Since mid 2014 US MSM propagate the following bogus narrative: There is an oil glut in the USA
market in particular despite the fact that the USA increasing their import of oil. To cry about
glut on oil in the country which imports more and more oil is something new to me. That
can happen only if some produced oil is subpar and nobody wants it (comment from blog post
World oil supply and demand
Econbrowser)
The Great Condensate Con?
We have seen a large year over year increase in US and global
Crude + Condensate (C+C) inventories. For example, EIA data show that US C+C inventories increased
by 100 million barrels from late 2014 to late 2015, and this inventory build has contributed significantly
to the sharp decline in oil prices.
The question is, what percentage of the increase in US and global C+C inventories consists of
condensate?
Four week running average data showed the US net crude oil imports for the last four weeks of
December increased from 6.9 million bpd in 2014 to 7.3 million bpd in 2015. Why would US refiners
continue to import large–and increasing–volumes of actual crude oil, if they didn’t have to, even
as we saw a huge build in US C+C inventories? Note that what the EIA calls “Crude oil” is actually
C+C.
I frequently cite a Reuters article that discussed case histories of refiners increasingly rejecting
blends of heavy crude and condensate that technically meet the upper limit for WTI crude (42 API
gravity), but that are deficient in distillates. Of course, what the refiners are rejecting is the
condensate component, i.e., they are in effect saying that “We don’t want any more stinkin’ condensate.”
Following is an excerpt from the article:
U.S. refiners turn to tanker trucks to avoid ‘dumbbell’ crudes (March, 2015)
In a pressing quest to secure the best possible crude, U.S. refiners are increasingly going
straight to the source.
Firms such as Marathon Petroleum Corp and Delek U.S. Holdings are buying up tanker trucks
and extending local pipeline networks in order to get more oil directly from the wellhead, seeking
to cut back on blended crude cocktails they say can leave a foul aftertaste. . . .
Many executives say that the crude oil blends being created in Cushing are often substandard
approximations of West Texas Intermediate (WTI), the longstanding U.S. benchmark familiar to,
and favored by, many refiners in the region.
Typical light-sweet WTI crude has an API gravity of about 38 to 40. Condensate, or super-light
crude that is abundant in most U.S. shale patches, ranges from 45 to 60 or higher. Western Canadian
Select, itself a blend, is about 20.
While the blends of these crudes may technically meet the API gravity ceiling of 42 at Cushing,
industry players say the mixes can be inconsistent in makeup and generate less income because
the most desirable stuff is often missing.
The blends tend to produce a higher proportion of fuel at two ends of the spectrum: light ends
like gasoline, demand for which has dimmed in recent years, and lower-value heavy products like
fuel oil and asphalt. What’s missing are middle distillates like diesel, where growing demand
and profitability lies.
My premise is that US (and perhaps global) refiners hit, late in 2014, the upper limit of the
volume of condensate that they could process, if they wanted to maintain their distillate and heavier
output–resulting in a build in condensate inventories, reflected as a year over year build of 100
million barrels in US C+C inventories.
Therefore, in my opinion the US and (and perhaps globally) C+C inventory data are fundamentally
flawed, when it comes to actual crude oil inventory data. The most common dividing line between actual
crude oil and condensate is 45 API gravity, although the distillate yield drops off considerably
just going from 39 API to 42 API gravity crude, and the upper limit for WTI crude oil is 42 API.
In 2015, the EIA issued a report on US C+C production (what they call “Crude oil”), classifying
the C+C by API gravity, and the data are very interesting:
Note that 22% of US Lower 48 C+C production consists of condensate (45+ API gravity)
and note that about 40% of US Lower 48 C+C production exceeds the maximum API gravity for WTI crude
oil (42 API). The above chart goes a long way toward explaining why US net crude oil imports increased
from late 2014 to 2015, even as US C+ C inventories increased by 100 million barrels, and I suspect
that what is true for the US may also be true for the world, in regard to the composition of global
C+C inventories.
Following is my analysis of global C+C production data versus estimated global crude oil production
data, through 2014, using the available data bases:
How Quickly Can US Tight/Shale Operators Cause US C+C Production to Increase?
Because of equipment, personnel and financial constraints, in my opinion it is going to take much
longer than most analysts expect for US operators to ramp up activity, even given a rising price
environment.
Except for the 2008 “V” shaped price decline (which bottomed out in December, 2008), and the corresponding
US rig count decline, the US (oil and gas) rig count has been around 1,800 to 2,000 in recent years.
Note that it took about five years to go from around 1,000 rigs in 2003 to around 2,000 rigs in 2008,
and it even took two years to go from around 1,000 rigs in 2009 to around 2,000 rigs in 2011.
And assuming a 15%/year rate of decline in existing US C+C production and assuming a 24%/year
rate of decline in existing US gas production, the US has to put on line around 1.5 million bpd of
new C+C production every year and around 17 BCF per day of new gas production every year, just to
offset declines from existing wells. Based on 2013 EIA data, the estimated annual volumetric loss
of production from existing US gas production exceeds the annual dry gas production of every country
in the world, except for the US and Russia.
Generally the idea of oil glut in the USA and simultaneously increasing imports is something from
Orwell novel 1984, where is was called doublespeak. If you’re an oil producer, you don’t pump oil unless
you have orders for it. If you pump oil without orders, then you need your own storage to store it.
You don’t ship any oil without getting paid for it. So oil glut theory claim that they are producers
which have oil stored instead of shipped to customers and nobody wants this oil. So it is rotting in
storage instead. And this bogus "theory" is propagated by MSM for more then 18 month now.
The best example of article that subscribes to this fallacy I found in NYT:
The world is awash in crude
oil, with enough extra produced last year to fuel all of Britain or Thailand. And the price of
oil will not stop falling until the glut shrinks.
The oil glut — the unsold crude that is piling up around the world — is a quandary and a source
of investor anxiety that once again rattled global markets on Friday.
As prices have dropped, the amount of excess production has been cut in half over the last six
months. About one million barrels of extra oil is now being dumped on the markets each day.
But that means the glut is still continuing to grow, and it could take years to work through
the crude that is being warehoused, poured into petroleum depots or loaded onto supertankers for
storage at sea.
The shakeout will be painful, taking an even bigger toll on companies, countries and investors.
I think the author never saw a real oil tanker and does not understand how much it costs to keep
oil in tanker for, say, a year. Regular lease of 200 barrel oil truck is around $4000 a month.
and at $40 the cost of 200 barrels is just $8000. So don't try this in your backyard ;-).
An ultra-large crude carrier, with a 3 million barrel capacity can well cost
around $40,000-60,000 a day. So in one day you burn 1000-1500 barrels (if we assume 40 pre barrel) of
your stored oil. That comes to 10-15% of stored oil in one year just in leasing costs (reuters.com)
As this is a skeptical page, one thing the creates strong doubts in MSM coverage of the current oil
prices slump is the idea of oil glut and Saudis supposed decision to "defend their share of the market"
by supposedly flooding the market with oil (in reality they were unable significantly raise their exports
(only by 0.3 Mb/d in 2016) and used predatory pricing since mid 2014 to slam the oil prices).
There are strong indications that that was the political decision make by Saudi elite to hurt
Iran after decision to lift sanctions was made by G7+Russia in mid 2014. It is due to this decision
the country started to dump their oil on the market at artificially low prices undercutting
other producers. They simply presented discount for each region they sell for their oil, essentially
putting a price on each barrel they sold.
But to cry about glut on oil in the country that imports more and more oil is something new to me.
This is something from Orwell novel 19884 and is called doublespeak. and that's was exactly the
situation with the USA in 2015. So MSM are deceiving the public. But why and what is the real situation,
if we can decipher it ?
The first thing to understand is that at a given stage of developing of drilling and other related
technologies there is such thing as minimal price of oil below which production can be continued only
at a loss. After all a well often costs $8 million, which need to be amortized for life of well. Which
in case of shale/tight oil is approximately five-six years with more half of oil extracted in the first
two years. The cost is much higher for non-conventional oil producers then for conventional producers.
Canadian tar sand production is even more expensive. Deep water drilling is somewhere in between conventional
and non-conventional oil.
There are different estimates, but most analysts agree that shale/tight oil producers need around
$70-$80 per barrel to be able to pay their debts and around $50-$60 to break even. Slightly less for
deep water oil ($40-$50). The picture below illustrated difference prices to produce different types
of oil ( see below) is reproduced from
What Me Worry About Peak Oil Art Berman, December 27, 2015 ):
This means that production of light oil from tight zones need the price of $70-80 per barrel to break
even. The same applies to extra heavy, deep water, and EOR projects. The implication seems to
be that most industry investments do require higher prices and 2010-2013 were gold age for this types
of oil as prices were close or above $100.
There were elements of glut in condensate and light oil before export restrictions were lifted because
the US refineries were tuned to different type of oil. some even rejected blended oil as output from
such oil in various fractions was different from "classic" oil to which refineries got used and that
was cutting their profits. But that's about it.
The key problem for shale/tight oil companies is that they have chance to stay afloat only at around
$70-$80 per barrel and most get to much debt in 2010-2013 trying to increase production to survive the
current price slump. In North America, 42 companies with $17 billion in debt filed bankruptcy in 2015,
the highest level since the financial crisis in 2008. Of these filings, 36 companies with $16.7 billion
in debt filed in the U.S.
Here is an old article
Crude oil is
surging (May 21, 2015) that asks important question "How we can have a glut of oil one week
and the next we don't "
Crude oil is having a big day. West Texas Intermediate crude oil rallied by more than 3% to cross
back above the $60 per barrel mark. On Wednesday, the Energy Information Administration said that
crude inventories fell by 2.7 million barrels last week.
It was the third straight week of declines in inventories, which have seen a huge swell in recent
months to the highest levels in at least 80 years. Earlier this week, we highlighted comments from
Morgan Stanley, noting that following the oil crash, drillers are now prioritizing profitability
over their output of barrels.
Brent crude oil, the international benchmark, was also higher, up by more than 2%. Here's a chart
showing the jump in WTI...
mad man
I can't understand, as everyone of us that are not greedy SOB's. How we can have a glut
of oil one week and the next we don't . I wouldn't leave this country for another , I'll
stand and fight for what we had in the past!
We have to rid this county of the #$%$S that think they are running it! Dem.'s or GOP's are
all #$%$'s! . This is not for the PEOPLE BY PEOPLE any more. WE ALL have to try and fix it .
H e
Crude is surging because the US dollar has no backbone anymore and losing it's world's reserve
currency status.
okeydokey
Market manipulation. Nothing more. As for Business Insider, this is a propaganda rag.
heybert17
I really enjoy reading all the expert opinions on oil. One says it will plummet, another
says it will surge, and another says it will stay steady. What are these people "experts" of?
It can't be oil or they would all say the exact same thing.
I agree with your post about market dynamics between customers having to pay through
their purchasing power in order to retire loans created by financial industry for oil companies.
But there are a few things that make this oil crash little bit “strange” to say at least:
OPEC (and mainly Saudis + GCC) did actually something by not doing anything and that is
refusing to cut their production. Well that is “man made” decision as Oman oil minister said
and not decision by invisible hand of market. I interpret this mainly as political decision
and not economical.
Second. Wall Street was pretty much shocked if not pissed by that Saudi decision. I
interpret that to be political reaction as well.
There is no worldwide collapse of demand that justify 65-70% fall of the oil price.
I am sorry but Wall Street is creating ninja loans for cars, student loans, mortgages from
the thin air with the same speed in the US. I would say that is political decision as well.
Worldwide collapse is not happening as of now either that would justify 65-70% drop of price.
Contraction is happening in Europe but very very gradually except in some marginal countries
like Greece, and war torn countries in ME and Africa. But these marginal countries did not
even have any big consumption to begin with.
Shale oil producers based on their balance sheet were bankrupt from Day 1. Why LTO
even got the loans to begin with? That is also political decision and not an economic. Why
are we waiting even a year after low prices for any major mergers, buyouts or bankruptcies?
I am sorry but 100% of LTO are bankrupt so why Wall Street is extending and pretending and
keeping them on a life support? Well it is again political decision.
So yes there are some market dynamics around this oil crash but there are a lot of political
dynamics as well.
To me too such a dramatic drop of oil prices looks like an engineered event, and is not
only the result of supply and demand discrepancies. I think coming online way too many projects
served a role, but not a decisive role. There was a political will to achieve that result.
One factor that might be in play ( it is NOT 100% reliable info) is that Saudis appropriated
all or large part of Iran quota during sanctions period.
So on July 14, 2014, when agreement about lifting sanctions was reached, Iran asked to Saudis
to compensate them for all this period. Saudis refused and started all this fun with declarations
that they will defend their market share by all means possible.
Obama was surprisingly strongly “pro-deal”: On Tuesday Obama promised to use his veto on any
domestic attempts to undermine the deal. “I am confident that this deal will meet the national
security needs of the United States and our allies, so I will veto any legislation that prevents
the successful implementation of this deal,” he said.”
Subsequently “sell as much as you can” regime for all OPEC members was instituted during the
last OPEC meeting — no countries quotas anymore. Which, in a way, is the dissolution of OPEC.
So this “conspiracy theory” presupposes that this was the way Saudis reacted to lifting Iran
sanctions, which threatened their share of oil market and also empowered their bitter regional
enemy due to high oil prices. And they probably were angry as hell about the US administration
duplicity — betrayal of the most reliable ally in the region, after the same trick with Mubarak.
Also it might well be that the agreement to lift sanctions from Iran was explicitly designed
as a perfect Trojan horse for dropping oil prices to ease pressure from G7 economies which were
in “secular stagnation” state. With Europe suffering from the cut from Russian market. In this
case this was a real masterpiece of “divide and conquer” strategy.
I don’t pay too much attention to the price because the price is just the consequence
of what buyers and sellers agree on. So there is no “engineering” in the classic sense of how
we interpret in the real life. What bothers me is the amount of new and unprofitable shale oil
that come to the market in the relatively short period of time. Well that is political engineering.
I thought for a while that this is all classic bubble of greed but then that did not make
sense either. We know that bankers like bubbles because they always make money on swings, either
going up or down. And that is ok with me; I accept that is how things work on this planet. But
they could make bubbles with tulips and make money too? It has been done before. Oil is little
bit different. You don’t piss oil on these swings when you are not making any money even on upswing.
So it is kind a troubling to see what is really going on. It looks to me that some breakdown
of communication happened between major oil producers and major bankers. But time will tell.
This is ,of course, hypothesis by Eric Zuesse, and the idea that the USA elite decided to
abandon EU elite is somewhat questionable, but some of his consideration are interesting...
Notable quotes:
"... Yeah, its the defense contractors. It has nothing to do with the zillions of cars that clog every fucking freeway in this country every morning and every evening, 7 days a week. Its not the assholes cruising around in monster trucks alone, just to show off their stupid trucks. It has nothing to do with the the zillions of jets screaming through the skies carry all those fat assholes to meetings all over the world for no reason. It has nothing to do with the billions of barrels of oil that come to the US on tankers as long as city blocks filled constantly day and night. ..."
The following is entirely from open online sources that I have been finding to be
trustworthy on these matters in the past. These sources will be linked-to here; none of this
information is secret, even though some details in my resulting analysis of it will be entirely
new.
It explains how and why the bottom-line difference between Donald Trump and Barack Obama,
regarding US national security policies, turns out to be their different respective estimations
of the biggest danger threatening the maintenance of the US dollar as the world's leading or
reserve currency. This has been the overriding foreign-policy concern for both Presidents .
Obama placed as being the top threat to the dollar, a breakaway of the EU (America's largest
market both for exports and for imports) from alliance with the United States. He was
internationally a Europhile. Trump, however, places as being the top threat to the dollar, a
breakaway of Saudi Arabia and of the other Gulf Arab oil monarchies from the U.S. Trump is
internationally a Sunni-phile: specifically a protector of fundamentalist Sunni monarchs -- but
especially of the Sauds themselves --
and they hate Shia and especially the
main Shia nation, Iran .
Here's how that change, to Saudi Arabia as being America's main ally, has happened --
actually it's a culmination of decades. Trump is merely the latest part of that process of
change. Here is from the US State Department's official
historian , regarding this history:
By the 1960s, a surplus of US dollars caused by foreign aid, military spending, and
foreign investment threatened this system [the FDR-established 1944 Bretton Woods gold-based US dollar as
the world's reserve currency ], as the United States did not have enough gold to cover
the volume of dollars in worldwide circulation at the rate of $35 per ounce; as a result, the
dollar was overvalued. Presidents John F. Kennedy and Lyndon B. Johnson adopted a series of
measures to support the dollar and sustain Bretton Woods: foreign investment disincentives;
restrictions on foreign lending; efforts to stem the official outflow of dollars;
international monetary reform; and cooperation with other countries. Nothing worked.
Meanwhile, traders in foreign exchange markets, believing that the dollar's overvaluation
would one day compel the US government to devalue it, proved increasingly inclined to sell
dollars. This resulted in periodic runs on the dollar.
It was just such a run on the dollar, along with mounting evidence that the overvalued
dollar was undermining the nation's foreign trading position, which prompted President
Richard M. Nixon to act, on August 13, 1971 [to end the convertibility of dollars to
gold].
When Nixon ended
the gold-basis of the dollar and then in 1974 secretly switched to the current oil-basis,
this transformation of the dollar's backing, from gold to oil, was intended to enable the
debt-financing (as opposed to the tax-financing, which is less acceptable to voters) of
whatever military expenditure would be necessary in order to satisfy the profit-needs of
Lockheed Corporation and of the other US manufacturers whose only markets are the US Government
and its allied governments, as well as of US extractive industries such as oil and mining
firms, which rely heavily upon access to foreign natural resources, as well as of Wall Street
and its need for selling debt and keeping interest-rates down (and stock-prices -- and
therefore aristocrats' wealth -- high and rtising).
This new system didn't only supply a constant flow of Saudi tax-money to the US Government;
it supplied a constant flow of new sales-orders and profits to the military firms that were
increasingly coming to control the US Government -- for the benefit of both aristocracies: the
Sauds, and America's billionaires.
That was near the end of the FDR-produced 37-year period of US democratic leadership of the
world, the era that had started at Bretton Woods in 1944. It came crashing to an end not in
1974 (which was step two after the 1971 step one had ended the 1944 system) but on the day when
Ronald Reagan entered the White House in 1981. The shockingly sudden ascent, from that moment
on, of US federal Government debt (to be paid-off by future generations instead of by current
taxpayers) is shown, right here, in a graph
of "US Federal Debt as Percent of GDP, 1940-2015" , where you can see that the debt had
peaked above 90% of GDP late in WW II between 1944-1948 , and then plunged during Bretton
Woods, but in 1981 it started ascending yet again, until reaching that WW II peak for a second
time, as it has been ever since 2010 , when Obama bailed-out the mega-banks and their
mega-clients, but didn't bail out the American public, whose finances had been destroyed by
those banksters' frauds, which Obama refused to prosecute; and, so, economic inequality in
America got even more extreme after the 2008 George W. Bush crash, instead of less extreme
afterward (as had always happened in the past).
Above 90% debt/GDP during and immediately following WW II was sound policy, but America's
going again above 90% since 2010 has reflected simply an aristocratic heist of America, for
only the aristocracy's benefit -- all of the benefits going only to the super-rich.
Another, and
more-current US graph shows that, as of the first quarter of 2018, this percentage
(debt/GDP) is, yet again, back now to its previous all-time record high of 105-120%%, which had
been reached only in 1945-1947 (when it was justified by the war).
But can the US Government's extreme misallocation of wealth, from the public to the
insiders, continue without turning this country into a much bigger version of today's Greece?
More and more people around the world are worrying about that. Of course, Greece didn't have
the world's reserve currency, but what would happen to the net worths of America's billionaires
if billionaires worldwide were to lose faith in the dollar? Consequently, there's intensified
Presidential worrying about how much longer foreign investors will continue to trust the
oil-based dollar.
America's political class now have two competing ideas to deal with this danger , Obama's
versus Trump's, both being about how to preserve the dollar in a way that best serves the needs
of 'defense' contractors, extractive firms, and Wall Street. Obama chose Europe (America's
largest market) as America's chief ally (he was Euro-centric against Russia); Trump chose the
owner of Saudi Arabia (he's Saudi-Israeli centric against Iran) -- that's the world's largest
weapons-purchaser, as well as the world's largest producer of oil (as well as the largest
lobbies) .
The Saudi King owns Saudi Arabia, including the world's largest and most valuable oil
company, Aramco, whose oil is the "sweetest" -- the least expensive to extract and refine --
and is also the most abundant, in all of the world, and so he can sell petroleum at a profit
even when his competitors cannot. Oil-prices that are so low as to cause economic losses for
other oil companies, can still be generating profits -- albeit lowered ones -- for King Saud;
and this is the reason why his decisions determine how much the global oil-spigot will be
turned on, and how low the global oil-price will be, at any given time. He controls the value
of the US dollar. He controls it far more directly, and far more effectively, than the EU can.
It would be like, under the old FDR-era Bretton Woods system, controlling the exchange-rates of
the dollar, by raising or lowering the amount of gold produced. But this is liquid gold, and
King Saud determines its price.
Furthermore, King Saud also leads the Gulf Cooperation Council of all other Arab oil
monarchs, such as those who own UAE -- all of them are likewise US allies and major
weapons-buyers.
In an extraordinarily fine recent article by Pepe Escobar at Asia Times, "Oil
and gas geopolitics: no shelter from the storm" , he quotes from his not-for-attribution
interviews with "EU diplomats," and reports:
After the Trump administration's unilateral pull-out from the Iran nuclear deal, known as
the Joint Comprehensive Plan of Action (JCPOA), European Union diplomats in Brussels, off the
record, and still in shock, admit that they blundered by not "configuring the eurozone as
distinct and separate to the dollar hegemony". Now they may be made to pay the price of their
impotence via their "outlawed" trade with Iran.
As admitted, never on the record, by experts in Brussels; the EU has got to reevaluate its
strategic alliance with an essentially energy independent US, as "we are risking all our
energy resources over their Halford Mackinder geopolitical analysis that they must break up
[the alliance between] Russia and China."
That's a direct reference to the late Mackinder epigone Zbigniew "Grand Chessboard"
Brzezinski, who died dreaming of turning China against Russia.
In Brussels, there's increased recognition that US pressure on Iran, Russia and China is
out of geopolitical fear the entire Eurasian land mass, organized as a super-trading bloc via
the Belt and Road Initiative (BRI), the Eurasia Economic Union (EAEU), the Shanghai
Cooperation Organization (SCO), [and] the Asia Infrastructure Investment Bank (AIIB), is
slipping away from Washington's influence.
This analysis gets closer to how the three key nodes of 21st century Eurasia integration
-- Russia, China and Iran -- have identified the key issue; both the euro and the yuan must
bypass the petrodollar, the ideal means, as the Chinese stress, to "end the oscillation
between strong and weak dollar cycles, which has been so profitable for US financial
institutions, but lethal to emerging markets."
It's also no secret among Persian Gulf traders that in the -- hopefully unlikely -- event
of a US-Saudi-Israeli war in Southwest Asia against Iran, a real scenario war-gamed by the
Pentagon would be "the destruction of oil wells in the GCC [Gulf Cooperation Council]. The
Strait of Hormuz does not have to be blocked, as destroying the oil wells would be far more
effective."
And what the potential loss of over 20% of the world's oil supply would mean is
terrifying; the implosion, with unforeseen consequences, of the quadrillion derivatives
pyramid, and consequentially [consequently] of the entire Western financial casino
superstructure.
In other words: it's not the 'threat' that perhaps, some day, Iran will have nuclear
warheads, that is actually driving Trump's concern here (despite what Israel's concerns are
about that matter), but instead, it is his concerns about Iran's missiles, which constitute the
delivery-system for any Iranian warheads: that their flight-range be short enough so that the Sauds will be
outside their range . (The main way Iran intends to respond to an invasion backed by the
US, is to attack Saudi Arabia -- Iran's leaders know that the US Government is more dependent
upon the Sauds than upon Israel -- so, Iran's top targets would be Saudi capital Riyadh, and
also the Ghawar oil field, which holds over half of Saudi oil. If US bases have been used in
the invasion, then all US bases in the Middle East are also be within the range
of Iran's missiles and therefore would also probably be targeted.)
Obama's deal with Iran had focused solely upon preventing Iran from developing nuclear
warheads -- which Obama perhaps thought (mistakenly) would dampen Israel's (and its billionaire
US financial backers') ardor for the US to conquer Iran. Israel had publicly said that their
concern was Iran's possibility to become a nuclear power like Israel became; those possible
future warheads were supposed to be the issue; but, apparently, that wasn't actually the issue
which really drove Israel. Obama seems to have thought that it was, but it wasn't, actually.
Israel, like the Sauds, want Iran conquered. Simple. The nuclear matter was more an excuse than
an explanation.
With Trump now in the White House, overwhelmingly by money from the Israel lobbies (proxies
also for the Sauds) -- and with no equivalently organized Jewish opposition to the pro -Israel
lobbies (and so in the United States, for a person to be anti-Israel is viewed as being
anti-Semitic, which is not at all true, but Israel's lies say it's true and many Americans
unfortunately believe it) -- Trump has not only the Sauds and their allies requiring him to be
against Iran and its allies, but he has also got this pressure coming from Israel: both the
Big-Oil and the Jewish lobbies drive him. Unlike Obama, who wasn't as indebted to the Jewish
lobbies, Trump needs to walk the plank for both the Sauds and Israel.
In other words: Trump aims to keep the dollar as the reserve currency by suppressing not
only China but also the two main competitors of King Saud: Iran and Russia. That's why
America's main 'enemies' now are those three countries and their respective allies.
Obama was likewise targeting them, but in a different priority-order , with Russia being the
main one (thus Obama's takeover
of Ukraine in February 2014 turning it against Russia, next door ); and that difference was
due to Obama's desire to be favorably viewed by the residents in America's biggest export and
import market, the EU, and so his bringing another member (Ukraine) into the EU (which still
hasn't yet been culminated).
Trump is instead building on his alliance with King Saud and the other GCC monarchs, a group
who can more directly cooperate to control the value of the US dollar than the EU can.
Furthermore, both conservative (including Orthodox) Jews in the United States, and also white
evangelical Protestants in the US, are strongly supportive of Israel, which likewise sides with
the Arab oil monarchs against Iran and its allies. Trump needs these people's votes.
Trump also sides with the Sauds against Canada. That's a matter which the theorists who
assert that Israel controls the US, instead of that the Sauds (allied with America's and
Israel's billionaires) control the US, ignore; they ignore whatever doesn't fit their theory.
Of course, a lot doesn't fit their theory (which equates "Jews" with "Israelis" and alleges
that "they" control the world), but people whose prejudices are that deep-seated, can't be
reached by any facts which contradict their self-defining prejudice. Since it defines
themselves, it's a part of them, and they can never deny it, because to do so would be to deny
who and what they are, and they refuse to change that. The Sauds control the dollar; Israel
does not, but Israel does the lobbying, and both the Sauds and Israel want Iran destroyed.
Trump gets this pressure not only from the billionaires but from his voters.
And, of course, Democratic Party billionaires push the narrative that Russia controls
America. It used to be the Republican Joseph R. McCarthy's accusation, that the "commies" had
"infiltrated" , especially at the State Department . So: Trump
kicked out Russia's diplomats, to satisfy those
neocons -- the neoconservatives of all Parties and persuasions, both conservative and
liberal.
To satisfy the Sauds, despite the EU, Trump has dumped the Iran deal . And he did it also to
satisfy Israel, the main US lobbyists for the Sauds. (Americans are far more sympathetic to
Jews than to Arabs; the Sauds are aware of this; Israel handles their front-office.) For Trump,
the Sauds are higher priority than Europe; even Israel (who are an expense instead of a
moneybag for the US Government) are higher priority than Europe. Both the Sauds and Israel
together are vastly higher. And the Sauds alone are higher priority for Trump than are even
Canada and Europe combined . Under Trump, anything will be done in order to keep the Sauds
and
their proxy-lobbyists (Israel) 'on America's side'.
Consequently, Trump's political base is mainly against Iran and for Israel, but Obama's was
mainly against Russia and for the EU. Obama's Democratic Party still are controlled by the same
billionaires as before; and, so, Democrats continue demonizing Russia, and are trying to make
as impossible as they can, any rapprochement with Russia -- and, therefore, they smear Trump
for anything he might try to do along those lines.
Both Obama and Trump have been aiming to extend America's aristocracy's dominance around the
world, but they employ different strategies toward that politically bipartisan
American-aristocratic objective: the US Government's global control, for the benefit of the US
aristocracy, at everyone else's expense. Obama and Trump were placed into the White House by
different groups of US billionaires, and each
nominee serves his/her respective sponsors , no public anywhere -- not even their voters'
welfare.
An analogous example is that, whereas Fox News, Forbes, National
Review, The Weekly Standard, American Spectator, Wall Street Journal, Investors Business Daily,
Breitbart News, InfoWars, Reuters, and AP , are propagandists for the Republican Party ; NPR,
CNN, NBC, CBS, ABC, Mother Jones, The Atlantic, The New Republic, New Yorker, New York
Magazine, New York Times, Washington Post, USA Today, Huffington Post, The Daily Beast , and
Salon , are propagandists for the Democratic Party ; but, they all draw their chief sponsors
from the same small list of donors who are America's billionaires, since these few people
control the top advertisers, investors, and charities, and thus control nearly all of the
nation's propaganda. The same people who control the Government control the public; but,
America isn't a one-Party dictatorship. America is, instead, a multi-Party dictatorship . And
this is how it
functions.
