Register

Peak Oil is You


Donate Bitcoins ;-) or Paypal :-)

Donate Bitcoin



Donate Paypal

Page added on April 20, 2016

Bookmark and Share

Why $80 could be ‘new normal’ for oil

The “new normal” for U.S. oil prices could be as much as double the current $40 per barrel, but don’t expect $65 to $80 crude until around 2018, long-time industry advisor Tom Petrie said Wednesday.

“We overshot on the downside, when we penetrated $30 [per barrel],” Petrie said, referring to the Feb. 11 bottom of $26.05 per barrel. Since then, WTI has surged about 45 percent. “Some of that recovery, shock though it was, was getting back into a more normal adjusted price.”

In the shorter run, the American benchmark West Texas Intermediate crude could top out in the mid-$40s or low-$50s by the end of 2016, the chairman of Petrie Partners told CNBC’s “Squawk Box.”

“We’re going to … [see] enough of a decline in North America and China and other non-OPEC sources, where by this time next year, most of the surplus if not all will be eliminated. But we still then need to pull down those inventories,” said Petrie, formerly a vice chairman of Bank of America Merrill Lynch.

Since the June 2014 highs of around $114, massive global oversupply and slowing demand have slammed crude by about 60 percent. The collapse has not only hurt U.S. producers, it’s put heavy pressure on the oil-rich nation of Saudi Arabia.

In these drastic times, the Saudis are close to securing a $10 billion, five-year bank loan — the government’s first significant foreign borrowing for over a decade — as the world’s top oil exporter seeks to fill a record budget gap.

“A lot of this is the theater of it. Ten billion [dollars] doesn’t really close the gap. Their numbers would say $100 billion of deficit. But it does signal, ‘look if you want to try to outlast us, you’re going to find it difficult,” said Petrie, who during his career has advised on more than $250 billion of energy-related mergers and acquisitions.

The kingdom last week also confirmed plans to sell a stake in its state-owned oil giant Saudi Aramco.

Against that backdrop, President Barack Obama arrived in Saudi Arabia on Wednesday for a meeting with King Salman, just days the Saudis and other OPEC and non-OPEC exporters failed to reach an agreement to freeze crude production.

CNBC



38 Comments on "Why $80 could be ‘new normal’ for oil"

  1. Boat on Wed, 20th Apr 2016 4:17 pm 

    What about Iran and adding a million b/pd.

  2. Plantagenet on Wed, 20th Apr 2016 4:30 pm 

    Yes, Iran is boosting their exports. But many conventional oil fields around the world have reached their peak and are now declining by a few percent per year. Global economic growth is slow, but oil demand continues to grow by 1-2% per year. Eventually the market will come back into balance and the oil glut will end.

    $80 bbl could well be the “new normal” for oil. We’ll find out in a couple of years.

    CHEERS!

  3. penury on Wed, 20th Apr 2016 4:43 pm 

    My guess is that the price of oil will not stabilize at any price for a lengthy period of time.
    Too many wars, too much ruin in the economies, and too much uncertain money in the oil business. Deflation is starting to take hold.

  4. makati1 on Wed, 20th Apr 2016 6:20 pm 

    … And elephants could fly, if only….

  5. Davy on Wed, 20th Apr 2016 6:59 pm 

    The financial system is rigged but the system itself can’t be controlled. The outcome is like pushing on a balloon with the bulge moving somewhere else. We are in this together so one countries efforts bounce on to other countries. The rigging of the system is one of those efforts that once started cannot be stopped. We are seeing resulting extremes with resulting extraordinary efforts. Oil is caught up in this generalized disequilibrium. Normal oil market fundamentals are no longer effective tools as they once were. All this is heading towards a financial break we just can’t see where at the moment because there are so many possibilities. Oil may or may not play a central role in this break but it will be influenced by any break.

  6. rockman on Thu, 21st Apr 2016 7:39 am 

    Just one more person who thinks they can predict the price of oil. Whether any “surplus” is eliminated or not will depend on global oil demand. And that demand will depend on the health of the global economy. And like many fantasizing economists he assumes the global economy will always be doing better despite the fact that he just laid off a significant of the oil price decline on a weaker global economy.

  7. Kenz300 on Thu, 21st Apr 2016 7:41 am 

    If Canada’s tar sands are going to stay in the ground oil has to be less than $80………. How long will it be before the huge Canadian tar sands producers go broke? Can they hold out another year or two?

    Canada’s Oil Price Recovery Could Take Longer Than Previously Thought: BoC

    http://www.huffingtonpost.ca/2016/04/20/canada-oil-price-recovery-boc_n_9743744.html?utm_hp_ref=green&ir=Green

    Climate Change is real and will impact all of us. We need to transition away from fossil fuels.

