The data for the charts below are from the EIA’s Monthly Energy Review. I will update this post Friday, May 31st with March data for the USA and charts for several states when the EIA’s Petroleum Supply Monthly is published. All data is through February 2019 and is thousand barrels per day.
World C+C production was down only slightly in February, dropping only 87,000 barrels per day to 82,389,000 bpd.
It is my contention that World, less USA peaked in November 2016 with the 12 month average peaking in 2017.
A longer view of things. I am thinking of creating a “World less US Tight Oil” graph. Perhaps I will do that next month.
Non-OPEC production was down 36,000 bpd in February.
Non-OPEC less USA peaked in December 2015. The 12-month trailing average peaked one month later.
OPEC is not, and will not, be our savior from Peak oil. It is the Non-OPEC big three.
Canada was down only slightly in February according to the EIA. The Canadian Energy Board has them recovering in March but dropping big again in April.
Mexico recovered slightly in February.
China seems to be holding steady after the big decline in 2016.
Russian oil according to the Minister of Energy through April. I converted tonnes to barrels using 7.33 barrels per ton. The EIA data is through February.
All the USA data below is through March 2019.
The above chart is through March 2019. US production was up 241,000 barrels per day to 11,905,000 bpd. That was after February production was revised down by 19,000 bpd. Production is still below November and December however.
The EIA’s Monthly Energy Review had estimated March production to be 12,110,000 bpd. They were 205,000 bpd too high.
The lions share of the March increase came from the Gulf of Mexico which was up 191,000 barrels per day. USA less the GOM has been flat for 5 months. Does this mean anything?
Ahhh, there’s the problem. The Permian is petering out. Either that of Eagle Ford is pulling things down.
And the Bakken is not doing all that well either.
Alaska continues its slow decline. This is the first time in decades that they failed to reach half a million bpd this past winter. They got to 497,000 bpd in November.
The GOM seems to be doing okay however.
Discovered volumes from high impact drilling fell overall by 50% in the 2014-2018 period compared to the previous five years. Only a little over half of the decline can be accounted for by a lower well count which fell by 28%; falling success rates and average discovery sizes accounted for the rest. Portfolio renewal has become a critical issue for the industry and larger companies have responded by trying harder to open new plays through increased frontier drilling.
So they drilled 28% fewer wells and found 50% less oil. No wonder they are drilling fewer wells, apparently they are just not that profitable.
The great inventory drain for 2019 and 2020 is coming soon. It will not be very visual in the beginning. Because, every on is concentrating on what the US reports. Yeah, US will go down, just not to the extent of all other countries. Heck, we still have close to 3 million a day we are exporting. I changed my mind on lower expectations of WTI due to over production. It ain’t gonna happen. I’m going back into 2021 leaps for USO 2021 tomorrow morning.
Heck, we still have close to 3 million a day we are exporting.
Well no, we don’t. First, the government does not export oil, oil companies do. And while oil companies do export oil produced in the USA, they import more than they export. In April, net imports were just over one and one half million barrels per day. The table below was taken from this month’s Monthly Energy Review and is in thousand barrels per day.
Petroleum Overview
Ron,
I think GuyM’s point is that we are exporting some of the oil that is produced in the US, we have done this for a long time with Canada and Mexico, but some people think exporting oil is a bad idea. I think oil companies should be free to sell their oil where they wish, if they get a better price by exporting the oil they produce, then export it.
The approximate annual net revenue to the US LTO industry from its 3MM BOPD of exports just about covers its approximate annual interest expense on $300bn of long term debt. That export revenue cannot be used to deleverage debt, replace reserves, or grow production rates. In fact, the LTO industry is still outspending revenue to be able to export that 3MM BOPD: https://www.rystadenergy.com/newsevents/news/press-releases/Just-10-percent-of-shale-oil-companies-are-cash-flow-positive/
As most of these exports come from the Permian we should not discount the approximate 1 BCF of associated gas getting pissed up a flare stack, wasted forever, nor the 1 billion barrels of fresh water being used to frac those wells, whose oil production then gets exported.
The United States is the largest oil consumer in the world. Granted, the shale oil phenomena the past decade has proven that “reserves” no longer need to be economical to recover. Still, wild ass guesses of 50,60,70G BO of recoverable reserves in the US are nuts. 302,000 more shale oil wells, for instance, will cost somebody, the American tax payer most likely, well over $3t. The 1975 Energy Policy and Conservation Act banning exports was signed into law for a reason. Those same reasons for prohibiting exports then, exist today…x 100.
Exporting America’s last remaining oil resources away, extracted on credit, is not free enterprise, nor capitalism, nor smart long term energy policy. Its stupid.
Yup.
Mike,
Why was it ok to export oil before 1975, but not after? Besides the law passed by fearful legislators.
The reasons were not good then, and they are not good now.
see
https://en.wikipedia.org/wiki/Comparative_advantage
I agree flaring the natural gas is not smart, that is up to state regulators to stop.
As far as running a business poorly, that is allowed in a free capitalist society. Eventually lenders will smarten up and stop lending money to poorly run enterprises.
At the end of 2017 US C+C proved reserves were about 42 Gb according to the EIA. My low oil price ($70/bo Brent in 2017$) scenario has about 53 Gb total tight oil produced, with about 14 Gb produced to date.
For my low oil price scenario at total of 256000 wells are drilled with 143300 completed through Feb 2019 and 112000 left to complete. The cost for those wells will be about 815 billion 2017$. With about 39 Gb left to produce at $70/b and net of about $37/b (assuming $5/bo of natural gas revenue used to offset part of LOE and transport cost of $5/b), we have about 1443 B in 2017$ which can be used to pay for the wells.
The tight oil plays can be run properly, perhaps some of the better independents and the oil majors will get to it.
We can even restrict exports, but my guess is the majority of oil producers don’t want the government telling them what to do, this is a pretty standard conservative principle.
@Mike
Your last paragraph is a little wordy for a bumper sticker…but I wouldn’t mind quoting that to a few people.
Your LTO jeremiads are hair-raising.
Keep at it.
I know we are a net importer. All I was saying was some of that now exported could be used to refine here, thus reducing potential decreases in inventory. I should have been clearer.
I think the overview of US oil import and exsport will be very interesting to follow in the years to come. There is now information stated that trade war will reduce world growth and oil demand by 50% , they now exspext demand will grow by 0,7% or approximately 700 k barrels in 2019. WTI soon reach 55 usd / bbl. I believe it will be the lower 50 range or even upper 40 usd range rest of 2019 and depending of Trumph how long it will stay there.
There is now information stated that trade war will reduce world growth and oil demand by 50% ,…
I think you meant the trade war will reduce World growth in oil demand by 50%. If so, then I agree.
When looking at imports and exports, we are exporting very light oil and importing heavy oil. The refineries in the U.S. Are set up to process heavy oil. Processing heavy oil gives them the highest margins.
This year’s Bible release is scheduled for 11/12 June. Heads up.
If the economy holds up, we might be looking at four dollar gasoline nationwide within a year.
Amazing that with the lack of investment in offshore, the UK is rocketing upward.
Came across a blurb concerning the contaminated Russian oil. The dilution of the contaminant is the solution selected by apparently everyone, including China.
China seems to have enough storage to buy quite a lot of the contaminated Russian oil, at a discounted price, with the intention of doing their own dilution at a later date with clean oil that they will obtain from wherever.
I have taken a look at trailing twelve month averages (TTMA) for World C+C minus tight oil output and World C+C minus tight oil minus bitumen (Canadian oil sands). The sharp rise in output from 2015 to 2017 was due to OPEC’s surge in output from Jan 2015 to Jan 2017 (about 2250 kb/d increased output over those 24 months for TTMA). Over past 13 years the average annual rate of increase for World minus tight minus bitumen has only been 124 kb/d each year.
OPEC TTMA chart below the average annual rate of increase in OPEC output from Jan 2005 to Jan 2019 (using TTMA) from linear trend is 202 kb/d each year.
When we consider the TTMA (trailing twelve month average) of non-OPEC C+C output minus tight oil minus bitumen , we find an average annual rate of decrease of 77 kb/d each year.
TTMA for US tight oil plus Canadian bitumen (oil sands) from 2010 to 2019 with linear trend line slope is 816 kb/d.
Dennis, drawing trendlines from 2005 is really misleading. It implies that this trendline will continue into the future. Many countries have peaked and gone into decline since 2005. And many other countries are at their peak right now.
Many people believed 2005 would be the year World oil production would peak. They were off by almost 15 years… so far. Do you think your trendlines will continue? Will oil production never peak? If not, then why draw the trendline from 2005? How about 2016?
Hi Ron,
No I am simply looking at the long term trend in OPEC output, it has been fairly flat. Looking at the month to month ups and downs is of little interest to me.
I chose the longer period because the slope was smaller than using the 2013- 2019 period you choose for your charts. Below is what we get when we choose 2014 to 2019 for the trailing twelve month average, the slope is 614 kb/d over that period.
I have never said what I expect about future OPEC output, I don’t really know, we have very little good information except past output.
The trend line shows what has happened over a given historical period, full stop. You are reading things that are not in the chart and imagining what I think will happen in the future. Hard to know what the Chump will do next, maybe sanctions on Canada and Mexico? 🙂
My best guess is that OPEC output will be relatively flat from 2019 to 2030 maybe up a bit or down a bit (+/-100 kb/d) from the Jan 2019 TTMA.
Ron,
You asked if I thought oil will never peak. I think you know the answer, hint below.
URRs are also deceptive Dennis. Easy oil comes up fast but hard and expensive oil comes up very slowly. URRs just don’t take that into consideration.
One of your URRs above may be correct, but that does not imply that your production curve is correct. My best guess is, and let’s admit it, we are both just guessing, that we will see a sharp decline soon after peak oil, then a very long tail that may go out for a century. So the URR could be 2800 to 3400 GB. But it will take many decades to get those last few GBs to the surface.
Ron,
The main point is you asked if I expect that oil production will peak.
I have endlessly posted charts with a peak in oil production, the point is not whether the production curve is precisely correct, it is why would you ask such a question? Have you not been paying attention. 🙂
Of course nobody knows future output, these are scenarios, a set of assumptions are proposed and the model follows from those. This is a basic material flow model, oil is discovered, then moves through fallow, build and maturation stages of development and is finally produced. The model is calibrated to actual output given discovery data, The future is a guess based on what we have seen in the past.
Of course the production curve will not be precisely correct, if the assumptions of the model are correct, the model will be correct. There are an infinite number of different assumptions that could be made resulting an infinite number of possible production curves for any single URR (of course the same applies to the URR).
So the chances that my model will be correct are roughly 1 divided by infinity or approximately zero.
The same can be said of every prediction of the future, they all have about the same chance of being correct, that is no chance at all. 🙂
So we agree future production cannot be predicted.
Ron what causes the very steep decline after the peak, all the wells in the World water out simultaneously? 🙂
Ron what causes the very steep decline after the peak, all the wells in the World water out simultaneously?
When there is plenty of other, easier oil to find, it makes sense to let an old well gradually decline and move on to better fields. When all the oil in the world is becoming more expensive, and scarcer, then every effort will be made to maintain production till the very end.
This means that historical well production and decline curves cannot be a basis for predicting the total world decline after peak. Decline will be steeper as efforts to maintain production fail “all at once” so to speak.
Further, economies do not decline gracefully. For those of us who believe that oil is an essential “ingredient” of the global economy, we expect the economy to decline, spasmodically and rapidly. For an idea what this looks like, one only needs to observe Venezuela’s oil production over the last decade.
Niko,
Statistically it is highly unlikely that the failures will occur “all at once”. The oil fields all over the world are each unique and the “steep decline” that you expect is unlikely to occur all at once. The most mature producing nation is the US. If you look at lower 48 (excludes Alaska) onshore (excludes Gulf of Mexico) conventional (excludes tight oil) C+C production from 2000 to 2010 the annual rate of decline is about 2% per year.
It is possible that oil production will be pushed to very extreme limits and then crash, there are many different possibilities for future extraction rates from conventional (excludes extra heavy oil sands and Orinoco output and tight oil) producing reserves.
The scenario below assumes extraction rates are pushed up to the 1973 level (10.8%) before levelling off and then declining back to 2018 levels. The possible number of future extraction rate paths is infinite, so this is one of many possible outcomes. We do not know how it will play out, only guesses are possible.
Clicking on chart will make it more readable (larger).
An alternative model below.
Click on chart for larger view.
Natural log of US lower 48 C+C output excluding tight oil and Gulf of Mexico output.
Average rate of decline was 3.5% from 1985 to 2010 (output increased over 2010 to 2015 period). Note that the 2000 to 2010 period has a lower decline rate, about 1.8%.
Niko,
Oil has become less and less important as an economic input. Oil prices will increase and oil will be used for the most important economic uses and substitutes will gradually replace oil. Oil production does not stop overnight and all fields do not fail to produce at the same moment. Decline rates are likely to slowly increase at the World level. Venezuela is a failed state and that is the reason oil output has decreased, you have the causation arrow reversed there. It is unlikely that all nations become failed states, a few will, most will not.
Dennis Wrote:
“Oil has become less and less important as an economic input. ”
If that was true, then demand of Oil would have leveled off or declined. I think jevon’s paradox is in play. Even if Transportion and other devices that use Oil have become more efficient, it just enabled more vehicles on the road.
To provide some prospect, in 2001 China had about 18 million cars & trucks registered. In 2019 it has about 310M cars & trucks, adding about 23M new vehicles per year. I recall pictures of China in the 1990’s when everyone was driving bicycles. Today you can see jammed back roads & highways full of vehicles.
Dennis Wrote:
“Oil production does not stop overnight and all fields do not fail to produce at the same moment. ”
Issue is that advance oil production technology was used to maintain production output for extended period, but at the cost of steeper production declines in the future. At some point. the oil column floating on top of the water column is going to be too thin to maintain production rates. Thus when horizontal drilling methods can no longer effectively manage water cuts, production declines will accelerate. My guess is that one this happens Oil production decline rate will be around 7%.
Yes, not all fields will simultaneous experience steep declines, but one by one they will slip into deeper declines until most of the big, oil field are all experience high production declines.
Consider that most of the Oil majors abandon reserve replacement project around 2013-2016. The need much higher oil prices but the global economy cannot support it. When prices do eventuall climb up to make these replacement project feastible, its going to take a long time for them to be completed & which the new supply is unlikely to offset years of declines.
Why is the the USA gov’t is bent on taking control of most of the ME oil fields? If ME oil wasn’t important that why has the US spent Trillions on ME wars?
Hi Techguy,
Can you explain why we have not seen the 7% decline rates for overall US L48 on shore C+C production excluding tight oil. From 1985-2010 was about 3.5 %, from 2010 to 2015 the rate slowed to about 2%.
Output declines very steeply for tight oil wells, but the rate changes over time, this will also be the case for fields with high water cuts, many wells will stop producing but the timing is different for every well.
When they all get added up worldwide, it will probably look more like the US L48 excluding GOM and LTO.
As to oil being less important, it is less important as an economic input, measured in dollars. About 2.1 trillion for a World economy of 80 trillion so about 2.6%.
As to oil being less important, it is less important as an economic input, measured in dollars. About 2.1 trillion for a World economy of 80 trillion so about 2.6%.
Oh my goodness, Dennis, are you serious? Oil is only 2.6% of the world economy? So by that reasoning, if all oil disappeared tomorrow the World economy would suffer a 2.6% decline. It would still be 77.4 trillion?
No, no, I know you know better than that Dennis. You are a very smart guy and only an idiot would believe that. Nevertheless, that is what your post leaves hanging. It leaves hanging nonsense that you obviously know better.
Right now there is nothing more critical to our economy, and our well being as 7.6 billion people on this planet, than liquid energy production. If it were to collapse tomorrow, we would all be dead within a few months.
But of course, we both know it will not collapse tomorrow. It may start it’s slow decline tomorrow but that is another story. If it does it will not be a catastrophe. But that does not diminish from the very important fact that liquid energy, along with all the other products made possible by oil, is what is driving our economy.
No, we will not all die quickly from the demise of fossil fuel. Our demise will be a long slow drawn out process.
Hi Ron,
We disagree on the importance of liquid fuel.
The point is that we do agree that oil output will not collapse overnight.
In part, the value of a commodity is measured in dollars. So it is a question of the relative importance of oil as an economic input, so in 1980 oil output was about 7.9% for total World GDP relative to 2.6% in 2018, so one third the importance as an economic input into the World economy. Oil will continue to fall in relative importance as output falls and as it becomes scarce and prices increase this will spur further substitution.
The fact that oil output will not collapse overnight will allow this substitution to occur to the point that oil prices will start to fall after 2040 after rising over the 2020 to 2030 period. Prices may be flat from 2030 to 2040 as the World substitutes other sources of energy for oil.
Dennis Asked:
“Can you explain why we have not seen the 7% decline rates for overall US L48 on shore C+C production excluding tight oil. ”
Yes I can. Largely because Tech. Advances in Oil extraction have significantly improved. the US 48 saw decline rates as high as above 5%. before they applied extensive in-fill drilling. This has enabled older fields to reduce declines, but at a cost in the future of steeper declines.
https://www.woodmac.com/news/opinion/can-conventional-oil-projects-compete-with-l48-oil/
“In our insight on decline rates, we calculated that non-OPEC conventional onstream declines stabilised at around 5% in 2016. We believe they’ll stay at this level through 2020 before increasing to historic norms of 6%.”
https://www.woodmac.com/news/feature/non-opec-decline-rates-remain-stable-until-2020/?contentId=7018&source=13
“After peaking at nearly 7% during the last decade (2.4 million barrels per day (b/d) a year), decline rates for conventional fields reached record lows in 2014 — just 1.2 million b/d per year, or 3.6%. The price collapse accelerated these rates back up to 1.9 million b/d (5.1%), due to the extent of immediate spending cuts, but we believe this level is sustainable until 2020.”
— Realistically, a 7% decline rate by the mid 2020s is pretty optimistic, considering its about 5% today. The only way likely to prevent production declines is to spend another $500B to $1T to drill the expensive oil (arctic, Deepwater, etc). But with Oil prices still bouncing between $45 and $65, there is little chance an Oil major is going to start. By the time they eventually complete new oil projects they won’t be able to offset years of high decline rates. Higher energy prices will also start impacting the global economy.
Bottom line, the World should have started a massive transition away from Oil started back in 2005 when trouble began. It was a warning that something import is wrong. It was ignored.
Tech guy,
We are talking past each other here, you are talking about individual wells or possibly fields in the absence of any new investment.
I am talking about large regions such as the US or the World and the rate that total production declines. Just look at the data, I used the data from the EIA. Prior to 1970 output in the US was rising and for the World output has risen most years through 2018.
The US decline rate for US L48 onshore conventional oil was about 3.5%. Note that we only have data from 1981 and from 1981-1985 US L48 onshore conventional output was flat.
Individual fields that have no more investment may indeed decline at 5%, bit it is not likely this happens for al fields everywhere in the World at the same time.
Decline rates will gradually increase from 0% to about 3.5% from 2025 to 2050.
Hi Dennis,
“The US decline rate for US L48 onshore conventional oil was about 3.5%. Note that we only have data from 1981 and from 1981-1985 US L48 onshore conventional output was flat.
Individual fields that have no more investment may indeed decline at 5%, bit it is not likely this happens for al fields everywhere in the World at the same time.
Decline rates will gradually increase from 0% to about 3.5% from 2025 to 2050.”
This last part “Decline rates will gradually increase from 0% to about 3.5% from 2025 to 2050.” Can you explain to me what you mean by that one? Decline rate 0%?
Im not sure if i have the wrong terminology here but you always have a decline rate right except on initial plateau? If for an area production dont decrease as in your example above US 81-85 it is simply new drilling hiding the effect of decline for production already on stream, but you still have a decline rate in those already producing assets right?