Trump cancelled the Iran deal because a different group of billionaires are now in control
of the White House, and of the rest of the US Government. Trump's group demonize especially
Iran; Obama's group demonize especially Russia. That's it, short. That's America's aristocratic
tug-of-war; but both sides of it are for invasion, and for war. Thus, we're in the condition of
'permanent war for permanent peace' -- to satisfy the military contractors and the billionaires
who control them. Any US President who would resist that, would invite assassination; but,
perhaps in Trump's case, impeachment, or other removal-from-office, would be likelier. In any
case, the sponsors need to be satisfied -- or else -- and Trump knows this.
Trump is doing what he thinks he has to be doing, for his own safety. He's just a figurehead
for a different faction of the US aristocracy , than Obama was. He's doing what he thinks he
needs to be doing, for his survival. Political leadership is an extremely dangerous business.
Trump is playing a slightly different game of it than Obama did, because he represents a
different faction than Obama did. These two factions of the US aristocracy are also
now battling each other for political control over Europe .
The US #1 objective is to protect US$ as the only one reserve currency that is the
foundation of US economic and military power as well as the US economic stability and
prosperity
Zionist Banking Mafia controls US$ and both US major political Parties
The USA can accomplish its goals only by destroying China, Russia, and Iran. The USA
cannot achieve its goals short of having a major military confrontation with China. Russia
is only one power that can provide/satisfy China with raw materials including oil &
gas. However, politically Trump is locked in a corner by the Democratic Party and it's
globalists allies who are trying to destroy Russia due to it's "misguided" policies in
Syria and Iran.
China understands the game and does it's best to confront America. Time is on China's
side. Very shortly China will move it's military to Iran and Syria with Turkey becoming a
serious US headache.
The Bottom Line
Trump and its policies have no chance to succeed neither inside nor outside the USA. The
USA has less than 3-5 years to maintain the present status quo.
Yeah, its the defense contractors. It has nothing to do with the zillions of cars that clog every fucking freeway in this
country every morning and every evening, 7 days a week. Its not the assholes cruising around
in monster trucks alone, just to show off their stupid trucks. It has nothing to do with the
the zillions of jets screaming through the skies carry all those fat assholes to meetings all
over the world for no reason. It has nothing to do with the billions of barrels of oil that
come to the US on tankers as long as city blocks filled constantly day and night.
Its not that, its Lockheed selling them airplanes. Thats how the sand niggers got so much
US money, Lockheed.
What a fucking conspiratorial ass-swipe this guy is.
Eric Zeusse ranks in popularity right along the Gatestone Institute - though Eric may just
be ignorant and opinionated whilst Gatestone is an affirmative disinformation propaganda
organ, both are equally annoying to read. I just came for the comments :).
+1. Eric Zuesse is part-and-parcel of the agenda that the Gatestone Institute
espouses.
Eric Zuesse's real agenda can be revealed by his position on 9/11 (see second link below).
He also blames Obama for everything (he shifts the blame away from Israel onto any other
party which could be blamed due to either direct or indirect ties)
Here is Eric Zuesse in his own words:
Notice the absence of Israel/Zionism
Historic New Harpers Article Exposes Who Controls America
Posted on December 17, 2015 by Eric Zuesse.
"The fundamentalist-Sunni royal family of the Sauds have bought the highest levels of the
U.S. government in order to control U.S. foreign policies, especially the ongoing wars to
take down the governments of Iraq, Libya, Syria, and ultimately (they hope) of Russia itself,
which latter nation has allied itself instead with Shia countries. The controlling entities
behind American foreign policies since at least the late 1970s have been the Saud family and
the Sauds' subordinate Arabic aristocracies, which are the ones in Qatar (the al-Thanis),
Kuwait (the al-Sabahs), Turkey (the Turkish Erdoğans, a new royalty), and UAE (its six
royal families: the main one, the al-Nahyans in Abu Dhabi; the other five: the al-Maktoums in
Dubai, al-Qasimis in Sharjah, al-Nuaimis in Ajman, al-Mualla Ums in Quwain, and al-Sharqis in
Fujairah). Other Saudi-dominated nations -- though they're not oil-rich (more like Turkey in
this regard) -- are Pakistan and Afghanistan."
". But, perhaps, one can safely say that the alliance between the U.S. aristocracy and the
royal Sauds, is emerging as a global dictatorship, a dictatorial type of world government.
Because, clearly: those two aristocraciues have been, to a large extent, ruling the world
together, for several decades now. From their perspective, jihadists are themselves a weapon,
not merely a political nuisance.
This is a more realistic explanation of America's decades-long catastrophic failures to
make significant progress in eliminating even a single one of the numerous jihadist groups
around the world: that's how things have been planned to be. It's not just 'intelligence
errors' or 'not being tough enough.' Those 'explanations' are just cover-stories, propaganda,
PR from the aristocrats. It's skillful 'crowd control': keeping the people in their 'proper'
places."
9/11: Israel Didn't Do It; The Plan Was Co-Led by U.S. & Saud Governments
By Eric Zuesse
March 15, 2018
"9/11 was a well-planned operation, whatever it was. Substantial money paid for it, but
little if any of that came from either Iran or Israel. It all came from
fundamentalist-Sunnis.
And, if all of the money was fundamentalist-Sunni, then the only non-Sunni people who
could have been involved in planning the operation would have been George W. Bush and his
friends
The problem certainly isn't Jews nor Muslims. The problem is the aristocracy, which
controls Saudi Arabia, and the aristocracy which controls Israel, and the aristocracy which
controls America. The victim is the public, and the victimizer is the aristocracy. It's not
just 9/11."
Obama's Nazis
Posted on August 17, 2014 by Eric Zuesse.
(Zuesse's obsession with the word nazis or Nazis)
"What Obama has done and is doing in Ukraine is historic, like what Adolf Hitler did, and
like what Slobodan Milosevic* did, and like other racist fascists have done; and he, and we
Americans (if we as a nation continue accepting this), will be remembered for it, like they
and their countries were. Evil on this scale cannot be forgotten. No matter how solidly the
American "news" media hide this history, it is already solidly documented for the history
books. Obama will be remembered as the worst President in U.S. history, just as the
racist-fascist or 'nazi' leaders of other countries are."
Jewish Billionaire Finances Ukraine's Aydar SS Nazi Troops
Posted on April 7, 2015 by Eric Zuesse.
"The hyper-nationalist Ukrainian-Israeli billionaire Ihor Kolomoysky, a friend of the
Obama White House and employer of Joe Biden's son Hunter Biden, is a major donor to far-right
Ukrainian causes. He sides with the followers of Stepan Bandera, the pro-Nazi Ukrainian
leader whom Hitler ditched when Bandera made clear that he wanted Ukraine to be nazi but
independent of Germany's Nazi Party. Briefly, Bandera's #2 in command, Yaroslav Stetsko, led
nazi Ukraine, and approved the slaughter of thousands of Jews there."
"Zuesse is pushing Zionist lies. One of the links in the article goes to a Reuters story,
"Exclusive – Over 100 Russian soldiers killed in single Ukraine battle – Russian
rights activists," that claims to get its info from the "Russian presidential human rights
council."
If you want to read more lies by Zuesse, go to this "AMAZON" link to read reviews of his
book, "Iraq War: The Truth," in which Zuesse claims that GW Bush invaded Iraq to thank Jesus
for his alcohol and drug addiction cure and to neuter the International Criminal Court???
There is one comment lavishing praise on Zuesse's book about the Iraq War by David
Swanson, another Zionist tool and BS artist, who's been outed in the past by the blog,
"American Everyman."
See how fast the internet warriors are to claim the article is rubbish, and not reflecting
reality. No argument to back up their propaganda, but that's not important. Must be
depressing running the Sunday evening shift in the cubicle farm; all the boys in their neatly
pressed uniforms, clicking away to keep us safe from democracy. Well done lads, another day
keeping the evil Russians /Iranians at bay.
I actually find it interesting to see what shakes the foundations, and this article seems
to be something that they don't like, so probably worth a re-read just to get all the
nuances. Of course, the author suggesting that it is not Jews running America will get short
shrift from some commenters, but it is certainly interesting to have pointed out, finally,
that Israel is a net drain, and Saudi Arabia an enormous gain for the US. We always say to
follow the money, and whilst Israel is good profit for the MIC, Saudi Arabia IS the
petrodollar system - mustn't forget that. No oil in Saudi Arabia, no petrodollar. I wonder
how long they have left until it's all gone? That would probably be the over-riding factor in
deciding war with Iran.
I always wondered why the EU did nit make bigger efforts to replace the petrodollar with
the petroeuro but nobody wants to end up as Ghadaffi or Saddam Hussein who threatened to do
just that. Iran has also repeatedly threaten to that. Also Putin has recently said that
Russia wants to move away from the petrodollar. He must know that that is dangerous for one's
health so there must be some sort of alliance against the dollar being formed.
"... "As we go more towards (the fourth quarter) that's when we really see the risk of prices going well into the 80s and potentially even into the 90s but very critical is how much Iranian production we lose," ..."
"... "A lot of people think China can just buy all of the Iranian oil but they came out and said: 'Yes, we may not reduce but we are not going to increase our intake either.' So, you could see a significant crunch in terms of lost supplies into the market and then that obviously means higher prices," ..."
Looming US sanctions against Iran will likely hit Tehran's oil sales abroad, and
it could lead to a price spike in oil contracts. The first round of renewed US sanctions will
take effect on Tuesday with the harshest sanctions, potentially targeting Iran's oil industry,
expected to return in early November.
"As we go more towards (the fourth quarter) that's when we really see the risk of prices
going well into the 80s and potentially even into the 90s but very critical is how much Iranian
production we lose," Amrita Sen, chief oil analyst at Energy Aspects,
told CNBC Monday.
Oil was trading at $74 per barrel of Brent benchmark, while the US West Texas Intermediate
stood at $69.77 on Monday.
"A lot of people think China can just buy all of the Iranian oil but they came out and
said: 'Yes, we may not reduce but we are not going to increase our intake either.' So, you
could see a significant crunch in terms of lost supplies into the market and then that
obviously means higher prices," the analyst added.
The new US sanctions will likely slash oil supply. The last time Iran was sanctioned, it
lost half of its exports, which have now returned to 2.4 million barrels per day. Many analysts
have said that this time, the negative impact on Iranian oil trade will be less significant,
and Iran will lose only half of the previous loss.
Meanwhile, other major producers are ramping up their output. This July, OPEC, Russia and
other significant players agreed to gradually raise output for fear of supply deficit on the
market. OPEC+ countries will increase production by 1 million barrels per day, of which 200,000
bpd will be provided by Russia.
Earlier estimates of OPEC have now changed, and there is no increase from June. Probably, a
slight decrease from SA. From OPEC sources, not Platts. I think they would start increasing
if Iran drops, but not much otherwise. I think Sauds and Kuwait joint venture is set up for
that potential.
Changing the way I gage things, into a much simpler format. Now, I look at world inventory
drops, and look at current increases from OPEC and US. Neither will change much, so inventory
drops should continue. Opec needs to come up with a lot more, or it will look damn scary in
2019. With pipeline constraints, Canada is pretty much out of the picture for further
increases this year, and not much, elsewhere.
Yes the outlook for OPEC's July production is looking more flat now. This is a strange
situation because Platts is one of OPEC secondary sources and so I assume that they see all
the numbers
Thank you. This news confirms that world production is stagnating. Possibly very close to the
decline. We will have to be attentive to the inventories. It will be the first place that the
nations get hold of in order to supply themselves with oil.
The US
Congress has revived
the so-called "NOPEC" bill
for countering OPEC and OPEC+.
Officially called the "
No
Oil Producing and Exporting Cartels Act
",
NOPEC is the definition of so-called
"lawfare" because it enables the US to extra-territorially impose its domestic legislation on
others by giving the government the right to sue OPEC and OPEC+ countries like Russia because of
their coordinated efforts to control oil prices.
Lawsuits, however, are
unenforceable
, which is why the targeted states'
refusal to abide by the US courts' likely predetermined judgement against them will probably be
used to trigger sanctions under the worst-case scenario, with this chain of events being catalyzed
in order to achieve several strategic objectives.
The first is that the US wants to break up the
Russian-Saudi
axis
that forms the core of OPEC+, which leads to the second goal of then unravelling the
entire OPEC structure and heralding in the free market liberalization of the global energy
industry.
This is decisively to the US' advantage as it seeks to become an energy-exporting superpower,
but it must neutralize its competition as much as possible before this happens, ergo the
declaration of economic-hybrid war through NOPEC. How it would work in practice is that the US
could threaten primary sanctions against the state companies involved in implementing OPEC and
OPEC+ agreements, after which these could then be selectively expanded to secondary sanctions
against other parties who continue to do business with them.
The purpose behind this approach is to intimidate the US' European vassals into
complying with its demands so as to make as much of the continent as possible a captive market of
America's energy exporters, which explains why Trump also wants to
scrap
LNG export licenses to the EU
.
If successful, this could further erode Europe's shrinking strategic independence and also
inflict long-term economic damage on the US' energy rivals that could then be exploited for
political purposes.
At the same time, America's recently unveiled "
Power
Africa
" initiative to
invest $175 billion
in gas projects
there could eventually see US companies in the emerging energy frontiers
of
Tanzania
,
Mozambique
,
and elsewhere become important suppliers to their country's Chinese rival, which could make
Beijing's access to energy even more dependent on American goodwill than ever before.
If looked at as the opening salvo of a global energy war being waged in parallel with the
trade
one
as opposed to being dismissed as the populist piece of legislation that it's being
portrayed as by the media,
NOPEC can be seen as the strategic superweapon that it
actually is,
with its ultimate effectiveness being dependent of course on whether it's
properly wielded by American decision makers.
It's too earlier to call it a game-changer because it hasn't even been promulgated
yet, but in the event that it ever is, then it might go down in history as the most impactful
energy-related development since OPEC, LNG, and fracking.
No way US can manipulate oil trade at this
point without hurting themselves or helping
their "enemies". Cause and effect, just think
it through.
The world needs energy, Russia has
energy...and a real surplus for sale. The US
is a net energy consumer with no surplus.
China needs energy in a big way. Trying to
cut off Russian and Iranian oil and trying to
blow up the Chinese economy are acts of war.
The West realizes there is no way they can
survive in their current status of moar with
that kind of competition out there. The
BRICST now constitute $17 trillion in
combined GDP. They have the energy sources
(Russia and Iran), they have the
manufacturing base (China), they have the
agricultural base (Russia, Brazil, South
Africa), and they have plenty of
customers.....even outside the BRICST union.
That is a formidable competitive force to
face when you are an economy structured on
infinite growth on a finite planet......that
you control less and less of each year.
"... "As we go more towards (the fourth quarter) that's when we really see the risk of prices going well into the 80s and potentially even into the 90s but very critical is how much Iranian production we lose," ..."
"... "A lot of people think China can just buy all of the Iranian oil but they came out and said: 'Yes, we may not reduce but we are not going to increase our intake either.' So, you could see a significant crunch in terms of lost supplies into the market and then that obviously means higher prices," ..."
"... For more stories on economy & finance visit RT's business section ..."
"As we go more towards (the fourth quarter) that's when we really see the risk of prices
going well into the 80s and potentially even into the 90s but very critical is how much Iranian
production we lose," Amrita Sen, chief oil analyst at Energy Aspects,
told CNBC Monday.
Oil was trading at $74 per barrel of Brent benchmark, while the US West Texas Intermediate
stood at $69.77 on Monday.
"A lot of people think China can just buy all of the Iranian oil but they came out and
said: 'Yes, we may not reduce but we are not going to increase our intake either.' So, you
could see a significant crunch in terms of lost supplies into the market and then that
obviously means higher prices," the analyst added.
The new US sanctions will likely slash oil supply. The last time Iran was sanctioned, it
lost half of its exports, which have now returned to 2.4 million barrels per day. Many analysts
have said that this time, the negative impact on Iranian oil trade will be less significant,
and Iran will lose only half of the previous loss.
Meanwhile, other major producers are ramping up their output. This July, OPEC, Russia and
other significant players agreed to gradually raise output for fear of supply deficit on the
market. OPEC+ countries will increase production by 1 million barrels per day, of which 200,000
bpd will be provided by Russia.
The US Congress has revived the so-called "NOPEC" bill for countering OPEC and OPEC+.
Officially called the " No Oil Producing and
Exporting Cartels Act ", NOPEC is the definition of so-called "lawfare" because it enables
the US to extra-territorially impose its domestic legislation on others by giving the
government the right to sue OPEC and OPEC+ countries like Russia because of their coordinated
efforts to control oil prices.
Lawsuits, however, are unenforceable , which is why the targeted states' refusal to abide by
the US courts' likely predetermined judgement against them will probably be used to trigger
sanctions under the worst-case scenario, with this chain of events being catalyzed in order to
achieve several strategic objectives.
The first is that the US wants to break up the Russian-Saudi axis that
forms the core of OPEC+, which leads to the second goal of then unravelling the entire OPEC
structure and heralding in the free market liberalization of the global energy industry.
This is decisively to the US' advantage as it seeks to become an energy-exporting
superpower, but it must neutralize its competition as much as possible before this happens,
ergo the declaration of economic-hybrid war through NOPEC. How it would work in practice is
that the US could threaten primary sanctions against the state companies involved in
implementing OPEC and OPEC+ agreements, after which these could then be selectively expanded to
secondary sanctions against other parties who continue to do business with them.
The purpose behind this approach is to intimidate the US' European vassals into complying
with its demands so as to make as much of the continent as possible a captive market of
America's energy exporters, which explains why Trump also wants to scrap LNG export licenses to the EU .
If successful, this could further erode Europe's shrinking strategic independence and also
inflict long-term economic damage on the US' energy rivals that could then be exploited for
political purposes. At the same time, America's recently unveiled " Power Africa " initiative to invest $175 billion in gas projects there
could eventually see US companies in the emerging energy frontiers of Tanzania
,
Mozambique , and elsewhere become important suppliers to their country's Chinese rival,
which could make Beijing's access to energy even more dependent on American goodwill than ever
before.
If looked at as the opening salvo of a global energy war being waged in parallel with the
trade
one as opposed to being dismissed as the populist piece of legislation that it's being
portrayed as by the media, NOPEC can be seen as the strategic superweapon that it actually is,
with its ultimate effectiveness being dependent of course on whether it's properly wielded by
American decision makers.
It's too earlier to call it a game-changer because it hasn't even been promulgated yet, but
in the event that it ever is, then it might go down in history as the most impactful
energy-related development since OPEC, LNG, and fracking.
Dearth of investments in oil projects mean a spike in prices above $100 could be on the
horizon
Crude across the globe is being used up faster than it is being replaced, raising the
prospect of even higher oil prices in the coming years. The world isn't running out of oil. Rather, energy companies and petro-states -- burned by
2014's price collapse -- are spending less on new projects, even though oil prices have more
than doubled since 2016. That has sparked concerns among some industry watchers of a massive
price spike that could hurt businesses and consumers. The oil industry needs to replace 33 billion barrels of crude every year to satisfy anticipated
demand growth, particularly as developing countries like China and India are consuming more
oil. This year, new investments are set to account for an increase of just 20 billion barrels,
according to data from Rystad Energy.
The industry's average decline rate -- the speed at which output falls without field
maintenance or new drilling -- was 6.3% in 2016 and 5.7% last year, the Norway-based
consultancy said. In the four years before the crash, that decline rate was 3.9%.
Any shortfall in supply could push prices higher, similar to when oil hit nearly $150 a
barrel in 2008, some industry participants say. "The years of underinvestment are setting the scene for a supply crunch," said Virendra
Chauhan, an oil industry analyst at consultancy Energy Aspects. He believes a production
deficit could come as soon as the end of next year, potentially pushing oil above $100 a
barrel.
SNIP In parts of Brazil and Norway, decline rates are already above 10-15%, Energy Aspects' Mr.
Chauhan said. Output from Venezuela's aging fields fell by more than 700,000 barrels a day over
the past year, according to the IEA. In June, Angola's output hit a 12-year low, while Mexico's
production is down nearly 300,000 barrels a day since the middle of 2016, despite efforts to
open up the industry and reverse declines, the IEA said. "Nobody is really stepping in," said Doug King, chief investment officer of the $140 million
Merchant Commodity hedge fund. "People still got burned by the downturn."
Rystad has first half figures for discoveries a bit better than last year, though more on the
gas side than oil, but there was a billion barrel Equinor discovery in Brazil this week that
will make things look better. I thought things were worse, partly because I assumed the
Guyana discoveries would count as appraisals and be back dated against 2016 and 2017, but it
looks like they are new fields. Overall though it still shows a big drop over the past few
years.
A "remarkable" recovery from "abnormally" low levels – complete bollocks, and pretty
close to self-contadictory. Everything is, and always will be, awesome in the oilprice
universe, if not they'd lose their revenue stream.
x
Ignored says:
07/27/2018 at 3:53 am Iran would not try to block anything unless it is under attack by the
US. The Pentagon is opposed to such an attack, but Trump is heavily influenced by Netanyahu and
is advised by the same neocons who got the US into the fiasco in Iraq. Given the inability of
the US Congress to enforce the constitution by denying the Prsident to start a war without a
congressional declaration of war, it seems the USA may be on its way to destroy the world
economy to please an extremist Israeli right wing government.
I write destroy the world economy because it's doubtful Iran would respond as anticipated by
the Americans, who have a tendency to fight wars with strategies based on previous wars and an
excess of complex gadgets and extremely expensive technology. I don't know what they have in
mind, but I'm sure it would be unexpected, calibrated to avoid nuclear retaliation, and may
evolve over time. But I'm sure others will see the risks, and the oil market will take off into
the $100's and possibly $200's unless there's adults left in the USA senate to block this
craziness.
Hightrekker x
Ignored says:
07/26/2018 at 9:51 am I agree– and with all those KSA installations just
15 minutes away by unstoppable missile technology (1970 midrange seems a little
hard for current technology), we have a quandary, not a problem.
Reply
Fernando Leanme
x Ignored says:
07/27/2018 at 3:57 am Exactly. But I'm not sure US National Security advisor
Bolton knows anything about low technology midrange missiles and drones, some of
which, in a pinch, can be piloted by small light weight kamikaze martyrs.
Eulenspiegel x
Ignored says:
07/26/2018 at 10:24 am The worst thing for a date to guess is politics.
There are 10 countries that have to grow oil production to avoid peak oil –
these with still big reserves.
One knocked out itself – Venezuela
One is under attack from the USA – Iran
Irak isn't that stable, either.
A hot war can break out every moment, or a civil war devasting and blocking
infrastructure for years, while other countries deplete.
Or peace can come and these ressources can get used.
These combined 10 mb/d alone will determine peak oil – by 5 years or more in
either direction. These 10 mb/day can't be replaced by russion oil tsars, US rednecks
with too much Wallstreet money or Saudis opening secret valves of instant oil wonder
production.
Venezuela can get a new government and increase production by a big amount, helped
by international money. It has the ressources to get one of the big producers when the
tar oil is lifted.
So in my eyes, it looks like somewhere between 2020 and 2030, perhaps even
later.
Couldn't agree with you more regarding OPEC reserve estimates, they are all full of
shit, and no one except a handful of people in those countries would know how much they
have left.
Solving this peak oil timing is more similar to a quantum mechanics problem rather
than a Newtonian mechanics one. It complexity, lack of transparency and political and
economic implication make it impossible to have a deterministic answer, its pure
probability, and also speculations.
Like you i think all these projections are wrong. Maybe we will extract a lot more
oil with newer technologies or new field discoveries and end up cooking the planet with
climate change, and we won't see a "peak oil" for 100s of years who knows.
TechGuy x
Ignored says:
07/26/2018 at 2:54 pm "The peak oil experts were dreadfully wrong with their HL 15
years ago, so what prevents their being just as wrong now? "
Why is Oil at $70/bbl? Back in 1999 its was about $10/bbl. If there no supply
constraints why did the price increase ~7 fold in less than 20 years? Also why the need
to to drill for Shale Oil (Source Rocks) & develop in Deep & ultradeep
water?
Conventional oil peaked in 2005, All the growth is coming from offshore & Shale.
New Oil discoveries have dropped off the cliff. We found almost nothing in 2017. Oil
Discoveries peaked in 1960s and been in permanent decline. Thus if we are discovery
less and less new oil fields every year, below the rate of consumption, Oil production
will have to fall to match discoveries at some point in the future.
Other clues:
1. Oil Majors perfer to drill on Wall street (aka using debt to fund stock buybacks)
instead of developing new fields for future production.
2. Shale Debt: Shale drilling never made a profit, except for using OPM (other People's
money) to fund CapEx\OpEx.
3. US invaded or targeted with Regime change in Middle East Oil producing nations. Only
Iran remains and you can already hear the War drumbeats for Iran.
Reply
Michael B x
Ignored says:
07/26/2018 at 3:31 pm Indeed, and thanks. Note that your answer has to do not
with HL but with obvious signs & symptoms. Believe me, I've been watching, too.
The uncertainty is killing me.
Fernando Leanmex
Ignored says:
07/27/2018 at 4:25 am Michael, I have never been a peak oiler. I come at this from
a different perspective: about 30 years ago I noticed exploration results were
decaying, and started working in areas which would allow producing oil and gas in the
far future from sources we weren't tapping much at the time.
I remember sitting in a meeting around 1990 and suggesting to managers in a
committee I was briefing that we needed to focus on locking up hydrocarbon molecules,
wherever they were, cut down exploration and use that money on technology and getting
access.
This is one reason why eventually I got involved in gas conversion to liquids, heavy
oil, and the former Soviet Union, which to us appeared like a happy hunting ground,
including its Arctic targets in the Barents, Kara, Yamal, etc. I also had colleagues
who went into deep water, EOR, North America Arctic, and of course the hydraulic
fracturing of vertical horizontal wells drilled in low perm formations.
So in my case I've been about 30 years now working on replacing conventional oil
barrels with more difficult barrels. And those difficult barrels require higher prices.
So the question is, what can poor countries afford?
Reply
Michael B x
Ignored says:
07/27/2018 at 5:13 am So, "not a peak oiler" means you think the fate of
conventional oil is not really all that important, and cost is the ultimate
arbiter, not the resource?
Reply
Fernando Leanme
x Ignored says:
07/27/2018 at 6:19 am Not a peak oiler means I don't use Hubbert
Linearization or similar techniques. In the past, my job has included the
estimate of resources (not reserves). The preferred technique was to estimate
technical reserves, meaning we supposedly didn't focus on economics. But I
couldn't have staff working out numbers doing endless iterations and model runs
for highly speculative cases, so I gave them the guidance to assume a really
high price, a higher OPEX and CAPEX environment, and prepare conceptual field
redevelopments and marginal field developments or targeting really low quality
reservoirs. We devoted about 5% of the time budget for this effort. And I told
head office I wasn't about to use more manpower working such hypothetical
figures, because we had to focus on reserve studies, and preparing projects to
move reserves along the reserve progression pathway so we could meet our
targets.
The fate of conventional oil is already written, in the sense that most of
the extra oil we get from conventional fields comes from redevelopments which
rely on higher prices, and EOR. The typical field with say 45% recovery factor
can be pounded hard to push it to say 55%, going above 55% gets mighty hard,
and pushing to 60% is nearly impossible. So there are limits, which involve the
huge amount of resources (cash, steel, chemicals, and people) we use up to get
those extra barrels.
One issue to consider is that these redevelopments which include EOR are not
contributing that much extra rate. They stop decline, get a slight bump, and
then yield a slower decline rate for 10-20 years. This means investments take
tine to payout and if the world is suffering from acute shortages they don't
help that much. The on,y fast reaction comes from fracturing "shales" and low
permeability sands, infills in newer fields, and workovers.
Reply
Michael B
x Ignored says:
07/27/2018 at 6:53 am Thanks. If you were doing this in the 90s, sounds
like you were "predicting" the future!
Reply
Hickory
x Ignored says:
07/27/2018 at 9:20 am Sure sounds like a long explanation for your
understanding of 'peak conventional oil'. Nothing to be ashamed of.
Reply
AdamB x
Ignored says:
07/26/2018 at 10:08 am With oil discoveries the last 3 years in the toilet due to lack
of capital investment and lack of major fields its just a matter of time mathematically. Be
thankful we still have time before peak production hits cause I don't think it will be fun
post peak. Hopefully still 5 years until its official maybe less When will Ghawar give up
the ghost .?
Reply
Dennis Coyne x
Ignored says:
07/26/2018 at 11:21 am Saudi Arabia may keep going for many years at 10 Mb/d,
probably until 2030, perhaps beyond.
Reply
AdamB x
Ignored says:
07/26/2018 at 12:02 pm One can hope .they can produce 10 Mb/d to infinity
according to their reserve numbers which never budge .I'd be curious what posters
think their reserves are. 175-225 GB?
Reply
Survivalist
x Ignored says:
07/26/2018 at 2:27 pm It'll be interesting to see how KSA shakes out when
oil consumption begins to zero in on oil production, and exports decrease..
ELM.
Dennis Coyne x
Ignored says:
07/26/2018 at 10:58 am Another consideration is discoveries and reserve appreciation.
