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Oil glut fallacy

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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)

http://www.reuters.com/article/2015/03/23/us-usa-refiners-trucks-analysis-idUSKBN0MJ09520150323

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:

https://www.eia.gov/todayinenergy/detail.cfm?id=23952

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:

Did Global Crude Oil Production Peak in 2005?

http://peakoilbarrel.com/worldwide-rig-count-dropping-again/comment-page-1/#comment-546170

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:

Stock Prices Sink in a Rising Ocean of Oil

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.

Here is another similar thread:

Ves, 12/25/2015 at 2:23 pm

Steve,

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:

  1. 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.
  2. Second. Wall Street was pretty much shocked if not pissed by that Saudi decision. I interpret that to be political reaction as well.
  3. 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.
  4. 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.

likbez, 12/25/2015 at 3:44 pm
Ves,

Thanks for the post. I agree with your reasoning.

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.

Ves, 12/25/2015 at 5:32 pm
Thanks likbez.

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.


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[Jun 21, 2018] Spare capacity of Saudis might be just oil in storage as they can't increase production much without adverse affects

Jun 14, 2018 | peakoilbarrel.com

TechGuy , 06/14/2018 at 4:29 pm

"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.

Michael B , 06/14/2018 at 5:32 pm
But this can't be right because it makes so much sense that I understand it.
George Kaplan , 06/14/2018 at 11:41 pm
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.)

Eulenspiegel , 06/15/2018 at 3:36 am
That all together sounds like it's completely senseless to keep some spare capacity for fields like this.

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

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

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

Did I understand it right?

George Kaplan , 06/15/2018 at 5:37 am
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.

Dennis Coyne , 06/15/2018 at 10:25 am
Thanks George.

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

George Kaplan , 06/15/2018 at 12:33 pm
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.

Dennis Coyne , 06/17/2018 at 9:27 am
Indeed there is much that we do not know about KSA.

[Jun 21, 2018] China's Oil Trade Retaliation Is Iran's Gain by Tom Luongo

Jun 21, 2018 | www.zerohedge.com

China's Oil Trade Retaliation Is Iran's Gain

by Tyler Durden Wed, 06/20/2018 - 23:05 13 SHARES Authored by Tom Luongo,

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.

Alistair Crooke also noted the importance of Trump's 'energy dominance' policy recently , which I suggest strongly you read.

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.

* * *

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[Jun 21, 2018] There is a narrative that oil demand will soon begin dropping due to widespread use of EV.

Jun 21, 2018 | peakoilbarrel.com

shallow sand x Ignored says: 06/18/2018 at 2:36 pm

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

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

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

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

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

I'd like to see some explanation with numbers.

GoneFishing x Ignored says: 06/18/2018 at 3:28 pm
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.

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

Dennis Coyne x Ignored says: 06/18/2018 at 6:04 pm
Shallow sand,

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

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

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

[Jun 21, 2018] Strange consumption growth in Eastern Europe

Jun 21, 2018 | peakoilbarrel.com

Watcher, 06/17/2018 at 11:37 pm

Got time to go thru the bible more carefully.

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

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

World oil consumption growth 1.8%.

(population in africa . . . . . .)

Ktoś, 06/18/2018 at 8:44 am

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.
Strummer, 06/18/2018 at 2:00 pm
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
Watcher, 06/19/2018 at 12:04 am
South Africa grew at 0.6%.

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

It's gotta be Nigeria west and Angola east.

Watcher, 06/18/2018 at 2:43 pm
Pssssst.

Oil consumption 2017 increased 1.8% from 2016.

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

hahahahhaa

Dennis Coyne, 06/19/2018 at 6:41 am
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.

[Jun 21, 2018] The idea behind peak demand fallacy is simply that oil supply may at some point become relatively abundant relative to demand in the future (date unknown).

Jun 21, 2018 | peakoilbarrel.com

Dennis Coyne x Ignored says: 06/18/2018 at 5:54 pm

Hi George,

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

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

Eulenspiegel x Ignored says: 06/19/2018 at 3:56 am
Why making a fire sale?

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

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

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

Dennis Coyne x Ignored says: 06/20/2018 at 8:00 am
Eulenspeigel,

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

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

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

[Jun 21, 2018] 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

Jun 21, 2018 | peakoilbarrel.com

Energy Newss: 06/18/2018 at 5:17 pm

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

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

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

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

Kolbeinh x Ignored says: 06/19/2018 at 3:49 am

Thanks for providing a lot of info!

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

George Kaplan,06/19/2018 at 4:06 am
Is it spare capacity or is it 300 kbpd from Khurais expansion start-up (which was due in May and even then was a year later than planned)?
Kolbeinh, 06/19/2018 at 4:39 am
I don't think it is Khurais. The project is delayed, but for how long is uncertain.

A quick search on the internet:

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

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

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

Energy News, 06/19/2018 at 5:14 am
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

[Jun 21, 2018] Why OPEC Isn't Going To Give Up On High Oil Prices That Easily

Jun 21, 2018 | www.zerohedge.com

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.

JailBanksters Wed, 06/20/2018 - 18:51 Permalink

$80 just happens to be the point to make shale oil and fracking become profitable.

Until that point they are sinking more money into getting the oil out than what they can sell the Oil for.

Oldguy05 Wed, 06/20/2018 - 18:51 Permalink

"Why OPEC Isn't Going To Give Up On High Oil Prices That Easily"

Cause they need money?

[Jun 21, 2018] Older wells are declining at about 8% per year

Jun 21, 2018 | peakoilbarrel.com

Fernando Leanme , 06/19/2018 at 2:17 pm

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.
Dennis Coyne , 06/20/2018 at 7:53 am
Hi Fernando,

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

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

Chart below from

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

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

Fernando Leanme , 06/20/2018 at 9:08 am
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.

[Jun 21, 2018] Norwegian production is down

Jun 21, 2018 | peakoilbarrel.com

Energy News, 06/19/2018 at 3:47 am 2018-06-19

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

George Kaplan , 06/19/2018 at 4:01 am

Big unplanned outages coming on the gas side for June numbers as well.
Kolbeinh , 06/19/2018 at 4:26 am
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.
George Kaplan, 06/19/2018 at 4:39 am
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"?

[Jun 21, 2018] Personally I think all the conventional oil in the ground will eventually be used, it's just too useful. It's just a matter of how long it takes. It would be better if it was used for chemicals and something else used for fuel

Jun 21, 2018 | peakoilbarrel.com

dclonghorn, 06/17/2018 at 10:57 pm

Here's a link to an interesting oil market assessment from 9 point energy.

http://www.ninepoint.com/commentary/commentaries/052018/energy-strategy-052018/

They come up with a projection of 100 oil by 2020 using some conservative assumptions.

George Kaplan , 06/18/2018 at 1:35 am
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.

Guym , 06/18/2018 at 8:55 am
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.
George Kaplan , 06/18/2018 at 4:47 am
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.
Energy News , 06/18/2018 at 5:40 am
SLB seems to agree with Simmons, that outside of OPEC & the USA overall World oil production is going to continue falling

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

Guym , 06/18/2018 at 9:06 am
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.
Dennis Coyne , 06/18/2018 at 11:19 am
Guym,

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

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

Hopefully the former course will be chosen.

[Jun 21, 2018] BP's Proven Reserves tab, historical says some interesting things

Jun 21, 2018 | peakoilbarrel.com

Watcher x Ignored says: 06/19/2018 at 12:15 am

BP's Proven Reserves tab, historical says some interesting things:

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

Canada reserves shrank about 1%. Weird.

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

KSA flat. Venezuela Orinoco reserves slight uptick 0.4%.

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

World as a whole reserves total declined 0.03%.

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

[Jun 21, 2018] What? Me worry? Rystadt says US has 79 more years of oil still available.

Jun 21, 2018 | peakoilbarrel.com

Guym

x Ignored says: 06/19/2018 at 11:46 am
https://oilprice.com/Energy/Crude-Oil/US-Outstrips-Saudis-In-Largest-Recoverable-Oil-Reserves.html

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?

[Jun 20, 2018] Best Russian oil is going to china; Europe gets only whatg is left

Jun 20, 2018 | peakoilbarrel.com

alimbiquated x Ignored says: 06/18/2018 at 6:30 pm

Anyone careto comment on the quality of Russianoil?

http://uawire.org/europe-cuts-back-on-russian-oil-purchases-by-20-due-to-poor-quality

Watcher x Ignored says: 06/18/2018 at 9:39 pm
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.

[Jun 20, 2018] The only four countries that have any ability to increase production -- Russia, Saudis, UAE and Kuwait

Jun 20, 2018 | peakoilbarrel.com

Don, 06/20/2018 at 11:16 am

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

[Jun 20, 2018] Consumption of oil continues to grow in 2018

Jun 20, 2018 | peakoilbarrel.com

Watcher, 06/13/2018 at 12:54 pm

The bible is out. A few surprises.

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

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

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

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

[Jun 20, 2018] Ho>w long it might take for US steel mills to make the type of pipes that are now being imported.

Jun 20, 2018 | peakoilbarrel.com

Energy News: 06/19/2018 at 8:28 am

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

HOUSTON (Reuters) – Major U.S. energy companies including Plains All American Pipeline, Hess Corp and Kinder Morgan Inc are among many seeking exemptions from steel-import tariffs as the United States ratchets up trade tensions with exporters including China, Canada and Mexico.

The pipeline industry could face higher costs from tariffs as about 77 percent of the steel used in U.S. pipelines is imported, according to a 2017 study for the pipeline industry. Benchmark hot-rolled U.S. steel coil prices are up more than 50 percent from a year ago, according to S&P Global Platts.

https://www.reuters.com/article/us-usa-trade-tariffs/u-s-oil-pipeline-companies-producers-seek-relief-from-steel-tariffs-idUSKBN1JF0DZ

Guym,06/19/2018 at 9:36 am

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?

[Jun 20, 2018] So far in June, the outlook for Venezuelan production is grimmer.

Notable quotes:
"... 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 ..."
Jun 20, 2018 | peakoilbarrel.com

Energy News , 06/12/2018 at 2:34 pm

2018-06-12 – CARACAS/HOUSTON (Reuters) – Venezuela's state-run PDVSA and partners have halted operations at two upgraders that convert extra-heavy oil into exportable crude and plan to stop work at two others, according to six sources close to the projects, a move aimed at easing the strains from a tanker backlog that is delaying shipments.
https://www.reuters.com/article/us-venezuela-pdvsa-crude/venezuelas-oil-upgraders-to-be-halted-amid-export-crisis-sources-idUSKBN1J82FX
Guym , 06/12/2018 at 3:27 pm
As I said above, the article points out that if they can't relieve the bottleneck; they will be forced to slow or shut in production.
Energy News , 06/12/2018 at 4:11 pm
2018-06-12 (Argus Media) So far in June, the outlook for Venezuelan production is grimmer. Venezuela was producing about 1.5mn b/d at the start of May, including roughly about 800,000 b/d in the Orinoco oil belt and a combined 700,000 b/d in the company's eastern and western divisions. But output in early June has dropped to 1.1mn-1.2mn b/d, according to three PdV officials.
https://www.argusmedia.com/pages/N ewsBody.aspx?id=1697240&menu=yes?utm_source=rss%20Free&utm_medium=sendible&utm_campaign=RSS
Guym , 06/12/2018 at 6:09 pm
Bigger drops coming, soon.

I agree with his take, mostly. At this level of confusion, and lack of money and personnel capital, it's not fixable.
https://oilprice.com/Energy/Energy-General/Venezuela-Wont-Have-Enough-Oil-To-Export-By-2019.html

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.

George Kaplan , 06/12/2018 at 11:31 pm
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.

Stephen Hren , 06/16/2018 at 12:59 pm
Good article in NYT about Venezuela's oil industry collapse.

https://www.nytimes.com/2018/06/14/world/americas/venezuela-oil-economy.html

[Jun 20, 2018] Excellent write-up on peak oil supply

Images removes
Jun 20, 2018 | crudeoilpeak.info

Peak oil in Asia Pacific (part 1)

This post uses data released by the BP Statistical Review in June 2018

https://www.bp.com/en/global/corporate/energy-economics/statistical-review-of-world-energy.html

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.

In part 2 we look at the oil balance in each country. Tags: BP Statistical Review , China oil demand , china peak oil , Middle East , South China Sea , South East Asia

[Jun 20, 2018] 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.

Jun 20, 2018 | peakoilbarrel.com

Kolbeinh, 06/18/2018 at 6:21 am

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.

[Jun 18, 2018] China blindsides US with new energy tariffs threat by Jim W. Dean

Notable quotes:
"... 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. ..."
Jun 18, 2018 | www.veteranstoday.com
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.

[Jun 15, 2018] Libyan Oil Exports Impaired as Some in OPEC Seek More Supply

Jun 15, 2018 | www.msn.com

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.

[Jun 15, 2018] Libya Halts Sharara Oil Loadings as Biggest Field Shuts Down - Bloomberg

Jun 15, 2018 | www.bloomberg.com

[Jun 05, 2018] With MBS supposedly dead, how will Saudi will change their oil policy? How much longer will the Saudi and international press be able to remain silent on this?

Notable quotes:
"... 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. ..."
"... Considering MbS's policies, I think his exit is better for the Middle East. His tilt of SA policy towards the US and Israel is likely to be reversed. ..."
"... All you need to know is that Mr. Media Roadshow decided overnight to shun video cameras, and not come out for Pompeo. The guy is dead as a door knob. He made way too many enemies during the forced corporate retreat he hosted at the Ritz. ..."
"... myself , i think the attack succeed in wounding and ultimately kill the prince , otherwise why no public appearance at all ? ( if i recall , muslim have to be buried no more than 24 hours after death so that's why i assume he was wounded at first and the medical team failed to keep him alive) ..."
"... In Assad's interview with RT he pointed out that the "opposition" first attacked Syria's air defenses at the beginning of the "civil war". Hillary wanted a "no-fly zone" over Syria. All that's missing is Victoria Nuland. ..."
"... The playground version: The neocons and Netanyahu think they're playing Trump, who in turn thinks he's use them. MbS wanted to be one of the cool kids and tried to get in on the action and might have gotten himself dead in the process. ..."
Jun 05, 2018 | turcopolier.typepad.com

FB Ali , a day ago

Re Saudi Arabia: I have previously referred to reports regarding the death of the Saudi Crown Prince, MbS, as a result of the AQ attack on his palace on April 21. Now, pictures are circulating of his funeral.

There is so far no official announcement, but that means nothing.

My own hunch is that these reports may well be true. How long can the Saudis (and the Western media) conceal what has happened?

Pat Lang Mod -> FB Ali , a day ago
If he was killed in the April 21 incident that would explain why the women activists have now been targeted.
FB Ali -> Pat Lang , a day ago
Agree. There is also the report that he was not at the Graduation Ceremony of the King Abdul Aziz Military College on May 19. (As Defence Minister, he would have been expected to attend).
Harlan Easley -> FB Ali , 17 hours ago
I have been following the story. A few things. Yes, I have seen the pictures of the funeral and his actual corpse prepared for burial under #mbs at twitter. The pictures are not the best. The size of the corpse and the nose and receding hairline along with the cheekbones and body size could definitely be MBS along with the eyes.

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.

Fourth, the recent trip of the Lebanon Prime Minister being called to Saudi Arabia when his schedule indicated no such trip.

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.

https://www.middleeastmonit...

And he asserted that he receives emails and other forms of communications from disaffected family members and the security services desiring for a change to be made.

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?

Finally, here is what I find so fascinating. The KIng of Saudi Arabia is reported to have dementia. Unfortunately, I have a great deal of experience with this dreadful disease. My stepfather. 16 years. There is no King in charge of Saudi Arabia. In fact, if MBS was killed like I believe there is no legitimate line to the next ruler. Survival of the Fittest.

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.

FB Ali -> Harlan Easley , 2 hours ago
Thank you for that excellent rundown of events. I tend to agree with your "speculation".

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.

Considering MbS's policies, I think his exit is better for the Middle East. His tilt of SA policy towards the US and Israel is likely to be reversed.

Vicky SD -> Harlan Easley , 4 hours ago
All you need to know is that Mr. Media Roadshow decided overnight to shun video cameras, and not come out for Pompeo. The guy is dead as a door knob. He made way too many enemies during the forced corporate retreat he hosted at the Ritz.
EEngineer -> FB Ali , 17 hours ago
This is news to me. How big do you think the resulting power struggle would be if MbS was killed or incapacitated? I can envision outcomes that range from 2nd page news all the way up to Archduke Ferdinand grade but I don't have any feel for the probabilities.

If true, would it cause you to see the events of the last month in the region in a different light?

disqus_f5ibuyVBnZ -> FB Ali , 4 hours ago
Brigadier,

With MBS dead, how will Saudi react to MBS's previous Israel's right to exist scenario, along with Jerusalem being declared Israel's capital and the embassy move by DT?

How much longer will the Saudi and international press be able to remain silent on this?

Who do you think will now ascend the Saudi throne as heir apparent?

J.

SurfaceBook -> FB Ali , 8 hours ago
FB Ali , sir , it is so hard to get info in the AQ Attack that allegedly mortally wound MBS.. as for the shooting reported as a wayward drone , i recall this video (anyone can confirm the skyline if this is saudi city near palace ?) , the gunfire last for long time , far too long to be guards firing on a drone.

myself , i think the attack succeed in wounding and ultimately kill the prince , otherwise why no public appearance at all ? ( if i recall , muslim have to be buried no more than 24 hours after death so that's why i assume he was wounded at first and the medical team failed to keep him alive)

do you think this is the 'blowback' from the massive shakedown that the prince did to his seniors ?

Play Hide
Bill Herschel , 18 hours ago
Has DT done a single thing that has helped Israel? I would say no. In Assad's interview with RT he pointed out that the "opposition" first attacked Syria's air defenses at the beginning of the "civil war". Hillary wanted a "no-fly zone" over Syria. All that's missing is Victoria Nuland.

Your post vividly depicts how isolated Israel has become. I reiterate DT has done nothing to help Israel and everything to harm it. One is permitted to ask what's going on.

EEngineer -> Bill Herschel , 3 hours ago
The playground version: The neocons and Netanyahu think they're playing Trump, who in turn thinks he's use them. MbS wanted to be one of the cool kids and tried to get in on the action and might have gotten himself dead in the process.

All the while Putin and the SCO crew wait and play for time as they tangle each other up into an ever larger mess of their own making hoping to avoid, or minimize, whatever conflict is necessary to get them all to accept the coming multi-polar world order.

Perhaps in the future when they make a movie about this period it will be called "A Deal Too Far".

/sarcasm

Pat Lang Mod -> Bill Herschel , 6 hours ago
The Israelis are quite pleased with him, but then, it is true tht they are short sighted fools.

[May 31, 2018] Is Saudi Arabia's 32-Year-Old Crown Prince Dead? by Sissi Cao

May be he was just wounded and recovering. To hide the death is tricky politically and usually is not done for that long.
Notable quotes:
"... Last week, the Iranian newspaper Kayhan ..."
May 25, 2018 | observer.com

Also "However, a week after the coup speculations, the Crown Prince, along with Saudi King Salman, was seen at the opening ceremony of a huge entertainment resort Qiddiya – an ambitious multi-billion dollar project that is expected to include a Six Flags theme park, water parks, motor sports, cultural events and vacation homes." Sputnik International

Saudi Arabia's Crown Prince Mohammed Bin Salman, the 32-year-old media-savvy leader of the oil kingdom, has been unnaturally quiet recently, so much so that some in the Middle East media couldn't help but wonder if he is dead.

Bin Salman hasn't been seen in the public eye since his meeting with the Spanish royal family in on April 12. On April 21, heavy gunfire was heard near a royal palace in Riyadh, the kingdom's capital. Although Saudi Arabia's state news agency claimed it was a security force shooting down a toy drone that had gotten too close to the royal property, some wondered if the gunfire was in fact a coup led by Saudi royals trying to topple King Salman, Bin Salman's father.

Some of Saudi Arabia's enemies were pretty sure.

Last week, the Iranian newspaper Kayhan reported that the Crown Prince was hit by two bullets during the attack and may actually be dead, citing "a secret service report sent to the senior officials of an unnamed Arab state."

"There is plenty of evidence to suggest that the absence of nearly 30 days of Muhammad bin Salman, the Crown Prince of Saudi Arabia, is due to an incident which is being hidden from the public," the daily paper claimed.

To add credence to the speculation, Kayhan pointed out that Bin Salman was not seen on camera when the new U.S. Secretary of State Mike Pompeo visited Riyadh in late April, while his father, Saudi King Salman bin Abdulaziz Al Saud, and Foreign Minister Adel al-Jubeir were photographed.

[May 29, 2018] How Wall Street Enabled the Fracking 'Revolution' That's Losing Shale Oil Companies Billions naked capitalism

Notable quotes:
"... By Justin Mikulka, a freelance writer, audio and video producer living in Trumansburg, NY. Justin has a degree in Civil and Environmental Engineering from Cornell University. Originally published at DeSmogBlog ..."
"... Wall Street caused the 2008 financial crisis, with some of its architects personally benefiting. However, while a few executives profited, the result was a drop in employment of 8.8 million people, and according to Bloomberg News in 2010, "at one point last year [2009] the U.S. had lent, spent, or guaranteed as much as $12.8 trillion to rescue the economy." ..."
"... JP Morgan (along with much of Wall Street) required large sums of money in the form of bailouts to survive the fallout from all of the bad loans made, which brought about the housing crisis. Is JP Morgan steering clear of making loans to the shale industry? No. Quite the opposite. ..."
"... To understand why JP Morgan and the rest of these banks would loan money to shale companies that continue to lose it, it's important to understand the gambling concept of "the vigorish," or the vig. Merriam-Webster defines vigorish as "a charge taken (as by a bookie or a gambling house) on bets." ..."
"... Wall Street makes money by taking a cut of other people's money. To a gambling house, it doesn't matter if everyone else is making money or losing it, as long as the house gets its cut (the vig) -- or as it's known in the financial world -- fees. ..."
"... Understanding this concept gives insight into why investors have lent a quarter trillion dollars to the shale industry, which has burned through it. If you take the vig on a quarter trillion dollars, you have a big pile of cash. And while those oil companies may all go bankrupt, Wall Street never gives back the vig. ..."
"... Trent Stedman of the investment firm Columbia Pacific Advisors LLC explained to The Wall Street Journal at the end of 2017 why shale producers would keep drilling more oil even when the companies are bleeding money on every barrel produced: ..."
"... "Some would say, 'We know it's bad economics, but it's what The Street wants.'" ..."
"... In 2017 "legendary" hedge fund manager Jim Chanos referred to shale oil companies as "creatures of the capital markets," meaning that without Wall Street money, they would not exist. Chanos is also on record as shorting the stock of heavily leveraged shale oil giant Continental Resources because the company can't even make enough money to pay the interest on its loans. ..."
"... The Wall Street Journal reports ..."
"... Growing production at any cost is the story of the shale "revolution." The financial cost paid so far has been the more than $280 billion the industry has burned through -- money that its companies have received from Wall Street and, despite the plea from Al Walker, continue to receive. ..."
"... Higher oil prices are yielding more stories about how 2018 will be the year that the shale industry finally makes a profit. Harold Hamm refers to it as Continental Resources' "breakout year." Interesting how potentially not losing money for a year is considered a "breakout year" in the shale industry ..."
"... I keep thinking that the whole enterprise was bankrolled specifically to crush oil prices and keep inflation tamped down, which provides much more profit to wall street via the assurance that the Fed's easy money policy lasts a lot longer. ..."
"... " If Wall Street is the bookie then who are the bettors?" It's a great question that leaves everyone guessing. My guess is pension funds, and calling them bettors is being kind. ..."
"... Bernie Sanders: The business of Wall Street is fraud and greed. ..."
"... I've mentioned this book a few times recently that I'm still in the middle of – Railroaded by Richard White . He points out that the 19th century railroad corporations were disorganized, poorly run, money losing enterprises. But that didn't stop people from investing in them and getting filthy rich. All you need is some fast talking and clever accounting. One example he mentions is that the railroads needed all kinds of supplies to keep things moving and so they would buy them from railroad logistics corporations or fuel from coal companies, etc. But guess who owned the suppliers? That's right, the railroad investors would set up separate companies to supply their own railroads and these companies were extremely profitable. ..."
"... But the pool of investors in these supplier companies was limited to the smart money in on the scam. In essence, the initial well heeled investors set up the railroads so that they could deliberately fleece them. He gives the example of one of the coal companies charging the railroad three times the going rate, which beggared the railroad but lined the pockets of the select few investors who owned stakes in both companies. ..."
"... I suspect that something similar may be going on in the fracking industry. So to figure out the whole scam, you would need to know if the logistics companies are making a profit and is there any common ownership between those companies and the frackers. ..."
"... The other book I recently read was The Whiskey Rebellion by William Hogeland which discusses finance and taxation during the period just after the American Revolution. Shorter version – Alexander Hamilton was a crook who deliberately set up a financial system to ensure that the rich get richer off the labor of the rest of us. ..."
"... The more you learn about the history of this country, the more you realize that there really is nothing new going on and the financial crooks of today are just following in the footsteps of their grifter forebears. And maybe someday they too will have cities named after them or at least a statue in the public square, because the US of A does love its con men. ..."
"... Hogeland's book Founding Finance is also great. Michael Perelman's book Railroading Economics is worth a read. The founders of economics in the US were looking at the example of the railroads and other corporations and acknowledging that competition was destructive and wasteful, but in their textbooks for college students they pushed the simplistic and misleading models that came to define neoclassical economics. ..."
"... Perhaps Wall Street and the banks are playing a larger game. When the U.S. had $4.00+ gasoline there was a real motivation to rework transportation systems and rely less on cars. Now, with the lower oil prices we are back to SUV's and pick-up trucks. So maybe a loss leader in the fracking scam has preserved a much larger cash cow in auto finance. There is also the whole oil services industry to consider. With new conventional discoveries at an all time low, what would the oil services sector do if there were no fracking? ..."
"... Can't help but wondering if this isn't all part of the neo-conservatives and their 'Great Games'. Since 1971 and the peak of conventional oil production in the US, the country has been a power in decline, economically if not militarily. If, as Frederick Soddy wrote almost a hundred years ago "Life is fundamentally a struggle for energy", then the country which controls that energy controls life on our planet. (I believe Kissinger said much the same thing.) This has all kinds of implications for issues from world (Middle East) peace and transitioning to renewable energy sources. Accidents of geology have left Middle Eastern countries with most of the world's remaining easily exploitable sources of conventional oil – and also as holders of much of the US and Western government debt upon which the international monetary system is based. ..."
"... Super (monetary) Imperialism ..."
"... I also can't help but wonder if Reagan shouldn't be most remembered for his instructions to White House maintenance personnel to 'take down those solar panels'. This is eight years after Hudson published Super Imperialism ..."
"... What the Saudis did in 2014 – 2016, maximizing output and spending ~2/3 of the 800 billion dollars equivalent in savings they then held to sustain their economy and regime, trying to bankrupt the U.S. oil industry (and secondarily, the Iranians, etc.) they quite literally cannot do again, anytime soon. They're close to broke, and fighting 1 – 2 wars. ..."
"... Regarding " The Saudis trying to bankrupt the U.S. oil industry" – The Saudis were not out to destroy the US oil industry. The US oil industry controls the Saudis through the US Military which keeps them in power. The Saudis were after the wildcat frackers who were not part of the global oil cartel (which includes US Big Oil). The wildcat frackers were not maintaining limited production quotas to maintain the monopoly oil price gouging. US Big Oil allowed the price collapse for long term goals with their Saudi partners. (Source: Antonia Juhasz) Apparently Wall Street was not in on the plan and kept the money flowing in the fracking Ponzi scheme. ..."
"... Luke is an oil man who brings to mind the Upton Sinclair quote "It is difficult to get a man to understand something when his salary depends upon his not understanding it." ..."
"... "There's a sucker born every minute" and Wall Street is P. T. Barnum directing investors with the sign "This Way to the Egress." The con will last as long as investors have cash to burn and think "product growth" is equivalent to "profit growth" – or in the words of Lucy "Well, uh maybe there is no profit on each individual jar, but we'll make it up in volume." ..."
May 29, 2018 | www.nakedcapitalism.com

How Wall Street Enabled the Fracking 'Revolution' That's Losing Shale Oil Companies Billions Posted on May 6, 2018 by Jerri-Lynn Scofield By Justin Mikulka, a freelance writer, audio and video producer living in Trumansburg, NY. Justin has a degree in Civil and Environmental Engineering from Cornell University. Originally published at DeSmogBlog

The U.S. shale oil industry hailed as a "revolution" has burned through a quarter trillion dollars more than it has brought in over the last decade. It has been a money-losing endeavor of epic proportions.

In September 2016, the financial ratings service Moody's released a report on U.S. oil companies, many of which were hurting from the massive drop in oil prices. Moody's found that "the financial toll from the oil bust can only be described as catastrophic," particularly for small companies that took on huge debt to finance fracking shale formations when oil prices were high.

And even though shale companies still aren't turning a profit, Wall Street continues to lend the industry more money while touting these companies as good investments. Why would investors do that?

David Einhorn, star hedge fund investor and the founder of Greenlight Capital, has referred to the shale industry as "a joke ."

"A business that burns cash and doesn't grow isn't worth anything," said Einhorn, who often goes against the grain in the financial world.

Aren't investors supposed to be focused on putting money toward profitable companies? While, in theory, yes, the reality is quite different for industries like shale oil and housing.

If the U.S. financial crisis of 2008 has revealed anything, it is that Wall Street isn't concerned with making a "shitty deal" when it means profits and bonuses for its traders and executives , despite their roles in the crash.

Wall Street makes money by facilitating deals much like a Vegas bookie makes money by taking bets. As the saying about Las Vegas goes: "The house always wins." What's true about casinos and gambling also holds true for Wall Street.

Wall Street caused the 2008 financial crisis, with some of its architects personally benefiting. However, while a few executives profited, the result was a drop in employment of 8.8 million people, and according to Bloomberg News in 2010, "at one point last year [2009] the U.S. had lent, spent, or guaranteed as much as $12.8 trillion to rescue the economy."

JP Morgan (along with much of Wall Street) required large sums of money in the form of bailouts to survive the fallout from all of the bad loans made, which brought about the housing crisis. Is JP Morgan steering clear of making loans to the shale industry? No. Quite the opposite.

As shown in this chart of which banks are loaning money to shale company EOG Resources, while all of the big players in Wall Street are in on the action, JP Morgan has the biggest bet.

To understand why JP Morgan and the rest of these banks would loan money to shale companies that continue to lose it, it's important to understand the gambling concept of "the vigorish," or the vig. Merriam-Webster defines vigorish as "a charge taken (as by a bookie or a gambling house) on bets."

Wall Street makes money by taking a cut of other people's money. To a gambling house, it doesn't matter if everyone else is making money or losing it, as long as the house gets its cut (the vig) -- or as it's known in the financial world -- fees.

Understanding this concept gives insight into why investors have lent a quarter trillion dollars to the shale industry, which has burned through it. If you take the vig on a quarter trillion dollars, you have a big pile of cash. And while those oil companies may all go bankrupt, Wall Street never gives back the vig.

Trent Stedman of the investment firm Columbia Pacific Advisors LLC explained to The Wall Street Journal at the end of 2017 why shale producers would keep drilling more oil even when the companies are bleeding money on every barrel produced:

"Some would say, 'We know it's bad economics, but it's what The Street wants.'"

And "The Street" generally gets what it wants, even when it is clear that loaning money to shale companies that have been losing money for a decade and are already deep in debt is "bad economics." But Wall Street bonuses are based on how many "fees" an employee can bring to the bank. More fees mean a bigger bonus. And loans -- even ones that are clearly bad economics -- mean a lot more fees.

Shale Oil Companies Are 'Creatures of the Capital Markets'

In 2017 "legendary" hedge fund manager Jim Chanos referred to shale oil companies as "creatures of the capital markets," meaning that without Wall Street money, they would not exist. Chanos is also on record as shorting the stock of heavily leveraged shale oil giant Continental Resources because the company can't even make enough money to pay the interest on its loans.

And he has a point. In 2017 Continental spent $294.5 million on interest expenses, which is approximately 155 percent of its 2017 adjusted net income generation. When you can't even pay the interest on your credit cards, you are broke.

And yet in 2017, investor capital was still flowing, with Continental Resources among those bellying up to the Wall Street trough for another billion in debt.

" In 2017, U.S. [exploration and production] firms raised more from bond sales than in any year since the price collapse started in 2014, with offerings coming in at around $60 billion -- up nearly 30 percent from 2016, according to Dealogic. Large-cap players like Whiting Petroleum, Continental Resources, Southwestern, Noble, Concho and Endeavor Energy Resources each raised $1 billion or more in the second half of 2017."

How big of a problem is this business of loaning money to an industry burning through billions and burying itself in debt? So big that the CEO of shale company Anadarko Petroleum is blaming Wall Street and asking its companies to please stop loaning money to the shale oil industry. Yes, that's right.

In 2017, Anadarko CEO Al Walker told an investor conference that Wall Street investors were the problem:

" The biggest problem our industry faces today is you guys. You guys can help us help ourselves. It's kind of like going to AA . You know, we need a partner. We really need the investment community to show discipline."

The Wall Street Journal reports that Walker maintains: "Wall Street has become an enabler that pushes companies to grow production at any cost, while punishing those that try to live within their means."

Imagine begging banks to stop loaning you money. And being ignored.

Growing production at any cost is the story of the shale "revolution." The financial cost paid so far has been the more than $280 billion the industry has burned through -- money that its companies have received from Wall Street and, despite the plea from Al Walker, continue to receive.

The Economist summarized the situation in 2017:

"It [the shale industry] has burned up cash whether the oil price was at $100, as in 2014, or at about $50, as it was during the past three months. The biggest 60 firms in aggregate have used up $9 billion per quarter on average for the past five years."

Higher oil prices are now being touted as the industry's savior but, as The Economist noted, the shale industry was losing money even when oil was $100 a barrel.

Still Wall Street keeps giving the shale industry money and the shale industry keeps losing it as it ramps up production. To be clear, this arrangement makes shale company CEO s and financial lenders very rich, which is why the trend is likely to continue. And why Continental Resources CEO Harold Hamm will continue to repeat the myth that his industry is making money, as he did at the end of 2017:

" For anybody to even put forth the suggestion we haven't had great expansion and wealth creation in this industry with horizontal drilling and all the technology that's come about the last 10 years, I mean, it's totally ridiculous."

No one will argue that Hamm and his partners on Wall Street are not extremely wealthy. That has happened despite Hamm's company and the rest of the fracking industry losing epic sums of money. The same year Hamm made that statement, his company couldn't even cover its interest expenses. To put that in perspective, Continental Resources couldn't even make the equivalent of the minimum payment on its credit card.

Watch What the Industry Does, Not What It Says

Higher oil prices are yielding more stories about how 2018 will be the year that the shale industry finally makes a profit. Harold Hamm refers to it as Continental Resources' "breakout year." Interesting how potentially not losing money for a year is considered a "breakout year" in the shale industry .

As reported on DeSmog, the industry certainly got a huge boost from the recent tax law, which will help its companies' short-term finances. Continental Resources alone took home $700 million in tax relief.

Recent reports in the financial press detail how the new approach in the shale industry will be to focus only on profitable oil production, not just producing more barrels at a loss. As The Wall Street Journal put it in a headline: "Wall Street Tells Frackers to Stop Counting Barrels, Start Making Profits."

In that very article, Continental CEO Hamm assures that he is on board with this new approach, saying, "You are really preaching to the choir." But has Continental actually embraced this new approach of fiscal responsibility and restraint? Not so much.

The fracking firm appears to have done the opposite, increasing production to record levels along with the rest of the shale industry. Continental recently reported plans to drill 350 new wells at an estimated cost of $11.7 million per well, which adds up to over $4 billion in total costs on those wells. The company currently holds more than $6 billion in debt and less than $100 million cash.

