Global Shale Output Decline Will Stabilize Oil Market

28 Comments on "Global Shale Output Decline Will Stabilize Oil Market"

Plantagenet on Thu, 10th Sep 2015 10:52 am 



Translation:—the Russians are waiting for other producers to cut their production to end the oil glut—the Russians themselves will continue to produce full out, of course.

Hahahahahahahaahah!

Cheers!

rockman on Thu, 10th Sep 2015 11:01 am 



There’s an even better reason for Russian oil companies to not cut production: They are netting about the same revenue now as when oil prices were higher. It was recently pointed out that the Russian govt indexes the tax rate of the oil companies to the price of oil. As a result the reduction in the tax rates of those companies did a good job of stabilizing company revenue. Of course the govt lost a lot of tax revenue so while it might wish to see prices increase the oil companies don’t have the same incentive.

In a similar fashion the revenue of the NG producing companies have also significantly increased despite lower production mainly as a result of the decline of the Russian currency. Again not good news for the govt. But given that many of the TPTB in the Russian govt also benefit directly from the fossil fuel industry I suspect they aren’t too disappointed. LOL.

BobInget on Thu, 10th Sep 2015 12:08 pm 



If a person or corporation is manufacturing, even growing food, the notion of lowering prices to gain market share could make sense.

Pursuing the same strategy with natural resources is, by definition, suicidal.
Pushing a commodity out the door below cost with the expectation of taking business away from another resource miner is a suckers game.

All I’m saying here, Saudi strategy is failing.
If tight oil and gas producers go belly up,
those resources are still available when KSA’
Gulf States, ‘run out of gas’ so to speak.

Going opinion has shale going broke standing still. I’m not so sure.

Higher oil prices, newer technology, changes
everything.

Jobs are coming back in the US.
Sadly, with crappy public transport, private cars remains the only way to ‘the job’.

Pick-up truck sales always rise during housing booms. WE are entering such a building boom.

BobInget on Thu, 10th Sep 2015 1:36 pm 



Saudis smell defeat. Avoid OPEC meeting

n.reuters.com/article/2015/09/10/opec-oil-idINL5N11G22P20150910

(Reuters) – Top oil exporter Saudi Arabia sees no need to hold a summit of producing countries’ heads of state if such discussions would fail to produce concrete action towards defending oil prices, sources familiar with the matter said on Thursday.

The comments followed a meeting of Gulf Arab oil ministers with Qatar’s emir in Doha, at which a Venezuelan proposal for an OPEC and non-OPEC summit was discussed.(snip)

Jaw Jaw Jaw, No War War War.

Posted Note:

Saudi Arabia as I’ve been saying since March,
placed itself in the awkward position of teaming up with two dangerous player in the Middle East.
The US and Israel. Needless to say, KSA won’t win any popularity contests on Arab Streets.

More to the point, Saudi Arabia abrogated its responsibility as leading OPEC producer by weaponizing product in order to minimize Iran’s
influence and bankrupt marginal US and Argentinian shale producers. Topping off this poop cake, KSA decides to bomb the Houthi
Tribesman fighters who overturned a Saudi
puppet government.

Predicted a year ago on these pages, KSA’s OPEC leadership will be overturned by an alliance of Venezuela, Russia, Ecuador, Iran, Kurdish Iraq possibly Nigeria and Algeria.

As we speak, this coup d’etat is a work in progress. Those waiting for a missile or two blowing up Saudi oil infrastructure needn’t be disappointed. Putin managed to make this murder look like suicide.

The Saudis of course, won’t go down w/o a fight.

Step one, Russians will attempt to save Syria from IS. Put Russian puppets in power as war limps along for a few more years till Saudi Arabia and the US find fighting too costly.

rockman on Thu, 10th Sep 2015 1:48 pm 



Bob – “Pursuing the same strategy with natural resources is, by definition, suicidal.” I couldn’t agree more. Which is why I’ve repeatedly pointed out that the KSA wasn’t orchestrating lower oil prices but instead was responding to them by increasing their production to max their revenue. Revenue they use to keep stability in their country. It’s just a coincidence that the shale players have taken a hit. As I’ve also pointed out before why put the blame on just the KSA anyway: Canadian and US companies have also been doing their best to max their oil production for the same reason. Unfortunately for those companies they don’t have the immediate capability to increase production like the KSA.