Consider estimates of conventional C+C using Hubbert Linearization by Jean Laherrere which
have gradually increased from 1998 (1800 Gb) to 2016 (2500 Gb.) In addition, there is not
any particular reason that output would tend to follow a "Hubbert" type logistical
function.
Generally estimates based on Hubbert Linearization would be a minimum estimate in my
view.
In addition conventional oil Extraction rates (output divided by producing reserves) in
the World (5.6% in 2016) are far lower than the United States (14.8% in 2016, all C+C), so
there is the potential that with higher oil prices the average extraction rate for the
World may increase. The World conventional extraction rate was about 11.6% in 1979. A
gradually increasing rate of extraction might allow a plateau in output to be extended for
many years (to 2030 at least). Impossible to predict of course, the number of scenarios
that can be created is large.
One such scenario is presented below (peak in 2025 at 85.5 Mb/d of C+C or 4275
Mt/year).
The analysis using the logistic function does not account for this potential.
Dennis Coyne x
Ignored says:
07/26/2018 at 6:49 pm I disagree. Oil prices are more likely to increase than
to fall to $30/b and more of these companies are likely to be profitable as oil
prices rise, also 3 of the top companies are profitable, so a "well run" oil
company can indeed be profitable, those that are less well run will either change
the way they operate or they will go out of business. The better companies buy the
worthwhile assets on the cheap and life goes on.
It's called capitalism folks.
Also the DPR is not very good, I ignore that report and use EIA's tight oil
estimates (link below) and shaleprofile.com for good information.
GuyM
x Ignored says:
07/27/2018 at 9:12 am "Also the DPR is not very good", is an understatement.
I have never seen an analysis use so many different fruits to come up with
bananas expected.
Reply
Minqi Li x
Ignored says:
07/26/2018 at 3:55 pm I suppose by "decline rate" they are talking about the
"legacy decline"
Reply
Guym x
Ignored says:
07/26/2018 at 5:48 pm As an example, I will use approximate data from a fairly
good tier 2 well in the Eagle Ford. It starts off production at 33k the first
month, and drops rapidly after that to reach 8k by the final month. Let's say it
produces 175k the first year, which would be profitable at today's prices. The next
year it produces 55k, and the next year 36k. By the fourth year it is producing
less than 100 barrels a day, and by the sixth year it is questionable to keep up.
Little better than stripper status. Tier three stuff is much worse, it may reach
stripper status by the third year. Eventually, all will be tier two and three
status wells. That's the majority of reserves estimated. Estimating future
production from current production doesn't touch on reality. Eventually, to keep up
on initial production, you would have to drill twice as many wells. But, you won't
keep up with twice as many, because the decline rates will be higher. There is a
lot of difference between a 600k EUR well, and a 300k EUR, or a 150k EUR. 2042 for
US peak? Not hardly.
Reply
I agree, probably 2023 to 2025 will be the US peak, after that decline is
likely to be rapid because mostly tier 2 and tier 3 wells will be left, high
oil prices may make them profitable, but it will be impossible to keep up with
the decline rate of legacy wells after 2025 and US output will decline rapidly
(4 or 5% per year) after 2030.
Reply
TechGuy
x Ignored says:
07/26/2018 at 7:48 pm One snag: The Shale Debt starts coming due in
2019 and continues through to 2024. Shale drillers were successful since
the borrowed at rock bottom interest rates and investors practically fought
each other begging Shale drillers to take their money. Not so sure it will
work if interest rates are higher, and The Shale sweet spots aren't
endless.
Reply
Guym
x Ignored says:
07/26/2018 at 8:49 pm That might slow the start up, for sure. If
the price of oil gets high enough, that will barrier will be short
lived.
Reply
TechGuy
x Ignored says:
07/27/2018 at 2:43 pm As oil prices increase so does the costs.
It takes a lot of diesel to haul Water, Sand, and oil. Shale
drillers never really made a real profit, even when Oil was over
$100/bbl. One must consider the EROEI for Shale & rising
CapEx\OpEx as the cost of Oil rises.
Second, its likely that consumers cannot afford high oil prices.
As prices rise, Consumers will cut back and it will plunge the
global economy back into recession. Perhaps the Worlds Central
banks can coach something back into the global economy, but it
won't work over the long term.
FWIW: Some of the recent data is showing weakness in the global
economy: Housing sales are falling and prices in the hot regions
are flatlining. Trumps tariffs are also taking a toll as global
trade is falling. And there are cracks in the developing world
credit markets. We might see a stock market correction this fall,
which would likely see commodity prices fall (including Oil).
Reply
Hickory
x Ignored says:
07/27/2018 at 10:37 pm " consumers cannot afford high oil
prices. As prices rise, Consumers will cut back and it will
plunge the global economy back into recession."
Well, that likely depends on how fast and far the prices go.
Slow steady rise can be well tolerated pretty far. Energy is so
cheap for what you get, after all.
Many other countries have a much better GDP/unit energy
consumed than the USA, and with price pressure the USA could
get there too. I suspect we could shed 10-20% of our oil
consumption without big effect, particularly if we did it
slowly. For example, it wouldn't affect the GDP at all if we
slowed down to max 60 mph. Painless saving of energy, if you
choose good music.
It is the fast changes in price that really tend to hurt.
Reply
TechGuy
x Ignored says:
07/27/2018 at 11:45 pm "I suspect we could shed 10-20%
of our oil consumption without big effect, particularly if
we did it slowly."
It doesn't work that way. Consumers cut back on
spending, from eating out, going on vacations. They loss
confidence and delay major purchases like new cars, homes,
etc.
Most of the population commute to work well below 60
mph. Traffic usually limits speeds to 40 mph or less during
commuting hours.
To understand how high oil prices affect the economy
just research the events around 2007/2008. Schools &
business were planning to reduce work & school days to
3 or 4 days a week. Thieves were draining fuel from parked
trucks and cars. The higher oil prices caused food prices
to soar, which lead to the arab spring in Africa & the
middle east. Europe had frequent riots. Airlines &
shipping companies impose fuel surcharges. People homes had
utilities shutoff. since they could afford their energy
bills.
Funny how quickly people forget the aftermath of high
energy prices. Doesn't anyone read or study economics?
GoneFishing x
Ignored says:
07/26/2018 at 5:28 pm Nice report. Production decline is a short time away if we
don't keep drilling.
Speaking of legacy wells, the huge number of abandoned wells from the past is
leaving us a legacy of leakage. The even bigger number of recent wells will continue
that legacy.
Fernando Leanmex
Ignored says:
07/27/2018 at 4:33 am 150 year old wells in the eastern USA could indeed leak
methane. But I would not rely much on Arstechnica, it's a blog run by a guy with a
liberal arts degree very well crafted to be a cheering section for renewables. It
may even be subsidized by Yingli Green, a Chinese solar panel maker.
Reply
Fred Magyar
x Ignored says:
07/27/2018 at 6:57 am Are you seriously claiming that a peer reviewed
scientific paper, in the 'Proceedings of The National Academy of Sciences of
The United States of America' is somehow untrustworthy because it's conclusions
were mentioned by Ars Technica?!
Identification and characterization of high methane-emitting abandoned oil
and gas wells
Abstract Recent measurements of methane emissions from abandoned oil/gas wells show
that these wells can be a substantial source of methane to the atmosphere,
particularly from a small proportion of high-emitting wells. However,
identifying high emitters remains a challenge. We couple 163 well measurements
of methane flow rates; ethane, propane, and n-butane concentrations; isotopes
of methane; and noble gas concentrations from 88 wells in Pennsylvania with
synthesized data from historical documents, field investigations, and state
databases. Using our databases, we (i) improve estimates of the number of
abandoned wells in Pennsylvania; (ii) characterize key attributes that
accompany high emitters, including depth, type, plugging status, and coal area
designation; and (iii) estimate attribute-specific and overall methane
emissions from abandoned wells. High emitters are best predicted as unplugged
gas wells and plugged/vented gas wells in coal areas and appear to be unrelated
to the presence of underground natural gas storage areas or unconventional
oil/gas production. Repeat measurements over 2 years show that flow rates of
high emitters are sustained through time. Our attribute-based methane emission
data and our comprehensive estimate of 470,000–750,000 abandoned wells in
Pennsylvania result in estimated state-wide emissions of 0.04–0.07 Mt
(1012 g) CH4 per year. This estimate represents 5–8% of annual
anthropogenic methane emissions in Pennsylvania. Our methodology combining new
field measurements with data mining of previously unavailable well attributes
and numbers of wells can be used to improve methane emission estimates and
prioritize cost-effective mitigation strategies for Pennsylvania and
beyond.
Reply
Fernando Leanme
x Ignored says:
07/27/2018 at 8:33 am I am an academy member. I also know how to search
for methane leaks. And I'm aware the academy publishes papers which lack
the quality one would like to see. But if you want credibility, I would
skip Arstechnica and link directly to the paper.
The Arstechnica editor has an axe to grind, publishes a bunch of
garbage, therefore I never pay attention to it. Regarding the paper itself,
it's not representative of what goes on in say Texas. There are areas in
Texas (say Spindletop) where gas leaks should be present from the wells
drilled with cable tools in the old days. But a better sense for what goes
on now is gained from looking at wells drilled and abandoned in Texas and
Louisiana in the last 40 years.
Regarding Pennsylvania methane leaks, in the overall picture they are
meaningless. There are coal mining regions in India and China which can be
seen as very large hot spots from satellites.
Fred Magyar
x Ignored says:
07/27/2018 at 3:11 pm Hippity hoppity! Off to a tea party
with the Mad Hatter and Alice! As in A Large Ion Collider
Experiment at the LHC. Much more fun than dealing with the
crippled egos of idealogues.
Cheers!
Reply
If the wells are plugged, the concrete eventually fails (30 years) so we
have an ongoing source of methane that could last for centuries. Millions
of wells across the US, much more across the world.
And guess what, those ideas of storing CO2 underground, well now we have
millions of pathways for the CO2 to escape, so actual sites would be few
and far between.
The original Canadian study I read a few years ago has disappeared from
the internet. It showed the long term potential leakage of well systems.
Reply
Dave Kimblex
Ignored says:
07/26/2018 at 6:11 pm All this Hubbertian analysis is useful to set a ceiling on
production, but the world's economy runs on making a profit and so producers have a minimum
price they must receive, while the end consumers have a maximum price they can afford to
pay.
In mid-2008 the effect of a 72% price rise in 18 months caused a $1.75 trillion extra
cost on OECD oil imports and the world economy crashed. Recovery required the USG to
guarantee loans to frackers to get the production numbers up. I am not saying that they
won't try that again, but this can only go so far. Surely next time this happens, no one
will be able to avoid the obvious conclusion that there is no future profit in oil
production, and the oil industry will have its share prices downgraded, reducing the
collateral for loans, whereupon they will go out of business in a puff of smoke.
This will happen long before any URR impacts, so I wonder at how much this analysis is
worth.
Reply
Guym x
Ignored says:
07/26/2018 at 8:25 pm USG guaranteed loans to frackers???? Interest rates for
everyone was low then, but I don't remember reading about any guarantees. Drilling
horizontals is a little past SBA stuff.
Reply
George Kaplan x
Ignored says:
07/27/2018 at 1:56 am If the "oil industry" means the IOCs then they are a minor
player now. The NOCs dominate the reserves and production, of course they all seem to
be having money issues as well but maybe they manifest in a slightly different way
– i.e riots, uprisings and infrastructure collapse.
It's already noticeable that many of the big companies are switching to share buy
backs (Total, Shell, Anadarko) and less development spending even as the price has been
rising. The one which has switched the other way is ExxonMobil, and not
uncoincidentally it is the only one with really good recent discoveries. That straight
line H/L for the rest of the world is just the tail run out on existing discoveries,
most of which are also already developed and wouldn't be taken off line even with
bankruptcies for the operators. If only as chemical feedstock oil is way better in
almost every way than anything that could be made from water/CO2/renewable energy so if
civilisation lasts long enough most of it will be used.
Reply
George Kaplan x
Ignored says:
07/27/2018 at 1:44 am Forcing a logistic curve on some of those production histories
might give some big errors, though maybe they cancel out overall. Hubbert said himself that
H/L wouldn't work well on production that had been artificially constrained by a cartel
(e.g. OPEC for Saudi, Kuwait, UAE, Iran and Iraq) or environmental moratoria (e.g. some US
and Canada oil). For oil sands they tend to be built on 50 year project lives, with steady
production and a fast fall off rather than a traditional decline curve. About 50 mmbbls of
reserve is already tied into operating, steady production. Future developments will be
similarly constrained with the additional limit from environmental objectives to both the
extraction and pipelines. Logistics curves might still come close if the reserve estimates
are good, but that is also the biggest unknown as other comments have said.
Reply
Minqi Li x
Ignored says:
07/27/2018 at 2:54 pm Projections are not meant to be predictions. Even EIA or IEA
say that. But they are always useful to illustrate given certain assumptions, what will
or what are likely to happen.
That has been said, given our understanding of the inherent limitations of
projections/data, a careful and cautious application of these projections does provide
us some idea regarding the likely range of future development. For example, the
projection for the US oil used in this report is likely to be too optimistic especially
for years after 2025, as many have pointed out. That will reinforce the case for a
global peak oil before 2025
In addition to production, I think the consumption data in the report also provides
some interesting information. I wonder if someone cares to comment about that.
Reply
Guym x
Ignored says:
07/27/2018 at 7:37 pm Well, obviously consumption can't be over production for
any great amount, or we won't have inventory. Peak production precedes any mythical
peak demand. Consumption mostly follows production is my guess. At probably a much
higher price than today.
Reply
"Pioneer spent $818 million on capital expenditures (CapEx) for additions to oil and gas
properties (drilling and completion costs) during Q1 2018, brought on 63 horizontal wells
in the Permian, and only added 9,000 barrels per day of oil equivalent over the previous
quarter"
So it's round about 13 million $ per well, not 7 million.
Reply
Fernando Leanmex
Ignored says:
07/27/2018 at 8:38 am The number of wells brought on isn't proportional to wells
drilled. And the CAPEX isn't proportional to wells drilled. Therefore it's hard to
derive a per well cost from such figures.
Reply
GuyM x
Ignored says:
07/27/2018 at 9:06 am Yeah, there a lot of DUCs, and you have to consider that
Pioneer lays out some bucks for its gathering system and gas processing plant in the
Permian. Hard to isolate per well from total capex figures.
Reply
(Sale of oil) – well cost – variable cost per barrel = profit
does not work that good – there are lots of hidden costs even under CAPEX,
that are almost as high as completion costs when these 7 million$ / well are
right.
And I think these cost are not one time cost just only in this quarter –
there is alway a pipeline to build, a convertert to install, a gravel road to the
site to build and so on.
Reply
George Kaplan x
Ignored says:
07/27/2018 at 3:42 pm Rystad has first half figures for discoveries a bit better than
last year, though more on the gas side than oil, but there was a billion barrel Equinor
discovery in Brazil this week that will make things look better. I thought things were
worse, partly because I assumed the Guyana discoveries would count as appraisals and be
back dated against 2016 and 2017, but it looks like they are new fields. Overall though it
still shows a big drop over the past few years.
With over 3000 platforms, 25,000 miles of pipeline, all unsecure in the Gulf of Mexico,
they provide a lucrative target in any conflict with the US. Energy disruptions and
environmental calamities would reek havoc. Surely there is a plan to quickly secure the Gulf
from under/over/on the water threats? If not get at it.
More Oilprice.com industry pimping. The world uses 36 billion barrels (Gb) of crude per
year. Plus they are quoting boe, or barrels equivalent. Gas is not crude. The article should
read: "The world is still pumping 9 barrels for every 1 it finds". D day is not something the
industry doesn't wants advertised.
Look at the graph again. Draw a trend line from left to right across the peaks from 2014
til now. Is the line pointing up or down? That's peak oil.
So there's been an up tick this year. How much has been discovered. Ooooh, 4.5 billion
barrels. Sounds like a lot to you? What's the world consumption rate expressed in millions of
barrels per DAY? Don't know? It's around 90 million barrels per DAY. Look it up if you doubt
me. If you divide 4.5 billion by 90 million, you'll calculate how many DAYS it takes to
consume 4.5 billion barrels. To make it easier for you, just reduce the fraction by stroking
6 zeros off each number. That's 4,500/90. Not too hard. That's 50 DAYS of supply!!! OK, maybe
another 4.5 billion will be found in 2H2018. Oooooh, another 50 DAYS worth. We're
saved!!!
In the last paragraph, what's the Reserve Replacement Rate? 10% . That's not so good.
Also, a large portion of the newly discovered oil is offshore, in ultra deep reservoirs.
Do you think that might be more expensive to produce?
As for abiotic oil, as Laws of Physics pointed out, even if that desperate theory were
true -- which it isn't -- it's the rate of replacement that matters, and it's nowhere near 90
million barrels per day.
So, fore-warned is fore-armed, but if you'd rather bury your head in the sand that's your
prerogative.
The last five economic recessions all were preceded by a spike in crude oil prices. The
recent rise in the price of oil has raised the likelihood of a recession, according to market
forecasts. Oil gained more than 20 percent in the first half of 2018, and odds have been rising
that higher crude oil prices will spark the next economic downturn.
Rosneft's chief executive Igor Sechin expects Brent could reach US$80 a barrel by this
year's end, Interfax reports citing a TV interview of the oil tycoon.
The company's budget for the year is based on a much lower price, at
US$63 a barrel, Sechin added, so it's hardly a surprise the CEO is happy with where prices
are now.
Some more smallish impacts here, but now, with no spare capacity and stocks heading down,
everything is likely to be proportionally more important than before: Hibernia (130 kbpd
Brent like oil) looks set for 40 day turn around in September; Cameroon is heading for civil
war, which could hit its production (70 kbpd) and Chad's exports (130 kbpd); Phoenix field
FPSO in GoM (30 kbpd) will be off station for two months in early 2019. And what's the
biggest news story that some of the trade mags. could come up with this week: a 4000 bpd well
(and I'd guess very short lived) started up a couple of months early in the GoM.
Of course they don't that's why the imaginary oil glut was thought up. Let everyone else
think its glut, it drops the price allows U.S. to buy more. Then deliberate increase
inventory by buying more then claim inventory as a reason to drop the price?
Then take oil from the SPR through its bidirectional pipelines, designed just for that
purpose and pretend it is production, then of course at some stage as I mentioned ages ago, a
fictional drawdown sale of millions of barrels of crude from the SPR would have to be made to
keep the books straight for oil that's already gone!
Add to that the Ponzi shale still churning out oil costing them $100 to produce for them
to sell at $50 then CEO's shouting from rooftops about how profitable it will all be....with
none of them making profits, most of them passing dividends over and selling assets and
borrowing more and more that they will never be able to pay back and where the Fed did
everything possible to fund the at ZIRP or NIRP but failed miserable.
Then of course we get the same old same old Saudi pretending to raise production when its
own wells are falling apart and declining rapidly most subject to water flooding, including
the Super Giant Ghawar field.
perated by high gasoline prices just ahead of the U.S. midterm elections, lawmakers in
Congress are trying to make it easier for the United States to sue OPEC. And unlike previous
failed efforts to go after the oil-exporting cartel, this time Congress will find a
sympathetic ear in the White House.
The bipartisan No Oil Producing and Exporting Cartels Act, or NOPEC bill, would tweak U.S.
antitrust law to explicitly ban just the kind of collusive behavior that OPEC was created to
engage in. The bill, a carbon copy of previous legislation, makes illegal any activity to
restrain the production of oil or gas or set oil and gas prices and knocks away two legal
defenses that in the past have shielded OPEC from U.S. antitrust measures.
The international lawyers of Wall Street did not hide from each other their shared belief
that they understood better than Washington the requirements for running the world. As John
Foster Dulles wrote in the 1930s to a British colleague,
The word "cartel" has here assumed the stigma of a bogeyman which the politicians are
constantly attacking. The fact of the matter is that most of these politicians are highly
insular and nationalistic and because the political organization of the world has under such
influence been so backward, business people who have had to cope realistically with
international problems have had to find ways for getting through and around stupid political
barriers. 44
This same mentality also explains why Allen Dulles as an OSS officer in 1945 simply evaded
orders from Washington forbidding him to negotiate with SS General Karl Wolff about a
conditional surrender of German forces in Italy – an important breach of Roosevelt's
agreement with Stalin at Yalta for unconditional surrender, a breach that is regarded by many
as helping lead to the Cold War. 45 And it explains why Allen, as CIA Director in
1957, dealt summarily with Eisenhower's reluctance to authorize more than occasional U-2
overflights of the USSR, by secretly approving a plan with Britain's MI-6 whereby U-2 flights
could be authorized instead by the UK Prime Minister Macmillan. 46
This mentality exhibited itself in 1952, when Truman's Justice Department sought to break up
the cartel agreements whereby Standard Oil of New Jersey (now Exxon) and four other oil majors
controlled global oil distribution. (The other four were Standard Oil Company of New York,
Standard Oil of California or Socony, Gulf Oil, and Texaco; together with Royal Dutch Shell and
Anglo-Iranian, they comprised the so-called Seven Sisters of the cartel.) Faced with a
government order to hand over relevant documents, Exxon's lawyer Arthur Dean at Sullivan and
Cromwell, where Foster was senior partner, refused: "If it were not for the question of
national security, we would be perfectly willing to face either a criminal or a civil suit. But
this is the kind of information the Kremlin would love to get its hands on." 47
At this time the oil cartel was working closely with the British Anglo-Iranian Oil Company
(AIOC, later BP) to prevent AIOC's nationalization by Iran's Premier Mossadeq, by instituting,
in May 1951, a successful boycott of Iranian oil exports.
In May 1951 the AIOC secured the backing of the other oil majors, who had every interest
in discouraging nationalisation.... None of the large companies would touch Iranian oil;
despite one or two picturesque episodes the boycott held. 48
As a result Iranian oil production fell from 241 million barrels in 1950 to 10.6 million
barrels in 1952.
This was accomplished by denying Iran the ability to export its crude oil. At that time,
the Seven Sisters controlled almost 99% of the crude oil tankers in the world for such
export, and even more importantly, the markets to which it was going. 49
But Truman declined, despite a direct personal appeal from Churchill, to have the CIA
participate in efforts to overthrow Mossadeq, and instead dispatched Averell Harriman to Tehran
in a failed effort to negotiate a peaceful resolution of Mossadeq's differences with London.
50
All this changed with the election of Eisenhower in November 1952, followed by the
appointment of the Dulles brothers to be Secretary of State and head of CIA. The Justice
Department's criminal complaint against the oil cartel was swiftly replaced by a civil suit,
from which the oil cartel eventually emerged unscathed. 51
Eisenhower, an open friend of the oil industry changed the charges from criminal to civil
and transferred responsibility of the case from the Department of Justice to the Department
of State – the first time in history that an antitrust case was handed to State for
prosecution. Seeing as how the Secretary of State was John Foster Dulles and the defense
counsel for the oil cartel was Dulles' former law firm (Sullivan and Cromwell), the case was
soon as good as dead. 52
Thereafter
Cooperative control of the world market by the major oil companies remained in effect,
with varying degrees of success, until the oil embargo of 1973-74. That the cooperation was
more than tacit can be seen by the fact that antitrust regulations were specifically set
aside a number of times during the 1950-1973 period, allowing the major companies to
negotiate as a group with various Mideastern countries, and after its inception [in 1960],
with the Organization of Petroleum Exporting Countries or OPEC. 53
Also in November 1952 CIA officials began planning to involve CIA in the efforts of MI6 and
the oil companies in Iran 54 -- although its notorious Operation TP/AJAX to
overthrow Mossadeq was not finally approved by Eisenhower until July 22, 1953.
55
The events of 1953 strengthened the role of the oil cartel as a structural component of the
American deep state, drawing on its powerful connections to both Wall Street and the CIA.
56 (Another such component was the Arabian-American Oil Company or ARAMCO in Saudi
Arabia, which increased oil production in 1951-53 to offset the loss of oil from Iran. Until it
was fully nationalized in 1980, ARAMCO maintained undercover CIA personnel like William Eddy
among its top advisors.) 57 The five American oil majors in particular were also
strengthened by the success of AJAX, as Anglo-Iranian (renamed BP) was henceforth forced to
share 40 percent of the oil from its Iran refinery with them.
Nearly all recent accounts of Mossadeq's overthrow treat it as a covert intelligence
operation, with the oil cartel (when mentioned at all) playing a subservient role. However the
chronology, and above all the belated approval from Eisenhower, suggest that it was CIA that
came belatedly in 1953 to assist an earlier oil cartel operation, rather than vice versa. In
terms of the deep state, the oil cartel or deep state initiated in 1951 a process that the
American public state only authorized two years later. Yet the inevitable bias in academic or
archival historiography, working only with those primary sources that are publicly available,
is to think of the Mossadeq tragedy as simply a "CIA coup."
Major oil producers agreed Friday to a nominal increase in crude production of about 1
million barrels per day, a bid to put a damper on high oil prices. But in practice, major oil
exporters will likely only be able to add about half that total to global markets, because many
countries are already producing at capacity or face severe threats of supply disruption.
Oil markets weren't calmed by the agreement announced Friday by the Organization of the
Petroleum Exporting Countries after a contentious week of meetings. Crude prices in New York
rose more than 3 percent to almost $68 a barrel and rose about 2 percent in London to more than
$74 a barrel.
OPEC didn't agree to increase production as such. Rather the group, with the addition of
nonmember Russia, agreed to respect its existing program of restricting supplies. But since the
group had gone well overboard and trimmed output by almost 2 million barrels a day, due in
large part to a steep falloff in Venezuelan oil production, respecting the original target will
translate into more oil for the global market -- on paper, at least.
In practice, only Saudi Arabia and Russia have the capacity to add significant amounts of
crude in the next few months. That means Friday's agreement will end up adding about 600,000
barrels of oil a day to the global market.
The contentious meeting took place under the shadow of vituperation from U.S. President
Donald Trump, who worried that high oil and gasoline prices would be politically painful ahead
of midterm elections later this year. Even after the group's decision had been announced, Trump
was still tweeting hopefully about OPEC increasing production.
VK
I posted the sequence of events used to create the petro dollar back in the 2018-33
thread.
Will post them again here as this thread concerns Kissinger.
More specifics can be added to this planned sequence of events, this just the basics.
...........
In the late 1960s, US found oil at Prudhoe bay and by 1970 it was a proved crude oil
reserve.
Due to environmental and other legal challenges, construction of the pipeline was held up.
In late 1972 the US Secretary of the Interior declares the trans-Alaska pipeline to be in
the US national interest
1973-74. OPEC oil embargo due to US backing of Israel pushes oil prices up in an initial
rise.
1973 (OPEC oil embargo) The Trans-Alaska pipeline Authorization Act legislation is quickly
pushed through. Signed by Nixon on November 16 1973. This blocked all further challenges
allowing construction to begin. pdf
Late 1973 Nixon along with Saudi Arabia create the petro dollar beginning in 1974.
1979-80 the price of oil skyrockets due to the Iranian revolution. The US is now the
global economic hegemon as all countries now need US dollars to purchase oil.
I have read that Kissinger withheld information from both Nixon and Israel, but have not
followed that line of research.
Here is a piece from an official Kissinger biography. You can see here he was working both
sides.
https://history.state.gov/departmenthistory/people/kissinger-henry-a
Kissinger entered the State Department just two weeks before Egypt and Syria launched a
surprise attack on Israel. The October War of 1973 played a major role in shaping Kissinger's
tenure as Secretary. First, he worked to ensure Israel received an airlift of U.S. military
supplies. This airlift helped Israel turn the war in Israel's favor, and it also led members
of the Organization of Petroleum Exporting Countries (OPEC) to initiate an oil embargo
against the United States. After the implementation of a United Nation's sponsored ceasefire,
Kissinger began a series of "shuttle diplomacy" missions, in which he traveled between
various Middle East capitals to reach disengagement agreements between the enemy combatants.
These efforts produced an agreement in January 1974 between Egypt and Israel and in May 1974
between Syria and Israel. Additionally, Kissinger's efforts contributed to OPEC's decision to
lift the embargo.
It is noticeable that Trump's US attack any Syrian forces coming too close to US occupied
zones of al Tanf and Dier Ezzor. Also Trumps takeover of the Deir Ezzor oilfields where US
forces simply set up bases or forward posts in the ISIS occupied area.
Under Trump, US has set up a number of new bases in Syria. On the other hand, no concern
about Afrin and Manbij. The Deir Ezzor area is Arab tribes and this and al Hasakah
(Kurd/Arab?) is the top end of the Persian Gulf/Mesopotamia oil field.
US now controls al Hasakah and half of Deir Ezzor province. The have been ongoing efforts
by the US under Trump to take Al Bukamal. US has a base just south of Al Bukamal in Iraq. US
bases are now thick throughout Mesopotamia, with more being built.
Also a new base being installed in Kuwait.
The US controls the Arab shore of the Persian gulf, it now has many bases in Iraq and
Syria. The only thing missing is the oil rich strip of Iran running alongside the Persian
gulf and Mesopotamia.
"... How different is it really from the past 70+ years (since that 45' meeting between FDR and the then ruler of KSA), and especially since the "oil shocks" of the 1970's ? The Trumpians are little more direct and crude in their wording, but that is really the only difference I see. ..."