How will Continental fund those new wells? Hamm has promised that going forward, there would be "absolutely no new debt." Perhaps Continental will fund it by selling assets because without more debt, Continental does not have the money to fund those new wells. However, if past is prelude, then Wall Street will happily lend Continental as much money as it wants. Why would Hamm say one thing and do another? Well, he personally has accrued billions of dollars while his company has burned through billions. Despite leading Continental to another money-losing year in 2017, Hamm took home a fat raise .


Louis Fyne , May 6, 2018 at 8:04 am

Funny how the news cycle will go nuts if -- insert public pension fund -- has 0.07% of its holdings in a gun stock.

But not a peep at 'golly aw shucks' Mr. Grandpa USA, Warren Buffet, over Wells Fargo its retail banking or its fracking enabling. or at (pal of chuck schumer and clintons) Jamie Dimon or USA-rescued Citi.

#resistance

johnnygl , May 6, 2018 at 8:21 am

Don't forget that warren buffet also owns the trains that eat a lot of the profits of the koch bros investments in the tar sands. That why they wanted that keystone pipeline soooooooo baaaad

Carolinian , May 6, 2018 at 9:05 am

The article could use an explanation -- for those of use who are financial dummies -- of who the investors are that are making these apparently foolish bets. If Wall Street is the bookie then who are the bettors? Or are the Wall Street banks using deposit money to invest in fracking?

On a recent drive through West Texas I noticed the landscape dotted with what looked like newish mini factories -- presumably fracking operations. Clearly it's not a low cost endeavor.

Gee , May 6, 2018 at 9:51 am

I keep thinking that the whole enterprise was bankrolled specifically to crush oil prices and keep inflation tamped down, which provides much more profit to wall street via the assurance that the Fed's easy money policy lasts a lot longer.

All the rest of this talk about profitability is just BS cover story. It's also an employment plan, in the same way that bankrolling student loan debt was a a huge employment plan for administration and construction, and soaked up unemployment by lifting enrollment rates and taking people out of the labor market.

I think we forget how so much of what happened after the financial crisis was a way of getting around the fact that they wanted the stimulus so much bigger than the 1 trillion they didn't even manage to get. I mean, look at the for profit school industry – that was an obvious total racket and a joke, yet they threw money at it, then pretended to clean up the shocking unexpected mess after when it was safe to do so (when the economy was more in the clear.)

The wall street insiders make a mint trading the junk stocks up, then short the hell out of them when they know the game is over and make a mint on the way down.

jsn , May 6, 2018 at 9:56 am

I've been wondering the same thing. There must be a huge pile of non-performing debt on someone's balance sheet or it's being moved around to where significant write downs are happening, but I have no idea where either of those two things might be. Who are the stuffees? Is German banks buying subprime again?

cnchal , May 6, 2018 at 10:14 am

" If Wall Street is the bookie then who are the bettors?" It's a great question that leaves everyone guessing. My guess is pension funds, and calling them bettors is being kind.

A bit off topic but yesterday in links was an article about the long time it takes to sue Goldman Sachs. Now, it's good to see a little bit of trouble coming their way but the article describes the lady doing the suing as a sweet innocent young thing being mauled by the male predators at Goldman and her specialty was the "sale of convertible bonds", a fee generating bullshit jawb that made her more money in a year than a deplorable can dream of making in a lifetime.

There were two problems however. One, the sexual predator grabbing her was a bit of a sideshow and from reading the guts of the article, the much bigger one is about money and how the ladies of Goldman were being cut out from their rightful share of the fee-loot generated at Goldman Sachs.

Bernie Sanders: The business of Wall Street is fraud and greed.

jsn , May 6, 2018 at 10:47 am

Pension funds is a good guess but one would think the consistent losses would start to show somewhere. The bezzle at this point has to be approaching trillions.

Stupendous Man - Defender of Liberty, Foe of Tyranny , May 6, 2018 at 11:28 am

The simple, short, response is "pension funds across the country, public and private, ARE evidencing/showing considerable shortfalls."

That doesn't equate with pension funds being involved in these types of investments, but we shouldn't be surprised if they are.

Michael Fiorillo , May 6, 2018 at 6:01 pm

In the case of public pension funds, many of not most of the "shortfalls" are in fact intentional under-funding of the plans, with contributions to the funds being skimmed off by state governments and diverted into the general operating funds, because Taxes Bad.

lyman alpha blob , May 6, 2018 at 11:34 am

No it isn't a low cost endeavor and that may be precisely how the scam works. Note that the article mentions at the end that Hamm who founded Continental has made billions personally while the corporation flounders.

So the question is, what else does he own?

I've mentioned this book a few times recently that I'm still in the middle of – Railroaded by Richard White . He points out that the 19th century railroad corporations were disorganized, poorly run, money losing enterprises. But that didn't stop people from investing in them and getting filthy rich. All you need is some fast talking and clever accounting. One example he mentions is that the railroads needed all kinds of supplies to keep things moving and so they would buy them from railroad logistics corporations or fuel from coal companies, etc. But guess who owned the suppliers? That's right, the railroad investors would set up separate companies to supply their own railroads and these companies were extremely profitable.

But the pool of investors in these supplier companies was limited to the smart money in on the scam. In essence, the initial well heeled investors set up the railroads so that they could deliberately fleece them. He gives the example of one of the coal companies charging the railroad three times the going rate, which beggared the railroad but lined the pockets of the select few investors who owned stakes in both companies.

I suspect that something similar may be going on in the fracking industry. So to figure out the whole scam, you would need to know if the logistics companies are making a profit and is there any common ownership between those companies and the frackers.

Also, for anyone interested in the shady world of corporate finance and how it came to be in the US, I can't recommend the book linked to above enough. One other aspect I found fascinating is how the railroad investors turned to Europe and specifically the Germans to buy their bonds when they couldn't find enough suckers stateside. Reminds me quite a bit of the mortgage crisis a decade ago that spilled into Europe.

The other book I recently read was The Whiskey Rebellion by William Hogeland which discusses finance and taxation during the period just after the American Revolution. Shorter version – Alexander Hamilton was a crook who deliberately set up a financial system to ensure that the rich get richer off the labor of the rest of us.

The more you learn about the history of this country, the more you realize that there really is nothing new going on and the financial crooks of today are just following in the footsteps of their grifter forebears. And maybe someday they too will have cities named after them or at least a statue in the public square, because the US of A does love its con men.

HopeLB , May 6, 2018 at 3:47 pm

Thank you very much for the book recommendations! Maybe their back up investments are in "fixing" the externalized, environmental costs e.g. water filtration systems that remove radiologocals/heavy metals from municipal supplies with the cost of purchasing being inversely portional to the extent of privatized ownership permitted?

SimonGirty , May 7, 2018 at 5:24 am

We spread the radium & strontium flavored "produced water" on as a replacement for road salt. Slickwater fracking of the Marcellus became sellable, after Katrina messed up Shell's deep water platforms in the Gulf (ie: a Democrat administration in PA, allowed fracking in a huge reservoir, 1/4 mile from two 40yr old reactors and "watering down" return water to "permissable levels" of toxic substances illegal to disclose to the 850,000 folks drinking "treated" water. (note the dates?)
https://vimeo.com/44367635 https://www.propublica.org/article/wastewater-from-gas-drilling-boom-may-threaten-monongahela-river

bones , May 6, 2018 at 6:22 pm

Hogeland's book Founding Finance is also great. Michael Perelman's book Railroading Economics is worth a read. The founders of economics in the US were looking at the example of the railroads and other corporations and acknowledging that competition was destructive and wasteful, but in their textbooks for college students they pushed the simplistic and misleading models that came to define neoclassical economics.

John k , May 6, 2018 at 12:29 pm

I know nothing, but: Banks can fund loans by creating deposits and then carry the debt on their books as assets. And they can be hidden there, their assets are secret. If the stuff can't be paid back it's toxic, just like subprime in 2008 .

And the party goes on until rising rates push the economy into recession, banks stop rolling over loans, the borrowers go to the Wall, etc.
And then what? The usual thing is for gov to bail out the Tbtf banks rather than take them over, and sack or jail the officers because can't hurt the biggest donors. But if it all hangs together until 2020 and Bernie wins there might be a change in the script.

drumlin woodchuckles , May 6, 2018 at 5:24 pm

If Sanders thinks of running again, he should say something basically like . . .

" If I am elected, I will have in place some responses ready to roll out and apply when the next crisis and depression breaks out during my term." And he could say why he is predicting a "next crisis and depression". If he were to get elected and then we had a next crisis and depression during his term, he would get public credibility for having predicted it. And he might have more political latitude for "doing the FDR thing" in response.

Carey , May 6, 2018 at 8:13 pm

I think that would be an excellent thing for him to do, with regard to the People, except it might well get him JFK'd.

rd , May 6, 2018 at 11:28 am

Many corporations, education institutions have pulled out of the fossil fuel industry investment funds, a cursory reading of the press will give you an update

drumlin woodchuckles , May 6, 2018 at 5:25 pm

Have they pulled out of the fossil fuel inVESTment industry as well as pulling out of the fossil fuel INdustry itself?

johnnygl , May 6, 2018 at 8:18 am

Great piece! Thanks for posting. I'm going to try and shop this around at work wish me luck

Jim M , May 6, 2018 at 8:28 am

My comment is a question – thanks in advance for your input: How does Wall Street fare when oil companies who they lent money to, go into bankruptcy?

lyman alpha blob , May 6, 2018 at 10:13 am

My guess is that even thought the banks aren't necessarily lending directly to the frackers and the fees they collect are lucrative, they still have some skin in the game somehow. The investors who are putting up the cash must have got the money from some bank or another. So the banks wouldn't put up this much money without some guarantee they would be made whole when it all goes belly up.

And I can't think of a bigger wink and a nod than what happened about ten years ago after the banks blew up the mortgage industry. If Uncle Sugar came to the rescue then, I think it's safe for them to assume it will happen again. After all, their friends run Treasury and the Fed.

bones , May 6, 2018 at 6:28 pm

And see article in FT posted in links a couple days ago "liquidity ousts debt as the big market worry." It provides some charts showing that banks are shifting away from holding debt and playing more of the role of broker (with some anti-regulation propaganda thrown it as editorial spin).

John Zelnicker , May 6, 2018 at 3:21 pm

@Jim M
May 6, 2018 at 8:28 am
-- --
One of the things the banks frequently do when their borrowers go into bankruptcy, is to participate in the debtor-in-possession financing that the bankruptcy court guarantees to be repaid. This allows them to earn some interest to offset any losses.

If the fracking companies don't go bankrupt, the debt will be rolled over continuously until the whole system collapses and the Fed bails out the banks again.

Rinse and repeat.

The Rev Kev , May 6, 2018 at 8:36 am

I guess that all the money pumped (no pun intended) into fracking must have originated in the several trillion dollars worth of Quantitative Easing funds created in the past decade. All that money sloshing around had to go somewhere. Maybe the only good news is that this will be all one way to cancel some of these excess funds. The bad news is that supporting an insupportable industry will screw up huge tracts of land and water supplies for god knows how long.

Jim Young , May 6, 2018 at 10:19 am

Though not as "profitable" as converting as much energy production as possible to solar, wind, and Pumped Storage Hydro (to store otherwise wasted "free" energy at 1/20th the cost of batteries), it seems inevitable that people will not keep paying so much extra for what should be much cheaper energy.

I don't know what price the planet and ones keeping us on too expensive energy will pay in the long run (financial market losses by suckers, or tax payers for Citizens United enabled politicians and phony regulators), but I suspect the ones that see the inevitable are getting as much profit as they can, while they can, and leaving so many more holding the bag (financially, and in abused environment).

There are some that will make wiser investments in more sustainable energy, as they accept lower returns more in line with energy production at much better cost benefit ratios (which are also less environmentally damaging).

See https://www.hydro.org/wp-content/uploads/2018/04/2018-NHA-Pumped-Storage-Report.pdf

kev4321 , May 6, 2018 at 9:45 am

Perhaps Wall Street and the banks are playing a larger game. When the U.S. had $4.00+ gasoline there was a real motivation to rework transportation systems and rely less on cars. Now, with the lower oil prices we are back to SUV's and pick-up trucks. So maybe a loss leader in the fracking scam has preserved a much larger cash cow in auto finance. There is also the whole oil services industry to consider. With new conventional discoveries at an all time low, what would the oil services sector do if there were no fracking?

steven , May 6, 2018 at 9:48 am

Can't help but wondering if this isn't all part of the neo-conservatives and their 'Great Games'. Since 1971 and the peak of conventional oil production in the US, the country has been a power in decline, economically if not militarily. If, as Frederick Soddy wrote almost a hundred years ago "Life is fundamentally a struggle for energy", then the country which controls that energy controls life on our planet. (I believe Kissinger said much the same thing.) This has all kinds of implications for issues from world (Middle East) peace and transitioning to renewable energy sources. Accidents of geology have left Middle Eastern countries with most of the world's remaining easily exploitable sources of conventional oil – and also as holders of much of the US and Western government debt upon which the international monetary system is based.

Free the world from its dependence on fossil fuels and you free it from its dependence reserve currencies, US government and Wall Street-created debt. I wish Hudson would return to the theme which introduced me to his work, Super (monetary) Imperialism . End it, i.e. replace the free lunch international monetary system from which the US and its 'exceptional people' derive the funds to spread murder and mayhem around the world, and you open at least the possibility for the world to enjoy a little peace and get to work on serious problems like climate change.

I also can't help but wonder if Reagan shouldn't be most remembered for his instructions to White House maintenance personnel to 'take down those solar panels'. This is eight years after Hudson published Super Imperialism – more than enough time for at least policy makers, drawn mostly from the ranks of finance, to understand 'the game' (and the orders from Saudi Arabia they must follow if they wished to keep playing.) Fracking is / was just a feeble attempt to show some independence which it and the rest of the world do NOT have so long as they remain hooked on the Middle East's 'ancient sunlight'.

pretzelattack , May 6, 2018 at 10:15 am

i'll always appreciate carter for putting them on.

Arizona Slim , May 6, 2018 at 2:42 pm

They were installed on the roof so that the White House kitchen could have hot water. And they didn't work well. So, Reagan had them removed. ISTR reading that a photovoltaic array was installed while Obama was president.

jsn , May 6, 2018 at 8:56 pm

"Life is fundamentally a struggle for energy"

This does appear to be at the core of human nature, particularly if you substitute "power" for energy as a term to include both physical BTUs, who's pursuit we share with all other animals, and the social relations that can be commanded with it which are a strictly human thing.

The question now front and center is, "is humanity capable of self-conscious restraint on power, even at the risk of extinction?"

I can only imagine survival for our species if we can make a religion of opposing "power" at the risk of life as a mater of faith. Power has to be a community resource used for community aims that intergenerationally sustain the community, but "the coordination problem" of large groups militates against this notion. A stretch I know, the limits of my creativity are showing!

Chauncey Gardiner , May 6, 2018 at 9:59 am

Thank you for posting this excellent piece. However, I question whether the domestic shale oil industry is financially unprofitable when it is considered in the aggregate, or if it is just the exploration and production sector. Setting aside for a moment the huge environmental, health and other social costs associated with this industrial activity, there is a vast network of entities that depend on this debt-fueled oil extraction and development. They range from oil and gas steel pipe manufacturers in Youngstown and drilling rig manufacturers in Texas to tank railcar manufacturers in Louisiana to major railroads to refineries and petrochemical facilities to pipeline companies and to some extent the domestic auto industry and military, etc. No question the domestic shale oil extraction sector itself is not cost competitive with other global suppliers, but I am wondering about the cumulative secondary and tertiary economic and employment effects.

The primary problems with this industry sector lie in the enormous long-term environmental and social costs it imposes, maybe even raising existential questions. Then there is the issue of oil pipeline companies being granted eminent domain to deliver this oil for export when the nation as a whole is a major net importer. Is that really a "public purpose" for which the eminent domain laws were intended, or simply to line the pockets of a few?

Bud-in-PA , May 6, 2018 at 10:22 am

You can thank our Federal Reserve for all of this!

Telee , May 6, 2018 at 12:51 pm

Considering the environmental impact of Non-conventional drilling ( fracking ) it should be noted that although denied by the industry wells have a considerable leak rate which puts methane aint the atmosphere and threatens potable water supplies. In addition the uptick in fracking has suppressed the development of non fossil fuel energy production which leads us headlong into the 1.5 to 3 degree temperature elevation that the Paris agreement seeks to avoid. The following links are a good introduction to these dangers. It seems likely that human intelligence will prove to be a lethal mutation.

https://www.youtube.com/watch?v=Dxis-vYGM_M
https://www.youtube.com/watch?v=PGfIjCG-zB4

Carey , May 6, 2018 at 1:29 pm

What happens when the true costs of fracking- to the land, soil, water, and communities- become part of the equation? That can't come soon enough, in my view. The squandering of vast natural resources here in the USA! is just so saddening.

jfleni , May 6, 2018 at 4:13 pm

At least the poor warehouse worker knows he doesn't have the time, so he carries his new P-bottle just in around in case; maybe the frack-daddies should wake up and start packing new bottles!

VietnamVet , May 6, 2018 at 7:22 pm

This is a good post. It is an existential question.

If I remember my lessons from NC, in 2007 it was clear that the subprime mortgage securitization scheme would tank as the housing market collapsed. The short spread bettors couldn't get anyone else to see what was really happening. Then suddenly Bear Stearns was sold, Lehman Brothers went bankrupt and AIG had to be rescued.

I assume that Wall Street will continue to make loans out of thin air and pocket the Vig. The Fed assures that the banks have an infinite money supply with deregulation and not forcing the banks to write off their bad loans. This is similar to the MMT funding of the military's never ending overseas wars. Wars end – badly most of the time. Fossil fuels are finite. When the fuel costs more money to produce than it can be sold; the system collapses. So, does that portion of civilization that is dependent on that energy source if there is no alternative available.

Luke , May 7, 2018 at 1:35 am

I work in the oil industry. My job is as a type of low-level geologist, actually living and working out on oil rigs for weeks or months at a time. (I drive to the nearest town with a ChinaMart about once a week or so to wash clothes and buy more groceries.)

Several observations:

1) What the Saudis did in 2014 – 2016, maximizing output and spending ~2/3 of the 800 billion dollars equivalent in savings they then held to sustain their economy and regime, trying to bankrupt the U.S. oil industry (and secondarily, the Iranians, etc.) they quite literally cannot do again, anytime soon. They're close to broke, and fighting 1 – 2 wars.

2) The U.S. oil industry cut costs dramatically over the 6-9 months from the end of 2014. That was done primarily by cutting WAY back on drilling (active rig counts in ND declined by 90-95% over that time) and reducing what they would pay drilling and service companies. Mudloggers, MWD, directional drillers, casing crews, etc., saw their wages go down by over HALF, if they even still had a job. (Many to most did not.)

3) The oil industry is pretty busy right now, but is running into some constraints. Tops is they are still in the early stages of raising wages back up; I only make about 3/5 as much per day as I did in October 2014 (and there has definitely been some inflation in the prices I pay for most everything since then). Many workers that left were older, so just completely retired or found retirement jobs. Some bought trucks/farms/small businesses, so are reluctant (especially at these still-depressed wages by 2014 standards) to uproot and come back. Many just can't see the math working, while others (or their wives, which = to the same thing) just can't stomach facing another inevitable downturn at some point, with inevitable job loss.

4) More than a few oil companies have leases on which they must drill, either in a certain time period before drilling rights expire, or must actually drill to retain them. Further, while many oil industry investors sadly poorly understand the delay between "let's drill there" and having oil to sell, many do. Some, perhaps a lot, of drilling is done in anticipation of eventually (likely almost certainly) higher prices at some point.

5) Oil companies actually aren't that bad on the environment most of the time. 5-10,000′ feet down where the zones of interest typically are located, WGAF what is pumped or spilled, as no one travels or lives there. (Very thick, impermeable casing hydraulically seals off those zones from interacting with the surface, with innumerable impermeable strata between fracked zones and surface water wells, the latter rarely even 1000′ deep, and usually more like <200'.) By comparison, ethanol (whether from grain or sugar cane) requires vast acreage be farmed, using POL for many aspects (~90% of commercial fertilizers and nearly all pesticides have oil origins), while windmills chop up tens of millions of environmentally desirable, often endangered or protected, birds every year in the U.S., with little or no sanctions on the windmill companies.

6) People working in the oil industry typically have the same attitude I have about anti-oil protesters. That is, let the ones who don't use petroleum, complain. That's not just gasoline, diesel, heating oil, kerosene, etc., but also lubricants, pesticides, fertilizers, plastics, thermal insulation used in most dwelling and commercial buildings, and anything produced or manufactured or transported by same. No food, no clothes, no utilities, no transport besides feet -- that would kill easily 90% of Americans within 6 months. This is part of why I figure all the sincere environmentalists have already committed suicide -- and the rest are hypocrites.

Tobin Paz , May 7, 2018 at 5:21 pm

No food, no clothes, no utilities, no transport besides feet -- that would kill easily 90% of Americans within 6 months.

That is the conundrum. However, abrupt climate change from continued burning of fossil fuels will kill many more.

James McFadden , May 7, 2018 at 6:30 pm

Regarding " The Saudis trying to bankrupt the U.S. oil industry" – The Saudis were not out to destroy the US oil industry. The US oil industry controls the Saudis through the US Military which keeps them in power. The Saudis were after the wildcat frackers who were not part of the global oil cartel (which includes US Big Oil). The wildcat frackers were not maintaining limited production quotas to maintain the monopoly oil price gouging. US Big Oil allowed the price collapse for long term goals with their Saudi partners. (Source: Antonia Juhasz) Apparently Wall Street was not in on the plan and kept the money flowing in the fracking Ponzi scheme.

Regarding: "while windmills chop up tens of millions of environmentally desirable, often endangered or protected, birds every year in the U.S., with little or no sanctions on the windmill companies." – This statement is just oil company propaganda. Quoting Stanford Prof. Mark Jacobson: "Wind turbines reduce bird kills relative to natural gas, coal, and oil for electricity and cause about the same bird death rate as nuclear power. A recent study published in Energy Policy found that wind turbines kill less than one‐tenth the bird deaths caused by each of natural gas, coal, and oil and similar deaths to that caused by nuclear power. As a result, wind turbines reduce bird kills relative to fossil energy sources. In addition, according to the American Bird Conservancy, the total number of bird deaths per year due to wind turbines (a few hundred thousand) is orders of magnitude lower than the numbers due to communication towers (10‐50 million), cats (80 million), or buildings (900 million)." Source: https://web.stanford.edu/group/efmh/jacobson/Articles/I/MythsvsRealitiesWWS.pdf

Regarding: "Oil companies actually aren't that bad most of the time." – The same can also be said of mass murders and child rapists. Oil company pollution and their global ruthlessness is well documented – and as the oil man I know once told me – to understand this industry all you need to do is watch the movie "There Will Be Blood."

Luke is an oil man who brings to mind the Upton Sinclair quote "It is difficult to get a man to understand something when his salary depends upon his not understanding it." He would have fit right in with those men cutting down the last tree on Easter Island -- unconcerned about the future of their people. He thinks climate change is a crock because if it is true, then his job is destroying the planet. For anyone paying attention to global pollution and climate change, it is clear we need a rapid transition to renewable energy (solar and wind), a reduction in consumption (transition to more leisure time), and stewardship for the planet rather than the get-rich-quick mining mentality that leaves a giant mess for future generations to clean up – assuming human civilization survives. The economic/engineering outlines for this needed rapid transition are discussed by Prof. Mark Jacobson in several publications – here is the one for California. ( https://web.stanford.edu/group/efmh/jacobson/Articles/I/CaliforniaWWS.pdf ) Current non-planning for the coming disaster just leave us "circling the drain" -- waiting for the ultimate collapse.

James McFadden , May 7, 2018 at 11:15 am

"There's a sucker born every minute" and Wall Street is P. T. Barnum directing investors with the sign "This Way to the Egress." The con will last as long as investors have cash to burn and think "product growth" is equivalent to "profit growth" – or in the words of Lucy "Well, uh maybe there is no profit on each individual jar, but we'll make it up in volume."

[May 29, 2018] There's No Getting Around Iranian Sanctions by Irina Slav

Notable quotes:
"... By Irina Slav, a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry. Originally published at OilPrice ..."
May 29, 2018 | www.nakedcapitalism.com

By Irina Slav, a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry. Originally published at OilPrice

"I personally think none of us will be able to get around it," Vitol's chief executive Ian Taylor said last week, commenting on the effects that renewed U.S. sanctions against Iran will have on the oil industry.

The sanctions, to go into effect later in the year, have already started to bite. French Total, for one, announced earlier this month it will suspend all work on the South Pars gas field unless it receives a waiver from the U.S. Treasury Department -- something rather unlikely to happen. The French company has a lot of business in the United States and cannot afford to lose its access to the U.S. financial system. So, unless the EU strikes back at Washington and somehow manages to snag a waiver for its largest oil company, Total will be pulling out of Iran.

Other supermajors have not dared enter the country, so there will be no other pullouts of producers, but related industries will be affected, too, in the absence of a strong EU reaction to the sanctions. For example, Boeing and Airbus will both have their licenses for doing business in Iran revoked, Treasury Secretary Steven Mnuchin said , which will cost them some US$40 billion -- the combined value of contracts that the two aircraft makers had won in Iran.

Tanker owners are also taking the cautious approach. They are watching the situation closely, anticipating Europe's move, but acknowledging that the reinstatement could have "significant ramifications" for the maritime transport industry, as per the International Group of PI & Clubs, which insures 90 percent of the global tanker fleet.

Everyone is waiting for Europe to make its move even as European companies in Iran are beginning to prepare their exit from the country. Everyone remembers the previous sanctions, apparently, and they don't want to be caught off guard. But the signals from Europe are for now positive for these companies, of which there are more than a hundred .

Earlier this month, an adviser to French President Emmanuel Macron said that Europe's response to the thread of U.S. sanctions on Iran will be "an important test of sovereignty." Indeed, unlike the last time there were sanctions against Iran, the European Union did all it could to save the nuclear deal and has signaled it will continue to uphold it.

While some doubt there is a lot the EU can do against U.S. sanctions, there is one 1996 law dubbed a blocking statute that will ban European companies from complying with U.S. sanctions, which would put companies such as Total between a rock and a hard place.

European Commission President Jean-Claude Juncker said two weeks ago the commission will amend the statute to include the U.S. sanctions again Iran and that the amendments should be completed before the first round of sanctions kicks in in early August.

Many observers believe that if the sanctions are only limited to the U.S. and no other signatory to the nuclear deal joins them, the effect will be limited as well. As McKinsey analyst Elif Kutsal told Rigzone, "Market fundamentals are not expected to change structurally given that Iran doesn't export crude oil or refined products to the U.S. and exports go mainly to Europe (20 percent) and Asia Pacific (80 percent). Therefore, if the sanctions are only limited to the United States, then this could cause short-term volatility in prices until a new/revised agreement framework is put in place."

And this is where Iran's Supreme Leader Ayatollah Ali Khamenei scored a goal: He demanded that the European Union provide guarantees it will continue to buy Iranian crude. If it doesn't, he said, Iran will restart its nuclear program. Now, if this happens, the EU will not have much choice but to join the sanctions, and then hundreds of thousands of barrels of Iranian crude could be cut off from global markets.

However, even this will result in only a temporary decline in supplies, according to Kutsal, and others that believe that Asian imports from Iran will offset the effect from the U.S. sanctions. According to this camp, the only thing that can unleash the full effect of sanctions is the UN joining the sanction push against Iran.

[May 29, 2018] The Saudi Lobby s Scheme to Destroy the Iran Deal by By William D. Hartung and Ben Freeman

May 23, 2018 | www.theamericanconservative.com

They gave Obama their tepid approval, then poured millions into a three-year campaign to kill it -- and won.

By William D. Hartung and Ben Freeman • Benjamin Netanyahu's April 30 presentation accusing Iran of lying about its nuclear program was clearly aimed at a Western audience, and at one man in particular -- Donald Trump. Trump was already inclined to violate and exit the multi-party deal to block Iran's path to a nuclear weapon, but Netanyahu's presentation offered a timely addition to the administration's rhetorical arsenal. His PowerPoint performance, filled with misleading assertions and stale information dressed up as new revelations, was referenced by Trump as part of the justification for abandoning the nuclear deal.

While this garnered headlines, another U.S. ally -- Saudi Arabia -- had been orchestrating a quieter but equally effective lobbying and public relations push to dismantle the deal. The Saudis' arguments were used just as much, if not more, by Trump in justifying his decision for the U.S. to walk away from a carefully crafted agreement that even some of his own military leaders had acknowledged was working.

The Saudi lobby's push began long before the Joint Comprehensive Plan of Action (JCPOA) was formally announced on July 14, 2015. In fact, Saudi lobbyists had been working behind the scenes in the U.S. for years to ensure that the Kingdom's concerns were incorporated into any deal Washington would agree to with Iran -- if there was to be a deal at all.

In total, the Christian Science Monitor found that Saudi Arabia spent $11 million dollars on Foreign Agents Registration Act (FARA)-registered firms in 2015, and "much of this spending relates to Iran." They were also assembling former policymakers like Senator Norm Coleman, whose FARA disclosure mentions his work on "limiting Iranian nuclear capability." More recently, Coleman penned an op-ed in The Hill applauding Trump for leaving the deal without disclosing that he was being paid by the Saudi government.

Despite their strong opposition to any deal with Iran, however, many of the Saudis' concerns were ultimately addressed by the JCPOA, specifically their demands that "snapback" provisions be incorporated to quickly reinstitute sanctions if Iran violated the agreement and that inspectors have access to military and other suspect sites. Above all, the Saudis wanted an assurance that the deal would prevent Iran from acquiring a nuclear weapon. The agreement provided this and President Obama guaranteed it. This led to what many had thought impossible -- Saudi Arabia supporting the Iran deal . Obama sealed the grudging support of Saudi Arabia and other Gulf States in a May 2015 meeting at Camp David where he offered "reassurances" that the deal would not jeopardize their security, underscored by a promise to sell them even more weaponry.

But Saudi support for the deal was tepid and ephemeral at best. While publicly supporting it, the Saudis and their lobbyists in D.C. were quietly working to undermine it. Their arguments largely centered on two points: that the funds freed up by the deal would underwrite Iran's continued support for terrorist groups, and that the deal would do nothing to halt Iran's ballistic missile program.

While more than two dozen D.C. lobbying and public relations firms working for Saudi interests have registered under FARA since the U.S. agreed to the Iran deal, none has been more aggressively pushing these anti-Iran talking points than the MSLGroup (which acquired long-serving Saudi client Qorvis Communications in 2014). The MSLGroup, which has been paid more than $6 million dollars by the Saudis just since the U.S. agreed to the Iran deal, has distributed a variety of "informational materials" (formerly called propaganda ) on each of these topics, including a five-page fact sheet on " Iranian Aggression in Yemen ," and a press release on Iran being the " biggest state sponsor of terrorism ," among many others. And of course, the MSLGroup wasn't alone in spreading anti-Iran propaganda on behalf of the Saudi regime. For example, as recently as March 2018, the Glover Park Group distributed information on Iran's "region," and Hogan Lovells distributed " facts about the Houthis and Iran ," with a section on Iran's ballistic missiles.

With these talking points in hand, the Saudis saw an opportunity in the election of the neophyte Donald Trump to up the ante on Iran, and they invested heavily in courting him. Their efforts paid off handsomely as Trump made his first overseas visit to the Kingdom of Saudi Arabia, initially supported them in their spat with Qatar (until he learned the U.S. has a rather large military base in Qatar), kept U.S. military support and bombs flowing for a Saudi-led campaign in Yemen that has cost more than 10,000 civilians their lives, and agreed to sell them billions of dollars in additional U.S. weaponry of all sorts, from more munitions to a costly missile defense system. But Saudi Arabia still wanted more -- they wanted the U.S. out of the Iran deal.

While Saudi Arabia's most unlikely ally in this cause, Israel, took a very outspoken approach to move the president, which culminated in Netanyahu's misleading presentation, the Saudis used their well-financed lobbying machine to disseminate their message into the D.C. bloodstream. Their primary talking points found their way to the president's ears and became routine features of his justification for abandoning the deal. The White House statement justifying leaving the Iran deal is littered with Saudi lobby talking points, including that "The JCPOA failed to deal with the threat of Iran's missile program," and Iran "continues to fund terrorist proxies In Yemen, the regime has escalated the conflict and used the Houthis as a proxy to attack other nations." The president's remarks on the day he announced that the U.S. was abandoning the deal are also rife with language that could easily have been lifted from a Saudi-financed "fact sheet." In fact, Trump's second sentence, "the Iranian regime is the leading state sponsor of terrorism," is nearly verbatim off of an anti-Iran talking point distributed by the MSLGroup.

Why did the Saudis want the U.S. to abandon the Iran deal? A New York Times analysis identified what is probably the primary reason -- a fear that the deal would be the first step towards a U.S. rapprochement with Iran that would undermine the Saudi regime's power in the region in general and its campaign against Iran in particular. "Exiting the deal, with or without a plan, is fine with the Saudis," the Times wrote. "They see the accord as a dangerous distraction from the real problem of confronting Iran around the region -- a problem that Saudi Arabia believes will be solved only by leadership change in Iran."

Former State Department official Jeremy Shapiro underscored this point when he noted that the Saudis and their Gulf allies "believe they are in this existential conflict with the Iranian regime, and nuclear weapons are a small part of that conflict . If the deal opened an avenue for better relations between the United States and Iran, that would be a disaster for the Saudis," he said. "They need to ensure a motivation for American pressure against Iran that will last even after this administration."

One disquieting outcome of the trashing of the Iran nuclear deal is that Saudi Arabia has threatened to acquire a nuclear weapon of its own if the end of the agreement leads Iran to revive its program. This is not the first time Saudi leaders have made such threats. Just after Trump announced the U.S. would be leaving the deal, the Saudi foreign minister said that if Iran now builds a nuclear weapon his country "will do everything we can" to follow suit. So on top of its implications for increased conventional conflict in the region, the end of U.S. participation in the Iran deal could spark a nuclear arms race in the Middle East -- an outcome that would have been far less likely if U.S. participation in the Iran deal had been maintained.

The potential for a Mideast nuclear arms race is yet another example of the disastrous consequences of Saudi Crown Prince Mohammed bin Salman's reckless foreign policy, which includes everything from his regime's brutal, counterproductive intervention in Yemen, to the Saudi-led effort to impose a blockade on Qatar, to its promotion of regime change in Iran -- preferably carried out by the United States.

In the wake of the U.S. pullout from the Iran deal, we can expect the Saudi lobby, working in concert with administration allies ranging from Jared Kushner to newly appointed national security advisor John Bolton, to double down in its efforts to promote these ill-advised, dangerous directions for U.S. foreign policy in the region. Countering Riyadh's blatant influence peddling should be part of an expanded effort to distance the United States from its increasingly risky, counterproductive relationship with Saudi Arabia. If Mohammed bin Salman's aggressive policies -- and Saudi advocacy for them in Washington -- continue, Riyadh is one "friend" the United States should consider doing without.

William D. Hartung is the director of the Arms and Security Project at the Center for International Policy, and Ben Freeman directs the Center's Foreign Influence Transparency Initiative.

[May 23, 2018] https://www.haaretz.com/us-news/.premium-qatari-fm-says-building-good-relations-with-visiting-u-s-jews-1.5785713

May 23, 2018 | www.haaretz.com

Qatar's foreign minister reacted publicly on Thursday to the recent wave of visits by leaders of U.S. Jewish organizations to his country at the invitation of the ruling Emir.


It seems the Qataris have figured out the best way to influence American foreign policy is to appeal to the real power brokers in the U.S..

The Sinister Reason Behind Qatar's Wooing of the Jews
https://www.haaretz.com/opinion/.premium-the-sinister-reason-behind-qatar-s-wooing-of-the-jews-1.5804517

Doha wants to influence D.C. elites. But rather than targeting Congress or the media, they're lavishly, and disproportionately, focusing on right-wing, pro-Israel Jews


One demand which the Qataris immediately acceded to was the suppression of the al Jezeera expose on the jewish lobby in American politics.

