Oil Supply and Demand to Rebalance in 2016

22 Comments on "Oil Supply and Demand to Rebalance in 2016"

makati1 on Tue, 17th Nov 2015 8:15 pm 



RIGPORN…

JuanP on Wed, 18th Nov 2015 5:25 am 



“In addition, he said that non-OPEC supply, specifically U.S. shale, will decline by around 400,000 to 500,000 barrels per day in 2016.” I find this easier to believe than the IEA’s WEO forecast of around 100,000 barrels a day. I expect non-OPEC oil extraction to decline by more than 500,000 barrels a day in 2016 as long as prices remain where they are now.

The IEA is full of shit, their forecasts are political documents full of lies and wishful thinking, and the idiots that believe them, like the one we have in this forum, are delusional ignorant fools.

joe on Wed, 18th Nov 2015 9:34 am 



Opec isn’t acting like a cartel. Many of its members are being negatively impacted. Ironically shale is going to cap peak oil prices thus forcing Opec to engage in a longer price war. Iraq and Iran haven’t even begun to have their impact yet. Pretty soon fat Saudi sheiks won’t be able to afford a camel, much less fund isis.

shortonoil on Wed, 18th Nov 2015 9:47 am 



We discuss this very issue here at the end of this thread:

http://peakoil.com/forums/the-etp-model-q-a-t70563-360.html

Basically – its not going to happen!

rockman on Wed, 18th Nov 2015 4:23 pm 



Juan – ““In addition, he said that non-OPEC supply, specifically U.S. shale, will decline by around 400,000 to 500,000 barrels per day in 2016.” What I find interesting is that they seem to imply “decline” is some natural process that one can project. While there might be a trajectory of maximum oil production decline it has the impact of producers making independent decisions about production rates. Consider all the cornies that argue against PO because we’ve recently seen record high production. But here’s the problem: did we see a new high in maximum oil production rate or voluntary production?

In other words lets say the world, utilizing what spare capacity it has left today, could produce 98 mm bopd. But X years ago it could have produced 105 mm bopd but the producers chose to deliver only 90 mm bopd. Thus while we may be seeing and increase in actual production we have actually had a decrease in production capability. IOW what exactly should we think of PO: actual oil production rate or maximum production rate?

That’s an important distinction when considering the anyone’s prediction: is it actual production capability or the chosen rate by producers? IOW if OPEC suddenly decreased production by 10 mm bopd would that set a new PO date in Nov 2015? Which “PO” date: actual capability or a chosen rate? More important: when some says oil production will decline by X bbl are they talking about how much less oil producers will be CAPABLE of producing or how much they’ll CHOSE to produce?

I think this should be an important consideration. But this gets to the heart of debate over the supply/demand dynamic. You may have notice my argument that supply and demand are currently in balance. IOW there s no oil “glut”. But what I’m putting forth is that there is no glut of $45/bbl oil: every bbl of oil being produced today is being bought and consumed. Except of course for the very small % of daily production being held in storage BY THE OIL PRODUCERS: you can’t count oil BOUGHT by speculators holding it in storage because it is being bought from the producers.

Now what if oil pops back up to $100/bbl would we have shortage or a glut? Neither: there would be a buyer for ever bbl of oil sold. But not every bbl of oil that could be produced, right? And who would argue we would have we would have a glut at that time? After all many consumers couldn’t afford to buy oil at that price so how could one say we had a glut? I think any reasonable person would agree, don’t you think?

Now here’s the sneaky part of my logic: today there are buyers for all the current production of $45/bbl. Regardless there are still tens of millions of potential consumers who can’t afford to by products made from $45/bbl oil. Just the same dynamic as we would have when oil would be going for $100/bbl when everyone would agree there was no glut. IOW every bbl of oil being produced under those two prices is being bought by those that could afford the price. And at the same time there are millions of consumers who couldn’t buy any oil at the then current price.

Which is just a long winded way of saying we have no glut of $45/bbl oil today. What we have is a severe glut of $100/bbl oil and a severe shortage of $20/bbl oil.

IOW supply and demand are currently in balance.

Boat on Wed, 18th Nov 2015 5:55 pm 



Rock,

Your a good man and I like you and love your posts but this post I think has a twisted logic to it.
There is an oil glut.A simple case of overproduction. Period.
When oil was high there were plenty of buyers and bought all the oil. Storage was down so buyers paid what it took to get their oil.
Now there is a glut. There are not enough buyers at $40 to lower storage. Why? There is now way markets build fast. There is no reason to buy extra oil unless you can burn it. Building the infrastructure to burn more oil takes a long time.
On the other hand it is easy to slow consumption. Simply don’t run the machine.
Even if oil was at $10 there are only so many machines that use oil or it’s products. Growth would happen faster but still over time. Growth happened at oil at $100 but one could argue not nearly as fast as it would have at $10. The bottom line is it takes time for price changes to affect consumption on a global scale regardless of the price.