"... Putin's announcement after Turkey's shooting down of a Russian jet that Turkey has been systematically facilitating ISIS oil sales illustrates how the terror-entity has become a figleaf to justify military action. ..."
"... As INSURGEintelligence has previously reported, there is significant evidence that high-level elements of Turkish government and intelligence agencies have covertly sponsored Islamist terrorist groups in Syria, including ISIS, and that this has involved permitting black market oil sales. ..."
"... Why, however, did Vladimir Putin wait until the murder of a Russian pilot before announcing Russia's possession of intelligence on Turkish state-sponsorship of ISIS? ..."
"... There can be little doubt that Putin had previously been more interested in protecting Russian relations with Turkey as an emerging gas transshipment hub to Europe, under which he and Erdogan planned to build the multibillion Russia-Turkey gas pipeline, Turkish Stream -- now suspended after the recent diplomatic furore. ..."
"... It has become increasingly clear that the US-led coalition strategy is aimed primarily at containment of the group's territorial ambitions within Syria. ..."
"... In this context, as Russia and Iran consolidate their hold on Syria through the Assad regime -- staking the claim to Syria's untapped resources in the Mediterranean -- the acceleration of Western military action offers both a carrot and a stick: the carrot aims to threaten the Assad regime into a political accommodation that capitulates to Western regional energy designs; the stick aims to replace him with a more compliant entity comprised of rebel forces backed by Western allies, the Gulf states and Turkey, whilst containing the most virulent faction, ISIS. ..."
The Saudi's. Interesting watching them agree to whatever Trump wants. The most recent one was Trump telling them to raise oil
output. The Saudi's now are very pro zionist and will back them against the Sunni Palestinians no matter what. If Trumps tells
them to pay for a US war or occupation they pay. If they are told to by lots of useless junk from the US MIC, they buy it and
manage to pull a twisted smile when Trump turns the screws about billions being peanuts.
Seems very much like KSA is now an expendable asset for the US, and their only chance of survival is a lot of 'yes sir, how
high sir'.
How different is it really from the past 70+ years (since that 45' meeting between FDR and the then ruler of KSA), and
especially since the "oil shocks" of the 1970's ? The Trumpians are little more direct and crude in their wording, but that is
really the only difference I see.
Posted by: Peter L. | Jul 1, 2018 11:21:17 PM | 23
Look no further than the first sentence of the text you quote. It has been documented a few times, including in the Intercept,
that there were some very serious money flows towards a certain foundation run by the family of the named person. Money flows
that originated in the Gulf. Money flows that were related to what happened in Libia.
Putin's announcement after Turkey's shooting down of a Russian jet that Turkey has been systematically facilitating ISIS
oil sales illustrates how the terror-entity has become a figleaf to justify military action.
As INSURGEintelligence has previously reported, there is significant evidence that high-level elements of Turkish government
and intelligence agencies have covertly sponsored Islamist terrorist groups in Syria, including ISIS, and that this has involved
permitting black market oil sales.
Why, however, did Vladimir Putin wait until the murder of a Russian pilot before announcing Russia's possession of intelligence
on Turkish state-sponsorship of ISIS?
There can be little doubt that Putin had previously been more interested in protecting Russian relations with Turkey
as an emerging gas transshipment hub to Europe, under which he and Erdogan planned to build the multibillion Russia-Turkey
gas pipeline, Turkish Stream -- now suspended after the recent diplomatic furore.
US, British and French military operations have been similarly inconsistent, inexplicably failing to shut down ISIS supply
lines through Turkey, failing to bomb critical ISIS oil infrastructure including vast convoys of trucks transporting black
market oil, and refusing to arm the most effective and secular Kurdish ground forces combating ISIS.
It has become increasingly clear that the US-led coalition strategy is aimed primarily at containment of the group's
territorial ambitions within Syria.
....
As Russia expands its military presence in the region in the name of fighting ISIS, the US, Britain and France are now scrambling
to ensure they retain a military foothold in Syria -- an effort to position themselves to make the most of a post-conflict
environment. As the US Geological Survey Minerals Yearbook put it:
"Most of the international investors who pulled out of Syria following the deterioration of the safety and security situation
throughout the country are expected to remain so until the military and political conflicts are resolved."
In this context, as Russia and Iran consolidate their hold on Syria through the Assad regime -- staking the claim
to Syria's untapped resources in the Mediterranean -- the acceleration of Western military action offers both a carrot and
a stick: the carrot aims to threaten the Assad regime into a political accommodation that capitulates to Western regional energy
designs; the stick aims to replace him with a more compliant entity comprised of rebel forces backed by Western allies, the
Gulf states and Turkey, whilst containing the most virulent faction, ISIS.
Drop in the bucket to what is happening right now. US will be about 500k less than their
(IEA's) expectations into 2019 due to transportation constraints.
George thinks Venezuela
will approximate zero by 2019, as do others.
Give them the benefit of doubt and say a one
million decrease from 1.6 at the beginning of this year.
IEA is still using production vs
export capabilities, which has to change. Europe's refineries have largely stopped buying
Iran's oil, as has India. That's 1.1 million that has to be sold elsewhere, or not. On
shipping, insurance, and financing that is not affected by the restrictions. I count 2.6
million into 2019 that is not on IEA's plate.
Yeah, as said above, 2019 is going to be quite
interesting, most of which we will see the end of 2018. None of this takes into consideration
any increase in demand for 2019 that is over the US production projection for 2019 (.9). nor
any shortage carried over from 2018. Yeah, we should be hunky dory.
In the investment world, we will still be watching EIA weeklies, to determine what is
happening in the rest of the world for awhile. So increased cognitive function won't happen
soon.
"... "Conclusion. No matter what clever US energy independence calculations are out there, the fact remains that the US is physically dependent on around 8 mb/d of crude oil imports, 4.3 mb/d out of which come from countries where oil production has already peaked and/or where there are socio-economic or geopolitical problems. As of April 2018 US net crude imports were about 6 mb/d, far from oil independence." ..."
"... I note also that about 45% of USA imports come from Canada, as well depicted in in your Fig 1. Thus we are 'captives' of Canada (to use the terminology of trump), but don't seem to have much appreciation or respect for their position. ..."
US total (oil + products) inventories made a new low (from the high February 2017)
US ending stocks July 6th
Crude oil down -12.6 million barrels
Oil products down -0.7
Overall total, down -13.3 (shown on chart)
Natural Gas: Propane & NGPLs up +6.1 (not included in chart)
Chart: https://pbs.twimg.com/media/Dh1-upjXUBEOjvn.jpg
"Conclusion.
No matter what clever US energy independence calculations are out there, the fact remains
that the US is physically dependent on around 8 mb/d of crude oil imports, 4.3 mb/d out of
which come from countries where oil production has already peaked and/or where there are
socio-economic or geopolitical problems. As of April 2018 US net crude imports were about 6
mb/d, far from oil independence."
I note also that about 45% of USA imports come from Canada, as well depicted in in your
Fig 1. Thus we are 'captives' of Canada (to use the terminology of trump), but don't seem to
have much appreciation or respect for their position.
Putin/Russia is also the only entity that can prevent Trump's US from simply walking in and
taking over the rich energy hub (Mafia style) to the south of Eurasia.
Notable quotes:
"... Global Energy Dominance is now part of the US National security Strategy. Although not labeled as global, when reading through the energy dominance section of the NSS, it can clearly been seen to be global. This is not just about sell oil produced in the US. ..."
"... Trump is going for the Achilles heel of Eurasia - energy. Rather than a creative accounting scam that simply racks up huge amounts of debt, Trump is looking for a monopoly or near monopoly business to take over and rake in the profits. ..."
"... Russia supply energy to Eurasia from the North. The opening for the Trump mob is in the south. The meet with Putin may well be to sound out the possibilities of forming a cartel. ..."
"... Yes, it absolutely is. But this is not a new "Trump policy." Certainly Zbiginew Brzezenski laid this out quite clearly in his 1997 book, "The Grand Chessboard: American Primacy and Its Geostrategic Imperatives." It's really all in there, just as you're now identifying. If you can't take the time to read it, please consider at least reading some book reviews. As I've noted before, Ziggy apparently didn't foresee Putin rising to power and restoring the Russian state, which threw the proverbial monkey wrench into the globalists' plans, but really, US foreign policy has continued to follow his plans otherwise. ..."
The latest article at the Saker site by Rostislav Ishchenko - Trump's Geopolitical Cruise
- I think is the best take on Trump's and his backers mindset. Worth a read and covers what I
think was the cause of the split in the US elite.
The petro dollar, kicking off in the late 70s was a piece of creative accounting to give
unlimited credit. This should have been ended with the collapse of the Soviet Union, but
greed got the better of most. Trump and the people backing him could see that this was now in
its terminal stages and US close to collapse itself.
Rostislav Ishchenko, like many thinks that Trump is pulling the US back to a form of
isolation from the world, but I don't think this is the case.
Global Energy Dominance is now part of the US National security Strategy. Although not
labeled as global, when reading through the energy dominance section of the NSS, it can
clearly been seen to be global. This is not just about sell oil produced in the US.
Trump is going for the Achilles heel of Eurasia - energy. Rather than a creative accounting scam that simply racks up huge amounts of debt, Trump is
looking for a monopoly or near monopoly business to take over and rake in the profits.
Russia supply energy to Eurasia from the North. The opening for the Trump mob is in the
south. The meet with Putin may well be to sound out the possibilities of forming a cartel.
Putin/Russia is also the only entity that can prevent Trump's US from simply walking in
and taking over the rich energy hub (Mafia style) to the south of Eurasia.
"Global Energy Dominance is now part of the US National security Strategy."
Yes, it absolutely is. But this is not a new "Trump policy." Certainly Zbiginew Brzezenski
laid this out quite clearly in his 1997 book, "The Grand Chessboard: American Primacy and Its
Geostrategic Imperatives." It's really all in there, just as you're now identifying. If you
can't take the time to read it, please consider at least reading some book reviews. As I've
noted before, Ziggy apparently didn't foresee Putin rising to power and restoring the Russian
state, which threw the proverbial monkey wrench into the globalists' plans, but really, US
foreign policy has continued to follow his plans otherwise.
Kissinger has written much the same, though I don't recall in which books/articles. This
page from the US Navy seems a fine reading list, designed as it appears to indoctrinate
officers in AZ Empire geopolitics.
IMO, the US took the lead in the Empire's Global Energy Dominance quest when FDR met with
King Saud on Great Bitter Lake in the Suez Canal in 1945 (swinging by after the final
post-war world planning meeting with Churchill and Stalin at Yalta). This was when the US
largely replaced Great Britain in primacy over Asian/Middle Eastern energy dominance.
The US is in the Persian Gulf to stay. Trumps face face meet with Putin will be so Trump
can try and gauge what Putin will do - if he will run any blocking moves, his reaction to a
fait accompli ect. Most likely a few more face to face meetings before any move on Iran.
Peter, thanks for pointing out the new and unwanted US base in Iraq. I just read that the US
was building the world's largest Embassy Compound in "Iraqi Kurdistan." I wonder it they're
the same thing?
In a quick web search, failing to find an answer, I noticed that besides the "Green Zone"
compound we built in Baghdad at the start of the current military occupation, the record
holder was the US Embassy Compound in Pakistan.
James and I have discoursed here a bit on the history of US military occupations since WW
II. Boils down to the US has never removed its military from any country it's occupied with
the exception of Vietnam.
veritas semper vincit @103 linked blogpost notes that the US has 40,000 troops still
occupying Germany. His (I presume) post is quite entertaining considering the severe
seriousness of the topic.
Dis is a nice little country ya gotz heyah. Id be a shame if sumpin' bad was ta happen to
it.
MOSCOW (Reuters) - Russian Energy Minister Alexander Novak said on Friday that a deal under which
Russia would provide goods to Iran in exchange for oil is still possible.
Russia is studying all legal issues related to the possible deal, he said.
We expect continued price fluctuations within a wide $50-80/barrel range, with the strip
gravitating lower over the medium-term and a wider Brent/WTI crude differential," JPM
writes.
Looks like OPEC 14 peaked two years. Can they beat it?, perhaps by a small amount in a world
without chaos.
Today orange fatty called out Germany for being captive to Russia. I'm pretty sure he was
referring to German dependence on imported fossil energy from Russia.
As of 2015 Germany net energy imports are 64% of total [USA 12% for comparison]. If this
means 'captive', then perhaps we should acknowledge that 11 of our top 13 trading partners
are highly dependent on imported energy from either Russia or the big OPEC producers.
'Captives' so to speak. Better get used to that idea, and learn how to get along with
others. Only Canada and Mexico aren't 'captives', but we don't look to good at being friends
with them either.
I managed to erase my own comment on this. And my comment was simple, the only true
measurement of market balance for oil going forward is global inventory level. Everything
else is perhaps manipulation or guesses.
I agree, with all the intentional and unintentional confusion it stays confused. I stay
confused trying to figure out what is confused. Inventory levels will be the only clear
measure of what is happening. US inventories should not be dropping fast, as we are about the
only country with increased production, but we dropped over 30 million last month. That's
really not small potatoes, as commercial stocks are just a little over 400 million. Though, I
think the US will be one of the last that would hit the danger zone.
Good point. My intention was not to give more confusion. These are forecasts from eia and, I
always like to remind this, they forecasted Brent averaging 105$ for 2015 in the STEO of
October 2014. They never forecast big surplus or deficit.
I messed with the numbers of the STEO from 2018 to guess when the are reliable. Inventory
levels are accurate for the US from the monthly report, which is 3 months old (april for July
STEO). Other inventory levels are less accurate, but stock changes are reliable from 4-5
month data.
Global inventories increased in April (0.74 Mb/d) and May (1.14 Mb/d). This would be quite
a change, as April would be a record inventory build since January 2017, and it would be
followed by another record. This have to be confirmed later.
So, now I know what I will look for in these STEO.
How does this fit with production and consumption?
I thought we have still increasing consumption of about 1.5 mb/year, and production in
April/May didn't jumped thad much – Opec flat and Permian already near it's pipeline
bottleneck.
As much as I know, many storages are unknown, especially Opec / China. There are these
satellite measurements, but there are additional deep storages.
Gathering all comsumption / raffinery input / production data would give an additional
picture. Still not easy.
With 1mb/day surplus we should go soon into the next oil price crash to 30-40.
Even if we haven't hit peak yet, the fact that production is likely to be going up by a
snail's pace the next 3 years is a problem. If consumption just goes up 0.75% a year we need
600K extra a year. That seems like a big challenge to a layman like myself.
Well what will happen is that the price of oil will hit $150-$200 a barrel to ration demand.
Which will cause much pain and ruction and gnashing of teeth among the voters, but Europe
has had those oil equivalent prices owing to taxation for quite some time and they manage
high living standards. $200/bbl probably destroys 10 million a day in superfluous 'Becky
driving by herself to the mall in a 3 ton SUV for no reason' kind of demand and incentivizes
quite a bit of production.
The transition period will be moody for sure, but at $200/bbl, the amount of economic EOR
targets in the US is somewhere in excess of 70 BBO from old conventional fields from the
industry reports I have seen – its just not economic to do since there isn't enough CO2
available to flood them, so you need to use more expensive techniques which require very high
prices (ethane flooding might be useful????). Worldwide its hundreds of billions. High prices
that encourage us to use the resource wisely and not waste the goddamn stuff liberally would
be a godsend, if we could quit wasting gigatons of plastic bullshit and 40% of our food
– i.e. if everything made from oil was more expensive as well.
It would be painful economically, but Mad Max isn't coming our way. After 5 years of pain,
we might actually finally get our shit together and research some goddamn alternatives.
I believe sugar cane ethanol is very competitive at $120 per barrel. This allows converting
grass cattle grazing ground to cane. I believe soy and palm will also become very attractive
crops. And I suspect countries like Haiti and Nicaragua will continue having riots.
Yes, I believe you are right. The future energy picture is complex, but authors writing books
about this say sugar cane ethanol could have EROEI (energy return on energy invested) of up
to 4. Even based on mechanised agriculture. And the big advantage of this crop is that it is
not very nitrogen intensive, the biggest fertilizer, currently energy intensive when it comes
to natural gas usage. Even when it comes to preindustrial crop rotation, the nitrogen
intensive main food crops were often rotated with legume crops which were not nitrogen
intesive in the hope to rebuild nitrogen content in the earth. So very long term, sugar cane
ethanol is a superb type of renewable energy. (that is what I read, no expert).
Brazil has the biggest potential out there when it comes to size, and it is not
inconceivable that they can cover much of domestic fuel demand with this outside aviation and
possibly shipping (no need for diesel and gasoline ;-)). It would be in competition with food
crops and concerns about deforestation, but still; a big potential there. Brazil is well off
in a more renewable future btw, having loads of hydro power, wind power, in addition to
biomass power (sugar cane the most promising).
"[Exxon's] approach is a gamble in a new era of energy breakthroughs such
as fracking and electric vehicles. Many of Exxon's competi-tors are
transforming their businesses to move away from oil exploration, and
have begun to spend carefully and diversify into renewable
energy ."
"'Most investors like Exxon, but they like other companies better,'
said Mark Stoeckle, chief executive of Adams Funds, which owns about $100
million in Exxon shares. 'The market is not willing to reward Exxon for
spending today in hopes that it will bring good returns
tomorrow.'
"Exxon has been pledging to produce more oil and gas for years, but its
output of about four million barrels a day is no higher today than it was
after its merger with Mobil Corp. in 1999. Even if Exxon succeeds in
doubling last year's earnings of $15 billion (excluding
impairments and tax reform impacts) by 2025, as Mr. Woods vowed in his
eight-year spending plan, it would still be making far less than in 2008, when it
set what was then a record for annual profits by an American
corporation, at $45 billion .
"Exxon's fracking prospects in the Permian basin in West Texas and New
Mexico, developed by its XTO unit, remain among its most profitable
opportunities, the company says. Still, its U.S. drilling
business has lost money in 11 of the last 15 quarters."
Hi Steve, this is exactly what we have been talking about for the last 8 years. To make
matters worse there seems to be a completely irrational belief that Shale will save the day.
Outside of the fact that shale is not processable without heavier crude, and it is at best
energy neutral, and probably negative, it is also long term unaffordable. There are 1.7
million Shale wells in the US. Over the next 5 years 1.4 million of those wells will have to
be replaced to just keep production even. That will be $6.2 trillion even if done on the
cheap. $6.2 trillion is equal to the total cost of all the finished product that will be
consumed by the US for the next 12.8 years (@ $75/barrel). Expending 12.8 years of sales
revenue to produce 5 years of oil is just not going to happen!
There seems to be a black out on this terrible situation. Some of that may be just plain
ignorance, but I suspect that the main reason is that it is politically unspeakable. For that
reason nothing is being spoken. As I have been saying for some time no one should expect big
oil, big government, or big anything to come riding to the rescue. The individual is now
completely on their own. Chose your options with discretion.
Agreed. The U.S. Shale Oil Ponzi Scheme will likely begin to disintegrate within the next
1-3 years. Already, the Permian oil productivity per well has peaked.
Then when the next Shale Oil ENRON event takes place... watch as the dominos fall.
@SRSrocco, U.S. Tight Oil depends on cheap credit. Regardless of oil prices.
Once cheap credit dries up and the previous debts are unable to be paid by drilling new
wells, the entire scheme falls apart.
Oil prices do not drive U.S. Tight Oil as much as cheap credit from easy loans.
Eventually, U S. Tight Oil using new credit cards to pay debts on old credit cards will
catch up with a vengence. Rising interest rates will be the catalyst. Rising oil prices only
prolong the increasing debt.
Didn't the EIA publish something not long ago stating their concerns that we could see oil
shortages by 2020? And around the same time, I recall that the Saudi Oil Minister came out
and stated that without more investment, we would likely see oil shortages by 2020. And then
at the recent OPEC meeting, I believe it was the Oil Minister from UAE who stated that we
need to find a new North Seas equivalent oil field EVERY YEAR to meet projected demand, which
of course is not going to happen. It has been a long slow grind since 2008 to get to this
point, but from here on out I anticipate that things will start unraveling at an ever faster
pace. Big changes on the way. But one thing that will NEVER happen is that the POTUS or some
other world leader comes out and says we are running short on energy. Instead it will be
Trade Wars, the damned Russians or some other lame propaganda -- anything but the truth.
The mitigation section of the study was most telling. It simply stated that local
sustainable economies would replace the modern era. These economies included local food
production and energy production. As this process unfolds, I simply do not see how a high
rise is going to remain habitable.
Zero hedge put a news story a while ago where (I think 2016) the US oil industry lost more
in that it earned in the previous 7 years (mining in general), so more investment wouldn't
have been coming in the US anyway - the price wasn't high enough to justify it.
Worldwide we are going to see some almightly crunch, whether it will arrive after 2020
will be seen. Ironically it might save Trump anyway if the world is seen to be beset by a oil
supply crunch since its hard to blame that on him.
The U.S. needs to get off its dead ass and start developing better batteries, solar power,
and other alternative energy sources. This was talked about in 1973, during the Oil Embargo
days, and its just astonishing the U.S. has done little since to ween itself off of oil. And
now we now have a tariff against Chinese made solar panels. DUH!!! How dumb can you get?
Look at the energy density of those power sources. You'll never run an industrial
civilization off of them. Electric cars may be great for zipping a couple of people around
town from day to day, but you're never going to run the large mining and shipping equipment
needed for our society. If you want to do that, you're going to have to develop viable
breeder reactors and the technology to manufacture liquid fuels with that energy - and this
is doable.
Right. There is nothing.....NOTHING....that can replace oil and gas as it is used and
utilized by the modern industrial society. Nothing......
What needs to happen right now is a steady rise in prices that will condition our
population to start learning to do with less cheap, easy energy. We have got to curb usage to
give society a chance to begin to learn another way.
The major obstacle to doing this responsible, rational action? The egregious, criminal
banking system that has gotten the world awash in debt to feed their greed. Any cut back in
the use of energy will destroy the economy and their gravy train.
"... President Trump's demand last week that OPEC "reduce prices now" or US military protection of OPEC countries may not continue almost sounded desperate. But if anything, Trump's bluntness is refreshing: if, as he suggests, the purpose of the US military – with a yearly total budget of a trillion dollars – is to protect OPEC members in exchange for "cheap oil," how cheap is that oil? ..."
"... Exactly how traditional 'US Mideast policies' benefit the average American however remains a mystery. Many of these questionable policies are never critically examined in the open – at least not the big ones involving that 'special relationship' with you-know-who. Never. ..."
"... Iran's crime? That nation's alleged 'sponsorship of terrorism' in support of the Palestinian struggle against Zionist occupation, as well as other anti-Zionist resistance movements in Lebanon, Syria and beyond. ..."
"... Yet it is Israel that is foremost occupying power in that region and it is Israel that is the expanding nuclear power. Meanwhile, the Zionist-lead BDS campaign against Iran is nothing less than a full-blown economic war. At the same time, Israel benefits from unconditional and continuous US subsidies. ..."
"... In no small way, Israel sees its mission to dominate the region and expand its borders as a religious duty. Destiny. This puts Israel in a class by itself. And unlike its neighbors (including Iran) Israel has nuclear WMD. ..."
President Trump is finding that his threats and heated rhetoric do not always have the
effect he wishes. As his Administration warns countries to stop buying Iranian oil by November
or risk punishment by the United States, a nervous international oil market is pushing prices
ever higher, threatening the economic prosperity he claims credit for. President Trump's
response has been to demand that OPEC boost its oil production by two million barrels per day
to calm markets and bring prices down.
Perhaps no one told him that Iran was a founding member of OPEC?
When President Trump Tweeted last week that Saudi Arabia agreed to begin pumping additional
oil to make up for the removal of Iran from the international markets, the Saudis very quickly
corrected him, saying that while they could increase capacity if needed, no promise to do so
had been made.
The truth is, if the rest of the world followed Trump's demands and returned to sanctions
and boycotting Iranian oil, some 2.7 million barrels per day currently supplied by Iran would
be very difficult to make up elsewhere. Venezuela, which has enormous reserves but is also
suffering under, among other problems, crippling US sanctions, is shrinking out of the world
oil market.
Iraq has not recovered its oil production capacity since its "liberation" by the US in 2003
and the al-Qaeda and ISIS insurgencies that followed it.
Last week, Bloomberg reported that "a complete shutdown of Iranian sales could push oil
prices above $120 a barrel if Saudi Arabia can't keep up." Would that crash the US economy?
Perhaps. Is Trump willing to risk it?
President Trump's demand last week that OPEC "reduce prices now" or US military
protection of OPEC countries may not continue almost sounded desperate. But if anything,
Trump's bluntness is refreshing: if, as he suggests, the purpose of the US military –
with a yearly total budget of a trillion dollars – is to protect OPEC members in exchange
for "cheap oil," how cheap is that oil?
At the end, China, Russia, and others are not only unlikely to follow Trump's demands that
Iran again be isolated: they in fact stand to benefit from Trump's bellicosity toward Iran. One
Chinese refiner has just announced that it would cancel orders of US crude and instead turn to
Iran for supplies. How many others might follow and what might it mean?
Ironically, President Trump's "get tough" approach to Iran may end up benefitting
Washington's named adversaries Russia and China – perhaps even Iran. The wisest approach
is unfortunately the least likely at this point: back off from regime change, back off from
war-footing, back off from sanctions. Trump may eventually find that the cost of ignoring this
advice may be higher than he imagined.
Trump may eventually find that the cost of ignoring [the advice to back off from Iran]
may be higher than he imagined.
Perhaps he's counting on not being President by then. Another case of IBGYBG (I'll be
gone, you'll be gone), an attitude that seems to be infecting bankers, Wall Street, and the
rest of the U.S. élite lately. A cataclysm is coming, and they can see it.
Why is Zio-America treating Iran with such hostility?
Iran and Israel are locked in a vicious cold war. Their animosities date back to mythical
antiquity. One alleged episode is even celebrated in the Jewish celebration of 'Purim'.
Take a look at the breathtaking insight that Gilad Atzmon has to offer about Purim:
In any case, Iran and Israel's antipathies for one another shouldn't concern superpower
America. Except that it does.
Like American television, Washington happens to be Israeli-held territory. Haven't you
heard?
This is why Zio-Washington invariably sides with Israel in all of its disputes, even when
1) Israel is the aggressor, 2) even when Israel is slaughtering powerless civilians who are
protesting their subjugation, and 3) even when US interests are not at stake or even in play.
And this uniform deference from Washington is thoroughly bipartisan. It is 'business as
usual'. It's basically unanimous. Both Parties. No dissent.
Many just call it 'US Mideast policy'. Ironclad. 'Unshakable'. But don't laugh or smirk.
Doing so might be seen as 'anti-Semitic'.
Exactly how traditional 'US Mideast policies' benefit the average American however
remains a mystery. Many of these questionable policies are never critically examined in the
open – at least not the big ones involving that 'special relationship' with
you-know-who. Never.
These rigid policies help explain how Crypto-Israelis in America – using Washington
as their proxy – have successfully brought the US into Israel's cold war against
Iran.
Zionist operatives have not only orchestrated the decades-long freeze of billions of
dollars in Iranian assets that belong to the Iranian people, but they have launched a global
(and crypto-Zionist) 'Boycott, Divestment and Sanctions' campaign against the relatively
peaceful nation of Iran.
Iran's crime? That nation's alleged 'sponsorship of terrorism' in support of the
Palestinian struggle against Zionist occupation, as well as other anti-Zionist resistance
movements in Lebanon, Syria and beyond.
Yet it is Israel that is foremost occupying power in that region and it is Israel that
is the expanding nuclear power. Meanwhile, the Zionist-lead BDS campaign against Iran is
nothing less than a full-blown economic war. At the same time, Israel benefits from
unconditional and continuous US subsidies.
Politicians who dare question this phenomena – or who wander off the Zionist
plantation in Washington – tend to disappear. Rapidly. Journalists, too.
In no small way, Israel sees its mission to dominate the region and expand its borders
as a religious duty. Destiny. This puts Israel in a class by itself. And unlike its neighbors
(including Iran) Israel has nuclear WMD.
Due to Israeli influence here, Americans are not only actively supporting various Zionist
war efforts, but they are also paying billions more for their gasoline since Zionists have
managed to prohibit the purchase Iranian oil throughout the West. These economic 'choices'
are what Americans unwittingly make – even though the 'average Joe' remains totally
unaware of them.
Indeed, even though Iran wants to be a trading partner with America and bring its oil onto
the world market, Zio-Washington says 'NO!' US consumers be damned. The Iranian people be
damned.
This is not the first time that US economic interests have taken a back seat to Israel's.
Please recall the 1973 Arab-Israeli war, Zio-Washington's intervention on behalf of Israel
during that conflict, the ensuing Arab oil embargo, and the disastrous recession that
followed.
But Zio-America never turned it back on Israel, even though American citizens never had
the opportunity to determine their allies or policies one way or another. US support of
Israel is mandatory. It's been this way since LBJ.
Today, Israel is maneuvering Zio-Washington to do to Iran what it did to Iraq, Libya and
Syria; namely, spread destabilization and impose 'creative destruction' upon all nations that
pose any long-term threat to the Zionist State.
Those suckers from Sanford and Bernstein again try to push thier view that shale oil has
great potential instead of potential to bury even more money in the sand. production of shale oil includes production of a
parallel stream of junk bonds.