Also i think perhaps using history of the us conventional onshore to predict decline rates of future world might be a bit flawed. Im with you on the “it wont happen at the same time” logic, but i think there might be potential for a slightly different story since we globally have the potential of old super giants running dry abruptly on main producers rather than slowly fading out. If that happens we probably are looking at higher decline rates than historical ones.
I mean we have more or less just moved production forward in time with technology right, at some point geology should set the limit and we will have high decline rates left and not much to do about it except transition into something new and i hope you are right on that part but i find myself being a bit more pessimistic about it myself.
Hi Baggen,
I am looking at the output curve for the US L48 excluding Gulf of Mexico and excluding tight oil output. The US is a very large very mature producing region and has a number of giant oil fields. There were surely individual fields that may have declined at 5% or perhaps even higher decline rates, but for the data we have from 1981-2015 the decline rate of total output was 3.5% or less.
There are a number of supergiant fields in the World, they will decline at different rates (and the rate is unlikely to be constant) and the decline of each field will start at different times. Even for any individual field (and these fields are enormous in many cases) individual wells will water out at different times and in many cases these are maximum reservoir contact (MRC) wells with multiple legs which will water out one leg at a time.
There were about 85,000 wells drilled by OPEC from 1980 to 2018 (not sure how many of these are still producing), statistically these wells will be shut in one well at a time and just as in a tight oil play the field decline will be less than the rate of decline of an individual well, this will also be the case for the World where we may have between 450,000 and one million individual producing wells (my guess is perhaps 600k to 700k (in 2017 there were 450k producing oil wells in the US alone, I am guessing 150k to 250k for the rest of the World). Note also that investment in new oil wells and maintenance of existing wells is unlikely to cease before 2050. If at some point oil prices drop due to lack of demand investment may cease and in that case the decline rate in World C+C production will steepen to perhaps 5% or more.
This only occurs when there is a lack of demand for oil and oil prices become very low (perhaps $30/b in 2017$ or less). I don’t anticipate this will be the case until a Great Depression 2 (perhaps in 2030) or until 2050 when BEVs and/or AVs have replaced most ICEVs. It is possible increased air and water transport and petrochemical use may lead to continued demand for oil so that oil prices never fall to low levels, in that case we never see the steep decline rates. Difficult to predict how it will play out over the next 100 years.
Dennis Wrote:
“The US decline rate for US L48 onshore conventional oil was about 3.5%. Note that we only have data from 1981 and from 1981-1985 US L48 onshore conventional output was flat”
L48 is decline rate for onshore conventional fields is running at about 5%, and will start increasing in 2020. Not individual wells, but entire legacy fields.
Not sure why you think Conventional, On Shore decline rates is only at 3.5% when it is not. Its running at 5% with investment into the legacy fields to prevent much steeper declines. ie Red Queen to hold declines at 5%.
I think you’re including the GOM, offshore (non-conventional) fields to get your 3.5%, but considering that Oil Majors have shelved Deep Water GOM projects, the GOM is not going to help offset declines.
Currently there are about 19 Rigs Drilling for Oil in the GOM, down from 60+ in 2014. I believe most of the GOM rigs are adding horizontal wells on already existing drilled fields. All the growth in US Oil production is from LTO.
Techguy,
No I use US data for C+C and deduct Alaskan output, GOM output and tight oil output.
From 1985 to 2010 the rate of decline averaged about 3.5 %, after that is slowed down further.
Just go to the EIA website and do the analysis, it is not very hard to do, took me about 10 minutes or less.
https://www.eia.gov/dnav/pet/pet_crd_crpdn_adc_mbbl_m.htm
My point is trendlines are not just useless but also deceptive. Your OPEC trendline above is a perfect example. It suggests that OPEC production will continue along that line. Yet your best guess is that OPEC production will be flat for the next 11 years. Then why the trendline? What does your trendline suggest? Really? Then why draw it?
Ron,
I was considering how World C+C output had grown and where that growth came from. I chose 2005 as a starting point because that was the start of a relatively long plateau in output.
So a trendline is used to give the general trend over the period covered, no more, no less. In fact it is no different than the reason you like to post charts, to see what the past trends have been. Does that mean you expect the future will look like the past? I would say mostly no.
On the steep decline that you expect consider that there are not many wells that decline more steeply than tight oil wells. The tight oil output for the nation will not decline steeply until producers stop drilling new wells or change the average rate of well completion very steeply.
For conventional output the oil can be produced at the usual rate the main difference for untapped resources is that they are expensive to produce, if oil prices are high enough to produce it profitably it can be produced. I model extra heavy oil and tight oil separately. The extra heavy oil model is based in part on the projections of the Canadian Association of Petroleum Producers (CAPP), I assume Venezuela starts to ramp up output about 15 years after Canada and then follows a similar trajectory (a WAG) but 15 years behind Canada. Only 200 Gb of extra heavu oil output is assumed, following Jean Laherrere.
Consider chart of shock model below and note the Mr. Laherrere usually focuses on C+C-XH, where XH=extra heavy oil. This model uses a high US tight oil scenario with peak LTO of 10.7 Mb/d in 2025, so it is on the optimistic side assuming high oil prices. The shape of my model and that of Mr. Laherrere is not very different.
I typically show the chart on a different scale, the URR of my “medium model” is about 3100 Gb. If extra heavy oil was added to Mr. Laherrere’s 3000 Gb model it would be 3200 Gb, my model is just a bit lower than the 3000 Gb model at 2900 Gb for C+C-XH.
Chart from Laherrere 35 nation oil forecast paper, page 19
https://aspofrance.org/2018/10/03/updated-extrapolation-of-oil-past-production-to-forecast-future-production/
Ron I will try one last time.
A trendline shows the trend over the period covered by the data.
It does not imply that trend should be extrapolated into the future.
It is shown to show the trend explicitly over the period considered.
I guess it may be deceptive to those that do not know what an ordinary least squares regression is. I assume people know the basics.
No problem Dennis. You continue to draw trendlines and I will continue not to do so.
Fair enough, but keep in mind most people just look at it as the trend over the period where there is data.
Extrapolation of a historical trend requires a solid theoretical justification.
And if Bubba takes over shale, what is the theoretical extrapolation? Not easy to figure, because no one knows how many independents will be still standing. Bubba will proably not export. We will always have imports, because other than Canadian, we have little heavy oil.
GuyM,
In that case the peak occurs earlier because tight oil production will not peak as high, but it will remain on plateau longer so declines will be less steep. So this suggests a long plateau in World C+C output from 2021 to 2030 or so or possibly slightly rising output if high oil prices spur more rapid development of oil resources as well as more exploration that might lead to some deep water discoveries.
Chart below shows a variety of US lto scenarios, your bubba scenario might look like the lower of these scenarios (or perhaps even lower).
Clicking on chart will make it bigger.
Dennis, your brilliant!
GuyM,
Thanks. The low scenario was developed in response to brilliant comments by you.
A group effort.
As to oil being less important, it is less important as an economic input, measured in dollars. About 2.1 trillion for a World economy of 80 trillion so about 2.6%.
Denise you are way out on this . The heart does not even weigh a kilo but once it is out then all your 80 kilo are headed directly six feet under . Remember the poem “the battle was lost for the horse shoe nail” .
Holeinhead,
In economics importance is measured in dollars. In 1980 oil output was about 8% of World economy, in 2018 about 2.6%. The relative importance of oil decreased from 1980 to 2018. The relative value of a good is in part a reflection of abundance. Water is very important but its abundance in the World makes its value from an economic perspective much lower than oil even though we can live without oil, but not without water.
Dennis Wrote:
” In 1980 oil output was about 8% of World economy, in 2018 about 2.6%. The relative importance of oil decreased from 1980 to 2018. ”
Oil is just as important today, as it was in 1980. Oil is probably more important today since a lot of developing world starting consuming a lot of it. Recall China in 1990s: everyone drove bicycles. China 2019, most people use cars & buses to get around.
Something does not seem right with your estimate that Oil decreases from 8% to 2.6% since 1980. For one in the 1980’s Oil was expensive (about $115/bbl adjusted for inflation, world was in a recession, and US interest rates were about 15% (topping out at about 20% during that year).
Bottom line: When Oil global production starts declining it will have a significant impact on the global economy. Consider that High Oil prices kill economic growth. (2011-2014 was an exception due to QE Money printing). If Oil prices did not impact the global economy, it would stall economic growth.
Dear Dennis, you are way off. In 1980 the world economy was very different from today’s world economy. The correct answer beeing China. Oil is super important. Actually, fossil fuels are super important. Every level of our society depends on them, their multiple utilizations and deployment. Without them there is no economy as we now have it. World economy needs energy and a lot of it. Without energy there is no economic growth. All the hype about degrowth, green, blabla, as much as I want that to happen…it will not happen. Thus, oil industry, as oil is the backbone of modern life, had, is having and for some time will have a disproportionate importance to our survival as a specie as to its size in the world economy.
USA did not spend trillions of dollars on wars and Drill, baby, drill just for the sake of spending.
It spend those money and got a lot of ppl killed in the process to maintain access to the MOST important mineral resource ever. Not even th shale boom has not stop America from bombing, invading and killing.
Linear extrapolation has never been a good technique to find out about the future, whether it is extrapolating oil production, oil price, Arctic sea-ice, or global surface temperature. The future remains unknowable and those that expect that trends will continue into the future are bound to be surprised when those trends inevitably change.
Javier,
I agree, it was not intended that the trend should be extrapolated, it was shown to illustrate the trend over the period of the regression, no more no less. There have been long periods (1982-2018) where the increase in C+C output has followed a linear trend, I do not expect that will continue.
Please keep the climate references in the Electric Power Monthly thread.
Thank you.
Most on the oil side are not interested and you brought it up, not me.
Oil production trend has generally decreased over time, as Gail Tverberg has shown repeatedly. See for example:
https://transitionferndale.files.wordpress.com/2011/04/world-oil-production-with-trend-lines.png
from
https://transitionferndale.wordpress.com/2011/04/25/oil-supply-trends/
As we all know the trend that was nearly flat 2005-2010, partly recovered with the fracking boom, yet it has gone back to less than 1% since 2016. It doesn’t look good for the future despite more people trusting that if more oil is needed more oil will be produced, because that is what has happened in the past.
But it amazes me that people well aware that linear trends in their field of expertise mean nothing for the future, totally buy that for other fields they do.
Javier,
What part of “the trend applies to the period of historical data included in the regression” do you not understand?
Nobody has suggested, except you and Ron that the trend should be extrapolated to the future.
This is so obvious to anybody that has taken a course in statistics that it does not need to be stated.
Chart below shows the linear trend from Jan 1982 to Jan 2019.
Just to make it plain, I do not expect the trend will continue beyond Jan 2019. To show that there has been a change in trend requires more than putting lines on a chart, there are statistical tests to determine the statistical significance of any changes in trend.
Ok, that seems logical. We point the driver where we think it will go, based upon what we know of the course (which we have never played before), but quien sabe?
What your trend hides is how the slope of the trend in oil production has been changing over time. Your linear trend just gives you an average for the whole period.
The annual rate of change in oil production has been consistently declining. As it is noisy data it is better looked as a 10-year average in the rate of change. It shows oil production grows more slowly over time, something your graph doesn’t show. Shale oil has not changed the declining trend in oil production growth, but without it it is obvious that rate of change would have become negative.
https://i.imgur.com/aDEPfia.png
The graph shows Peak Oil is inevitable if the decline in growth continues and while I can think of many things that could accelerate the decline leading to Peak Oil in the short term, I can’t think of anything that would make this 35 year negative trend become flat or positive.
So the linear trend is deceiving. The trend is getting flatter over time.
Javier,
If you mean that the rate of growth has slowed, then yes for a linear trend in output that is quite obvious. And of course it shows the average rate of increase, as that would be the definition of an OLS regression.
I agree the 1945-1972 rate was very different (about 7.7% annual rate of increase in C+C output over that period) and roughly 6.6% per year from 1920 to 1973.
From 1983 to 2018 the rate of increase was much slower about 1.2% per year on average. There are “flat” periods in 1990-1993 and 2005-2010 which followed periods of faster growth. 2011 to 2018 has followed the trend fairly closely.
I do agree at some point output will flatten, my expectation is between 2021 and 2024.
Both you and I could be incorrect, the peak date will be known about a year or maybe even 5 years after it has occurred.
Click on chart for larger view.
Javier,
I thought you said we should not assume trends will continue into the future.
The trends that fit your narrative will continue, no doubt. 🙂
I agree there will be a peak and I agree the trend will change, probably to a slower rate of growth reaching zero by 2022-2030, then growth will become negative at some unknown future rate, likely it will gradually decrease from 0% to around -3.5% over several decades. Though much will depend on unknown future extraction rates from producing reserves as well at the rate that resources are developed from discovery to producing reserves.
Exactly. The existence of a trend does not provide information about the future as you have pointed out. Information about the future can be obtained from a good knowledge of the system, though. To a certain extent we can predict what will happen to an object falling from a height from physical laws and material resistance studies. There is always uncertainty about the future. Election polls provide knowledge that sometimes, but not always, allows good predictions on the outcome. The more we know about a system the better we are at projecting what might happen. That’s the idea behind this site, I guess.
I don’t think that getting the opposite result for 15 years can be construed in any way other than failure. Don’t lower your standards so much.
Javier,
People knew the 2005 prediction was wrong by 2011, over the 2005 to 2010 period there was an undulating plateau, most did not see the tight oil coming in 2011 (tight oil output was about 1.7 Mb/d at the time). Most people at the time were only aware of Bakken output (about 500 Kb/d) and perhaps Eagle Ford output about 360 kb/d at the end of 2011, but the data was not tracked very well by the EIA at the time so mostly the Bakken got the headlines.
Here are my thoughts from 2012
https://oilpeakclimate.blogspot.com/2012/07/an-early-scenario-for-world-crude-oil.html
https://oilpeakclimate.blogspot.com/2012/07/further-modeling-for-world-crude-plus.html
https://oilpeakclimate.blogspot.com/2012/08/i-noticed-that-compared-to-model-by.html
The last of these 3 posts was the best I could do in 2012 and note that I had not yet accounted for the rapid rise in tight oil that would occur from May 2012 to April 2019 (about an increase of 5.4 Mb/d over that period in tight oil output). So the low peak output in these scenarios reflects this unknown future.
A physics problem such as dropping an object from a given height is a fairly easy study that is easy to reproduce.
We have very limited information publicly available for the oil industry, predicting future discoveries, resource development and consumption is not possible.
So I set realistic standards, as only a single prediction (best guess) can be made and the possible future scenarios are infinite.
A simple math exercise suggests the probability of a correct prediction is zero.
The linear trendline of this true stress vs. true strain chart for AISI 4140 steel looks very reliable from 0ksi to about 175ksi. While on the linear portion of this curve, it appears that the material will continue to behave predictably for ever increasing loading. However, if you keep pulling to the point where 175ksi is reached, the curve takes a serious departure to nearly horizontal until the tensile limit is achieved. The catastrophic rupture of material ends with a jarring bang when you hear it on a materials testing machine. It is always unnerving even when you know it’s coming, as your eyes follow the pen plotter across the graph paper past the yield point.
Fracture mechanics is largely the study of crack propagation in metal alloys. Strain energy drives crack propagation dramatically from the yield point to the plastic limit; ultimately, both the density and extent of crystalline dislocation at the crack fronts within the material becomes so severe that failure occurs all at once.
Based on Ron’s graphs, I submit to you, that it is possible we are still on the linear portion of the hydrocarbon production curve and have just reached the yield point in 2019.
I edited the above comment and it appears the AISI 4140 graph disappeared. Here it is again.
Mike, when you edit a post, any attachment only appears to disappear. It is still there, just not in the edit. If you refresh the page it will appear again, just like magic. 😉
Hi Mike Sutherland,
Interesting analogy. In this case for the World, it would be more like testing some new metal that had never been discovered. Based on my own experience as a mechanical engineering student the point where the curve becomes nonlinear is not predictable. I would submit the hypothesis that the curve might become non-linear at any point from 2018 to 2025 with my best guess around 2020 or 2021, with the peak in output arriving in 2022 to 2030, depending upon actual resources (2800 to 3600 Gb), the state of the World economy, and the price of oil.
This is far more complex than a simple repeatable controlled lab experiment and far less predictable.
Javier, You seem not not realize that much of the discovery data is from the past, so the extrapolation also uses data from the past. Next time remember that current production comes from discoveries that may have been made years ago.
Javier said: ” The future remains unknowable”
Yet the past is known.
Sure, sure. That’s why the Peak Oil prediction for 2004 came out wrong. Because the past was known. But some people never learn that it is difficult to make predictions, especially about the future.
Javier,
The 2004 or 2005 prediction depended on a flawed Hubbert Linearization approach. That’s not how we approach this.
See
https://www.amazon.com/Mathematical-Geoenergy-Discovery-Depletion-Geophysical/dp/1119434297
If you suck fluid out of a cup through a straw, the production rate of fluid appears to be consistent as long as there is fluid to be drawn. There is no smooth transition of flow rate from minimum to maximum to minimum. It simply goes from 0 to maximum, perhaps holds there for a while, and then stops completely. Likewise, I believe that most oil reservoirs will behave in this fashion.
Mr Sutherland.
For a single well you are correct. For a reservoir we have a non-homogeneous rock matrix with random fractures in many cases as well as multiple straws inserted at random intervals as well as thousands of unique reservoirs each with different behaviors and permeability. The oil shock model uses a maximum entropy model to capture the statistical uncertainty in the rate of development in oil resources, then assumes a constant annual rate of extraction from the average producing reserves (the average extraction rate from producing conventional reserves). Historical production is matched by setting the extraction rate so modelled production matches actual production. Future production assumes the rate of resource development remains similar to the past and assumes either constant extraction rates, increasing extraction rates or decreasing extraction rates after 2018.
We can only guess which it will be. From 1982 to 2010 extraction rates were decreasing and from 2011 to 2018 the trend was gradually increasing extraction rates as the pool of producing reserves reached its maximum in 2011 (for low URR case of 2800 Gb). Seems more likely in my view that the extraction rate will gradually increase over time after 2018, but the correct assumption will only be known after the fact.
Javier said:
“That’s why the Peak Oil prediction for 2004 came out wrong”
In the greater scheme of things, it came out reasonably correct. What is being off by a few years when one realizes that we are now relying on fracked oil and tar sands and all kinds of non-conventional oil.
That’s so funny. Specially coming from someone that claims to apply the scientific method. If you are into predictions the timing is everything. If the timing is wrong your hypothesis is wrong. If you predicted a La Niña for 2019 and it doesn’t take place your hypothesis is wrong. It doesn’t matter that eventually there is a La Niña sometime later as it is bound to happen. It has been 15 years since 2004. The Peak Oil prediction was wrong because nobody in the Peak Oil camp thought that fracking could be expanded so much, providing the missing oil from conventional sources. Peak Oil is inevitable but the timing is everything. Even some cornucopians like David Middleton accept that Peak Oil is inevitable, they just think it will be irrelevant because it will take place when we have solved the problem of substituting it.
Javier,
In a highly complex system prediction is probabilistic, precise predictions are not possible in nature where controlled experiments are not possible. Surely you can see this. Don’t hold others to impossible standards, not only is data imcomplete but predicting future choices by 7.7 humans is beyond impossible.
We are not doing simple lab experiments in microbiology here.
Dennis,
Javier does not realize that Peak Oil timing is a stochastic analysis and any date has a probabilistic interpretation.
I can talk El Nino but that needs to go on another thread.
Venezuela production was probably ~ 800k per day in April. EIA estimate is 830k; OPEC secondary sources are 750k.
https://www.eia.gov/todayinenergy/detail.php?id=39532&src=email
https://oilprice.com/Latest-Energy-News/World-News/Tanker-Sabotage-Venezuelas-Crisis-Worsens.html
The chart below was taken from the EIA’s latest Monthly Energy Review. March and April are obviously projections. Are they a tad overly optimistic?