In August 2013 the KSA was producing 10.24 million bopd. As of May 2015 they were producing 10.14 million bopd. I don’t recall anyone arguing that the KSA was trying to undermine US shale player in August 2013 when they were producing a tad more than they are today. Of course during 2013 the inflation adjusted oil prices averaged $92.40/bbl compared today’s price around $50/bbl. IOW the KSA oil revenue has fallen over $150 BILLION per year as a result of those lower prices. I can’t imagine how anyone would expect the KSA to recoup the loss of HUNDREDS OF $BILLION over several years. Oil would have to increase to $140+/bbl for years just for the KSA to break even let alone see a better profit. And if oil were to hold at that price level FOR YEARS who doesn’t believe the US shales wouldn’t see another boom?

The opinion that the KSA intentionally pushed prices down is beyond any logic I can imagine.

BobInget on Thu, 10th Sep 2015 2:42 pm 



Respectfully, Rockman.

Like most common sense oil men you are missing that big elephant.

Middle Eastern Islamic factions of OPEC worked themselves up into a frenzy of illogical action.
Non Islamic producers; Nigeria, Venezuela, non OPEC members like Russia and USA are suffering terrible ‘collateral damage’ as result.

Only in the US, among producers have low oil prices helped a stuttering economy.

Saudi Arabia kept pushing production higher.
Saying, truthfully as it turns out, Demand not Revenge must be the only reason to break OPEC
wide open. If demand falls off ever so little,
traders find excuse after excuse to call “oversupply” .

We now know with several
mid sized oil producers off line any oil ‘Glut’
was within margins of just-in-time deliveries.
We now know WW demand grew over-all as predicted.

Nony on Thu, 10th Sep 2015 6:40 pm 



Price dropping because of excess supply. Investment in new production dropping which sets the stage for declines by marginal producers. And miles driven going up because of lower gasoline prices. Setting the stage for a small upwards price increase.

P.s. KSA is not intervening in the market because they know shale will just come back quickly. The $100 POD days are over. They are just competing naturally at the new lower price.

shortonoil on Thu, 10th Sep 2015 6:44 pm 



Nice try Bob, blame it on the crazy Muslims; sure. The fact is oil is no longer able to drive enough economic activity to justify a higher price. In fact, it can not even justify its own full life cycle production cost. At $45/ barrel there is not a producer on the planet that can afford to replace the reserves they are extracting. The only way the industry can now survive is by consuming its capital assets, and assuming huge amounts of debt.

Good try, but that dog don’t hunt!

Makati1 on Thu, 10th Sep 2015 8:45 pm 



Rockman, you saved me the time to explain the Russian situation. Thanks.

Much as some here love to bash the Russians, they are doing quite well, thank you. The UK & US, not so much.

Makati1 on Thu, 10th Sep 2015 8:47 pm 



Shortonoil, you see the real situation, not the propaganda spewed over the sheeple to keep them in a war frenzy.

Boat on Thu, 10th Sep 2015 10:33 pm 



Short,
Eventually the money runs out and new wells will get a higher price. Frackers and tar sands are 2 examples. If the price get high enough here comes electric and hybrids. There is a tipping point for every way to build and run machinery. A higher price of oil just speeds up the inevitable.

apneaman on Thu, 10th Sep 2015 10:46 pm 



“There is a tipping point for every way to build and run machinery. A higher price of oil just speeds up the inevitable.”

Two more completely meaningless nonsensical sentences.

You’re either taking the piss, or are the dumbest motherfucker ever, boat.