"... statements from the U.S. government about "zero tolerance" towards Iran could mean that those losses will end up being much higher. Just by shifting the supply outages from 0.5 to 1 mb/d would translate into an oil price increase of about $8 to $9 per barrel, according to Bank of America Merrill Lynch. ..."
"... "We estimate that every million b/d shift in [supply and demand] balances would push the oil price by $17/bbl on average. So based on those assumptions, we estimate zero Iran exports could push oil up by $50/bbl if Saudi caps out. We expect in this game of chicken, someone will blink before that happens." ..."
"Investors who had egged on management teams to reign in capex and return cash will lament
the underinvestment in the industry," the analysts
wrote . "Any shortfall in supply will result in a super-spike in prices, potentially much
larger than the $150 a barrel spike witnessed in 2008."
... ... ...
Of course, for many, this is a problem for another day. The oil market is
arguably facing a supply crisis right now. Until recently, the oil market assumed a loss of
about 0.5 mb/d from Iran because of U.S. sanctions. But statements from the U.S. government
about "zero tolerance" towards Iran could mean that those losses will end up being much higher.
Just by shifting the supply outages from 0.5 to 1 mb/d would translate into an oil price
increase of about $8 to $9 per barrel, according to Bank of America Merrill Lynch.
"We estimate that every million b/d shift in [supply and demand] balances would push the
oil price by $17/bbl on average. So based on those assumptions, we estimate zero Iran exports
could push oil up by $50/bbl if Saudi caps out. We expect in this game of chicken, someone will
blink before that happens."
In other words, if Saudi Arabia is unable to plug the deficit, the U.S. would likely have to
back down on its "zero tolerance" policy towards Iran. The oil market is too tight, and the
supply gap would be too large. Cutting Iran exports by that much, in an increasingly tight oil
market, would send prices skyrocketing, something that the Trump administration probably won't
be able to stomach. If Trump proceeded, a price spike of that magnitude would lead to a
meltdown in demand.
As the world continues to burn energy like there is no tomorrow, global oil and gas discoveries
fell to another low in 2017. And to make matters worse, world oil investment has dropped 45% from
its peak in 2014. If the world oil industry doesn't increase its capital expenditures
significantly, we are going to hit the Energy Cliff much sooner than later.
According to Rystad Energy, total global conventional oil and gas discoveries fell to a low of
6.7 billion barrels of oil equivalent (Boe). To arrive at a Boe, Rystad Energy converts natural
gas to a barrel of oil equivalent. In 2012, the world discovered 30 billion Boe of oil and gas
versus the 6.7 billion Boe last year:
"We haven't seen anything like this since the 1940s," says Sonia Mladá Passos, senior analyst
at Rystad Energy. "The discovered volumes averaged at ~550 MMboe per month.
The most
worrisome is the fact that the reserve replacement ratio in the current year reached only 11%
(for oil and gas combined) - compared to over 50% in 2012."
According to Rystad's
analysis, 2006 was the last year when reserve replacement ratio reached 100%.
The critical information in the quote above is that the world only replaced 11% of its oil and
gas consumption last year compared to 50% in 2012. However, the article goes on to say that the
last time global oil and gas discoveries were 100% of consumption was back in 2006. So, even at
high $100+ oil prices in 2013 and 2014, oil and gas discoveries were only 25% of global
consumption.
As I mentioned at the beginning of the article, global oil capital investment has fallen right
at the very time we need it the most. In the EIA's International Energy Outlook 2017, world oil
capital investment fell 45% to $316 billion in 2016 versus $578 billion in 2014:
In just ten years (2007-2016), the world oil industry spent $4.1 trillion to maintain and grow
production. However, as shown in the first chart, global conventional oil and gas discoveries fell
to a new low of 6.7 billion Boe in 2017. So, even though more money is being spent, the world
isn't finding much more new oil.
I believe we are going to start running into serious trouble, first in the U.S. Shale Energy
Industry, and then globally, within the next 1-3 years. The major global oil companies have been
forced to cut capital expenditures to remain profitable and to provide free cash flow.
Unfortunately, this will impact oil production in the coming years.
Thus, the world will be facing the Energy Cliff much sooner than later.
Yeah tHis article is ridiculous, resident ZH self-purported Mensa members
like Tmos' have proven beyond any doubt that 'abiotic oil' replenishes the
world's supply of easily accessed hydrocarbons every fifteen minutes or so,
regardless of increasing consumption rates; indeed regardless of any
veritable facts whatsoever.
Worked by whole life in the oil business. Depletion is real. Abiotic oil
replenishment is Magic unicorns dancing on rainbows. Oil won't run out
ever, but the energy required to extract the oil will make remaining oil
reserves uneconomic at some point.
Strange that the oil industry does not agree with you. And it's strange
that reserves all over the world are not stable but decreasing. Your
Mensa idol is full of shit.
With the US and China contemplating their next moves in what is now
officially a trade war, a parallel narrative is developing in the world of energy where Asian
oil refiners are racing to secure crude supplies in anticipation of an escalating trade war
between the US and China, even as Trump demands all US allies cut Iran oil exports to zero by
November 4 following sanctions aimed at shutting the country out of oil markets.
Concerned that the situation will deteriorate before it gets better, Asian refiners are
moving swiftly to secure supplies with South Korea leading the way. Under pressure from
Washington, Seoul has already halted all orders of Iranian oil, according to sources, even as
it braces from spillover effects from the U.S.-China tit-for-tat on trade.
"As South Korea's economy heavily relies on trade, it won't be good for South Korea if the
global economic slowdown happens because of a trade dispute between U.S and China," said Lee
Dal-seok, senior researcher at the Korea Energy Economic Institute (KEEI).
Meanwhile, Chinese state media has unleashed a
full-on propaganda blitzkrieg , slamming Trump's government as a "gang of hoodlums", with
officials vowing retaliation, while the chairman of Sinochem just become China's official
leader of the anti-Trump resistance, quoting Michelle Obama's famous slogan "
when they go low, we go high. " Standing in the line of fire are U.S. crude supplies to
China, which have surged from virtually zero before 2017 to 400,000 barrels per day (bpd) in
July.
Representing a modest 5% of China's overall crude imports, these supplies are worth $1
billion a month at current prices - a figure that seems certain to fall should a duty be
implemented . While U.S. crude oil is not on the list of 545 products the Chinese government
has said it would immediately retaliate with in response to American duties, China has
threatened a 25% duty on imports of U.S. crude which is listed as a U.S. product that will
receive an import tariff at an unspecified later date.
And amid an escalating tit-for-tat war between Trump and Xi in which neither leader is even
remotely close to crying uncle, industry participants expect the tariff to be levied, a move
which would make future purchases of US oil uneconomical for Chinese importers.
"The Chinese have to do the tit-for-tat, they have to retaliate ," said John Driscoll,
director of consultancy JTD Energy, adding that cutting U.S. crude imports was a means "of
retaliating (against) the U.S. in a very substantial way".
In an alarming sign for Washington, and a welcome development for Iran, some locals have
decided not to see which way the dice may fall.
According to
Japan Times , in a harbinger of what's to come, an executive from China's Dongming
Petrochemical Group, an independent refiner from Shandong province, said his refinery had
already cancelled U.S. crude orders .
"We expect the Chinese government to impose tariffs on (U.S.) crude," the unnamed executive
said. " We will switch to either Middle East or West African supplies ," he said.
Driscoll said China may even replace American oil with crude from Iran. " They (Chinese
importers) are not going to be intimidated, or swayed by U.S. sanctions."
Oil consultancy FGE agrees, noting that China is unlikely to heed President Trump's warning
to stop buying oil from Iran. While as much as 2.3 million barrels a day of crude from the
Persian Gulf state at risk per Trump's sanctions, the White House has yet to get responses from
China, while
India or
Turkey have already hinted they would defy Trump and keep importing Iranian oil. Together
three three nations make up about 60 percent of the Persian Gulf state's exports.
Under pressure from Washington, Seoul has already halted all orders of Iranian oil,
according to sources, even as it braces from spillover effects from the U.S.-China
tit-for-tat on trade.
Expecting SA to help supply the World's needs is perhaps going off the deep end. It's their
bread and butter for years to come. As years pass, they become more aware that those years
are limited. This is not the 1970's, it's 2018. They will supply what is profitable for them,
and wasting it early, doesn't sound real smart, does it? If we offered them massive support
to develop their nuclear capabilities, it would probably entice them. Or, jump out of the
pot, and into the frying pan. Iran May have more capacity for new oil.
If I have understood this correctly. When most of their fields are mature, the option they
have is to invest (almost overbuild) in facilities foremost to treat and inject the steadily
higher volume of water to keep oil production steady and at the same time overinvest in
infill drilling to keep the volume rising. All this to sustain or even increase oil output
from mature fields, so that the oil price can stay low. And then there is the extra gain in
extra barrels to consider as a result of the investments that adds to ultimate recovery at
each field. The gain from extra barrels could make up for a mediocre return on investment in
some cases and a questionable one in other cases. Given a relatively low oil price
assumption.
Why would they do that? Keeping the facilities as they are for mature fields, accepting
only small investments where they are highly profitable, limiting infill drilling to the best
locations, let the oil production fall and hope for prices to rise would be a superior
solution for them, would it not? Why rush investments in mature oil fields?
When most of their fields are mature, the option they have is to invest (almost overbuild)
in facilities foremost to treat and inject the steadily higher volume of water to keep oil
production steady and at the same time overinvest in infill drilling to keep the volume
rising. All this to sustain or even increase oil output from mature fields,
Well no, it does not usually increase production, it just drastically reduces the decline
rate. For instance, a very mature field may have a natural decline rate of 6 to 8% per year.
With infill drilling of horizontal wells along the top of the reservoir, they may reduce that
decline rate to 2% per year.
so that the oil price can stay low.
No, that's not why they are doing it. They are doing it to maintain their annual
production. Some do increase production but with oil from new fields. These new fields,
however, will have a much lower URR and will start to decline after only a few years. All the
giant and supergiant field have already been discovered.
The "so that the oil price can stay low" was a well hidden irony from my part. But you
have a point, they want to keep their long term customers supplied, not losing face in OPEC
and their long term allies happy. They stretch to keep everyone happy.
A field is creamed by massive infill drilling with horizontal wells that skim the very top
of the reservoir. The decline rate is the[n] drastically reduced while the depletion rate is
drastically increased. Things will go just great until the water hits those horizontal wells
at the top of the reservoir. Then production will drop like a rock.
I assume this is the money quote. These methods comprise the "game changer" that scuttled
peak oil predictions circa 2005.
By demurring a prediction as to when the stone might–will!–drop, you're
acknowledging the deplorable state of the data. This should give us pause. We might call this
the New Peak Oil Reticence.
Let's grant that what you say is true (I'm certainly not qualified to refute it). If you
know it (that is, that the rock will drop), then "they" know it, and by "they" I mean those
who are in the business of developing these "creaming" methods. They must know it.
No one producing country is looking at the global problem. They are only concerned with their
own country and the problems at home. Most are old men who realize that they will be long
dead if there is ever a catastrophe. And most, like the contributors to this blog, believe
that there will never be a catastrophe. They believe that renewables, or fusion energy, or
God, human ingenuity, or something else will save us from any type of collapse.
But the point is, the oil barons of each individual country, are not even remotely
concerned with the collapse of civilization as we know it. They believe God, or Allah, or
human ingenuity, will simply not allow that to happen.
"And most, like the contributors to this blog, believe that there will never be a
catastrophe. They believe that renewables, or fusion energy, or God, human ingenuity, or
something else will save us from any type of collapse."
But doesn't that require, like, planning? Plenty of planning?
I think Dr. Minqi Li put together an exceptionally well researched paper. The only one I have
a faintest glimmer of knowledge in is oil. 2021. Give or take a couple of years is a good
estimate of when peak oil occurs, based on current findings and technology. Improvements in
either would probably only affect the tail of the decline rate. Which, based on the immense
overstatement of EIA, and the creaming you mentioned, the tail should have much more of a
decline than depicted. I am tending towards 2022 to 2023 as the final peak, due to the little
over a year hiatus on the Permian final push due to pipeline and other constraints. We all
know 2042 is a bad projection for the US, it will get there as soon as it can. It will get
there as soon as it can, because the oil price will be high enough to beg, borrow, or steal
to get there. For that reason, all other sources will be staining to get there at the same
time. We are in the final stage, I do think.
Yes, I agree with you on Dr. Minqi Li's paper. I am not sure, however, that the Permian will
show enough yearly increase to hold off the peak until 2023.
Russia is certainly being creamed. The massive infill is visible from satellites and they
haven't found/opened anything new of size, yet have outlasted what everyone (including them)
calculated would be the start of their decline.
Russia needs the oil revenue badly. But is their ultimate decline going to look like
China? Very likely.
2018-07-05 (Platts) While Saudi Aramco CEO Amin Nasser told Platts recently that "maximum
sustainable production" was 12 million b/d, industry experts believe Saudi Arabia will
struggle to pump more than 1 million b/d of additional output.
Yeah, I think that is pretty much what Ron and George have been saying. It is why all these
drops in production, and projected production that will not get out of the ground has to
cause demand to exceed supply within the next year by a substantial amount. Throw in Iran's
sabre rattling over the Homez, and oil prices should be through the roof. That it is not, is
mainly complacency built up over the past four years from the inventory overage. As Scarlet
O'Hara said, "After all tomorrow is another day".
MSNBC announced that the Aramco IPO may never happen. MSNBC didn't say why, however I suppose
those reserves that the Saudis have touted for so long could be very difficult to have
verified based on SEC rules. I think that much of the last two years of prep for their IPO
has been shopping for a exchange that would allow them to get their stock issued without
drastically revising their prior reserve disclosures.
You can also look at this development as an indication that the above discussed "rock" may
have already dropped.
I think that the potential threat of what happens if there is a hot war are more extensive
than just having the Strait of Hormuz being closed. If you look at that map you can see that
Saudi Arabia is just across the Strait. And as luck would have it, Saudi Arabia's oil fields
are mostly in the east which means that they are within close missile range of Iran. Nice oil
fields you have there Saudi Arabia. Shame if something happened to it. The United Arab
Emirates are also within missile range as well. If both countries think that Patriot
batteries will protect them then they must have been disillusioned to find that those
Patriots couldn't even defend against wonky Houthi missiles.
Then there is the fact that Iran shares a border with Pakistan and Afghanistan. Remember how
the CIA shipped all those anti-tank guided missiles (ATGM) and ManPads to the Syrian
Jihadists via countries like Saudi Arabia? Be a real shame if captured stock got passed on to
the Taliban via all those borders and started targeted US/Coalition forces in Afghanistan.
Just these two possibilities show how Iran has a whole range of options to use if it came to
a military confrontation. And it should be remembered. If a US/Coalition could not
successfully occupy Iraq with a population of 37 million, then how can Iran with a population
of 80 million be occupied?
Another factor is that even if a US/Coalition managed to somehow suppress all those missiles
the Iranians are using to guard those Straits, you would never be sure that you got them all.
Who really want to risk their oil tankers going down those Straits and wanting to risk that
bottleneck beig turned into a flaming sea? The trouble there is no way that there would be a
quick campaign possible with everybody home by Christmas. This has the potential of still
being fought during the 2020 US elections and I do not think that the US establishment wants
to risk that one. What they do want is to strangle Iran economically and turn the place into
one of grinding poverty but if pushed too far may go the Sampson option.
Local kids could also be trained to fire rockets across the water. The straits are not
straight and cut into Iran, so there's a good vantage point for Iran.
> probably already is.
>> China is still officially stating that it will not end its Iranian oil imports and
operations.
China's investment of billions into the deep port of Gwadar should not be discounted.
While China has ceded the ocean surface to the US navy, the wei qi way is to surround and not
engage directly. By now the Gulf of Oman should be a sensory organ for information critical
to Iran, and passive systems are much harder to detect & destroy.
We're now three years out from Qiao Liang saying China "thinks that Washington will not
fight Beijing for the next ten years". China doesn't want the fight (and I mean high
explosives, not 'fighting for') yet, but they've been preparing. And let us not forget the
rooster tails on the American fleet fleeing the Persian Gulf in October 2015 when Russia
launched cruise missiles at Syria. That was three months after the 'One Belt, One Road'
speech.
While the Saud's are working out their family disputes they cannot afford to have the
petrodollar disabled. But the US is materially capable of weathering energy disruptions
better than the EU, which would become even more dependent on Russia. Long term, the
petrodollar is gone and climate migrations are coming, so the when of Fortess America could
depend on relative and not absolute 'cui bono, ciu malo'.
tldr: the fight is inevitable, there's more than two in the ring, and there's no
referee.
I doubt if it is mined at this time, but mines would be a logical way to quickly shut the
Strait down. A couple of small fast ships dropping mines at night could shut it down very
quickly. They could drop mines along the far shore which would force ships towards the Iran
side where they would be vulnerable to shore-based anti-ship missiles.
BTW, the standing NATO minesweeping group is three ships (two Lithuanian and one British).
Historically minesweeping is one of the roles carried out by other countries that the US is
currently working hard to alienate. https://en.wikipedia.org/wiki/Standing_NATO_Mine_Countermeasures_Group_1
Mine sweeping ships generally are not heavily armored to avoid magnetic and acoustic
signatures that can trigger mines. So they can struggle in contested waters and would be very
vulnerable to anti-ship missiles.
"Rouhani, considered by European politicians to be a reformist, appears to be showing a
hardline streak that is nearer the strategy of the country's supreme leader, Ayatollah
Khamenei. "
Everybody becomes a hardliner when faced with an existential threat, which Trump's threats
are now creating for Iran.
There's no need to sink any oil tankers to stop all oil shipping. Those tankers don't sail
without full insurance for the cargo, and no maritime insurer will back shipping through the
Strait of Hormuz while the Iranians are on the warpath. Hence, no oil tanker.
That is why a few mines would be very effective. All oil shipping would cease immediately.
Because mines can be redeployed very easily, including by air or fishing boats, insurers
would probably not be assuaged by naval assurances that mines have been swept.
In the 1980's when the Iranians mined the Straits the tankers still moved. What was the
insurance deal then? Did it the US pick it up for that part of the trip?
"If a US/Coalition could not successfully occupy Iraq with a population of 37 million,
then how can Iran with a population of 80 million be occupied?"
Iran is also mostly Persian. Yes, there are Arabs, Armenians, Baluchis, etc., but the vast
majority are Persian and are proud to be Persian. Unlike Iraq, where you have a country with
3 groups you can play off each other.
I visited Iran over 5 years ago and was able to speak to some regular Iranians (English is
not uncommon amongst men and women). They will fight to the last man, woman, and child if
anyone came into their country. And that's what the secular ones who hate their government
say.
Every town has lamppost flags showing the pictures of all the young men who died in the
Iran-Iraq War. It was humbling to see the generational devastation wrought on that country.
Even the youth view that war as a world war, since people from over 25 countries were found
to be fighting on the Iraq side ( https://en.wikipedia.org/wiki/Iran%E2%80%93Iraq_War
– Remember the Soviet Union was ALSO on Iraq's side!). They faced destruction and
survived. They view themselves as an ancient, sophisticated people as well as the greatest
survivors in the world (all with good reason as they are an amazing people with a rubbish
government).
I do not see this ending well if the US thinks they can put the Iranians into a corner and
get compliance. It is an amazingly ahistorical understanding of the geopolitics of Iran.
These are the people we should be allying with not Saudi Arabia. But this is the same group
who think blundering into Iraq or Syria was a good idea, so I really can't be surprised.
Just to add that the people living above the main Saudi oil fields, Eastern Province, are
mainly Shiites. Shiites are also to be found in the south along the ill defined border with
Yemen. Both communities are disaffected and have been for decades, although the BBC, which
advertises its "unparalled global expertise" (sic) between news bulletins and other
programmes, reckons the Arab Spring caused the restiveness in Saudi Arabia.
This said, the Saudis and their Pakistani poodles can foment (Sunni) Arab and Baluch
disorder in Khuzestan and Sistan / Iranian Baluchistan.
I always wonder to myself when, on the BBC News Channel, they pan across the alleged
newsroom in New Broadcasting House and you see all those desks -- rows upon rows of them --
where people are sat, or, occasionally, get up and have a wander around, what the heck are
they doing there? It can't be producing news reports because you see the same half a dozen
so-called news "stories" stripped endlessly across the schedule throughout the day.
Every so often we get "business" news, which is someone from a spread betting company
piffling on about some rot or other then "a look at the markets", not, unfortunately, a view
of Covenant Garden or something, that would be more interesting, but rather some mysterious
figures from world indices and forex rates splayed across the screen like some inscrutable
hieroglyphs.
Then a bit of sport, with a dash of added jingoism.
Finally, some rally round the flag update on "the forces" with some top brass on the poop
deck of an aircraft carrier looking for an F35 ("F35 coming real soon"). Maybe Sophie
Rayworth in a tank.
Or alternatively it's Jenny Hill from Berlin with something about sausages and Merkel with
stock footage of people drinking beer from unfeasibly large glasses wraps it all up apart
from a sky diving granny then the weather.
It could be worse. We all could work in one of these places. It would not matter how great
a story you found, it would all have to get through the editors who report directly to their
owners like with the Murdoch press. The stuff you talk about is just the stuff that gets the
editorial nod i.e. pure pap.
Some of the stuff that I have seen on Australian TV, however, is nothing less than out and
out propaganda. I watch some of this stuff and I compare it with what I read on this site or
what a commentator chips in with and I wonder what these newsreaders actually are thinking as
they read some of these stories. Probably their steady pay packets.
I wish to god I knew. I have seen this creeping in the past decade or more. I suspect that
a lot of bad practices are imported from overseas. There are international conferences for
conservative political parties so you would have American Republicans, British Conservatives,
Australian Coalition, etc. all mixing together and swapping idea and techniques. They even
work together when there is an election in their country.
Just the other day I heard one Coalition member describe another as a "patriot" which you
NEVER hear in Oz. Kinda like a Republican describing another Republican as a good Communist.
You just never hear it. We even have an ex-Prime Minister that sounds like he could be a good
buddy to Mark Rubio running around trying to blow up his own party (currently in power)
saying that we should build as many coal power stations as possible because climate change is
not real.
Historically our governments have been ruled by pragmatism and past US governments have
labelled us as "socialist" due to adopting such things as single-payer health. The past few
years I am noting more and more ideologues going into politics who want to drag the country
into their way of thinking whether it is to pick fights with China (our major trade partner)
or send the Australian military to the ends of the earth as if they were Mercenaries-r-us.
The times they are a changing.
It all reminds me of C S Lewis' description of H -- as a giant bureaucracy. "The Screwtape
Letters" were written at the end of WW-2 and still come across as 'fresh.'
Supposedly the KSA funded development of the Pakistani bomb. There probably is some
agreement to hand some over (if it hasn't already been done) for "existential threats" This
could turn very bad very fast.
Iran has lots of options. Their Navy wouldn't last very long in a hot war but they have
lots of asymetric options. They have reverse engineered Russian torpedoes and these could be
launched from land or from mini-subs in shallow waters (where they are far harder to detect),
making life very difficult for opponents, let alone tankers. They can strike the UAE and much
of Saudi Arabia using a wide variety of ballistic missiles. To prevent this, the US would
have to strike Iranian territory, and this would cause a massive escalation. In almost any
scenario, the Straits would be shut down for many months, and this would be catastrophic for
the world economy. Asia would come off worse as they are most dependent on LNG and oil from
that region.
As you say, the great 'unsaid' is the Taliban. If Iran decided it was in their interest to
supply them with a few dozen trained operators with a few thousand anti-tank missiles and
manpads, then its goodbye Kabul.
The Iranians hate the Taliban and Al Quaeda and ISIS a lot more than we do since we are on
Saudi Arabia's side. They also seem to follow their principles. Don't forget our allies and
proxies in Syria are the headcutters and madmen ..all Sunnis ..although our government does
not want to admit it. They would be a lot smarter to trigger a Shiite uprising in Saudi
Arabia and shut the country down. The Shiites in Saudi are downtrodden and abused.
To escalate a carrier sinking to nuclear war is, I believe a lose/lose proposition. Let
say the Iranians sunk a carrier and the US Nuked Tehran.
The Iranians would not be in a forgiving mood at that point, and it would do little to
remove the somewhat irritated Iranians along the northern side of the Persian Gulf. The
irritated Iranians would initiate incidents over the impact of irradiated Iranians.
The US could nuke the Iranian Coast along the Persian Gulf, but, the gulf is not wide, and
the result would be poor prospects for the US allies on the South side of the Gulf. In
addition one does not know if nuking Shea would provoke a Sunni backlash against "the
infidels, the Christian US."
One could argue that Christians and Nukes cannot be mentioned in the same sentence.
The Prologue of Robert Baer's "Sleeping With the Devil" outlines a potential scenario of a
Shiite attack on the eastern Saudi oil fields. The sub-title is The Doomsday Scenario.
The book is about the US-Saudi relationship by a retired CIA officer. A very good read and
part of trying to understand this entire mess.
Exactly right. Logic dictates that if Iran is attacked, Iranian missiles will soon
thereafter attempt to destroy all of the oil producing capacity selling to Europe, Japan and
the US within range of its missiles. This means ships, oil fields, pipeline, ect. Oil prices
would skyrocket, plunging the US, Japan and Europe into a deep economic downturn.
Why people ignore the outcome you provided is beyond me. If I were Iran, I'd do the same
if Israel attacked too.
Your guess is that nobody will attack the Iranians after they attack the shipping to close
the straits?
In the 1987 Iran attacked about 91 ships in the Gulf. The oil still flowed. On April 18,
1988 the US attacked and severely damaged a number of Iranian ships and bases. After that
things started winding down. Then on July 3, 1988 the US shot down that Iranian airliner.
Then things really quieted down.
What are the differences now? Iran: ballistic missiles and subs?
There's Lt. General Riper, who played the Iranian side in the 2002 Millennium Challenge war
games, "killing" 20,000 Navy personnel and "sinking" 16 American warships
on the first day, so he knows better than to even start such a bottlenecked battle.
There's always General Farnsworth, the great grandson of Colonel Armstrong Custer.
Farnsworth has worked for two decades in the Purchasing & Planning wing of the Pentagon
-- three levels below daylight -- but his confidence in an immediate American victory Over
There is indubitable.
In similar vein, MI5's Eliza Manningham Buller is a descendant of Redvers Buller, British
commander in the second Boer War, but much more of a realist and moderate.
Redvers Buller? Seriously? I have read a lot about his role in the Zulu War of 1879.
Intriguing character being hard-fighting and hard-drinking and yet refused to wear his 1860
China medal on the grounds that it was an unnecessary war. And a descendant of his is head of
MI5?
Here's a little character sketch of Redvers Buller, from " On the Psychology of
Military Incompetence ", by Norman Dixon:
The leading character was the commander-in-chief, General Sir Redvers Buller. According
to a contemporary description there could be no finer choice for our South African
adventure: 'There is no stronger commander in the British Army than this remote, almost
grimly resolute, completely independent, utterly fearless, steadfast and vigorous man.
Big-boned, square-jawed, strong-minded, strong-headed Smartness sagacity administrative
capacity He was born to be a soldier of the very best English type, needless to say the
best type of all.
Unfortunately this assessment was at variance with the facts in all but two particulars.
Firstly, he was indeed big. Secondly, though sadly lacking in moral courage, he was
undoubtedly brave when it came to physical danger. In this respect, as in many others, he
was not unlike Raglan of the Crimean War, and indeed some other commanders of subsequent
years.
Of Sir 'Reverse' Buller, as he came to be known by his troops, Rayne Kruger writes: 'At the
risk of marring [the] contemporary description it should be mentioned that his big bones
were particularly well covered, especially in the region of the stomach, and that his
square jaw was not especially apparent above a double chin. He had entered the army with no
disadvantage, his mother being a Howard and niece of the Duke of Norfolk, and he was very
wealthy, which was fortunate in view of his preference for a diet of ample good food and
champagne.
Such examples of the Peter Principle, wherein people are raised to their own level of
inefficiency, was never better illustrated than in the case of Sir Redvers Buller, who has
been described as 'a superb major, a mediocre colonel and an abysmal general'. In this
case, high-level military incompetence must be laid at the door of heroic leadership, for
this was the quality which eventually put him where he could do the most damage to his own
side.
The US response will be that this unprovoked aggression is an act of war, etc. This
ignores our own unprovoked act of aggression, the embargo.
In case any has forgotten, those dastardly Imperialist Japanese launched an "unprovoked"
attack on Pearl Harbor because the US put Japan under an embargo.
Embargoes themselves are not acts of war, but blockades are. But this is all technical
blather. The US is attempting to strangle Iran. Iran will attempt to strangle the Gulf Arabs
and the US. If Iran starts firing missiles or blockading the straits, the US will attack
Iran. Iran will in turn launch attacks on the Gulf states. This could drive oil over $200,
perhaps higher.
If Iran were clever, they would institute some sort of quarantine or inspection in their
territorial waters. Indeed, they should claim jurisdiction over the entire strait in the
interest of international security (they could certainly find some US document somewhere and
just change the names). Then they could stop every ship going in and out and spend a week or
so inspecting each one for contraband, disease, etc. This would not be an act of war but
would certainly provoke the US into striking first anyway.