JuanP on Wed, 18th Nov 2015 6:08 pm 



Thanks, Rock! I agree the distinction is important and have given the issue of total potential production capability vs. actual production some thought.

And, yes, the market is balanced both at $45 and $100, with millions always left out and millions more wanting more than they can afford regardless of price. Some things never change. LOL

I personally wouldn’t mind filling up with gas coming from $10-20 oil. Ah, those were the days for consumers!

apneaman on Wed, 18th Nov 2015 6:14 pm 



Boat said

” Growth would happen faster but still over time.”

no comment necessary.

JuanP on Wed, 18th Nov 2015 6:17 pm 



Iran aims to boost oil exports! https://www.rt.com/business/322538-iran-oil-opec-sanctions/

Some Russian propaganda about some Iranian propaganda about dreams of doubling oil exports, oil production, and gas production. Not unlike equally unrealistic claims a few years ago that Iraq would someday produce 12 mbpd of oil.

I do believe their oil exports could double for a while, but the other claims are harder to believe. Iran does have huge amounts of oil and, particularly, zabillions cubic feet of gas. 😉

BC on Wed, 18th Nov 2015 11:46 pm 



https://app.box.com/s/ye6ek8rc3x1gw0t5uxzps3n9lk7c655b

https://app.box.com/s/8f0rm31psk7thwtd5j3gwgrtx8acmo8t

Some support for the rock, albeit tangentially (or by inference perhaps in an arcane way).

The primary inference is that even oil at $40-$45 is still not “cheap” enough to permit real GDP per capita to accelerate to the long-term trend and thus to sustain sufficient demand to permit US shale oil production to continue to grow at the market price and net energy cost of energy extraction of the lower-quality, higher-cost shale oil (and Canadian tar).

If the growth of the economy cannot accelerate to provide sufficient growth of demand for shale oil and tar, then it is unlikely that there will be sufficient investment, profits, wages, and purchasing power to justify further profitable build out of renewables to scale AND simultaneously maintaining the fossil fuel infrastructure indefinitely.

Something will give, and it is today, which is the growth of real GDP per capita and renewables’ production.

As to per capita measures that some like to scoff at, consider that we human apes experience “reality” in linear time space, but our population grows exponentially, whereas Nature constrains our growth and aggregate consumption per capita at a log-linear limit bound of renewable resources.

Aggregating these curves and their differential rates leaves no doubt whatsoever (as the LTG researchers anticipated decades ago) that the human ape species achieved our sustainable regional and global carrying capacities at current level and growth of standard of material consumption in the 1950s-70s, and we are well into overshoot and observing the first signs of collapse.

There was a theoretical possibility in the 1960s to early 1980s that we in the West and westernized Asia might have collectively acted to postpone the worst effects of overshoot, or at least provided a kind of glide-path cushion for civilization and the species. But US peak oil production per capita, deindustrialization, and the competitive geopolitics of the day informed and persuaded the western Power Elite top 0.001% that overshoot had occurred, that die-off was unavoidable, and that they were going to be the last men in the last-man-standing contest for the remaining scarce resources of finite planet Earth.

Virtually every major event that has occurred since the oil shocks of the 1970s-80s through 9/11, the chaos in MENA and Central Asia, and the GFC to date are consequences of the foregoing, and the cumulative regional and global structural effects will only increase to scale.

Next comes the progressive deterioration and eventual collapse of the Chinese economy and of US-China diplomatic and trade relations, and then the West’s embargo and blockade of China in the Pacific, Africa, and the western hemisphere, risking military conflict and the collapse of “globalization”.

We will be conditioned by mass-media propaganda to perceive it as caused by terrorists, China, political corruption and incompetence, and other factors, but the first causes will be overshoot, Peak Oil, resource depletion per capita, the associated, self-reinforcing effects of climate change, the resulting worsening effects of food insecurity, and simply human nature.

shortonoil on Thu, 19th Nov 2015 6:20 am 



All the graphs showing increased production are “all liquids”; NGLs are not crude. Crude can be converted into fuels, NGLs can’t. Next year the EIA will include output from the NY sewer system, and production will be up again. If the data that the graph was constructed from is useless, so is the graph!