The data is in thousand barrels per day.
Jan-19 11,870
Feb-19 11,683
Mar-19 12,110
Apr-19 12,200
Yeah, probably over current by over 200 bbs per day.
GuyM,
Possibly a typo? I think you might have meant 200 kb/d?
If so, I agree, though the GOM is the wild card. I think there was news that some new field just came online, these types of startups (if I am remembering correctly) can lead to a bump in output. My guess for March is about 233 kb/d less than the estimate from the MER, nearly equal to your estimate.
Ron I agree the EIA is too optimistic, I think their tight oil estimates need to be adjusted lower for March and April.
https://www.reuters.com/article/us-shell-appomattox/shell-starts-production-at-giant-appomattox-field-in-gulf-of-mexico-idUSKCN1ST1R4
It is about 175 kboe/d, but probably will not affect April’s output as it was reported in May.
Another report suggests several wells will come online in 2019, no specific dates were given.
https://www.offshore-mag.com/drilling-completion/article/16790570/llog-expects-three-field-startups-in-2019
https://oilprice.com/Energy/Energy-General/BP-Unlocks-One-Billion-Barrels-In-Gulf-Of-Mexico-With-New-Tech.html
Lots of activity, not a lot of firm dates. SouthLaGeo could you up date us on GOM?
Yeah, not a typo, just typing ahead of rational thought. Yes, and they may eventually be reduced even further than that, if Dean’s estimates are correct. It looks like one or more companies have over reported since mid year 2018. I don’t pick it up on my calculations, as the corrections could be made after a three month look back.
Hi Guy,
Here is a slight modification of Dean’s chart using the last 12 months of vintage data rather than all vintage data. The 12 month line is pretty close to the EIA estimate in Feb 2019 only about 70 kb/d under the EIA estimate for Feb 2019.
Yes, I did not say it was substantial, only noticeable.
From August 2018 to Jan 2019 the difference between Dean’s estimate and that of the EIA for Texas output is indeed substantial, but by February they seem to be converging. It will be interesting to see how the EIA march estimate compares with Dean’s 12 month vintage estimate which is 4939 kb/d for March 2019 Texas C+C output.
GuyM,
Your guess was nearly perfect, off by about 3 kb/d. Amazing!
US inventories week/week change (1000 barrels)
Crude Oil -282
7 oil products -4,003
Total (crude oil + 7 products) -4,285 (shown on chart)
Propane & Natural Gas Plant Liquids: +3,659
SPR no change
Line 13 Adjustment +6,167
Seasonal: Total (crude oil + 7 products) +48,588 year/year
Chart with dates of highs and lows
https://pbs.twimg.com/media/D72C1cjXkAYs7ze.png
Inventories: the sum of the USA + Fujairah + Japan (million barrels)
Total (Crude + Distillates) -4.0 week/week
Total (Crude + Distillates) +53.6 year/year
Total https://pbs.twimg.com/media/D72DrOVXkAIK_F_.png
Split https://pbs.twimg.com/media/D72EApFXsAALJCq.png
https://oilprice.com/Energy/Crude-Oil/Why-Oil-Majors-Are-Going-All-In-On-US-Shale.html
Morgan Stanley sees a 1.1 million a day deficit by the third quarter. Umm, yep, or more. That’s global, not what the EIA reports.
1.2 million a day from OPEC, and add in net Venezuela and Iran drop, Russia’s half million makes OPEC plus a wash, at least 600k a day from demand increase, and I could count far more than 1.1 million, as US is at a standstill. But, I discount my computations, as they never work out.
GuyM.
Hey at least we had some ok prices for April and May. Here we go back down again.
I’m using the time to shop for options. Calm before the hurricane. Not sure exactly when, but it’s coming.
GuyM.
Maybe.
Or maybe the Smoot-Hawley like tariffs will crash the US (and world) economy.
Some sections of the US and China economy are damaged. But China, overall, is NOT dependent on what the US buys. Farmers are damaged in the US. Not good! But, overall, the US economy will chug along. But, that would be dependent on how much chicken little convinces everyone the sky is falling. We should have adopted a VAT many years ago. Tarrifs are too hokey.
Hi Guym,
Any advice on the best place to buy options appreciated.
Sean
Sign up for etrade, or any comparable site, deposit money, and buy.
There is certainly a deficit in the market, question is how much and who is covering it short and medium term.
Interesting to note that OPEC has it that Iran has decreased production in May (Reuters survey) with 400k b/d from 2.6 m b/d to 2.2 m b/d. Which begs the question where about 800k/d are going since domestic use is a bit more than 1 m b/d and exports are less than 200k b/d at the moment. Most of it is inventory building, some can be some sort of smuggling of crude or utilising extra refining capacity and move products abroad one way or another. Anyway probably at least 0.5 m b/d gone from the market in the form of inventory. This has the potential to be released later though, when waivers may be given once again.
Russia with 1 m b/d disruption, from June 10th pipelines should be up again. Nobody knows what the rate will be after that.
No matter how you put it, it is safe to estimate that we would be at least 2 m b/d short in 2019, with about 1 m b/d being demand increase, 0.5-1 mill b/d Venezuela, 0.5 mill b/d decrease due to decline mostly offshore (North Sea, Mexico, Angola, Asia) and 0.5 mill b/d Iran (although countries like that has a tendency to look at all other options before actually reducing production – a bit sceptical). Assuming US production being flat, I bet the deficit will more than 3 m b/d going forward, especially because 2H of the year is always high demand season for crude. The assumption of flat US production becomes even stronger when we know there is a trend towards more condensate/less normal oil coming from the shale patch. It takes a stable genius to sort this situation out, and I don’t think lower oil prices for a period of time is the medicine.
https://uk.reuters.com/article/oil-opec-survey/table-opec-oil-output-falls-by-60000-bpd-in-may-survey-idUKL8N2355XJ
Posted an article earlier that said the Russian pipeline will operate at half speed for about six months.
Ok ,thanks. Not sure what information is realiable anymore in this market, but we will see what happens.
Yeah, you got that right.
Regarding the Russian contamination issue, it doesn’t seem all that trivial after looking at this chart (from twitter).
So how long was China’s (and other countries) trade surplus with the US to be tolerated? The largely anti Trump media will devote most text to how Trump states are hurt, and never point out that none of his predecessors sought a fix of any kind.
So . . . how long? Don’t hand wave and talk about how this fix cannot work. Just answer how long? Why did everyone else decide not now?
I’d say everyone else didn’t tariff because they had studied both history and economics.
Don’t disagree there are issues with both China and Mexico, but not sure tariffs plus insults will get the desired result.
Trade war is a major gamble. Is there a plan here or are we totally shooting from the hip?
Yes, agree. I have studied economics and it says that a country should produce what it is best at producing (lowest cost) and trade it with other countries exporting what they are best at. And maximise volumes, and all will benefit. Growth everywhere. Tariffs do not solve anything really. It just adds to the cost of the products a country is best at producing.
If the history part is included, what happend in the 1930’s? Trade barriers lowering world trade substantially and lack of stimulus to get out of a deflationary cyclus. Beacuse a lot of people have studied this time period, I think the main solution to the debt/lack of growth problem this time around is to print money (or give credit) and ensure governement deficit spending (by getting loans from the central bank? seems likely). So inflation out of control on the horizon could be what is coming; at least this would be the most likely scenario if oil prices spiral out of control.
The best solution? Maybe to increase money (QE) of all the the major currencies at the same rate at the same time because of the stimulus needed and the stable exchange rates, encourage and ensure stable trade relations (bin the tariffs) and also have a realistic policy in the energy sector (state governed if needed).
Shallow sands,
“We’ll see what happens…”
-President Chump
How long?
Why does the talk turn into hand waving and questioning mechanism?
It’s a simple question. How long was the trade deficit to be tolerated?
The yuan Peg is the target IMO. I don’t think there will be any agreement. Until china free floats their currency. This is going to end badly for the majority and a few minority will benefit greatly from it.
With all the currency Japan has created. Watch the Yen end up at an all time high against every other currency including the dollar as that carry unwinds. Which is a problem in itself because of the debt load they have.
The US official position on China is US wants China to allow their currency to strengthen. They going to get the exact opposite if that Peg is broken.
QE or currency depreciation to lesson the burden of debt isn’t working. Nobody gets to keep their gains long enough to lesson the burden. Trade wars are just an end product of not being able to print away the debt burden.
I guess it would go against human nature if all countries lived within their means and didn’t spend money they didn’t actually have. World would be a totally different place if you couldn’t borrow from the future and then print money when you realize the future just isn’t enough.
Interesting. I have noticed that every time trade war is on the agenda the US dollar seems to show strength against Euro and other asian currencies. An overvalued currency is not exactly the way to ensure a better trade balance, so I can see how currency can be used as a weapon.
No country has to submit its currency to FX trading. Hasn’t China proven that?
Hell, even if you do trade it, behold the Japanese yen. No one can print more than they have. It generated no inflation and it generated no currency collapse.
Money is a substance created by whim from nothingness. No such thing has to make any sense.
I kind of see your point with the “money is created through nothingness”. Low inflation would however not last if there is scarcely not enough energy around though. Your argument is counterintuitive; a lot of money easily available and scarce resources. Would you not get what you need if you have the money? Imagine the scenario: Pressure builds up, nobody wants to stand in lane for petrol and all kind of companies would claim they need the diesel to make the economy go around. Airlines screaming for more kerosine. Price would go to a certain point, then it would be all state control maybe. Or if not, way too high. Price, rationing and incentives to produce more would be in danger of being regulated (oil, natural gas or even better renewables if competitive).
You don’t win a ‘trade war’ by installing artificial barriers or punitive measures.
You must compete. Develop your strengths. Be disciplined.
That is why China is doing better.
They are focused, hungry, and much more disciplined.
We are easy prey, and Trump is pursuing a lose-lose policy.
Secondly, at some point in the next year there is a real possibility that the republican party will decide that it is time to dump trump [what took so long?], or the voters will. He will not go quietly I fear. Major tantrum. He is the kind who would burn down the house rather than admit to himself that he is loathed- narcissist nightmare.
No one else did ANYTHING. He has taken action. How long was the trade differential to be tolerated? Concentrate on that last sentence and ignore all media.
Watcher.
Maybe do some reading on the subject of trade deficits.
Pretty telling this morning when Trump supporter Rick Santelli agreed that we will only know in hindsight if the tariffs were a good idea.
Santelli also admitted if they don’t work by 2020 elections the R’s will be swept out of office.
Shallow Sand,
Hey tariffs worked great in the 1930s, what could possibly go wrong? 🙂
I recently participated in the restoration of the computer and electronics system of a flooded late model Cadillac. If you look at the different sensors and control modules you will find parts manufactured and assembled in various countries such as Canada, Mexico, Hungary, etc, etc… If you look inside those modules you will find computer chips and components from all corners of the globe, such as Malaysia, Philippines, Taiwan, Vietnam, etc… Where do you suppose the minerals and rare earths come from?
Do you even understand how interconnected the global supply chain actually is…
.
Trade deficits have nothing to do with “fair” trade or tariffs.
If a country exports more than it imports it is a net saver — it produces more than it consumes and squirrels away the extra income.
If a country imports more than it exports it a net consumer — it consumes more than it produces and spends its savings or borrows from foreigners to cover its consumption.
America has had a trade deficit for decades because consumers borrow and spend instead of saving. The country wastes immense amounts of oil on a ridiculous transportation system, and that oil (which the country does not have) has to be imported. But instead of offsetting this by cutting spending in other areas, we simply print and export dollars.
The solution to the trade deficit issue is to simply tax the bejesus out of oil consumption.
Holding off on USO options for 2021. It has been said to never try to catch a falling knife. Makes no sense that Dow and oil are attached for awhile, but history tells us it does attach.
Ok, did anyway. 127 calls at 16 jan 21 at .62.
Backwardation has started… !
This could get really ugly.
Brent was in backwardation at $70. And ugly is in the eyes of the beholder. Right now, they are dumping paper barrels to cover. USO performs best in backwardation. We will have a long run on backwardation.
Things are interesting—
https://www.bloomberg.com/news/videos/2019-05-28/oil-analyst-sen-sees-demand-perception-as-main-driver-of-prices-video
From a few days ago….
Here is a good interview with Amrita Sen from Energy Aspects. I think she does a good job with summing up the situation.
One of the conundrums in the oil market lately has been why are we seeing the physical market tight and also we are seeing global oil inventories much higher(about 90 million barrels) than a year ago. If we dig into where inventories have increased it has all come from the U.S. and China. Partly driven by more refinery maintenance than usual because the changeover in fuel standards from bunker fuel for ships at the beginning of next year, refiners are taking extra maintenance now so they can run harder at the end of the year and partly because China has built out a lot of storage. Everywhere else stocks are much lower. Oil on water has plummeted which indicates exports are declining and that tells us that inventories are about to start coming down substantially.
Yeah, that’s what I was guessing.
Or suppose none of that data is reliable. Then what?
Then I guessed wrong, not the first time?
https://www.eia.gov/petroleum/production/
Pretty flat through March.
Yes most of the increase is due to the GoM rather than LTO
US crude oil production in March at 11,905 kb/day up +241 in March
February at 11,664 kb/day, was revised from 11,683 kb/day
Federal Offshore Gulf of Mexico, March at 1,907 up +191 from February 1,716
North Dakota +42 kb/day
New Mexico +23 kb/day
Texas down -6 kb/day
Yeah, it was slightly higher Nov 18, so flat the past 5 months for total US. And not higher (except maybe GOM) to current. And no plans for an increase per the RRC permits. Minimum five months from permit to production. Shale can’t stay flat for long at this rate.
GuyM,
Pretty sure if the completion rate stays around the April 2019 level for the Permian that will be enough to keep output either flat or slightly increasing. Once the market wakes up to the impending oil shortage, oil prices will increase and the completion rate might increase a bit. The permit numbers are for new permits I think, I imagine producers have enough permits filed that they can drill what they need, the completion numbers are where the rubber meets the road as it were. Permits suggest intention, completions are real.
The March average of the weeklies was 12,106
And the IEA had 11,948
And the EIA STEO (date May 7th) was 12,005
Yeah, and the latest EIA weekly had 12.3. The May RRC permits will most likely be the predictor for the rest of this year.
Above comments all very interesting. As a Canadian with a son working in the Alberta Patch, plus as a long time Oil Drum/Ron reader, I would like to comment about the often denigrated Oil Sands product. At least you know what you have with Oil Sands and can forecast an accurate production and decline rate. Lay out your grids, sample and drill for cores…do it all over again. Development costs are known as are extraction costs. The only changing factor is wage contracts and interest rates and even those are visible and easier to forecast than guessing at sesmic, dry holes, declining flows, etc. It’s mining. Every shovel scoops this much this fast, every truck takes this long to haul X distance and as the distance increases add trucks. Heavy haulers are now autonomous. Maint is done by contract, rebuilds are forecasted ahead of time and scheduled for, and equipment can even be leased at set rates without production fears. Obviously, the crunch is in price per bbl vrs set production costs, but what isn’t?
These are good 200K per year jobs and are of vital interest to the Canadian economy. I predict the KM Trans Mtn will be started this summer before the next election in October. When it is completed 900K bbl/day will be going on the World market, (most likely to Asia) and not to the US. This will really disrupt a lot of complacency about supplies and current US exports, plus what to do with all the light shale products now able to be blended in US refineries thanks to available heavy Cdn product at a discounted price.
regards Paul S
That’s a powerful pipeline, but there is powerful secretive funding of the First Nations groups opposing it. You’ll need to buy some judges to make this happen, and I think they are already bought.
They just want a piece of the pie, and will, most likely, eventually get it.
Hi Paul,
What is your estimate for URR for the Canadian oil sands? Do the CAPP forecasts seem reasonable to you? Jean Laherrere only estimates a 115 Gb URR for Canadian oil sands. Also what oil price is needed for the more expensive areas (less prospective) to be extracted profitably?
Thanks. Figured you may have done some research, or you sound very knowledgeable in any case.
Hi Paulo. It’s good to hear from you.
Added to the TransMountain expansion, if Enbridge gets to finish the Line 3 replacement that will add 760 000 barrels of crude a day to the US, and the Keystone XL would contribute at least 700 000 bpd for a total of 1 460 000 bpd. It appears that Canada would be in the catbird seat as regards getting its oil to market, finally.
Historically, oil-sands crude has been refined mostly by the Midwest refineries, if memory serves. I’d expect that their source of diluent would be LTO from the Bakken/Permian/Eagle Ford/etc. as long as they pay more than the shippers from the Gulf Coast would.
It will be fun to watch all this play out.
Baker Hughes U.S. Rig Count
Oil: up +3 to 800
Natural Gas: down -2 at 184
BH-> https://bakerhughesrigcount.gcs-web.com/na-rig-count?c=79687&p=irol-reportsother
I have updated the USA graph in the post with the March data. I have also added several states and a few comments.
Thanks Ron,
Even though Texas output is flat, that might be due to a slowdown in conventional output.
What does the flat output in the US mean? Possibly that the crash in oil prices affected the completion rate for new wells, fewer completions means lower output growth (perhaps none). When oil prices rise, the completion rate will rise and output will increase up to about 2025, then falling new well EUR will lead to a short plateau and then decline as fewer wells are completed as profitability falls for new tight oil wells.
Chart below has Permian plus Eagle Ford output, though some of the Permian output is from New Mexico so this doesn’t match up with Texas production exactly. According to the EIA the Eagle Ford has not declined since Jan 2019, output has been flat there, the Permian and Eagle Ford combined saw a 100 kb/d drop in output in January, but by March output was about 50 kb/d above the Dec 2018 output level. For all US tight oil the March 2019 level was only 8 kb/d higher than December 2018, essentially flat.
Yes, there are a lot of other plays other than the horizontal drilling in the EF and Permian. Drops are probably in the Permian conventional, and less drilling in the Austin Chalk which had some monster wells for awhile from EOG efforts. And, I really doubt that EF is maintaining.
GuyM,
I am with you on the Eagle Ford. The EIA seems to be punting on that one, they have the same estimate for Jan, Feb, Mar, and April 2019 for Eagle Ford output, seems doubtful at best. Though when I look at the numbers in greater detail there is a bit of change from month to month.
EF in kb/d, Jan to April 2019
1212.056
1212.139
1212.223
1212.307
I think they may be making this stuff up. 🙂
Yeah, those numbers do NOT seem real.
Even though Texas output is flat, that might be due to a slowdown in conventional output.
So you are suggesting that conventional oil is now declining about the same speed is tight oil is accelerating. I am not surprised. I agree wholeheartedly. It’s just a matter of months now until the decline in tight oil starts to decline. Then both conventional oil and tight oil will be in decline.
Do you agree? Or do you disagree? Interesting? I would love to know.
The May EIA drilling report says:
Bakken: + 16 kb/d, legacy: -67, new wells 83
EF: -1, L: -119, new wells 118
Permian: +56, L -259, New wells +315
The Red Queen is doing a US shale tour. Rystad Energy, who usually claims US shale will continue to grow, says: only 4 of 40 studied shale oil companies had a positive cash flow first quarter.
https://www.oilandgasmiddleeast.com/drilling-production/34061-just-10-of-shale-oil-companies-are-cash-flow-positive-rystad-energy
US shale oil will soon hit a peak. The question is will it be permanent?
Tom,
Unless Brent oil prices remain at $70/bo in 2017$ or lower from now until 2030 (52 week average Brent oil price) US tight oil is unlikely to peak before 2023, my best guess is 2025, and it might be as late as 2027 with low completion rates and oil prices close to the EIA AEO 2018 reference oil price case.