Iran has already extended its territorial waters to 12 miles, as did Oman. Given that the
strait is 29 miles at the narrowest, and that to deal with the amount of shipping, pretty
much all of it passes through either Omani or Iranian territorial waters. Technically,
Iran/Oman has right to stop any non "innocent" (read unarmed) shipping trough it territorial
waters. Not sure what is Omani relationship with the US/Saudis at the moment, wasn't paying
much attention to the Gulf.
Once the US decides to strike first, we're going to be on our own. The Saudis will be
completely useless as they always were, understandably not wanting to be cannon fodder for US
interests. And with most of Europe and Asia relying on gulf oil, our 'coalition of the
willing' is going to be a bit shy of members.
But $200 a barrel and the US a solid producer? Seems to be some win-win money to be made for
both Raytheon and Exxon-Mobil.
No Saudi just like no rich American will give his life for his country .in the military.
Life is just too good for them .why fight in the desert when you can cool it at a cafe in
Munich ..why are all the Syrian men of fighting age in Munich and Hamburg? They don't want to
fight for their country.
Considering the restraint Iran has shown regarding Israeli attacks in Syria, it's safe to
assume they want to avoid war at all cost. Don't expect any acts of aggression from them.
Talk of closing the strait is trying to see if there is any spark of independence left in
Europe's political elite. Unfortunately the Europeans only care about money – what they
get personally from the US to run their countries and what their corporations get from doing
business with America. There just isn't enough business between Iran and Europe to offset
that. Now the more unreasonable Washington becomes the more uncomfortable its allies become,
however they will still hold their noses and answer the call to duty. I'm afraid Iran's
courting Europe will produce little to help them. Luckily China and Russia, even Turkey and
India, are far more important.
The nice thing for Iran's hardliners – assuming the MSM narrative that they are
nasty terrorists always looking to cause trouble – is that they don't need to take
aggressive action to start a war. They've got America/Israel and that's the cause of every
war in the 21st century. That pairing will decide if and when there is to be a war. Russia
and China might have the ability to provoke caution but Iran doesn't.
Do not expect any actions from the Iranians to provoke a war. It's a war they cannot win
and they know it. it's also a war they can't lose but the price they could pay by surviving
might be really horrific. I'm not sure they'd close the strait even in a shooting war because
that would risk further escalation. The moment America starts bombing Iran the law of
diminishing return kicks in. The US will be looking for any excuse to go nuclear. Therefore I
doubt Iranian resistance will be more than defensive. Hopefully Russia is providing them with
air defences to be able to shoot down some US planes. Just lay low and ride out the storm.
That's been the philosophy of US/Israeli opponents in the Middle East this decade. It's why
the Russians take so much crap and keep turning the other cheek. They understand that either
they lose such a war or, if they are winning they risk the US going nuclear. Iran can't win a
war with America. Iran, however, can inflict unacceptable casualties but then they run the
same risk of Washington going nuclear in retaliation. In Asian capitals you have rational
players who understand that a nuclear war must be avoided if possible. Thus they avoid any
aggressive actions which they fear could lead to such a war. The problem humanity has is that
we're not sure if there are any rational players in Washington or Tel Aviv.
"The problem humanity has is that we're not sure if there are any rational players in
Washington or Tel Aviv."
+1
Given our belief in being an "exceptional nation" hasn't this been humanity's problem since
the end of WW2?
Will the sanctions pull Iran enough to such an escalation? Would other countries (apart
from Turkey) thing that this is troubling enough to risk US sanctions and disobey? There has
been an escalation in language between the UE and US regarding Iran sanctions but it is still
too soon to know what will be the EU position. We migth know after tomorrow's meeting in
Vienna. I don't know what could happen but be sure the US is running out of "natural allies"
by stepping up too much it's support for Saudi Arab. Trump is inaugurating a new era and it
doesn't look pretty.
The Army might be in trouble but the Marine Corps WILL BE IN A HURT LOCKER FROM HELL if
its ever called on to face Russian forces if they follow thru with published planning.
It is as clear as day that President Trump is obsessed with regime change in Iran. What is
not made clear is how much his gambit is damaging to Americans and American interests.
Without cause or justification, Mr. Trump pulled out of the Joint Comprehensive Plan Of
Action (JCPOA), striking a hard blow to America's European allies – and its own
credibility. Moreover, he threatened European countries with secondary sanctions should they
continue to trade with Iran.
To top it all, in his latest move, he has called for all Iranian oil exports to be cut off
by November. Or in practical terms, he is imposing an economic blockade on Iran. This is a
similar scenario that was played out by the British in 1951 against Iran and Dr. Mossadegh
– who was later overthrown in the 1953 British-US coup. But today, the IR of Iran is not
the Iran of 1953, and the brunt of American demands and actions will not be borne by Iran
alone.
Demanding that no country purchase oil from Iran is in fact an economic blockade. It is an
illegitimate use of power to force a sovereign nation to surrender. It must be made clear
however, that it is not just Iran that is the target here. The Trump administration's demands
arean offensiveexercise of extraterritorial authority with no regard for sovereign equality
between states. All states involved in trade with Iran will either have to cower to his demands
or be punished.
But there is more than state sovereignty and indignation that is involved. These actions
will have a dire effect on the economy of allies, and they will hit Americans in the wallet
– hard. If Mr. Trump is giving a November deadline, he hopes to postpone the impact this
will have on the November elections. He wants total rule over America before totally
bankrupting it.
To fully appreciate how Mr. Trump intends to make 'America great again' where his policy
regarding Iranian oil is concerned, one must take a look at some numbers and empirical
evidence.
The oil strikes leading up to the toppling of Iran's Shah were felt around the world. During
the 1978-79 revolution, Iranian oil production dropped 3.8 million barrels per day for 3
months. Although outside production increased by 1.8 million barrels to make up for the loss,
the net loss to the world was 150 million barrels of oil. However, the compounding results of
the production loss were significant around the globe.
Many Americans may recall the lines at the fuel pumps, but that was just what met the eyes.
The increase in oil prices impacted farming, production, transportation of goods and services,
and so on. At that time, China, currently the second biggest oil consumer behind America, was a
net exporter of oil. The loss to U.S. economy was estimated at many billions of dollars in 1979
and 1980 (Deese and Nye 308-309) [i]
.
More recent studies show that Iranian oil has a major impact on the U.S. economy even though
America does not import a single barrel of oil from Iran. In 2008, economists Dean DeRosa and
Gary Hufbauer presented a paper in which they claimed that if the United States lifted
sanctions on Iran, the world price of oil could fall by 10 percent which would translate into
an annual savings of $38-76 billion for the United States [ii] .
But sanctions alone were not responsible for oil price hikes in 2008 and beyond. In July
2008, oil had reached a peak of $142.05/bbl (see chart HERE ). This price hike
came on the heels of some important events. In May, President Bush sent a ' warning message' to Iran on
the same day that additional aircraft carriers with guided-missile destroyers were sent to the
Persian Gulf.
In June of the same year, the New York
Times reported that: "Israel carried out a major military exercise earlier this month that
American officials say appeared to be a rehearsal for a potential bombing attack on Iran's
nuclear facilities."
In July, then presidential candidate Barak Obama asked for
tougher sanctions to be imposed on Iran.
It was not until September 2008 when President
Bush declined to help Israel attack Iran that oil prices started to relax. They hit a low
of just over $53 /bbl in December 2008.
Oil prices continued to rise again under Obama's sanctions and reached well past the $100
mark. The prices climbed down once again during the JCPOA negotiations reaching an all time low
of $30.24/bbl in January 2016 – after the signing of the JCPOA.
Today, oil prices stands at $74.30/bbl. A fact not lost on any American who has filled up
his/her gas tank lately– and paid for groceries. The deadline for Iran oil cut off is yet
months away, but the impact has started.
Given that other countries may step in to compensate for some of the Iranian oil
loss, other factors which effect prices must be considered – the most important of which
is the security of the Strait of Hormuz. As mentioned previously, the British oil blockade
scenario of 1951 will have far different consequences in 2018 should America impose an economic
blockade or oil embargo.
In the 1950's, Iran did not have the military might to retaliate to the oil embargo and the
naval blockade was aimed at crushing the economy in order to bring about regime change. This
economic blockade, should it be allowed to happen, would crush the economy of much of the
world.
As it stands, 35% of seaborne oil goes through the Strait of Hormuz 85% of which goes to
Asian markets. As the US Energy Information Administration (EIA) has stated: "The blockage of
the Strait of Hormuz, even temporarily, could lead to substantial increases in total energy
costs."Today, Iran not only has the military might to block the Strait of Hormuz in
retaliation, but it also has the legal right.
The 1982 United Nations Convention on the Law of the Sea (UNCLOS) stipulates that vessels
can exercise the right of innocent passage, and coastal states should not impede their passage.
Under UNCLOS framework of international law, a coastal state can block ships from entering its
territorial waters if the passage of the ships harms "peace, good order or security" of said
state, as the passage of such ships would no longer be deemed "innocent" [iii] .
Saudi Arabia and the UAE export oil through Iran's territorial waters. Should they help America
choke Iran's economy, their passage is not deemed 'innocent'.
Even if Iran simply chooses to merely delay the passage of tankers by exercising its right
to inspect every hostile oil tanker that passes through the Strait of Hormuz, such inspections
and subsequent delays would contribute to higher oil prices.
No doubt, the Iranian navy is no match for the formidable US navy. However, the shallow,
narrow waters of Hormuz do not allow for the maneuvering of US battleships. The very presence
of warships can lead to incidents. At its narrowest point, the Strait of Hormuz is 21 miles
wide – hardly wide enough for a naval battle to take place and allow the passage of oil
tankers at the same time. In recent years (2012), the USS Porter, a US navy destroyer,
collided with an oil tanker in the Strait of Hormuz. The collision left a big whole in the
navy destroyer.
American officials and oil companies have attempted to assuage the concern of over oil
shortages by stating that America is one of the top oil producers. Some fact checking is in
order.
According to EIA's latest available data, America's total exports in 2018
(thousands of barrels/month) was 7,730 bblin April. The same governmental body stated that
total imports for the same month was 310,295. According to the EIA: "In 2017, the United States
producedabout 15.4 million barrels of petroleum per day (MMb/d), and it consumed about 19.9
MMb/d. Imports from other countries help to supply demand for petroleum." (Click HERE for
explanation of imports and exports).
These facts do not stop the spread of such news. As recently as June 4, 2018, Offshore Technology announced America is marching toward being the biggest oil
producer. Important factors to bear in mind are that 1. America is the largest oil consumer and
continues to have a deficit, and 2. Shale oil production is up thanks to higher oil prices.
While environmentalists objected to shale oil production, oil companies halted the
extraction of oil when prices dropped. Anything above $50/bbl makes shale oil production
feasible – which also makes it more expensive of the consumer. Although Mr. Trump and his
administration have no regard for the environment, many states and countries have banned shale
oil production (see LINK for list as of December
2017).
So the American people (and much of the rest of the world) is left with a stark choice.
Either cave in to Mr. Trump's demands, accept loss of business, pay much higher oil prices at
the pump and for consumer goods, prepare for a potential war, and sacrifice the environment
– especially water, and mortgage the future of the earth more than we already have, or,
don't heed Trump's demands – even if means a short term loss.
Either way, messing with Iran's oil exports is not an alternative that the world can afford.
It may well be that Mr. Trumpis beholden to Mr. Netanyahu. He may well feel comfortable enough
to subject the American people – and their allies to financial hardship; but the question
is will Americans and the rest of the world sacrifice themselves at the Trump-Netanyahu
altar?
* Soraya Sepahpour-Ulrich is an independent researcher and writer with a focus on
U.S. foreign policy and the role of lobby groups in influencing US foreign policy.
Brent currently above $78 and heading up. A bad EIA twip stock report could mean it goes
above $80 and stays there. Iran is threatening to blockade the Straits or Hormuz and
Venezuela is threatening to invade the White House. The Saudis, Russians and E&Ps must be
hoping for some more "art-of the deal" Trump magic: a couple more contra-interventions for
lowering oil price on his part and we'll see $150 by Xmas.
"... I believe due to OPEC massively inflating their URR, and the inaccuracy of the Hubbert method due to the creaming of all giant fields, the expected peak dates here are highly inaccurate. ..."
In the table below I have converted the data Dr. Minqi Li presented in metric tons per year
to million barrels per day. Again, this is C+C plus natural gas liquids.
2017
At Peak
Year Peak
BPD Increase
us
11.47
15.08
2042
3.61
Saudi
11.29
12.17
2030
0.88
Russia
11.13
12.01
2033
0.88
Canada
4.74
7.85
2049
3.11
Iran
4.70
5.40
2039
0.70
Iraq
4.44
6.51
2042
2.07
China
3.S6
4.32
2015
UAE
3.53
4.38
2037
0.84
Kuwait
2.93
3.35
2040
0.42
Brazil
2.87
3.03
2025
0.16
Rest of W
27.13
33.22
2004
Total World
88.10
90.95
2021
2.85
The source for this chart is the same as the table above. I believe due to OPEC
massively inflating their URR, and the inaccuracy of the Hubbert method due to the creaming of
all giant fields, the expected peak dates here are highly inaccurate.
Well, all except three. The rest of the world did peak in 2004, China did peak in 2015, and
the world will peak by 2021 or before. Congratulations to Dr. Minqi Li, the most accurate
future peak there is the one that he calculated. Guym x Ignored says:
07/04/2018 at 8:10
am
I think Dr. Minqi Li put together an exceptionally well researched paper. The only one I have
a faintest glimmer of knowledge in is oil. 2021. Give or take a couple of years is a good
estimate of when peak oil occurs, based on current findings and technology. Improvements in
either would probably only affect the tail of the decline rate. Which, based on the immense
overstatement of EIA, and the creaming you mentioned, the tail should have much more of a
decline than depicted. I am tending towards 2022 to 2023 as the final peak, due to the little
over a year hiatus on the Permian final push due to pipeline and other constraints. We all
know 2042 is a bad projection for the US, it will get there as soon as it can. It will get
there as soon as it can, because the oil price will be high enough to beg, borrow, or steal
to get there. For that reason, all other sources will be staining to get there at the same
time. We are in the final stage, I do think.
Ron, many thanks for your very informative post about world oil (as always) and your
comments on my post.
However, like much of the peak oil community, having missed some of the previous peak
oil predictions, now I may err on the conservative side. Many have criticized the EIA
projections and OPEC reserves. But again, even with those projections/reserves, the world
oil production is still projected to peak in 2021. This suggests that world oil production
may indeed peak in the near future. As I promised, I will follow up with part 2 on
this.
Regarding China, China's oil consumption growth has re-accelerated as its oil production
is in decline. This development may have some major impact on global economy/geopolitics in
the coming years. On top of that, China is (or will soon become) the world's largest
natural gas importer.
Iran's OPEC governor Hossein Kazempour Ardebili said the US ban amounted to "self harm," adding that Iran's
position is that oil should not be used as a weapon or for political purposes. He predicted that higher oil prices
would end up hurting the US economy.
Historically that has been the case, and with Saudi production already at record levels, Trump's expectation
that the Saudis will make up for Iran's shortfalls are not realistic. Still, US officials continue to demand the
world, including major Asian powers, stop buying from Iran.
Iranian President Hassan Rouhani downplayed the seriousness of the ban, saying he is confident Iran will
survive this round of US sanctions as it has other sanctions in the past. Many coutries have not committed to the
US ban, and if prices rise, Iran may ultimately take in just as much money even with fewer exports.
World cumulative oil production up to 2017 was 192 billion metric tons. The world's
remaining recoverable oil resources are estimated to be 276 billion metric tons and ultimately
recoverable oil resources are estimated to be 468 billion metric tons. By comparison, the BP
Statistical Review of World Energy reports that the world oil reserves at the end of 2017 were
239 billion metric tons.
World oil production is projected to peak at 4,529 million metric tons in 2021.
2017 Production and Peak Production are in million metric tons; Cumulative Production, RRR
(remaining recoverable resources or reserves), and URR (ultimately recoverable resources) are
in billion metric tons. For Peak Production and Peak Year, regular characters indicate
historical peak production and year and italicized blue characters indicate theoretical peak
production and year projected by statistical models. Cumulative production up to 2007 is from
BGR (2009, Table A 3-2), extended to 2017 using annual production data from BP (2018).
The USA elite might now want abandoning of GATT and even WTO as it does not like the results. That single fraud on the west has
had catastrophically perverse consequences for the coterie of killer's future and all because the designers of GATT had never thought
outside the square of economics and failed utterly to grasp the gift of scientific and manufacturing politics.
Notable quotes:
"... The US still depends heavily on oil importation -- it is not "independent" in any manner whatsoever. Here's the most current data while this chart shows importation history since 1980. ..."
"... the only time a biological or economic entity can become energy independent is upon its death when it no longer requires energy for its existence. ..."
"... A big part of the US move into the middle east post WWII was that they needed a strategic reserve for time of war and also they could see US consumption growing far larger than US production. ..."
"... The USA of WAR may have oil independence, but it is temporary. The race is on for release from oil dependency and China intends to win in my view. It is setting ambitious targets to move to electric vehicles and mass transit. That will give it a technology dominance, and perhaps a resource dominance in the EV sphere. We are in the decade of major corporate struggles and defensive maneuverings around China investments in key EV sectors. ..."
"... In ten to twenty years' time the energy story could well be significantly different. The USA and its coterie of killers are still fighting yesterday's war, yesterday's hatred of all things Russian, yesterday's energy monopoly. ..."
"... I don't believe that the USA of WAR has changed or even intends to change the way they play their 'game'. The General Agreement on Tariffs and Trade set the trajectory for technology transfer, fabrication skills transfer, growth of academic and scientific achievement in 'other' countries (China, Russia etc). Their thoughts in the GATT deal were trade = economics = oligarchy = good. ..."
"... That single fraud on the west has had catastrophically perverse consequences for the coterie of killer's future and all because the designers of GATT had never thought outside the square of economics and failed utterly to grasp the gift of scientific and manufacturing politics. ..."
"... Canada and the gulf monarchies are the only countries with large reserves that are not hostile as yet to the US. As the US no longer is totally reliant on imports to meet its consumption, Saudi's, Bahrain and co are now expendable assets. ..."
The US still depends heavily on oil importation -- it is not "independent" in any manner whatsoever.
Here's the most current data
while this chart shows importation
history since 1980.
As I've said before, the only time a biological or economic entity can become energy independent is upon its death when
it no longer requires energy for its existence.
What I am looking at are strategic reserves, not how much oil is currently produced. With shale it now has those reserves and
shale oil I think is now at the point where production could quickly ramp up to full self sufficiency if required. Even if the
US were producing as much oil as they consumed, they would still be importing crude and exporting refined products.
A big part of the US move into the middle east post WWII was that they needed a strategic reserve for time of war and also
they could see US consumption growing far larger than US production.
@Peter AU 1 #28 Thank you for that stimulating post. I just have to respond. And thanks to b and all the commenters here, it is
my daily goto post.
The USA of WAR may have oil independence, but it is temporary. The race is on for release from oil dependency and China intends
to win in my view. It is setting ambitious targets to move to electric vehicles and mass transit. That will give it a technology
dominance, and perhaps a resource dominance in the EV sphere. We are in the decade of major corporate struggles and defensive
maneuverings around China investments in key EV sectors.
In ten to twenty years' time the energy story could well be significantly different. The USA and its coterie of killers
are still fighting yesterday's war, yesterday's hatred of all things Russian, yesterday's energy monopoly.
I don't believe that the USA of WAR has changed or even intends to change the way they play their 'game'. The General Agreement
on Tariffs and Trade set the trajectory for technology transfer, fabrication skills transfer, growth of academic and scientific
achievement in 'other' countries (China, Russia etc). Their thoughts in the GATT deal were trade = economics = oligarchy = good.
That single fraud on the west has had catastrophically perverse consequences for the coterie of killer's future and all
because the designers of GATT had never thought outside the square of economics and failed utterly to grasp the gift of scientific
and manufacturing politics.
By gross ignorance and foolish under-investment, the USA of WAR and its coterie of killers have eaten their future at their
people's expense.
Light sweet vs heavy sour. Light means it contains a lot of diesel/petrol. Sweet means low sulphur. Many oils are heavy sour.
Canada sand. the stuff they get from that is thick bitumen with high sulpher. The sulpher needs to be removed and the bitumen
broken down into light fuels like diesel and petrol.
Canada and the gulf monarchies are the only countries with large reserves that are not hostile as yet to the US. As the
US no longer is totally reliant on imports to meet its consumption, Saudi's, Bahrain and co are now expendable assets.
The great game for the US now is control or denial. Access to oil as a strategically critical resource is no longer a factor
for the US.
"We're an empire now, and when we act, we create our own reality. And while you're studying that reality – judiciously, as
you will – we'll act again, creating other new realities, which you can study too, and that's how things will sort out. We're
history's actors . . . and you, all of you, will be left to just study what we do." Karl Rove.
The squealing and consternation coming from the UK indicates that the empire has changed course and the UK is left sitting
on its own shit pile.
I encourage you to give the Escobar article a second reading. I just did to make sure I knew what it was saying. I think karlof1
is making the right points from it.
The collaboration between Saudia Arabia and Russia is a very small part of the article, and no one disputes that this collaboration
is occurring. Russia may even be part of OPEC soon, if it chooses. The relationship works against the US but it's not specifically
made for this reason. Read Adam Garrie's take on this to see that the moves into OPEC by Russia in recent years are clearly from
its own interest as a hugely major supplier, and that Saudi Arabia needs Russia:
The New Russia-Saudi Partnership Has Riyadh's US Ally Over a Barrel
I just skimmed it a third time and I don't see Escobar saying anywhere that the Saudi-Russia relationship is to kill US shale.
He does say that both Russia and Iran are interested in countering it. I think the point here is that all serious oil producers
with profitable reserves take alarm at the US shale oil because it's hard to say that it's a real commodity with an inbuilt profitability.
It's a short-term entry into the market that can serve to disrupt the market temporarily, but it has no staying power. I suspect
most nations would prefer it simply not intrude.
No one actually has to act against US shale - it's something of a pretender in the real oil world anyway, and this has long
been commented upon. Escobar's point that the US shale is largely a myth is not a new concept. At best the reserve will deplete
within 15 years, and that's at best - along the way it will destroy the US potable water table. And its intrinsic value is far
from clear, since the entire industry is dubiously financed using relatively free Federal Reserve money. As Escobar points out,
many call $100 per barrel the profit threshold for shale - that's a ludicrously high bar for profitability in the oil world.
Much of Escobar's article was about the relationship between Russia and Iran, and it served also as a very good primer in world
oil and petro-currency numbers. I found it pretty sound.
"... The Iranians will lose marketspace, sure, but the inevitable increase of the price of oil will somewhat soften the blow. And anything over $100 per barrel, along with a stronger dollar, is proven to be detrimental to energy importing countries. It will be painful to keep the economy rolling. ..."
Oil will continue to flow from Iran, there simply isn't a significant supply stemming from
the Saudi-Russia alliance or US shale to fill the gap.
The Iranians will lose marketspace,
sure, but the inevitable increase of the price of oil will somewhat soften the blow. And
anything over $100 per barrel, along with a stronger dollar, is proven to be detrimental to
energy importing countries. It will be painful to keep the economy rolling.
And when there's less appetite for oil; the price of oil crashes resulting in another big
financial crash (due to bad dept) followed by another round of austerity measures which
spells political turmoil in a number of countries. And the landscape gradually changes.
So Trump asked the Saudis to pump 2 million more barrels per day to offset Iranian exports?
Daffy!. Saudis do not have a spare barrel, let alone 2 million. Ask Simmons. Oh wait, he
has been offed:
LONDON(Reuters) - The leader of Saudi Arabia has assured U.S. President Donald Trump that
the Kingdom can raise oil production if needed and the country has 2 million barrels per
day of spare capacity that could be deployed to help cool down oil prices to compensate for
falling output in Venezuela and Iran.
In a tweet on Saturday, Trump said Saudi Arabia had agreed to increase output by up to
this amount, although a subsequent statement from the White House rowed back on this
assertion.
Either way, the kingdom, OPEC's biggest member, can barely raise output by 1 million bpd
to 11 million bpd and even that would be difficult, according to industry analysts who
forecast a further oil price rally due to a lack of new supply.
Below are comments from some leading OPEC analysts:
[ED: one of several cited below]
"The Saudis do not have 2 million bpd of spare capacity as it would imply production of 12
million bpd. They can likely produce a maximum of 11 million and even that will be running
their system at stress levels," said Ross.
He added that with a potential output fall of up to 1.5 million bpd in Iran and
further outages in Venezuela and Libya, the world could be short of 2 million bpd of oil
output without an increase in Saudi output by the end of the year."
Pepe declares US shale to be a myth, but then says KSA and Russia have teamed up to fight. Us
production figures also left out. Disappointing piece from Pepe, especially this glaring
contradiction where KSA and Russia has to team up to fight what he calls a myth.
Pepe's referring to the assumed longevity of shale which is proven to be a gross lie. I can
provide documentation about that but it will have to wait until I have more time to work.
karlof1
Ok so according to Pepe Russia and KSA are joining forces to fight this gross lie.
either shale is a real and major threat, or Russia and KSA are not joining forces. That is
the glaring contradiction in Pepes piece. the other option is that both Russia and KSA both
of which have some knowledge of oil are mistaken about US shale.
Already have Syria? Not really. Heard of the SDF occupying the North-Eastern third of
Syria. If Trump & Putin can't come to an agreement on Iran what's the bet Trump decides
to pump money, weapons and US troops into North-Eastern Syria to fully support the Kurds?
NordStream II? Sure, it will be built, but Trump can sanction Germany and German industry
- ie automakers - heavily if he so wishes. He might do. He can blame NordStream II. He's
certainly been talking about it.
There are certainly ways and means Trump can create huge trouble for Germany/Russia in
regards to NordStream II even if it is built.
Crimea? Yeah, Russia has it but it is also used as the bludgeon to impose sanctions on
Russia. Perhaps recognising Crimea as part of Russia and dropping all sanctions on Russia
will be offered to Putin in return for Russia staying out of any conflict regarding Iran in
2019.
I'd hardly say Trump has nothing to bargain.
Besides, why would Putin select Medvedev as Prime Minister again despite Medvedev being
obviously a Euro-Atlanticist?
I'd also add - who do you think Russia fears in the future decades.
Is it a decaying Europe/EU who nevertheless can buy lots of Russian goods including oil
& gas obviously?
Or do Russia fear a rising China that always has one eye on the Russian Far East as a
possible place for expansion to take care of their oil & gas & mineral needs?
I suspect - and you can look to the history of Russia/China relations for this - that
Russia retains a more existential fear of China than anyone else.
Russia always clearly seeks to balance Europe/EU/US/Atlantic against China and others.
Where does Iran fit in all this? If Iran is taken out who benefits? Doesn't Iran being
taken out strengthen Russia's hand vis-a-vis China in terms of oil & gas? I'd say it
does. Certainly. Without Iranian oil & gas China becomes more dependent on who?
RUSSIA!
So I bet Russian thought would tend to say to China. Look, we are not going to put
ourselves on the line to defend Iran. But hey, if you want to do that we'll support you doing
so, afterall, Iran is of a more of a vital strategic interest to you than us.
We defended Syria, we can't defend anyone and you can't expect us to defend everyone. If
you want a country to retain its independence you have to step up to the plate every now and
then rather than just relying on the Russian military.
And look - we defended Syria - what did you do in Syria's defence?
Just to finish this comment.
In case you haven't noticed the US has put a date of November 4 on stopping the
export/import of Iranian oil. Which is? It is 2 days before the November 6 Mid-Terms...
It's a clear set-up for 2019.
My prediction.
There will be military action against Iran in the first half of 2019.
I suspect March-April-May being the most likely.
At that time you also have Brexit, European Elections (dominated by populists), Ukrainian
Presidential Elections, South African Elections, Indian Elections... It's a big few
months.
My advice? Buy oil & gas in the second half of this year - it's value is likely to
skyrocket in 2019.
What will Iran's response be? I'd say if you are in any of Saudi Gulf Coast, UAE (Dubai
& Abu Dhabi), Kuwait or Bahrain - get out before New Year's!!!
Re: Posted by: Peter AU 1 | Jul 1, 2018 11:14:41 PM | 27
I'm not judging one way or another on what Putin will necessarily do, but clearly Trump's
gambit is to wean Iran off Russian support.
Will it work? Who knows. But Iran clearly has less strategic importance to Russia than
Syria.
Let me ask you a question. Do you think Russia prefers Iranian-Qatari oil & gas
pipelines through Iraq-Syria-Turkey to Europe or would Russia prefer Saudi-UAE-Qatari oil
& gas pipelines to Europe??
Any effort to understand US foreign policy from actual US interests is a futile exercise in
frustration. US foreign policy is driven by two things:
1. The interests of international financiers (heavily Jewish)
2. The Israeli government.
At consideration for actual US interests is secondary if such things considered at all.
That should be obvious enough to everyone by now.
The one thing that Russia and/or China could do that would do more to avoid another major
power war, is to loudly, clearly and publicly inform the Israelis (the people as well as the
government) that any attack upon Russia, China, or their forces by the US or NATO will be
treated as a direct attack upon Russia/China by the state of Israel and the Jewish people and
these will be utterly destroyed in the first salvo of the Russian/Chinese response.
