the peak in dry natural gas output is at 50% of URR and the EIA’s estimate for dry natural gas remaining TRR is correct we have cumulative output of 1225 TCF through 2016 and 2462 TCF TRR for URR of 1225+2462=3687 TCF, the 50% point is 1843 TCF of cumulative output which would be reached in 2034 if the AEO 2018 reference case is followed from 2018 to 2034.

              By this analysis we would expect the US dry natural gas peak in 2034 at 38.5 TCF of annual output.

            2. Dennis

              A lot of numbers in that comment.
              Obviously u r a math oriented kind of guy.

              When you referred to that USGS figure of 1050 Tcf TRR the other day, I thought that was surprisingly low.
              I did some digging but could not find the source for that number.

              Would you be able to point me to a source where I could ‘dig down’ a little deeper to what the USGS incorporated into presenting that low number?

              I suspect – ahead of time – that the USGS may still be using the 2011 Marcellus assessment that pegged TRR at 84 Tcf and the 2012 Utica TRR at 38 Tcf.

              Both of these assessments are demonstrably way low as recent production figures and parameters clearly show.

            3. Coffee, please mind your blood pressure there, mate; you often get to hyperventilating about this shale gas shit. Get someone to explain to you what technical recoverable reserves mean and try the best you can to wrap your arms around the fact that soooooo much gas depresses the market and nobody makes any money. When nobody makes money, and the ATM machine finally breaks down, all your “demonstrable” dreams will not play as you seem to be most certain they will. From a profit standpoint, shale gas sucks too…

            4. Mr. Roughneck

              ‘Preciate the concern ’bout the blood pressure, but I keep blowing those cuffs right off my arm and don’t think that’ll change anytime soon.

              Interesting that you point out the meaning of TRR – Technically Recoverable Resource (not reserves) – as I went through several USGS assessments today trying to find Dennis’ source. (I believe he is mistaken).

              In that process, I came across, about 6 times, the clear definition, to wit, it is the volume recoverable using current exploration and recovery techniques without regard to cost.

              Bypassing the cost is important as that is, as you know, where the reserves come into play as per SEC, GAAP, etc.
              When oil is 100 bucks versus 30, reserve amount and value change dramatically.
              Again, you know this.

              Regarding the low price/revenue stream for producers when super abundant resource is identified, I – also – recognize this, yet it does not alter the reality of how much is there.

              BTW, while Art is a true gentleman, the ongoing financial analysis from RBN Energy is way better.
              A more accurate, if unpleasant, set of data might be preferable if one wants to know what is actually going on.

              Appalachia Rising!

            5. Well, lawsuits over frac related mineral trespass are “rising” in the App Basin, at an alarming rate, that’s for sure. Another example of how extenuating circumstances often foil the best laid plans of mice and men. Kind of like folks in New York: http://www.chriswellconsulting.com/news/daniel-plainview-can-no-longer-drink-your-milkshake-after-pa-judge-throws-our-rule-of-capture

              BTW, how in the world do YOU know that RBN is more accurate than Berman; because they write what you like to read? Berman’s data is from SEC filings; RBN sells its analyses to oil and gas midstream entities.

            6. Coffeeguyzz,

              It does not really matter how much natural gas is “there”, only the natural gas that is profitable to produce will be produced.

              If one has to assume $10/MMbtu (or the equivalent of about $58/boe in 2017$) for the natural gas to be produced, then the natural gas power plants can no longer compete with wind and solar in most of the nation and there will be very little demand for natural gas, in addition LNG will not be able to compete with lower cost producers such as Qatar and Iran.

              So bottom line, a lot of the “TRR” gets left in the ground under reasonable natural gas price scenarios. The price matters and only economically recoverable resources (ERR) are worth considering.

              Note that the EIA’s reference natural gas price scenario has prices rising from $3/MMbtu to $5/MMbtu from 2018 to 2050. Doubtful that their output scenario and price scenario will match up. Either prices will be higher or output will be lower than they forecast (probably a little of both).

            7. Dennis

              Glad to see you weigh in that it doesn’t really matter how much gas is there …

              Mmmkaayy …

              If you guys are going to keep clinging to the canard that these guys are losing their collective asses, financially, make the most of that ploy as that corner has already been turned.

              One of the bigger issues many of these companies are now publicly discussing is how best to disburse free cash flow.