Hi Ron.
My guess is that Texas output will be up slightly over the course of April to Dec 2019, probably 200 to 500 kb/d over that 8 month period.
WTI is down 6.01% as I write this. Wow. Is that a record? Interesting days 🙂
I know this is not an investment website but back in early January I made a bet on oil prices going up. Well that was a good bet, until now when it is nearly even anyway. I just could not decide to sell before some “actors” decided to crash the market. And I am not really a gambling guy or anything, but how much money are made by the guys having inside information? Fortunes, I for sure don’t have it. I hope it all comes crashing down, because the last thing I want to see is the smug faces of the ones cheating in the market place (Btw don’t worry about me, more than 80% of my assets are relatively safe – if energy related could ever be safe).
I wouldn’t sell now!!!!
Inside information?
What information could there be that would tell you anything?
This has to be the most illogical and insane day I have seen in the price of oil. No connection to reality, or even perceived reality.
Is this not temporary Trump tariff tomfoolery?
Problem is most of Trump’s tariff tomfoolery will have a long-lasting effect, not all that temporary. We elected an idiot for a president.
I think countries are looking for ways to reduce dependence on the US. And it doesn’t help that we have now proven that we will abandon agreements as it suits us.
I think Trump is permanently shifting the US in the world. I don’t think the Chinese model is preferable to what we might have offered, but the country is bigger, thinks in terms of longer range plans, and appears to have a smarter leader.
Plus I think they have a better grasp of defense spending. They better understand how to undercut us without the need for conventional warfare.
Neither the Chinese model nor the US model looks particularly appealing right now, but I think Trump is incapable of mobilizing the world against China. And I don’t necessarily want that anyway.
I think Trump is permanently shifting the US in the world.
Trump is like a bull in a china shop. He has no idea what he is doing. He is just willy-nilly putting tariffs on everything. He thinks he is fixing things when he is really screwing everything up. Trump is an idiot. We elected an idiot for our president.
Will we survive this stupid idiot of a president? I have no idea but it will be difficult.
“He has no idea what he is doing”
Wrong, he knows exactly what he is doing. It’s just not in most Americans interest. That’s the plan. Our democracy has been and is under attack by a welcome trojan horse. Pelosi is waiting for Americans to wake up and care. But The Bachelorette is starting a new season, the Angry Bird app downloads for free and understanding politics isn’t fun.
Wrong, he knows exactly what he is doing.
Not so sure.
He is a 6 times bankrupt scammer from Queens.
No one would touch him, as he had ripped so many people (except the Russians and Deutsche Bank- for some pretty interesting reasons).
Being a scammer, he has those instincts, but not that smart.
You may be right, but the morally challenging behavior has me questioning.
He may be what late stage capitalism needs in a “leader”.
Your belief in late stage capitalism is a scam perpetrated on the electorate to accept failure as the powerful concentrate power. Don’t help wheel the horse(a stacked court, deregulation, tax cuts) inside the gate.
Don’t be a victim, salud
Really?
Some political literacy is needed.
Hmmm! I wonder what would happen if the Russians are forced to take a loss on their investment in Trump (IOW it turns out he has scammed them) and start to think that DJT is a liability to them?
I don’t believe your wondering, you know better.
Trump is a wrecking ball to American democracy. The Russian gift that just keeps on giving. Putin is going to double down for 2020.
https://www.patheos.com/blogs/dispatches/2019/05/31/is-trump-the-worlds-most-petty-man-ever/
Whatever you think of John Mccain politically, he was a POW at the Hanoi Hilton.
Trump is a draft dodger because of a “bone spur” in his foot. But he can’t remember which foot.
Forcing the US Navy to move a ship with John Mccains name on it is a disgrace.
Without the US Navy, the strait of hormuz would be controlled by rapscallions.
Woot Woot!
McCain has been tainted for a very long time, since the S&L Crisis in the 1980. More recently he’s been in several photos with confirmed terrorists that were fighting in Syria. McCain is not a nice guy.
In my opinion all Politicians are corrupt, narcissistic & delusional. They only way they should be serving is either behind bars, or in a mental institution. They play on the public, but no matter which side has control its always the same: bigger gov’t & more wars.
Its now at the point we are getting real close to World War Third. The doomsday clock is 2 minutes to the highest since the 1950’s (Duck & Cover). Its likely the trade wars will transition into more proxy wars that eventually lead to direct confrontation. Already in Syria, US forces have attacked and killed Russia Soldiers. China is under a massive military buildup.
The US has two remain targets: Iran & Venezuela. I suspect VZ. will fall under US occupation (Direct or indirect) in a few years. Iran has Nukes, and I don’t know if Washington realizes the danger of attacking Iran will be.
McCain has been tainted for a very long time, since the S&L Crisis in the 1980. More recently he’s been in several photos with confirmed terrorists that were fighting in Syria.
I just ain’t buying that shit. Got a link to those photos?
Here you go:
https://www.globalresearch.ca/did-john-mccain-meet-with-abu-bakral-baghdadi-the-alleged-head-of-the-islamic-state-isis-isil-daesh/5498177
Oh my God! I thought you meant he met with rebels fighting against the USA. No, at great risk to his own life he met with rebels fighting for the USA, they were rebels trying to overthrow the Assad regime. As it says in the video, the USA was actively giving support to these rebels. They were giving them everything except weapons.
This makes John McCain a hero twice over. Good God Techguy, how do you get off saying this was something bad McCain did.
John McCain was an American Hero. I say that proudly even though he was a Republican. But he was the exact opposite of that bunch of Republican cowards we have in the Senate today and in the White House.
Ron,
I agree. Though I voted for Obama, McCain would have been a better President than Trump by a factor of at least 1000. Like most politicians he was not perfect, but he would have been far less of an embarrassment.
He was also unbelievably gracious in defeat in 2008. His concession speech at link below:
https://www.npr.org/templates/story/story.php?storyId=96631784
An excerpt:
My friends, we have come to the end of a long journey. The American people have spoken, and they have spoken clearly. A little while ago, I had the honor of calling Sen. Barack Obama — to congratulate him on being elected the next president of the country that we both love.
In a contest as long and difficult as this campaign has been, his success alone commands my respect for his ability and perseverance. But that he managed to do so by inspiring the hopes of so many millions of Americans, who had once wrongly believed that they had little at stake or little influence in the election of an American president, is something I deeply admire and commend him for achieving.
This is an historic election, and I recognize the special significance it has for African-Americans and for the special pride that must be theirs tonight.
…
Sen. Obama and I have had and argued our differences, and he has prevailed. No doubt many of those differences remain. These are difficult times for our country, and I pledge to him tonight to do all in my power to help him lead us through the many challenges we face.
I urge all Americans who supported me to join me in not just congratulating him, but offering our next president our goodwill and earnest effort to find ways to come together, to find the necessary compromises, to bridge our differences and help restore our prosperity, defend our security in a dangerous world, and leave our children and grandchildren a stronger, better country than we inherited.
Whatever our differences, we are fellow Americans. And please believe me when I say no association has ever meant more to me than that.
…
John McCain – an American hero.
https://www.zerohedge.com/news/2017-07-22/complete-history-john-mccain-calling-war-around-world
You’re crazy. War in Syria has displaced millions and killed hundreds of thousands, all to get a pipeline built and to steal the little oil Syria has.
So we had to destroy a nation & kill a lot of them of the to save the people?
McCain is no hero, Those are not rebels, they are hired terrorists, Killing, raping & pillaging anything they can.
You’re crazy. War in Syria has displaced millions and killed hundreds of thousands, all to get a pipeline built and to steal the little oil Syria has.
Okay, just who are you calling crazy? If you think the war in Syria was started and people killed just to get a damn pipeline built, you are the crazy one.
McCain is no hero, Those are not rebels, they are hired terrorists, Killing, raping & pillaging anything they can.
Oh shit, your conspiracy theory is even worse than those of Alex Jones. Hired terrorists? Just who hired them. And just who shot poison gas missiles into Syrian neighborhoods held by the rebels? How does your conspiracy theory explain that?
The evidence we were never meant to see about the Douma ‘gas’ attack
“For in the last few days, there has emerged disturbing evidence that in its final report on the alleged use of chemical weapons by the Syrian regime in the city of Douma last year, the OPCW deliberately concealed from both the public and the press the existence of a dissenting 15-page assessment of two cylinders which had supposedly contained molecular chlorine…
…the dissenting assessment, which the OPCW made no reference to in its published conclusions, finds there is a ‘higher probability that both cylinders were manually placed at those two locations rather than being delivered from aircraft’.
It is difficult to underestimate the seriousness of this manipulative act by the OPCW. In a response… the OPCW admits that its so-called technical secretariat ‘is conducting an internal investigation about the unauthorised [sic] release of the document’.
Then it adds: ‘At this time, there is no further public information on this matter and the OPCW is unable to accommodate [sic] requests for interviews’. It’s a tactic that until now seems to have worked: not a single news media which reported the OPCW’s official conclusions has followed up the story of the report which the OPCW suppressed.
And you bet the OPCW is not going to ‘accommodate’ interviews. For here is an institution investigating a war crime in a conflict which has cost hundreds of thousands of lives – yet its only response to an enquiry about the engineers’ ‘secret’ assessment is to concentrate on its own witch-hunt for the source of the document it wished to keep secret from the world.” ~ Robert Fisk
Leaked OPCW report suggests Syria gas attack was ‘staged,’ MIT scientist says
“Renowned MIT scientist Theodore Postol says a newly leaked OPCW report shows the supposed 2018 gas attack in Douma, Syria was ‘staged’, undermining the case for US strikes on the Syrian government.”
Ron said:
..the USA was actively giving support to these rebels. They were giving them everything except weapons.
Well, they were also given weapons:
https://www.nytimes.com/2017/08/02/world/middleeast/cia-syria-rebel-arm-train-trump.html
A side effect of arming rebels is that the rebels walked side by side with Al Nusra who is co-operating with Al Qaida, which the US has been fighting. What an irony. But hey, everyone can make a mistake.
And speaking about rebels. Rebels supplied with tank-destroying missiles, might easily be called terrorists by the state defending it’s country. I am tempted to think about an example where a foreign state supplied anti American terrorists in the USa excuse me rebels with anti-tank missiles and I have the feeling that the US government would not be amused. But that’s not the point.
The problem is though, that using rebels to fight Syrian forces who fight ISIS will prolong the war as Syria has to have two fronts, and ISIS is not as quickly defeated as they could have been. So what is the point of US forces to be there? Syria has never been a threat to the US. Why on earth is the US doing all these wars? The US wars is the big elephant in the room.
Why on earth is the US doing all these wars? The US wars is the big elephant in the room.
Hey, I said after 9/11 that I would never argue with conspiracy theorist again. But then I got sucked into this one because you insinuated that John McCain was a traitor. That’s bullshit and everyone on this list knows it… well perhaps except for one or two others who haven’t a clue either. But take your shitty argument somewhere else. I am finished.
I rest my case.
Dear Ron Patterson
Judging by your application:
“What did the Syrian government forces use
chemical weapon”
What I really believe was not. There was no objective investigation. And only statements, interested, engaged persons.
I consider you to be the victim of Ameerikan propaganda.
With deep regret.
Respecting you
Alexander.
“Although I admit that the outcome in a stateless society will be bad, because not only are people not angels, but many of them are irredeemably vicious in the extreme, I conjecture that the outcome in a society under a state will be worse, indeed much worse, because, first, the most vicious people in society will tend to gain control of the state (Hayek 1944, 134-52; Bailey 1988; Higgs 2004, 33-56) and, second, by virtue of this control over the state’s powerful engines of death and destruction, they will wreak vastly more harm than they ever could have caused outside the state (Higgs 2004, 101-05). It is unfortunate that some individuals commit crimes, but it is stunningly worse when such criminally inclined individuals wield state powers. ~ Robert Higgs, ‘If Men Were Angels: The Basic Analytics of the State versus Self-government’
“…[Chris] Hedges draws on classical literature and his experiences as a war correspondent to argue that war seduces entire societies, creating fictions that the public believes and relies on to continue to support conflicts… The Hurt Locker, an Academy Award-winning film, opens with a quotation from the book: ‘The rush of battle is a potent and often lethal addiction, for war is a drug.’ ” ~ Wikipedia
“Behind Boetie’s thinking was the assumption, later spelled out in great detail by David Hume, that states cannot rule by force alone. This is because the agents of government power are always outnumbered by those they rule. To insure compliance with their dictates, it is essential to convince the people that their servitude is somehow in their own interest. They do this by manufacturing ideological systems…” ~ Llewellyn H. Rockwell, Jr.
“The most dangerous man, to any government, is the man who is able to think things out for himself… Almost inevitably he comes to the conclusion that the government he lives under is dishonest, insane and intolerable…” ~ H.L. Mencken
Not to everyone. Time to read again what Art Berman said in March:
“The United States is no longer over-supplied with oil. That sounds like good news. The bad news is that it may signal lower oil prices going forward.
An unexpected 9 million barrel (mmb) crude oil withdrawal from storage this week moved comparative inventory (C.I.) below the 5-year average. That shifted C.I. to into negative territory at -5 mmb for the first time since September 2018.
The bad news is that it crossed the 5-year average at about $55/ barrel. That crossing point is called the mid-cycle price, the clearing price of the marginal barrel needed to maintain adequate supply through the current supply-demand cycle (Figure 1).
…
Many analysts and market observes believe that oil prices will move much higher with OPEC+ production cuts, declining U.S. inventories and a relatively strong global economy assuming that U.S.-China trade talks have a happy ending. I agree with them but C.I. yield curve data suggests that prices may disappoint the oil bulls.
…
When WTI prices were in the $70s last September and October, I angered price bulls by suggesting that trend would probably not last. I am again urging caution based on the data.”
http://www.artberman.com/u-s-no-longer-over-supplied-with-oil-good-news-bad-news/
Art seems to have nailed it. That’s what I call a good prediction.
The good news is that it shouldn’t go much lower than 55$.
I wonder how long before there is a credit crunch in shale.
There already is a credit crunch in shale.
OAS, QEP, WLL will have a tough time surviving sub $65 WTI for more than a year or so.
There are a few smaller names that are trading for pennies so I assume BK for all of them is imminent.
Not a believer in watching production and/or supply anymore. When the API of WTI started to change I realized that the liquid called oil is no longer what it used to be. Largely renders historical comparisons invalid.
And that’s not to even mention constituent yields.
From The Archives:
Free Thought-Bubbles From The Subsidized Shower
“1. If or when there is an (added) economic slowdown, it will be as severe as 2008’s or less, but most likely not more severe (if the powers that be play their cards ‘right’/pull most of the ‘right’ levers). This is because ‘we’ are now essentially in a subsidized/engineered economy (certainly more of one in any case) and so the economy has to be stable enough to maintain the ‘transitional engineering’ notions of the status-quo– PV’s/EV’s/etc….
Space X, Tesla, energy, Walmart, TBTF banks, Google, military, etc.– it’s all hugely subsidized…
This is approaching Soviet Union stuff… And maybe there’s an irony for Dmitry Orlov, or an approaching one.
When we talk about debt, what we are really talking about now, or much more so, is subsidy/grant, and since also the price of money is 0 or near-0. This is also because we cannot really issue debt (with a promise to pay it back with interest) in a shrinking economy. A significantly-shrinking or long-term-shrinking economy is, almost by definition, a non-debt-based economy, and if money is debt, then money loses its meaning in this context. Thus, money becomes not debt, but subsidy/grant.
2. Given the above, then, the notion of, or concern with debt (bubbles and whatnot, except of course how to manage them) is practically or increasingly irrelevant or meaningless, and there may even be a global debt jubilee/forgiveness– a monetary reset-button– since it is unlikely to be paid off in a shrinking economy.” ~ Caelan MacIntyre
It’s here. It walks among us. Shale will not increase this year. There will be no increase anywhere. Only inventory draws. And we are worried about some CI line??? Sorry, Barbie Dolls are sold out. I don’t care if you want to pay twice the amount for one. You are crossing over the CI line. It is forbidden. No, you can’t bid $2 higher for that oil, you are going over the CI line. We are going to sell to the bidder for $2 less, who is within the CI line. Asinine.
GuyM.
Besides Sanchez energy, what other EFS producers are headed toward BK any day?
Is Halcon still there?
https://seekingalpha.com/amp/news/3468415-halcon-resources-gets-nyse-continued-listing-notice
Halcon not looking so healthy. There is a litany of companies who have bought up castaway acreage by the big guys, who are within the bubble. They are not potential buy outs, because, who wants the land?
My bigger question is on some of those bigger players in the Permian. Some, like Pioneer, are avoiding capex like the plague. They are not the only big player doing so. The question is, will internal growth stave off the precipice? Stay tuned.
Right now, I think the majors have taken over the appearance of vultures. So much weakness, so many choices.
If I were a major, I’d be most interested in Marathon. They are far from being weak, but so under utilized. If they could get both the producing company and the refinery end, they would get as much production as Occidental, and three million barrels a day of refinery capacity. A combination of Marathon and Occidental would push any major over into a super major.
Marathon split it’s upstream and downstream into separate companies years ago.
MRO (upstream) could be bought but I am not so sure about the downstream. They just bought out Andover and have some pretty big and modern refineries. Big time reputation with regards to safety, they are slowly but surely turning around the Texas City BP refinery that they bought from BP after the tragic explosion and fire.
Shale oil has never been responsive to price, it has never tried to turn a profit. Oil traders know that even if the price plummets shale oil will still be trying to maximize production rather than make a profit. This means the economics of the oil market is broken, there is no response to the marginal price. If the economy is tanking, shale oil will continue to try to increase production. The potential for a massive price slide is there…
Interesting to look at market cap for MRO and MPC since MPC was spun off 6/30/2011.
MRO market cap 6/30/11 $22.1 billion.
MRO market cap 5/31/19 $10.78 billion.
MPC market cap 6/30/11 $14.1 billion.
MPC market cap 5/31/19 $30.5 billion.
Shale has apparently had a big impact of both upstream and downstream valuations, based on the above.
I assume COP and PSX show something similar.
shallow, Halcon has been a “pure play” permian producer for some time now. Looks like Floyd squeezed the last nickel out of it then left, they need magic beans to survive now.
dc. I read he is trying to start yet another shale company. Truly amazing isn’t it.
One company I have completely missed is ROAN. Went public in early 2017. Assets are SCOOP, Merge etc in OK.
Shares got up over $40 at one time early, now trading at $2 with board and management seeking strategic alternatives.
So it just took them two years to go broke in OK shale despite WTI averaging $65 in 2018.
Did Dennis ban the guy that used to brag about his OK shale royalties on here?
Now that you mention it, that OK guy hasn’t posted for awhile. I hope he is banned. I don’t miss him.
“The good news is that it shouldn’t go much lower than 55$.”
Well that prediction was wrong since it already dipped below $55. If we fall into a recession it will go below $50. Trump is the only President that I can recall, that is pressing for a major recession right before elections. I suppose his plan is to be a one-termer.
FWIW: I am reasonably sure that trade war is fake and the real intent is to get the US public to except a new VAT. With Boomers poised to begin retirement, & no saved capital for pensions & entitlements, the US federal gov’t needs a massive tax hike to avoid a implosion by the mid to late 2020s. Current trends indicate that the Interest on the Debt + entitlement & Gov’t pensions will exceed total federal revenues between 2022 & 2024. Presumably a 20% to 25% VAT could delay the problem.
This explains why the Trump admin. continues to move the goal posts everytime a county agrees to the demands. After Mexico agreed to the Terms, Trump slapped them with a new Tariff over illegal immigation.
The economy appears to be in a weaker state than it looks. The Economic Cycle Research Institute (ECRI) Weekly Leading Index (WLI) growth shows a failed rebound that suggests we might have entered a period of slower growth like in the 2015-16 period that might show reduced GDP growth in coming quarters.
https://www.advisorperspectives.com/images/content_image/data/3e/3ef96af606de431ad69bb2d650b2e918.png
We are in recession watch. It may not happen, but it has an increased probability.