Israel Lobby Pressures Qatar to Kill Al Jazeera Documentary
https://www.richardsilverstein.com/2018/02/08/israel-lobby-pressures-qatar-kill-al-jazeera-documentary/

Two extraordinary events have come together to place Al Jazeera in a vise-like squeeze that may result in the death of a major TV documentary expose about the power and operations of the Israel Lobby in the U.S. The same investigative team ... created the remarkable four-part film, The Lobby, about the UK Israel Lobby.

and
The new documentary follows a similar script. Al Jazeera recruited someone to infiltrate various Lobby organizations based in Washington...

and
...Haaretz published a story acknowledging that almost all of these American Jewish supplicants came to Qatar for one very special reason (there may have been others, but this one was key). They wanted the Al Jazeera documentary killed. They knew if it was aired it would make them look as shabby, venal, and crude as the UK series did.

Posted by: pantaraxia | May 22, 2018 11:03:42 AM | 6

[May 20, 2018] Saudi Crown Prince Absent from Cadets Graduation Ceremony

May 20, 2018 | en.farsnews.com

The Saudi defense ministry announced in a statement on Sunday that Riyadh ruler Faisal bin Bandar bin Abdolaziz has attended the ceremony instead of bin Salman.

The statement declined to comment on the reason of bin Salman's absence while naturally the defense minister should participate in such ceremonies.

[May 20, 2018] Daily Arab Intel Says Saudi Crown Prince Likely Killed in Coup

He didn't appear for any of the Ramadan events either, which is very odd."
Notable quotes:
"... A growing number of videos surfaced the media at the time displaying that a heavy gunfire erupted around King Salman bin Abdulaziz Al Saud's palace in the capital, Riyadh. ..."
"... Witnesses and residents of the neighborhoods near the palace said a coup was underway, adding that the soldiers attacking the palace were guided by footage and intel they were receiving from a drone flying over the palace. ..."
"... Saudi opposition members claimed that "a senior ground force officer has led a raid on the palace to kill the king and the crown prince". ..."
"... Saudi Arabia, the world's top oil exporter, has witnessed a series of radical political changes over the past year as Mohammed bin Salman ousted his cousin as crown prince and jailed well-known princes in an anti-corruption purge. ..."
"... Moreover, bin Salman oversees social and economic reforms that have been censured by several powerful Wahhabi clerics. ..."
"... Notably, bin Salman made no media appearance during the April 28 visit of the newly-appointed US State Secretary Mike Pompeo to Riyadh, his first foreign trip as the top US diplomat. ..."
"... During his stay in Riyadh, Saudi media outlets published images of Pompeo's meetings with King Salman and Foreign Minister Adel al-Jubeir. ..."
May 20, 2018 | en.reseauinternational.net

According to the Persian-language newspaper, Keyhan, a secret service report sent to the senior officials of an unnamed Arab state disclosed that bin Salman has been hit by two bullets during the April 21 attack on his palace, adding that he might well be dead as he has never appeared in the public ever since.

Heavy gunfire was heard near the Saudi King's palace in Riyadh Saudi Arabia on April 21, while King Salman was taken to a US bunker at an airbase in the city.

A growing number of videos surfaced the media at the time displaying that a heavy gunfire erupted around King Salman bin Abdulaziz Al Saud's palace in the capital, Riyadh.

Reports said the king and his son, Crown Prince Mohammed bin Salman, were evacuated to a bunker at an airbase in the city that is under the protection of the US troops.

While Saudi officials and media were quiet over the incident, there were contradicting reports over the incident. Witnesses and residents of the neighborhoods near the palace said a coup was underway, adding that the soldiers attacking the palace were guided by footage and intel they were receiving from a drone flying over the palace.

Saudi opposition members claimed that "a senior ground force officer has led a raid on the palace to kill the king and the crown prince".

Videos also showed that a growing number of armored vehicles were deployed around the palace. 'Bin Salman's special guard' then took charge of security in the capital. Riyadh's sky was then closed to all civil and military flights as military helicopters from 'Bin Salman's special guard' were flying over the palace.

Bin Salman was a man who previously often appeared before the media but his 27-day absence since the gunfire in Riyadh has raised questions about his health.

Saudi Arabia, the world's top oil exporter, has witnessed a series of radical political changes over the past year as Mohammed bin Salman ousted his cousin as crown prince and jailed well-known princes in an anti-corruption purge.

Moreover, bin Salman oversees social and economic reforms that have been censured by several powerful Wahhabi clerics.

Saudi Arabia is also embroiled in a long running conflict in its Southern neighbor Yemen, dubbed by the United Nations as the world's worst humanitarian crisis.

Notably, bin Salman made no media appearance during the April 28 visit of the newly-appointed US State Secretary Mike Pompeo to Riyadh, his first foreign trip as the top US diplomat.

During his stay in Riyadh, Saudi media outlets published images of Pompeo's meetings with King Salman and Foreign Minister Adel al-Jubeir.

This is while the state-run outlets used to publish images of meetings in Riyadh between bin Salman and former US secretary of state Rex Tillerson.

A few days after the April 21 incident, Saudi media published footage and images of bin Salman meeting several Saudi and foreign officials. But the date of the meetings could not be verified, so the release of the videos could be aimed at dispelling rumors about bin Salman's conditions.

It is not clear if bin Salman's disappearance is due to reasons such as him feeling threatened or being injured in the incident.

http://en.farsnews.com/newstext.aspx?nn=13970227000578

[May 20, 2018] Saudi political instability can further raise oil prices

May 17, 2018 | www.dailysabah.com
It has been almost a month since Saudi Crown Prince Mohamed bin Salman made a public appearance, triggering questions whether the April 21 incidents at the Royal Palace had a role in his disappearance.

Several reports claimed that the security incident in April, what Saudi officials said was a result of a recreational drone flying near the king's palace in Riyadh, was indeed a palace coup attempt. Saudi Prince Salman was allegedly injured during the attempt, according to reports, mostly coming from Iran.

As a man who enjoys the public and media's eye, Salman's absence caught attention especially after he was not seen on camera during U.S. Secretary of State Mike Pompeo's first visit to Riyadh in late April.

The 32-year-old leader ousted his older cousin as crown prince last summer in a palace coup and then jailed senior royals as part of an anti-corruption sweep. Prominent clerics have also been detained in an apparent bid to silence dissent.

Those moves have helped Prince Mohammed consolidate his position in a country where power had been shared among senior princes for decades and religious figures exercised significant influence on policy.

But they have also fueled speculation about a possible backlash against the crown prince, who remains popular with Saudi Arabia's burgeoning youth population

[May 15, 2018] Oil Retreats from 3-Year High - Prices - Oil Price Community

When fear is gone, greed takes its place. Reason NEVER prevails!
May 15, 2018 | community.oilprice.com

William Edwards

(edited) Report post

On ‎5‎/‎14‎/‎2018 at 6:05 PM, Carlsbad said: So I guess the question is, then, how do we see the oil market, fundamentally, in that timeframe? Doesn't look great to me, nor does it look disastrous. Prices are too high right now, but demand is still strong and will be for some time to come. U.S. shale doesn't always follow fundamentals, though. They seem to binge and purge, depending on their level of maturity.

Although it appears that we are basically on the same page, I sense one significant difference in our understanding of the fundamentals, Carl. When I apply sound logic to my review of past history, I conclude that the price of oil is not a function of supply/demand levels. In other words, high demand does not cause high prices and plentiful supply does not cause low prices. Oversupply and undersupply are actually impossible situations. Consumption draws out whatever supplies that it needs at whatever price is in vogue at that moment. Supply always matches consumption at every price level. If you question this assessment, I can show you historical data that refute whichever side of the supposed supply/demand-caused price moves that you suggest.

Moving on, I agree with your assessment that prices are too high now for a smoothly sustainable industry. But the time for the system to reach equilibrium, once the price is established, is much longer than it takes for the system to make a price change. Therefore demand is forever trying to match the price level, as is supply, but the price changes too rapidly for either to catch up. Distressing but true.

Turning to shale oil, Mike Shellman has spoken for years about the underlying problem of the shale industry. He astutely points out the disconnect between the industry's willingness to borrow and drill, concomitant with no thought of the consequences of their combined output, allowing the industry to suffer the consequences of desperation marketing. So the roller coaster price/production profile will likely continue. Binge and purge it shall be!

William Edwards

On ‎5‎/‎14‎/‎2018 at 7:42 PM, Tom Kirkman said: Related to your question, here is a link to Art Berman's recent presentation.

While I don't expect others to agree with Art's conclusions (he is directly flying in the face of mainstream opinion), his presentation raises numerous points that are worth mulling over and at least considering .

The pdf is 15 MB:

http://www.artberman.com/wp-content/uploads/TEC-Presentation-May-2018.pdf

Thanks, Tom. I went through Art's presentation, rather quickly I must admit, and I find agreement with most of his presentation. He was over my head on some of it so my comments exclude that info.

I should emphasize my strong agreement with his assessment regarding the swing producer. His views match mine and we both can vigorously defend the validity of that assessment. The US reserves are much too small for us to ever be considered in the swing producer role. On an instantaneous basis we can force pricing actions that are basically unsound for the industry, but we cannot sustain the supply impact that would be necessary to play that game very long.

His presentation is well worth the time required to understand his points.

Mike Shellman

Thank you once again, William. I have a long standing "debate" with an analyst who is very into modeling shale oil growth. His driving factor is price. Our arguments stem around the fact that the US shale oil phenomena is based entirely on the availability of low interest capital and has little to do with product price. We more or less already have proof of that, yes? A portion of the total HZ rig count in America is controlled by loan covenants and lenders; a much smaller portion driven by "free" cash flow due to higher prices. If the price falls, rather when it falls, we'll see less growth but there will still be growth; really its the FED that's has control of the US LTO industry, not OPEC.

Having said that, I do believe OPEC, Russia and Non-OPEC producers know exactly how shale oil growth is funded in America, what it costs, how unprofitable it is, and understand rising GOR, decline and depletion very well. They are not stupid about oil and gas production, in spite of what folks might think in Midland. There is a price level that is good for the US shale oil industry (this may be it!) that will drive it plum off the cliff in 3-5 years and that is precisely the plan. We're always in a big damn hurry in America...in this case to deplete our remaining hydrocarbon resources. The buzzards are circling.

A last word about Art's presentation in Dallas; he has been getting hammered for his comments by the shale industry and by the MSM because most, in their rush to attack the messenger, did not even read the message. The PDP, PUD reserves he quoted that might leave the Permian HZ play with only about 7-8 more years of life were proven reserves estimated by shale oil companies themselves and reported to the SEC. He did not make that data up; they did.

Why do folks hate Art Berman's message so much?

Fear.

Mike Shellman

Eric, with respect to my friend, Art Berman, and Yahoo finance, the possibility that 27% of shale oil companies in America made money in 2017 is a stretch to me. In my opinion, there was a lot of non-GAPP, funky accounting that created this illusion based on asset sales and enormous, one time tax charges. We have to rely on SEC data, of course, but personally I don't think anybody made money in 2017, in spite of lower costs, higher productivity, and production cuts from OPEC. More importantly, at least to me, they did not make enough money to put a dent in debt (Devon reduced debt, EOG added debt).

The shale oil industry, even the mighty Permian, is sustainable only as long as the money holds out. Or until they saturate core, sweet spots and have to start drilling the really lousy rock, then things will go from bad to worse. In the mean time the shale industry is facing some hefty debt maturities coming up in a few years, with interest rates going up.

Here is a statistic that will knock your socks off, about 75% of all unconventional HZ wells drilled in the Permian, since the beginning, now make less than 40 BOPD (IHS, shaleprofile.com); the answer to your question might lie there.

But pat yourself on the back; you are on the right track. Question everything. Dig out the facts. Do your own math. This might be interesting to you also: https://www.scribd.com/document/370742449/Shale-Reality-Check-Drilling-into-The-U-S-Government-s-Rosy-Projections-for-Shale-Gas-Tight-Oil-Production-Through-2050#fullscreen&from_embed

[May 13, 2018] Possibility of a new war in Middle East the shoot the oil prices to $200 frighten Germany

Notable quotes:
"... Several years ago Putin made a speech at the UN in favor of upholding International Law I thought at the time this "diplomatic statesmanship" was going to be Putin's way of bring Russia back into equal power with the Europeans and the US. Some have wondered and been asking about Putin not being as aggressive as he could be in defending Syria and Iran. Putin's holding off on tough talk/action could be amassing more power in the end. Putin comes off as the voice of sanity..exactly what the Europeans want to hear and see. ..."
May 13, 2018 | www.unz.com

renfro , May 12, 2018 at 6:05 am GMT

Several years ago Putin made a speech at the UN in favor of upholding International Law I thought at the time this "diplomatic statesmanship" was going to be Putin's way of bring Russia back into equal power with the Europeans and the US. Some have wondered and been asking about Putin not being as aggressive as he could be in defending Syria and Iran. Putin's holding off on tough talk/action could be amassing more power in the end. Putin comes off as the voice of sanity..exactly what the Europeans want to hear and see.

As Europe turns away from the US they turn to Putin.

If anyone remembers all the Jew rags making fun of "old Europe" during the Iraq war run up and urging that the US break with them as outdated relics no longer needed in the new modern age -- this is what it was all about -- separating the US from its traditional allies who were not as subservient to Israel as the US. So .now we are down to the Jew plan Europe and sanity vr the US Orange Clown and his allies of midget Nazi Israel, Saudi and the UAE.

http://theduran.com/germany-begs-russia-to-pick-up-the-torch-that-us-has-dropped/

Germany begs Russia to pick up the torch that US has dropped

"Germany's Foreign Minister, Heiko Maas, who has a history of expressing anti Russian rhetoric relevant to Russia's presence in Syria as well as an alleged cyber attack on the German Foreign Ministry which Maas says that he 'has to assume stemmed from Russia', has turned an about face. He has traveled, for the first time, to Moscow to discuss international diplomacy, the Iran nuclear deal, peace talks on Ukraine, and Syria.

Maas met with his Russian counterpart, Sergei Lavrov, where he encouraged Russia to leverage its influence with Iran to help spur the Middle Eastern state in remaining committed to the nuclear deal, which Trump abandoned earlier in the week.

Germany's Foreign Minister, Heiko Maas, who has a history of expressing anti Russian rhetoric relevant to Russia's presence in Syria as well as an alleged cyber attack on the German Foreign Ministry which Maas says that he 'has to assume stemmed from Russia', has turned an about face. He has traveled, for the first time, to Moscow to discuss international diplomacy, the Iran nuclear deal, peace talks on Ukraine, and Syria.

Maas met with his Russian counterpart, Sergei Lavrov, where he encouraged Russia to leverage its influence with Iran to help spur the Middle Eastern state in remaining committed to the nuclear deal, which Trump abandoned earlier in the week.

Maas then declared that Germany was interested in bringing back the peace talks on the Ukraine, together with other European partners. Maas also pointed out that the Syrian conflict can't be settled without Russia, before contributing a wreath to the tomb of the unknown soldier, which is a dedication to Russian soliders who died fighting the Germans in WW2.

Deutsche Welle reports:

Germany's top diplomat Heiko Maas and his Russian counterpart Sergey Lavrov both called for the nuclear deal with Iran to be upheld on Thursday, during Maas' first official visit to Russia. The appeal marks a rare moment of unity between Moscow and Berlin just days after US walked out on the 2015 accord.

In Moscow, Maas urged Russia to influence Tehran and make it stick to the deal, which aims to limit Iran's alleged pursuit of nuclear weapons. The German foreign minister also said he was seeking details from the US on its plans for future sanctions against Iran
US President Donald Trump has shrugged off pressure from allies to keep the deal in place and called the accord "defective at its core." However, leaders of the UK, France, and Germany all contacted Iranian President Hasan Rouhani in the attempt to salvage the accord.

Germany's Chancellor Angela Merkel called Rouhani on Thursday to reaffirm Germany's commitment to the deal "as long as Iran continues to fulfil its obligations," said Merkel's spokesman Steffen Seibert. Merkel also said she was ready to negotiate about Iran's ballistic missiles and involvement in Syria and Yemen.

Angela Merkel is also set to visit Russia next week.

Visiting Moscow on Thursday, Germany's top diplomat Maas suggested reviving the peace talks between Germany, France, Ukraine and Russia on the conflict in eastern Ukraine. Lavrov responded by saying Russia was "ready to consider" this offer.

Maas also called for "honest dialogue" with Moscow and for Russia to be included in global diplomacy, despite its differences with Berlin. Maas admitted that the conflict in Syria "cannot be solved without Russia."

The German diplomat also laid a wreath at the Tomb of the Unknown Soldier in Moscow, which is dedicated to the Soviet soldiers killed during World War II.

Also in a bid to get Russia to assume a leadership position relative to preserving the nuclear deal, and by extension, the European economy, Merkel got on the phone with Russian President Vladimir Putin, where he mutually voiced his concern over Trump's action, and where Merkel also came forward about the situation in Syria.

TASS reports:

BERLIN, May 11. /TASS/. Federal Minister for Economic Affairs and Energy Peter Altmaier has confirmed that he will visit Moscow at the beginning of the next week, he said in an interview with German radio station Deutschlandfunk released on Friday.

"I will follow my colleague [German Foreign Minister Heiko] Maas, who attended negotiations in Moscow yesterday. I will be there on Monday and Tuesday, and Chancellor [Angela Merkel will visit Sochi -- TASS] during the week," Altmaier said.

continued,,,,,,

[May 03, 2018] Can $80 Oil Be Justified by Tsvetana Paraskova

May 03, 2018 | oilprice.com

Some analysts do expect oil to reach $80 in the coming months.

Francisco Blanch, head of global commodities research at Bank of America Merrill Lynch, told Bloomberg Daybreak: Americas that he sees oil hitting that level in this quarter, due to some bottlenecks emerging in the Permian that could slow down the growth pace.

Goldman Sachs, for its part, sees oil prices at $80 by the fourth quarter of this year due to expectations that global oil demand growth will stay high this year, and that China's demand growth may be even higher than currently estimated.

[Apr 18, 2018] Russia retaliate Our Response to US Sanctions Will Be Precise And Painful

Apr 18, 2018 | community.oilprice.com

luckysoul777

Report post " What exactly do we get from Russian that we couldn't do without? " <== The willingness to ally with the U.S. vs the Chinese.

There is no denial of what Russia has done in the last few years, and it's wrong! However, what is entirely missing from the western media is the U.S. ambassador to the USSR, Jack Matlock, and George Kennan have been warning the American political elites since the 90's, prior to Putin was even known and in politics, that the American foreign policy is steering us straight into confrontations with Russia! It's not if but when it will happen REGARDLESS OF who is in Kremlin! Nobody cared to heed because we were indulging ourselves as the sole superpower in the world.

Neither has the American media reported even our old friend, Gorbachev, is praising Putin and has harsh words for the U.S. In a nutshell, the Russians don't like to be treated as a nobody country, ie. with decisions of world affairs already made and shoved at their face, and they can either put up or shut up! However, that is exactly how Washington has conducted business with Russia until the crisis in Ukraine in 2014. Would the American public put up with a revolution led by a Russian politician in Mexico City or Ottawa, even though it's Mexican or Canadians self-determination? Then what makes us think the Russians would tolerate John McCain leading an anti-Russian revolution in Kiev, even if it's Ukrainian self-determination? Don't forget the U.S. directly invaded Grenada when they were exercising their self-determination to ally with the USSR!

This is not about defending Russia. The Russians can take care of that themselves. Rather, can the U.S. afford to have Russia and China solidify their alliance again? It's already happening unless we can adopt a sensible Russian policy to turn it around. Who would you rather ally with? Someone (like the U.S.) who expects you to be a subordinate vs another (like China) who is willing to treat you as an equal?

One can certainly argue how it is possible to ally with a country like Russia, who sponsors dictators, meddles in our elections and tramples on other nation's self-determination. If you are willing to be honest with yourself, just Google it. There is not one thing we accuse of the Russians that our politicians are not doing it overseas, by MULTIPLE magnitude! The biggest gripe the Russians have toward the U.S. is "are you preaching democracy or hypocrisy?" Yes, one sin doesn't justify another, but why our politicians can't uphold this principle when they are committing treacheries overseas?

[Apr 13, 2018] Live updates Syria under military attack on Trump's orders

Notable quotes:
"... People think this is about Syria, it is not. It's about oil price. Watch on Monday and the days following oil price will rocket up, and Iran, Russia, US will all be celebrating privately. The Chinese stock market will fall because oil will cost them more. ..."
Apr 13, 2018 | www.presstv.com

Syrian state TV said that the attack hit the country's army depots in the area of Homs, Reuters reported.

A Reuters witness said that at least six loud explosions were heard in Damascus with smoke rising over the Syrian capital where a second witness said the Barzah district, the location of a major Syrian scientific research center, was also hit in the strikes.

Meanwhile, Syrian state television reported that "Syrian air defense blocks American, British, French aggression on Syria." It added that 13 missiles were shot down.

The US has been threatening Damascus with military action since April 7, when a suspected chemical attack on the Syrian town of Douma, Eastern Ghouta, reportedly killed 60 people and injured hundreds more. The Syrian government has already strongly denied using chemical munitions in the flashpoint town.

Joe ,

People think this is about Syria, it is not. It's about oil price. Watch on Monday and the days following oil price will rocket up, and Iran, Russia, US will all be celebrating privately. The Chinese stock market will fall because oil will cost them more.

[Mar 29, 2018] "The objectives of these US actions as the labelling of China as a "strategic competitor" suggests, is it to halt China's technological progress altogether

China's rise has made the US fear the loss of its role as the sole superpower. And the neoliberal elite fights back. That replays on a new level rift of the USSR and China in the past.
Mar 29, 2018 | www.ft.com

Martin Wolf : How China can avoid a trade war with the US

... the plan to impose 25 per cent tariffs on $60bn of (as yet, unspecified) Chinese exports to the US shows the aggression of Mr Trump's trade agenda. The proposed tariffs are just one of several actions aimed at China's technology-related policies. These include a case against China at the World Trade Organization and a plan to impose new restrictions on its investments in US technology companies.

The objectives of these US actions are unclear. Is it merely to halt alleged misbehaviour, such as forced transfers -- or outright theft -- of intellectual property? Or, as the labelling of China as a "strategic competitor" suggests, is it to halt China's technological progress altogether -- an aim that is unachievable and certainly non-negotiable. Mr Trump also emphasised the need for China to slash its US bilateral trade surplus by $100bn. Indeed, his rhetoric implies that trade should balance with each partner. This aim is, once again, neither achievable nor negotiable.

...A still more pessimistic view is that trade discussions will break down in a cycle of retaliation, perhaps as part of broader hostilities.

[Feb 20, 2018] For the life of me I cannot figure why Americans want a war/conflict with Russia

Highly recommended!
This post summaries several "alternative" views that many suspect, but can't express as clearly as here.
Feb 20, 2018 | www.moonofalabama.org

Palloy | Feb 20, 2018 8:52:02 PM | 34

@4 "For the life of me I cannot figure why Americans want a war/conflict with Russia."

Ever since US Crude Oil peaked its production in 1970, the US has known that at some point the oil majors would have their profitability damaged, "assets" downgraded, and borrowing capacity destroyed. At this point their shares would become worthless and they would become bankrupt. The contagion from this would spread to transport businesses, plastics manufacture, herbicides and pesticide production and a total collapse of Industrial Civilisation.

In anticipation of increasing Crude Oil imports, Nixon stopped the convertibility of Dollars into Gold, thus making the Dollar entirely fiat, allowing them to print as much of the currency as they needed.

They also began a system of obscuring oil production data, involving the DoE's EIA and the OECD's IEA, by inventing an ever-increasing category of Undiscovered Oilfields in their predictions, and combining Crude Oil and Condensate (from gas fields) into one category (C+C) as if they were the same thing. As well the support of the ethanol-from-corn industry began, even though it was uneconomic. The Global Warming problem had to be debunked, despite its sound scientific basis. Energy-intensive manufacturing work was off-shored to cheap labour+energy countries, and Just-in-Time delivery systems were honed.

In 2004 the price of Crude Oil rose from $28 /barrel up to $143 /b in mid-2008. This demonstrated that there is a limit to how much business can pay for oil (around $100 /b). Fracking became marginally economic at these prices, but the frackers never made a profit as over-production meant prices fell to about $60 /b. The Government encourages this destructive industry despite the fact it doesn't make any money, because the alternative is the end of Industrial Civilisation.

Eventually though, there must come a time when there is not enough oil to power all the cars and trucks, bulldozers, farm tractors, airplanes and ships, as well as manufacture all the wind turbines and solar panels and electric vehicles, as well as the upgraded transmission grid. At that point, the game will be up, and it will be time for WW3. So we need to line up some really big enemies, and develop lots of reasons to hate them.

Thus you see the demonisation of Russia, China, Iran and Venezuela for reasons that don't make sense from a normal perspective.

[Feb 16, 2018] The big news is the Russian offer to the Saudi authorities to invest directly in the upcoming Aramco initial public offering

Feb 16, 2018 | consortiumnews.com

Mild-ly -Facetious , February 16, 2018 at 5:42 pm

F Y I :> Putin prefers Aramco to Trump's sword dance

Hardly 10 months after honoring the visiting US president, the Saudis are open to a Russian-Chinese consortium investing in the upcoming Aramco IPO

By M.K. BHADRAKUMAR
FEBRUARY 16, 2018

[extract]

In the slideshow that is Middle Eastern politics, the series of still images seldom add up to make an enduring narrative. And the probability is high that when an indelible image appears, it might go unnoticed -- such as Russia and Saudi Arabia wrapping up huge energy deals on Wednesday underscoring a new narrative in regional and international security.

The ebb and flow of events in Syria -- Turkey's campaign in Afrin and its threat to administer an "Ottoman slap" to the United States, and the shooting down of an Israeli F-16 jet -- hogged the attention. But something of far greater importance was unfolding in Riyadh, as Saudi and Russian officials met to seal major deals marking a historic challenge to the US dominance in the Persian Gulf region.

The big news is the Russian offer to the Saudi authorities to invest directly in the upcoming Aramco initial public offering -- and the Saudis acknowledging the offer. Even bigger news, surely, is that Moscow is putting together a Russian-Chinese consortium of joint investment funds plus several major Russian banks to be part of the Aramco IPO.

Chinese state oil companies were interested in becoming cornerstone investors in the IPO, but the participation of a Russia-China joint investment fund takes matters to an entirely different realm. Clearly, the Chinese side is willing to hand over tens of billions of dollars.

Yet the Aramco IPO was a prime motive for US President Donald Trump to choose Saudi Arabia for his first foreign trip. The Saudi hosts extended the ultimate honor to Trump -- a ceremonial sword dance outside the Murabba Palace in Riyadh. Hardly 10 months later, they are open to a Russian-Chinese consortium investing in the Aramco IPO.

Riyadh plans to sell 5% of Saudi Aramco in what is billed as the largest IPO in world history. In the Saudi estimation, Aramco is worth US$2 trillion; a 5% stake sale could fetch as much as $100 billion. The IPO is a crucial segment of Vision 2030, Saudi Crown Prince Mohammad bin Salman's ambitious plan to diversify the kingdom's economy.

MORE : http://www.atimes.com/article/putin-prefers-aramco-trumps-sword-dance/

[Feb 03, 2018] JP Morgan Oil Could Hit $78 Within Months

Highly recommended!
Feb 03, 2018 | oilprice.com

J.P. Morgan beat all other investment banks in their forecasts for the price of Brent crude this year, setting its projection at US$70 a barrel. To compare, the second most bullish forecast on Brent is from Bank of America at US$64 a barrel, while Goldman is even more cautious and has not yet upgraded its Brent price forecast from its US$62 a barrel prediction.

J.P. Morgan's reasoning is the same as the other banks': the global economy will continue to expand, which will stimulate growth in oil demand and healthy prices. This dynamic will also drive WTI prices higher, with the average for the year seen at US$65.63 a barrel by J.P. Morgan's oil analysts.

Despite the upbeat mood, the investment bank's analysts do recognize the danger of growing U.S. and other non-OPEC production. So, while their price forecasts are for the average level of Brent and WTI this year, the bank's senior oil analyst Abhishek Deshpande noted in an interview with CNBC that "This 2018 is going to be a year of two halves. The first half is going to be a ... half of demand, and the second half is more about supply, which is coming back in reaction to the higher oil prices." The first half of the year will be so strong, Deshpande believes, that Brent could hit US$78 a barrel in the first or the second quarter. Yet in the second half of the year, drillers will increase their production in response to the higher prices, and this higher production may weigh on the benchmarks.

There is also something else that may occur before too long: a price correction resulting from the record-high bullish positions on the six most popular oil-related futures contracts. In his latest column , Reuters' John Kemp warned that despite the already record number of long bets on these six contracts, money managers are continuing to place more, with the number of net long bets on Brent alone rising by an equivalent of 14 million barrels in the week to January 23. In total, net long bets on the six contracts swelled by 44 million barrels to 1.484 billion barrels. More Top Reads From Oilprice.com:

Mamdouh G Salameh on January 30 2018 said:
The positive oil fundamentals of the global oil market can easily support an oil price ranging from $70-$75 a barrel in 2018. If similar positive market conditions continue into 2019, then we can see oil prices rising to $80/barrel or even higher in 2019 and hitting $100 or higher by 2020. A $70/barrel will be the for for Brent oil prices in 2018.

Prices will also be supported by a fast re-balancing of the market and also by an understanding between Saudi Arabia and Russia to maintain the OPEC/non-OPEC production cut agreement well beyond 2018 with some adjustments to reflect changing market conditions.

On the supply side, the global oil market will ignore exaggerated claims by the EIA and IEA about US shale oil production averaging 10.3 million barrels a day (mbd) in 2018 and rising to 11 mbd by 2019. My projection for US shale oil production in 2018 is 9.25 mbd made up of 5.10 mbd of shale oil and 4.15 mbd of conventional oil. My projection allows for a 5% depletion in US conventional wells.

The oil price has to rise beyond $100/barrel before one can talk about a price correction. I have always expressed the view that a fair price is $100-$130/barrel. Such a price will provide a great impetus to the global economy.

Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London

Citizen Oil on January 30 2018 said:
The daily oil prediction nonsense. Wasn't it just a few months ago the daily nonsense was "lower for longer" LOL Haven't heard that one for a while. Predictions we'd be in a $ 40 to $ 50 oil environment for years if not decades . Oh yeah, then we'd be at $ 10 when everyone drives an EV.

[Feb 02, 2018] Why Is The Shale Industry Still Not Profitable by Nick Cunningham

Looses of shale companies which hedged oil production for 2018 at 2017 prices can be tremendous.
Notable quotes:
"... Al Rajhi Capital notes that more recently, shale companies ended up locking in hedges at prices that could end up being quite a bit lower than the market price, which could limit their upside exposure should prices continue to rise. ..."
Feb 02, 2018 | oilprice.com
too much hype surrounding U.S. shale from the Saudi oil minister last week, a new report finds that shale drilling is still largely not profitable. Not only that, but costs are on the rise and drillers are pursuing "irrational production."

Riyadh-based Al Rajhi Capital dug into the financials of a long list of U.S. shale companies, and found that "despite rising prices most firms under our study are still in losses with no signs of improvement." The average return on asset for U.S. shale companies "is still a measly 0.8 percent," the financial services company wrote in its report.

Moreover, the widely-publicized efficiency gains could be overstated, at least according to Al Rajhi Capital. The firm said that in the third quarter of 2017, the "average operating cost per barrel has broadly remained the same without any efficiency gains." Not only that, but the cost of producing a barrel of oil, after factoring in the cost of spending and higher debt levels, has actually been rising quite a bit.

Shale companies often tout their rock-bottom breakeven prices, and they often use a narrowly defined metric that only includes the cost of drilling and production, leaving out all other costs. But because there are a lot of other expenses, only focusing on operating costs can be a bit misleading.

The Al Rajhi Capital report concludes that operating costs have indeed edged down over the past several years. However, a broader measure of the "cash required per barrel," which includes other costs such as depreciation, interest expense, tax expense, and spending on drilling and exploration, reveals a more damning picture. Al Rajhi finds that this "cash required per barrel" metric has been rising for several consecutive quarters, hitting an average $64 per barrel in the third quarter of 2017. That was a period of time in which WTI traded much lower, which essentially means that the average shale player was not profitable. Not everyone is posting poor figures. Diamondback Energy and Continental Resources had breakeven prices at about $52 and $37 per barrel in the third quarter, respectively, according to the Al Rajhi report. Parsley Energy, on the other hand, saw its "cash required per barrel" price rise to nearly $100 per barrel in the third quarter.

A long list of shale companies have promised a more cautious approach this year, with an emphasis on profits. It remains to be seen if that will happen, especially given the recent run up in prices. But Al Rajhi questions whether spending cuts will even result in a better financial position. "Even when capex declines, we are unlikely to see any sustained drop in cash flow required per barrel due to the nature of shale production and rising interest expenses," the Al Rajhi report concluded. In other words, cutting spending only leads to lower production, and the resulting decline in revenues will offset the benefit of lower spending. All the while, interest payments need to be made, which could be on the rise if debt levels are climbing.

One factor that has worked against some shale drillers is that the advantage of hedging future production has all but disappeared. In FY15 and FY16, the companies surveyed realized revenue gains on the order of $15 and $9 per barrel, respectively, by locking in future production at higher prices than what ended up prevailing in the market. But, that advantage has vanished. In the third quarter of 2017, the same companies only earned an extra $1 per barrel on average by hedging. Part of the reason for that is rising oil prices, as well as a flattening of the futures curve. Indeed, recently WTI and Brent have showed a strong trend toward backwardation -- in which longer-dated prices trade lower than near-term. That makes it much less attractive to lock in future production.

Al Rajhi Capital notes that more recently, shale companies ended up locking in hedges at prices that could end up being quite a bit lower than the market price, which could limit their upside exposure should prices continue to rise.

In short, the report needs to be offered as a retort against aggressive forecasts for shale production growth. Drilling is clearly on the rise and U.S. oil production is expected to increase for the foreseeable future. But the lack of profitability remains a significant problem for the shale industry.

[Jan 30, 2018] Do you really think The USA shale producers are going to increase production by one million barrels with primarily condensate?

Notable quotes:
"... Blending it will become a problem: http://www.argusmedia.com/pages/NewsBody.aspx?id=1254610&menu=yes ..."
"... Do you really think we are going to increase production by one million barrels with primarily condensate? On second thought, if they could get to Canada, they could make a killing on condensate: http://business.financialpost.com/commodities/energy/encana-pivots-to-78-per-barrel-condensates-from-prolific-montney-basin/amp ..."
"... Higher initial GOR and higher gravity liquids leads to higher EURs; the best EF wells are generally in the very volatile, liquids rich gas leg in Dewitt County, for instance. Higher gravity stuff also can mean lower prices at the WH and market difficulties. ..."
"... I suggest Berman's twitter feed for some good poop on oil and condensate quality. Light tight oil IS getting lighter and it is a very serious problem with end users. We will never become hydrocarbon independent in America simply because of the quality of the stuff we now produce. ..."
"... So what's the plan in America? Send LTO to Corpus and ship it to China or anyone else that will take the stuff. We can't use anymore of it in America. Instead of developing heavy markets to blend LTO with, so America can use America's oil and not export it, we have developed this stupid "isolationistic, energy dominance" plan that is shortsighted and pissing the rest of the oil producing world off. ..."
"... Average Eagle Ford produced now, is probably 40 to 45. I am constantly looking at completion reports, and not just re-quoting some expert. Yes, mine at 33, would be exceptional, and I didn't mean to confuse. Over 45 causes problems. Misinformation is caused by listening to experts, and not doing your own research with primary data. ..."
"... If all of the Eagle Ford or tight oil was at an API gravity of 33, we probably would not be importing as much oil. Nor, would we ever have had the huge inventory build. ..."
"... Over 45, you have a smaller number of options. There are a few refineries in W Texas set up for this, there are a few more refineries set up, but they are small in number and production, and are hard to transport to. Blending becomes difficult, per my post. Bigger option is to export it. ..."
Jan 30, 2018 | peakoilbarrel.com

Guym says: 01/28/2018 at 7:39 am

https://oilprice.com/Energy/Crude-Oil/US-Condensate-Output-Set-To-Increase-In-2018.html

Headline and story are disconnected. That is very possibly a reality, but not developed within the article. Too bad, as it was the closest thing to reality posted in awhile. Assume it is a problem with Oiprice, as garbage info is what interests them the most.