              Paying down debt, stock buybacks are amongst the most common tactics discussed/implemented.

              No disrespect, but it is quite amusing reading you guys talking about financial distress when most serious observers recognize a new paradigm has already emerged.

              The fact that you even hypothetically used a figure like $10 mmbtu HH shows a staggering degree of disconnect, Dennis.
              These comments are neither offered as criticism nor disparagement
              Rather, should you wish to actually understand what is occurring, find out from the people who are actually DOING it.

            8. Mr. Roughneck

              Re Art, it is easy to pass judgement on his accuracy by simply reading the great body of work he has produced.

              Easy peasy.

              The above chart may well be hard data from SEC filings, but they are from the group of companies he has pre-selected.

              RBN has done the same thing, selecting dozens of E&Ps, dividing them into oil focused, gas focused, or companies producing both.
              Most recent article was just the other day.

              Fact is, as I pointed out to Dennis, several of these companies are now generating more revenue than expenses.

              That “Stealing your Milkshake” article refers to the recent Southwestern decision by a lower court that most observers feel will be overturned.

              The leasing/regulatory environment in Appalachia is SO different from Western /Southern states that a small book would be needed to describe the situation.

              Suffice to say, absent pre configured DSUs, all sorts of mayhem can ensue.
              When recalcitrant property owners (ideological/financial motives are common), refuse leasing, they may wind up owning a worthless ‘donut hole’ whereby surrounding properties are developed and no alternative operator would touch the unleased property.

              Pennsylvania has 300 foot setbacks from the property line.
              It is IMPOSSIBLE to EVER measure how much – if any hydrocarbons migrate through manmade fractures to adjacent leases hundreds of feet away.
              Operators today closely monitor, in real time, the propagation of the fracs.

              This suit will be thrown out when more information is presented to the higher courts.

            9. Dennis

              EXAMPLE from TODAY (9/4) illustrating the financials I’ve previously mentioned …

              Southwestern just sold its entire Fayetteville operations for just under $2 billion (1.865). Private equity backed the buyer.

              $900 million retiring debt.
              $200 million share re-purchase (increasing stockholders value)
              Plowing more capital into expanding Appalachian Basin development.

              …and that’s how it works.

            10. “Pennsylvania has 300 foot setbacks from the property line.
              It is IMPOSSIBLE to EVER measure how much – if any hydrocarbons migrate through manmade fractures to adjacent leases hundreds of feet away.
              Operators today closely monitor, in real time, the propagation of the fracs.
              This suit will be thrown out when more information is presented to the higher courts.”

              With this, Coffee, you are seriously showing your ignorance of anything related to oil and gas. Wells are interfering with each other, communicating with each other 2000 feet apart in ALL of America’s shale oil basins and now you suggest that frac’s don’t cross lease or unit lines with 300 foot ‘setbacks?’ Frac’s go out of zone, behind pipe, up, out and bash shallower wells in the SCOOP/STACK and in the Permian, they’ve even gotten out of zone in the APP Basin. Google it. Weren’t you just a year ago crowing about halo affects and how parents benefit children in the Bakken?

              You have now crossed thru the worm hole, hand; you are embarrassing yourself about all this stuff. If you find my concerns about profitability “amusing,” I find your comments laughable.

            11. Mr. Roughneck

              Quotes from the Briggs/Southwestern court decision …

              “In the instant case, it is unclear from the record before us whether Southwestern’s hydraulic fracturing operations resulted in a trespass of Appellants’ (Briggs) property. There does not appear to be any evidence, or even an estimate, as to how far the subsurface fractures extend from each of the wellbore (sic) on Southwestern’s lease. …
              On remand, Appellants must be afforded the opportunity to fully develop their trespass claim.”

              Filed in PA Superior Court, April 2, 2018.

              Mmmm….

              Sounds like an opportunity for you to hustle up to the Keystone State, contact the Briggs’ attorneys, assure them that you can not only prove trespass has occurred across property lines, but by exactly how much.

              Oh, and to save everyone a lot of time, give a precise calculation of EXACTLY how much of the Briggs’ Milkshake has been taken.

              Much obliged.

            12. Coffeeguyzz,

              I used the gas in gas deposits plus the gas in oil deposits from

              https://energy.usgs.gov/portals/0/Rooms/oil_and_gas/noga/multimedia/USGS%20Continuous%20Results%202000%202017.xlsx

              This spreadsheet has undiscovered “continuous oil and natural gas” resources that is tight oil and shale gas. Natural Gas in proved reserves is not included, nor is cumulative production.