I have followed ECRI for years. Generally, they are pretty accurate, but they blew a recession call 2-3 years ago.
Gobbledygook.
Probably the most amusing item in the world of GDP took place about 1 year ago. The Federal Reserve economics staff decided that uncomfortable periodicity had appeared in first quarter GDP reports too often.
So what did they do? Why, they applied a seasonal adjustment, of course. Purely empirical. Zero mechanism explanation. They just announced that their weather adjustments were insufficient.
This was important because first quarter GDP numbers were extremely weak year after year, so much so that they were dragging the whole year’s number down. Can’t have that.
So don’t hitch your wagon too firmly to GDP reports.
Recession in Europe, trade wars, brexit, China PMI in contraction territory, would probably explain it.
Boris Johnson, contestant for UK Conservative party leadership and therefore Prime Minister, is more pro Brexit no-deal than most.
Trump does not have a monopoly on the prospects for tariffs, and he supports Johnson, perhaps unsurprisingly.
Does this make us look even more stupid?
https://www.theguardian.com/business/2019/may/29/energy-department-molecules-freedom-fossil-fuel-rebranding
And this Administration is not more stupid?
Been saying for a while that the EIA lazy extrapolation in Texas was wrong. Turns out Texas is flat in March and EIA was 200k too high for aggregate production. Texas doesn’t have the Q1 weather swings that the Bakken does either; if anything people can work harder in West Texas in winter. This is a decline v. capex problem. The Permian has a lot of legacy decline and all but one county in Eagle Ford is post-peak (and saturated with wells…). If investors and banks are through with funding losses, the well drilling spree needed to get significant increases against that simply won’t happen.
“This is a decline vs capex problem.” Yeah, that’s my take. Doubt that it is permanent. If WTI approximates $90 for a good while, it’s likely to improve.
Pro, we sure as hell do work harder in the winter; that is very perceptive of you. Winter is great; time to roll. Its June now, Texas has had lots of rain, the ground is soaked and working on limestone locations feels like you are a piece of broccoli getting steamed in a pot. Its not even really hot yet. We’ll roll thru 120’s later in the summer also, but in the summer things slow way down. Those weenies on shale oil locations actually have to have mandatory breaks every hour or so to go sit in “cool-down” trailers, whatever they are.
I don’t think $80 oil will save the Eagle Ford now; its rolling down hill fast. The saturation of wells in the county you refer to is astounding. In the most saturated of sweet spots GOR is rising and interestingly, so is WOR. Sort of a new thing, that. GOR in the Bakken is going out of site and the percentage of condensate now being produced over 50 is amazing. All of America’s oil eggs are now firmly in the Permian Basin basket.
What part of Texas are you in, and what formations are you drilling in? And, I agree EF is way past peak.
The hot, humid part. Years ago I reeled it all in and focused on Carrizo and Upper Wilcox stuff; it need not be over engineered, is cheap to find, cheap to produce (incremental lift costs per BO in the high teens), its ROI’s are 15 times of the shale and its annual decline rates are nil. I have wells that are nearing 50 years old whose OWR’s have not changed in the past 25. Its heavy, sweet, and Three Rivers pays a big premium for it. I’m done now and set to leave it all to my employees. They’ll be able to operate it for another 50, I hope.
I’m in the Austin Williams 956 and 957, far western Atascosa. Leased by EOG, but after they suck up the EF, they’ll tire of it. If there ever looking in that area, I’d be interested. Half owned by a tight knit family, and the other half held by a ranch. About 2000 acres.
I know exactly where it is.
I know absolutely nothing about isolating a Wilcox sand potential. Much higher up and newer. I accidentally found one producing a long time about twenty miles east of there.
It is literally only days since folks here were talking about realistic scenarios or non realistic scenarios as regards oil price. All of a sudden non realistic scenarios become realistic and vice versa and why?
Because none of you had a clue from day one. And still don’t. And never will.
If you have to have the oil, and you do have to have the oil, the number of printed pieces of paper are not going to control whether or not you have the oil.
The single most important thing going on in the world of oil today is a manifestation of Deep State maneuvers to try to rescue American influence in the Middle East, and that is influence the President did not campaign on as a priority. It appeared just yesterday with a military attack on oil transport into and within Syria. If a Russia flagged tanker gets attacked in a Syrian port offloading oil — under the auspices of sanctions enforcement, bad things will happen. And instantly you will not care much about price.
https://oilprice.com/Latest-Energy-News/World-News/US-Forces-Blow-Up-Three-Oil-Tankers-In-Syria-Enforcing-Oil-Embargo.html
Shocking stuff. 4 dead.
Dropping bombs on civilians driving tankers, what would that be called if it happened in the US?
Terrorism.
US plans to take control of Southern Syria & build pipelines to move Oil & Gas through Israel & also take control of the Syrian Oil fields in South Eastern Syria.
US is planning to take control of Venezuela & Iran, the last two independent Major Oil Exporters.
Speaking of Ven, in case it has not been mentioned, or I have not mentioned it, Guido said about 6 weeks ago that under no circumstances would he negotiate with Maduro.
Maduro agreed to send negotiators to Norway to negotiate something or other with Guido’s negotiators. Going on right now.
I think some undrained swamp critters persuaded the president that it would be a straightforward and easy thing to replace Maduro and not attract any serious headlines.
There are stories of a meeting the president and Pence had with staff and some raging took place about the absence of popular support appearing in overwhelming fashion (for a guy no one had heard of 6 months ago), and why in hell did they ever think otherwise. So off to Norway. Don’t know who paid for the Guido guys’ plane tix.
Yea, Maduro was to be gone several years ago-
Still there, and more support than tRump.
Getting your information from MSM has been an adventure in fantasy.
Might be time for better info? Or, I guess propaganda is simpler?
Whatever- I know no one in country right now.
(As long as U.S. media deliver such bad ‘analysis’ of foreign state positions, the policies derived from it will continue to be unrealistic.)
It seems indeed that the US want to take control of Iran and Venezuela and before they have done so, most of the world had no idea what is going on. The occupation is gradual and claimed to be a fight against terrorism or to protect (eg right to protect (R2P)) citizens against what the US call militarian regimes or dictators. Ironically, during this process millions of civilians have already been and will be killed. An estimate for dead civilians caused by the Iraq War II is 1 million. A war which was started on false evidences. When looking at the number of US soldiers and bases in various countries in the world, eg Iraq, these countries are de facto occupied. In Iraq the US troops are asked to leave. How many times have we heard that US will pull out forces from Afghanistan, Iraq, Syria? It has been postponed and postponed and gradually it is understood that it may never happen. One quarter of Syria is now occupied by US forces. Who is the military regime led by a dictator (IE. Where the president solely can start a war)? And which country has caused most civilian deaths the last 20 years? And the world is deceived over and over and over again. People need to protest NOW! It is particularly important that US citizens start protesting as it is their government causing all this.
It seems indeed that the US want to take control of Iran and Venezuela and before they have done so, most of the world had no idea what is going on.
The US is not a person, it is a nation. When you say the US wants to take control of Iran and Venezuela, just who are you talking about. Everyone in the US? Congress? Or perhaps you are talking about Trump. Trump speaks for Trump. His wants should not be confused with what the US wants.
A war has actually not been started by US as long as Trump has been president. At least so far. But USA have started, initiated or become involved in more wars than any other country in the world the last 20 years. So it seems fair to say that US as a nation is responsible for the wars. Exactly which persons have been involved is a long list and difficult to settle.
Cut me some slack. I am referred to the gov’t of the USA. Has the USA “GOV’T” (officials: State Dept, DoD, etc) have made provocative statements regarding VZ & Iran? Has US Pres, Congressmen, & Senators made belligerent statements regarding Iran & VZ: Yes.
Regardless who is power. War is war, and its unlikely to stop with a different admin in 2021. War with Syria, Libya, & Yemen all happened under the Obama admin.
VZ = Venezuela
TechGuy, the US does make mistakes. After all, no bigger mistake was ever made than when we elected Trump. But no country is perfect.
The Vietnam War was a huge mistake. WW2 was not. The second Iraq war was a mistake, the first was not. They had invaded Kuwait and had to be driven out.
No, fuck no, the US government, whoever they are, does not want to take over Syria and we definitely do not want to take over Iran. The US does not colonize nations.
Can you imagine a nation of infidels trying to run a Muslim nation? My God, what a headache that would be. No, we did not invade Iraq for their oil like a lot of uninformed folks think we did. And by uninformed I mean Trump and his ilk. “We should have taken the oil.” And we, as a nation, have absolutely no interest in taking Iran’s or Venezuela’s oil. That is a myth.
It is a myth that the Iraq War was a mistake. It was well planned.
https://www.newsweek.com/2015/05/29/dick-cheneys-biggest-lie-333097.html
But you just can’t call a war causing 1 million dead people for a mistake. “Oops, sorry about that, we killed 1 million people and then we discovered there was actually no WMD”.
The US should have paid an enormous amount of money back to Iraq if there was any justice in this world.
Tom, I think you are a little confused. The word “mistake” and the term “well planned” are not a contradiction in terms. Many mistakes are well planned. The mistake was planning them in the first place.
Let me put it this way. The second Iraq war was a very well planned mistake.
So why was it planned? What did the US want to achieve?
BTW: According to merriam-webster a mistake is
1) a wrong judgement
2) a wrong action or statement proceeding from faulty judgement, inadequate knowledge, or inattention
The judgement was not faulty, but the evidences leading to the decision were false. Imagine the reaction if a country had sunk an American aircraft carrier and called it a mistake. Only the US can get away with wars and poor excuses.
So why was it planned? What did the US want to achieve?
Just what the hell has that to do with the question at hand? Was it a mistake? Yes.
1) a wrong judgement
Damn right!
The judgement was not faulty,
Bullshit! We thought there were WMDs. There were none. Very faulty judgment.
Only the US can get away with wars and poor excuses.
More bullshit. No one got away with anything. We paid dearly for that mistake. And we are still paying for that mistake.
You just contradicted yourself. https://www.vox.com/2016/7/9/12123022/george-w-bush-lies-iraq-war
Four things:
One: Because it’s on the internet does not make it true.
Two: We do not know that George Bush believed what George Tenet told him.
Three: Even if Bush did know there were no WMDs there, it was still a mistake. Almost everything Trump does is based on a lie. And almost everything Trump does is a mistake.
Four: There was no contradiction in anything I wrote. A contradiction is where you say or write one thing then say or write the exact opposite. Even if Bush lied, that does not make anything I wrote a contradiction.
I think Iraq war ( the “darth vader” cheney one) was about ensuring Iraqi Oil was available to the free market.
It wasn’t about stealing the oil, it was about ensuring it was available to the people that profit from it.
Guys like Bush, Cheney, China, etc.
But that is just my opinion.
There is no mechanism for the USA to STEAL oil. The government doesn’t produce oil.
I think Iraq war ( the “darth vader” cheney one) was about ensuring Iraqi Oil was available to the free market.
Naaaaah, that can’t be right. By what mechanism do you think those guys make money off Iraqi oil?
It was a mistake, yes. And a calculated act. Here is another source indicating that Bush planned the war against Iraq a long time before it happened :
https://www.motherjones.com/politics/2011/12/leadup-iraq-war-timeline/
and that the evidences were thin.
In this wiki article, the inspector Hans Blix says that the US or UK never presented to him evidences of WMD.
https://en.wikipedia.org/wiki/United_Nations_Security_Council_and_the_Iraq_War
The article also indicates that both inspectors questioned the so-called evidences Powell presented in the UN Security Council. Kofi Annan said the war was illegal.
I simply don’t buy that US thought Iraq had WMD. It is insane or evil to start an illegal war and kill lots of people based on thin, questioned evidences. It cannot be explained in a different way than the US had another agenda.
Iraq was taken over for its Oil. Even Dick Cheney stated back in 1999 that the US needs another “Iraq”.
The plan than has been in place for 20 years is still ongoing.
https://www.globalresearch.ca/we-re-going-to-take-out-7-countries-in-5-years-iraq-syria-lebanon-libya-somalia-sudan-iran/5166
GEN. WESLEY CLARK (2007):
“This is a memo that describes how we’re going to take out seven countries in five years, starting with Iraq, and then Syria, Lebanon, Libya, Somalia, Sudan and, finishing off, Iran.”
[Plan is still in place, it’s just taking a lot longer than the 5 years]
Ron, where or how do you get your news or information? What is(/are) your source(s)?
TechGuy, that quote from General Clark was taken out of context. He was quoting someone else who was reading from a memo… he said. Also, Clark was a civilian in the 2007 video and had been for many years.
About the oil. Iraq invaded Kuwait for its oil. So one can truly say, that if oil was not involved there would have been no Iraqi war. Iraq wanted Kuwait’s oil. But that’s as far as the oil goes. If you really think Cheney wanted to invade Iraq because Cheney wanted their oil, then your conspiracy theory mind has gone completely off its rocker.
This is a response to Ron P.
I’ll reply here, because it seems whenever a thread gets too long, the reply link disappears.
“Naaaaah, that can’t be right. By what mechanism do you think those guys make money off Iraqi oil?”
Haliburton? It seems like these “mistakes” always happen in countries with OIL.
https://www.nytimes.com/2004/09/28/us/a-closer-look-at-cheney-and-halliburton.html
Why don’t they happen in Kenya or Singapore?
I think Bush and Cheney were Peak Oil aware because they are associated with OIL people.
Iraq was obviously a place that OIL people saw a lot of potential.
Why don’t people think there are WMDs in Thailand?
I am conscious of not being a conspiracy nut.
Happy to be wrong! Wont be the first time!
Ron, even Alan Greenspan admitted in his memoir that the Iraq war was for oil, c’mon man.
https://www.theguardian.com/world/2007/sep/16/iraq.iraqtimeline
‘I am saddened that it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil.’
Ron, even Alan Greenspan admitted in his memoir that the Iraq war was for oil, c’mon man.
O goddammit it man. Of course it was for oil. Iraq invaded Kuwait for their oil. Dammit man, everyone knows that.
The question is: Who benefitted, oil wise, from the war?
Answer that question…. PLEASE!
Haliburton? It seems like these “mistakes” always happen in countries with OIL.
Listen dammit! The Iraq war all started because Iraq invaded Kuwait for their oil. That’s why it happened. Hey, it just ain’t that hard to understand.
Why don’t they happen in Kenya or Singapore?
Because no one invaded Kenya or Singapore! Enough of this shit. Okay, the last Bush administration was packed with idiots. Not as many idiots as the Trump administration but a lot. The Bush administration made a lot of mistakes. But it had nothing to do with oil other than the original invasion by Iraq.
Iraq is obviously a place that OIL professionals would see with potential.
These mistakes never happen in countries without oil.
I am a huge fan of your work Darwinian!
thanks for all the stuff I’ve learned from you!
Watcher,
That isn’t exactly true when your currency is no longer accepted as payment. If your currency isn’t accepted as payment well your fucked. That is exactly where things are headed. There are a lot of people that do have to have it that aren’t going to get it in the quantities they need.
This link may have been posted before. It was published May 9th. If it was I Missed. At any rate it deserves another look.
The Shale Boom Is About To Go Bust
The shale industry faces an uncertain future as drillers try to outrun the treadmill of precipitous well declines.
For years, companies have deployed an array of drilling techniques to extract more oil and gas out of their wells, steadily intensifying each stage of the operation. Longer laterals, more water, more frac sand, closer spacing of wells – pushing each of these to their limits, for the most part, led to more production. Higher output allowed the industry to outpace the infamous decline rates from shale wells.
SNIP
Ultimately, precipitous decline rates mean that huge volumes of capital are needed just to keep output from declining. In 2018, the industry spent $70 billion on drilling 9,975 wells, according to Hughes, with $54 billion going specifically to oil. “Of the $54 billion spent on tight oil plays in 2018, 70% served to offset field declines and 30% to increase production,” Hughes wrote.
As the shale play matures, the field gets crowded, the sweet spots are all drilled, and some of these operational problems begin to mushroom. “Declining well productivity in some plays, despite application of better technology, are a prelude to what will eventually happen in all plays: production will fall as costs rise,” Hughes said. “Assuming shale production can grow forever based on ever-improving technology is a mistake—geology will ultimately dictate the costs and quantity of resources that can be recovered.”
Anyone who wants to argue with Baker, ain’t too smart. To add to that, we have capex problems with investors wanting their share, limitations on funding, and big oil waiting in the wings to take over. That does not change, no matter what the price of oil goes to this year, or later. More funding may appear, but it will not be cheap.
Anyone who wants to argue with Baker, ain’t too smart.
Who’s Baker?
Baker Hughes, the source of information from the article you posted.
Errr… No, that was David Hughes. Baker Hughes is an oil rig and tool company, not a person. The name comes from the merger of the Hughes Tool Company and the Baker Oil Tool Company in 1987. The Hughes in this case was Howard Hughes.
David Hughes, an earth scientist, and author of the Post Carbon report, warned. Technological improvements “don’t change the fundamental characteristics of shale production, they only speed up the boom-to-bust life cycle,” he said.
Oops! Still agree with analysis, even if it is not Baker Hughes.
Baker Hughes is now a GE Company. You know, the financial wizards that own NBC and Bring Good things to Life like FUKUSHIMA Nation wrecking Level 7 Triple Meltdowns and obsolete oversized Jet Engines .. The root cause of multiple 737Max Crashes & Economic Crisis. https://www.bhge.com/
GE sold out of NBC in 2013 when NBC was merged into Comcast.
Sorry but the 737Max problems are all owned my Boeing: Trying to rush a plane into market to complete with new Airbus model.
GE on the other hand dances on the edge of insolvency.
Interesting statistics from Friday. Dow down by 1.44%, WTI down by 3.09%, USO down by 5.61%, and the price I bought the $16 strike price of 2021 for USO options was down by 17.33%. There were only two trades that day, a smaller lot of 10 at .60, and mine of 127 at .62. If it goes down some more, I’m still ok with that.
Correction WTI was down 5.46%.
Trendline support this week for WTI is at about $45. Trendline support for the Dow is at about 22680. That is a long ways from where we are currently. Not saying it can’t happen in one week but more than likely it will take a few weeks or a month or two to reach trendline support.
These are rising trendlines so every week trendline support moves up from where it was the previous week.
If something breaks this week and price makes it all the way down to $45 i’d expect price to bounce there and consolidate there for a bit before either going higher or breaking trendline support and going lower. You’ll get a consolidation pattern and depending on what it looks like. Depending on what kind of candlestick patterns we get. Either support forms which can be visibly seen on a chart or it sets up for a breakdown. With the most likely bottom in the low $20’s
$20 scenario would require a GFC 2.0 type situation.
Iron Mike.
I hate to disagree with you but oil hit WTI $26 in Q1 2016. Many crude producers had several days where the actual price they received was $15-20. We had two months where our average price for the month was below $30 and one slightly above $30, we were losing a decent amount of $$ just barebones operating, which had only happened prior a couple months in 2008-2009 GFC, and prior to that 1998-early 1999.
I think $20 is ridiculous, but it doesn’t matter what I think. Oil is traded many more times in paper than in physical barrels. So it could go to $20 or less, but not for a long period of time hopefully.
It would only take prices here for the rest of the year to substantially harm a large part of the US shale industry and many of its remaining service companies. It looks like the easy money has been cut off, and the names are now very out of favor.
I personally would like to see the $55-65 price band, we could make good returns and shale would be subdued but would not have massive layoffs that will come if sub $50 hits for a prolonged period like 2015-17.
Shallow sands,
Good point, I believe the 2016 lows was due to a glut of oil in the world.
With the current data, i have my doubts that there will be a glut in world wide production similar to 2016, in the short term anyways.