The second thing that could/should be done, is for Russia to implement a covert campaign
of targeted assassinations of Jewish figures who are actively engaged in efforts to undermine
Russian interests. This would include people like Sheldon Adelson, Haim Saban, key players in
international finance, etc. No Jew anywhere in the world should feel that they are beyond the
reach of Russian retaliation. This is precisely how the Israelis conduct their foreign policy
and Russians should not shirk from engaging fire with fire.
@Julian
I think you underestimate the long term benefit of a stable and prosperous Iran in the
greater Eurasian gambit (Infrastructure Node, stability for the region) vs the short term
gains Russia may achieve from a destroyed and fractured Iran that is in disarray. Russia
doesn't just export energy after all. Exploding oil prices will end up hurting consumer
nations, which in turn affects the global economy and by extension oil producers, there is
always a delayed feedback loop.
Just because someone competes with you in the energy realm doesn't automatically mean you
want that actor weak or destroyed. If that was the case, then why does Russia maintain good
relationships with Azerbaijan, a direct competitor to Russian Gas? Similarly Central Asian
countries are competitors in the gas market for China, yet Russia would never allow these to
be subverted by radical Islamists without acting.
"... The great power game is why there is continuity of government policy in the 'US west' no matter who is elected. Within the great power game democracy in the west is meaningless. ..."
"... If the US is changing how it plays the game, then the Brit players may be getting desperate. They are now small players but unlike the US do not have an oil reserve. ..."
"... This may be the reason the Brits have ramped up the propaganda to the ridiculous and also why they have attempted to take down Trump. ..."
Loot is only a side benefit for post WWII wars and no doubt before. Oil is energy and energy
means power to those that control it. UK, French, US have fucked the MENA region over simple
for control of the oil.
Working to prevent communism, socialism, democracy and pan Arab
movements which are all a threat to FUKUS control of MENA, and then pulling the same dirty
tricks on each other. Russia has its own all and through the Soviet era seems to have only
dabbled in the region.
China needs to import energy and so the great power game of controlling
or denying access to energy continues.
karlof1 @ 3 said"Criminality mostly driven by Greed."
james @ 5 said: "trump isn't much different or he would be addressing this too..."
Two bottom line truths, that are apparent...
As always, profits "trump" humanity. How to change that mindset? I for one, don't know,
but, the so called "religious" among us, should ask themselves that same question. IMO,
religion is, as practiced, mostly crowd control..
The great power game is why there is continuity of government policy in the 'US west' no
matter who is elected. Within the great power game democracy in the west is meaningless.
with USA's new found oil independence, the direction they take may change from the last 70
years or so.
Another recent change is the rise of current Russia and their vision of a multi polar
world, also the rise of China.
If the US is changing how it plays the game, then the Brit
players may be getting desperate. They are now small players but unlike the US do not have an
oil reserve.
This may be the reason the Brits have ramped up the propaganda to the ridiculous and also
why they have attempted to take down Trump.
2018-06-26 (Rudaw) When US sanctions were placed on Iran in 2012, the four Asian countries
were given a waiver, requiring them to reduce their business with Iran by 20 percent each six
months rather than halt trade immediately.
The Asian oil buyers are less likely to receive a similar waiver from the Trump
administration Iran may need to resort to a bartering system to continue selling its oil.
Under the 2012 US sanctions, India imported $10.5 billion worth of goods, mainly crude oil,
and exported commodities worth $2.4 billion.
The barter system will be inefficient, as Iran's oil sales are greater than the value of
what it imports from these countries. It also cannot use the currencies of these countries
for international business transactions. http://www.rudaw.net/english/business/250620181
2018-06-26 (Bloomberg) U.S. presses allies to cut Iran oil imports to *zero* by November
* U.S. isn't granting waivers on Iranian oil imports ban
(State Department Official)
"The global economy looks like the Titanic right now. The iceberg is the incoming oil price
spike and the complacent investment community won't even know what hits them. "
-Baby Domer
So, an important question for this board is, could we have reached peak oil production this
year? The Permian will increase substantially into 2020. However, that will be partially
offset by the Venezuelan drop. Add in other declines, and the drop could easily offset any US
production. At some point, OPEC will see that extra production will never meet demand, and
not just waste what they have.
It depends totally on political scenarios, not technical and not financial.
There's still a lot of growth potential to offset the declines:
– Permian
– Other US shales to a degree
– Kanada with it's vast heavy oil ressources
– Venezuela
– Russia
– Iraq
– Iran
– SA (nobody knows), at least they can call to their spare capacity
– Kuwait
– UAE
-Brasil
That's 10 locations, some are politically knocked out ( Ven, Iran partly) from growth.
The more important thing for world economy is: How long can they support the consumption
growth, additional to the decline of all other countries.
I think peak oil is somewhat more melodramatic: When Ghawar finally dries up, we have
reached peak oil. It will dry fast, due to all these horizontal tapping keeping the oil
flowing until the last feed of oil column. And replacing these 5 mb/d will require an
additional fully developed Permian – something not in sight at the moment.
Libya's Tripoli-based NOC Says Exports from Benghazi-based NOC in the east are "illegal"
2018-05-26 BENGHAZI, Libya/TUNIS (Reuters) – Eastern Libyan commander Khalifa
Haftar's forces have handed control of oil ports to a National Oil Corporation (NOC) based in
the east, a spokesman said on Monday, a move the internationally recognized NOC in Tripoli
dismissed as illegal.
If implemented, the transfer of control would create uncertainty for buyers of Libyan oil who
normally go through NOC Tripoli.
In comments later confirmed to Reuters, Ahmed Mismari, spokesman of Haftar's Libya National
Army (LNA), said on television that no tanker would be allowed to dock at eastern ports
without permission from an NOC entity based in the main eastern city, Benghazi.
https://www.reuters.com/article/us-libya-oil/east-libyan-forces-say-oil-ports-handed-to-eastern-based-noc-idUSKBN1JL2DQ
Tripoli-based NOC https://pbs.twimg.com/media/DgkrEMeXUAADLGS.jpg
Some kind of summary with some details from Libya (from comments section in HFIR article
above – Game Over – Oil Prices Are Going Higher).
Nigeria and Libya are also becoming disruption hotspots. Three of Nigeria's main crude
streams (Forcados, Bonny Light and Qua Iboe) are either halted or severely disrupted, but
violence in Libya grabbed the recent headlines. Militias led by Ibrahim al Jathran, former
head of the local Petroleum Facilities Guard, attacked and briefly seized the 0.35 mb/d Es
Sider and 0.22 mb/d Ras Lanuf terminals from Khalifa Haftar's Libyan National Army (LNA).
Although the LNA are back in control, Libyan oil output has collapsed from 0.95 mb/d to
around 0.55-0.60 mb/d because of the fighting and NOC has declared force majeure at the two
ports (along with apparently unrelated technical issues undermining production at AGOCO-run
fields in the east).
After around 10 days of fighting, the extent of the damage at the two terminals remains
unclear. There is currently no information about the status of Es Sider, which exported
around 0.30 mb/d in the previous three months. The destruction of two storage tanks at Ras
Lanuf, which was exporting around 0.10 mb/d before the clashes, has reduced storage capacity
from 0.95 mb to 0.55 mb. Seven tanks at the terminal had already been damaged in previous
clashes and the destruction of another two leaves only four tanks capable of operating. Once
the fighting is over (and there is a considerable risk of further clashes over the next few
weeks), it will take several days to evaluate the status of Es Sider and Ras Lanuf. This
would be followed by emergency repairs, which could take a week or two, with export capacity
recovering only gradually. Consequently, we expect output to remain at 0.55-0.60 mb/d until
early/mid-July, even as NOC studies options to bypass Ras Lanuf and possibly divert exports
to the Zueitina terminals.
In conclusion: Libya is good for no more than 0.8 Mb/d, but likely less than that in
2018.
The debate seems to be around what effect the risk of secondary sanctions from US
government for international companies will have. Some argue that the US allies and their
companies will not pick a fight over this with the US right now. In either case, it certainly
is not good for the Iranian economy which contracted after the last round of sanctions and
boomed when they were lifted afterwards. Also the Iranians want western equipment and
competence to develop their oil and gas fields (some of their oilfields are somewhat
complicated to develop), and it is not certain Lukoil and russian service companies can be a
good enough replacement.
There are some hurdles with switching customers for large oil volumes. Tanker freight and
insurance services now done by western companies afraid of sanctions will have to be replaced
or the obstacles overcome somehow. But I agree with you that China, while also having a
futures market trading in yuan, will look to Iran when shortage arrives. However the
perception of shortage has still not arrived in oil markets today. Some reduction of export
from Iran is likely both initially and for some time further. Hard to say how much, some
argue that it takes 6-12 months to see the full effects of US sanctions. And once sanctions
now are in place, even if it was untimely given the supply situation in the oil market, it
will not be practical and too confusing as a political move to see them lifted soon (less
than 1 year).
Fun to look at this analysis, and plug in a one million shortage from North America.
Obviously, there would not be a one million drop in Iran, as it would be sold somewhere.
We might be seeing similar articles about gas over the next couple of years. Driving a bit
less is maybe a good thing, pensioners and children freezing to death and industry shut down
with rolling blackouts is maybe less negotiable.
Suppose there is too little oil and the price doesn't change. Producing countries will be
sure their own countries have a sufficient amount so regardless of price, that oil isn't
leaving the country. It stays right there for consumption. External price is meaningless to
that country, as it should be.
There are countries that produce about what they consume. Mexico is one. Argentina. Their
oil isn't going anywhere. A higher price elsewhere tries to get it exported? Clearly the govt
will stop anything like that. Just as the US did with its export ban in the 70s. Price
doesn't matter if bans are in place.
Oh, and another annoying thing in that article. Something like . . . if supply shrinks,
only "demand destruction" can avoid some sort of catastrophe. This is absurd. Demand is not
destroyed. The desire for oil will grow with population. The population demands oil. It is
consumption that is destroyed by lack of supply. Can't consume what doesn't exist.
Besides which, if some level of "grim" is approached, then some decision is going to be
made to liberate that Orinoco heavy from the horrible popularly elected government that
controls it. As I noted before, there is a large ethnic Russian population in Venezuela. The
1917 revolution sent many people there, fleeing confiscation. Liberation may not go
smoothly.
Mexico doesn't use what it produces, it doesn't have the refining capacity – it exports
crude and imports products.
Invading Venezuela wouldn't necessarily stop the decline in production – their
equipment and wells are falling apart, to get back to where they were a couple of years ago
would require a five year occupation, probably with forced labour (or really high wages), and
the investment money all coming from the invading country, with no net returns for longer
than that.
Demand is usually defined with some relation to price, not assuming a commodity is free.
From the Bloomberg article: "The U.S. plans to speak with the governments of Turkey, India
and China, all of which import Iranian oil, about finding other supplies."
Iranian condensate will most likely replace US condensate to China as much as possible.
China is the key to if/when this harsh "embargo" of Iran will ease. They have the strength to
stand up against the US and then others will follow suit (e.g. India). A barter system (goods
vs. goods trade) or payment in yuan could probably be a good enough way to avoid american
banking sanctions. But if China wants to stand up against US at this point is uncertain. If
this strangling of Iran is highly successful, it is hard to see the rewards. A high oil price
that will be the tipping point for the global economy in the wrong direction or indirectly
(hopefully not directly – who needs another war now?) overthrow the Iranian government
and thus the creation of new political problems in the country; a repeat of the Iraq
experience almost. I almost forgot that there is the nuclear issue there as well, maybe that
is also a driver
"We have a lot of diplomatic muscle memory for urging, cajoling, negotiating with our
partners to reduce their investments to zero," the official added.
(This official infers that EU countries will soon capitulate to US demands, but does he
believe that, say, India will agree to this? The CNN reporters don't ask.)
Yeah, we are setting ourselves up for creating a 2.5 million barrel a day shortfall by
sometime in 2019. The US is creating these surprises by far overestimating Permian output,
and the Iran sanctions. Now, Perry is saying the OPEC increase may not be enough. Really, ya
think? What do we do now, President "Not good!"?
Trump's master plan was written on the back of a business card with a crayon. Nobody, can
decipher it, it more difficult than the most complex code.
I think probably the most telling take of his presidency, is the aide in charge of keeping
Presidential documents complaining that he tore every sheet of paper on his desk into little
shreds, constantly. Sure sign of a serious mental disturbance. Captain Queeg.
Guym. I assume most of the small conventional producers are receiving a low price in the
Permian. Bad deal for them, situation not of their making. Hoping very much that does not
spread to the Midcontinent.
Anecdotally, zero rigs presently drilling in our little field. Drove the width of Kansas
twice recently, including OK and TX panhandles. Saw zero drilling rigs. Saw just three
workover rigs.
The shale plays appear to be the USA oil future. The rest are not big enough to draw
outside money.
Really have to wonder how many of the world's fields are "self sufficient" at $70-80 at
this point.
Not much at $70 to $80 anymore. Not very much of a profit, at those prices. But, you get what
you pay for, and soon the world will find out that the price they wanted to pay results in a
deficit to what they need.
Yes, market really overdid it dropping prices to the 2015-17 levels.
I still blame a lot of the overdone price crash on US shale CEO talk. Their true costs
were murky, and they continually talked the price down through 2015 by claiming they could do
well financially at those levels or below.
Those companies should be doing great now, given the claims of 2015-17. Lol.
2015-17 took a lot of the fun out of oil production investment for me. None of us have
much desire to do any drilling or other risk taking. Just feeling relief, but worried the
roller coaster prices will never end.
Watching Trump kill grain prices. If the Dems could find someone that could appeal to
Midwest, I'd say Trump will not win in 2020. Very conservative ag folks are upset. Suprsing
to me how vocal they are about it.
Maybe a trade war will kill oil demand. More roller coaster.
"... tier plays that have been a bust. With the seismic and visualisation technology improvements the E&Ps should know better where and where not to drill. They seem to be more selective with falling wildcat numbers (and that is not much of a function of price that I can see as it has been happening since 2010) and yet the commercial discovery rates are staying fairly low. I can only interpret that as indicating that there just isn't that much left. With Rystad indicating 6 to 8% decline rates in mature fields, and rising, and few new prospects how can there not be a peak? ..."
"... Saudi ministers spout out any thing that comes to mind to support flip-flop policies and their feud with Iran seems to be bubbling in the background of a lot that's going on; every year Iran and/or Iraq say they have a new plan and target for higher production, which is 100% guaranteed not to be met even remotely. ..."
I think if the world economy starts to drop, which is overdue and looking increasingly likely
every time Trump opens his mouth, and keeps the oil price down then it's likely we'll be in a
slow but accelerating decline. That might be a good thing – the further the peak is
pushed out the steeper the decline when it comes.
What has surprised my most recently has been the fall in discoveries for oil and, maybe
more so, gas, and with that the number of new fron tier plays that have been a bust. With
the seismic and visualisation technology improvements the E&Ps should know better where
and where not to drill. They seem to be more selective with falling wildcat numbers (and that
is not much of a function of price that I can see as it has been happening since 2010) and
yet the commercial discovery rates are staying fairly low. I can only interpret that as
indicating that there just isn't that much left. With Rystad indicating 6 to 8% decline rates
in mature fields, and rising, and few new prospects how can there not be a peak?
The oil drop might have been more expected than the gas, and was predicted by some when
peak oil was first mentioned, I think gas less so, but perhaps the price has had a bigger
effect there. Whatever the cause many countries have been banking on ever rising supplies,
either by pipeline or LNG, that might not be forthcoming.
Having said that simple economic arguments rarely seem to work as predicted, oil supplies
would have peaked well before now without, mostly non-proftable, LTO; Venezuela production
should be rising not a basket case; Saudi ministers spout out any thing that comes to
mind to support flip-flop policies and their feud with Iran seems to be bubbling in the
background of a lot that's going on; every year Iran and/or Iraq say they have a new plan and
target for higher production, which is 100% guaranteed not to be met even remotely.
At the moment the traders don't seem certain which way to turn – falling/rising
supplies, short/long term demand rise/fall – you can see why they tend to fixate on US
crude stocks, everything else is too complicated. The next few Wednesday/Thursday trading
patterns will be interesting.
(ps if anything highlights the state of the oil industry at the moment it's that Fram, a
two well, eight year life-cycle, gas condensate tie-back with about 10 mmboe reserves, has
been the main headline news on at least four of the trade magazines this week.)
A little short by over 2 million a day. Perry has to know the Permian is on a hiatus for
at least a year. That's probably over a million. Iran push is for another million. Yeah,
that's a little short. Idiocy reigns. Russia just called for tariffs against the US. Any
assistance from Russia ain't gonna happen.
The slow motion train wreck in progress. No one knows why the driver of the Lower for
Longer Train has picked up speed down the curving stretch .
Ok, I'll forgo the train wreck series. Yeah, it's serious. So was the ridiculous pricing
we've had for the past four years, and no one but the people who relied on oil income
complained. There was not enough for capex to get new oil. The trainweck happened already.
U.S. oil production is booming at record levels, and U.S. oil exports have also reached
new highs -- 3 million barrels a day in the last week, according to government data.
Those exports are more than most OPEC countries can produce each day and only lag two OPEC
countries, Saudi Arabia and Iraq, in terms of exports.
And if you read far enough down in that article they do mention imports, as if they hardly
matter.
As U.S. production has grown, U.S. imports have decreased. The U.S. imported a
relatively high 8.4 million barrels per day last week.
Okay, the US exported 3 million barrels per day and imported 8.4 million barrels per day.
Yet the headline says the US exported more oil than most OPEC countries. Is this Orwellian
Newspeak?
We all agree that 2+ 2 = 5, but what we don't know is which one belongs to the thought
police. I agree the Permian will produce 1.3 million this year, just take the rat cage off my
head.
"the US exported 3 million barrels per day and imported 8.4 million barrels per day. Yet the
headline says the US exported more oil than most OPEC countries. Is this Orwellian Newspeak?"
At the just concluded OPEC meeting, Iran, Iraq and Venezuela were against any increase in
extraction, while the Saudis wanted an increase. What resulted is
detailed in this article . Moneygraph:
"... OPEC does not need to change its output deal since the group had already cut supply
by much more than it had agreed. What Zanganeh offered was for OPEC and Russia to pump back
up to decrease the current cuts to the initial 1.176 million barrels per day (bpd).
"Output in May 2018 was actually down by 1.9 million, somehow 62 percent or 724,000 bpd
more than what was agreed upon in 2016."
The upshot is an increase will occur but no increase will occur--understand? The
extraction amount agreed to in 2016 remains the amount OPEC will extract. There will be
no increase in that amount this year.
"I think not, it's a lot cheaper to add a few more production wells than to add a couple of
million barrels of high pressure water injection capacity (topsides facilities and the wells
needed to inject it"
Water injection isn't the problem, its water cut. The don't need to inject more if they
keep the water cut stable. In order to keep the water cut, they have to perodically drill new
wells to keep the wells in contact with the Oil column. Over time the Water column push up on
the Oil column (ie Oil floats on Water). All the CapEx/Opex goes into drilling to keep in the
Oil Column Zone as well as add new wells to tap oil trapped in pockets. As the Oil column
continues to shrink and and as the water column become increasing contact with the cap rock
its going to required more and more drilling to maintain production.
My guess well know when SA starts running into problems when we start to see the rig count
increase and the production dropping over a period of a couple of years.
"The drilling of new oil wells is to maintain current production, not to increase it"
SA cannot increase Oil production much. They are working on extracting the remaining cream
(oil column) floating on a see of water. Increasing production would just increase the water
cut and also increase trapped oil that would later be more costly to extract. The only way SA
can increase production is to tap new fields or increase drilling for oil trapped in pockets.
But at some point these options will vanish over time as it will be increasing more difficult
to squeeze more oil out, like trying to squeeze trapped toothpaste out of a depleted
toothpaste tube.
I didn't say water injection was the problem I said it was the limit to increasing
production. It is. Water cut is the problem that leads to decline unless they keep drilling
new wells.
Two ways that increasing water cut is a problem are: 1) you have to inject more water for
the same amount of oil, which they don't have, 2) you have to treat more produced water,
which they don't have capacity for. Exactly what I said above. The third is that it reduces
overall well flow and, more so, oil flow; but that is easily got round if it easy to drill
new wells, as is the case for Saudi, even the offshore fields, which are shallow. That also
solves the first two problems because the individual field and overall country water cuts are
held steady.
The limits on surface facilities are much more expensive and long term (5 years at least)
to get round, but it could be done, therefore it is wrong to say that the only way to
increase production is to tap new fields.
(ps – I worked on water flood oil fields, including some minor studies for Saudi,
for at least 15 years through my career, the water is a bigger influence on the design and
operation than the oil.)
That all together sounds like it's completely senseless to keep some spare capacity for
fields like this.
This capacity will cost billions, hold back for not much. A big oil storage is better
there for satisfying demand peaks or temporary supply losses.
Reserve capacity is cheap to have when you are in primary recovery of a conventional
(giant) field.
The only illusion of reserve capacity would be in fields with tertiary recovery would be
to postpone maintainance for a few months to get that 5% more production.
Some spare is always needed, just to maintain production during maintenance or unplanned
outages. Sparing doesn't postpone maintenance, it means maintenance can be done without
taking the plant offline, or at least not for too long, so you get maximum returns on your
investment (when plants are taken down for major turn arounds it is to do work on items for
which there are no online spares).
Depending on the maturity of the field there is also always different amount of sparage in
the different project components – e.g. the wells, compression, power generation, oil
processing, export capacity, water injection, water processing – the limit is the
component with the least amount of sparage.
In Saudi also, at least for the heavy fields, they have been known to rest them completely
for a time, this allows the water contact to settle out and avoid excessive coning, which
provides a much better sweep of the oil and higher recoveries (I don't think any where else
has that luxury).
So when someone says "we have spare capacity" it can mean almost anything from
2×100% pumps on a particular duty to an entirely unused, ready for action oil
field.
From a modern capitalist approach with everything just-in-time and the next quarterly
statement being all important then excess sparing wouldn't please the shareholders, but Saudi
designed facilities with 50 year life times, so it might be different.
From looking at their recent production profiles, which seem to go up when they report a
new start-up and then decline, and stock draws, which have been consistent since January
2016, I find it hard to believe they have a large amount of "real" spare capacity –
i.e. that's easy to bring on line and that doesn't alter any of the performance of the fields
over the long term or compromise planned maintenance schedules – but I can't say for
sure. And, as I've said, the limit to expanding production (that means beyond just using up
the spare) is almost certainly with the surface facilities for water, so it's likely that is
also the part with the least spare capacity.
It sounds like you believe they might be able to maintain a plateau of 10 Mb/d for many
years, if they just drill more wells as needed. Though I may not be understanding
correctly.
There's the big question. Once the horizontal wells are at the top of the reservoir then you
can't drill any more and once the water contact hits them, even with intelligent completions,
then the decline will be fast (but even that is relative, huge fields take longer to decline
than small ones). There was a report in the Oil Drum some time ago that indicated that a lot
of Ghawar wells were near the limit but nothing much seems to have happened since to indicate
this turned into a problem, but then Saudi has a lot of other fields. On some of their
offshore fields they are replacing all the wellheads to add ESPs, that usually means they
have run out of new well options. Their rig count is declining, but maybe jus because they
are drilling much more productive MRC wells.
It's the difference between the size of the tank and the size of the tap (or for water
injection more like the size of the vent that lets air in to stop the tank collapsing under
suction). Might only know what's going on well after the fact.
I've told you that once you start down the Trade War path forever it will dominate your
destiny.
Well here we are. Trump slaps big tariffs on aluminum and steel in a bid to leverage Gary
Cohn's ICE Wall
plan to control the metals and oils futures markets . I'm not sure how much of this stuff I
believe but it is clear that the futures price for most strategically important commodities are
divorced from the real world.
But today's edition of "As the Trade War Churns" is about China and their willingness to
shift their energy purchases away from U.S. producers. Irina
Slav at Oilprice.com has the good bits.
The latest escalation in the tariff exchange, however, is a little bit different than all
the others so far. It's different because it came after Beijing said it intends to slap
tariffs on U.S. oil, gas, and coal imports.
China's was a retaliatory move to impose tariffs on US$50 billion worth of U.S. goods,
which followed Trump's earlier announcement that another US$50 billion in goods would be
subjected to a 25-percent tariff starting July 6.
It's unclear as to what form this will take but there's also this report from
the New York Times which talks about the China/U.S. energy trade.
Things could get worse if the United States and China ratchet up their actions
[counter-tariffs] . Mr. Trump has already promised more tariffs in response to China's
retaliation. China, in turn, is likely to back away from an agreement to buy $70 billion
worth of American agricultural and energy products -- a deal that was conditional on the
United States lifting its threat of tariffs.
"China's proportionate and targeted tariffs on U.S. imports are meant to send a strong
signal that it will not capitulate to U.S. demands," said Eswar Prasad, a professor of
international trade at Cornell University. "It will be challenging for both sides to find a
way to de-escalate these tensions."
But as Ms. Slav points out, China has enjoyed taking advantage of the glut of U.S. oil as
shale drillers flood the market with cheap oil. The West Texas Intermediate/Brent Spread has
widened out to more than $10 at times.
By slapping counter tariffs on U.S. oil, that would more than overcome the current WTI/Brent
spread and send Chinese refiners looking for new markets.
Hey, do you know whose oil is sold at a discount to Brent on a regular basis?
Iran's. That's whose.
And you know what else? Iran is selling tons, literally, of its oil via the new Shanghai
petroyuan futures market.
Now, these aren't exact substitutes, because the Shanghai contract is for medium-sour crude
and West Texas shale oil is generally light-sweet but the point remains that the incentives
would now exist for Chinese buyers to shift their buying away from the U.S. and towards
producers offering substitutes at better prices.
This undermines and undercuts Trump's 'energy dominance' plans while also strengthening
Iran's ability to withstand new U.S. sanctions by creating more customers for its oil.
Trade wars always escalate. They are no different than any other government policy
restricting trade. The market response is to always respond to new incentives. Capital always
flows to where it is treated best.
It doesn't matter if its domestic farm subsidies 'protecting' farmers from the business
cycle or domestic metals producers getting protection via tariffs.
By raising the price above the market it shifts capital and investment away from those
protected industries or producers and towards either innovation or foreign suppliers.
Trump obviously never read anything from Mises, Rothbard or Hayek at Wharton. Because if he
did he would have come across the idea that every government intervention requires an
ever-greater one to 'fix' the problems created by the first intervention.
The net result is that if there is a market for Iran's oil, which there most certainly is,
then humans will find a way to buy it. If Trump tries to raise the price too high then it will
have other knock-on effects of a less-efficient oil and gas market which will create worse
problems in the future for everyone, especially the very Americans he thinks he's
defending.
There is a narrative that oil demand will soon begin dropping due to widespread use of EV.
1 million EV just replaces 14,000 BOPD of demand. Conservatively assuming those one
million EV require $40K per unit of CAPEX, just to replace 14,000 BOPD of demand took $40
billion of CAPEX.
Likewise, to replace 1.4 million BOPD of demand via EV would take $4 trillion of
CAPEX.
Worldwide demand has been growing somewhere between 1.2-2.0 million BOPD annually,
depending on who one believes.
See where I am going with this? How do the EV disruption proponents explain away the
massive CAPEX required just to cause oil demand to flatten, let alone render it near
obsolete?
The average US car gets 25 mpg and travels 12,500 miles per year for 500 gallons of gasoline
per year.
Refineries in the US produce 20 gallons of gasoline per barrel of oil.
That gives 69,000 BOPD per day reduction per million EV cars in the US and 110,000 BOPD oil
equivalent energy due to the multiple energies put into gasoline and distillate
production.
At current rates of EV sales growth the US will reach 50 million EV cars by 2031. That should
put he US to being mostly independent of external oil for gasoline by mid 2030's and
It's tough to predict a complete transition in the US since cars as a service could greatly
reduce the numbers of cars needed, especially in dense population areas. That would mean a
much earlier transition.
If US ICE cars trend upward in mpg during that time, the demand for oil could be quite low
by the early 2030's.
All depends on continuation of trends, for which the auto manufacturers seem to be on board.
Just have to get the public charging infrastructure out ahead of the trend.
Here is an interesting article, from a couple of years ago, showing the trend and sales at
that time.
Cars get replaced all the time and the cost of new EVs will fall over time to the same
price as ICEV, so it's simply a matter of replacing the ICEV currently sold with EVs over
time, in addition cars can get better gas mileage (50 MPG in a Prius vs 35 MPG in a Toyota
Corolla or 25 MPG in a Camry.) There's also plug in hybrids like the Honda Clarity (47 miles
batttery range) or Prius Prime(25 mile range on battery) these have an ICE for when the
battery is used up.
If oil prices rise in the short term to over $100/b (probably around 2022 to 2030), there
will be demand for other types of transport besides a pure ICEV.
EVs and plugin hybrids will become cheaper as manufacturing is scaled up due to economies
of scale.
Surprising stuff. Huge oil consumption growth rates in Eastern Europe. 8+% growth %s in
Poland, Czech Republic and Slovakia. Something weird going on because Romania and Slovenia
didn't show the same thing.
Western Africa grew consumption of oil 13% last year. I'll add a !!!!. East Africa about 6%.
Both are over 600K bpd, so that growth rate is not on tiny burn.
Poland's official oil consumption growth is caused by better fighting with illegal, and
unregistered fuel imports since mid 2016. When taxes are 50% of fuel price, there is big
incentive for illegal activities. Real oil consumption probably didn't increase much.