Guym : 01/28/2018 at 1:36 pm
They are going to have major problems transporting this, too.
http://mobile.reuters.com/article/amp/idUSL1N0UV1YB20150116
Guym : 01/28/2018 at 4:10 pm
Blending it will become a problem: http://www.argusmedia.com/pages/NewsBody.aspx?id=1254610&menu=yes

Do you really think we are going to increase production by one million barrels with primarily condensate? On second thought, if they could get to Canada, they could make a killing on condensate: http://business.financialpost.com/commodities/energy/encana-pivots-to-78-per-barrel-condensates-from-prolific-montney-basin/amp

Timthetiny : 01/29/2018 at 5:05 am
The average eagle Ford is 45-50. Most operators won't consider anything under 40 from shale as it's too heavy. Again with the misinformation.
Mike : 01/29/2018 at 6:37 am
Its possible to create isopach maps for gravity of oil throughout the Eagle Ford trend; it varies. Higher initial GOR and higher gravity liquids leads to higher EURs; the best EF wells are generally in the very volatile, liquids rich gas leg in Dewitt County, for instance. Higher gravity stuff also can mean lower prices at the WH and market difficulties.

I don't see any blatant misinformation here. I see people trying to understand what is going on. I suggest Berman's twitter feed for some good poop on oil and condensate quality. Light tight oil IS getting lighter and it is a very serious problem with end users. We will never become hydrocarbon independent in America simply because of the quality of the stuff we now produce.

So what's the plan in America? Send LTO to Corpus and ship it to China or anyone else that will take the stuff. We can't use anymore of it in America. Instead of developing heavy markets to blend LTO with, so America can use America's oil and not export it, we have developed this stupid "isolationistic, energy dominance" plan that is shortsighted and pissing the rest of the oil producing world off.

We're trying to 'prove' something to the rest of the world. In another decade or so when we have exported all of our LTO away and OPEC and others have us entirely by the ying-yang again, we'll look back and ask, "who in the hell was in charge?"

Exporting America's oil away is stupid. But then again, less than 20% of America's population has a savings account so no sweat. Let the kids fend for themselves.

Guym : 01/29/2018 at 8:05 am
T- Then why are they producing it? Under 40 is too heavy?? That's what the frigging refiners buy. Average Eagle Ford produced now, is probably 40 to 45. I am constantly looking at completion reports, and not just re-quoting some expert. Yes, mine at 33, would be exceptional, and I didn't mean to confuse. Over 45 causes problems. Misinformation is caused by listening to experts, and not doing your own research with primary data.

If all of the Eagle Ford or tight oil was at an API gravity of 33, we probably would not be importing as much oil. Nor, would we ever have had the huge inventory build.

Over 45, you have a smaller number of options. There are a few refineries in W Texas set up for this, there are a few more refineries set up, but they are small in number and production, and are hard to transport to. Blending becomes difficult, per my post. Bigger option is to export it.

[Jan 30, 2018] Iraqi Oil Minister confident that an oil export capacity of five million barrels per day will be realized by the end of 2018

Jan 30, 2018 | peakoilbarrel.com

Energy News: 01/29/2018 at 7:22 am

2018-01-29 Chatham House Events – Iraqi Oil Minister confident that an oil export capacity of five million barrels per day will be realized by the end of 2018 – a "landmark in the oil industry"

Current Iraqi oil reserves of 153 billion barrels due to reach 175 billion in the coming years, says oil minister Luaibi at Annual MENA (Middle East & North Africa) Energy conference

Iraq's oil minister Luaibi said the country seeks to ramp up refining capacity and reduce imports of refined products :"I am determined that Iraq will become a product exporter instead of product importer".

https://twitter.com/CH_Events

[Jan 21, 2018] Wells that they drilled last year will produce the biggest rates of decline, well over 50 percent. So, how many wells would need to be completed to increase production over a million barrels in 2018?

Jan 21, 2018 | peakoilbarrel.com

John x Ignored says: 01/18/2018 at 9:12 pm

Will be interesting to see US shale production in response to increasing frac hits, increasing costs, mounting debt wall. These are all legitimate issues which IEA seems to overlook when issuing rosy predictions. Three Stooges thought they could repair a hole in a pair of pants by cutting it out .same logic as IEA.
Guym x Ignored says: 01/19/2018 at 5:20 pm
Yeah, it's those items and more. The biggest they overlook is declines from production. The past two years, they have concentrated in sweet spots, to keep their chins above water. In doing so, they have miraculously brought production back up to 2015 highs, and not much more, although the EIA is reporting imaginary oil. Underneath all that production, wells are declining at a rapid rate. The biggest rates are what they drilled last year. Those wells will produce less than half of what they produced last year. So, how many wells would need to be completed to increase production over a million barrels in 2018? More than current capacity, that's for sure.
Dennis Coyne x Ignored says: 01/19/2018 at 6:40 pm
Hi Guym,

I agree.

Although tight oil output has increased at an annual rate of close to 1000 kb/d over the past 12 months (Dec 2016 to Nov 2017), I doubt that rate of increase will continue, probably about half that unless oil prices rise more than I expect (and I expect we might get to $85/b by Jan 2019).

Guym x Ignored says: 01/19/2018 at 7:48 pm
I'd say it's a crap shoot as to whether it goes up, or down with about the same number of completions in 2018 as 2017. Ok, let's say we have more completions, I still can't say it will go up 500k barrels. While people place statistics on depletion rates, I haven't seen a well, yet, that can comprehend statistics. As a matter of fact, they defy statistics.
There are 180k producing wells in Texas. There were about 5400 completions in 2017. That's about 3% of total producing wells.

[Jan 21, 2018] "frack cocaine" and oil price swings

Jan 20, 2018 | peakoilbarrel.com

Stephen Hren: 01/20/2018 at 10:55 am

I believe the oil price will be extremely volatile over the coming decade. There are major developments in both the supply and demand for oil that are very independent of each other and unlikely to move in tandem, with the likely result that there will be ebbs and flows of both supply and demand that have little relationship to one another, causing wild price swings.

I would summarize these as follows:

SUPPLY: The development of medium- and long-term supply appears to be severely curtailed by fracking and a limited supply of suitable sites for new exploration. CEOs are likely worried that any developments will not be profitable because shale will overproduce and knock down prices again. Until a clear picture of this phenomenon is apparent, it will curtail the willingness of oil companies to tackle bigger and more expensive projects. Possible new medium-term supply appears to exist in Mexico's Gulf, Guyana, South China Sea, off-shore Brazil, Canadian Tar Sands, possibly the Arctic. The problem with developing these resources is fracking.

Fracking leads to a quick hit of oil, based primarily on debt infusion, that quickly dissipates – hence I like the term "frack cocaine". It prioritizes rapid expansion of oil supply in the short term to the detriment of medium and long term investments. What Wall Street giveth, Wall Street can also taketh away. The shale oil industry has a similar profile to developing countries like Mexico in 1994 and Argentina in 2005. The flow of money can halt abruptly, and the consequences could be disastrous. The short-term oil will quickly go away, but the investments for serious longer term oil supply will likely be too little, possibly much too little.

Political trouble will likely lead to disruptions in Venezuela, Nigeria, and Libya. The cold war between Iran and KSA will likely remain cold, but if proxy wars get out of hand, massive oil supply disruptions will likely ensue.

DEMAND: The outlook for short and medium term demand is quite good. Global growth is strong, and entrenched systems of car production that favor ICEs will continue. Longer term, EVs and self-driving EVs in terms of taxi systems pose serious threats (perhaps least of all to the US, where distances tend to be longer, density is lower, and gas taxes are cheapest). GM is deploying self-driving cars as a taxi service next year based on the EV Bolt. Developing countries have a big incentive to embrace this technology for their populations: small diesel engines that primarily power scooters and taxis and larger bus engines lead to horrible air pollution, and electricity can be generated within borders rather than imported (whether by coal, gas, wind or solar doesn't matter, so far as oil demand is concerned). Europe's love affair with diesel cars is over and gas taxes (and parking prices) remain high, making EVs and EV-based taxi services very appealing. Battery technology is about to enter a new wave, with solid-state lithium ion batteries that are basically dendrite-free (hence much longer life), super-safe, easier to charge, and 2-3 times the range of current technologies now in production. Specifically I am looking at Toyota, who has promised such a vehicle by 2022. All other manufacturers better be able to match Toyota by then or very soon after, or they will leave everyone in the dust just like they did with hybrids. Lithium-based batteries and lithium itself could see major price swings based on this rapid increase in demand.

Or, of course, the global economy could fall off a cliff at any moment. Fwiw, I see a price range for oil over the next decade as between $25-$250, with very little pattern to its rise and fall. Volatility will be key. Oil may peak and fall several times based on fracking and other short-term trends – a very bumpy plateau. I reckon by 2030 the peak in oil will be obvious, although some will call it from supply while others will call it from demand, based on their preferences. By that date, little to no investment in oil will likley make financial sense, and it will begin to whither away as a global industry. This will be from a combination of reduction in demand due to an EV technological wave that will unstoppable by then, and political collapse that occurs in the interim in countries heavily depending on exporting or importing oil.

Should be an interesting decade!

[Jan 21, 2018] Possible Seneca cliff of oil production due to technological enhancements of extraction of oil from depleting fields. And first of all KSA

Notable quotes:
"... Major oil producing countries, Saudi Arabia chief among them, are using technology to stave off production declines. These YouTube videos are a perfect example of the extreme lengths being employed to continue production: ..."
"... When the decline kicks in, these technologies will ensure that the cliff will be steeper. While I believe we are living at the absolute peak of world production and that decline will kick in soon, I'm not so concerned about specific predictions. It will happen soon enough and when it does the impact will be severe. ..."
"... I think of this problem in personal terms -- my son was born in 2000. He will live to see a world of diminishing oil production (as well as sea level rise, resource conflicts, and many other problems). Does anyone doubt that by the time he is 30 (2030) world oil production will be in decline? Does anyone doubt by the time he is 50 (2050) the world will be a drastically different place than it is today? I have lived through the peak period. I cannot envision what comes after. I can only hope that my son finds a way through it. ..."
"... "Does anyone doubt that by the time he is 30 (2030) world oil production will be in decline? Does anyone doubt by the time he is 50 (2050) the world will be a drastically different place than it is today?" ..."
"... Perhaps. But such sentiments were very common ten, fifteen years ago, and they were directed toward today, not 2030. So, yes, I do "doubt" it, but that's not saying much, as it's a subject I find interesting but useless to speculate about. ..."
"... I'm checking in here for the first time in about 9 years. I'm an old-time peaker, who jumped ship in 2009 when it became clear the dire predictions of Campbell, Deffeyes, et al., were failing to materialize. ..."
Jan 19, 2018 | peakoilbarrel.com

x says: 01/19/2018 at 9:55 am

Ron is absolutely right about the creaming issue. Major oil producing countries, Saudi Arabia chief among them, are using technology to stave off production declines. These YouTube videos are a perfect example of the extreme lengths being employed to continue production:

These videos underscore how uniquely valuable oil is as an energy source and how no other substitute will ever come close to matching its utility.

When the decline kicks in, these technologies will ensure that the cliff will be steeper. While I believe we are living at the absolute peak of world production and that decline will kick in soon, I'm not so concerned about specific predictions. It will happen soon enough and when it does the impact will be severe.

I think of this problem in personal terms -- my son was born in 2000. He will live to see a world of diminishing oil production (as well as sea level rise, resource conflicts, and many other problems). Does anyone doubt that by the time he is 30 (2030) world oil production will be in decline? Does anyone doubt by the time he is 50 (2050) the world will be a drastically different place than it is today? I have lived through the peak period. I cannot envision what comes after. I can only hope that my son finds a way through it.

Michael says: 01/19/2018 at 10:12 am

"Does anyone doubt that by the time he is 30 (2030) world oil production will be in decline? Does anyone doubt by the time he is 50 (2050) the world will be a drastically different place than it is today?"

Perhaps. But such sentiments were very common ten, fifteen years ago, and they were directed toward today, not 2030. So, yes, I do "doubt" it, but that's not saying much, as it's a subject I find interesting but useless to speculate about.

I'm checking in here for the first time in about 9 years. I'm an old-time peaker, who jumped ship in 2009 when it became clear the dire predictions of Campbell, Deffeyes, et al., were failing to materialize.

This doesn't mean I think oil is infinite or anything. I do think our capacity to predict doom is much more circumscribed than our abilities to avoid it.

(I like the new editing feature on this site.)

[Jan 16, 2018] GOM oil and gas production in decline from now on

Jan 16, 2018 | peakoilbarrel.com

SouthLaGeo

x Ignored says: 01/12/2018 at 7:11 pm
Interesting BOEM report attached – their prediction of GOM oil and gas production from 2018-2027.
They predict oil production will increase from 1.65-1.67 mmbopd in the 2017-2019 window to 1.74-1.77 mmbopd in the 2023-2027 time frame. They include future production from current reserves, contingent resources and undiscovered resources. Contingent resources are mainly field expansion projects, new fault blocks, new reservoirs, and resources from discoveries that have not been put on production.
They have initial production from undiscovered resources occurring already in 2019 – suggesting that a few discoveries will be made and be on line by the end of 2019. Seems rather ambitious even for subsea tiebacks.
Given the lack of GOM exploration success in the last few years, my biggest challenge to these predictions are their estimates of production coming from new discoveries. They show about 1 BBO of production comes from currently undiscovered resources in this 10 year window.

https://www.boem.gov/BOEM-2017-082/

George Kaplan x Ignored says: 01/13/2018 at 3:14 am
SLG – hope you are well and had a good holidays. Here is my updated effort at the same thing. I've added some new discoveries, but not as big or developed as fast BOEM show. I've included all qualified fields as named entries except a few discovered in 2016 and 2017, and for a lot I've had to make guesses for reserves based on the expected development size (numbers in brackets show nameplate capacity). I might be able to improve things a bit when BOEM reserve numbers for end of 2016 come out, but it's still not going to look much like their estimates. It's noticeable that there's a lot of activity in short term, small tie backs now – but these only add about 5 to 10 kbpd and immediately start to decline. So like you I don't know where they are getting such high contingent resource production additions from unless it is all on existing developments – I guess if a lot of fields get to grow like Mars-Ursa has and Atlantis might this year then there'd be enough, but that seems unlikely to me, especially at the rate they show it.

SouthLaGeo x Ignored says: 01/13/2018 at 8:47 am
Thanks George, and same to you for the new year.
I've made a stab at comparing numerous production profiles for the 2018-2027 window – your's from above, my midcase and downside estimates from a little over a year ago, and BOEM's estimates – both their total estimate, and their total estimate minus any new resources/discoveries.
I plan to expand on this in a future post – including revised EUR estimate ranges.

George Kaplan x Ignored says: 01/13/2018 at 11:53 am
They are all models with something worthwhile to add to the discussion, which is not what I would say about the EIA projections. They just add have some kind of growth rate, with no basis in actual numbers, and make it look fancy by adding a hurricane effect – and yet this is the number usually quoted in the MSM. I think their predictions a couple of years ago had an exit rate for this year of 2.2 mmbpd – miles off, and when they do try to provide bottom up justification they look ridiculously ill informed.

Fernando Leanme x Ignored says: 01/15/2018 at 4:49 am
Maybe they have a higher oil price forecast? Or they don't bother to see if what gets put on line is worth developing? I know this is hard, but try preparing a forecast with prices increasing 3% per year above inflation for 30 years, and you will get a higher forecast.
Dennis Coyne x Ignored says: 01/15/2018 at 10:28 am
https://www.eia.gov/outlooks/aeo/data/browser/#/?id=12-AEO2017&region=0-0&cases=ref2017&start=2015&end=2030&f=A&linechart=ref2017-d120816a.3-12-AEO2017&sourcekey=0 \

The BOEM probably uses the EIA AEO 2017 reference price forecast.

[Jan 16, 2018] Maybe the EROI cliff starts setting a real limit for Canadian oil sands and no matter to what level the oil price rise the deposits deeper, thinner, harder, heavier much faster

Jan 16, 2018 | peakoilbarrel.com

George Kaplan x Ignored says: 01/14/2018 at 8:26 am

One thing I haven't figured out with Canada is how they come up with the reserves estimates. If you look at the Alberta oil sands quarterly reports all the projects that are operating, in development (not many now) or approval are listed. Even given the long operating times for these projects the reserves included can't be much more than 50 Gb left. Presumably these are also the best prospects, and given some have lost quite a bit of money in the last couple of years, and often just operate as arbitrage – turning energy in gas to energy in oil – then the remaining 100 and more Gbs must be really difficult to get at. Presumably it will need even more and longer wells (i.e capital) and natural gas (which would have to come from shale now I think); and maybe the EROI cliff starts setting a real limit somewhere, no matter what the price rises to, as the deposits get deeper, thinner, harder, heavier or whatever it is that has made them less attractive.
OFM x Ignored says: 01/14/2018 at 9:57 am
Thanks , guys.

In a long term emergency situation, I believe the process of permitting and getting started on construction will take place on a war time economic pace, once it becomes clear that the emergency is long term.

I don't know any more than the next layman about pipelines or railroads, other than welding, which is a minor consideration in terms of the big picture. But it seems to me that laying another pipe, or another track parallel to an existing pipeline or track could happen pretty fast, maybe within a year, or two at the longest, once the decision is made to do so on an emergency footing.

When it comes down to arbitraging gas for oil, George makes a really important point. Eventually gas is sure to get to be really expensive, given that depletion never sleeps, and when it does, this means cost of oil sands will necessarily have to go up quite a bit, maybe even to the point that it becomes necessary to burn some oil sands crude on site to continue production.

If things get to this point, the environmental camp will have a hissy fainting fit, but I doubt it will matter, because once the majority of people realize that they are going to be doing without gasoline, they will forget all about the environment and this includes the ones who don't even drive, as often as not.

The vast majority of us depend on the smooth functioning of the automobile centric economic model to make a living. Even though she doesn't drive, a waitress who lives over the restaurant where she works won't be able to pay her rent if half of her regulars cut way back on eating out due to being short out of work or working short hours themselves. Even divorce lawyers can't make much money when people don't have it to lose. Fruit's good for you, an apple a day is priceless, if it's all the fruit you can afford, but I can buy chicken and beans cheaper than I can buy apples at the nearest supermarket, and compared to chicken and beans .. apples are starvation food. If the overall economy crashes, apples will be a luxury rather than an every day item for people thrown out of work or on short hours. If growers lose even a fifth of our market, half of us will be out of business, and the other half won't be buying very many new cars.

Bottom line, environmental considerations are NOT going to stop the exploitation of the oil sands, or coal to liquids, or any other tech that will keep the economic wheels turning.

There's NOTHING that we can substitute for affordable oil in the very short term, and how fast we can switch to electrified transportation is anybody's guess.

Mine is that we are going to be utterly dependent on having pretty close to as much oil as we do now, on a daily basis, for at least another ten years, and probably closer to twenty. Maybe by then there will be enough electric vehicles on the road to offset depletion and demand growth due to growing population.

Jeff x Ignored says: 01/15/2018 at 3:32 am
The pipeline issue is not complex at all. Canada's heavy oil is landlocked in Alberta (and Saskatchewan) and need to be transported to US or to the coast (west or east). Provinces that produce oil are pro new pipelines but British Columbia (transit and export province) is against. I fully understand landowners (especially first nations) that neither want new pipelines nor expansion of current ones. Once a pipeline has been constructed it will transport crude for many decades, enable production to increase, possibly leak and it´s uncertain what will happen when the pipe reach its end of life.

To some, pipelines are more than just a few bucks.

"When the last tree is cut, the last fish is caught, and the last river is polluted; when to breathe the air is sickening, you will realize, too late, that wealth is not in bank accounts and that you can't eat money."

Fernando Leanme x Ignored says: 01/15/2018 at 4:59 am
The keystone XL pipeline and a full upgrader (by full I mean a 200,000 BOPD plant making 38 degree API syncrude) should help reduce the bottleneck. The upgrader takes about 7 years to design, permit and build. Meanwhile they'll have to make dilbit and ship that to the USA gulf coast,

The situation in Venezuela is very fluid. Turning production around and raising it to 2.5 mmbopd may take ten years if the current conditions are allowed to continue during 2018. I have a difference of opinion with some youngsters I see discussing more emphasis on light oil production. Problem is I know they are mostly inexperienced MBAs well versed in PowerPoint but lack education or experience taking over an oil field, refurbishing it, and getting it to increase production. I've been doing that on and off since 1978, and it's not easy.

[Jan 13, 2018] All eyes may be fixed on Jan. 18 as the day China begins trading oil contracts in Yuan currency ~ The Daily Economist

Jan 13, 2018 | www.thedailyeconomist.com

According to one source out of the Far East, China's Yuan denominated oil contract is set to go live for trading on Jan. 18.

While not an official date announced from government sources, according to an anonymous member of the Futures market where the new oil contract will trade, this is the expected date for Beijing to begin its latest challenge to the long-standing Petrodollar system.

According to the Shanghai-based news portal Jiemian, which cited an unidentified person from a futures company, trading is expected to start Jan. 18. Multiple rounds of testing have been carried out and all listing requirements met. The State Council, China's cabinet, was said to have given its approval in December, one of the final regulatory hurdles. The push for oil futures gained impetus in 2017 when China surpassed the U.S. as the world's biggest crude importer. - Zerohedge
While the Chinese markets are not expected to immediately take dominion over the West's Brent and WTI oil markets, several countries which include Venezuela, Russia, Qatar, Pakistan, and perhaps even Iran appear ready to transition away from dollar based oil trade. Additionally, many more nations will likely be willing to dip their toes into this market as it proves itself to be a viable alternative to dollar hegemony, and as protection from foreign policy threats from the U.S. which often uses the dollar as leverage in economic sanctions.

[Jan 11, 2018] 3 Million Barrels Per Day Could Go Offline In 2018 OilPrice.com

Jan 11, 2018 | oilprice.com

Ed Morse of Citi says that Venezuela's production could fall below 1 mb/d , which would essentially be a loss of 700,000 bpd by the end of the year.

The losses from Venezuela, combined with potential outages in Iraq, Libya and Nigeria, could reach 3 mb/d in 2018, Citi said .

[Jan 11, 2018] 5 Oil Market Myths In 2018 OilPrice.com

Jan 11, 2018 | oilprice.com

Busting The Five Biggest Oil Market Myths

By ZeroHedge - Jan 09, 2018, 3:00 PM CST
Rig

The oil market has come to be defined by several narratives over the past couple of years: market rebalancing, OPEC versus shale, Russia's delicate relationship with OPEC, OPEC's conformity with production cuts with the latest deal extension running to end of 2018 and shale's resilience to lower prices.

But these frameworks have created a narrow ideology that could harm the way producers participate in the oil market this year and beyond.

Myth 1: OPEC's exit strategy means exit

The idea that the 24 producers who came together and struck a deal to cut production by 1.8 million b/d in November 2016 are somehow going to 'exit' the alliance later this year is misleading. There will be no exit when OPEC, Russia and other non-OPEC producers decide the market has rebalanced -- based on OECD stock levels reaching their five-year average -- rather a continuation of the grand alliance under amended, and most probably looser, terms.

OPEC's hands are somewhat tied: unwind from the deal and undo all the good work achieved, and so it must continue managing the market in another guise to create stability and encourage long-term investment in oil.

Gary Ross at Platts Analytics has been talking of cuts "into perpetuity" since the historic deal was made and informed industry sources note that the exit strategy is the wrong phrase to be using. But while there is uncertainty as to what that new agreement will look like, the market will anxiously hang on to the exit strategy term and these jitters could serve to keep an ultimate cap on prices.

Myth 2: OPEC's top priority is market rebalancing

Market rebalancing may be the measure, backwardation may be the means but price is the ultimate goal.

When prices tanked after a nine-month extension was agreed in May 2017, there was clear disappointment from OPEC sources even if publicly the whims of the market were dismissed and ministers anxiously waited for prices to recover in the medium term.

The difficulty with a price target is that nobody knows what an optimal long-term sustainable price is so the goal posts keep shifting. Besides, different price levels create new supply-demand dynamics and the price may be influenced by more than just underlying fundamentals such as geopolitical risk.

Related: Is This The Beginning Of An Oil Sands Revival?

Thus, for now OPEC's clumsy priority is market rebalancing. It just needs remembering that bringing down the more than 100 million barrels in stocks to its five-year average could prove elusive given the oversupply in recent years.

There is also the flipside risk in which OPEC tightens too much. Indeed, Saudi Arabia oil minister Khalid al-Falih has admitted that OPEC may need a more concrete goal at its June meeting and when it alters its market management strategy it may well coincide with a new long-term target.

Myth 3: Russia will end its alliance with OPEC

Russian oil companies have begrudgingly stayed on board with the deal due to the iron hand of President Vladimir Putin and steely determination of oil minister Alexander Novak.

Russia is not so at ease with ongoing market management and the fanfare and media circus that surrounds OPEC. Russia also arguably needs the extra revenue less and is more worried about losing market share in Europe and Asia to competition from rising U.S. shale oil exports. But the growing political nexus between Russia and Saudi Arabia, Russia's increasing swagger as joint head of this broad OPEC alliance (as noted at the November 30 meeting in Vienna with everyone awaiting Novak's arrival) as well as the budgetary need for sustained higher prices means Russia could well be in it for the long haul.

Putin is keenly aware of the U.S.-Saudi ties and has been building relations with Saudi Arabia since 2007 when it offered the kingdom nuclear aid.

Indeed, the overriding concern for the world's biggest oil producer is that, should the agreement unravel, prices could plunge putting the country back at ground zero. It may be an inconvenient truth for both, but to wield the necessary global energy influence, OPEC and Russia need each other indefinitely.

Myth 4: The battleground is OPEC versus U.S. shale

Ever since OPEC did an about-turn on its pump-at-will strategy and started working on a market share approach that was first brokered in Algiers in September 2016, the battle between OPEC and shale has been exaggerated. What may have started out as a move to crush U.S. shale in 2014 has transformed into a broader coexistence at the end of 2017 in a bid to find an equilibrium that allows profits to be made and coffers to be filled by all producers.

(Click to enlarge)

There has been growing dialogue between U.S. frackers and the oil producer group.

It could be argued that OPEC's first mission was to stop the runaway train that was OPEC output as producers ramped up production month on month as competition intensified. It could also be argued that the real target for OPEC is still unconventional and uneconomic oil as once investment becomes a free for all, OPEC risks a repeat of an oil boom and bust and the volatility it is trying to guard against. But at what point will deepwater, oil sands and Arctic drilling in general become economic enough to persuade investors to commit?

For example, the U.S. deepwater Gulf of Mexico sector has struggled since crude dropped in late 2014, but costs have dropped and efficiencies improved, and analysts suggest the sector may be at a turning point if prices are maintained.

Myth 5: U.S. shale is simply resilient

U.S. shale producers may well be predicted to make capex gains in 2018, they may have made technological innovations in drilling and completions that have brought down costs and they may have adapted to a lower price environment. In fact, Platts Analytics predicts a U.S. shale production growth of 900,000 b/d in 2018. But, despite all this, a productivity inflection point may well have been reached, a crossroads for investors.

(Click to enlarge)

Cyclical cost efficiencies and geological productivity are beginning to unwind with a combination of inflation and a broadening from the sweetest spots and core acreage.

Related: China Is About To Shake Up Oil Futures

In the Permian, rig efficiency peaked in July 2016 according to the EIA, and has since consistently decreased, while the Eagle Ford and Anadarko (Woodford) plays have experienced a significant drop-off in rig productivity. Moreover, investors want a return on their capital and have tired of capturing resources without seeing value being maximized. For almost a decade, the U.S. exploration and production industry has outspent its cash flows in drilling costs, requiring a constant inflow of debt and equity financing to keep going.

With prices back above $60 a barrel, can investors make a healthy sum? With the biggest producers now the oil majors, their shareholders may prefer returns over market share.

By Paul Hickin via Zerohedge

[Jan 09, 2018] Oil rises above $68 to highest since May 2015 on tighter market

Jan 09, 2018 | www.reuters.com

Oil rose further above $68 a barrel on Tuesday, touching its highest since May 2015, supported by OPEC-led production cuts and expectations U.S. crude inventories fell for an eighth week.

[Jan 08, 2018] Oil will take a much higher price to get any bids for the NS and for the GOM

Notable quotes:
"... Always skeptical of "technical recoverable guesses," my suggestion is to focus on product prices instead and the current reduced level of activity in the GOM. Oil prices are volatile because of the fiscally irresponsible, short investment nature of the shale oil industry and offshore development takes years and years to bring to market. There is natural gas coming out of our ears at the moment because of the shale phenomena; the price is tanking back to the mid $2's and there is no place to put anymore gas. ..."
"... much like Trump turned over Obama's legislation regarding offshore drilling, this one will be turned over as well. I don't think a 3 year time frame and price volatility gives the offshore industry enough time to do anything with this, personally. Its fluff. ..."
Jan 08, 2018 | peakoilbarrel.com

HVACman

x Ignored says: 01/05/2018 at 5:23 pm
Carrying over from islandboy's EIA thread:

http://www.sciencemag.org/news/2018/01/trump-proposes-vast-expansion-offshore-drilling

From post above:
TRUMP PROPOSES VAST EXPANSION OF OFFSHORE DRILLING
(Zinke) "This is a start on looking at American energy dominance,"

Regardless of emotional reaction to this announcement, I am skeptical of its viability.

My skeptical mind tells me, when all else fails, look at the numbers. The numbers per MMS chart on Wikipedia:

Undiscovered technically-recoverable oil resources on the outer continental shelf, 2006:

Washington/Oregon – 0.4Bbo Nor Cal – 2.08 Bbo Central Cal – 2.31 Bbo So Cal – 5.74 Bbo All Atlantic + east FL – 3.84 Bbo GOM – 44.92 Bbo North Slope – 23.6 Bbo Alaska less NS – 3.0 Bbo

Total 85.88 Bbo

https://upload.wikimedia.org/wikipedia/commons/5/54/758Syms2006OCSMapWithPlanni.png

I conclude that most of the "new" oil unleashed by this stunning decision is in the GOM and and the North slope, both of which are well-known by the industry and which have been open to Federal leases in the past. After Shell's bad experience, oil will take a much higher price to get any bids for the NS and for the GOM, this is just BAU. The Atlantic and Pacific Coasts don't have enough resource to be worth exploring, much less leasing.

OK, there are some sharp oil people here on the forum and I'm just a dumb HVAC engineer. Help me. Am I missing something? Are they actually going for the natural gas, and is it worth going after?

Boomer II x Ignored says: 01/05/2018 at 11:20 pm
Either Trump and his energy folks are so determined to stick it to environmentalists that they are willing to hurt the industries they claim to help, or they know this won't amount to anything but it will impress their hardcore supporters.
shallow sand x Ignored says: 01/06/2018 at 12:10 am
I sincerely doubt most states will cooperate with allowing all the shoreline and shallow water infrastructure needed to replicate the GOM.

Can anyone see FL allow pipelines running to tank farms located on the shoreline?

I understand the states control from the shore to 3 miles out.

If I am wrong, please point out how.

Greenbub x Ignored says: 01/06/2018 at 7:24 pm
Shallow, you aren't kidding about these reckless frackers:

http://thehill.com/blogs/blog-briefing-room/367780-michael-moore-says-hes-going-to-frack-off-coast-near-mar-a-lago

Mike x Ignored says: 01/06/2018 at 6:57 am
I believe that is a good summary HVAC, as is Boomers suggestion that this offshore development legislation is cursory and an otherwise meaningless gesture made toward an agenda that involves eliminating regulations for the oil and gas industry and "unleashing" America's energy might on the rest of the world.

Always skeptical of "technical recoverable guesses," my suggestion is to focus on product prices instead and the current reduced level of activity in the GOM. Oil prices are volatile because of the fiscally irresponsible, short investment nature of the shale oil industry and offshore development takes years and years to bring to market. There is natural gas coming out of our ears at the moment because of the shale phenomena; the price is tanking back to the mid $2's and there is no place to put anymore gas.

This is another nail in this administrations coffin, from my conservative perspective. It is enraging the environmental left and will help assure the biggest Democratic turnout in history in 3 years.

Then, much like Trump turned over Obama's legislation regarding offshore drilling, this one will be turned over as well. I don't think a 3 year time frame and price volatility gives the offshore industry enough time to do anything with this, personally. Its fluff.

[Jan 08, 2018] Canada production is growing and reached three and a half million barrels a day (crude oil + condensates + upgraded bitumen + bitumen)

Jan 08, 2018 | peakoilbarrel.com

Energy News x Ignored says: 01/06/2018 at 8:09 am

Alberta Canada – Total Production (crude oil + condensates + upgraded bitumen + bitumen)
November at 3,412 kb/day, up +304 m/m. Average production in 2017 to November, up +250 kb/day over 2016 full year.

[Jan 08, 2018] A million barrel of NG Condensate in a Tanker is burning after Iranian tanker collision

Jan 08, 2018 | peakoilbarrel.com

Longtimber x Ignored says: 01/07/2018 at 1:00 pm

Unexpected cargo? A million barrel of NG Condensate in a Tanker? Still afloat and burning Sunday morning 30+ missing. https://www.zerohedge.com/news/2018-01-07/iranian-oil-tanker-bursts-flames-after-colliding-chinese-ship-near-south-korea?page=1
Hightrekker x Ignored says: 01/07/2018 at 1:09 pm
Messy -- but this is late stage capitalism.

[Jan 03, 2018] Oil production in the USA remains flat

Notable quotes:
"... At this point the only (legal) reason left to explain the divergence is that the EIA has started including NGL into their numbers ..."
Dec 29, 2017 | peakoilbarrel.com

Energy News says: 12/29/2017 at 11:54 am

EIA 914 Survey, October crude oil production 9,637 kb/day, +167 kb/day m/m. September revised down -11 kb/d to 9,470 kb/day

Texas October 3,767 kb/day, September 3,561 kb/day revised down -13 kb/d

Gulf of Mexico October (Hurricane Nate) 1,449 kb/day, September 1,649 kb/day, revised -1 kb/d

https://www.eia.gov/petroleum/production/#oil-tab

dclonghorn says: 12/29/2017 at 12:00 pm
EIA estimated Texas production at 3767000 bpd vs Dr Dean's above estimate of 3305000 bpd a difference of 462000 bpd. Wow that is a big difference.
Dean says: 12/29/2017 at 12:13 pm
Yes, it is unreal: either at the Texas RRC they had really HUGE problems in the past months collecting data, or the EIA used only model estimates without any form of revision.

The correcting factors of the Texas RRC have not changed much and they showed they usual variability, so that I cannot explain why there is such a big divergence between corrected RRC data and EIA. They only problem that I can think of (on the part of the RRC) is that the hurricane completely disrupted their work: does anyone know whether the offices and data servers of the Texas RRC were damaged during the hurricane? Thanks for the information.