So in my worthless opinion a decline to $20 oil in the short term would be due to a world wide recession or some sort of financial crisis. Chances are i am wrong but that’s my “prediction”.
Iron Mike,
I agree with your prediction. Of course we could both be incorrect.
Apparently Chevron is worried enough about electrification of the vehicle industry that they have tapped their retirees to campaign against utility sponsored EV charging stations in AZ.
Lame rearguard action, IMO.
https://www.greencarreports.com/news/1123325_chevron-taps-retirees-to-oppose-ev-charging-in-arizona
“A new report in the Arizona Republic tells us that support for electric cars still hasn’t moved us past that. Chevron is tapping its retirees to mount a letter-writing campaign in opposition to a new rule proposed in March that would require public utilities in the state to build public charging stations.”
Don’t seem to recall any government bill that required public utilities to build gas stations. It’s maybe conceivable in 1930 or so, but I suspect it never happened.
So why should such a thing NOT be opposed? Aren’t gas stations built by gasoline companies, or convenience stores who contract with gasoline companies — with no government abuse or coercion?
Chevron can probably think of better uses of its mental energy.
If not, they will sink, faster.
And I think you misunderstand the states proposed rule on the public electrical utility- they are not requiring them to put in gas pumps.
Nor are they requiring gas stations to put in electrical charging stations- Although I suspect many gas stations will gradually add the service/convert on their own.
How can one misunderstand a rule requiring Public Utilities to build electric charging stations. What is there to misunderstand about that?
So why should such a thing NOT be opposed? Aren’t gas stations built by gasoline companies, or convenience stores who contract with gasoline companies — with no government abuse or coercion?
Well, here’s one reason right from the article
The problem with that argument is that one of the biggest beneficiaries of electric vehicles is likely to be electric utilities, who will sell a lot more electricity at times when they currently have a large amount of overcapacity. And today, electric cars are hardly “advantaged.” Although they do receive federal tax credits, sometimes state rebates, and often additional credits from utilities, public charging infrastructure still lags what’s needed, and the purchase incentives serve mostly to offset the higher costs of large battery packs.
Yeah! Cry me a river, somehow the idea that Chevron is concerned about the poor defenseless utility companies just rings really hollow. They see a direct threat to their gasoline sales. That’s the bottom line.
If utility companies are going to make a fortune charging cars then there’s no need for a government regulation Forcing them to build charging stations. Such a thing obviously should be opposed.
Its a public electric utility, If the state (republican controlled no less) decides it is for the common good of the public to have charging stations available, then so be it.
They are not forcing private companies to get into some other business.
It is interesting to see the strong fear of electric vehicles that you express.
Don’t worry. It will take along time.
Chevron is obviously a little conflicted-
“That’s why it was noteworthy when Chevron’s emerging technology venture capital arm invested in EV charging company ChargePoint in November”
Analysts watching how majors engage with clean energy say that even compared to its peers, Chevron’s action has been minimal.
U.S. Ending Stocks for March, monthly change (million barrels)
Crude oil: +7.6 (The weeklies suggested a small crude oil draw)
Products: -20.3
Total (Crude oil + Products): -12.7 (shown on chart)
LPG: +8.5
Chart https://pbs.twimg.com/media/D8EXGiCXsAAE9pT.png
Europe vs USA – monthly but with the latest weekly for the USA
Chart https://pbs.twimg.com/media/D8EXsq1WsAIYgvI.png
UK crude oil production
March at 1101 kb/day, down -18 from February
Average 2018: 985
Press release summary: Production is up y-o-y due to projects that started in 2017 and are still ramping up, also Clair Ridge which started late 2018.
And Brent over $60 probably helps
Chart https://pbs.twimg.com/media/D8EeKCnXoAAiivg.png
The EIA seem to use an estimate for Canada’s recent production even after the Statistics Canada number is available. The EIA always revise their Canada data to match Statistics Canada, and so why not use their recent numbers?
https://pbs.twimg.com/media/D8E1nTHXkAAdxU3.png
WTI closed at $53 and change Friday.
2015 average $49
2016 average $43
2017 average $51
2018 average $65
I rounded the above.
If the Donald puts the US economy in recession and oil averages sub $55 WTI for 2019 I expect many bankruptcies in late 2019 and 2020. Could be the nail in the coffin for a large part of the offshore service industry. Many shale firms will also BK.
We will hang on. Idea is the lower for longer we are the more of a snap back that will occur. The issues will be
1. Economy. A prolonged recession will keep a lid on.
2. How high the US can go. US is hovering around 12 million BOPD. Unprecedented. Can it go to 13, 14, 15 etc with these decline rates?
3. Alternative demand destruction. Very heavy lifting in the near term IMO. Hard for me to gauge.
We are a few days from the definitive measure of consumption being released, but as of the data available right this moment, it is clear that China’s consumption of the past year sharply grew from the previous year — per import data that has already been reported.
Further, India’s 2017 consumption was corrupted by monetary issues they faced that were reversed in 2018, and preliminary consumption data for them indicates an even larger growth (larger than China’s) over 2017 consumption.
There is zero indication of consumption destruction. It is popular to focus on recession as a negative influence on consumption, but recession faces a perpetual offsetting force as regards consumption — population increase. Consumption growth during the 2008 event merely flattened. Its decline was marginal at most, and it quickly made up the lost ground of those years because population growth did not slow.
Note that none of this need be relevant to price. There is no proof that it is.
Watcher,
Perhaps the BP data is not definitive. When one compares various versions of BP data there are many discrepancies, which version is “correct”, is not known.
To put it another way. Diesel and gasoline for the most part are non-discretionary items, therefore during recessionary times, cut back on spending will happen on discretionary items. Particularly in the US where people are car crazy.
Craig,
In short term you are right. In the long term people buy more efficient vehicles, move closer to work or public transit and demand decreases. See World oil consumption from 1979 to 1983.
This was shot down months or years ago. Why would this be quoted again?
1979 was the Iranian Revolution and a crash of its oil production., which at that time was a signif proportion of the global total. If it’s not produced it cannot be consumed. It had nothing whatsoever to do with seeking more efficient consumption. If it’s not produced you cannot consume it and we’re all going to be very much aware of that rather soon.
Watcher,
More efficient use was a consequence of lower supply, that is correct. I was assuming people were aware of the Iran Iraq war, which was the main reason for the drop in oil supply, the 1979 Iranian revolution caused a small drop in supply, but the main cause was the war between Iran and Iraq.
My point was simply that high oil prices due to insufficient oil supply causes the necessary changes in consumer behavior.
The claim that demand is inelastic in the short run doesn’t really hold up when there is not enough oil to go around.
Either the good is rationed, prices are controlled and customers stand in line, or we let prices float to the point that some demand is destroyed. All options have been chosen in the US in WW2, 1973 oil embargo, and price spikes in 1980s, 2000s, and 2011-2014 when we let the free market work. The last choice is best in my view, but we’ll see what happens as our fearful leader says …
Shallow sand,
The average daily closing spot price for WTI from Jan 2, 2019 to May 28, 2019 was $57.97/bo, so close to the middle of your preferred $55-$65/bo price range. For Brent oil price over the same period the average dialing closing price was $66.36/bo, so the Brent WTI spread in 2019 (first 5 months) was about $8.39/bo. The EIA expects the Brent WTI spread to narrow as pipeline capacity comes online in 2019Q3. I have done a couple of scenarios that assume $70/bo Brent as a maximum oil price in 2017$.
That would roughly be a maximum WTI price of $63/b, if the EIA prediction of narrower Brent WTI spreads proves correct. That is also in your “sweet spot” price range and would severely limit the completion rate in most tight oil plays (assuming good management is running the tight oil companies). A problem with the analysis which assumes “low” oil prices ($63/b WTI or less) is that World oil supply would likely be short in such a scenario and only as severe Worldwide recession would be likely to keep oil prices that low.
Many believe such a scenario is likely, I am not one of those people, I think the severe recession probably hits in 2030 about 5 years after peak oil in 2025, in the mean time, I expect oil prices to rise (52 week average oil price) with lots of volatility along the way.
The average rate of increase in the WTI oil price has been about $8/b each year on average from Jan 2016 to May 2019 and the most recent daily oil price average for the past year has been about $62/b.
I can easily see WTI oil prices continuing to rise at about $8/b each year until reaching $100/bo in late 2024, after that oil prices will rise at the slower long term 2000-2019 rate of about $2/bo each year, before plateauing in 2034 at $120/bo, but that is only if the Great Financial Crisis of 2030 is short lived because economic advisers have re-read their Keynes between now and 2030. Otherwise we see Great Depression 2 and oil prices crash back to $60/bo in 2017$.
Shallow sand,
On US output levels if we assume about 7.5 Mb/d of tight oil currently and also assume that conventional and offshore output remain relatively flat overall (GOM increases offset conventional decreases), then tight oil might rise to between 8.5 and 11 Mb/d by 2025 or 1 to 3.5 Mb/d above March 2019 levels. So that would be 13 Mb/d at minimum to as much as 15.5 Mb/d, by 2025. If the higher number is correct decline will be relatively steep and it will be less steep with the lower peak of 13 Mb/d.
Dennis.
I am thinking a “two front” (heck maybe we will tariff the European Union while we are at it) trade war will cause a recession and drop WTI sub $55 for a considerable period of time. We have been bouncing around $53 today, so already there and no recession has been declared yet.
It’s the economy stupid, someone once said. As Santelli stated, if these tariffs do not work, it will be a Democratic Party landslide in 2020.
Are there examples of tariffs working in the history of the United States? At least since the 20th century. I know pre-income tax that is how the Federal Government raised funds. The 1828 Tariff of “Abominations” as the South called it, was one of the reasons the split between the N and S grew.
Shallow sand,
Not sure on tariffs working. In general economic theory says free trade makes sense. See
https://en.wikipedia.org/wiki/Comparative_advantage
As Trump doesn’t know how to read, he probably never read any economics at the Wharton School of Business. Oh well, at least he can only serve two terms, not sure the nation will survive. Maybe congress will reign him in, they are supposed to be in charge of tariffs, the “national emergency” stuff is getting a bit old. Has he also never heard the story of the boy who cried wolf? Probably not. The man is not well read.
Hi Dennis, comparative advantage in economic theory has a major flaw. It does not take into account transportation costs, and assumes they will always be low enough to not matter. Therefore, globalization makes sense because there will always be enough oil for low cost transport. Of course this assumption may not hold. Scaling back globalization through tariffs before peak oil really hits to relocalize manufacturing may be the only thing King Clown Chump does right.
As transportation costs rise, I assume some manufacturing, agriculture, and resource production will be relocated back to the States, and others will be dropped. If something is more of a non-essential and is too high to produce in the States or can’t be produced here, we probably will see less of it. I am thinking about foods, in particular. Like fruits and vegetables that don’t lend themselves to being grown in the US.
Boomer,
The price of those exotic foods would rise to take account of transport costs (these costs are already included, if the cost increases, so does the price). You are exactly correct that less will be imported, if there are no tariffs the amount imported will be equal to the amount that people want to consume at the price offered for the good.
Boomer Wrote: “As transportation costs rise, I assume some manufacturing, agriculture, and resource production will be relocated back to the States, and others will be dropped.”
I doubt Manufacturing & resource production will return: Demographics & Millennials do not do Manufacturing or Industrial jobs. and there is also NIMBY.
Most likely outcome is consumers consume a whole lot less, especially when you consider US Consumer hideous debt levels as well as companies downsizing due to advances in office automation, and soaring healthcare costs. I am seeing a lot of Big\Medium size companies outsource white collar jobs: Move IT to the cloud: little to no IT infrastructure, thus very few IT workers. Sales & call centers get replaced by Websites & online ordering systems. Sales, Legal, IT, HR, Procurement, are all getting downsized.
Also many states are raising taxes to pay for State Worker pensions which means less money for consumers.
Lower consumption is where I think we are headed and must be headed. The US lifestyle is based on buying a lot of stuff we don’t actually need anyway.
People may not willingly give up what they have gotten used to, but I anticipate that it will happen.
Yup, Could not agree more, but usually people resist change, especially when their standard of living declines. In that case, they usually start kicking & screaming as if they were 3 years old.
2020’s is shaping up to be the decade of total chaos.
Stephen Hren,
It would seem adding the transport costs would be a minor modification to the model. If the cost to import (including transport costs) is less than the cost to produce domestically, then the good is imported and resources are allocated to production where we can produce goods (including cost to transport) more cheaply than others. The tariffs will always make a nation worse off than a World where tariffs are reduced to zero and goods are freely traded.
In short, comparative advantage is robust and correct.
If comparative advantage always worked (i.e., let some other country provide the goods/services if they can do it cheaper), why are not the wealthiest countries in the world countries like Jamaica, Haiti, Liberia, Somalia, etc. God knows that almost any developed country can produce anything that they would want cheaper than they could provide for themselves.
Rocky,
It works. It is a little like people specializing in a field and doing what they are good at or enjoy and then using that income to buy clothes, food, etc rather than weaving their own cloth and making clothes, and growing their own food.
So developed nations focus on higher technology products, such as airplanes, computers, and high end automobiles rather than clothes, and shoes and other lower tech goods.
It is the reason that any decent economist will tell you that free trade is a good idea. I would note this is especially true where trade is fair. The actions against China may be justified, those against Mexico are not.
Dennis,
You have to be very selective to state that it is a good idea/it works. Free trade is maybe beneficial for resource exporters in the short term but not necessarily in the long term. Countries that have transitioned from mainly resource exporters to industrialized and thereby increased their wealth (GDP/capita) have done so by adopting protectionist policies such as boarder adjusting tariffs and government support to some industries. This applies to Japan and China in second half of 20th century as well as many European countries 100-150 years ago. I’m not confident that the outsourcing of manufacturing that has taken place in the last 20-30 years is beneficial in the long term.
Best
One example from an economist, don’t know if you consider him to be decent Dennis: “The neoliberal experiment – lower taxes on the rich, deregulation of labour and product markets, financialisation, and globalisation – has been a spectacular failure. ”
-Joseph Stiglitz
https://www.theguardian.com/business/2019/may/30/neoliberalism-must-be-pronouced-dead-and-buried-where-next
I do not subscribe to all of his statements but I think he brings up more than one good point.
Hi Jeff,
I think Stiglitz is a good economist. Note that globalization is one of many things on his list.
I am fairly sure his beef with globalization is when unfair labor practices in some undeveloped nations or government subsidies to industry in some nations makes the playing field tilted.
If global trade were both free and fair (level playing field) then Stiglitz would most likely not have a problem with it.
Many nations have indeed used protectionist measures in the past. Economists did not always understand comparative advantage well and ideas take some time to be understood by those in power.
The fact is that free and fair trade will make everyone better off, achieving this is difficult as there are no referees in international trade. 🙂 The WTO tries to serve such a purpose, but has little real power.
Jeff, just read the article, in a nutshell Stiglitz is promoting proper regulation of the economy, to protect health, the environment, and reduce market power of monopolies.
Aside from mentioning globalization, the piece talks about it very little, there is no mention that free trade is a bad idea or that tariffs are a good idea.
Oh and I agree with the ideas Stiglitz presents in that piece completely.
Jeff quoted:
“The neoliberal experiment – lower taxes on the rich,….has been a spectacular failure. ”
That is neoliberalism? Lower taxes on the rich is a conservative mantra. That’s exactly what Trump did. And yes, it was a complete failure. But it has nothing to do with liberalism, new or old.
Hi Ron,
See
https://en.wikipedia.org/wiki/Neoliberalism
Neoliberalism or neo-liberalism is the 20th-century resurgence of 19th-century ideas associated with laissez-faire economic liberalism and free market capitalism. While it is most often associated with such ideas, the defining features of neoliberalism in both thought and practice have been the subject of substantial scholarly discourse. These ideas include economic liberalization policies such as privatization, austerity, deregulation, free trade and reductions in government spending in order to increase the role of the private sector in the economy and society. These market-based ideas and the policies they inspired constitute a paradigm shift away from the post-war Keynesian consensus which lasted from 1945 to 1980.
Have you ever played monopoly? It´s first mover advantage, just as in the real world. The poverty trap applies to countries too and those that have escaped from it usually did so by adopting “protectionist policies”.
“I am fairly sure his beef with globalization is when unfair labor practices in some undeveloped nations or government subsidies to industry in some nations makes the playing field tilted.”
Perhaps he cares for undeveloped nations but his opinion piece only discusses the situation in developed countries (that have outsourced manufacturing jobs in the name of free trade).
”Many nations have indeed used protectionist measures in the past. Economists did not always understand comparative advantage well and ideas take some time to be understood by those in power.”
Economists (and politicians) should not design policies based on how they wished the world looked but how it actually is. If some countries have protectionist policies (and there has always been some) then other countries must take this into consideration.
“Aside from mentioning globalization, the piece talks about it very little, there is no mention that free trade is a bad idea or that tariffs are a good idea.”
Do not agree. For example, labour law and regulation of financial capital movements has very much to do with globalization – don’t you agree?
US treasury yields are starting to get inverted. Interesting part is 10year yields are dropping like a rock. Dollar hasn’t barely budged an inch. But lets just say trade war goes away and everything was peachy again. Yields start to rise again because not only is dollar a safe haven. It’s also a risk on trade now.
If your buying oil in US dollar terms oil is already much more expensive for countries that do buy oil in US dollars. If your selling oil in US dollar terms like Canada does your having to sell much more to equal same amount of dollars as you use to get. Because your currency lost value not because oil lost value. But when oil loses value in dollar terms on top of your currency lost value. Well it not good to say the least.
Soon as we get a peak with a following decline that is permanent. Consumption destruction will happen somewhere automatically. Exactly why trade wars are happening. We are at or close to being at peak. It’s not as if there is another choice here. Winners and losers will be sorted out.
2019-06-03 (ShaleProfile) Permian – update through February 2019
On a normalized basis (lateral length or proppants), well productivity topped out in the middle of 2016.
https://shaleprofile.com/blog/
2019-05-31 EIA’s new liquids pipeline projects database shows new U.S. crude oil pipeline capacity
https://www.eia.gov/todayinenergy/detail.php?id=39672
2019-06-02 (HFI Research) US crude storage vs US crude storage excluding linefill.
HFI chart https://pbs.twimg.com/media/D8FP0LiVUAA9YaP.jpg
Twitter Account https://twitter.com/HFI_Research
Another good EIA article on pipeline constraints in the Permian basin and the affect on oil prices in West Texas and Cushing, OK relative to Gulf Coast and Brent prices at link below:
https://www.eia.gov/todayinenergy/detail.php?id=38832
And storage capacity to support exports is increasing too. And so the increase in inventories over the last few years is partly due to an increase in transport capacity. This increase in transport capacity clouds the use of the inventory level as an indicator for excess inventories or storage by speculators.
EIA Working and Net Available Shell Storage Capacity (Release Date: May 31, 2019)
https://www.eia.gov/petroleum/storagecapacity/
2019-04-29 (Reuters) Texas terminal operators are projected to boost storage capacity 7 percent by the end of 2019 to 393 million barrels, TankTerminals data shows.
https://uk.reuters.com/article/us-texas-energy-tank-violations/u-s-oil-storage-industry-fines-soar-on-air-water-violations-idUKKCN1S508Z
Energy News,
Yes that is a good point, a lot of the storage capacity is oil sitting in pipelines. A better measure of inventories is days of forward supply for the OECD which reflects the increased oil in storage needed to support higher consumption levels. There is not very good data on World storage levels publicly available so storage levels are about as clear as mud on the World level. To a large extent we are flying blind.
Energy News provides a wider view of inventory data than OECD. EIA will be useless to determine where we are. I look forward to reviewing his posts on this. I have read that floating is way down.