Davy on Thu, 19th Nov 2015 6:40 am 



BC, I like a lot of what you are saying but when you delve into the .001%er’s conspiracies I am neutral to negative. Hairless apes even the very wealthy ones are for the most part captivated by the feeling of exceptionalism especially the very wealthy apes who find the power of money and its powers so intoxicating. We humans are lost in our exceptionalism of knowledge and technology applied in development and growth. It is a religion above all other religions. I say this because all other religions have been co-opted to believe in human material exceptionalism. Hence the wealthy .001%ers that run this global world are just delusional themselves about where all this is going. Although since 08 crisis I believe many are in the hangover phase and in the realization of decay and descent. Now is the time of the runaway “last-man-standing contest not prior to 08 crisis. Before 08 crisis there was always some kind of narrative that held the possibility of a break out from our limits of growth and tangent of descent.

rockman on Thu, 19th Nov 2015 7:05 am 



Boat – “There is an oil glut. A simple case of overproduction. Period. When oil was high there were plenty of buyers and bought all the oil.” You seem to be implying that now when oil is $45/bbl there aren’t plenty of buyers. And that not all the oil is being bought despite the fact that more oil is being bought today then when we had higher oil prices.

And again a producer storing his oil is one thing. But it appears most of the oil going into storage has to be counted as consumed since it’s being bought by those who aren’t producers. That oil is no different then oil bought by a refiner: both are VOLUNTARY buyers…no producers stuck with oil they can’t sell. And that goes back to my point: there is more oil being bought today then a year ago. Perhaps you see “glut” differently then I do. To me a glut of any commodity it when there is more available then there are buyers for that commodity. Thus how can we have a glut if every bbl of oil being offered for sale is being bought?

Storage: Consider Cushing…the largest oil storage facility ON THE PLANET. The latest report: first week of Nov saw a 713,000 bbl gain. But during that same week the US consumed 130 million bbls of oil. Which means the US produced and imported 130,000,000 + 713,000 bo. IOW during that week 99.5% of all US oil produced and imported DID NOT GO INTO STORAGE. That doesn’t smell like a glut to me. LOL. And even that assumes all of the 713,000 bbls was owned by producers who couldn’t find a buyer for that 0.5% of US consumption that week. But we know that isn’t true. I can’t find the exact number but it is consistently reported that most of the Cushing oil is owned by speculators and not producers. Which means many of those 713,000 bbls did find a buyer: those speculators who BOUGHT oil just like a refinery would. IOW many of those 713,000 bbls did have a buyer…the speculators.

So anyway you slice it our citizens are consuming a minimum of 99.5% of all the oil in the country. And that’s at the same time of record high global production. That just doesn’t paint a picture of a “glut” IMHO. But it’s OK by me if it does to you: everyone has the right to their opinions.

marmico on Thu, 19th Nov 2015 7:26 am 



All the graphs showing increased production are “all liquids”

Are you as dumb as a door knob or do you just play one on the intertubz?

The latest call out from the EIA is that July 2015 “C+C” is up 2.9 mb/d year on year.

http://www.eia.gov/totalenergy/data/monthly/pdf/sec11_5.pdf

apneaman on Thu, 19th Nov 2015 8:55 am 



Rebalance? So it was balanced and now it’s not balanced, but it will soon be rebalanced. Balance is good.

marmico on Thu, 19th Nov 2015 9:22 am 



Occam’s razor. The quantity supplied by oil producers rose proportionately more than the quantity demanded by oil refiners. The equilibrium price falls.

http://cdn.yourarticlelibrary.com/wp-content/uploads/2013/09/clip_image012_thumb19.jpg

Domestic oil producers and foreign oil exporters get whacked and domestic consumers benefit.

BC on Thu, 19th Nov 2015 11:03 pm 



Davy, I sympathize with your perspective, but I know, and have worked for, quite a number of the 0.001%, and they are generally self-aware and fully prepared to be Nazis when the time comes to maintain their wealth, income, status, privilege, and power.

In fact, they are sociopathic enough that they would prefer that the system collapse rather than give up ANYTHING to the peasant masses or their sympathizers.

That’s not self-delusional but suicidal for ALL OF US: a distinction with a BIG difference.

MrNoItAll on Fri, 20th Nov 2015 1:45 am 



“the competitive geopolitics of the day informed and persuaded the western Power Elite top 0.001% that overshoot had occurred, that die-off was unavoidable, and that they were going to be the last men in the last-man-standing contest for the remaining scarce resources of finite planet Earth.”

Never forget that the U.S. Military, its strategic planners, the CIA with their fact gathering and risk analysis capability, and a vast network of academic and scientific specialists ALL feed information to and inform the top 0.001%.

There is no way in hell that the top elites are or have been unaware that approaching collapse of the current economic paradigm is inevitable. And knowing that, of course they are planning for it, and the aftermath. It is obvious that the government is preparing for a collapse scenario, and have been for quite a while.