Dean says: 12/29/2017 at 1:55 pm
I had a very interesting discussion on Twitter: operators in Texas confirmed me that the RRC offices were not affected by the hurricane and data reporting proceeded normally. At this point the only (legal) reason left to explain the divergence is that the EIA has started including NGL into their numbers:

https://twitter.com/ZmansEnrgyBrain/status/946796541406208000

[Jan 03, 2018] WTI might reach $90 in 2018

Beware this post has "confirmation basis" I am a believer in peak oil...
Notable quotes:
"... Was doing some tax work earlier today and noted for June 2017 oil we got $40.71 per barrel. If 12/29/17 close holds we get $56. $15.29 more on every barrel is huge for us as it is for everyone who operates wells Be it you XOM Harold Hamm Russia OPEC etc. As I recall oil prices rebounded in late 2016 then shale went nuts and the price tanked. Their shares tanked too as I recall. ..."
"... However I am then also sure that you just like us went from making a killing on low decline conventional and $90 oil to making much much less and in your case were using almost all cash to pay for new shale well AFE's. ..."
"... I am happy to see you want $70 even higher than me. So I'll leave you alone now. Take care. I think maybe deep down you too hope US doesn't ram through 10 and then 11 million BOPD next year? ..."
"... Cling to whatever makes you feel good dude. I guess when you're favorite industry produces a lot of product but can't make any profits doing so one has to find the silver lining wherever they can. Shale is a Ponzi scheme. It won't be long until the music stops and the investors lose their shirts. ..."
"... I agree with Mike that LTO producers are not profitable (as a group). I have suggested that if oil prices remain under $65/b (WTI price) that US output may increase by about 600 kb/d (average annual C+C output) in 2018 compared to 2017. If oil prices are higher output may be higher if you tell me what that average oil price will be in 2018 I can make a better output estimate. ..."
"... The oil price may improve in 2018. However it will likely go DOWN CONSIDERABLY first before it continues higher. According to the COT REPORT (Commitment Of Traders) there is a record Commercial Short Position against oil going back 23 years. ..."
"... You will notice right before oil fell from $100 in 2014 there was also a high amount of Commercial Short Positions. Today that level is even higher. ..."
"... WTI is refined to 6% Diesel while global crude average is 34% Diesel. ..."
Dec 31, 2017 | peakoilbarrel.com

shallow sand says: 12/31/2017 at 11:20 pm

Mike.

Unless I missed it I am still waiting for TT to explain how he finances the huge AFE's he must routinely get from $10+ million STACK and SCOOP wells.

Was doing some tax work earlier today and noted for June 2017 oil we got $40.71 per barrel. If 12/29/17 close holds we get $56. $15.29 more on every barrel is huge for us as it is for everyone who operates wells Be it you XOM Harold Hamm Russia OPEC etc. As I recall oil prices rebounded in late 2016 then shale went nuts and the price tanked. Their shares tanked too as I recall.

Say TT owns 10% of a shale monster well that cranks out 200K BO in year one. Say his NRI is 8%.

So he got billed $1 million for his part of the well. A $15 higher oil price nets him $240 000 more in year one before deducting severance tax.

So I assume TT would rather get an extra $240 000 in year one and have shale not go crazy talk and crazy drill again as opposed to being able to crow about political crap?

Mike do you know any non-op's on shale wells? How the heck do they finance them?

PS. I know you think it's cold down there in Texas but in my part of the Mid Continent it will be -5 F later tonight. 1 stinking degree F right now. Ouch!!

shallow sand says: 01/01/2018 at 8:43 pm
TT. If you came into shale with a lot of rock solid conventional paid for in full I can see how you could come up with the money.

However I am then also sure that you just like us went from making a killing on low decline conventional and $90 oil to making much much less and in your case were using almost all cash to pay for new shale well AFE's.

Even if you have zero debt I assume you at least have an un drawn credit facility just in case a good big deal were to arise. And therefore I assume you were none too pleased when your borrowing base dropped by more than 2/3 from 2014 to 2015 and again another 20+% in 2016 due to shale over production crashing oil and NG prices.

If you are big enough to cash flow several shale AFE I assume you have net production of somewhere between 2 000-10 000 BOEPD?

So let us say 5 000 BOEPD. Again just hypothetical to show what shale did to a larger private independent owned by maybe 2-4 shareholders who got very rich 2005-14.

2014 say you could have cashed out for $500 million. 2016 likely cashed out for 1/3 to 1/4 of that. Quite a hit to the net worth.

Further in 2014 you maybe cleared $90+ million pre income taxes before CAPEX on that 5 000 BOEPD? 2016 that went to $18 million maybe and of course you are getting AFE and JIB on the shale that is draining that the near zero? So no shareholder dividends or distributions in 2015 and 2016 after getting big ones in prior years.

We are small and not in a shale area but we have been around the block Dad has been in since the Arab Embargo. Pretty much everyone had to fire someone in 2015-16 it's good if you didn't. Pretty much everyone had the rug pulled out from under them just like in 1986 and 1998.

Thing is I think even most of the shale guys aren't real happy about shale. They know shale overproduction will drag the price. Same bittersweet deal as farmers growing a bumper crop. Farmers made the most $$ during 2012-13 even though most places 2012 was terrible drought. US commodity producers never do good during periods of oversupply. Just the middle men do good then.

Again I'm just speculating on how you do things numbers etc. I may be all wrong. If I am I apologize.

I just know in 2015 and 2016 there were a ton of shale wells completed that won't payout. Maybe not as many in 2017 but they are still out there. Further they hurt cash flow especially when you cannot control the expense recognition time frames as a non-op.

I am so glad we did not own non-op where drilling was going on 2015-17 as it would have sucked away all our cash and then some plus sold our flush production at market lows.

I am happy to see you want $70 even higher than me. So I'll leave you alone now. Take care. I think maybe deep down you too hope US doesn't ram through 10 and then 11 million BOPD next year?

Mike says: 01/01/2018 at 8:48 pm
Your 2% production tax in Oklahoma is going back to 7% tee tee; you and Mr. Blackmon are definitely on the same 'mindless' page regarding the future of shale oil: https://www.forbes.com/sites/davidblackmon/2017/12/31/the-oil-and-gas-situation-a-preview-of-2018/#7b9a4fe67613

You are insulting to people here who actually understand the basic arithmetic of the oil business a little better than you give them credit for. There is very clear mounting evidence that things are not getting better in your industry they are actually getting worse. You on the other hand seem to struggle with reality. Five days ago gas was trading at $2.55 per MMBTU not $4 and after royalty deductions interest expenses etc. etc. 5 BCF will not come close to paying for a $10-11M well. I understand now that even after 35 years of whatever it is you do you can't insult me anymore than you have already tried. I would have to value your opinion first.

If you want to win friends and influence people here on POB it would be helpful if you were to give us your name your company's name where these awesome wells are so we can check production data and tax roles etc. That would give you credibility and strengthen your arguments. Otherwise you are just a cute name embarrassing as that is to my beloved Texas who likes to brag about how much money he makes in the shale oil business. We're interested in the big picture here not you personally.

Boomer II says: 01/01/2018 at 9:30 pm
I still get the feeling that this is a sales job. Why tout the industry doing so great if you don't need investors and lenders?
Boomer II says: 01/01/2018 at 2:56 pm
I found this. It is from 2016 and it is based on privately held companies. Oil and gas extraction companies was the least profitable industry.

https://www.forbes.com/sites/sageworks/2016/10/03/the-15-least-profitable-industries-in-the-u-s/#2c690cbf618a

I just found the same article for 2017. Oil and gas still tops the list.

https://blogs-images.forbes.com/sageworks/files/2017/09/least-profitable-industries-ttm-07312017.png

Survivalist says: 01/01/2018 at 5:35 pm
@TT
Cling to whatever makes you feel good dude. I guess when you're favorite industry produces a lot of product but can't make any profits doing so one has to find the silver lining wherever they can. Shale is a Ponzi scheme. It won't be long until the music stops and the investors lose their shirts.
Survivalist says: 01/01/2018 at 7:01 pm
My credentials are irrelevant to the fact that shale oil is a profitless venture. If not for profit then what's it all about? Take a long hard suck on my ass fuck face. Fucking retard.
Survivalist says: 01/01/2018 at 7:33 pm
shale oil is a profitless venture. Deal with it fuck head.
Survivalist says: 01/01/2018 at 7:53 pm
Here's one for the Texas teabagger aka the Lone Star State scrotum sucker.Im guessing it didn't go to business school.
Lloyd says: 01/01/2018 at 11:28 pm
Until you post a name and a company you can't complain about anyone else's credentials. We know who Mike is. You are nameless likely lying and probably a charlatan. And the emojis prove you are a moron.
Lloyd says: 01/02/2018 at 10:57 pm
Watcher I didn't say he had to identify himself I just pointed out that he was a hypocrite to demand other people's credentials without presenting his own.

To the Teabagger I say "Put up or shut up." Though I do prefer "shut up".

-Lloyd

Dennis Coyne says: 01/02/2018 at 9:01 am
Hi Texas Tea

I agree with Mike that LTO producers are not profitable (as a group). I have suggested that if oil prices remain under $65/b (WTI price) that US output may increase by about 600 kb/d (average annual C+C output) in 2018 compared to 2017. If oil prices are higher output may be higher if you tell me what that average oil price will be in 2018 I can make a better output estimate.

I also agree with Mike that I do not know what the future oil price will be. Generally higher World output levels result in lower oil prices (as in 2015-2017) and generally lower oil prices result in lower profits for oil companies ceteris paribus.

SRSrocco says: 01/01/2018 at 10:35 am
Shallow

The oil price may improve in 2018. However it will likely go DOWN CONSIDERABLY first before it continues higher. According to the COT REPORT (Commitment Of Traders) there is a record Commercial Short Position against oil going back 23 years.

You will notice right before oil fell from $100 in 2014 there was also a high amount of Commercial Short Positions. Today that level is even higher.

steve

Energy News says: 01/01/2018 at 3:24 am
EIA Today In Energy: What are natural gas liquids and how are they used?
Table on Twitter: https://pbs.twimg.com/media/DSarQ0wUEAACODP.jpg
https://www.eia.gov/todayinenergy/detail.php?id=5930#
Energy News says: 01/01/2018 at 4:38 am
World demand for oil products – JODI Data – As everyone knows January is the seasonal low for demand. Comparing demand in December to January of the next year shows an average drop of -2.2 million barrels per day.

Chart on Twitter: https://pbs.twimg.com/media/DScZ25HX4AAdDwB.jpg

Longtimber says: 01/01/2018 at 2:54 pm
Rather Crude product sort out by molecular weight: WTI is refined to 6% Diesel while global crude average is 34% Diesel.
Survivalist says: 01/01/2018 at 8:06 pm
One more for the Texas Teabagger

https://www.bloomberg.com/news/articles/2017-11-01/fracking-boom-hits-midlife-crisis-as-investors-geologists-see-shale-limits

Watcher says: 01/02/2018 at 12:43 pm
George don't want to scroll way up.

Don't suppose you know if oil fields do blending prior to sending to assay? Doesn't seem too very conspiratorial. Someone could gin up a rationale and no one would complain provided the refiner gets the same blend as assayed.

George Kaplan says: 01/02/2018 at 2:32 pm
Most are blends – i.e. a bunch of producers discharge into a pipeline and what comes out the end is the cargo – it varies a bit depending on the relative flows from each platform and they might have to blend further in the tank farm (e.g. Forties delivers Brent crude I think from 15 to 20 different platforms).

I can only think of one time there might not be blending of some kind which is if an offshore platform with storage (e.g. FPSO) unloads as repeated cargoes which always go to one specific refinery (probably the platform operators – but even then there are usually more than one owner and they often take the cargos separately in proportion to their stake).

George Kaplan says: 01/02/2018 at 3:20 pm
https://www.researchgate.net/profile/Hassan_Harraz/publication/301842929_BENCHMARKS_OF_CRUDE_OILS/links/572a065b08aef7c7e2c4ede8/BENCHMARKS-OF-CRUDE-OILS.pdf

This is from 2015/2016 – but prices are still light/sweet -> expensive; heavy/sour -> cheap. The only thing that can mess that up is if there are transport bottlenecks which is why WTI is a bit cheaper than Brent (it wasn't before LTO came on line).

Tapis is still the lightest and costliest although almost none of it is produced it is still a useful benchmark against which other oil can be rated.

Although there are benchmark crudes I think every cargo is basically a negotiated price between the refinery and the producer (there can be penalties if it isn't quite the quality agreed on and it could even be rejected and I think there is an adjustment based on the latest benchmark prices as the contract price would have been negotiated well ahead of delivery). And that is about as much as I know about the trading business except there is a lot of money that can be made and lost on very small margins and variations.

Watcher says: 01/02/2018 at 6:26 pm
source of interest my recall of Bakken and Eagle Ford assays of yrs ago and how with an increase in API degs reported in the new assays the middle distillate yield hasn't changed. Should not be -- well it's possible but should not be likely.
Watcher says: 01/02/2018 at 1:16 pm
https://www.zerohedge.com/news/2018-01-02/peak-mexico
Energy News says: 01/02/2018 at 6:06 pm
US implied domestic demand monthly figures – seasonal

(Finished Motor Gasoline + Finished Aviation Gasoline + Kerosene-Type Jet Fuel + Distillate Fuel Oil + Residual Fuel Oil + Lubricants + Asphalt) but no NGLs

From here: EIA – Finished Petroleum Products – Products Supplied: https://www.eia.gov/dnav/pet/pet_sum_snd_d_nus_mbblpd_m_cur.htm

The January dip in demand table on Twitter

https://pbs.twimg.com/media/DSki1qFWsAAK6zX.jpg

Yearly averages & the year over year change. 2017 to Oct.

https://pbs.twimg.com/media/DSko0eLXcAEyl8L.jpg

Dennis Coyne says: 01/02/2018 at 6:35 pm
First chart from comment above

Dennis Coyne says: 01/02/2018 at 6:36 pm
Second chart in link from energy news. Thanks!

[Jan 03, 2018] More on great condensate con

Notable quotes:
"... The US exported last week 3 mill barrels per day of propane and other light distillates which just fetch the price of less than 20 USD per barrel. ..."
"... In my estimate the US has to pay USD 60 per barrel for imports and gets on average USD 30 per barrel for exports. This is a serious mismatch and cannot be solved by an increase of Shale condensate production. ..."
"... However 45 API is still way above the specification of 38 API for WTI. In other words none of the Shale production can be sold as crude oil and must be classified as condensate or more general as light distillates earning substantial price discounts on worldwide market. ..."
"... This is in my view also the reason why Shale companies have such catastrophic financial difficulties: they receive not enough cash to cover the high production costs and high depletion. ..."
"... WTI is no longer 39.6. It's well over 40. That's from the most recent assay data. Historical analysis means nothing if definitions change, and they have changed. ..."
"... This is exactly the dilemma of Cushing. Officially it is a WTI trading hub, yet in reality most of the inventory cannot meet the the specifications for a WTI grade. It is therefore very difficult to reduce inventory at Cushing. ..."
"... Why do you think the US has still to import over 10 mill bbl per day in crude oil and products? There must be a clear reason for it, if not for quality reasons. People would not send for fun oil around the world without reason. ..."
"... And the reason is that Shale does not produce crude oil, but condensate and light distillate products. It is just in the wrong market and Shale condensate and lighter products must be sold in the worldwide market at a cheap price. This is also the reason the US has still a high oil deficit, despite high condensate and light distillate products exports. ..."
"... This point was well discussed by Jeff Brown who called it the great condensate con. PAA in the conference call clearly indicated export market is needed for Permian to expand. Delaware basin produces mostly condensates. ..."
"... Brown asks, "Why would 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 [U.S.] C+C [crude oil plus condensate] inventories?" ..."
"... US refiners did not like the dumb bell crude when you mixed too light a crude with too heavy a crude. Distillation test will reveal that. Lately the Asian buyers of US crude did not like the fact it produced too much light gas. I saw EPD came up with the specs. and it was immediately followed by CME. ..."
"... US light oil needs an export market or a condensate splitter is needed ..."
"... The definition has not changed it has been 38-42 for a long time, but it is correct that the average WTI has increased from about 39.6 historically to about 41 in 2013 and 2014 and it has occasionally risen above 42 on a monthly basis. ..."
Dec 21, 2017 | peakoilbarrel.com

Heinrich Leopold, says: 12/21/2017 at 10:58 am

Mr. Kaplan,

Condensates in a classic sense are part of light distillate group and are traded at a 20%discount to Brent. There is some demand to upgrade heavy oil, yet this comes at a cost. However, the group of light distillates includes also LPG amongst others.

The US exported last week 3 mill barrels per day of propane and other light distillates which just fetch the price of less than 20 USD per barrel.

In my estimate the US has to pay USD 60 per barrel for imports and gets on average USD 30 per barrel for exports. This is a serious mismatch and cannot be solved by an increase of Shale condensate production.

Heinrich Leopold, says: 12/21/2017 at 11:20 am
Dennis,

However 45 API is still way above the specification of 38 API for WTI. In other words none of the Shale production can be sold as crude oil and must be classified as condensate or more general as light distillates earning substantial price discounts on worldwide market.

If the giant South Pars field in Iran starts up, there are gigantic capacities of these grades coming to the market, depressing prices even further. There is no doubt that Shale production experiences a significant quality problem.

This is in my view also the reason why Shale companies have such catastrophic financial difficulties: they receive not enough cash to cover the high production costs and high depletion.

Watcher, says: 12/22/2017 at 1:59 am
I'm not gonna go back and find the links again.

WTI is no longer 39.6. It's well over 40. That's from the most recent assay data. Historical analysis means nothing if definitions change, and they have changed.

Can search the archives here, or can use rational thought. WTI now includes lighter oil coming out of shale in West Texas. As I recall the assay was at Cushing which also blends it with Bakken flow. The definition has changed.

My recall is officially, not just from the assay.

Heinrich Leopold, says: 12/22/2017 at 4:22 am
Watcher,

This is exactly the dilemma of Cushing. Officially it is a WTI trading hub, yet in reality most of the inventory cannot meet the the specifications for a WTI grade. It is therefore very difficult to reduce inventory at Cushing.

Dennis Coyne, says: 12/22/2017 at 8:41 am
See link below 2013-2014 avg was about 41:

API Gravity-≥37 and ≤42 • Monthly averages in 40 to 42 range. Occasional values above 42. • Seasonal variation with winter being slightly higher. • December 2014 average was 41.6. • If your assay does not reflect ~41 API, it probably warrants review.

http://www.coqa-inc.org/docs/default-source/houston-tx-february-2015-presentations/02192015–sutton–wti-quality.pdf?sfvrsn=14346bb_2

and

https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MCRAPUS2&f=M

Heinrich Leopold, says: 12/22/2017 at 9:24 am
Dennis,

As far as I can see it from the data this includes all oil input including oil imports, heavy oil from Canada and conventional oil from GOM . Nevertheless, there is a clear upward trend.

Why do you think the US has still to import over 10 mill bbl per day in crude oil and products? There must be a clear reason for it, if not for quality reasons. People would not send for fun oil around the world without reason.

And the reason is that Shale does not produce crude oil, but condensate and light distillate products. It is just in the wrong market and Shale condensate and lighter products must be sold in the worldwide market at a cheap price. This is also the reason the US has still a high oil deficit, despite high condensate and light distillate products exports.

Krisvis says: 12/22/2017 at 10:50 am
This point was well discussed by Jeff Brown who called it the great condensate con. PAA in the conference call clearly indicated export market is needed for Permian to expand. Delaware basin produces mostly condensates.

Brown asks, "Why would 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 [U.S.] C+C [crude oil plus condensate] inventories?"

Krisvis says: 12/22/2017 at 10:59 am
What I see now if that EPD and CME are adopting COQA recommendations and implement them in 2019.

US refiners did not like the dumb bell crude when you mixed too light a crude with too heavy a crude. Distillation test will reveal that. Lately the Asian buyers of US crude did not like the fact it produced too much light gas. I saw EPD came up with the specs. and it was immediately followed by CME.

US light oil needs an export market or a condensate splitter is needed

Dennis Coyne says: 12/22/2017 at 10:45 am
Hi Watcher,

The definition has not changed it has been 38-42 for a long time, but it is correct that the average WTI has increased from about 39.6 historically to about 41 in 2013 and 2014 and it has occasionally risen above 42 on a monthly basis.

[Jan 03, 2018] WaPo propaganda

Jan 02, 2018 | peakoilbarrel.com

Cats@Home says: 01/02/2018 at 8:04 pm

U.S. oil production booms to start 2018
Updated 8:39 AM; Posted 8:39 AM

By The Washington Post

http://www.nola.com/business/index.ssf/2018/01/us_oil_production_booms_to_sta.html

U.S. crude oil production is flirting with record highs heading into the new year thanks to the technological nimbleness of shale oil drillers who have unleashed the crude bonanza.

The current abundance has erased memories of 1973 gas lines which raised pump prices dramatically traumatizing the United States and reordering its economy. In the decades since presidents and politicians have mouthed platitudes calling for U.S. energy independence.

President Jimmy Carter in a televised speech even compared the energy crisis of 1977 to "the moral equivalent of war."

"It's a total turnaround from where we were in the '70s " said Frank Verrastro senior vice president at the Center for Strategic and International Studies.

Shale oil drills can now plunge deep into the earth pivot and tunnel sideways for miles hitting an oil pocket the size of a chair Verrastro said.

The United States is so awash in oil that petroleum-rich Saudi Arabia's state-owned oil and natural gas company is reportedly interested in investing in the fertile Texas Permian Basin shale oil region according to a report last month.

That is a far cry from the days when U.S. production was on what was thought to be an irreversible downward path.

"For years and years we thought we were running out of oil " Verrastro said. "It took $120 for a barrel of oil to make people experiment with technology and that has been unbelievably successful. We are the largest oil and gas producer in the world."

The resilience of U.S. oil producers has come as the price of crude rose above $60 per barrel on world markets. Many shale drillers can start and stop on a dime depending on the world oil price. The sweet spot for shale profit is in the neighborhood of $55 to $60 per barrel.

[Jan 03, 2018] No major discoveries in 2017

Notable quotes:
"... Rystad Energy concluded this week that 2017 was yet another record low year for discovered conventional volumes globally. Less than seven billion barrels of oil equivalent has been discovered YTD. "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 million barrels of oil equivalent 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%; largely thanks to the giant onshore gas field Galkynysh in Turkmenistan. Not only did the total volume of discovered resources decrease – so did the resources per discovered field. An average offshore discovery in 2017 held ~100 million barrels of oil equivalent, compared to 150 million boe in 2012. "Low resources per discovered field can influence its commerciality. Under our current base case price scenario, we estimate that over 1 billion boe discovered during 2017 might never be developed", says Passos. ..."
"... We have recently observed strong empiric evidence for the theory that a positive tendency in initial production rates for shale wells does not always lead to similar improvements in ultimate recovery. ..."
"... But profits and stock valuations are terrible over the past five to ten years. Drillers, Explorers, Services, I'd be shocked if you could find an index combo that has come even close to matching S&P, Biotech, Semiconductors, NASDAQ. Not positive but E&P et al might not even have beaten transportation over the past decade. If you've been invested in Oil and Gas you are officially a loser. ..."
"... The cooperative program and understanding between the Kingdom and Russia, the two largest producers in the market. ..."
"... Last but not least, we need to develop a culture of saving to increase our capital buildup for the economy. This is not an easy task, and requires a total rehabilitation of our consuming behavior." ..."
"... At this posting, New England is burning oil for 17% of their electricity generation. Wholesale spot price for electricity is $230/Mwh, about 10 times regular pricing. Later this afternoon, demand is expected to increase more. ..."
Dec 21, 2017 | peakoilbarrel.com

George Kaplan, says: 12/21/2017 at 6:55 am

https://www.rystadenergy.com/NewsEvents/PressReleases/all-time-low-discovered-resources-2017

ALL-TIME LOW FOR DISCOVERED RESOURCES IN 2017: AROUND 7 BILLION BARRELS OF OIL EQUIVALENT WAS DISCOVERED

Rystad Energy concluded this week that 2017 was yet another record low year for discovered conventional volumes globally. Less than seven billion barrels of oil equivalent has been discovered YTD.

"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 million barrels of oil equivalent 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%; largely thanks to the giant onshore gas field Galkynysh in Turkmenistan.

Not only did the total volume of discovered resources decrease – so did the resources per discovered field.

An average offshore discovery in 2017 held ~100 million barrels of oil equivalent, compared to 150 million boe in 2012. "Low resources per discovered field can influence its commerciality. Under our current base case price scenario, we estimate that over 1 billion boe discovered during 2017 might never be developed", says Passos.

I think every drilled high impact wildcat well identified by Rystad at the end of 2016 has now turned out dry, with a couple postponed for lack of finance.

Dennis Coyne, says: 12/21/2017 at 8:14 am
Thanks George.

It would be great if they gave the gas/liquids split all rolled up. Does it look to your eyes like a roughly 50/50 gas/liquids split in 2017, as it does to mine? (Talking about Rystad chart.)

SouthLaGeo, says: 12/21/2017 at 8:38 am
2017 looks likes another very disappointing year for conventional discoveries. I wonder how unconventional resource adds have been over the last few years. I suspect that is how many of our big oil friends are achieving their annual resource add goals.
George Kaplan, says: 12/21/2017 at 8:50 am
The EIA reserves are going to be interesting: even before the price crash the extension numbers, which is where all the LTO growth came from rather than discoveries, were starting to fall and reserve changes looked like they might be going negative, which I'd guess is due to decreases in URR estimates; e.g. below for Bakken.

George Kaplan, says: 12/21/2017 at 8:50 am
And EF.

George Kaplan, says: 12/21/2017 at 8:54 am
About 50/50, maybe slightly more gas because of the big BP find, which I thought was 2.5Gboe but they have as 2.
Dennis Coyne, says: 12/21/2017 at 10:54 am
Thanks George,

Yes reserves decreased in 2015, probably due (in part) to a fall in oil prices from $59/b in Dec 2014 to $37/b in Dec 2015, the price in Dec 2016 was $52/b, using spot prices from the EIA, so perhaps reserves increased a bit in 2016, it will be interesting to see the 2016 estimate.

George Kaplan, says: 12/22/2017 at 3:22 am
I think they have to use averages for determining economic recovery not spot prices – I can't remember now if it's six month or annual (or other – I think maybe six months to March and September when they reevaluate) – 2016 would be bout the same or a bit lower depending on the time frame.
Dennis Coyne, says: 12/22/2017 at 8:59 am
Hi George,

I am not sure exactly how it works.

I found this:

https://sprioilgas.com/sec-oil-and-gas-reserve-reporting/

Initially, SEC rules required a single-day, fiscal-year-end spot price to determine a company's oil and gas reserves and economic production capability. The SEC Final Rule changes this requirement to a 12-month average of the first-of-the-month prices.

Using this I get
2014, 101
2015, 54
2016, 42

So 2016 reserves should decrease further if prices affect reserves.

George Kaplan, says: 12/21/2017 at 6:56 am
EIA reserve estimates were due at the end of November, but still haven't appeared, maybe they don't look so good?
Dennis Coyne, says: 12/21/2017 at 8:15 am
Hi George,

Last year it was mid Dec, maybe at the end of the year. Not sure why it takes so long as these are 2016 reserves as of Dec 31, 2016.

George Kaplan, says: 12/21/2017 at 6:59 am
https://www.rystadenergy.com/NewsEvents/Newsletters/UsArchive/shale-newsletter-december-2017

EMPIRICAL EVIDENCE FOR COLLAPSING PRODUCTION RATES IN EAGLE FORD

We have recently observed strong empiric evidence for the theory that a positive tendency in initial production rates for shale wells does not always lead to similar improvements in ultimate recovery.

Cabot announced they are selling up in the EF and concentrating on gas (15,000 bpd), maybe more likr them to come.

Fernando Leanme, says: 12/21/2017 at 10:14 am
I have had to work hard over the years to explain to management that oil completions have to be optimized, and that seeking the highest peak rate wasn't likely to be the best answer. This of course happens because high level oil company managers are good at sales and PowerPoint, but have opportunities for improvement in key areas.
Dennis Coyne, says: 12/22/2017 at 2:38 pm
Hi George,

Great article, thanks.

This confirms the suspicion of many that the high peak rates on newer wells (often with longer laterals and more frack stages and proppant, in short more expensive wells) don't boost cumulative output much. In the case of the Eagle Ford, wells in Karnes county (the core of the play) only increased output by about 40 kb over the older wells with less expensive completion methods.

Looking at Bakken data, it is clear that this is the case as well, with about a 10%to 15 % increase in cumulative output over the first 24 months and then similar output to older wells thereafter.

Many observers assume that a higher peak production from a well leads to higher cumulative output of the same proportion. That is if the peak goes from 400 kbo/d for a well projected to have an EUR of 200 kbo to a peak of 800 kbo/d for a newer well, it is often assumed that the new well will have cumulative output of 400 kbo. This is incorrect, in fact the newer well is more likely to have an output of 240 kbo an increase of only 20% rather than the 100% often assumed.

Ron Patterson, says: 12/25/2017 at 7:00 am
Another article citing that same Rystad report:

Shale Growth Hides Underlying Problems

However, Rystad Energy argues that there is some evidence that suggests those higher initial production (IP) rates do not necessarily translate into larger gains in the total volume of oil and gas that is ultimately recovered. A sample of wells in the Eagle Ford showed steadily higher IPs in recent years, but they also exhibited steeper and steeper decline rates.

George Kaplan, says: 12/21/2017 at 7:16 am
It seems a bit unlikely that Canada is going to continue increasing production as shown above over the next 6 to 8 years (after 2018 ramp ups are complete). There are no major greenfiled developments currently under construction and these take at least 5 years from FEED to production, there are continuing redundancies in the oil patch as some of the large, recent developments move from development to operations, and there is no spare pipeline (or rail) capacity such that the oil is at about $10 to $15 discount which is likely to increase as Fort Hill's ramps up through next year (and new pipeline permitting and construction is likely to take even longer than the actual oil sands project).

With Iran and Iraq – they may have oil in the ground, but they need huge,new surface production facilites to process it and supply water/gas for injection – those too take about 5 years to construct, assuming they can find some outside funding.

FreddyW, says: 12/23/2017 at 5:31 am
Dennis,

"OPEC has already demonstrated it can produce more, before they cut back in Jan 2017"

Yes OPEC may have some capacity to increase production. But many OPEC countries are in decline and Saudi Arabia does not have any Khurais or Manifa like fields left to develop. If I ruled Saudi Arabia then I wouldn´t produce more than 10 mb/d even if there were shortages. Better to stay on the platau a little bit longer. Iraq is the country with the biggest possibilities for increases. But they will do so when they are able to, not because of shortages. The other countries you mentioned have mainly expensive oil like tar sands in Canada, arctic in Russia and ultra deepwater in Brazil. Sure we can see increases there but it takes a long time to develop.

"I don't think oil producers were struggling at $100/b, they were overproducing so prices dropped."

US LTO increased production. But conventional prioduction not so much (outside OPEC). Remember this?
https://www.ft.com/content/35950e2a-a4be-11e3-9313-00144feab7de
(google for "ExxonMobil targets $5.5bn spending cuts")

"There's also rail, ridesharing, telecommuting, public transportation etc. High oil prices will lead to changes."

Yes I agree on that. Changes will have to happen.

Dennis Coyne, says: 12/26/2017 at 2:20 pm
Hi Tech guy,

http://www.imf.org/external/datamapper/NGDP_RPCH@WEO/WEOWORLD

World real economic growth has been about 3.5% per year since 2012.

https://www.bis.org/statistics/totcredit.htm?m=6%7C380%7C669

For the World Debt to GDP has increased from 226% in 2012 to 243% in 2Q2017, for advanced economies over the same period debt to GDP went from 272% to 275% and for emerging economies over the same period 145% to 190%.

The story is better access to credit for emerging economies from 2012 to 2017.

A major recession is not very likely.

The IMF forecasts real GDP growth of 3.75% for the World from 2018 to 2022.

Dennis Coyne, says: 12/27/2017 at 5:12 pm
Hi Techguy,

Oil prices at over $100/b were no problem for the World economy from 2011-2014, real GDP grew at 3.5% per year. No reason $100/b oil would cause a recession.

The $160/b (2017$) will only be about 3.3% of World GDP in 2026, assuming medium UN population growth scenario and real per capita GDP growth at 1.5%/year and 84 Mb/d C+C output in 2026.

That's a lower level than 2014.

George Kaplan, says: 12/21/2017 at 7:25 am
https://www.eia.gov/petroleum/weekly/

There was another big drop in US crude stocks by the twip – down 6.5 mmbbls with gasoline and diesel up 2 mmbbls combined. The crude level is fast approaching the middle of the 5 year average – how far does it have to undershoot before panic sets in?

Jeff, says: 12/21/2017 at 9:05 am
US SPR drawdown this year is about 21.5 million barrels, this is usually not included when calculating the 5y average. Planned annual sales are similar for the next couple of years ( https://www.eia.gov/todayinenergy/detail.php?id=29692 note that the figure shows fiscal year).

The story being told is that oil markets should be in balance next year or slight surplus if LTO maintains its pace. KSA low production during end of 2017 and the problems in Venezuela should result in continued stock drawdowns or only a small build during the spring (forties supports this too). Next summer driving season can be interesting, assuming the economy remains healthy. 2019 will be _very_ interesting since it will be revealed how much of the OPEC cuts were made voluntary.

Heinrich Leopold, says: 12/21/2017 at 4:49 pm
As inventories are still way above historical averages, it is important to bear in mind that substantial infrastructure in form of tanks and pipelines have been constructed over the last few years. This increased the necessary working inventory to keep the system functioning. So, the critical inventory level might be much higher than in previous years.
George Kaplan, says: 12/22/2017 at 3:26 am
They need a minimum amount of empty capacity to allow for blending and movement, not a minimum amount of stored volume to keep it working. The storage is to cover for upsets and to allow people to make money from arbitrage.
FreddyW says: 12/22/2017 at 5:39 am
You are wrong on this point. See
https://www.reuters.com/article/us-oil-storage-kemp/should-we-worry-as-oil-stocks-hit-3-billion-barrels-kemp-idUSKCN0T92PP20151120

The lowest value the commercial oil stocks have been since 1982 was 247 mb in 2004:
https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCESTUS1&f=W

It was propably close to the point where it was low enough to cause problems at that time. Why? Because from a commercial point of view, it´s just stupid to have more storage than you need. It´s cost money to store it and it´s better to sell it and get the money instead of just having it in storage. Also there is the SPR from where you can get oil if there is supply problems. So really no need to have large amounts of oil in storage.

George Kaplan, says: 12/22/2017 at 3:26 am
I was speculating about future undershoot, not current conditions.
Dennis Coyne, says: 12/22/2017 at 9:34 am
Hi George,

Yes that was how I interpreted your original comment. At least for US commercial crude stocks for the current week we are currently about 95 million barrels above the 2012 and 2013 average for the same week of the year, so perhaps another few years before any panic if stocks continue to decrease by 50 Mb per year as they did from 2016 to 2017. I chose 2012 and 2013 because oil prices were relatively high in 2012 and 2013 ($88/b and $98/b in Dec 2012 and Dec 2013 for WTI).

On rereading your original comment, I think when it gets near the lower edge of the 5 year average, panics sets in, it may take a few years.

Longtimber, says: 12/21/2017 at 4:17 pm
http://www.zerohedge.com/news/2017-12-20/another-governor-demands-state-pension-abandon-fiduciary-duties-sell-fossil-fuel-inv
A factor in Future production if Pension Shale Patch backing is reduced? A sample position breakout in there.
texas tea, says: 12/22/2017 at 8:03 am
"You can just say it is an industry in decline and there are better places to put one's money in." yes you can say "the industry is in decline" but then you would be wrong, not usual for you or many on the board. In this case however, the statement is not only wrong but delusional. Both production and demand are at record highs for oil natural gas and natural gas liquids. Of course why let facts get in the way of your political views, to quote a old line; fat, drunk and stupid in no way to go through life, son 😜
twocats, says: 12/22/2017 at 2:03 pm
"Both production and demand are at record highs for oil natural gas and natural gas liquids. "

But profits and stock valuations are terrible over the past five to ten years. Drillers, Explorers, Services, I'd be shocked if you could find an index combo that has come even close to matching S&P, Biotech, Semiconductors, NASDAQ. Not positive but E&P et al might not even have beaten transportation over the past decade. If you've been invested in Oil and Gas you are officially a loser.