GuyM,
I look at his numbers carefully. Of the numbers he quotes, the OECD data dwarfs the other storage data. Next time he posts something on storage take a look at the absolute volumes reported. For example in Singnapore stocks are about 47,000,000 barrels, but OECD commercial stocks are about 3,000,000,000 barrels. For all crude and product stocks including government reserves the total is about 4,000,000,000 barrels. The Singapore stocks are about 1.2% of the OECD stocks.
We do not have very good information on China or India’s petroleum stocks, this is a big wild card.
OECD stocks in days of forward cover in chart below (quarterly through 2019Q1).
US Line Fill – between March 2011 and March 2019 there has been a 43.7 millon barrel increase in line fill.
This chart doesn’t look like the previous chart that I posted a link to – that chart has a larger gap than the 43.7 millon barrels seen here.
Energy news,
Is the vertical axis on the chart above is in thousands of barrels?
US commercial stocks around 450 million barrels for crude only, for crude plus petroleum stocks the number is 1249 million barrels at the end of March 2019 for Non-SPR stocks. For crude only the number is 459 million barrels.
https://www.eia.gov/dnav/pet/pet_stoc_typ_d_nus_SAX_mbbl_m.htm
Yes the y axis is 1000 barrels
Red line: US Crude Oil in March is at 459,322 kb
And so the blue line in March is at (459,322 minus pipeline fill -43,747) = 415,575 kb
(I would say that the new storage built on the Gulf Coast to support exports should also be subtracted but we don’t have figures for that. Yes the blue line on the chart would be lower).
Energy news,
So the pipeline fill is all crude pipelines or just new pipelines? Pipeline fill has always been a part of oil stocks, but I agree it is interesting to keep track of total pipeline capacity as more pipe means higher stock levels. I would say storage facilities should not be subtracted, because unlike a pipe a storage facility isn’t necessarily filled to capacity. In other words, a storage facility for 500 kbo might have some minimum capacity (perhaps 50 kbo) but it might be filled anywhere from 50 kbo to 500 kbo. In that case subtracting the minimum of 50 kbo would make sense, but not the entire 500 kbo. I have no idea if there are such minimum levels, but no doubt there are pipelines and pumping systems that cannot go lower than some minimum level, 10% is just a WAG on my part.
Yes the chart is just the growth in pipeline fill. I was just wondering how much of the increase in crude oil stocks is due to the increase in midstream.
Energy News,
It is an interesting chart, basically about 10% of stocks is due to the increase in pipelines. Thank you.
Energy News,
Do you have the data needed to do a similar chart for total petroleum products (crude+ gasoline+diesel+jet fuel+residual fuel+kerosene)?
https://amp.ft.com/content/9f7764e2-838d-11e9-b592-5fe435b57a3b
From the India press. I’m not seeing any big build from your OECD numbers either. And, I assume you left the US in the OECD numbers.
GuyM,
Yes US is included in the OECD data.
I agree not much of a build in OECD stocks through 2019Q1. In fact stock levels are similar to 2014 when oil prices were $100/b. I guess the turmoil caused by the White House clown act has made traders think everything is going to hell in a hand basket. They may be right, who knows.
GuyM,
I don’t subscribe to FT so cannot read your link, maybe copy and paste the relevant portion?
I don’t either, I have no idea how I read it, because I can’t now. Basically, it indicated that because of the intense backwardation, markets appear tight. It did not expect low prices to continue.
thx GM.
GuyM,
If the title is copied and pasted to a google search, you can read the article
Tumbling spot price of oil does not tell full story, say traders
So for anyone interested the title of the piece is above, copy and paste in google search and you might be able to read it. It is a good piece in my opinion.
Thanks for the heads up.
2019-06-03 (ANP) In April, oil production was 2.604 million barrels per day, an increase of (+44 kb/day) 1.7% in relation to March and 0.3% compared to the same month of the previous year.
ANP-> http://www.anp.gov.br/noticias/anp-e-p/5202-producao-petroleo-gas-abril
Average 2018: 2.587 million barrels per day
Chart https://pbs.twimg.com/media/D8JtOw5WkAI37qm.png
Bloomberg Survey of May OPEC Production
Table https://pbs.twimg.com/media/D8JDedgV4AEzZQ0.png
Oilytics chart https://pbs.twimg.com/media/D8JO86VXkAATK-0.jpg
Fuel hub inventories – Yes it’s difficult for us to know without subscription data. As you know for the fuel hubs it’s the turnover of stock (sales) that are important to the markets but we never see those figures
Inventories to May 17, 2019 https://pbs.twimg.com/media/D8J-abwW4AAeDpv.png
Energy News,
On that vertical access it is millions of barrels, yes?
Yes its million barrels
thx EN.
Russia down 125,000 barrels per day in May. That is using 7.33 barrels per tonne.
Yeah, kinda low numbers for decline considering the pipeline fiasco.
The OPEC Secretariat is pleased to announce the release of the 54th edition of the Annual Statistical Bulletin
Some highlights https://www.opec.org/opec_web/en/press_room/5532.htm
Global oil consumption 2018 up 1.5% year-over-year.
The R word is not recession.
It’s relentless.
Thanks Energy News,
Interesting tidbit from OPEC ASB.
From 1980 to 2018 3 million oil wells were completed in the World with about 85,000 total oil wells completed in OPEC member nations or about 2.8% of all wells in the World. I did not realize the number was that large, I had read numbers in the past of hundreds of thousands of wells in the US and maybe tens of thousands in the rest of the World, as far as producing wells, the number is probably lower maybe 1 million? I have not seen recent data for World, but for the US there were 435,460 oil wells producing at the end of 2017.
From 1980 to 2010 there were 473,680 oil wells completed in the US (development wells). The average completion rate from 2005 to 2010 was 12,825 oil wells per year. If we assume the rate was 12,825 wells per year from 2011-2018 then the total would be 589,100 oil wells completed from 1980 to 2018 for the US. With 85,000 from OPEC we would have US plus OPEC at 674,000 oil wells.
The 3 million number seems a bit high and might be both oil and natural gas wells, so perhaps 1.5 million oil wells completed from 1980 to 2018, even that seems too high.
An alternative is to look at total wells drilled in the US (oil and natural gas, both development and exploratory and include dry holes drilled) that number is about 1.7 million wells from 1980 to 2018 (with similar approximation used for 2011 to 2018 where we have no data). So about 35% of this larger total is oil development wells (excludes natural gas wells, exploratory wells and dry holes).
If we take the 3 million wells drilled from the OPEC ASB and assume that is “total wells drilled for natural gas and oil including exploratory wells and dry holes”, then perhaps 35% of that number would be right for total oil development wells completed in the World from 1980 to 2018. That would be about 1 million wells, with about 59% of those wells completed in the US. According to shale profile about 87,000 horizontal tight oil and natural gas wells were completed in the main US tight oil and shale gas basins from 2003 to 2017, the total oil and natural gas development wells (excludes dry holes) was about 569,000 in the US from 2003 to 2017 so only about 15% of the wells drilled over that period were tight oil or shale gas wells. For the more recent 2011 to 2017 period when tight oil and natural gas ramped up quite rapidly about 77k wells were horizontal tight oil or shale gas wells of 284.5k development wells completed in US, so about 27% of wells oil and natural gas development wells drilled were tight oil and shale gas horizontal wells from 2011 to 2017.
Dennis.
Do those numbers also include salt water disposal wells and other types of service wells?
shallow sand,
I used data from page below for US data and the OPEC Annual Statistical Bulletin (ASB).
https://www.eia.gov/dnav/pet/pet_crd_wellend_s1_a.htm
The short answer to your question is I do not know. Would those wells be considered “development wells or exploratory wells”?
As you know I am not an expert on drilling for oil and gas. Far from it.
Did find this in the explanatory notes:
These well counts include only the original drilling of a hole intended to discover or further develop already discovered crude oil or natural gas resources. Other drilling activities, such as drilling an old well deeper, drilling of laterals from the original well, drilling of service and injection wells, and drilling for resources other than crude oil or natural gas are excluded.
This seems to indicate that the answer is no.
I also use the page below for producing wells in the US, see appendix C.
https://www.eia.gov/petroleum/wells/
Of the 435,460 oil wells producing at the end of 2017, 330,234 of those wells produced 10 b/d or less, with the average output at 1.71 bo/d, those wells produced 6.8% of US crude output in 2017.
Other drilling activities, such as drilling an old well deeper, drilling of laterals from the original well, …
Dennis, several years ago I had a link to an article that explained how Saudi Arabia was converting its vertical wells to horizontal wells. The vertical wells were pulling up way too much water. So the well would be plugged a few feet from the top of the reservoir. Then a lateral well would be drilled along the top of the reservoir.
That way the same infrastructure for the old vertical well could still be used for the new horizontal well.
I wish I had saved the link but that was several computers ago and it is now long gone.
I hope the oil bears are enjoying this. It may be their last hurrah.
I am going to have to go fill the gas tank in my Model 3. 🙂
Enno’s February Permian update
January production
103,458 of total 3,053,252. Wells 239
February production
339,432 of total 3,019,165. Wells 544
Production drop of 34,047.
Is legacy decline starting to overwhelm new production or is this due to late Texas reporting?
Hi Ovi,
Enno usually states that future updates will lead to revisions in his data, especially for the most recent 3 to 5 months, you can compare the data from previous updates to confirm this. When I have checked in the past I have found this to be the case. I have not rechecked since last December, so it is possible this is no longer valid.
Enno says:
I expect that after revisions, production in February will come in 5-10% higher than shown here, or about 3.2-3.3 million bo/d. This would represent just a modest gain from the end of last year.
Enno has Dec 2018 output at 3141 kb/d and he expects Feb 2019 to be 3250 kb/d after revisions. Note that the “first flow” well estimates also tend to get revised over time. Currently the Nov 2018 first flow well estimate is 389 wells. On April 1, the estimate for Nov 2018 first flow wells was 331 wells.
So the main thing we are seeing is fewer wells completed in Dec 2018 and Jan 2019 resulted in a flattening of output, this is exactly what the model predicts and is not surprising at all.
Hi Dennis
Thanks for the explanation.
Maybe the plateauing of the Permian is beginning. The drop in recent WTI pricing to the lower 50s does not offer much incentive to produce more oil. I also wonder if the big guys moving in will result in a slower pace of production increase or possibly none to help stabilize prices above $50. Slower production, longer life will result in higher prices for the bigger guys who have a longer term perspective than independent drillers trying to make a quick buck.
Hi Ovi,
If the completion rate continues to gradually fall then output might remain on plateau, see model scenario below. Note that in my view it is more likely that output continues to rise if the completion rate stabilizes near the Jan to Dec 2018 average (perhaps at 400 new wells per month).
The scenario below has the completion rate stabilize at 300 new wells per month in 2022.
Ovi,
The scenario below seems more likely in my view even if Brent oil prices remain at $60/b to $70/b in 2017$.
Nah, it just ain’t gonna happen Dennis.
Ron,
Do you believe oil prices will remain low? If your answer is yes, then perhaps you will be correct. I doubt oil prices will remain low.
Also the majors are investing in the Permian, their pockets are pretty deep. I think oil prices will go up to $70 or even $80/bo by Oct 2019. Tight oil output will increase if I am correct, at minimum output will be flat at the March 2019 level.
If, and that is a BIG if, the ideas about what the URR/valuable real estate in the Permian is are correct, it could leg higher again. Theoretically. With something like the Chinese efforts to stabilize domestic production at all costs regardless of profitability. Catch in real life is logistical constraints and also that “damn the profitability ” is exactly what people bankrolling shale are fed up with.
Eagle Ford is a different situation where all the real estate besides Karnes County is definitively post-peak.
https://shaleprofile.com/wp-content/uploads/2019/05/EF-Top-8-counties.png
Combined with the general lack of interest in trying to expand NE (or NW…) in favor of planting more wells in the very densely drilled core, that sure looks like there aren’t prospects equivalent to what has already been done at any price/ amount of effort.
Propoly,
I agree EFS will be flat or lower, Permian is likely to see increased output.
It seems there might be a increase in shale oil again increasing US stock , bringing oil price down. In additional the tradewar might wash away the weak growth in world trade that will have begative impact on oil consumption. I am thinking the folowwing case. If I manage a shale oil Company in Permian, my break even price is 65 usd/bbl . The bank, investors are calling , crys every day to get some money. How can I earn money to pay my exspensives, well there is where the DUC’s is vital if they are drilled with depth buth could give cash if the drilling cost is with drawing. The lower oil price , the more Ducs need to be compleated. Than what happen if trade war continues and WTI remain in the 50 range, banks and investors refuse to give more liabilities . I believe that will be the time when oil price starting increase. The question is than, how long will the Ducs drilled in good Area last.?
Spent some time on the OPEC statistical report linked above. Specifically, on consumption.
Consumption increase was 1.5% year-over-year for the 2018 global total. This was focused in Asia and North America. Asia appears to have grown their consumption about 3% year-over-year. North America increased about 1.8%. They say gasoline and distillates are 55% of total consumption and trend upwards.
We will of course need to compare this to the BP report due out in a few days, but there is clearly no sign of a decrease in consumption.
In other news, Jerome Powell yesterday announced that the world in general should stop thinking in terms of Fed tools being conventional or unconventional. Rather, they should realize that the unconventional tools are now conventional and will be used again sooner than anyone thinks.
For those not aware, conventional tools have been defined as the purchase and selling of Treasury instruments to force an increase or reduction of short-term interest rates. As those rates approached zero, and Ben Bernanke needed some additional tool to generate monetary stimulus, Quantitative Ease was invented to inject money into the system as a whole without regard to any sort of Congressional limit (of which there is none). This was until yesterday called unconventional.
There was also the briefest mention by Powell of an expansion of the tool box, which several weeks ago was described (by others) to be purchase of equities, as is done by central banks in Japan, Switzerland and Europe.
So one should assume lower interest rates and another stock rally?
QE and another round of interest rate cuts is likely to be very dollar positive this go around because as counterintuitive as that might sound. FED QE and interest rate cuts puts a bid under the market. Which means yield hungry investor will chase yield.
YEN and to a certain extent the EURO will push up the value of the dollar up in such a scenario. Because of interest rate differentials. Carry trade, as yields on 10year German bunds and Japanese 10year remain below zero. If the FED were to do QE just watch the USD/JPY push the so called high beta commodity currencies like the Canadian, Australian and New Zealand currency down.
Stocks up. Commodities of all types including oil down.
Yes, quite the emergency Powell was reacting to:
Sometimes the discussion here heads into the risk of conventional warfare.
Because it is expensive and crude and can destroy the very assets a conquering country might want to control, I think propaganda and cyberwar will be used as often as possible. No need to drop bombs and send troops if you can either disrupt countries enough that their citizens can’t work together, or you manipulate them so that they favor the actions you want to see.
https://www.politico.com/story/2019/06/05/study-russia-cybersecurity-twitter-1353543
Suppression of oil consumption requires an involuntary population decline. Calories are bipartisan and oil moves them. In a world of oil scarcity, it isn’t country policy that war would seek to control. It is oil consumption that war would seek to reduce. That’s done by killing people.
While war is an effective way to reduce populations, I haven’t heard anyone say it is an intentional strategy.
Genocide comes closely because it seeks to wipe out people rather than to dominate them.
Closer, not closely. Didn’t catch the typo in time.
A really big build, both crude oil and products and the reported increase in imports isn’t enough to explain it all
U.S. Petroleum Balance Sheet
pdf file: http://ir.eia.gov/wpsr/overview.pdf
Saxo Bank chart summary
https://pbs.twimg.com/media/D8TiU8tU8AAAOMM.png
Oilytics chart summary
https://pbs.twimg.com/media/D8Tj59pUIAEygOt.jpg
https://pbs.twimg.com/media/D8Tl5ivUEAA-x-V.jpg
So we have a 3mb/day surplus alone for the USA… the world is awash in cheap oil.
Has driving collapsed in the USA, or is everyone using bicycles now? No more jets, trucks…
Or are these numbers like the walk of a drunken sailor?
The USA makes a little over 1mB/d of corn ethanol (subsidized).
It comes from 5.6 Billion bushels of corn. Picture that.
It takes 38% of the USA corn crop to achieve that.
We could scale it back to just local farm economy level use if we choose to.
Eulenspiegel, I don’t know enough to say for sure but it does look like we’re awash with cheap US LTO. We’re about to go into peak demand, so will have to wait and see what happens. And I’m waiting to see if the US rig count continues decreasing.
This is probably a factor too: the EIA stopped reporting oil company lease stocks (in 2016) and so lease stocks are only visible once they are transported to inventories that the EIA still count – this is probably at least part of Line13.
The rest of the world should be short of oil due to lower exports from Iran and Venezuela
US weekly inventories
The previous 2 years show an increase in inventories for this week but this year is the highest. And this year is the 5th build in the last 7 weeks.
The previous 2 years also show a dip in implied demand (gasoline+distillates+kerosene) in this same week.
Inventories chart https://pbs.twimg.com/media/D8UjSweVUAAnJ5N.jpg
Inventories: the sum of the USA + Fujairah + Japan (million barrels)
Total (Crude + Distillates) +15.7 week/week
Total (Crude + Distillates) +52.6 year/year
Chart https://pbs.twimg.com/media/D8Ujho4VsAEBAZm.png
We’re about to go into peak demand, so will have to wait and see what happens.
When oil production starts to fall, how will we know whether it’s peak demand or peak supply? The answer is quite simple. If it’s peak demand then prices will fall and if it’s peak supply then prices will rise.
I am betting on the latter, peak supply.
by peak demand I was trying to say that we’re about to go into summertime when demand should be at it’s highest in the USA.
Wow, oil prices are collapsing at the moment.
Anybody have a reasonable explanation for the inventory builds in crude and in products? Wow? It seems very counterintuitive considering everything I’m reading.
What’s happening with oil prices? I know, everyone is asking that same question. But does anyone have an answer? I don’t.
I do.
They are declining.
And oil consumption was up in the US 1.8% in 2018 y/y, re the opec stat report above.
Rather than being purely snide, how about this:
Oil isn’t oil as defined in the past. WTI’s API number has changed. It still has the same label on NYMEX, but it’s not the same stuff.
It doesn’t matter. That is the definition doesn’t matter, it is all falling in price, Brent, WTI, the OPEC Basket Price, everything. So nothing is explained by saying the definition of oil has changed. Why is everything falling in price?
https://www.zerohedge.com/s3/files/inline-images/global%20trade%20IMF%20may%202019_1.jpg?itok=Nm_VLSxh
It’s more so than perhaps you know. Even the price of money is falling.
The magnitude of debt, globally, is so high that the price of money (interest rates) cannot increase. The word cannot in this instance implies not so much inability, but rather, a restriction. When you owe 22 trillion dollars, you would be insane to allow an essentially random process to define your annual interest expense. Someone knocked on a door at the Federal Reserve in January and laid down the reality of the situation. Instantly, quantitative tightening ceased to be the order of the day and down went 10 yr rates.
Guys, for God’s sake, recognize that money is an imaginary substance. Its value is only inside your head and your counterparty’s head. Something like a third of global debt has negative interest rates. I don’t mean a negative real, I mean negative nominal. How can that make any sense? For a very obvious reason. The substance is created from nothing. It doesn’t have to make sense.
As an exercise for the reader, surf around and find the difference between disinflation and deflation. You might also want to recognize that the word disinflation pretty much did not exist 5 years ago.
Oh, and by the way. That decreasing price of money? That’s been going on for about 40 years now.
Ron,
I think it is because investors see a recession coming. So they are selling oil as they see demand falling in a contraction environment.
Look at gold, it has been rallying which points to investors fleeing to a safe haven. And the federal reserve have talked about dropping interest rates this month and possibly another round of QE down the line, so naturally gold moves in the opposite direction of monetary rates. Just my 2 cents, not 100% sure on any of it really.