Poland, Czech and Slovakia are going through a huge economic boom now (I live in Slovakia and
party in Czech Republic). It's visible everywhere, there wasn't this much spending and
employment ever in the last 28 years
Oil demand is mostly determined by GDP growth, oil price has a minor influence on short term
demand. World GDP grew by about 5% from 2016 to 2017 according to the IMF, so oil demand
increased by 1.8% possibly less than one would expect. Real GDP (at market exchange rates)
grew by about 3% in 2017.
The idea behind peak demand is simply that oil supply may at some point become relatively
abundant relative to demand in the future (date unknown). When and if that occurs, OPEC may
become worried that their oil resources will never be used and will begin to fight for market
share by increasing production and driving down the price of oil to try to spur demand. That
is the theory, I think we are probably 20 to 40 years from reaching that point for
conventional oil.
Oil still contributes quite a bit to carbon emissions and while I agree coal use needs to
be reduced (as carbon emissions per unit of exergy is higher for coal than oil), I would
think it may be possible to work on reducing both coal and oil use at the same time. Using
electric rail combined with electric trucks, cars and busses could reduce quite a bit of
carbon emissions from land transport, ships and air transport may be more difficult.
It's better to sell half of your ressources for 90$ / barrel than all at 30$ / barrel.
The gulf states will always have cheap production costs at their side, they will earn more
at each price of oil. Why not make big money, especially when at lower production speed the
production costs are much lower (less expensive infrastructure).
And in the first case you can sell chemical feedstock for a few 100 years ongoing for a
good coin. Theocracies and Kingdoms plan sometimes for a long time. When you bail out
everything at sale prices, you end with nothing ( and even no profit).
You assume half the resource can be sold at $90/b, at some point in the future oil supply
may be greater than demand at a price of $90/b, so at $90/b no oil is sold and revenue is
zero.
In a situation of over supply there will be competition for customers and the supply will
fall to the point where supply and demand are matched. Under those conditions OPEC may decide
to drive higher cost producers out of business and take market share, oil price will fall to
the cost of the most expensive (marginal) barrel that satisfies World demand.
I don't think we are close to reaching this point, but perhaps by 2035 or 2040 alternative
transport may have ramped to the point where World demand for oil falls below World Supply of
oil at $90/b and the oil price will gradually drop to a level where supply and demand
match.
Drilling Productivity Report – what we need is a Permian Plumbing Report. EIA – NOTE: Productivity estimates may overstate actual production which could be limited
by logistical constraints. https://www.eia.gov/petroleum/drilling/#tabs-summary-2
Regarding Saudi Arabia, what seems certain is that they have increased crude exports in
parts of May and early June by either activating "spare capacity" or withdrawal from storage.
Coming into peak domestic demand season it will be hard for OPEC to compensate for Iran,
Venezuela, Libya and any other negative "surprises" coming along in 2H2018. It would be a
real surprise if not the solution is to agree to a moderate production increase due to quite
a few reasons (I can think of at least 5 reasons for this on top of my head). I can imagine
OPEC/Russia want a somewhat controlled price increase to let us guess 90-100 dollars before
the low demand season kicks in 1H2019. If demand growth is still not impacted too much the
supply problems start to become unsolvable in 2019 and in any case 2020. There is both a
potential for a great price spike and recessions in 2019 imho.
I don't think it is Khurais. The project is delayed, but for how long is uncertain.
A quick search on the internet:
"We see Opec building capacity over the coming five years, largely driven by Saudi Arabia
where we see the Khurais expansion in 2019 and the Marjan field start-up by 2021. Saudi
Arabia is pressing ahead with upstream investment as part of its Vision 2030 strategy,"
BofAML said.
I was thinking that the price of WTI is still cheap. But then countries such as Russia have
been complaining that product prices are too high and that their refinery margins are too
low, and so I don't know. I still think prices could spike higher, sometime, due to outages
and lack of long term investment.
It seems that OPEC is looking to prevent supply shortages during peak demand
2018-06-19 OPEC technical panel sees strong oil demand in H2 2018, implying that the
market could absorb additional production, according to 3 OPEC sources
With the most highly-anticipated
OPEC meeting since November 2014 taking place Friday in Vienna, Macrovoices host Erik
Townsend made this week's podcast all about oil. He started his three-part interview series
with Dr. Ellen Wald, the author of "Saudi Inc.", a book about Aramco. During their discussion,
Wald shares what she learned about the Kingdom of Saudi Arabia and - most importantly - how the
royals view both Aramco and the oil market. This perspective is important, she explains, in
interpreting why former Saudi energy minister Ali Al Naimi made the infamous decision back in
November 2014 to
keep OPEC oil production targets unchanged . That decision precipitated another leg lower
in oil prices, eventually sending them to $30 a barrel. Many observers criticized the Saudis
for shooting themselves in the foot by standing against production cuts. But the one thing that
these critics didn't understand, Wald said, is that the Kingdom has always treated Aramco like
a family business.
They have two twin objectives: long-term profit and power. And when they look at Aramco,
they're not concerned about meeting, say, what their quarterly reports are going to show or
their stock price. They're looking at this in the long term, in a generational
perspective.
And so in 2014 when it seemed as though oil production was increasing around the world
– there was lots of other sources – not just shale oil production in the United
States but we had really increasing from all over – they went into that OPEC meeting
and everyone thought oh, they have to cut production. If they don't they won't maintain the
price they need for the budget and this is what has to be.
Instead, they surprised everyone by basically walking out and saying to heck with it,
we're going to produce as much as we possibly can. And the reason, it seemed to me, was very
clear: They knew that no matter how low the oil price went it was going to be that much worse
for everybody else and not as bad for Saudi Arabia.
When Townsend asks about the decision to float 5% of Aramco in a foreign stock market (a
plan that is reportedly on hold, for now at least), Wald explains that the Saudis respect their
company's "American heritage" (the Saudis slowly nationalized Aramco in stages during the 1970s
and 1980s, buying it in stages) and they view the company as an international oil company like
Exxon.
But in another sense, I see this as a natural progression for a company that was an NOC
but has always seen itself as really a major international oil company. And it's expanding
its research, it's expanding its downstream operations, in order to have a profile similar to
that of an IOC. They are very, very proud of the patents that they've acquired and they
compare it to the number of patents that, say, Exxon gets. It's really very evident
throughout this.
Next, Townsend turned to energy analysts Anas Alhajji and Joe McMonigle for a three-way
discussion about what to expect From Friday's meeting. Earlier this month, we heard from fellow
"geological expert" Art Berman, who speculated that the current glut of oil created by the
shale boom in the US is a temporary anomaly
But the bigger factor here is Venezuela and how quickly Venezuelan crude has come off the
market. Venezuela was producing about 1.4 million barrels a day. It's probably 1.3 now, in
June. Under the OPEC agreement, they could be producing close to 2 million barrels a day.
Berman speculated that the global demand curve is growing at a pace much more quickly than
most market experts anticipate, and that - regardless of whether OPEC decides to raise or
maintain production - the world will inevitably find itself mired in a supply crunch. But
McMonigle asserted that the collapse of crude production in Venezuela has left a massive
production hole that should be filled by OPEC members. Because of this, Saudi Arabia doesn't
have a problem with higher prices, and even OPEC
itself is anticipating that demand will remain strong in the second half of the year.
So that's 600-700 thousand barrels extra that has really accelerated crude stock drawdowns
and I think has really supported higher prices quicker than most people thought. I was in the
camp, and I think others were, that in the second half of this year we would be around
between $70 and $75.
Obviously, we got there pretty quickly at $80. And most of that had to do with Venezuela.
And then, of course, you had the Iran sanctions – which we've been talking about for a
long time – that we expected to come. But there are a lot of people on the market that
just didn't think Trump would pull the trigger on it. Well, he did. And so that really pushed
things up to over $80. There isn't any crude yet coming off the market, but we certainly
expect that there will be.
[...]
First of all, I have to say I don't think OPEC is going to give up that easily on higher
prices. I think the Saudis are quite comfortable with prices around $80. They don't really
see a production problem. The physical oil markets are pretty well-supplied, as I think Anas
will talk about. But they really have a political problem instead of a production
problem.
And the political problem is this: You know, higher prices, you've got some calls for
action. Trump, of course, with his tweet a couple of weeks ago while the compliance committee
was meeting in Riyadh I think really took them by surprise. I think there is kind of an
implicit agreement to help because of the Iran sanctions. And that's something that Saudi
Arabia and UAE and all the other Gulf countries support.
However, the one thing that could change their minds, is a political issue concerning their
relationship with the US. Following Trump's aggressive Iran policy, there could be a consensus
forming among the Gulf countries to support higher production levels that would held rein in
prices. But this might not be in the long-term best interest of the Saudis.
Older wells are declining at about 8% per year. A 25 BOPD well with a 10 BOPD economic limit
should have 70,000 barrels of oil left to produce in about 12 years.
Is it safe to assume that newer wells will behave the same as older wells?
Some petroleum engineers that have commented at shaleprofile.com (Enno Peters wonderful
resource) that the high level of extraction from newer wells will likely lead to a thinner
tail.
illustrates this, notice how the 2014 and 2015 wells fall below the 2010 well profile
after 24 months, the same is likely to occur for 2016 and later wells. Also note that the
2010 well profile is representative (close to the mean) for 2009 to 2012 average well
profiles.
Dennis, i would say the decline rate (8%) is very safe to use for all LTO wells, i would
definitely apply it after the 6th year of well life, because by then what counts is rock
quality and fluid type. This is only good for a bulk projection.
By the way I tweaked my price model when I was preparing my CO2 pathway. I took into
account the Venezuela crash, the difficulties the Canadians have moving their crude, etc. The
price projection is $88 per barrel Brent for evaluating projects which start spending in
2019. I also prepared a different look for very long term projects which start spending in
2023: $110 per barrel.
Don't forget these aren't prices predicted for those particular years. They are prices one
can use to evaluate long term projects such as exploring in the Kara Sea, offshore West
Africa deep water, the African rifts, Venezuela heavy oil developments, etc. These prices are
plugged in and escalated with inflation for the 20-30 year project period. Real prices should
oscillate back and forth around these values.
Norwegian crude oil & condensate production (without NGLs) at 1,321
kb/day in May, down -223 m/m, down -297 from 2017 average or -18%. The main reasons that
production in May was below forecast is maintenance work and technical problems on some
fields. http://www.npd.no/en/news/Production-figures/2018/May-2018/ Almost down to the Sept 2012 low at 1,310 kb/day
This is what happens when there are no sizeable new fields coming online for 1/2 year and as
G.Kaplan has mentioned not enough allocation for supply disruptions are included in the
forecast.
A brutal decline, even if this month is an anomaly as NPD say.
Looking at the field numbers (only through April) it looks like Troll Oil is in decline a bit
earlier and a bit steeper than expected. It's the biggest oil producer still bu has dropped
fairly consistently and slightly accelerating from 161 kbpd in October to 121 in April. It's
all horizontal wells and requires continuous drilling to maintain production, it's close to
exhaustion with only 10% remaining at the end of 2017 (about R/P of 3 years) and had been
holding a good plateau around 150 for a few years. The gas is due to be developed starting in
2021 so the oil rim would need to be depleted by then, but maybe dropping a bit sooner than
expected – is a reservoir not behaving as modelled a "technical problem"?
I don't know about the price as it depends on the demand side and the global economy looks to
me increasingly rocky, but the supply side analysis looks pretty good, except as you say a
bit conservative. One thing missing was consideration of increasing decline rates on mature
fields, especially offshore, partly a result of accelerating production in the high price
years and partly because of an increasing ratio for deep and ultra deep water. Additionally I
think the lack of increase in non-US drilling rigs as the price has risen is relevant and
partly represents a shortage of in-fill prospects and short cycle appraisals.
If they are relying on GoM to add the 300 kbpb (or more into 2020) that EIA are predicting
then I think they are going to be short by 400 to 500 kbpd for a 2020 exit rate.
(I don't follow the chart showing new OPEC developments, the numbers can't be number of
projects, probably kbpd added, or maybe mmbbls reserves, and I'm betting they've mixed in gas
with the oil.)
As in all these investment type analyses they don't look too far ahead and there's a kind
of tacit assumption that everything will be sorted out with more investment later on, but
five years of low discoveries and accelerated development of the good ones means there's
actually not that much new to invest in, and if there is then ExxonMobil will be looking to
buy it.
Yeah, demand is always a big question. Hard to measure, even in the rear view mirror.
However, their constant increase of 1.2 million barrels in the US over a three year period,
should offset any question of demand. While 1.2 in 2020 is something I can't predict, 1.2
million for 2018 and 2019 is impossible without increased pipelines long before the second
half of 2019. So, I think it is way conservative.
They say "We believe we are 6-9 months ahead of consensus with our oil forecast. Why is no
one else seeing what we see?." Obviously they haven't been reading POB for the last two
years.
POB made it possible to piece together in my own way, otherwise I would be like most. Staying
confused with constant conflicting info. Predicting price is virtually impossible, as is
demand to a large extent. But, when supply is ready to fall off a cliff, then being exact is
not required.
A simple way to think about C+C demand is to assume over the long run that supply and
demand will be roughly equal (though of course there will be short term imbalances which
changes in the oil price over the short term will try to correct). From 1982 to 2017 C+C
output grew at an average annual rate of about 800 kb/d. It is probably safe to assume that
oil demand will continue to grow at roughly that pace in the absence of a severe global
recession and those are pretty rare. I define a "severe global recession" as one where real
World GDP (constant prices) based on market exchange rates decreases over an annual cycle for
one or more years. Since 1900 there have been two cases where this occurred, the Great
Depression and the Global Financial Crisis (GFC) in 2008/2009. These have been on roughly a
60 to 70 year cycle (a previous crisis occurred in 1870, but this might have only been a US
crisis and possibly not a global one.)
In any case, my guess is that a Global economic crisis may result a the World tries to
adjust to declining (or stagnant) World Oil output after 2025, probably hitting around 2030
to 2035. If economists re-read Keynes General Theory and respond to the crisis with
appropriate policy recommendations, the economic crisis may be short lived. On the other hand
a World response similar to the European response to the GFC, where fiscal austerity is
considered the appropriate response to a lack of aggregate demand (this was also Herbert
Hoover's response to the 1929 Stock Crash), then a prolonged deep depression will be the
result.
The somewhat vast majority of countries say their reserves are flat in 2017 vs 2016. They
pumped billions of barrels, but no change to reserves for . . . lemme count . . . 36
countries (of which the US was one).
World as a whole reserves total declined 0.03%.
BP's flow report is "all liquids". Dunno if that is consumption, too. And if reserves . .
. reserves are in a footnote. Crude, Condensate AND NGLs. Probably excludes algae.
What? Me worry? Rystadt says US has 79 more years of oil still available. Of course, that
is the imaginary oil. They admit that commercially recoverable oil in the world only has 13
years left. Where did we pick up another 50 billion of imaginary oil in the US this year?
read deep into the article -- the best oil goes to China. Europe gets only what is left.
Haven't needed it, but the North Sea is dying. Iran is the next supplier but if sanctions
eliminate them, Russian oil of whatever quality will be the only choice.
Or Europe could ignore sanctions, if they have the courage.
I
wanted to make a comment about the OPEC(and Russia) meeting coming up and a possible production
increase. The speculation going around is that OPEC and Russia might increase production up to
1.80 mbpd. The minimum production increase would be around 500kbpd. What is the most likely
production increase based on past production?
The only four countries that have any ability to increase production are
1) Russia: Current production 10.9mbpd. High production 11.3mbpd Difference -400kbpd 2) Saudi Arabia: Current production 10.0mbpd. High production 10.6mbpd Difference -600kbpd 3) UAE: Current production 2.9mbpd. High production 3.10mbpd Difference -200kbpd 4) Kuwait: Current production 2.70mbpd. High production 2.8mbpd Difference -100kbpd
The high watermark in production for these countries happened from Mid 2016 to Mid 2017.
Currently these four countries are producing about 1.3mbpd below their all-time high production
limits. Ask yourself what is the likelihood that these four countries will increase production
to all-time highs and potentially surpass their highs which would be required to increase
production to 1.80mbpd? When OPEC did announce production cuts at the end of 2016 many believe
they had increased production to unsustainable levels to give each country a higher quota from
the production cuts. The guys a Core Labs believed they had to cut because it would have
threaten the long term integrality of their fields.
My guess is that the most OPEC and Russia can bring back for a sustainable period is about
half of the 1.30mbpd they reduced from their production highs .maybe about 600kbpd
India's oil consumption growth was only 2.9%. Derives from their monetary debacle early in
the year. We should see signs of whether or not that corrects back to their much higher norm
before next year.
China consumption growth 4%. Higher than India. Clearly an aberration.
KSA consumption actually declined fractionally, which allows Japan to still be ahead of them
in consumption.
US consumption growth 1%. So much for EV silliness.
Permian pipelines and steel tariffs – it's a good update but the article doesn't
give any clues as to how long it might take for US steel mills to make the type of pipes that
are now being imported.
HOUSTON (Reuters) – Major U.S. energy companies including Plains All American
Pipeline, Hess Corp and Kinder Morgan Inc are among many seeking exemptions from steel-import
tariffs as the United States ratchets up trade tensions with exporters including China, Canada
and Mexico.
The pipeline industry could face higher costs from tariffs as about 77 percent of the steel
used in U.S. pipelines is imported, according to a 2017 study for the pipeline industry.
Benchmark hot-rolled U.S. steel coil prices are up more than 50 percent from a year ago,
according to S&P Global Platts.
Significant. It may not prevent the pipelines being built, but it will, no doubt, delay the
timing of the start to completion timeline. Extended starts and stops on construction would
be extremely expensive. A 25% tariff on oil to China is also a game changer. That's about
600k a day that now has questionable outlets. India is going to have about 600k a day it
won't buy now from Iran, so that's a possibility. Not as big of a game changer as in the
future, when US production begins increasing, again. I could speculate that there is some
timing connection between India foregoing Iran purchases, and the China tariff decision.
Whole Permian scenario keeps shifting down. Pipeline completion dates are more questionable,
and the future export capabilities have a bigger question mark.
Goldman states that most of the producers have no plans to cut back in the Permian. What
else would they tell the investment bank who helps determine their stock price? Yeah, we are
screwed, and currently looking for a buyer?
"... So far in June, the outlook for Venezuelan production is grimmer. Venezuela was producing about 1.5mn b/d at the start of May, including roughly about 800,000 b/d in the Orinoco oil belt and a combined 700,000 b/d in the company's eastern and western divisions. But output in early June has dropped to 1.1mn-1.2mn b/d, according to three PdV officials. https://www.argusmedia.com/pages/N ewsBody.aspx?id=1697240&menu=yes?utm_source=rss%20Free&utm_medium=sendible&utm_campaign=RSS ..."
The basic problem is the General he put in charge did not understand Maduro's command. He
thought Maduro said oil production needs to decrease a million barrels a day.
They are losing workers especially the technical managers, don't have money for spares and
are going to shut down to repair (I note it says repair not just maintenance for two of them)
and restart all four of the most difficult operations in refining, all at the same time.
These are high temperature fluidised beds with some pretty horrible waste product (highly
viscous, toxic coke in heavy oil residue sludge which can block pipes and burners and corrode
all sorts of stuff). Shutting them down fro extended periods is not always a great idea at
the best of times. Planned maintenance for such things is usually phased so only one is down
at a time to ensure all the planning and purchasing can be completed and the experts are
available to go to each plant in turn. The plants need catalyst replacement which costs
money, and tends to be more frequent if the plant isn't in very good condition or isn't being
operated optimally (the operators need to be well trained). Be interesting to see how long it
takes and how many come back, it's quite possible the best case will be cannibalising a
couple to keep the others going.
As to: "If PDVSA cannot alleviate the shipping bottleneck, the company and its joint
ventures could be forced to slow or temporarily pause production at some Orinoco Belt
oilfields," that is already happening: they have dropped over half the rigs and might be down
to none by September at current rate, without new wells and workovers heavy oil can decline
pretty quickly.
Oil production seems to have left its bumpy 6 year long (2010-2015) plateau of 8.4 mb/d and
is now back to 2004 levels of 7.9 mb/d, a decline of 6% over 2 years.
Base production is the sum of the minimum production levels in each country during the
period under consideration. Incremental production is the production above that base
production. In this way we clearly see that the peak was shaped by China, sitting on a
declining wedge of all other Asian countries together. Note that growing production in Thailand
and India could not stop that decline. Now let's look at the other side of the coin,
consumption:
There has been a relentless increase in consumption since the mid 80s. The growth rate after
the financial crisis in 2008 was an average of 3% pa.
Chinese annual oil consumption growth
rates have been quite variable between 2% and a whopping 16% in 2004 which contributed to high
oil prices. Fig 4 also shows there is little correlation between GDP growth and oil consumption
growth (statistical problems?). There is nothing in this graph that could tell us that the
Chinese economy has a consistent trend to become less dependent on oil. In the years since
2011, oil consumption growth was around 60% of GDP growth.
Let's compare China with the US. China's oil consumption is catching up fast with US
consumption.
On current trends, China's oil consumption would reach US consumption levels of 20 mb/d in
just 14 years.
Contrary to misinformation by the media, the US is still a net importer of oil. Even blind
Freddy can see that there will be intense competition for oil on global markets.
All governments who plan for perpetual growth in Asia (new freeways, road tunnels, airports
etc) should fill in the above graph. Hint: We can see that Asia has diversified its sources of
oil imports but is still utterly dependent on Middle East oil
"Other Middle East" is Iran
and Oman (as Syria and Yemen no longer export oil)
China is preparing for the future by building bases to secure oil supply routes:
Proven reserves have not changed much in the last years meaning that P2 and P3 reserves have
been proved up commensurate with production. The reserve to production ratio is 16.7 years
equivalent to an annual depletion rate of 6%, a little bit higher than a reasonable rate of 5%
(R/P of 20 years).
The depletion rates vary considerably and may only be approximate as oil
reserves will have been estimated by using differing methodology and accuracy. Indonesia's
depletion rate is very high. Not shown in Fig 14 is Thailand where the depletion rate is off
the charts (almost 50%) suggesting reserves are too low.
There are some rumors that KSA has increased exports starting in May (about 0.5 m b/d more
than prior months) by drawing even more from storage. If we are to believe OPEC production
numbers from May which are steady, that must be the case. OPEC has essentially flooded the
market with exports before the meeting on Friday. The nearest month Brent future changed to
contango compared to closest month some weeks ago, but it has now all changed again to
backwardation. Point being, it seems the physical market is getting tighter again and that
the export flood may have something to do with the meeting. Or it could be that reduced
exports from Iran, Venezuela and Libya are starting to impact the market.
If the market balance overall is to change from a a deficit to near balanced, production
within OPEC has to be increased with almost maximum of whatever spare capacity available in
my opinion. The assumption is that spare capacity in reality is smaller than stated by the
agencies.
"... According to US Energy Department figures, China imports approximately 363,000 barrels of US crude oil daily. The country also imports about 200,000 barrels a day of other petroleum products including propane. ..."
Just as China topped the list of nations buying US oil, Beijing – retaliating to
unilateral Trump economic threats – sent jitters through energy markets on Friday by
threatening new tariffs on natural gas, crude oil and many other energy products.
On Friday, Beijing threatened to impose tariffs on US energy products in response to $50
billion in tariffs imposed by US President Donald Trump. Such tariffs would inhibit Chinese
refiners from buying US crude imports, potentially crashing US energy markets and hitting the
fossil fuel industry where it hurts the most: in shareholder approval.
"This is a big deal. China is essentially the largest customer for US crude now, and so for
crude it's an issue, let alone when you involve [refined] products, too. This is obviously a
big development," Matt Smith, director of commodity research at ClipperData, told Reuters.
According to US Energy Department figures, China imports approximately 363,000 barrels of US
crude oil daily. The country also imports about 200,000 barrels a day of other petroleum
products including propane.
The US energy industry has seen its profits boosted by fracking in domestic shale fields,
which produce some 10.9 million barrels of oil per day.
The US is also exporting a record 2 million barrels per day, and encouraging countries like
China to import more US energy products instead of those from Iran, after Trump recently
withdrew from the historic Joint Comprehensive Plan of Action (JCPOA) 2015 nuclear arms deal
with Tehran.
China is currently the largest buyer of Iranian oil as well, purchasing some 650,000 barrels
daily during the first quarter of 2018.
According to Bernadette Johnson with the Denver, Colorado, energy consultancy Drilling info,
tariffs will increase prices for other petroleum products including propane and liquefied
natural gas.
"The constant back-and-forth about the tariffs creates a lot of market uncertainty that
makes it harder to sell cargoes or sign long-term [trade] deals," Johnson noted, cited by
Reuters.
In late March, the White House slapped trade sanctions on China, the world's second largest
economy, including limitations in the investment sector as well as tariffs on $60 billion worth
of products.
Citing "fairness" considerations, Trump referred to the car market, stating that China
charged a tariff ten times higher on US cars than the US did on the few Chinese cars sold in
the US.
Separately, in a bid to deliver on campaign promises, Trump announced his intention to
impose a 25-percent tariff on steel imports and a 10-percent tariff on aluminum imports from an
array of US allies, including the EU, Mexico and Canada. Those nations -- longtime allies to
the US -- have promised retaliatory economic measures.
Trump has also reportedly mulled placing a 25-percent import tax on European cars, something
that would significantly affect the highly-profitable US market for expensive German
automobiles.
by Salma El Wardany (Bloomberg) Two of Libya's biggest oil ports stopped loading on Thursday
after clashes erupted between rival forces for control of the country's economic lifeline,
taking more barrels off the market just as OPEC debates whether to boost production.
Fighting at Es Sider and Ras Lanuf terminals led to the loss of about 240,000 barrels of
Libya's daily oil production, state energy producer National Oil Corp. said in a statement
Thursday. NOC evacuated staff from both terminals, which account for 40 percent of Libya's oil
exports, and declared force majeure on shipments.
The disruptions come a week before OPEC nations hold key meetings in Vienna with other major
producers including Russia to discuss if they should stick with a pact to restrain oil supply
after prices topped $80 a barrel in May. Oil producers were already facing growing pressure,
including from U.S. President Donald Trump, to boost supply to offset disruptions caused by the
economic crisis in Venezuela and renewed American sanctions on Iran.
Libya's oil output has rebounded over the past two years, but remains well below the 1.8
million barrels a day the country pumped before the 2011 campaign to oust Muammar Qaddafi. That
NATO-backed war gave way to years of fighting among rival Libyan groups in which the country's
oil installations became prized targets.
"... My own hunch is that these reports may well be true. How long can the Saudis (and the Western media) conceal what has happened? ..."
"... Second, I believe the trip by our Secretary of State was in response to the incident of April 21st. My hunch is the Crown Prince was gravely wounded and later perished at a Military Hospital. ..."
"... Third, the night of the incident a twitter user named CivMilAir tracked the Royal Medevac jet leaving the airport near the gunfire and documented the airplane turning off its transponder. There was speculation concerning whether or not it was the Crown Prince that night on that thread. There was even push back from other twitter users based in Saudi Arabia. Even one demanding to know how this twitter user obtained this information. ..."
"... Fifth, the outrage at the German Government and the reports from German businesses that the door to trade has been slammed shut this past month. I attribute this to the one and only exile prince from the Royal family, Saudi Prince Khaled Bin Farhan. living in Europe. He was granted asylum by Germany. There were 3 other exiles but they have been tricked or kidnapped back to Saudi Arabia. This Prince was advocating for the removal of the Crown Prince as recently as March 23, 2018. ..."
"... Sixth, I noticed this week in the news that Crown Prince "MBS" has consolidated his control further this week by taking operational control of the construction and cyber security industries in the country. 35% of the Bin Laden group was basically stolen. I watched an interview of Saudi Prince Alwaleed bin Talal after his release from detention and he was clearly shaken. He was playing a confidence game where everything would go back to normal and mention how the Bin Laden group was back working on his projects. Then this? 35% gone overnight. Cyber security crack down or internet crackdown coming in Saudi Arabia? ..."
"... Seventh, there is no way that MBS approved the recent arrest of the feminist. Not after his carefully cultured PR campaign in the United States. ..."
"... Eight, where's Waldo? ..."
"... Here is my speculation. Al-Qaeda will be the cover story. Crown Prince MBS was killed by members of the Royal Family and other powerful individuals he made enemies with in his short rule. ..."
"... The Royal family members who supported MBS are furious at Germany for the above stated reasons and lashing out in all directions. Threatening to invade Qatar if Russia provides them the S-400. I believe even President Trump's bizarre threat to put huge tariffs on German luxury automobiles because the German public doesn't want to buy crappy American cars like the Chevy Impala is his frustration over one of his essential architects on the plan to change regime's in Iran being eliminated. ..."
"... A lot of torture and indiscriminate arrest is going on at this very moment in Saudi Arabia. The family appears split and trust lost. Time will tell. ..."
"... It would appear that there's no one in charge in SA at the moment. One can now expect a period of confusion, and lots of infighting between various factions trying to assert dominance, or just survive. ..."
© China Stringer Network / Reuters Looming US sanctions against Iran will likely hit Tehran's oil sales abroad, and it could lead to a price spike in oil contracts. The first round of renewed US sanctions will take effect on Tuesday with the harshest sanctions, potentially targeting Iran's oil industry, expected to return in early November.
Is this the end of ultra cheap gasoline in Venezuela?