Now, high yield bonds might be a different story. But in the wake of all the bankruptcies for the past five years was 100% of all bonds paid? They might have been, not sure.

Boomer II, says: 12/22/2017 at 6:40 pm
Oil companies themselves have changed the way they are investing. So I take that as a sign they, too, think their best times are behind them.

In terms of financial management, there are industries that have done better and are likely to do better than gas and oil. It's simply not a growth industry anymore.

Dennis Coyne, says: 12/24/2017 at 8:44 am
Hi Boomer II,

I think oil prices have an effect on investment, especially outside the LTO focused companies. For the LTO players they seem to focus on output growth regardless of profits, not a great long term business model.

David Archibald, says: 12/21/2017 at 10:10 pm
Regarding the gap, a third of the consumption growth over the last decade was from China. If Chinese consumption plateaus, as it very well might, then consumption growth from here will be less and the gap smaller. But putting in an assumption to change an established trend would just add another point of failure. This piece isn't so much a model as a creation story, trying to figure out why past expectations weren't met and where the known unkowns might come from. A big one of these is what the Permian might end up doing. I think that is why industry is paying up to get into the Permian. If you are not in the Permian you don't have a future. And shareholders will pay any amount of money for you to keep your job.

The piece was prompted by Ovi's observation that Non-OPEC less the big three has been in decline since 2004 – very encouraging. There are some systems in which a price rise does not result in an increase in production simply because the resource is clapped out. The gold market last decade for example. The gold price rose at an average of about 17% per annum year after year but gold production fell. That is not supposed to happen. Now some mines are digging up rock with just over one part in a million of gold in it and that pays for turning that rock into mud.

Paul Pukite (@WHUT), says: 12/21/2017 at 10:57 pm

David Archibald says

https://www.mediamatters.org/blog/2014/04/14/meet-david-archibald-the-fringe-scientist-predi/198886

Hickory, says: 12/22/2017 at 11:30 pm
Thanks Paul. Good to know the bias of the author.
Watcher, says: 12/22/2017 at 2:11 am
There was a July report for China imports that extrapolated to another 6.6% consumption growth year for them. No evidence of slow down. Ditto India.

Reminder to folks because it is a tad obscure. India's consumption growth is 8% but it's concentrated in an unusual way. LPG. They run motors on LPG, mostly motorbikes.

Watcher, says: 12/23/2017 at 2:24 am
https://fred.stlouisfed.org/series/M12MTVUSM227NFWA/

Vehicle miles driven. The increase is relentless as is US population growth. In the big smash of 2008/2009 there was a flattening of the increase but not really any sort of collapse. There was in oil price, but there was no need for it since consumption did not decline more than 5%. A quick look at historical consumption not just miles driven shows essentially the same tiniest of down ticks during that timeframe.

So I would say we need a new theory as to why price declines during recession. Doesn't appear to be less driving to work.

OFM, says: 12/23/2017 at 8:23 am
Consumption of oil would seem to decline a little bit right across the board during a recession, especially a big one. Construction machinery runs less, people travel less, buy fewer new things. It doesn't take very much by way of falling consumption to reduce the price of oil. The price of oil is highly inelastic, in the short term, and it's like milk.

The price of milk has to fall a long way before you can find uses for more than the usual amount.

People buy as much milk as they want for their kids, and maybe a little to cook with. NO MORE, even if the price goes down a lot. They don't have any use for it. So .. if it's coming to market, it has to sell cheaper in order for people to FIND uses for it. You can feed milk to the cat, and even to the pigs, if it's cheap enough. Farmers have been feeding excess milk to pigs just about forever, lol. I did so myself when we had more than we could use otherwise when I was a kid.

So . if the price of gasoline falls, maybe you take the ski boat to the lake one extra weekend , which can easily result in burning a couple of hundred gallons, round trip, as opposed to spending the weekend golfing at a cheap nearby course.

Or you drive the old car that's a gas hog more, because it saves putting miles on a newer car. When the price of gasoline bottomed out, I drove my old four by four truck a lot more than I would have otherwise, because I knew I would be retiring it before long, and wanted to get as many miles out of it as I could, saving wear and tear on the car .. which I'm planning on keeping indefinitely.

It broke down yesterday, and while it's not quite dead, I 'm thinking it's time to euthanize it, lol.

I'm also running my big yellow machines a lot more than usual, because when diesel is down close to two bucks, as opposed to four bucks or so, this saves me a hundred bucks a day, or more, if I stay with it, and I've got some pretty big long term projects such as a new lake, which I work on at odd times, whenever circumstances permit.

IF I were hiring out, which I don't , I would be able to offer a neighbor a hundred bucks or more off for a days work, with diesel at two, as opposed to four bucks. That would result in neighbors with cash, and thrifty Scots habits, spending some of their savings, doing long planned work sooner, or maybe going for a new small project.

Overall though construction falls off during a recession.

Most of the increase in total miles happens as the result of people driving new cars, and by and large, new cars and light trucks are far more fuel efficient than old ones.

And people who are broke spend as much on gasoline as they can afford, period. They MUST spend to get to work. If a tank at twenty bucks will get them to Grandma's house and back in their old clunker, they go. A tank a forty bucks often means calling rather than visiting.

Krisvis says: 12/23/2017 at 10:04 am
It is pretty much a given that Permian oil needs export market. This is from PAA conference call.

" PAA comments: If you look at the amount of 45-plus gravity. It's about 300,000 barrels a day now, growing to 1 million plus. So, a lot of those volumes are coming, and that's really the crux of the benefit of a Cactus pipeline being able to take that directly to the water because I think we are going to see a lot of pushback from refiners. We are already starting to see it as far as the lightning of the general stream going up to Cushing.

The refiners don't want any lighter. So, it's an integral part of the strategy and a piece of everything we've been building."

Delaware basin produces 56% oil that is greater than API gravity 50 plus according to Woodmac.

Every week I see announcements to export US oil. Here are some.

https://www.businesswire.com/news/home/20171206005367/en/Wolf-Midstream-Partners-Plans-New-Permian-Basin#.Wik_YewJKuc.twitter
https://www.upi.com/More-US-oil-export-capacity-in-the-works/8051512568297/?spt=su&or=btn_tw
https://www.businesswire.com/news/home/20171222005375/en/EPIC-Announces-Approval-New-Build-730-mile-Permian

HuntingtonBeach, says: 12/24/2017 at 2:34 am
"OPINION-
Don't be taken in by the surge in oil prices

But oil prices have continued to be volatile. They went down from $114 per barrel in June 2014 to $26 per barrel in early 2016 and moved gradually upward to touch $64 per barrel in late November 2017. On the other hand, economic forecasts expect oil prices to continue to rise to a range of between $70 to $80 by the end of the first quarter of 2018. Futurists in the field base their expectations on the following indicators:

1) The cooperative program and understanding between the Kingdom and Russia, the two largest producers in the market. 2) The continuation of efforts to reduce oil surplus in the market 3) The agreement among OPEC members and some non-members to continue their programs of production reduction up to the end of 2018. 8. Last but not least, we need to develop a culture of saving to increase our capital buildup for the economy. This is not an easy task, and requires a total rehabilitation of our consuming behavior."

http://www.saudigazette.com.sa/article/524652/Opinion/OP-ED/Dont-be-taken-in-by-the-surge-in-oil-prices

Heinrich Leopold, says: 12/27/2017 at 10:04 am
Interesting development for natgas: Iroquois zone 2 spot prices just shot up to over 32 USD per mcf. This is nearly 1000% up from last month. As much depends now on the future weather, it shows how volatile the US gas market can be – despite massive efforts towards more supply.

As the industry has completely shifted the supply from the South to the Northeast, hurricanes are no more a threat to supply, yet freeze offs become now a major issue. Previously just the supply of the Rockies has been hampered by freeze offs. As this concerned just 10% of US total production, this has never been an issue for gas supply. However, as currently 70% of supply comes from the Northeast and the Rockies, freeze off could lead to serious supply disruptions, if the freeze continues.

The next weeks could now be very interesting.

coffeeguyzz, says: 12/27/2017 at 11:07 am
Not freeze offs, simply lack of pipeline capacity in the face of unprecedented demand. When the receipt figures from the various transfer points are published, they should show 100% capacity utilization.

At this posting, New England is burning oil for 17% of their electricity generation. Wholesale spot price for electricity is $230/Mwh, about 10 times regular pricing. Later this afternoon, demand is expected to increase more.

The supply is there in the pipelines, Mr. Leopold, there just isn't enough of them to satisfy demand during this cold spell.

Heinrich Leopold, says: 12/27/2017 at 11:47 am
Coffee,

I was expecting your reply. Thanks for your opinion.

Nevertheless, there has been huge infrastructure spending over the last years. The pipelines should be already in place.

However, freeze offs are not an issue just yet. If the gas wells freeze off later in the week (temperatures are going to zero down until Cincinnati) , the shortage of supply may be really a concern. There is just one week left and we know it.

This is one of the structural weaknesses of Shale gas:you probably do not have it when you need it the most.

coffeeguyzz, says: 12/27/2017 at 12:35 pm
Mr. Leopold

The pipelines that have been completed greatly favor delivery west to southwest from the Appalachian Basin.

The Atlantic Sunrise is being built that will deliver into the NYC area via a hookup with Transco, I believe.

Deliveries to the north, that is New York State and New England have been virtually nil.

Yes, the storage aspects of all gas products is a challenge, and – as you mentioned – the coming cold days will highlight the vulnerabilities of the situation, sadly, at great expense to many.

[Jan 03, 2018] Possibible commection between oil prices and the US trade deficit.

Jan 03, 2018 | peakoilbarrel.com

Heinrich Leopold says: 12/21/2017 at 6:44 am

The main catalyst for more oil demand and higher oil prices is actually the US trade deficit.

A high US trade deficit weakens the US dollar and thus ignites higher worldwide growth and oil demand.

This is why Shale condensate production is so important as it reduces the US trade deficit.

[Jan 03, 2018] The oil market experienced substantial structural changes besides the volume growth and increased demand from non-OECD countries. The Shale production increased oil volume growth, yet it also shifted growth towards light distillates and left the world oil market short of middle distillates.

Jan 03, 2018 | peakoilbarrel.com

Heinrich Leopold says: 12/21/2017 at 5:49 am

Mr. Archibald,

Thank you for your report and for presenting your view about future developments. However, in my view the oil market experienced substantial structural changes besides the volume growth and increased demand from non-OECD countries. The Shale production increased oil volume growth, yet it also shifted growth towards light distillates and left the world oil market short of middle distillates.

This is best demonstrated by the dramatic change in the mix of US hydrocarbon market. As the US market is swamped by light distillates, it is actually hit by an extreme shortage of middle distillates, which is used for the production of diesel, aviation and shipping fuel, as well as heating oil. The recently EIA weekly supply estimate revealed that the US had to import 80% more distillate fuel oil than last year. Distillate fuel oil inventories are 25 mill barrels below last year and reach a multi year low. It is for this reason that the total imports surged again over 10mill bbl per day as the US has to cover the shortage of middle distillates despite a glut of light distillate production. In that sense the US has to import a growing amount of expensive conventional oil containing middle distillates and has to export the surging Shale condensate production, which does not meet the specifications of international crude oil benchmarks, at a low price.

As a consequence, the price of condensate will be falling considerably and the price of crude oil containing middle distillates will be rising in the near future.

George Kaplan, says: 12/21/2017 at 7:08 am
Most of the worlds producing countries have production that is gradually getting heavier, condensate is wanted worldwide by refineries for blending and has a premium price over heavy oil grades, which is likely to continue (e.g. EF condensate $53, South Texas Heavy $48; Canadian Condensate $58, Canadian Sweet $49).

[Jan 03, 2018] Distillates share in the USA oil production is under scrutiny

Notable quotes:
"... Politics is a major part of oil markets and keeping Russia at bay is a goal for the administration I guess. ..."
"... But the profound backwardation in the futures market for Brent at the moment tells me that reality is storage withdrawal until shortage for oil. ..."
"... Especially distillates is under scrutiny because of lack of Venezuela heavy oil and too much light oil from Texas. Conventional oil worldwide is suffering from underinvestment and OPEC policy is as expected to serve their own interests. The main problem is easy oil mid API range (too much exploitation). ..."
"... Your posts meets exactly my point as Shale increases the supply of light distillates yet does little to cover the growing worldwide shortage of middle distillates. ..."
"... I think Euan has the price about right ($80/b at the end of 2018 for Brent) but I disagree with him on World oil output in 2018. ..."
"... Anybody knows what the definition of crude oil by Texas RRC is? The reason I ask the question is because the production increase up to API gravity 40 is only 70K/day out of 767 K/day from November 2016 to October 2017. PAA said in the conference call that Delaware basin is producing mostly oil with APII gravity higher than 45 and needs to be exported as our US refiners will not touch it. ..."
"... Shale produces mostly condensates and light distillates which are an excellent feedstock for the chemical industry. However this concerns just 15% of the oil market. At the beginning of the Shale boom Shale light distillates could substitute a lot of conventional oil which was previously used in the chemical feedstock market. This brought down the oil price. ..."
"... I am wondering if EIA is including NGLs as I see OK production has ramped up quite a bit. A lot of OK liquids are 55+ API. ..."
"... API gravity is a density measurement of oil. Measures how heavy it is compared to water. The higher the API number the lighter the oil. Refineries do not create "middle distillates" out of nothing. They extract them from oil. "Middle distillates" are middle heavy liquids within oil. Diesel and Kerosene. Read truck/tractor fuel and jet fuel. Gasoline is a light distillate. Heavy distillates would be something like bunker fuel or asphalt. ..."
"... This is all within the same liquid called "crude oil". Traditional labels are applied as regards the word "quality". High "quality" crude oil was light and "sweet". Sweet refers to having low content of materials that cause problems in refining. Like sulphur or vanadium. But tradition has run up against the new nature of crude oil. It has gotten too light. It often lacks middle distillates. ..."
"... I have examined assays of many different oil types from all over the world. Jet fuel boils about 160 degs C and the heaviest diesel boils up around 350 degs C. So "middle distillates" that are actual fuel for things that matter are in the assay between those temps. ..."
"... All I'm worried about is you shalies killing the oil price again. 2015-17 not good for anyone actually making $$ from the commodity of oil. (Corporate management gets theirs regardless of profits so I don't count them). ..."
"... Corporate shale CEO's receive enormous salaries and compensation packages based on booking fake reserves. The profitability of their corporations or shareholder equity means little to them. Midstream companies that gather shale oil and shale gas are totally reliant on the shale oil industry to continue to be able to borrow more money. They are sheep in a flock. The entire thing from the top down is a façade using OPM. Nobody borrowing this money is personally on the hook; there are no personal loan guarantees nobody is going to be ruined when the entire thing collapses. The scheme is based on getting as much as you can as fast as you can and getting out unscathed. ..."
Jan 03, 2018 | peakoilbarrel.com

Kolbeinh says: 12/29/2017 at 2:00 pm

Politics is a major part of oil markets and keeping Russia at bay is a goal for the administration I guess.

And so is the target of 3% gdp growth for the president. But the profound backwardation in the futures market for Brent at the moment tells me that reality is storage withdrawal until shortage for oil.

Especially distillates is under scrutiny because of lack of Venezuela heavy oil and too much light oil from Texas. Conventional oil worldwide is suffering from underinvestment and OPEC policy is as expected to serve their own interests. The main problem is easy oil mid API range (too much exploitation).

Energy News says: 12/29/2017 at 3:43 pm
Liquefied Petroleum Gases (ethane+propane+butane) October production: 3 499 kb/day +281 m/m
https://www.eia.gov/dnav/pet/pet_pnp_gp_dc_nus_mbblpd_m.htm

Heinrich Leopold says: 12/30/2017 at 8:26 am
Energy News

Your posts meets exactly my point as Shale increases the supply of light distillates yet does little to cover the growing worldwide shortage of middle distillates.

As the US exports mostly cheap light distillates and imports expensive real crude oil the recent trade numbers confirm a swift deteriorating goods trade deficit and consequently a sharply falling US dollar as we have seen over the last few days. All what Shale is currently doing is to depress the price of light distillates yet it leaves the growing supply shortage of real oil unaffected.

Dennis Coyne says: 12/31/2017 at 10:20 am
Hi Heinrich

The increased LPG is due to increased natural gas production especially "wetter" natural gas. The has less to do with LTO output and more to do with shale gas output.

It also has very little to do with condensate which is liquids that condense at the lease (it is called "lease condensate") at ambient temperature and pressure.

LPG is at either higher pressure or lower temperature than ambient conditions.

Longtimber says: 12/29/2017 at 11:43 pm
https://www.zerohedge.com/news/2017-12-29/crypto-qatar-these-are-best-worst-assets-2017
NG -- Ugly.. A Trainwreck for 2017.
What Coke Nose Jim Crammer use to say? time to BACK UP THE TRUCK?
Heinrich Leopold says: 12/30/2017 at 6:47 am
As it is too early to assess the impact of the current cold on gas production the recent 40% Canadian rig count slump may serve as a harbinger for the US for next weeks . It is not only freeze offs but but also transport infrastructure and pipeline constraints.
Dennis Coyne says: 12/31/2017 at 10:22 am
Hi Heinrich

Canadian rig count always drops over the Christmas to New Year's holiday this is not unexpected.

Jeff says: 12/30/2017 at 9:00 am
Haven´t seen it posted here yet. Euan Mearns who sometimes post here has a new blog post on "oil price scenario for 2018": http://euanmearns.com/oil-price-scenario-for-2018/ . I like figure 4 think that Ian Schindler has showed something similar for longer time periods (70/80´s).

Euan lacks at least two factors but they are more or less impossible to forecast particularly: i) economic growth (demand) ii) how much of the OPEC cuts are voluntary. Also his calculation of natural decline is wrong he assumes all legacy production is in decline.

Dennis Coyne says: 01/02/2018 at 2:03 pm
Hi Jeff

Thanks. I think Euan has the price about right ($80/b at the end of 2018 for Brent) but I disagree with him on World oil output in 2018.

I think World C+C output will increase at about 600 kb/d per year over the next few years until about 2020 and then will gradually slow down as LTO output and oil sands output will not increase rapidly enough to offset declining output elsewhere in the World by 2025 potentially there could be a short plateau until 2028 or a longer plateau from 2022 to 2029 the higher World output goes the more likely that any plateau will be very short. I agree with your assessment that Euan has overestimated the World decline rate at about 8% which for C+C would be about 6.5 Mb/d not all of World C+C oil fields are in decline some are on plateau and a few are increasing output (at the field level) though if one considers individual oil wells probably 99% of oil wells currently producing (weighted by daily output) are likely to be in decline.

Euan may be looking at things from that perspective which would mean (assuming my 98% guess is correct and that those wells decline at an average annual rate of 8%) we would need 6.4 Mb/d of newly completed wells just to offset the declining wells in order to remain on a plateau.

Euan believes the World will just be able to manage this I think higher oil prices will enable 7.1 Mb/d of oil completions Worldwide over the next year with a net increase in World C+C output.

We will not really even know World C+C output for 2017 until March 2018 (I use EIA estimates) and 2018 output will be unknown until March 2019.

The most recent 12 months of World C+C output (average monthly output from Oct 2016 to Sept 2017) was 80 999 kb/d based on EIA data.

Watcher says: 12/30/2017 at 9:52 am
The latest numbers out of China say oil consumption growth this year 2017 will be double last year's. This year is pegged at 6.5% with a month to go. India numbers as of Oct say their 2017 growth rate will be about 8% as it was last year.
Energy News says: 12/30/2017 at 12:16 pm
China's crude oil stockpiles the latest numbers: There is a big difference between China's official numbers and analysts calculated numbers (China says +90 kb/day vs IEA up to +1000 kb/day)

BEIJING Dec 29 (Reuters) -- China had stored 37.73 million tonnes or 275 million barrels in nine bases by mid-2017 up from 33.25 million tonnes at the end of June the previous year according to the data from the National Energy Administration (NEA).

Adding 4.48 million tonnes of crude oil over the 12 months to June 2017 is equivalent to adding 89 600 barrels of oil per day (bpd).

Reuters (December 29 2017) https://www.reuters.com/article/china-crude-reserves/update-2-china-accelerates-stockpiling-of-state-oil-reserves-over-2016-17-idUSL4N1OT2HF

China's (commercial) crude inventories in November hit a seven-year low of 26.15 million tonnes Xinhua data showed.
Reuters (December 28 2017) https://www.reuters.com/article/us-global-oil/oil-prices-stay-near-high-on-strong-u-s-refinery-runs-china-data-idUSKBN1EM04P

You'll remember this

LONDON October 12th 2017 (Reuters) -- China has built its crude oil stockpiles at a record pace in 2017 and while its purchases could tail off towards the year-end inventories could hit the billion-barrel mark in six months the International Energy Agency said.

The agency estimates that over the first half of 2017 Chinese stockbuilding hit a record 1 million b/day.

https://uk.reuters.com/article/oil-iea-china/chinas-crude-oil-buying-spree-looks-set-to-continue-iea-idUKL8N1MN2GO

Krisvis says: 12/30/2017 at 2:21 pm
Anybody knows what the definition of crude oil by Texas RRC is? The reason I ask the question is because the production increase up to API gravity 40 is only 70K/day out of 767 K/day from November 2016 to October 2017. PAA said in the conference call that Delaware basin is producing mostly oil with APII gravity higher than 45 and needs to be exported as our US refiners will not touch it.
Heinrich Leopold says: 01/02/2018 at 1:56 pm
Krisvis

Thanks for posting your comment. This is exactly my point.

Shale produces mostly condensates and light distillates which are an excellent feedstock for the chemical industry. However this concerns just 15% of the oil market. At the beginning of the Shale boom Shale light distillates could substitute a lot of conventional oil which was previously used in the chemical feedstock market. This brought down the oil price.

As Shale oil has now serious troubles to enter the transportation fuel market (due to a lack of middle distillates) the US is forced to sell cheap light distillates on export markets and import on the same time expensive real oil containing middle distillates at a high price. So US imports of real oil are on the rise again. This is why we are seeing a rising oil price and US oil trade deficit again. The dollar has already reacted by a steep slump over the last days.

Dennis Coyne says: 01/02/2018 at 2:19 pm
When one looks at the price of oil with API 40-45 it trades at a premium to heavy oil. Oil above 45 or 50 API is typically classified as condensate.

As George has commented repeatedly most of World output is getting heavier and is more expensive to refine. There are many customers around the World that need the lighter oil to blend with heavier crude. In fact much of the US condensate goes to Canada to blend with bitumen so it will flow through pipelines.

For net crude oil imports for the US see

https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MCRNTUS2&f=M

Dennis Coyne says: 01/02/2018 at 2:22 pm
Wrong chart in comment above sorry( link has updated chart)

Dennis Coyne says: 01/02/2018 at 2:30 pm
This chart is from EIA (chart above used the EIA data Jan 2015-Oct 2017).

The US has had net imports of crude oil since 1945 (based on monthly data).

On an annual basis the last year the US was a net exporter of crude oil was 1943. Net imports of crude peaked (annual data) in 2005 at over 10 Mb/d and fell to 6.9 Mb/d in 2015 and rose slightly in 2016 (by 0.36 Mb/d) to 7.26 Mb/d in the most recent 12 months net imports have fallen to 6.99 Mb/d.

texas tea says: 12/30/2017 at 5:14 pm
"Whatever the case nothing creates job and opportunities the way oil and natural gas exploration does at this time"
https://oilprice.com/Energy/Energy-General/GOP-Tax-Bill-Is-A-Boon-For-Oil-And-Gas.html

choke on it boys the truth comes out making america great again not just a slogan anymore 😊

Boomer II says: 12/30/2017 at 5:57 pm
Companies losing money don't pay income taxes anyway. A cut won't do them any good.
Boomer II says: 12/30/2017 at 6:04 pm
"Given President Donald Trump's obsession with reviving the dying industry it's almost surprising that the Republican tax bill doesn't contain any new breaks or incentives that explicitly help coal. 'Energy is actually the least of the beneficiaries in this bill and the simple reason is that energy already has so many carve-outs and exemptions in the tax code that a lot of U.S. based companies just pay hardly any income tax as it is ' said Pavel Molchanov an energy research analyst at the financial firm Raymond James. 'So there is virtually no effect on energy of any kind either positive or negative and that includes coal.'"

https://newrepublic.com/article/146388/tax-bills-gift-big-coal

Mike says: 12/30/2017 at 6:24 pm
Choke on this tee tee: because the shale oil industry can't keep its MasterCard(s) in its pants its overleveraged LTO oversupply is the direct cause of low volatile oil prices that has resulted in the loss of over 440 000 oil and gas jobs around the world since 2014. https://www.rigzone.com/news/oil_gas/a/148548/More_Than_440000_Global_Oil_Gas_Jobs_Lost_During_Downturn . There are still an estimated 55 000 still out of work in America in EOR GOM and in stripper well production. Your beloved shale industry got nothing nada zip out of the new tax law except interest deduction limits which will hurt it not help it.
Dennis Coyne says: 12/30/2017 at 8:30 pm
Hi Mike

If most of the LTO companies are losing money I don't think they pay federal taxes on losses so the reduction in tax deduction for interest paid would have no effect.

Am I missing something?

Mike says: 12/30/2017 at 9:03 pm
No but tee tee is. Its not easy you know getting thru.

Take for instance the help the oil and gas industry is getting by opening ANWAR. Who is that going to help particularly since there is countless geological and depositional studies done that pretty much condemn the entire area? Or lets take the "roll back" of certain MMS/BSEE regulations regarding multi-string pressure and BOP testing in the GOM after the Macondo incident? That is stupid shit that dumb uninformed people buy into that has nothing to do with reality. Reality is those regulations were on the books and un-enforced. It cost BP what $80B to cut some corners? Nobody I repeat nobody is going to let that happen again. Whatever the current BS is about reducing regulations on the oil industry and helping American become great again by unleashing its hydrocarbon "might " on the rest of the world is laughable. Who is laughing all the way to the bank?

OPEC and Russia dat' who. They are watching America's energy policies get worse not better.

texas tea says: 12/31/2017 at 5:53 pm
you can educate the ignorant but not the stupid who said that oh yea me. any one of my birddogs knows more about north slope geology than you mike. perhaps you can make a new years resolution try to be accurate at least once in 2019 gonna be hard for a "man" like you but give it a shot 😜 oh yea surely you can do better than bathroom jokes after all a "man" of your intellect should oh never mind 😎
HuntingtonBeach says: 12/31/2017 at 7:59 pm
"you can educate the ignorant but not the stupid who said that oh yea me. "

Enough said

shallow sand says: 12/30/2017 at 9:00 pm
I am wondering if EIA is including NGLs as I see OK production has ramped up quite a bit. A lot of OK liquids are 55+ API.
Guym says: 12/31/2017 at 8:40 am
Read the post twitter link Dean posted above. Most interesting is a post by a CPA who was involved with the 914 reporting. He thinks it is double counting the M&A production. However within his post he describes that the 914 survey is actually done by a third party contractor. In his discussion with him they were using the higher of projected drilling info or operator report. To put it in my perspective I don't see the 914 having anything like the consistency of the RRC. IMG Crown Energy Services is the third party contractor. Look up their website. Not a lot of time spent on it for a heavy duty IT company so no warm fuzzies there. One could speculate that the primary income is from the EIA contract. EIA paints themselves into a corner with wild projections on Texas production. They call up the third party contractor and question the figures they think are too low. Contractor has to do something to keep the contract don't they?
Now nobody at EIA can get fired for cooking the books because they have plausible deniability.
Dennis Coyne says: 12/31/2017 at 10:30 am
Hi Guym

From May 2015 to July 2017 the 914 survey was pretty consistent (within 275 kb/d and 365 kb/d of drilling info estimate average 320 kb/d). Perhaps that has changed I would not put much weight on a Twitter comment by a CPA. We will see in a few months what the drilling info estimates are which are usually within 1% of the final output after 3 to 5 months. So by March or April we may know what Oct 2017 TX C+C output is.

As Mike says in Texas they are patient.

Guym says: 12/31/2017 at 11:30 am
That CPA owns his own oil company who reports to the contractor. Do you?
Dennis Coyne says: 12/31/2017 at 4:15 pm
No. Has he been reporting NGL (in the US this would be natural gas plant liquids) to the contractor as C+C?

In any case I agree with Mike patience is needed. Perhaps the 914 survey is now covering a much higher percentage of Texas C+C output relative to the May 2015 to July 2017 (27 month long) period.

Time will tell.

Guym says: 12/31/2017 at 4:50 pm
"Double counting M&A production" has nothing to do with NGLs. He was admonished by the contractor for under reporting production that was sold off. Instead of using his figures they used his old wells as listed in the drilling info estimate. Hence double reporting it. But what was more interesting is the contractor part. They can send out the survey but can determine whatever they want to include.
Dennis Coyne says: 01/02/2018 at 8:53 am
Hi Guym

The EIA contractor checks with operators when reported numbers are different than expected and sometimes they use the drilling info data instead if the numbers don't look right.

The numbers are revised over time as more data comes in. These are estimates nobody knows final output for many months (for the entire state of Texas or all of the US).

Dennis Coyne says: 01/02/2018 at 8:48 am
Hi Guym

The link below covers the 914 survey methodology. Yes mergers and acquisitions are a potential problem. The EIA does it's best to account for these to avoid double counting.

About 450 of the largest oil and gas companies that produce about 90% of US oil and gas output (of approximately 13 000 petroleum producers in the US) fill out the 914 survey.

https://www.eia.gov/petroleum/production/pdf/eia914methodology.pdf

Dennis Coyne says: 12/31/2017 at 10:34 am
Hi Shallow sand

No not NGL only crude plus lease condensate. The EIA has never based C+C on API gravity just liquids produced in the oil field as far as I know.

Watcher says: 12/31/2017 at 11:21 am
A bit of recap for newcomers:

API gravity is a density measurement of oil. Measures how heavy it is compared to water. The higher the API number the lighter the oil. Refineries do not create "middle distillates" out of nothing. They extract them from oil. "Middle distillates" are middle heavy liquids within oil. Diesel and Kerosene. Read truck/tractor fuel and jet fuel. Gasoline is a light distillate. Heavy distillates would be something like bunker fuel or asphalt.

This is all within the same liquid called "crude oil". Traditional labels are applied as regards the word "quality". High "quality" crude oil was light and "sweet". Sweet refers to having low content of materials that cause problems in refining. Like sulphur or vanadium. But tradition has run up against the new nature of crude oil. It has gotten too light. It often lacks middle distillates.

Here is a chart posted a year or so ago by Jeffrey Brown: https://imgur.com/a/cqtvu

I have examined assays of many different oil types from all over the world. Jet fuel boils about 160 degs C and the heaviest diesel boils up around 350 degs C. So "middle distillates" that are actual fuel for things that matter are in the assay between those temps.

https://www.statoil.com/en/what-we-do/crude-oil-and-condensate-assays.html

Scroll down to their .XLS spreadsheets for various blends that they have assay'ed. I would say it does not conform to the chart. BUT. There are some caveats scattered around. "Blend". Dumbbell liquid. This means if oil from one field doesn't have what you want in it you add oil from another field to it to get the constituent parts. Assay it and declare it looks good. BP has an assay website as do others like Capline from Marathon.

All this was to address the question above -- "what is the definition of oil". Study all that and you'll see that the definition is whatever the money agenda says it should be that moment.

George Kaplan says: 12/31/2017 at 11:40 am
Crude oil is only getting lighter in the US everywhere else it's getting heavier and the light LTO is likely to be in greater demand for blending. Refineries set up for heavier oil usually have crackers -- either fluid crack crackers or hydrocrackers -- which can convert heavier components to gasoline and diesel but can only go so far and blending lighter oil allows the throughput to be maximised. There is no current problem from the oil range of oils being produced.
Energy News says: 12/31/2017 at 12:22 pm
HOUSTON (Reuters) -- Several oil pipeline companies this month agreed to move ahead on multi-billion-dollar projects that would link Texas shale fields to Gulf Coast export hubs offering new outlets for burgeoning output expected in 2018.

https://www.reuters.com/article/us-usa-oil-pipelines/pipeline-projects-move-ahead-to-tackle-rising-texas-shale-output-idUSKBN1EN1PD

texas tea says: 12/31/2017 at 6:09 pm
That information must leave many readers here perplexed. You have pipeline companies refineries etc. building out the infrastructure to process and transport the oil but Mike tells us it's all hype not to be believed geez and even Dennis agrees with him what are we to believe? I bet they did not do their due diligence probably just read a few presentation and decided hey lets go spend a few billions of dollars for the hell of it Right Mike? I think I will follow the money on this one and not the want-to-be pretend only in cyber space oil men bloggers
shallow sand says: 12/31/2017 at 8:33 pm
TT.

All I'm worried about is you shalies killing the oil price again. 2015-17 not good for anyone actually making $$ from the commodity of oil. (Corporate management gets theirs regardless of profits so I don't count them).

And if your response is "compete" I will know you are not for real on owning oil. Because I don't know how a non-op can make $$ on wells that do not payout. Shale CEO's can but non-ops can't IMO. So I don't know how you could be happy seeing Shale getting ready to kill the oil price again?

The only thing I can see killing $55-65 WTI at this point is overproduction of US shale. And it will hurt them too if they overproduce. The shareholders not the management. But it should absolutely destroy non-ops like you if we once again have $25 oil and $1.50 gas.

Mike says: 12/31/2017 at 9:33 pm
Corporate shale CEO's receive enormous salaries and compensation packages based on booking fake reserves. The profitability of their corporations or shareholder equity means little to them. Midstream companies that gather shale oil and shale gas are totally reliant on the shale oil industry to continue to be able to borrow more money. They are sheep in a flock. The entire thing from the top down is a façade using OPM. Nobody borrowing this money is personally on the hook; there are no personal loan guarantees nobody is going to be ruined when the entire thing collapses. The scheme is based on getting as much as you can as fast as you can and getting out unscathed.

Why promote or cheerlead for an industry that is obviously grossly unprofitable and that is going to ultimately leave hundreds upon hundreds of billions of dollars of debt for our children to deal with? Because you don't care. You don't give a rat's ass. Because exactly like a corporate shale oil CEO royalty owners receiving income from shale wells free and clear of all costs don't care about debt about profitability about depleting our nations remaining hydrocarbon resources and conservation they just care about themselves.

The Peak Oil Barrel community can decide for itself who the "pretenders" actually are.

[Jan 03, 2018] If global oil demand increases by around 1.5mbld as it has done over the last few years then $90 + oil is very possible in 2018. Obviously it also depends on how strongly US tight oil grows and what OPEC will do.

Notable quotes:
"... In the oil business debt is having stage 2,3 or 4 cancer. Ignoring its treatment is not the cure. Again, take Shallow's CLR's diagnosis: it has $6.6B of debt and only $10M of COH. If independently audited its reserves would not cover its long term debt. It is basically insolvent. It belongs in Hospice Care. You are relying on corporations like that to make your predictions come true. ..."
"... If global oil demand increases by around 1.5mbld as it has done over the last few years then $90 + oil is very possible. Obviously it also depends on how strongly US tight oil grows and what OPEC will do. ..."
"... At the moment US growth and OPEC spare capacity could drive down prices again. I believe in around 3 years time there will be very little OPEC spare capacity and increases from the US, Canada, Brazil, Iraq new developments etc will not be able to meet the extra demand. ..."
"... The big factors for future energy costs is the lack of CapEx in replacing consumption and the lack of finding replacement reserves. A lot of big western projects that would have replaced depletion were cancelled. Western Oil companies opted to drill in Wall Street (ie Stock buybacks) or buying up smaller companies instead of developing newer fields (Artic and Offshore). ..."
"... I suppose sooner or later Middle East Producers will follow the Western Oil Companies by choosing to Drill Wall Street instead (ie the Saudi Aramco IPO). ..."
"... So you own your country, as a practical matter, and you therefore own your own ( national ) oil company. Oil's cheap. You expect it to STAY cheap for years. But maybe you know a buyer that will pay you a hell of a lot of money for your oil company, fifty times, a hundred times, maybe , the net cash flow you're getting after paying the oil company's expenses. Now if you were an ordinary businessman, such as the ones with an MBA from any of the Ivies, you would sell in a flash, and take that cash and put it into another business. ..."
"... I'm as far from an expert as east is from west, but according to everything I read, investment in the oil industry is at very low levels, world wide, and oil wells are like apple trees Ya gotta have new ones, cause the old ones quit on ya. ..."
Jan 03, 2018 | peakoilbarrel.com

x says: 12/23/2017 at 7:09 am

Dennis, I am not capable of predicting what the price of oil is going to be in six months, much less six years. Neither are you. Shallow and Fernando, both oily folks, might state a "range" scenario but if you were to pen them down they'd likely say they don't know either.