Investors have notoriously predicted 10 of the last two recessions.
Not sure of any of it? Read above.
Bloomberg May 28 Diesel demand in China fell 14% and 19% in March and April respectively, reaching levels not seen in a decade, according to data compiled by Wells Fargo.
https://www.cnbc.com/2019/05/28/falling-diesel-fuel-demand-in-china-paints-bleak-picture.html
Some of the import and export numbers coming out of South East Asia are also down significantly.
https://www.smh.com.au/business/the-economy/maximum-vulnerability-china-and-the-world-are-still-in-big-trouble-20190419-p51fk4.html
SE Asia numbers will include Singapore, which does not consume what it imports. It is a big refinery center and it distributes product throughout Asia.
Exxon’s refinery there can process over 500K bpd, and is expanding to do more. So maintenance, or even a customer getting shipments from somewhere else, can affect the numbers that Singapore would report. Bottom line, you can’t trust consumption numbers for Southeast Asia.
The article from CNBC doesn’t make sense to me. Or maybe I don’t understand it. It is saying Chinese diesel demand has been trending down since 2014 and recently fell off a cliff. I believe it is definitely down over the last few months but overall consumption of oil in China has gone from 11.20 mbpd in 2014 to about 13.5 mbpd today and at the same time they are saying diesel consumption is down. All of the new consumption is going to gasoline and jet fuel??
There are only about 15 zillion reports about what oil is doing. When this one proves wrong it will be forgotten.
Don,
Does “consumption of oil” in the article refer to amount imported?
Refineries do the importing and China’s refineries have been exporting a lot of refined products. The more products exported the more crude had been imported.
Just a guess.
Although maybe not a big contributor, wet conditions have caused major planting delays of the US corn, soybean and spring wheat crops.
This could have decreased demand some compared to YOY comparisons. Very far behind in states such as South Dakota, Illinois, Indiana and Ohio.
Of course, if this was a contributor it should turn around as farmers plant in June.
Keep in mind that commodity prices are very cyclical, with weak periods lasting several years.
Corn is still very low considering how many corn acres have been lost and how much yield loss there will be due to late planting, even if weather is good the remainder of the growing season.
I was just looking at some statistics on crop planting if anyone is interested, nice clear charts…
2019-06-03 (Twitter @kannbwx) As of June 2, only 46% of the U.S. corn crop had emerged versus a five-year average of 84%. That is BY FAR the slowest on record.
Only 19% of U.S. soybeans had emerged by June 2, easily the slowest in records since 1999. Average is 56% and last week was 11%. Last year was 65%.
Corn chart https://pbs.twimg.com/media/D8Kd0LXUIAAkJJh.jpg
Soybean chart https://pbs.twimg.com/media/D8KqVD7XoAYlTG-.jpg
Twitter -> https://twitter.com/kannbwx
EN.
The University of Illinois has two very good Ag sources of information. WILL (radio station) has many podcasts regarding markets.
Farmdoc daily website also has many good bits of information.
I first started paying attention to commodities in the mid-1980s, right when both oil and grains were a bust. This bust pretty much lasted until Y2K.
The current grain bust started in the Spring of 2014, with crude following shortly thereafter.
Unless there is perfect weather, corn and soybeans will be short at the end of this harvest. You wouldn’t know it from current prices. Corn has rallied some, but not anywhere near where one would think given how late the crop is.
Also should mention that there will likely be a lot of preventive plant acres. This would reduce oil demand in US, as the acres would neither be planted nor harvested.
Shallow, somewhere in the archives I actually did a computation of how much oil is consumed in the United States by agriculture. My recall is I included transportation of fertilizer, insecticide and crops to the shelf. It wasn’t a big number, but I later discovered things that I had not included that needed to be included and was too lazy to go back and update the number.
The things I did not include were trips to pick up diesel for the tractors, trips to carry product to non end-users (meaning animal feed trips to the animals (who are not Walmart shoppers)), and trips to Washington to lobby for subsidy.
https://www.americanthinker.com/blog/2019/06/agricultures_role_in_chinas_war.html
Archibald is a troller. Nothing to do with the topic of the thread.
He has achieved the rarified status of ignore,as has javier.
btw- i do not use ‘ignore’ just because I disagree with someones point of view. rather because they are incoherent, unsubstantiated or half-cocked in their positions. or just overtly fascist.
Which States Have the Most Corn Left to Plant?
“At this point on the calendar, all major-corn producing states should be at least 80% to 90% complete, per USDA’s historical averages.
How far behind are the major corn-producing states? Based on the corn acre estimates for each state in the March 2019 Prospective Plantings report and the most-recent Crop Progress report, the “I” states, Ohio and South Dakota have the most total acres left to plant.”
https://www.agweb.com/article/which-states-have-the-most-corn-left-to-plant/
I didn’t mean to derail the topic. But I think Ag and oil prices are linked quite a bit.
Just thought lack of field work, which is FF intensive, might be a reason for there being lower demand in March-May year over year.
Also think oil and grain commodities are linked somewhat price wise, and pointing out that even though grain has had a weather rally, the funds have kept the grain prices far below the yield loss implied.
Farmers had to be bailed out last year. A farmer who grew 1,000 bushels of soybeans last year got paid somewhere between $50-100K, depending on yield.
This year, the bailout has already been announced to not be yield dependent, nor crop dependent, but based on total acres planted, as it appears USDA wants to encourage farmers to actually plant a crop and not take preventive plant. So they are kind of patterning the bailout on the fly, even to the extent of paying it in three tranches, so they can decide to not pay one or two in the event prices really rally due to the difficult planting conditions.
As has been discussed many times, the issue primarily is a very strong dollar. It has and will continue to hammer commodity prices.
For most of the years I have been paying attention, US Ag has necessarily required government payments to avoid massive failure. Furthermore, the barriers to entry in US Ag are so large that any major shock to the system would be catastrophic IMO.
Just look at the average age of the US farmer.
As for labor intensive crops and livestock, I suggest you check the facts. Without the massive migration through the US southern border the past few decades, these foods would flat out not have been produced.
I am in Western NE and KS every year. The populations there are 50-80% Hispanic. Something like 1/4 of all beef and pork plus the feed for same are raised there.
Urban people have been subsidizing this whole thing for decades, in exchange for very cheap food. A messed up circular system.
I suppose the same can be said for oil and gas with regard to the percentage depletion deduction. However, that deduction again is for the first 1000 BOEPD only, and can only be taken to the extent of profits, so it is not really a bailout. If oil drops to $20 for a year (or gas remains below the cost of production, as it has for several years) there is no percentage depletion deduction to be taken.
I guess I’d like to know where all the volatility is coming from. In oil it has been insanely high.
When I first bought working interests in oil wells, they were very cheap, the commodity had been depressed for over 10 years. Despite this, the prices managed to halve, about wiping out my small investment, until they suddenly tripled and then some, which caused that small investment to go from deficit to quick payout. From 1998 to 2014, the trend had been higher.
The past five years have been the toughest time in the now 22 years I have been in this, because operating expenses are so much higher than they were in 1997. What took $10 back then now takes $35 per barrel, and that is after major belt tightening following the 2014 crash.
It has really been something to see US production in both oil and gas skyrocket in the face of low commodity prices.
Don’t think for one minute that US producers are making money or have since 2014. They aren’t. There is still a massive amount of debt out there. There has been so much distortion of depreciation, cost depletion and amortization that GAAP books are worthless in analyzing these names. Just look at the check book. Year number six of cash burn.
The same is true for our other energy sources. The alternative energies are rife with cash burn. We have been offered a lease for solar panels on a portion of our farm. It is a tremendous offer, almost 4 times the annual cash rental amount we could receive for grain. Yet we are very hesitant because the solar company’s finances make shale companies look like Warren Buffett’s balance sheet. What happens if they erect these panels and then go BK?
Very challenging times. The price of oil dropped $30 in two months late 2018. It has dropped $15 in less than a month now.
Sorry for the rant. As many of you know I use this place to blow off steam. Better than here than at the family.
shallow sand,
Rant all you like. I learn a ton from your rants. Thanks.
Agree. I appreciate the perspective you bring. S. Sand
I feel your pain Shallow. I’m 3rd generation in the Kansas oil patch. Sitting in my office right now burning some midnight oil, wondering if I should really line up a rig in July and October to drill a few holes in the ground, or just save our effing cash. There isn’t any Wall Street money behind this outfit. There’s no stiffing vendors and Chapter 11 restructuring. You save when times are good and hunker down when they’re bad. This drilling with reckless abandon bullshit, and flaring gas with even more reckless abandon in places like the Permian and Bakken makes me sick. Borderline criminal accounting…(what do they do at the SEC anyway)? What a ridiculous waste of natural resources (I’m on your side M. Shellman).
Thanks, Mr. Kansas; and I’m on your side and the side of what’s best for our country in the long run. Its not flaring gas to facilitate more and more exports, all on credit, that’s for sure.
Funny, I also was this week sitting in my office, late, trying to sort out prices, taxable income for the year, and what to do about my drilling budget. On those occasions I find a couple of scotch and sodas tend to clear the picture some; not this time. Price volatility is a bitch. Only people that work out of a check book understand that.
Keep a bind on it. We’ll be OK in a few years, I reckon. If we can last that long.
Mike
They are letting the shale people flare enough gas to heat several states, but we expect sometime soon we will have to buy or rent a $100K imaging camera to detect whether each of our wells is emitting more or less than 300 scf per day, fill out a ton of paperwork in either event, and for the ones over 300 scf, figure out a way to comply (with no gas pipeline infrastructure nearby) or plug the wells out.
I don’t know how a small producer can plan anything ahead with the oil price AND regulatory uncertainties.
One side wants to LEAVE IT IN THE GROUND, the other wants it out of the ground ASAP WITH NO REGARD FOR ECONOMICS OR ENVIRONMENTAL IMPACTS.
Here are my two cents.
There seems to be two oil markets, the world oil market based on Brent and the US market based on WTI. While they are connected in terms of price movements, the shape of the futures curve are dramatically different. Below are the futures tables for Brent and WTI.
The WTI table is in Contango, i.e., the front month price is less than the next month. In this table, the August contract is 15¢ more than the front month, July, and October is 25¢ higher. Essentially this implies that the refiners are saying to the drillers, we have plenty of oil and keep it in the ground for a little longer. In the meantime imports are climbing. Puzzling? Who is importing all of this oil.
Looking at the Brent/world futures table, we see a totally different picture. It is in Backwardation. In fact extreme Backwardation. Note that the front month, August, is $1.10 more expensive than the September contract. A situation opposite to the WTI contract. This means that the refiners are saying to the suppliers, I need your oil and I need it now and I am willing to pay extra for it. While 15¢ to 25¢ difference is typical, $1.10 is atypical and that is why I say that the Brent futures are in extreme Backwardation.
So the question is why are there these two extremely different markets. For one, the oil market has looked to the weekly EIA numbers as a harbinger of world demand. While this was true in the 70s and 80s I don’t think this line of thinking still holds today.
So the question that needs to be asked is why is there such a difference between the US oil market and the world. Clearly Mr T wants low oil prices in the US. In the meantime, OPEC + wants higher prices. Looks like Mr T’s side is winning now.
Second table
Look at the EIA numbers on the Weekly. Up over 400k a day than is possible. If GOM was up 200k a day, it could only be about 12.1, not 12.4. At this price, Texas will not increase. Not for a long while, no matter how many pipelines they open. Is the govt trying to keep prices down? You have to ask? Just throw out numbers that are sheer BS, the dumb traders will buy it.
You can’t tell me they really believe their numbers. Look at their last two sets of monthlies, and tell me it is reasonable.
You could make it physically, too if you want.
Just import a few supercarriers full of oil, gas and other products more than needed. Doesn’t cost that much.
Then US stock is overflowing – and US stock ist price defining. All other prices are connected over the paper oil market. And Trump gets his low oil prices.
Just my conspiracy theory.
PS: My few oil long options (I hold goldman sachs papers) get taxed higher and higher this week. Looks like GS doesn’t believe the price slump.
Europe lost Iran oil, rest OPEC pricier… US recession looms… less oil, costs less. Big Pic? No British, Finland oil…someone will need a NATO to protect ME.
Do you realize how hard it is to have a recession with a 1 trillion dollar deficit? Look up the GDP equation.
Easy: Deutch bank has 45T in derivatives going under with <6 stock options…cross coupling induces no loans…therefore CO2 down, world saved, Vote Biden
I don’t know what that means, but it’s useful always to understand that multiple trillions in derivatives almost always refers to credit-default swaps, and when those are computed they are computed in nominal fashion.
Nominal CDS means not net. That 45 trillion could net out to zero if they are equally distributed on both sides of various counterparties. Without the babble, this means that when the default risk was spread out it may have been spread out evenly. Counterparties may have essentially equal risk for both sides of each position. A CDS pays you if the borrower defaults. But you may have debt as well and only because you got paid can you now make your debt payment. So someone else who was betting on You defaulting won’t collect on the CDS he had on your default.
Complex stuff, but overall just remember that when you hear about godawful numbers of derivatives held by banks, quite a lot of them offset each other and the net total is far less.
And, perhaps most important, remember always that it doesn’t have to conform to arithmetic. We saw this during the Greek events about 7 years ago. People held CDS on Greek sovereign debt. They wanted that debt to be declared in default so they could collect on their derivative. But the numbers were big enough that a Greek default would threaten the global system of money. That’s right, Greece threatened the entire world.
So, the derivative holders made a claim to collect on their holding. The official agency that is the arbiter of default examined the situation, received the relevant phone calls, waited an extra week, and manufactured some text to explain why a country that had not made its debt payments was not actually in default.
The world was saved by declaring that arithmetic doesn’t have to mean anything when it comes to money. It would be useful for everyone who is oil focused to understand this and recognize that the disaster coming will not be caused or solved by numbers on a screen representing a substance created from thin air.
Cracks in the Ice? Oil Price discovery is USD. Settlement in Yaun, Euros?
http://www.artberman.com/wp-content/uploads/MV-5-JUN-2019-1.mp3
Coach RedPill explains the History of the PetroDollar.
https://www.youtube.com/watch?v=xNr1LWgIyiE
2019-06-05 Rystad Energy is raising its forecast for US crude output to 13.4 million barrels per day (bpd) by December 2019. For May 2019, our research and calculations point to crude oil production averaging 12.5 million bpd.
https://www.rystadenergy.com/newsevents/news/press-releases/US-oil-output-poised-to-set-yet-another-record-in-2019/
2019-06-04 (Rystad Energy) Flaring and venting of natural gas in the Permian Basin in Texas and New Mexico reached a new all-time high in the first quarter of 2019, averaging as much as 661 million cubic feet per day (MMcfd), according to research conducted by Rystad Energy.
https://www.rystadenergy.com/newsevents/news/press-releases/Permian-natural-gas-flaring-and-venting-reaching-all-time-high/
They are full of it, at this price, it’s a good chance of a decline.
I think GuyM is on to something. Whether we start to see aggregate declines, or simply muted growth, the effects are similar.
Anyone who has been watching the EIA DPR closely knows that they have been a touch optimistic on projecting production growth for the past few months. The Rystad report pulls May production straight from the EIA projection and it appears to be a bit high in my mind.
Just look at the EIA’s “cover of night” prior month DUC count reductions over the past six months and one can see a lot of froth working out of the system as far as optimistic future productivity estimates.
We are indeed adding production in the shales, but this is a fast moving treadmill folks, and it’s getting faster by the day with every incremental BBL of growth. In my humble opinion we are not seeing the necessary increases in rigs and frac crew counts yet to keep up with the wild growth that many are “hoping” for. (ie: Rystad in their US projection which relies almost solely on shales for growth).
Efficiencies in Drilling and Completing wells will help close some of the gap, but that just speeds the treadmill up even further. Will be an interesting second half of 2019.
Look! In the sky! Is it a bird or plane? Nope a oil vulture!
https://finance.yahoo.com/amphtml/news/why-oil-stocks-tumbling-today-180800665.html
2019-06-06 (ShaleProfile) Eagle Ford – update through February 2019
February oil production came in at 1,22 million bo/d, the same rate of production as a year earlier. After revisions, it will be a little higher but still below the level at the end of last year. As is visible in the graph above, the contribution of wells that came online before 2018 was just about 50% in February.
https://shaleprofile.com/2019/06/06/eagle-ford-update-through-february-2019/
https://oilprice.com/Energy/Crude-Oil/US-Total-Oil-Output-Poised-To-Set-New-2019-Record.html
Rystad has completely lost touch with reality. I want some of what they are smoking!
I can imagine the scene, three dolls hanging over a boiling pot: “Double trouble, toil and trouble, fire burn and cauldron bubble, a few newts eyes, and frog toes, and to one point four million, the oil it ROSE!
Ok, still waiting. Nothing so far, ok, change witches!!!
No, your witches are fine. You are probably just using the wrong newts! You need the ones from Central Alberta, Canada.
Central Alberta marks the northernmost occurrence of the western tiger salamander (Ambystoma mavortium)
Oh bummer, that’s where the Tar Sands are. Guess those newt eyes are going to be harder to find from now on…
Both WTI and Brent printed a bear flag pattern. On short term charts. 5 min through 2hr chart you can see it real good. Which is a continuation of trend pattern. It however is unlikely to breakdown out of this pattern till next week. On the daily chart it just looks like a gap higher at open. More downside to come.
WTI trendline support next week isn’t much different from this week. At about $45
If this happens, things will get interesting. It will trash from the financial world into real world:
– more people will buy SUVs , people will drive more. Especially in growing asian countries.
– Shale will flatten output or even begin to decline when investors demand money and not production numbers. Shale service companies will fold in numbers.
– OPEC will get in panic and lengthen the cut to end of year, perhaps even tighten it
– In other countries, deep see projects will be stalled or at least slowed.
– Venezuela will collpse more – even less money
At some moment it will be realized that tanks in the USA are full, but everywhere else empty.
That’s the moment things get interresting.
Oil and food prices move in tandem in the long term. FAO food price index is up in june: http://www.fao.org/worldfoodsituation/foodpricesindex/en/
It’s mainly higher dairy price that is behind the increase. Planting problems in US didn’t have much impact. Grain stocks are very high but inventory is likely to decline – making the market more volatile.
https://www.bloomberg.com/amp/news/articles/2019-06-06/american-oil-keeps-flowing-to-china-despite-mounting-trade-war
https://mobile.reuters.com/article/amp/idUSKCN1T42UQ
Nothing stays the same for long.
Baker Hughes US Rig Count
Oil: -11 to 789
Gas: +2 to 186
Texas -7
Louisiana +4
BH -> https://bakerhughesrigcount.gcs-web.com/na-rig-count?c=79687&p=irol-reportsother
Lol, looks like they are gearing up to get that 1.4 million barrel a day increase that Rystad is predicting?
Interesting. US land down 91 for the year. Permian down 34 for the year. Yet most folks expect US shale oil to grow by leaps and bounds this year. It hasn’t so far. But will it?
Well, I guess that defines me! Not like most folks? Because I see little (if at all) growth from the US in 2019. Not in the cards.
There is an article on today’s Wall Street Journal about the lack of financing and cash available to frackers. I won’t bother to add a link because it is behind a paywall.
“Frackers Scrounge for Cash as Wall Street Closes Doors”
“Shale drillers are scrambling to raise cash as oil prices plummet and financing from Wall Street dries up.
The companies behind the U.S. fracking boom are turning to asset sales, drilling partnerships and other alternative financing to supplement their cash flow. These forms of funding often come with higher interest rates or carry other downsides, such as giving outside investors a hefty share of future oil and gas production, but are gaining traction as drillers face dwindling access to traditional sources of capital.”
New posts up
http://peakoilbarrel.com/oil-shock-model-scenarios-2/
http://peakoilbarrel.com/oil-shock-model-scenarios/
second link is the open thread non-petrol