              You may be correct that this uses older Marcellus and Utica assessments, when the estimates are updated, I update my assessments as well.

              The EIA estimates a remaining natural gas technically recoverable resource of 2400 TCF, usually the EIA estimates are quite optimistic, there are roughly 322 TCF of natural gas reserves (shale and conventional) so we would add this to the 1050 TCF from the USGS for 1372 TCF, I couldn’t find a USGS figure for conventional natural gas resources.

              See also

              https://www.eia.gov/analysis/studies/worldshalegas/pdf/table3.pdf

              Using the table at the link above we get 2431 TCF of US natural gas remaining TRR (this includes 1546 TCF of conventional natural gas TRR including reserve growth).

              Note that I used cumulative dry natural gas output from 1930-2016 from link below

              https://www.eia.gov/dnav/ng/ng_prod_sum_a_EPG0_FPD_mmcf_a.htm

              That was combined with the EIA natural gas TRR estimate for about a 3700 TCF URR for US dry natural gas, we would expect the peak at roughly 50% of the URR or about 1850 TCF cumulative dry gas output.

              The AEO natural gas reference case can be found at link below

              https://www.eia.gov/outlooks/aeo/data/browser/#/?id=13-AEO2018&cases=ref2018&sourcekey=0

              Cumulative dry gas output from 1930-2034, if the AEO reference case is followed from 2018-2034 is more than 50% of dry natural gas URR as estimated by the EIA, so this suggests a peak in US natural gas output in 2034, if the optimistic estimates of the EIA prove correct.

              Note that for the Marcellus proved reserves at the end of 2016 plus cumulative production through the end of 2016 (I am assuming most of the proved reserves are in Pennsylvania.) is about 85 TCF, there may be some probable reserves (possibly 20 TCF) which would raise the total to 105 TCF, though we can only speculate about probable reserves.

              Most of the production is coming from a few counties in Pennsylvania and shale gas reserve estimates sometimes are revised lower as has been the case in Louisiana and Arkansas.

              For Utica cumulative output through 2016 plus proved reserves (assuming most is in Ohio) is about 18.4 Tcf.

              So based on cumulative production and proved reserves for the Marcellus and Utica plays the USGS estimates look pretty good.

              Keep in mind the higher estimated ultimate recovery from more recent wells may be mostly due to longer laterals, if we double the lateral length we halve the number of potential wells drilled with no change in overall URR.

              More frac stages may just result in high production early in the well’s life with lower output later, again no change in overall TRR, though this might result in better profitability if the faster recovery offsets the higher well cost associated with more frac stages per foot of lateral.

              The lofty estimates for TRR by the EIA will require natural gas prices that are quite a bit higher than the current natural gas price level in the US.

            13. Dennis, that USGS link is somewhat dated.
              When Utica/Marcellus numbers come out, fasten your seat belt.

              BTW, that first EIA link is informative for many reasons.
              Check the TRR for China (and Argentina, for that matter) and go back and review Dr. Li’s recent post for perspective.

              (Footnote #6 should also be instructive.)

              Lottsa gas.

            14. Coffeeguyzz,

              That link contains all the latest USGS assessments, keep in mind that not all TRR is necessarily profitable to extract, the ERR is always lower. The current EIA assessment combined with EIA AEO reference case suggests a 2034 peak in US natural gas output if the peak occurs at 50% of URR.

              Also natural gas prices are likely to rise while substitutes like wind and solar are seeing falling prices. This leads to a lot of resources that are not profitable to extract.

            15. The Barnett in Texas was the first shale gas play 15 years ago. Tens if thousand of wells drilled and it peaked a few years ago. What are you smoking?

            16. December, 2015, USGS released a new Barnett assessment.
              Raised the TRR to 53 Tcf, up from earlier 26 Tcf.

              No smoking pour moi, but you might ask the government rock docs that question as it is their data, not mine.

            17. Coffee:

              Re: The SWN sell out in the Fayetteville. Would you happen to know full cycle sunk costs incurred by SWN in the Fayetteville? You know things like capitalized land costs, G&A expense, geologic and geophysical expense, Drilling and Completion costs, gathering, compression, and pipeline expense, plugging and abandonment expense , depreciation and amortization. Then there is the revenue side. How much oil and gas did SWN produce? What was the revenue?