If the predictor of our hydrocarbon future has to "qualify" those predictions based on what the price of oil might be, I am sorry, I don't see the point in the prediction at all. You, Mr. Archibald, and many others all miss the point entirely with regard to LTO growth in America. You assume that because LTO has grown, it will continue to grow. You focus on oil prices to make your predictions come true and ignore, entirely, that shale oil extraction in America is not nationalized, it is managed by private enterprise. Private enterprise must succeed, it must be profitable enough to drill new wells from old wells. Now, because of poor business decisions in the past the US LTO industry must manage its old debt, ultimately pay down that old debt AND create sufficient net cash flow to drill new wells without getting further in debt. It cannot do that at prices short of $100 or more for a sustained period of time. It is a business, Dennis; I am sorry you cannot seem to grasp that.

In the oil business debt is having stage 2,3 or 4 cancer. Ignoring its treatment is not the cure. Again, take Shallow's CLR's diagnosis: it has $6.6B of debt and only $10M of COH. If independently audited its reserves would not cover its long term debt. It is basically insolvent. It belongs in Hospice Care. You are relying on corporations like that to make your predictions come true.

I suggest you quit worrying about the price of oil and start focusing on profitability and debt. You seem to embrace debt as being acceptable in the reserve growth LTO business model. That is a very bad mistake, a mistake common to people that have never been in the oil "business," that must write checks, receive revenue from the sale of oil and gas production and be profitable. Or not eat.

Instead I suggest you focus on where the money is going to come from to keep funding this miracle of US LTO growth. That growth potential is not price sensitive, it is capital sensitive.

Mike says: 12/24/2017 at 12:06 pm
Rune has a good handle on it all, indeed. Regarding LTO debt and new tax laws, he was kind enough to recently send me this:

https://wolfstreet.com/2017/12/22/what-will-the-tax-law-do-to-over-indebted-corporate-america/

Merry Christmas, Dennis.

Peter says: 12/22/2017 at 3:27 am
Hi Dennis

If global oil demand increases by around 1.5mbld as it has done over the last few years then $90 + oil is very possible. Obviously it also depends on how strongly US tight oil grows and what OPEC will do.

At the moment US growth and OPEC spare capacity could drive down prices again. I believe in around 3 years time there will be very little OPEC spare capacity and increases from the US, Canada, Brazil, Iraq new developments etc will not be able to meet the extra demand.

Many people do not realise how many electric vehicles would have to be sold to cope with a world where oil production stops growing. About 30 to 40 million of the 100 million vehicles would have to be fully electric, hybrids would not be enough.

TechGuy says: 12/26/2017 at 1:56 am
Peter Wrote:

"Global demand has been slowing down in recent years, so the graph does not show a gap of 8 million between demand and supply."

Seems likely that global demand will likely to decline as Western & Asia populations continue to grow older. Currently the global economy has been propped up by ZIRP and lots of QE (China, Japan, EU, & US). Worldwide Debt has nearly doubled since 2008 due to cheap & easy credit. Sooner or later there will another global recessions that forces a reduction in Oil demand.

The big factors for future energy costs is the lack of CapEx in replacing consumption and the lack of finding replacement reserves. A lot of big western projects that would have replaced depletion were cancelled. Western Oil companies opted to drill in Wall Street (ie Stock buybacks) or buying up smaller companies instead of developing newer fields (Artic and Offshore).

I suppose sooner or later Middle East Producers will follow the Western Oil Companies by choosing to Drill Wall Street instead (ie the Saudi Aramco IPO).

My guess is that Oil pricing does not increase much (excluding geopolitical events/natural disasters) over the next 2 years. I think the odds favor a decrease in prices and consumption over the next 2 years caused by another global recession: Interest rates are rising at a time when consumers are borrowing more to meet ends, and consumers savings rates are near zero (perhaps going negative again).

OFM says: 12/21/2017 at 4:34 am
I don't do any modeling and number crunching. Couldn't even if I wanted to, due to lack sufficient statistical and computer skills.

But I don't see where all this new production is supposed to come from, without the price going up. There's nothing in the news I read here, or at a number of other places, indicating that any huge new fields that are going to be cheap to produce have been discovered in recent times, and are in the process of being developed.

So how is it that new production adequate to offset the inevitable decline of the huge older fields that still supply the bulk of the oil, PLUS enough more to actually increase production somewhat, can be achieved without the price going up quite a bit?

Where's the new CHEAP oil supposed to come from, considering that oil companies these days are going after ever smaller and more expensive to produce fields ?

Some of my neighbors, and some of my family members, have amazed everybody who knows them, including their physicians, by continuing to be productive workers right on into their eighties.

But when they did finally " decline " or "deplete" they went down hill pretty damned fast. Men and oil fields are subject to the SENECA CLIFF.

I disagree with our honorable and esteemed founder Ron Patterson about the odds of some of us pulling thru the coming bottleneck more or less whole, but I'm of the opinion he's right about a lot of production being maintained these days by practices such as infield drilling and water flooding and so forth that will result in pretty sharp declines in production at many major oil fields sometime in the not very distant future.

Maybe the people who think like Tony Seba are right, and our need of oil is peaking now, or will peak, very soon. I don't see it happening within the next ten years though, because I just don't see electric vehicles displacing oil burners so quickly, considering the size of the vehicle fleet, and the number of relatively new ICE cars that will continue to be sold for some years yet.

Matt Simmons was ahead of his time, like a lot of people who are hailed as visionaries after they're gone, but he nailed it when he said rust and depletion never sleep.

Demand for use as auto and light truck fuel may indeed peak and plateau in rich western countries, but unless the world wide economy goes sour, demand overall won't peak until batteries or fuel cells get to be fully competitive in up front terms.

Money has a hell of a lot of time value, and most people aren't going to lay out a lot of money up front unless they earn an excellent return by doing so . This is particularly true in the case of small businesses and the large majority of individuals, because they don't HAVE a lot of money to lay out up front, and lack good enough credit to borrow enough to pay a significant premium for an electric vehicle, considering their other needs for borrowed money.

The oil biz is unlike any other, because most of the key players are GOVERNMENTS, and governments have never been noted for their business acumen.

Sure governments want to make money on their oil, but the ordinary rules that allow us to predict what other industries will do just don't apply well to oil, because politicians have too many other things to consider, in addition to the bottom line.

Consider this. Suppose you are the head of government, with enormous power, dictatorial power, so that you can do more or less as you please. You must have money coming in at all times, and once you're selling oil , you're HOOKED on the money.

So you own your country, as a practical matter, and you therefore own your own ( national ) oil company. Oil's cheap. You expect it to STAY cheap for years. But maybe you know a buyer that will pay you a hell of a lot of money for your oil company, fifty times, a hundred times, maybe , the net cash flow you're getting after paying the oil company's expenses. Now if you were an ordinary businessman, such as the ones with an MBA from any of the Ivies, you would sell in a flash, and take that cash and put it into another business.

But since you're a little tin pot dictator, or even time dictator, like the king of Saudi Arabia, you won't give selling even a passing THOUGHT. ( Remember it always takes at least an exception or two to prove a rule, lol, and in the case of the Saudi's selling a little .. it's a pig in a poke, and they're going to maintain total control, and they're just MAYBE pricing it at a very large premium, lol) .

You CAN'T sell, it just doesn't work that way, because you have to control the oil industry in order to control your country. Politicians who expect to stay in power more or less forever very rarely sell national assets that generate cash. The money they could skim off isn't worth as much to them as the power that comes with control. Sure they sell a money losing operation such as a water works sometimes, because that HELPS them stay in power.

But even though they are constrained from selling the assets, they are virtually always compelled to sell produced oil, and the lower the price, the MORE they need to sell, ouch! And the bigger the bind they're in for cash, the less likely it is that they will be making the long term investments necessary to bring new production online , or even spending the cash to preserve current production by properly managing the oil fields.

The amount of money actually spent by the big independent super national oil companies on new production is trivial, compared to the amounts spent by national oil companies, and they aren't spending much, not even a piddly hundred million here and there, if they can avoid doing so.

I kept my old Daddy's orchard up and running right thru some very tough times, losing money a lot of years, making almost nothing some other years, because it was his LIFE, his passion. And I had every reason to believe that good times would return, because almost everybody backed way off on planting new trees, and lots of growers simply quit altogether.

But I didn't plant new trees, because I was getting old myself. My neighbors who did are doing VERY well the last few years, as farming goes, because prices are very good in relation to costs, and will stay that way until the industry as a whole manages to over do production again. Both oil and apples involve long lead times, lol. If oil production capacity falls short of demand, the price will go up, substantially, and stay up a long time, as long as the economy holds up, and as long as there aren't viable substitutes. Batteries are nice, but it's going to take a LONG time for batteries to displace more even five percent of oil consumption.

I'm as far from an expert as east is from west, but according to everything I read, investment in the oil industry is at very low levels, world wide, and oil wells are like apple trees Ya gotta have new ones, cause the old ones quit on ya.

I'm dead sure oil will go up unless the world wide economy goes to hell. But .. I've been dead wrong before. ;-)

Chain Oil says: 12/23/2017 at 10:46 am
Thank you soooo much for that brilliant essay, written clearly and understandably for us laymen.

[Jan 03, 2018] Quick rump up of oil production is impossible. There will no the second shale revolution in the current range of oil prices, or may be ever

Jan 03, 2018 | peakoilbarrel.com

says: 12/27/2017 at 8:37 pm

So, is there a big wall of US shale oil coming from Texas that will dash my "happy times" of $55-65 WTI?

So thankful to get up to this level after 36 months of headaches about the oil price. Seems the only thing that could screw it up is US shale, which apparently is set to explode in 2018.

I saw someone touting Halcon stock today on SA. Making a big deal about having little debt. Too bad they flushed about $3 billion of debt when they went BK. I'm sure Mr Wilson (CEO) is, "still getting his" so to speak.

My brother is griping about why he hasn't been able to draw a salary for the last three years, heck all the shalie management has! Have to remind him we aren't in the shale fantasy land. He knows, he's just blowing like I'm prone to do.

If I don't post anymore this year, happy New Year everyone!! Things are looking up, just hope the shale industry doesn't torch it again!

Heinrich Leopold x Ignored says: 12/30/2017 at 8:12 am
Shallow sand,

IN my view you will be sleeping well in the next year. Shale increases mostly the supply of condensate and light distillates, which does little to cover the worldwide shortage of middle distillates. So, the price of 'real' oil will very likely increase over the next future whereas the prices of light distillates (propane, butane, pentane , LPG, NGPL composite .. ) are very likely depressed. Light distillates can substitute middle distillates to some degree, yet the potential is limited. So, in that sense I wish you a happy and successful New Year.

Energy News x Ignored says: 12/28/2017 at 4:36 am
INEOS Forties Pipeline System Media Update – 28/12/2017
All restrictions on the flow of oil and gas from platforms feeding into the pipeline system have been fully lifted. All customers and control rooms have now been informed.
https://www.ineos.com/businesses/ineos-fps/news/ineos-forties-pipeline-system-media-update/
https://uk.reuters.com/article/forties-oil/update-1-ineos-sees-forties-oil-flows-back-to-normal-around-new-year-idUKL8N1OS0VU
Stephen Hren x Ignored says: 12/28/2017 at 12:59 pm
https://mobile.nytimes.com/2017/12/27/world/americas/venezuela-oil-pdvsa.html?action=click&module=Top%20Stories&pgtype=Homepage

Oil production in Venezuela appears to be in free fall.

Mushalik x Ignored says: 12/28/2017 at 4:37 am
Shale gas revolution did not last long for BHP – the Fayetteville story
http://crudeoilpeak.info/shale-gas-revolution-did-not-last-long-for-bhp-the-fayetteville-story
Heinrich Leopold x Ignored says: 12/30/2017 at 6:37 am
There is no question, Shale is a disaster for investors. Nevertheless, it is a blessing for Wall Street as high oil and gas production ensures dollar stability and a growing bond bubble. The only question is when will investors will wake up. As it is perfectly OK for small companies to sacrifice themselves and burn the cash of investors through, big companies are less willing to do so. Who is next? XOM, Statoil , APA ?
Energy News x Ignored says: 12/28/2017 at 7:31 am
The ratio of commodities / S&P500 is at a record low, S&P_GSCI / S&P_500
The S&P GSCI currently comprises 24 commodities from all commodity sectors – energy products, industrial metals, agricultural products, livestock products and precious metals.
Bloomberg chart on Twitter: https://pbs.twimg.com/media/DSCfWj6W4AA7xyW.jpg
Dennis Coyne x Ignored says: 12/28/2017 at 7:33 am
https://www.bloomberg.com/news/articles/2017-12-27/all-that-new-shale-oil-may-not-be-enough-as-big-discoveries-drop

Discoveries of new reserves this year were the fewest on record and replaced just 11 percent of what was produced, according to a Dec. 21 report by consultant Rystad Energy. While shale wells are creating a glut now, without more investment in bigger, conventional supply, the world may see output deficits as soon as 2019, according to Canadian producer Suncor Energy Inc.

George Kaplan x Ignored says: 12/28/2017 at 9:39 am
Are we not now near enough to 2019 to say that there just isn't time to bring major new conventional projects on-line before mid to late 2019? The only offshore projects that could be approved and developed earlier than that would be single well tie backs using the wildcat/appraisal well as a producer, probably no more than 5 to 10 kbpd and in immediate (and likely rapid) decline, and would be dependent on there being spare processing capacity on a nearby hub (i.e. production the new production would be mitigating decline not adding output).
George Kaplan x Ignored says: 12/29/2017 at 5:00 am
But the issue isn't lack of discoveries this year, as the headline implies, it's the lack of recent FIDs which might be in part because of the drop off in discoveries in 2012 to 2015 (for all oil, but particularly easily developed oil), coupled with high debt loads, and prices that aren't high enough (or at least not yet for long enough) to allow development of what resources there are available to the IOCs. As prices rise and IOCs become more confident and are able to pay dividends as well as fund longer term developments then the really low discoveries in 2015 to 2017 might give them far fewer options than people expect (noteworthy is that any discoveries in that period that have been attractive, like Liza, have been immediately fast-tracked, so there really isn't much of a backlog of attractive projects at all).
Dennis Coyne x Ignored says: 12/30/2017 at 7:37 am
Hi George,

Headlines are almost always not quite right.

I was basing my comment on what the article said. Many of the companies are aware that discoveries have been low and not many projects will be coming online soon.

George Kaplan x Ignored says: 12/28/2017 at 9:50 am
Mexico may be heading for a period of accelerated decline (above 10%). Their two onshore regions and the southern marine region are falling at 15 to 20%, and the largest producing region (Northern Marine, which includes KMZ and Cantarell) looks like it may be starting to accelerate. The non KMZ nd Cantarell fields had been the only ones increasing, but look to now be in decline or at least on plateau, and by PEMEX forecast KMZ should be off plateau in the next couple of months or so. Mexico has now stopped exporting light oil (which mostly comes from the three smaller regions, with KMZ and Cantarell producing heavy and medium heavy) and will presumably be looking for increasing imports of it, which is probably good for the Texas LTO producers. Operating rigs have recently been declining fast.

(Apologies if this has already been posted)

George Kaplan x Ignored says: 12/28/2017 at 9:53 am
ps – for numbers: last month C&C was down 35 kbpd, and overall 210 kbpd y-o-y (almost exactly 10%).
Lightsout x Ignored says: 12/28/2017 at 10:11 am
Hi George

Do you have any information on how the ramp up of production is going for the Western isles project following first oil on 15th November.
On a side it looks like the Weald basin myth is starting to unravel.

George Kaplan x Ignored says: 12/28/2017 at 11:27 am
Not yet -first numbers for December start-up should be in March, it's a question of limiting their losses at current prices I think. All the wells were predrilled so ramp up should be fast but I wouldn't be surprised if they get pretty low reliability in the first 6 to 12 months given all the construction problems they had. Also interesting that Catcher started up on time, against most expectations. Wonder if Clair Ridge will make it this year – do you know if there are big tax benefits from depreciation for starting within a given calendar year in the UK (or might be financial yar end is more important)?
George Kaplan x Ignored says: 12/29/2017 at 10:19 am
This shows how fast the SW marine region fields are now falling (a lot of small fields were added 2007 to 2015 and are now in steep decline).

There seems no reason this and the two land regions shouldn't continue to fall at current rates (they may even accelerate given how the rig count has dropped), and if KMZ follows the predicted PEMEX curve Mexico could drop around 350 kbpd this year, possibly the same in 2019 in decline (but with 60 kbpd additions due from Abkatun), but maybe approaching as low as 1000 kbpd by mid 2020, which is probably the earliest ENI will be able to get their shallow water field on line if they fast track it.

Greenbub x Ignored says: 12/30/2017 at 1:26 am
thanks, George
Energy News x Ignored says: 12/28/2017 at 1:04 pm
Dallas Fed Energy Survey – December 28, 2017 – At what West Texas Intermediate (WTI) crude oil price would you expect the U.S. oil rig count to substantially increase?
Above $60, chart on Twitter: https://pbs.twimg.com/media/DSJdl-zX0AAUwD4.jpg
https://www.dallasfed.org/research/surveys/des/2017/1704.aspx#tab-questions
Frugal x Ignored says: 12/28/2017 at 11:11 pm
$16B Mackenzie pipeline project cancelled

CALGARY -- Imperial Oil says its much-delayed $16.1-billion project to build a natural gas pipeline across the Northwest Territories from the coast of the Beaufort Sea to northern Alberta has finally been cancelled.

George Kaplan x Ignored says: 12/29/2017 at 6:50 am
IRAQ FORMS PANEL TO OPERATE MAJNOON FIELD

Originally the plan was to increase Majnoon to over 1 mmbpd. That has now been downgraded to 400 kbpd (from current 220). Shell and Petronas have pulled out and a "government panel" will oversee the development. I'd bet on continued decline rather than any increase, and potential for significant reservoir damage along the way.

Similarly for Nasirya oil field – intend is to increase from 90 kbpd to 200, using a local oil company that also sounds like it has a lot of government input.

To me none of this ever declining brownfield development with IOCs pulling out, and promises of more exploration "coming" is compatible with the claims for their discovered resources (developed or not), or any chance of a quick ramp up if oil prices start to inflate rapidly after 2018.

http://www.ogj.com/articles/2017/12/iraq-forms-panel-to-operate-majnoon-field.html

Heinrich Leopold x Ignored says: 12/29/2017 at 9:28 am
So far, the experiences about freeze off Shale wells are limited. Will glycol also work for Shale wells when there is much water involved? I think nobody knows yet how big the impact of the cold will be on Shale wells. However, it looks like shorts are getting hyper-nervous.
Ian H x Ignored says: 12/29/2017 at 7:25 am
Oil and Gas Producers Find Frac Hits in Shale Wells a Major Challenge
In North America's most active shale fields, the drilling and hydraulic fracturing of new wells is directly placing older adjacent wells at risk of suffering a premature decline in oil and gas production.

The underlying issue has been coined as a "frac hit." And though they have long been a known side effect of hydraulic fracturing, frac hits have never mattered or occurred as much as they have recently, according to several shale experts who say the main culprit is infill drilling.

"It is a very common occurrence -- almost to the point where it is a routinely expected part of the operations," said Bob Barree, an industry consultant and president of Colorado-based petroleum engineering firm Barree & Associates.

He added that frac hits are also an expensive problem that involve costly downtime to prepare for, remediation efforts after the fact, and lost productivity in the older wells on a pad site.

A frac hit is typically described as an interwell communication event where an offset well, often termed a parent well in this setting, is affected by the pumping of a hydraulic fracturing treatment in a new well, called the child well. As the name suggests, frac hits can be a violent affair as they are known to be strong enough to damage production tubing, casing, and even wellheads
https://www.spe.org/en/jpt/jpt-article-detail/?art=2819

FWIW The first SPE paper referenced discusses mediating the negative nature of frac hits. It discusses the refrakking of a six well pad drilled in 2010 in the middle Bakken and three forks, North Fork Field, McKenzie. The six wells have a cumulative oil production to date of 3.6mmboe and 7.7bcf.
Since I am not in the field, much of the paper went over my head, I merely skimmed through it, however it appears that well communication was observed for horizontal and vertical spacing of 1000 feet.

[Jan 03, 2018] I think our happy price for 2018 is going to hold

Notable quotes:
"... I think "our" happy price for 2018 is going to hold. Happy New Year buddy ! ..."
"... "The main suspect for the increasing divergence is now the inclusion of NGLs into the EIA computation" Duh. Definitions are more or less always changed to meet agenda. ..."
"... Same trick was pulled by Russia now report total liquids. ..."
"... Politics is a major part of oil markets and keeping Russia at bay is a goal for the administration I guess. ..."
"... But the profound backwardation in the futures market for Brent at the moment tells me that reality is storage withdrawal until shortage for oil. ..."
"... Especially distillates is under scrutiny because of lack of Venezuela heavy oil and too much light oil from Texas. Conventional oil worldwide is suffering from underinvestment and OPEC policy is as expected to serve their own interests. The main problem is easy oil mid API range (too much exploitation). ..."
"... Your posts meets exactly my point as Shale increases the supply of light distillates yet does little to cover the growing worldwide shortage of middle distillates. ..."
Jan 03, 2018 | peakoilbarrel.com
Mike says: 12/30/2017 at 7:06 am
Shallow; Hurricane Harvey disrupted some but not very much EF production. Most of the production drops were related to refinery closers along the GC that curtailed ALL producers in Texas. That storm had no affect whatsoever in Austin other than some rain and did not affect TRRC reporting. There were other electronic issues with TRRC reporting that are now back on the mend.

The EIA like all government entities is a mess; some years back it got confused and with a snap of the finger stopped reporting on-lease production storage. Now now all of a sudden it is reporting gas liquids and anything else it can to make production appear higher than it is. Is there an intentional motivation in that? You decide. Harold already has. EIA 914 surveys are ESTIMATES too; people don't seem to get that. Otherwise this TRRC debate has reached absurd proportions; the EF is on its way down the toilet check Enno's latest post. The Permian is still growing but that rate of growth is going to slow; things out there are getting way gassier and way lighter. There is no place to put the stuff anymore.

I liked your comment about Floyd Wilson; he is a trip. Reminds me of Billy Bits at Shale R Us: https://www.linkedin.com/feed/update/urn:li:activity:6351385280427196416/

I think "our" happy price for 2018 is going to hold. Happy New Year buddy !

Mike

Watcher says: 12/30/2017 at 9:39 am
"The main suspect for the increasing divergence is now the inclusion of NGLs into the EIA computation" Duh. Definitions are more or less always changed to meet agenda.
Lightsout says: 12/30/2017 at 2:48 pm
Same trick was pulled by Russia now report total liquids.
Dennis Coyne says: 12/30/2017 at 5:56 pm
The EIA estimates for Aug to Oct are probably too high by 50 to 100 kb/d.

Mike is correct that the EIA makes estimates as does drilling info based on RRC data.

The average correction factor for the most recent two months of drilling info data (Aug and Sept) is 42 and 287 kb/d respectively based on past data sets from Aug 2015 Mar 2016 May 2016 Aug 2016 May 2017 Jul 2017 Aug 2017 Sept 2017 and Oct 2017 compared to the Dec 2017 data set from drilling info. In the chart below the Dec 2017 drilling info data set is "corrected" in this way (adding 42 kb/d to August and 287 kb/d to Sept.)

An alternative is to compare the 914 survey data to the drilling info estimate from May 2015 to July 2017 the average difference was 320 kb/d over that period. So I show the 914 survey plus 320 kb/d also in the chart below.

Through July 2017 we have pretty good estimates for Texas C+C after that it is difficult to say which estimate is correct. Note that the 914 survey has differed from the drilling info estimate by as little as 275 kb/d and as much as 365 kb/d from May 2015 to July 2017 so the 914 survey plus 320 kb/d might be off by +/-50 kb/d especially for Aug to Oct 2017 period.

Energy News says: 12/29/2017 at 1:18 pm
The latest STEO forecast from just 2 weeks ago

EIA Short-Term Energy Outlook (December 12 2017 ) Domestic Production October 9.3 million b/day

Dennis Coyne says: 01/02/2018 at 6:46 pm
For comparison EIA estimates US output was 9637 kb/d in Oct 2017 though perhaps the Texas estimate is high by about 80 kb/d so 9560 kb/d might be a better estimate unless the estimates for other states are too low.

Looks like the STEO expected a 180 kb/d decrease in October and instead there was roughly a 160 kb/d increase. Perhaps the correct final data will be between 9300 and 9640 kb/d. The most recent month's estimate is often revised by 1% or more.

Energy News says: 12/29/2017 at 1:01 pm
US crude oil exports at 1 731 kb/day in October a new record high
https://www.eia.gov/dnav/pet/pet_move_expc_a_EPC0_EEX_mbblpd_m.htm
Kolbeinh says: 12/29/2017 at 1:17 pm
I don´t know what to say but it somehow does not make sense. Something is very fishy here. Makes me very confident about my bullish oil price predictions for 2018.
Kolbeinh says: 12/29/2017 at 2:00 pm
Politics is a major part of oil markets and keeping Russia at bay is a goal for the administration I guess.

And so is the target of 3% gdp growth for the president. But the profound backwardation in the futures market for Brent at the moment tells me that reality is storage withdrawal until shortage for oil.

Especially distillates is under scrutiny because of lack of Venezuela heavy oil and too much light oil from Texas. Conventional oil worldwide is suffering from underinvestment and OPEC policy is as expected to serve their own interests. The main problem is easy oil mid API range (too much exploitation).

Energy News says: 12/29/2017 at 3:43 pm
Liquefied Petroleum Gases (ethane+propane+butane) October production: 3 499 kb/day +281 m/m
https://www.eia.gov/dnav/pet/pet_pnp_gp_dc_nus_mbblpd_m.htm

Heinrich Leopold says: 12/30/2017 at 8:26 am
Energy News

Your posts meets exactly my point as Shale increases the supply of light distillates yet does little to cover the growing worldwide shortage of middle distillates.

As the US exports mostly cheap light distillates and imports expensive real crude oil the recent trade numbers confirm a swift deteriorating goods trade deficit and consequently a sharply falling US dollar as we have seen over the last few days. All what Shale is currently doing is to depress the price of light distillates yet it leaves the growing supply shortage of real oil unaffected.

Dennis Coyne says: 12/31/2017 at 10:20 am
Hi Heinrich

The increased LPG is due to increased natural gas production especially "wetter" natural gas. The has less to do with LTO output and more to do with shale gas output.

It also has very little to do with condensate which is liquids that condense at the lease (it is called "lease condensate") at ambient temperature and pressure.

LPG is at either higher pressure or lower temperature than ambient conditions.

Longtimber says: 12/29/2017 at 11:43 pm
https://www.zerohedge.com/news/2017-12-29/crypto-qatar-these-are-best-worst-assets-2017
NG – Ugly.. A Trainwreck for 2017.
What Coke Nose Jim Crammer use to say? time to BACK UP THE TRUCK?
Heinrich Leopold says: 12/30/2017 at 6:47 am
As it is too early to assess the impact of the current cold on gas production the recent 40% Canadian rig count slump may serve as a harbinger for the US for next weeks . It is not only freeze offs but but also transport infrastructure and pipeline constraints.
Dennis Coyne says: 12/31/2017 at 10:22 am
Hi Heinrich

Canadian rig count always drops over the Christmas to New Year's holiday this is not unexpected.

Jeff says: 12/30/2017 at 9:00 am
Haven´t seen it posted here yet. Euan Mearns who sometimes post here has a new blog post on "oil price scenario for 2018": http://euanmearns.com/oil-price-scenario-for-2018/ . I like figure 4 think that Ian Schindler has showed something similar for longer time periods (70/80´s).
Euan lacks at least two factors but they are more or less impossible to forecast particularly: i) economic growth (demand) ii) how much of the OPEC cuts are voluntary. Also his calculation of natural decline is wrong he assumes all legacy production is in decline.
Dennis Coyne says: 01/02/2018 at 2:03 pm
Hi Jeff

Thanks. I think Euan has the price about right ($80/b at the end of 2018 for Brent) but I disagree with him on World oil output in 2018. I think World C+C output will increase at about 600 kb/d per year over the next few years until about 2020 and then will gradually slow down as LTO output and oil sands output will not increase rapidly enough to offset declining output elsewhere in the World by 2025 potentially there could be a short plateau until 2028 or a longer plateau from 2022 to 2029 the higher World output goes the more likely that any plateau will be very short. I agree with your assessment that Euan has overestimated the World decline rate at about 8% which for C+C would be about 6.5 Mb/d not all of World C+C oil fields are in decline some are on plateau and a few are increasing output (at the field level) though if one considers individual oil wells probably 99% of oil wells currently producing (weighted by daily output) are likely to be in decline.

Euan may be looking at things from that perspective which would mean (assuming my 98% guess is correct and that those wells decline at an average annual rate of 8%) we would need 6.4 Mb/d of newly completed wells just to offset the declining wells in order to remain on a plateau.
Euan believes the World will just be able to manage this I think higher oil prices will enable 7.1 Mb/d of oil completions Worldwide over the next year with a net increase in World C+C output.

We will not really even know World C+C output for 2017 until March 2018 (I use EIA estimates) and 2018 output will be unknown until March 2019.

The most recent 12 months of World C+C output (average monthly output from Oct 2016 to Sept 2017) was 80 999 kb/d based on EIA data.

Watcher says: 12/30/2017 at 9:52 am
The latest numbers out of China say oil consumption growth this year 2017 will be double last year's. This year is pegged at 6.5% with a month to go. India numbers as of Oct say their 2017 growth rate will be about 8% as it was last year.
Energy News says: 12/30/2017 at 12:16 pm
China's crude oil stockpiles the latest numbers: There is a big difference between China's official numbers and analysts calculated numbers (China says +90 kb/day vs IEA up to +1000 kb/day)

BEIJING Dec 29 (Reuters) – China had stored 37.73 million tonnes or 275 million barrels in nine bases by mid-2017 up from 33.25 million tonnes at the end of June the previous year according to the data from the National Energy Administration (NEA).
Adding 4.48 million tonnes of crude oil over the 12 months to June 2017 is equivalent to adding 89 600 barrels of oil per day (bpd).
Reuters (December 29 2017) https://www.reuters.com/article/china-crude-reserves/update-2-china-accelerates-stockpiling-of-state-oil-reserves-over-2016-17-idUSL4N1OT2HF

China's (commercial) crude inventories in November hit a seven-year low of 26.15 million tonnes Xinhua data showed.
Reuters (December 28 2017) https://www.reuters.com/article/us-global-oil/oil-prices-stay-near-high-on-strong-u-s-refinery-runs-china-data-idUSKBN1EM04P

You'll remember this

LONDON October 12th 2017 (Reuters) – China has built its crude oil stockpiles at a record pace in 2017 and while its purchases could tail off towards the year-end inventories could hit the billion-barrel mark in six months the International Energy Agency said.
The agency estimates that over the first half of 2017 Chinese stockbuilding hit a record 1 million b/day.
https://uk.reuters.com/article/oil-iea-china/chinas-crude-oil-buying-spree-looks-set-to-continue-iea-idUKL8N1MN2GO

Krisvis says: 12/30/2017 at 2:21 pm
Anybody knows what the definition of crude oil by Texas RRC is? The reason I ask the question is because the production increase up to API gravity 40 is only 70K/day out of 767 K/day from November 2016 to October 2017. PAA said in the conference call that Delaware basin is producing mostly oil with APII gravity higher than 45 and needs to be exported as our US refiners will not touch it.
Heinrich Leopold says: 01/02/2018 at 1:56 pm
Krisvis
Thanks for posting your comment. This is exactly my point.

Shale produces mostly condensates and light distillates which are an excellent feedstock for the chemical industry. However this concerns just 15% of the oil market. At the beginning of the Shale boom Shale light distillates could substitute a lot of conventional oil which was previously used in the chemical feedstock market. This brought down the oil price.

As Shale oil has now serious troubles to enter the transportation fuel market (due to a lack of middle distillates) the US is forced to sell cheap light distillates on export markets and import on the same time expensive real oil containing middle distillates at a high price. So US imports of real oil are on the rise again. This is why we are seeing a rising oil price and US oil trade deficit again. The dollar has already reacted by a steep slump over the last days.

Dennis Coyne says: 01/02/2018 at 2:19 pm
When one looks at the price of oil with API 40-45 it trades at a premium to heavy oil. Oil above 45 or 50 API is typically classified as condensate.

As George has commented repeatedly most of World output is getting heavier and is more expensive to refine. There are many customers around the World that need the lighter oil to blend with heavier crude. In fact much of the US condensate goes to Canada to blend with bitumen so it will flow through pipelines.

For net crude oil imports for the US see

https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MCRNTUS2&f=M

Dennis Coyne says: 01/02/2018 at 2:22 pm
Wrong chart in comment above sorry( link has updated chart)

Dennis Coyne says: 01/02/2018 at 2:30 pm
This chart is from EIA (chart above used the EIA data Jan 2015-Oct 2017).

The US has had net imports of crude oil since 1945 (based on monthly data).

On an annual basis the last year the US was a net exporter of crude oil was 1943. Net imports of crude peaked (annual data) in 2005 at over 10 Mb/d and fell to 6.9 Mb/d in 2015 and rose slightly in 2016 (by 0.36 Mb/d) to 7.26 Mb/d in the most recent 12 months net imports have fallen to 6.99 Mb/d.

texas tea says: 12/30/2017 at 5:14 pm
"Whatever the case nothing creates job and opportunities the way oil and natural gas exploration does at this time"
https://oilprice.com/Energy/Energy-General/GOP-Tax-Bill-Is-A-Boon-For-Oil-And-Gas.html

choke on it boys the truth comes out making america great again not just a slogan anymore 😊

Boomer II says: 12/30/2017 at 5:57 pm
Companies losing money don't pay income taxes anyway. A cut won't do them any good.
Boomer II says: 12/30/2017 at 6:04 pm
"Given President Donald Trump's obsession with reviving the dying industry it's almost surprising that the Republican tax bill doesn't contain any new breaks or incentives that explicitly help coal. 'Energy is actually the least of the beneficiaries in this bill and the simple reason is that energy already has so many carve-outs and exemptions in the tax code that a lot of U.S. based companies just pay hardly any income tax as it is ' said Pavel Molchanov an energy research analyst at the financial firm Raymond James. 'So there is virtually no effect on energy of any kind either positive or negative and that includes coal.'"

https://newrepublic.com/article/146388/tax-bills-gift-big-coal

Mike says: 12/30/2017 at 6:24 pm
Choke on this tee tee: because the shale oil industry can't keep its MasterCard(s) in its pants its overleveraged LTO oversupply is the direct cause of low volatile oil prices that has resulted in the loss of over 440 000 oil and gas jobs around the world since 2014. https://www.rigzone.com/news/oil_gas/a/148548/More_Than_440000_Global_Oil_Gas_Jobs_Lost_During_Downturn . There are still an estimated 55 000 still out of work in America in EOR GOM and in stripper well production. Your beloved shale industry got nothing nada zip out of the new tax law except interest deduction limits which will hurt it not help it.
Dennis Coyne says: 12/30/2017 at 8:30 pm
Hi Mike

If most of the LTO companies are losing money I don't think they pay federal taxes on losses so the reduction in tax deduction for interest paid would have no effect.