    New Documents Show Oil Industry Even More Evil Than We Thought

    http://www.huffingtonpost.com/entry/oil-cover-up-climate_us_570e98bbe4b0ffa5937df6ce

    Oil Giants Spend $115 Million A Year To Oppose Climate Policy

    http://www.huffingtonpost.com/entry/oil-companies-climate-policy_us_570bb841e4b0142232496d97

    The Kochs Are Plotting A Multimillion-Dollar Assault On Electric Vehicles

    http://www.huffingtonpost.com/entry/koch-electric-vehicles_us_56c4d63ce4b0b40245c8cbf6

    Inside the Koch Brothers’ Toxic Empire | Rolling Stone

    http://www.rollingstone.com/politics/news/inside-the-koch-brothers-toxic-empire-20140924?page=2

  8. Pops on Thu, 21st Apr 2016 8:32 am 

    Half a dozen years ago I guessed the “new normal” would BE volatility.

    I was thinking the cause of the volatility would be demand (the economy) fluctuating in response to scarcity and a higher cost to produce. I didn’t give much consideration to the ability of price to affect supply any longer– since I thought supply was only going in one direction.

    So a little premature, the market at least doesn’t think we are at peak yet.. In the next few years it will be interesting to see if the return to higher price can enable enough tar/frac, Iran/Iraq, Brazil/VZ what/where – ever, to catch up to ongoing depletion elsewhere.

  9. shortonoil on Thu, 21st Apr 2016 8:44 am 

    Crude oil is almost worthless as a salad dressing! It is used because it provides energy; that is about the only reason anyone uses it. So unless these pundits can state how much energy is gotten out of a barrel of oil, and how much that energy is worth they are talking through their arse!

    This is like watching an auger read the lobes on a sheep’s liver to see how the harvest is going to go; pathetic!

  10. makati1 on Thu, 21st Apr 2016 8:57 am 

    Pops, the market is a big debt inflated bubble. As far from reality as the Unicorn is. So is the Western, (and maybe some Eastern) economies. We don’t have years. Maybe just months. Chaos rules, not sanity.

  11. peakyeast on Thu, 21st Apr 2016 9:32 am 

    Hey Pops thank you for posting. I have always loved your well thought-out posts and missed them for a while.

    And your prediction seems very true.

  12. PracticalMaina on Thu, 21st Apr 2016 9:38 am 

    Non-OPEC is set to fall hard, according the the IEA.
    http://www.reuters.com/article/us-global-oil-idUSKCN0XI03V

  13. Pops on Thu, 21st Apr 2016 9:48 am 

    Thanks PeakYeast!
    I gotta get my head out of the silo now and then. lol

  14. GregT on Thu, 21st Apr 2016 10:56 am 

    “I was thinking the cause of the volatility would be demand (the economy) fluctuating in response to scarcity and a higher cost to produce.”

    Is this not what we have been witnessing since circa 2005?

  15. Davy on Thu, 21st Apr 2016 10:56 am 

    Lol, Makati Bill thinks maybe some eastern economies. Lol

  16. rockman on Thu, 21st Apr 2016 11:08 am 

    “If Canada’s tar sands are going to stay in the ground oil has to be less than $80” With comments like this I think it’s good to remind folks that the first 1 million bopd from the oil sands was developed when oil was at its current price. Oil sands production is more like a mining operation then a drilling program like the shales. Once the infrastructure is in place then the cost to produce the next bbl of oil is much less then the original cost to develop a project. New projects won’t be started if the economics don’t justify it. But if a company hasn’t borrowed themselves into a hole they can keep producing commercially at current prices. The only companies in danger of going under are those who borrowed a lot of capex that requires high oil prices in order to repay debt.
    And I have no sense as to how many (or how few) companies fall into that category.

  17. Davy on Thu, 21st Apr 2016 11:12 am 

    Yeap, the famous demand/supply destruction vortex. That began in earnest in 2014. Prior to that is was a disequilibrium of demand and supply through the Ponzi policies of the central banks. The next step is the black hole of hyperinflation from the loss of confidence and physical shortages. The question is the timeline until that endgame.

  18. Pops on Thu, 21st Apr 2016 11:49 am 

    “Is this [scarcity] not what we have been witnessing since circa 2005?”

    05-’09 that was true, bubbles bubbles everywhere made for big demand, especially in China and supply couldn’t keep up with the growth. But think about it, 5-7 years is the lag for new conventional production to come online, 2005 was 7 years from $15/bbl oil of 1998… it would have been pretty surprising if there hadn’t been some scarcity wouldn’t it?

    Recession, caused by high oil prices is what I thought would cause falling demand and lower price. But it wasn’t collapse of modern civilization that caused the recent glut – demand grew more last year than the recent average, it’s just that supply grew more.

    Rising production doesn’t disprove peak oil, just that oil has peaked.

  19. Boat on Thu, 21st Apr 2016 12:11 pm 

    If you simply scroll through world oil consumption by year the last 30 years you will see a mb/d is not weak demand.
    Now if you cherry pick 2005 to 2010 growth looks weak because for 2 years after the crash oil demand dropped. Shorts fav numbers. Lol

  20. marmico on Thu, 21st Apr 2016 12:18 pm 

    So unless these pundits can state how much energy is gotten out of a barrel of oil, and how much that energy is worth they are talking through their arse!