              Real companies used to do those post audits so they could actually measure performance.

              Is it really a good deal or is SWN just feeling good because the pain has finally stopped?

              1.) Do you know how much debt SWN retains after the proceeds are used to pay down debt?

              2.) The share buyback. Did you mean to say that the stock repurchase would increase C-Suite Officers year end compensation?

              Let’s get to the end of the year before we start trying to convince ourselves that the common stockholders will actually see an increase in their share value.

              And from a practical standpoint I’m quite certain that the royalty owners will be robbed blind.

              In fact, I’m hearing that many royalty owners are actually getting monthly bills from the after their entire royalty payment has been zeroed out by excess post production charges.

              That corner that your paradigm “turned” is really a long, sharp screw (IMHO) for the ones that matter to me. Again IMHO of course.

            18. I looked at a chart online and SWN stock hasn’t been this low since October, 2004. It closed at $5.34 today. Before the bottom fell out of NG prices, it was trading in the $30s and $40s.

              Another former high flyer is RRC, which is trading at 14 year lows. Was over $90 in 2014. Is now under $16.

              The natural gas weighted E & P’s have been a tough place for investors to make money the past few years.

  30. Libya’s production is back from outage but they have declared a state of emergency in the capital

    2018-08-31 (Platts) Libya’s crude oil production edged up again this week, with increased output from two smaller fields in the east of the country, sources said Friday.
    With all its oil terminals currently open, the country’s crude output has climbed to over two-month highs of around 1 million b/d.
    https://www.spglobal.com/platts/en/market-insights/latest-news/oil/083118-libya-crude-oil-output-boosted-by-amal-as-sarah-fields

    2018-09-02 (Reuters) The U.N.-backed government based in Tripoli declared a state of emergency in the capital “given the seriousness of the current situation.”
    Although the government is formally in charge, it does not control the capital where armed groups are allied to it but operate with autonomy, often motivated by money and power.
    https://www.reuters.com/article/us-libya-security/two-killed-in-rocket-strike-on-camp-in-tripoli-activist-idUSKCN1LI0SU

    2. Gaddaffi was right all along.

      He was the only one who cold hold the place together.

    1. This is going to be a good comparison chart for awhile. Production numbers will continue to be quoted by OPEC for awhile, without any substantial drop from Iran. But, what is making it to market, and what is staying home? I see about a 500k drop in the market, in comparison to previous.

    1. “Brazil’s pre-salt is increasing but declines in other areas are still larger”

      G.Kaplan nailed this one really. Just what he anticipated, just look up prior posts.

  35. FUD (Fear Uncertainty Doubt) hits Denmark Crude Production – Becomes a NET Importer
    The Danish Energy Agency revised down its oil production forecast by 8 percent compared to last year’s forecast, mostly due to a downward revision of the resources, delays, and a “greater uncertainty regarding the development of several fields and discoveries.”
    https://www.zerohedge.com/news/2018-08-31/denmark-becomes-net-oil-importer-first-time-25-years

  37. There is pretty much a universal desire on the part of people to think that there is some control on central banks and whether they can create money.

    Well, there is control.

    Some years ago, long before the present supposed crisis, the president of Argentina threw the governor of their central bank in jail, because the CB governor would not do what was desired. So yes, some control was exercised over that central bank’s creating of money — but it had nothing to do with any fundamental economic law of the universe that restricted or defined a CB’s action.

    Well, maybe I should back off from that statement, too. The fundamental law of the universe involved there was . . . force decides most things of all kinds.

    Y’all do realize the ECB is still creating money via purchase of bonds of European countries (and European companies, last I checked). Still Errr Not . . . “via”. Via should be “in order to”. They create the money, from nothingness, and lend money to various countries (aka buy their bonds). There is no fundamental rule of the economic universe that says they must do this or must not do this. They do this because Mario Draghi wants to. It’s essentially whimsical.

    There is . . . in this context, and everybody here needs to get this deep into their psyche, absolutely no reason why the lifeblood of civilization should be constrained to insufficiency by an absence of needed money. There will never be an absence of needed money for the lifeblood of civilization. How could there be?

    The hammer falls when geology says it should. Not when economics says it should.