This isn’t to say that there aren’t many very wealthy individuals in America who are clueless — there are, no doubt. But there is a solid core of elites wired in with the military and security and intelligence organizations, and they KNOW what is coming down the pipeline, in fact they are certainly controlling events to a large extent and engaged actively in the implementation of detailed plans.

For all of us huddled masses, all we can do is plug away at our daily routine and wait to see how it all plays out. Big events are in our future. And the clock is ticking.

Davy on Fri, 20th Nov 2015 6:40 am 



BC, I have lived and worked with .01% and through that experienced encountered some .001%’ers. I am not an expert on the .001%’ers but I do have good insight into those .01%’ers that are far more numerous and significant. I say significant because when shit hits the fan their fall will be much less.

When globalism decays and crumbles we will see forced localization. The .001%’ers are so few in comparison to the total wealthy. The .001%’ers level of wealth is so dispersed, abstract, and likely ephemeral in collapse. Physical wealth that is manageable in a situation of low security and communications is the key. Digital wealth will disappear overnight. Much of wealth the hyper net worth individuals have is going to evaporate. The less wealthy with local connections and better physical management of wealth will be more significant. In fact many of the .001%’ers will drop to normal wealth status then experience the fall in material wealth all wealth brackets will experience because collapse is a break to a lower level.

It is possible some of these very wealthy will form duchy or dukedom arrangements. We quite possibly may see warlords with private armies and fiefdoms develop. This is a big global world of numerous locals so many situations are possible. We might also see many of them swept away by fate in random chaos of destruction and decay. Even the best laid plans and mighty armies are laid waste by fate. Many poor will find that opportune niche and ascend to power and relative wealth.

Much will depend on collapse. There are just too many variables involved to define specifically. We know the various collapse variables well here on our board. We discuss them at length. Yet, it is how these combine in place, duration, degree, manner, and time that makes collapse an actual blend instead of a single barrel pure spirit.

I do think one can generalize about the .001%’ers. To get to that level one must be a closet psychopath, sociopath, narcissist, and cruel. You cannot get to that level of material wealth and power without a fight. Not all are this way but a significant amount. At the lower level of the .01%’ers the numbers are far greater and the dispersion across locals, cultures, and skill types too immense to generalize. The psychopaths are there among the .01%’ers too and they want to be .001%’ers. I would go as far as to say all of us have psychopathic tendencies in the right situation. There seems to be a knife edge of good and bad we dualistic animals live.

Many in the .01% bracket are happy where they are but many would desire less affluence and more peace and quiet. Many would prefer a simple life. I spent 10 years of my life a .01%’er and it was miserable for me. I was dying spiritually so I bailed. I bailed to where I lost significant wealth but landed in a far better situation. Losing significant wealth at the .01% level and landing in a simple life with wealth that is enough is fine for me. I do not count my wealth. I count my life experience and quality of life. I have turned large fortunes into small fortunes with life choices but I have lived a rich and colorful life. I know people that were careful and counted every dime and they have lived dull and boring lives. That is not for me. I am not saying that is wrong. My point here is below the .001%’er level and in the far more numerous .01% level there is far greater diversity.

Personally I feel the life of a .01%’er considering what is going on with nature and human society is wrong but it is not so much a choice as it is a self-organizing life choice. If I could have been granted a wish I would never have been in the position I was in. A simple good life in a remote wilderness setting with a happy family any day over the bullshit I lived.

Modern life is trending towards societal poverty at every level. It is my hope at the spiritual level we may have a spiritual renaissance of sorts. We are not going to have a material renaissance. We are going to have a material collapse. Our only hope for growth of any kind is spiritual. Some of the greatest of spiritual human advancement came at times of social decay and disruption. A case in point is Taoism in warring states period of China. If you want some insight into what one should be embracing ahead of the coming bottleneck read a few books on the Tao. We modern humans too often forget about what happened in our history is applicable to what is going on now.

JN2 on Fri, 20th Nov 2015 8:18 am 



Davy, just checking, did you mean top 1%-er and top 0.1%-er?

Davy on Fri, 20th Nov 2015 8:35 am 



JN2 thanks for the correction or clarification. These things happen when one talks too much word salad and prattle. BC got me sidetracked by talking .001%’ers. Funny concept to begin with the label of %er. In any case currently I am a well to do goat and cattle doomstead farmer IOW insignificant in the greater scheme of BAU

GregT on Fri, 20th Nov 2015 9:30 am 



JN2,

The fact that you are typing on a computer with an internet connection, in all likelihood makes you yourself a 1%er on this planet. If you make over ~40K per year, congratulations, you are among the wealthiest 1%.