Am I missing something?

Mike says: 12/30/2017 at 9:03 pm
No but tee tee is. Its not easy you know getting thru.

Take for instance the help the oil and gas industry is getting by opening ANWAR. Who is that going to help particularly since there is countless geological and depositional studies done that pretty much condemn the entire area? Or lets take the "roll back" of certain MMS/BSEE regulations regarding multi-string pressure and BOP testing in the GOM after the Macondo incident? That is stupid shit that dumb uninformed people buy into that has nothing to do with reality. Reality is those regulations were on the books and un-enforced. It cost BP what $80B to cut some corners? Nobody I repeat nobody is going to let that happen again. Whatever the current BS is about reducing regulations on the oil industry and helping American become great again by unleashing its hydrocarbon "might " on the rest of the world is laughable. Who is laughing all the way to the bank?

OPEC and Russia dat' who. They are watching America's energy policies get worse not better.

texas tea says: 12/31/2017 at 5:53 pm
you can educate the ignorant but not the stupid who said that oh yea me. any one of my birddogs knows more about north slope geology than you mike. perhaps you can make a new years resolution try to be accurate at least once in 2019 gonna be hard for a "man" like you but give it a shot 😜 oh yea surely you can do better than bathroom jokes after all a "man" of your intellect should oh never mind 😎
HuntingtonBeach says: 12/31/2017 at 7:59 pm
"you can educate the ignorant but not the stupid who said that oh yea me. "

Enough said

shallow sand says: 12/30/2017 at 9:00 pm
I am wondering if EIA is including NGLs as I see OK production has ramped up quite a bit.

A lot of OK liquids are 55+ API.

Guym says: 12/31/2017 at 8:40 am
Read the post twitter link Dean posted above. Most interesting is a post by a CPA who was involved with the 914 reporting. He thinks it is double counting the M&A production. However within his post he describes that the 914 survey is actually done by a third party contractor. In his discussion with him they were using the higher of projected drilling info or operator report. To put it in my perspective I don't see the 914 having anything like the consistency of the RRC. IMG Crown Energy Services is the third party contractor. Look up their website. Not a lot of time spent on it for a heavy duty IT company so no warm fuzzies there. One could speculate that the primary income is from the EIA contract. EIA paints themselves into a corner with wild projections on Texas production. They call up the third party contractor and question the figures they think are too low. Contractor has to do something to keep the contract don't they?
Now nobody at EIA can get fired for cooking the books because they have plausible deniability.
Dennis Coyne says: 12/31/2017 at 10:30 am
Hi Guym

From May 2015 to July 2017 the 914 survey was pretty consistent (within 275 kb/d and 365 kb/d of drilling info estimate average 320 kb/d). Perhaps that has changed I would not put much weight on a Twitter comment by a CPA. We will see in a few months what the drilling info estimates are which are usually within 1% of the final output after 3 to 5 months. So by March or April we may know what Oct 2017 TX C+C output is.

As Mike says in Texas they are patient. 🙂

Guym says: 12/31/2017 at 11:30 am
That CPA owns his own oil company who reports to the contractor. Do you?
Dennis Coyne says: 12/31/2017 at 4:15 pm
No. Has he been reporting NGL (in the US this would be natural gas plant liquids) to the contractor as C+C?

In any case I agree with Mike patience is needed. Perhaps the 914 survey is now covering a much higher percentage of Texas C+C output relative to the May 2015 to July 2017 (27 month long) period.

Time will tell.

Guym says: 12/31/2017 at 4:50 pm
"Double counting M&A production" has nothing to do with NGLs. He was admonished by the contractor for under reporting production that was sold off. Instead of using his figures they used his old wells as listed in the drilling info estimate. Hence double reporting it. But what was more interesting is the contractor part. They can send out the survey but can determine whatever they want to include.
Dennis Coyne says: 01/02/2018 at 8:53 am
Hi Guym

The EIA contractor checks with operators when reported numbers are different than expected and sometimes they use the drilling info data instead if the numbers don't look right.

The numbers are revised over time as more data comes in. These are estimates nobody knows final output for many months (for the entire state of Texas or all of the US).

Dennis Coyne says: 01/02/2018 at 8:48 am
Hi Guym

The link below covers the 914 survey methodology. Yes mergers and acquisitions are a potential problem. The EIA does it's best to account for these to avoid double counting.

About 450 of the largest oil and gas companies that produce about 90% of US oil and gas output (of approximately 13 000 petroleum producers in the US) fill out the 914 survey.

https://www.eia.gov/petroleum/production/pdf/eia914methodology.pdf

Dennis Coyne says: 12/31/2017 at 10:34 am
Hi Shallow sand

No not NGL only crude plus lease condensate. The EIA has never based C+C on API gravity just liquids produced in the oil field as far as I know.

Watcher says: 12/31/2017 at 11:21 am
A bit of recap for newcomers:

API gravity is a density measurement of oil. Measures how heavy it is compared to water. The higher the API number the lighter the oil.

Refineries do not create "middle distillates" out of nothing. They extract them from oil. "Middle distillates" are middle heavy liquids within oil. Diesel and Kerosene. Read truck/tractor fuel and jet fuel. Gasoline is a light distillate. Heavy distillates would be something like bunker fuel or asphalt.

This is all within the same liquid called "crude oil". Traditional labels are applied as regards the word "quality". High "quality" crude oil was light and "sweet". Sweet refers to having low content of materials that cause problems in refining. Like sulphur or vanadium. But tradition has run up against the new nature of crude oil. It has gotten too light. It often lacks middle distillates.

Here is a chart posted a year or so ago by Jeffrey Brown:
https://imgur.com/a/cqtvu

I have examined assays of many different oil types from all over the world. Jet fuel boils about 160 degs C and the heaviest diesel boils up around 350 degs C. So "middle distillates" that are actual fuel for things that matter are in the assay between those temps.

https://www.statoil.com/en/what-we-do/crude-oil-and-condensate-assays.html

Scroll down to their .XLS spreadsheets for various blends that they have assay'ed. I would say it does not conform to the chart. BUT. There are some caveats scattered around. "Blend". Dumbbell liquid. This means if oil from one field doesn't have what you want in it you add oil from another field to it to get the constituent parts. Assay it and declare it looks good. BP has an assay website as do others like Capline from Marathon.

All this was to address the question above -- "what is the definition of oil". Study all that and you'll see that the definition is whatever the money agenda says it should be that moment.

George Kaplan says: 12/31/2017 at 11:40 am
Crude oil is only getting lighter in the US everywhere else it's getting heavier and the light LTO is likely to be in greater demand for blending. Refineries set up for heavier oil usually have crackers – either fluid crack crackers or hydrocrackers – which can convert heavier components to gasoline and diesel but can only go so far and blending lighter oil allows the throughput to be maximised. There is no current problem from the oil range of oils being produced.
Energy News says: 12/31/2017 at 12:22 pm
HOUSTON (Reuters) – Several oil pipeline companies this month agreed to move ahead on multi-billion-dollar projects that would link Texas shale fields to Gulf Coast export hubs offering new outlets for burgeoning output expected in 2018.
https://www.reuters.com/article/us-usa-oil-pipelines/pipeline-projects-move-ahead-to-tackle-rising-texas-shale-output-idUSKBN1EN1PD
texas tea says: 12/31/2017 at 6:09 pm
That information must leave many readers here perplexed. You have pipeline companies refineries etc. building out the infrastructure to process and transport the oil but Mike tells us it's all hype not to be believed geez and even Dennis agrees with him what are we to believe? I bet they did not do their due diligence probably just read a few presentation and decided hey lets go spend a few billions of dollars for the hell of it Right Mike? I think I will follow the money on this one and not the want-to-be pretend only in cyber space oil men bloggers 😜
shallow sand says: 12/31/2017 at 8:33 pm
TT.

All I'm worried about is you shalies killing the oil price again. 2015-17 not good for anyone actually making $$ from the commodity of oil. (Corporate management gets theirs regardless of profits so I don't count them).

And if your response is "compete" I will know you are not for real on owning oil. Because I don't know how a non-op can make $$ on wells that do not payout. Shale CEO's can but non-ops can't IMO. So I don't know how you could be happy seeing Shale getting ready to kill the oil price again?

The only thing I can see killing $55-65 WTI at this point is overproduction of US shale. And it will hurt them too if they overproduce. The shareholders not the management. But it should absolutely destroy non-ops like you if we once again have $25 oil and $1.50 gas.

Mike says: 12/31/2017 at 9:33 pm
Corporate shale CEO's receive enormous salaries and compensation packages based on booking fake reserves. The profitability of their corporations or shareholder equity means little to them. Midstream companies that gather shale oil and shale gas are totally reliant on the shale oil industry to continue to be able to borrow more money. They are sheep in a flock. The entire thing from the top down is a façade using OPM. Nobody borrowing this money is personally on the hook; there are no personal loan guarantees nobody is going to be ruined when the entire thing collapses. The scheme is based on getting as much as you can as fast as you can and getting out unscathed.

Why promote or cheerlead for an industry that is obviously grossly unprofitable and that is going to ultimately leave hundreds upon hundreds of billions of dollars of debt for our children to deal with? Because you don't care. You don't give a rat's ass. Because exactly like a corporate shale oil CEO royalty owners receiving income from shale wells free and clear of all costs don't care about debt about profitability about depleting our nations remaining hydrocarbon resources and conservation they just care about themselves.

The Peak Oil Barrel community can decide for itself who the "pretenders" actually are.

shallow sand says: 12/31/2017 at 11:20 pm
Mike.

Unless I missed it I am still waiting for TT to explain how he finances the huge AFE's he must routinely get from $10+ million STACK and SCOOP wells.

Was doing some tax work earlier today and noted for June 2017 oil we got $40.71 per barrel. If 12/29/17 close holds we get $56.

$15.29 more on every barrel is huge for us as it is for everyone who operates wells Be it you XOM Harold Hamm Russia OPEC etc.

As I recall oil prices rebounded in late 2016 then shale went nuts and the price tanked. Their shares tanked too as I recall.

Say TT owns 10% of a shale monster well that cranks out 200K BO in year one. Say his NRI is 8%.

So he got billed $1 million for his part of the well. A $15 higher oil price nets him $240 000 more in year one before deducting severance tax.

So I assume TT would rather get an extra $240 000 in year one and have shale not go crazy talk and crazy drill again as opposed to being able to crow about political crap?

Mike do you know any non-op's on shale wells? How the heck do they finance them?

PS. I know you think it's cold down there in Texas but in my part of the Mid Continent it will be -5 F later tonight. 1 stinking degree F right now. Ouch!!

Mike says: 01/01/2018 at 7:38 am
Happy New Year Shallow and to the rest of the POB community. We close our schools in Texas when it gets below 40 almost. We are expecting low 20's here each night for the next three nights and we are all standby in the field to deal with an array of frozen broken messes. This is not a good time of year to be in the oilfield. I don't know how you folks stand it up north.

You know quite well the story of tiny NPRI owners not wishing to be pooled in Bakken units and instead electing to assume WI ownership in well(s) then going non-consent in hopes of backing in after payout and becoming real oilmen. That was a disaster. Their expenses now exceed their income and they are on the hook for plugging and decommissioning costs they'd give that stuff away if they could. You have shown us all numerous of these type of WI's for sale on energy.net

In the beginning I knew numerous folks in the EF and PB who turned deals with small carried WI or reversionary back ins after payout. I also knew folks who farmed out shale rights and kept WI. They did so I believe thinking fiscal responsibility and profitability was the order of the day like it always has been in our industry but quickly found out that was not the case and were literally spent into the dirt within a year or so. They sold their WI to operators as fast as they could never to return. I am sure there are exceptions but not many. It is a big boys game now run by lenders with very onerous loan covenants. How does a 1/32nd or a 1/16th WI pay its share of 15) $10M wells that take 3 4 and 5 years to payout if ever? They don't. Not without borrowing money themselves.

If on the other hand one includes RI and ORRI in the well(s) with the NRI from your WI nd pay 1/16th of the costs for say. 0.10000 total interest then you can puff up like a rooster and say I own WI in shale oil wells and they all "make" money. The only people making money in this shale gig is royalty owners overriding royalty owners CEO's and lenders on interest income. That's just a fact.

Stay warm man.

texas tea says: 01/01/2018 at 5:45 pm
For the life of me SS I am not sure what is so freaking confusing. I have said numerous times the world needs $70 oil. That is a price level that folks like you and most others can make enough money and produce free cash flow to fund new projects. Fact not fiction. BUT. I have also said I live and work in the real world where we actually do real work well by well section by section to find opportunities.
Just to restate the facts we have conventional production in 5 states both working interest and royalty interest.(spread the risk) we do not borrow money everything we do is out of cash flow. On most of our wells we lease part of the minerals we acquired and drill a portion of the minerals we acquired. What you may not know is many operators in the better shale plays are actively buying royalty to increase their NRI but of course they are a bit late to the party. The wells we drill are at current prices very economical. freaking do the math. at $50 oil and $4.00 nat gas(btu adjusted) @2 % tax rate in the first 2 years and wells that will produce 400 000BO and 5BCFG. The gas alone pays for the wells and the oil is "free". We started thinking we might get 5-6 wells a section now that number is 15 wells per section.

It is a much longer conversation most of which would be way over the heads of the readers of this blog the improvement in production numbers (new frac techniques) over the last 18 months we are seeing are out of this world. 30% at the low side at 100% at the high end increased in production with a 11 month comparison period. How this translates to ultimate EUR i am not prepared to say what I will say is that based on 35 years of experience it looks great.

A couple of takeaways. One there is a point to be made some maybe even most of the shale guys have played fast and loose with normal best practices with regard to finances. But because we have alcoholics we don't condemn the entire industry or impose prohibition which is the argument Mike like's to make.
This is a process what works and does not work will be sorted out by the market place as it should be MUCH will WORK that IS a fact. What the folks who are building pipelines and refineries and other midstream and downstream infrastructure sees is what we see their in the real world where we deal in facts and allocate our money accordingly.

best wishes for 2018

shallow sand says: 01/01/2018 at 8:43 pm
TT. If you came into shale with a lot of rock solid conventional paid for in full I can see how you could come up with the money.

However I am then also sure that you just like us went from making a killing on low decline conventional and $90 oil to making much much less and in your case were using almost all cash to pay for new shale well AFE's.

Even if you have zero debt I assume you at least have an un drawn credit facility just in case a good big deal were to arise. And therefore I assume you were none too pleased when your borrowing base dropped by more than 2/3 from 2014 to 2015 and again another 20+% in 2016 due to shale over production crashing oil and NG prices.

If you are big enough to cash flow several shale AFE I assume you have net production of somewhere between 2 000-10 000 BOEPD?

So let us say 5 000 BOEPD. Again just hypothetical to show what shale did to a larger private independent owned by maybe 2-4 shareholders who got very rich 2005-14.

2014 say you could have cashed out for $500 million. 2016 likely cashed out for 1/3 to 1/4 of that. Quite a hit to the net worth.

Further in 2014 you maybe cleared $90+ million pre income taxes before CAPEX on that 5 000 BOEPD? 2016 that went to $18 million maybe and of course you are getting AFE and JIB on the shale that is draining that the near zero? So no shareholder dividends or distributions in 2015 and 2016 after getting big ones in prior years.

We are small and not in a shale area but we have been around the block Dad has been in since the Arab Embargo. Pretty much everyone had to fire someone in 2015-16 it's good if you didn't. Pretty much everyone had the rug pulled out from under them just like in 1986 and 1998.

Thing is I think even most of the shale guys aren't real happy about shale. They know shale overproduction will drag the price. Same bittersweet deal as farmers growing a bumper crop. Farmers made the most $$ during 2012-13 even though most places 2012 was terrible drought. US commodity producers never do good during periods of oversupply. Just the middle men do good then.

Again I'm just speculating on how you do things numbers etc. I may be all wrong. If I am I apologize.

I just know in 2015 and 2016 there were a ton of shale wells completed that won't payout. Maybe not as many in 2017 but they are still out there. Further they hurt cash flow especially when you cannot control the expense recognition time frames as a non-op.

I am so glad we did not own non-op where drilling was going on 2015-17 as it would have sucked away all our cash and then some plus sold our flush production at market lows.

I am happy to see you want $70 even higher than me. So I'll leave you alone now. Take care. I think maybe deep down you too hope US doesn't ram through 10 and then 11 million BOPD next year?

Mike says: 01/01/2018 at 8:48 pm
Your 2% production tax in Oklahoma is going back to 7% tee tee; you and Mr. Blackmon are definitely on the same 'mindless' page regarding the future of shale oil: https://www.forbes.com/sites/davidblackmon/2017/12/31/the-oil-and-gas-situation-a-preview-of-2018/#7b9a4fe67613

You are insulting to people here who actually understand the basic arithmetic of the oil business a little better than you give them credit for. There is very clear mounting evidence that things are not getting better in your industry they are actually getting worse. You on the other hand seem to struggle with reality. Five days ago gas was trading at $2.55 per MMBTU not $4 and after royalty deductions interest expenses etc. etc. 5 BCF will not come close to paying for a $10-11M well. I understand now that even after 35 years of whatever it is you do you can't insult me anymore than you have already tried. I would have to value your opinion first.

If you want to win friends and influence people here on POB it would be helpful if you were to give us your name your company's name where these awesome wells are so we can check production data and tax roles etc. That would give you credibility and strengthen your arguments. Otherwise you are just a cute name embarrassing as that is to my beloved Texas who likes to brag about how much money he makes in the shale oil business. We're interested in the big picture here not you personally.

Boomer II says: 01/01/2018 at 9:30 pm
I still get the feeling that this is a sales job. Why tout the industry doing so great if you don't need investors and lenders?
Boomer II says: 01/01/2018 at 2:56 pm
I found this. It is from 2016 and it is based on privately held companies. Oil and gas extraction companies was the least profitable industry.

https://www.forbes.com/sites/sageworks/2016/10/03/the-15-least-profitable-industries-in-the-u-s/#2c690cbf618a

I just found the same article for 2017. Oil and gas still tops the list.

https://blogs-images.forbes.com/sageworks/files/2017/09/least-profitable-industries-ttm-07312017.png

Survivalist says: 01/01/2018 at 5:35 pm
@TT
Cling to whatever makes you feel good dude. I guess when you're favorite industry produces a lot of product but can't make any profits doing so one has to find the silver lining wherever they can. Shale is a Ponzi scheme. It won't be long until the music stops and the investors lose their shirts.
texas tea says: 01/01/2018 at 6:01 pm
go f your self .what the hell are your credentials not better than most here. the totality of your experience in the "oil" business is probably limited to buying lube
(for your bicycle chain) 😜
Survivalist says: 01/01/2018 at 7:01 pm
My credentials are irrelevant to the fact that shale oil is a profitless venture. If not for profit then what's it all about? Take a long hard suck on my ass fuck face. Fucking retard.
texas tea says: 01/01/2018 at 7:19 pm
well there you go proof that many here are illiterate and ignorant. you resort to profanities when you have no facts. I bet your parents are proud of you 😢
Survivalist says: 01/01/2018 at 7:33 pm
shale oil is a profitless venture. Deal with it fuck head.
texas tea says: 01/01/2018 at 7:44 pm
I have seen many folks in foreign countries tuck in the pant leg of their trouser in their socks so that it does not keep getting in the chain of their bicycle I bet you can tell us does that work for dresses too?
Survivalist says: 01/01/2018 at 7:53 pm
Here's one for the Texas teabagger aka the Lone Star State scrotum sucker.
Im guessing it didn't go to business school.

https://seekingalpha.com/article/4084591-new-darlings-wall-street-folly-oil-fracking-investing

https://www.cnbc.com/2017/09/13/us-shale-oil-and-gas-investors-are-on-road-to-ruin-warns-jim-chanos.html

Lloyd says: 01/01/2018 at 11:28 pm
Until you post a name and a company you can't complain about anyone else's credentials.

We know who Mike is. You are nameless likely lying and probably a charlatan.

And the emojis prove you are a moron.

Watcher says: 01/02/2018 at 12:39 pm
Damn when did this start.

Why is invasion of privacy a good thing? Think bitcoin.

Lloyd says: 01/02/2018 at 10:57 pm
Watcher I didn't say he had to identify himself I just pointed out that he was a hypocrite to demand other people's credentials without presenting his own.

To the Teabagger I say "Put up or shut up."

Though I do prefer "shut up".

-Lloyd

Dennis Coyne says: 01/02/2018 at 9:01 am
Hi Texas Tea

I agree with Mike that LTO producers are not profitable (as a group).

I have suggested that if oil prices remain under $65/b (WTI price) that US output may increase by about 600 kb/d (average annual C+C output) in 2018 compared to 2017. If oil prices are higher output may be higher if you tell me what that average oil price will be in 2018 I can make a better output estimate.

I also agree with Mike that I do not know what the future oil price will be.

Generally higher World output levels result in lower oil prices (as in 2015-2017) and generally lower oil prices result in lower profits for oil companies ceteris paribus.

shallow sand says: 01/01/2018 at 3:00 am
Of course I complain about -5 F. Wow much worse in Bakken.

Major respect for folks working outside always but especially in the Bakken tonight.

Take care up there. Seeing -32 F in Sidney MT and -25 F in Williston ND.

SRSrocco says: 01/01/2018 at 10:35 am
Shallow

The oil price may improve in 2018. However it will likely go DOWN CONSIDERABLY first before it continues higher. According to the COT REPORT (Commitment Of Traders) there is a record Commercial Short Position against oil going back 23 years.

You will notice right before oil fell from $100 in 2014 there was also a high amount of Commercial Short Positions. Today that level is even higher.

steve

texas tea says: 01/01/2018 at 6:03 pm
Hey Steve show us how your predictions on gold prices have done over the last 5 years ooops next to mike you almost look like a genius.
Survivalist says: 01/01/2018 at 7:56 pm
https://www.marketslant.com/article/zombie-shale-oil-killing-itself-survive
You're a living joke.
Let me know when shale turns a profit.
Dennis Coyne says: 01/02/2018 at 9:05 am
Hi Shallow sand

Not a lot of completion work occurs at those temperatures I would think.

Not much fun outside in this weather.

Energy News says: 01/01/2018 at 3:24 am
EIA Today In Energy: What are natural gas liquids and how are they used?
Table on Twitter: https://pbs.twimg.com/media/DSarQ0wUEAACODP.jpg
https://www.eia.gov/todayinenergy/detail.php?id=5930#
Energy News says: 01/01/2018 at 4:38 am
World demand for oil products – JODI Data – As everyone knows January is the seasonal low for demand. Comparing demand in December to January of the next year shows an average drop of -2.2 million barrels per day.
Chart on Twitter: https://pbs.twimg.com/media/DScZ25HX4AAdDwB.jpg
Longtimber says: 01/01/2018 at 2:54 pm
Rather Crude product sort out by molecular weight: WTI is refined to 6% Diesel while global crude average is 34% Diesel.
https://www.economist.com/news/christmas-specials/21732697-crude-oil-most-traded-commodity-world-what-it-made-and-where-does
http://infographics.economist.com/2017/xmas/20171223_XMC600_weblarge.png
Survivalist says: 01/01/2018 at 8:06 pm
One more for the Texas Teabagger

https://www.bloomberg.com/news/articles/2017-11-01/fracking-boom-hits-midlife-crisis-as-investors-geologists-see-shale-limits

Watcher says: 01/02/2018 at 12:43 pm
George don't want to scroll way up.

Don't suppose you know if oil fields do blending prior to sending to assay? Doesn't seem too very conspiratorial. Someone could gin up a rationale and no one would complain provided the refiner gets the same blend as assayed.

George Kaplan says: 01/02/2018 at 2:32 pm
Most are blends – i.e. a bunch of producers discharge into a pipeline and what comes out the end is the cargo – it varies a bit depending on the relative flows from each platform and they might have to blend further in the tank farm (e.g. Forties delivers Brent crude I think from 15 to 20 different platforms). I can only think of one time there might not be blending of some kind which is if an offshore platform with storage (e.g. FPSO) unloads as repeated cargoes which always go to one specific refinery (probably the platform operators – but even then there are usually more than one owner and they often take the cargos separately in proportion to their stake).
George Kaplan says: 01/02/2018 at 3:20 pm
https://www.researchgate.net/profile/Hassan_Harraz/publication/301842929_BENCHMARKS_OF_CRUDE_OILS/links/572a065b08aef7c7e2c4ede8/BENCHMARKS-OF-CRUDE-OILS.pdf

This is from 2015/2016 – but prices are still light/sweet -> expensive; heavy/sour -> cheap. The only thing that can mess that up is if there are transport bottlenecks which is why WTI is a bit cheaper than Brent (it wasn't before LTO came on line). Tapis is still the lightest and costliest although almost none of it is produced it is still a useful benchmark against which other oil can be rated. Although there are benchmark crudes I think every cargo is basically a negotiated price between the refinery and the producer (there can be penalties if it isn't quite the quality agreed on and it could even be rejected and I think there is an adjustment based on the latest benchmark prices as the contract price would have been negotiated well ahead of delivery). And that is about as much as I know about the trading business except there is a lot of money that can be made and lost on very small margins and variations.

Watcher says: 01/02/2018 at 6:26 pm
source of interest my recall of Bakken and Eagle Ford assays of yrs ago and how with an increase in API degs reported in the new assays the middle distillate yield hasn't changed. Should not be -- well it's possible but should not be likely.
Watcher says: 01/02/2018 at 1:16 pm
https://www.zerohedge.com/news/2018-01-02/peak-mexico
Energy News says: 01/02/2018 at 6:06 pm
US implied domestic demand monthly figures – seasonal
(Finished Motor Gasoline + Finished Aviation Gasoline + Kerosene-Type Jet Fuel + Distillate Fuel Oil + Residual Fuel Oil + Lubricants + Asphalt) but no NGLs
From here: EIA – Finished Petroleum Products – Products Supplied: https://www.eia.gov/dnav/pet/pet_sum_snd_d_nus_mbblpd_m_cur.htm

The January dip in demand table on Twitter
https://pbs.twimg.com/media/DSki1qFWsAAK6zX.jpg
Yearly averages & the year over year change. 2017 to Oct.
https://pbs.twimg.com/media/DSko0eLXcAEyl8L.jpg

Dennis Coyne says: 01/02/2018 at 6:35 pm
First chart from comment above

Dennis Coyne says: 01/02/2018 at 6:36 pm
Second chart in link from energy news. Thanks!

Cats@Home says: 01/02/2018 at 8:04 pm
U.S. oil production booms to start 2018
Updated 8:39 AM; Posted 8:39 AM
By The Washington Post

http://www.nola.com/business/index.ssf/2018/01/us_oil_production_booms_to_sta.html

U.S. crude oil production is flirting with record highs heading into the new year thanks to the technological nimbleness of shale oil drillers who have unleashed the crude bonanza.

The current abundance has erased memories of 1973 gas lines which raised pump prices dramatically traumatizing the United States and reordering its economy. In the decades since presidents and politicians have mouthed platitudes calling for U.S. energy independence.

President Jimmy Carter in a televised speech even compared the energy crisis of 1977 to "the moral equivalent of war."

"It's a total turnaround from where we were in the '70s " said Frank Verrastro senior vice president at the Center for Strategic and International Studies.

Shale oil drills can now plunge deep into the earth pivot and tunnel sideways for miles hitting an oil pocket the size of a chair Verrastro said.

The United States is so awash in oil that petroleum-rich Saudi Arabia's state-owned oil and natural gas company is reportedly interested in investing in the fertile Texas Permian Basin shale oil region according to a report last month.

That is a far cry from the days when U.S. production was on what was thought to be an irreversible downward path.

"For years and years we thought we were running out of oil " Verrastro said. "It took $120 for a barrel of oil to make people experiment with technology and that has been unbelievably successful. We are the largest oil and gas producer in the world."

The resilience of U.S. oil producers has come as the price of crude rose above $60 per barrel on world markets. Many shale drillers can start and stop on a dime depending on the world oil price. The sweet spot for shale profit is in the neighborhood of $55 to $60 per barrel.

[Jan 02, 2018] Wahabism is necessary for KSA rulers to keep the local population under control. Particularly the minority Shia population who live along the eastern coast, an area, which incidentally also has the all the oil reserves.

Notable quotes:
"... I fully agree that attacking Iran would be yet another disaster but I don't understand why Saudi Arabia is portrayed as an 'enemy', the 'real' one, no less, in alt-media circles like this. I mean let's be honest with ourselves. KSA is the definition of a vassal state. Has been so since the state established established relations with the USA in the 1940s and the status was confirmed during the 1960s under King Faisal. Oil for security. Why pretend that they have any operational clearance from the US? ..."
Jan 02, 2018 | www.unz.com

Chad , July 11, 2017 at 8:28 am GMT

I fully agree that attacking Iran would be yet another disaster but I don't understand why Saudi Arabia is portrayed as an 'enemy', the 'real' one, no less, in alt-media circles like this. I mean let's be honest with ourselves. KSA is the definition of a vassal state. Has been so since the state established established relations with the USA in the 1940s and the status was confirmed during the 1960s under King Faisal. Oil for security. Why pretend that they have any operational clearance from the US?

Contrary to the popular view, Wahabism is necessary to keep the local population under control. Particularly the minority Shia population who live along the eastern coast, an area, which incidentally also has the all the oil reserves.

USA fully understands this. Which is why they not only tolerated Wahabism, but strongly promoted it during Afghan jihad. The operation was by and large very successful btw.

It was only during the '90s when religion became the new ideology for the resistance against the empire across the Muslim world. Zero surprise there because the preceding ideology, radical left wing politics was completely defeated. Iran became the first country in this pattern. The Iranian left was decimated by the Shah, another vassal. So the religious right became the new resistance.

And as far as the KSA is considered, Wahabi preachers aren't allowed to attack the USA anyway. If any individual preacher so much as makes a squeak, he will be bent over a barrel. There won't be any "coming down very hard on Saudi Arabia" because USA already owns that country.

So what's the answer? Well, props to Phillip as he understood – "it would also require some serious thinking in the White House about the extent to which America's armed interventions all over Asia and Africa have made many people hate us enough to strap on a suicide vest and have a go."

Bingo.

Replies:

@Jake

Your analysis starts too late. The US supports Wahhabism and the House of Saud because the pro-Arabic/Islamic English Elites of 1910 and 1920 and 1935 supported Wahhabism and the House of Saud.

The British Empire 'made' the House of Saud,

Thinking it wise to use Wahhabism to control Shia Islam is like thinking it wise to use blacks to control the criminal tendencies of Mexicans.

[Dec 25, 2017] The Petro-Yuan Bombshell and Its Relation to the New US Security Doctrine

Notable quotes:
"... The new 55-page "America First" National Security Strategy (NSS), drafted over the course of 2017, defines Russia and China as "revisionist" powers, "rivals," and for all practical purposes strategic competitors of the United States. ..."
"... The NSS stops short of defining Russia and China as enemies, allowing for an "attempt to build a great partnership with those and other countries." Still, Beijing qualified it as "reckless" and "irrational." The Kremlin noted its "imperialist character" and "disregard for a multipolar world." Iran, predictably, is described by the NSS as "the world's most significant state sponsor of terrorism." ..."
Dec 25, 2017 | russia-insider.com

"Russia and China ... have concluded that pumping the US military budget by buying US bonds ... is an unsustainable proposition ..." Pepe Escobar 12,072 198

The new 55-page "America First" National Security Strategy (NSS), drafted over the course of 2017, defines Russia and China as "revisionist" powers, "rivals," and for all practical purposes strategic competitors of the United States.

The NSS stops short of defining Russia and China as enemies, allowing for an "attempt to build a great partnership with those and other countries." Still, Beijing qualified it as "reckless" and "irrational." The Kremlin noted its "imperialist character" and "disregard for a multipolar world." Iran, predictably, is described by the NSS as "the world's most significant state sponsor of terrorism."

Russia, China and Iran happen to be the three key movers and shakers in the ongoing geopolitical and geo-economic process of Eurasia integration.

The NSS can certainly be regarded as a response to what happened at the BRICS summit in Xiamen last September. Then, Russian President Vladimir Putin insisted on "the BRIC countries' concerns over the unfairness of the global financial and economic architecture which does not give due regard to the growing weight of the emerging economies," and stressed the need to "overcome the excessive domination of a limited number of reserve currencies."

That was a clear reference to the US dollar, which accounts for nearly two-thirds of total reserve currency around the world and remains the benchmark determining the price of energy and strategic raw materials.

And that brings us to the unnamed secret at the heart of the NSS; the Russia-China "threat" to the US dollar.

The CIPS/SWIFT face-off

The website of the China Foreign Exchange Trade System (CFETS) recently announced the establishment of a yuan-ruble payment system, hinting that similar systems regarding other currencies participating in the New Silk Roads, a.k.a. Belt and Road Initiative (BRI) will also be in place in the near future.

Crucially, this is not about reducing currency risk; after all Russia and China have increasingly traded bilaterally in their own currencies since the 2014 US-imposed sanctions on Russia. This is about the implementation of a huge, new alternative reserve currency zone, bypassing the US dollar.

The decision follows the establishment by Beijing, in October 2015, of the China International Payments System (CIPS). CIPS has a cooperation agreement with the private, Belgium-based SWIFT international bank clearing system, through which virtually every global transaction must transit.

What matters, in this case, is that Beijing – as well as Moscow – clearly read the writing on the wall when, in 2012, Washington applied pressure on SWIFT; blocked international clearing for every Iranian bank; and froze $100 billion in Iranian assets overseas as well as Tehran's potential to export oil. In the event that Washington might decide to slap sanctions on China, bank clearing though CIPS works as a de facto sanctions-evading mechanism.

Last March, Russia's central bank opened its first office in Beijing. Moscow is launching its first $1 billion yuan-denominated government bond sale. Moscow has made it very clear it is committed to a long-term strategy to stop using the US dollar as their primary currency in global trade, moving alongside Beijing towards what could be dubbed a post-Bretton Woods exchange system.

Gold is essential in this strategy. Russia, China, India, Brazil & South Africa are all either large producers or consumers of gold – or both. Following what has been extensively discussed in their summits since the early 2010s, the BRICS countries are bound to focus on trading physical gold .

Markets such as COMEX actually trade derivatives on gold, and are backed by an insignificant amount of physical gold. Major BRICS gold producers – especially the Russia-China partnership – plan to be able to exercise extra influence in setting up global gold prices.

The ultimate politically charged dossier

Intractable questions referring to the US dollar as the top reserve currency have been discussed at the highest levels of JP Morgan for at least five years now. There cannot be a more politically charged dossier. The NSS duly sidestepped it.

The current state of play is still all about the petrodollar system; since last year, what used to be a key, "secret" informal deal between the US and the House of Saud, is firmly in the public domain .

Even warriors in the Hindu Kush may now be aware of how oil and virtually all commodities must be traded in US dollars, and how these petrodollars are recycled into US Treasuries. Through this mechanism, Washington has accumulated an astonishing $20 trillion in debt – and counting.

Vast populations all across MENA (Middle East-Northern Africa) also learned what happened when Iraq's Saddam Hussein decided to sell oil in euros, or when Muammar Gaddafi planned to issue a pan-African gold dinar.

But now it's China who's entering the fray, following through on plans set up way back in 2012. And the name of the game is oil-futures trading priced in yuan, with the yuan fully convertible into gold on the Shanghai and Hong Kong foreign exchange markets.

The Shanghai Futures Exchange and its subsidiary, the Shanghai International Energy Exchange (INE) have already run four production environment tests for crude oil futures. Operations were supposed to start at the end of 2017, but even if they start sometime in early 2018, the fundamentals are clear: this triple win (oil/yuan/gold) completely bypasses the US dollar. The era of the petro-yuan is at hand.

Of course, there are questions on how Beijing will technically manage to set up a rival mark to Brent and WTI, or whether China's capital controls will influence it. Beijing has been quite discreet on the triple win; the petro-yuan was not even mentioned in National Development and Reform Commission documents following the 19th CCP Congress last October.

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