Boat on Thu, 10th Sep 2015 10:59 pm 



You just don’t understand capitalism. Oil is the worlds largest traded commodity. Every time it goes up it spurs innovation. New widgets are developed to lower the cost to compete with other fuels. Same with everything, if you want to survive in business you can’t stand still, you have to innovate and improve. Oil is a great example because it powers so many widgets. Is that simple enough for you?

GregT on Thu, 10th Sep 2015 11:11 pm 



Boat,

Sorry buddy, but from what you just said above, it is crystal clear that you don’t understand very much at all. Human ingenuity does not trump physics, biology, or basic mathematics.

apneaman on Thu, 10th Sep 2015 11:16 pm 



I understand that Capitalism is an ideology, which you apparently do not. All ideologies are emotion driven at their root. I also understand that physics trumps all ideologies, which you apparently do not. Capitalism is failing as we speak, but you can never admit it because your identity is wedded to it and therefore you must defend it. That makes you a slave. This is why you need illegal immigrants and refugees and drop in the bucket subsidies to Ethiopians to blame for it’s failings. The system is pure so it must be something external that is causing the failing. Won’t be too much longer boat. Then the blaming on others will really kick into high gear.

Makati1 on Fri, 11th Sep 2015 12:25 am 



Maybe Boat belongs to the Church of the Wall Street Virgins…lol. He worships the idea of an income he doesn’t have to produce anything to receive. A lot of twenty somethings bought into that fantasy and wasted their education and now their lives on a dying fad. I hope he doesn’t have a degree in economics where reality is not allowed to exist.

Davy on Fri, 11th Sep 2015 4:08 am 



Turds have wings per some on this board

The price of oil, Russia’s chief export commodity, has more than halved since its peak in June 2014, mainly due to global oversupply and weaker economic growth in China, the world’s top energy consumer.

OK, that was two of the Bric turds. What’s next?

http://theeconomiccollapseblog.com/archives/tag/brazil
Brazil’s real plummeted to a 12-year low of 3.34 to the dollar, reflecting the country’s heavy reliance on exports of iron ore and other raw materials to China.
The devaluation tightens the noose on Brazilian companies saddled with $188bn in dollar debt taken out during the glory days of the commodity boom. The oil group Petrobras alone raised $52bn on the US bond markets.

http://www.cnbc.com/id/100982740
India’s wide current account deficit (the broadest measure of the trade balance), which stood at $18.1 billion in the first quarter of the year, is cited by analysts as the chief reason for why the rupee is bearing the brunt of the sell-off in emerging market currencies.

http://qz.com/492352/south-africas-economy-is-facing-headwinds-but-these-five-sectors-could-help-stabilze-it/
Amid the recent global economic slowdown and persisting domestic challenges in the country, South Africa’s economy contracted by 1.3% in the second quarter of 2015, edging closer to a possible recession in the next quarter.
It is no wonder South Africa’s president, Jacob Zuma, was reported to have described South Africa’s economy as “sick.” It was an acknowledgment the current state of affairs could no longer be business-as-usual.

I am here to say the whole global system is interconnected and vulnerable to systematic contagions across national borders. No nation is immune. Earlier in the Year it was the Brics center stage led by the grand master Putin and his buddy Xi. My Bric criticism was dismissed then when all this absurd Bric fanfare was going on. Now I am vindicated. I said all along the Brics were turds.

shortonoil on Fri, 11th Sep 2015 6:33 am 



“Short,
Eventually the money runs out and new wells will get a higher price.”

In 1960 the Saudis were pumping oil for 25 cents a barrel; wells that cost less than a $100,000 to drill were producing 50,000 barrels a day of the highest quality light sweet crude the world has ever seen. They were selling oil for $2.80 a barrel, and getting fabulously rich. Today, at $46 they have to borrow money to pay the bills.

Today a new well in North Dakota cost $8.5 million, and produces 450 barrels a day of high test camel pee for a month before it starts its collapse. The quality of the world’s reserves has fall so far that it is almost no longer usable. That occurred because producers have continually taken the best, leaving the dregs for later. It is now latter, much latter!