    1. Oh gosh, you have no understanding of economics. If you think oil will never stop flowing because money will be created to do so, you don’t understand money.

      Money has no intrinsic value. It is not wealth, it is just a claim on wealth supported by confidence on the authority that issues it. It can’t do anything by itself. Ask Maduro how much money he can create to pull Venezuela’s oil out of the ground. Their problem is not geological.

      Creation of money out of thin air is an experiment attempted frequently since money was invented. It always ends badly, despite appearing to work at the beginning, surprising everybody involved. This lesson has not been learned. The claim cannot be far superior to the wealth base.

      The novelty this time is that money has been created only to claim financial assets, avoiding inflation in non-financial resources. But the laws of economy apply equally.

      One of the results has been a huge increase in inequality between those that posses significant financial assets (1%), and those that don’t. To some simple minds this means the 99% is protected from inflation. They are not. The spill from financial to non-financial assets is small as long as confidence on the authority issuing the money remains high.

      Some simple minds believe the solution to economic woes has been found. As long as you have a strong central bank backing an important currency, and as long as most strong central banks act in the same direction, recessions are a thing of the past. If oil is needed money will be created and given to companies to get it out of the ground.

      The problem is that creating money is easy, but going backwards is painful. Quatitative easing was done in big steps that were immediately rewarding. Monetary tightening has to be done slowly and carefully. It requires that the economy is growing and can replace the monetary draining, and even then at the expense of reduced economic growth, as part of the output has to be used on that.

      Now we come to the last part, the one you haven’t thought out. If we have discovered QE as anti-recession weaponry, we are safe from recessions and oil will be provided no matter what. Except that QE has two huge negative effects. It inflates financial assets into bubble proportions, and it increases monetary authority indebtness, decreasing confidence.

      The second one is Macri’s and Erdogan’s problem. Lack of confidence = monetary run, then currency crisis.

      In essence the monetary system becomes more unstable after QE. The lack of confidence on Southern European economies can be contained by the ECB, but the lack of confidence on the ECB could not be contained if it happened. And by taking over the Southern European economic problems and issuing more QE the confidence on the ECB is at more risk than not doing it.

      Now comes the black swan. Something that spooks the financial markets. As financial assets have been inflated, someone thinks it would be a good idea to transfer part of that to safer real assets. That’s how bubbles pop. And then you have the mother of all inflations in real assets and no amount of money creation can stop that. A recession compounded with a monetary crisis is a bitch. People suddenly realize it wasn’t such a good idea to create money, after all. Oil will be left in the ground.

    1. And the list goes on. OPEC plus is far from being able to offset OPEC declines. US and Canada can not keep up with non-OPEC declines and increases in demand for 2018-19. Which, duh, leaves us with a huge shortage.
      https://mobile.reuters.com/article/amp/idUSKCN1LK028

      How long will it take for the US and the World to start circling the wagons? It’s all going to look completely different in a couple of years, and I can’t begin to imagine what it will look like. Even with an end to Iran sanctions. But, I did get some idea with what happened in the 70s. Wars? Strongly possible, that’s the energy equivalent to money.

    2. I was going to say the same thing. Not many are adding up all the disappointments on the supply side, since the IEA and EIA refuse to acknowledge that supply ever can be insufficient to cover demand.

      Offshore is bleak because we are in the zone where production really starts to hurt due to lack of investments starting 3,5-4 years ago. Brazil never ever seems to get their anticipated growth going. The Kalimba project in Angola is going to keep declines at bay in the country for a while, Bonga in Nigeria will do the same thing there. And there is also Johan Sverdrup in Norway autumn 2019 and the Exxon Guyana prospects set to be fast tracked for production in 2020. But the declines are stacking up quickly year for year, especially when it comes to deepwater. So even with all new projects coming online it is doubtful that we will see any growth in total for offshore; it is much more likely with declining production. The picture will not change until some years after the next investment boom starts (assuming that will be the case).

      1. I was looking at a US EIA oil inventory historical graph, we are within a few weeks of dipping below 400 million barrels of oil but noticed before the huge drop in oil price that levels seem to be in the 300 to 350 million range most of the time. Will it take levels to keep screeching down to those numbers to wake people up? Next 2 years will be very interesting…

        1. Yeah, Adam, but that is just in the US, where we are having to export oil to get rid of inventory, because our refineries can’t handle all the light oil. Less that 20% of the world total. If you have been keeping up with Energy News posts of world inventory, it looks quite a bit more bleak. We keep measuring inventory in terms of historical data, and we are consuming more now than before. There should be more in inventory based on that, and we are below historical data, now. With current declines in exports, it will go down at a faster rate. I will be looking for a used electric car soon.