The argument that more money will be poured into it to solve the problem is an oxymoron. If it is not there any longer all the money in the world is not going to put it there. This apparent inability of people to understand the effects of depletion is like people ignoring the affects of gravity. It is an effect that can be ignored if you want – until you hit the ground!

http://www.thehillsgroup.org/

bug on Fri, 11th Sep 2015 8:23 am 



Apnea said ” I understand Capitalism is an idealogy”. Very well said and as long as there are people that think it and “Economics” are sciences, we are lost. Thanks

Kenz300 on Fri, 11th Sep 2015 10:00 am 



Shale production goes down and Iran oil exports go up ….. seems like a wash……………

The Russians and every other oil producing country wants someone else to cut production while they raise production.

The high cost producers will get squeezed.

apneaman on Fri, 11th Sep 2015 11:41 am 



Peak Oil Ass-Backwards (part 2): Crashing Oil
Prices Aren’t Due to an Oil Glut But to Demand
Destruction and Peaking Credit

http://fromfilmerstofarmers.com/blog/2015/september/peak-oil-ass-backwards-part-2/

onlooker on Fri, 11th Sep 2015 12:25 pm 



Absolutely spot on. AP

GregT on Fri, 11th Sep 2015 12:33 pm 



100% spot on Apnea. And worth quoting from:

“With peak oil and fractional-reserve banking being the first two pieces of this puzzle, the third piece that I needed to factor in is the fact that money is a proxy for energy.”

“Simply put,… the core function of money is that it enables us to command energy – the energy used to move our bodies with, to power our machines, to feed to domesticated animals whose energy we then use to do work (which nowadays generally means entertaining us), etc. In other words, it might be tough and/or inconvenient, but one can get by without money. You can’t get by without energy.

In other words, at their core, our economies don’t run on money, they run on energy. ”

And this is precisely why the eCONomists have it all wrong.

onlooker on Fri, 11th Sep 2015 12:45 pm 



I think a way for most people to understand this issue is that money is NOT a substitute for resources rather it is an enabler and distributor of said resources. Money has never created anything rather it has been the liaison between supply and demand. Normally a 5 years child would understand that but Economists are so convoluted in their jargon and concepts they fail to see the most obvious of things.

Apneaman on Fri, 11th Sep 2015 2:01 pm 



Nate Hagens has often said that money is a future claim on resources. What will happen when most people realize that their future claims can never be met because the master resource is no longer cheap or available at the same scale?

Transcript for Nate Hagens: We’re Not Facing a Shortage of Energy, but a Longage of Expectations

“Nate Hagens: Yeah, that’s right. And, you know, the main reason that’s a problem is because our entire system is based on the incorrect assumption that energy, which underpins every single physical service transaction we have in this economy, is substitutable. You can substitute capital or labor for it. And in reality, that’s not true. If you don’t have energy, you don’t have an economic transaction.”

http://www.peakprosperity.com/page/transcript-nate-hagens-were-not-facing-shortage-energy-longage-expectations

You know how many say the government and their 1% masters do not have a plan B? They do, it’s just not a very good one, but it’s the only thing they know how to do. They actually announced their plan to the world last year, but the sheep who it will effect the most did not even blink. TPTB did an end around and legislated a future claim on the average person’s future claims.

New G20 Rules: Cyprus-style Bail-ins to Hit Depositors AND Pensioners

http://ellenbrown.com/2014/12/01/new-rules-cyprus-style-bail-ins-to-hit-deposits-and-pensions/

GregT on Fri, 11th Sep 2015 2:38 pm 



“What will happen when most people realize that their future claims can never be met because the master resource is no longer cheap or available at the same scale?”

Then things will revert back to normal. Physical human labour will once again become the “master resource”.

Makati1 on Fri, 11th Sep 2015 7:42 pm 



GregT, you see it. The day is coming where, if you do not produce something of real value that another needs to survive, you will not eat.

Apneaman on Fri, 11th Sep 2015 8:00 pm 



Killing without a conscience will probably come in handy too.