          And, I keep reading stories how the high oil prices are going to put a serious dent in demand. Yeah, it no doubt will. In demand increases. It wont decrease demand. Get real.

          1. Inventory as a percentage of consumption I was contemplating as I wrote that.. lol. As a former retail store manager the term Days of Supply comes to mind. Basically the U.S. is doing a juggling act shipping out it’s high API and importing the heavier stuff. I bet 90% of those people who tout the “Shale Miracle” don’t know what API is sadly.

          2. I agree with your demand thesis. In danger of repeating myself, changes in demand won’t happen overnight. If China invests in 1 million trucks in 2018 as they do, they would not just quit using them because of high oil prices. No doubt the demand side will adapt after a while. Natural gas seems to be to be the key due to the low cost a lot of places (but not all places) compared to oil. Indirectly in the form of “fueling” electric cars, or more directly fueling vehicles or ships in the form of LNG or other forms of compressed gas.

        2. The whole US inventory thing is interesting. There is a lot of supply available for the US, but that means the imports need to be high. The exports can’t be too low either. The refineries can only take a limited amount of extra light oil/condensate (about 30% max of 40-45 api oil) to keep the output of the types of products they want and also they want to avoid further investments to be able to process more of it if not profitable. And the result of it all – a high spread Brent/WTI because the rest of the world is suffering from lack of oil compared to demand. And forcing oil to be priced according to a global market in the end anyway.

          1. If shale output continues upward for another 2 to 3 years could the spread between Brent/WTI get even worse? Like 100 Brent/85 WTI…

            1. A 15 dollars spread only if Saudi Arabia and other related countries intent to keep the US supplied and ignoring the rest of the world. A 10 dollar spread would do to prevent imports and encourage exports – I don’t think it would get any larger really.

              I think the large spread right now has something to do with the SA/Trump deal.

  39. We’ve talked about a coming recession/depression, debt, and oil.

    I think the recession is coming and one factor is no breakthrough technologies on the horizon to transform the global economy. Sustainable energy technologies could do that, but will they be too little, too late?

    I found this which I think is worth passing along.

    “Based on long-run historical data for advanced economies, I find that rising top income inequality and low productivity growth are robust predictors of crises – even outperforming wellknown early-warning indicators such as credit growth. Moreover, if crises are preceded by such developments, output declines more during the subsequent recession. In addition, I show that asset booms explain the relation between income inequality and financial crises in the data.”

    https://www.frbsf.org/economic-research/publications/working-papers/2017/23/

  40. 2018-09-04 (SLB) Kibsgaard Speaks at Barclays CEO Energy-Power Conference
    During the recent industry downturn, many international operators have focused on maximizing cashflow by producing their fields harder and by prioritizing short-term actions at the expense of the full-cycle investments required to manage the overall resource base.
    The short-term investment focus adopted since 2014 offers a finite set of opportunities over a limited period of time, and this period is now clearly coming to an end as seen by accelerating decline rates in many countries around the world.
    So, in summary, the international production base after four years of record low activity needs double-digit growth in investments for the foreseeable future simply to keep production flat at current levels.
    Text here –> https://www.slb.com/news/presentations/2018/2018_0904_kibsgaard_barclays.aspx
    Download pdf file with slides here –> http://investorcenter.slb.com/phoenix.zhtml?c=97513&p=irol-presentations

    1. He sees inventories dropping in 2019, even with a 20% drop in demand increase. I guess they would probably drop with a 100% decrease in increase. (Err, zero increase,that is.)

      Good slides, too.

    2. Thank you, it confirms a lot of what has been discussed here by George and others (including higher decline rates going forward – not lower as IEA recently claimed). However, the message is still that more upstream investment will solve the situation. The lack of good prospects is still not to be mentioned.

      1. I still wonder about that. Who is supposed to make this investment?

        I’ve always been most interested in decline rates.

    1. The question here is: Will Trump let see it’s Iran sanctions fizzle into nothing, or will India get a little attention and some trade war?

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