    Since the ETP is a crock of shit and the ETPPRO is a double crock of shit, I will play the pundit.

    In 2015, the U.S. consumed ~6,000 Btus of total primary energy per dollar of GDP. Petroleum (crude + condensate + natural gas liquids) was ~35% of total Btus or ~2,000 Btus per dollar of GDP.

    There are ~5.8 million Btus per barrel of oil. By arithmetic each barrel of oil produced ~$2900 of GDP in 2015.

  21. Boat on Thu, 21st Apr 2016 12:26 pm 

    marmico,

    Can you do that math for 1970. Supposedly when we had good oil.

  22. shortonoil on Thu, 21st Apr 2016 12:42 pm 

    “If you simply scroll through world oil consumption by year the last 30 years you will see a mb/d is not weak demand.
    Now if you cherry pick 2005 to 2010 growth looks weak because for 2 years after the crash oil demand dropped. Shorts fav numbers. Lol”

    Average increase between years – 30 years

    1985-2014 1.42%

    2005-2014 0.43%

    As usual, you are talking out of your lower external orifice!

  23. Boat on Thu, 21st Apr 2016 1:41 pm 

    2010 to 2015??

  24. shortonoil on Thu, 21st Apr 2016 2:02 pm 

    “2010 to 2015??”

    Another of your oxymorons; the EIA hasn’t posted 2015 data yet. They usually do that sometime in June.

    PS: If you find it post the link here, I would love to see it.

    PPS: I’m not talking JODI, their data is usually incomplete, and they make up the numbers to fill in the blanks.

  25. Boat on Thu, 21st Apr 2016 2:11 pm 

    EIA estimates that global consumption of petroleum and other liquid fuels grew by 1.3 million b/d in 2015

    https://www.eia.gov/forecasts/steo/report/global_oil.cfm

  26. marmico on Thu, 21st Apr 2016 3:52 pm 

    Can you do that math for 1970.

    ~$1000 plus several Harriet Tubmans in constant dollars.

    It’s the decline in energy intensity over 45 years. In 1970, total primary energy consumption was ~14,400 Btus per dollar of GDP and petroleum was ~44% of the compositional mix.

  27. Boat on Thu, 21st Apr 2016 5:06 pm 

    marmico

    That is amazing amount of efficiency gain.

  28. marmico on Thu, 21st Apr 2016 6:29 pm 

    That is amazing amount of efficiency gain.

    It’s mostly efficiency. Some is substitution and conservation.

    Don’t tell the ETPPRO double crock of shit fuctard. The quart shy of oil’s Chart #161 says that a barrel of oil is associated with 4.5 Harriet Tubmans of GDP in 2014. ROTFLMFAO

  29. GregT on Thu, 21st Apr 2016 7:15 pm 

    “EIA estimates that global consumption of petroleum and other liquid fuels grew by 1.3 million b/d in 2015”

    Petroleum and other liquid fuels are not oil Boat.

    Stop playing your childish games.

  30. Boat on Thu, 21st Apr 2016 7:33 pm 

    That is what short says even though it’s great for mixing with heavy oil. And brings a higher price than heavy oil which ya’ll call real oil. Lol What else is light oil good for? Turns out it’s best for gasoline. The most popular product on earth. No wonder refineries buy so much of it. You see gregt price determines value.

  31. GregT on Thu, 21st Apr 2016 8:14 pm 

    Stop being an idiot Boat. If you aren’t willing to be truthful, then go away.

  32. Boat on Thu, 21st Apr 2016 8:39 pm 

    Another chart, try real hard to learn API and fracked oil.

    http://www2.emersonprocess.com/siteadmincenter/PM%20Articles/Olsen_CEP_April2015.pdf

  33. Boat on Thu, 21st Apr 2016 8:42 pm 

    Another chart, try real hard to learn API and fracked oil.

    http://www2.emersonprocess.com/siteadmincenter/PM%20Articles/Olsen_CEP_April2015.pdf

    Look gregt, if you gonna talk oil at least learn about it.

  34. GregT on Thu, 21st Apr 2016 9:04 pm 

    Thanks Boat,

    A very good article describing exactly why fracked oil should not be lumped in with conventional crude. Transportation difficulties, contaminants, variability in composition, and above all else, cost.

    The very points that many of us have been making here for quite some time. Welcome aboard!

  35. Boat on Thu, 21st Apr 2016 9:25 pm 

    gregt,

    Now all you have to learn about is conventional oil where much of it is more expensive to deal with.

  36. GregT on Thu, 21st Apr 2016 9:43 pm 

    The world’s economies have hummed along quite nicely for the better part of a century with conventional crude oil Kevin.

    Since the fraking craze began 7 or so years ago, not so much.

  37. Apneaman on Thu, 21st Apr 2016 9:46 pm 

    Boat says

    “marmico,
    Can you do that math for 1970.”

    Ahhh how adorable. I just love it when the little ones express their curiosity.

    You’re so cute little boaty. Maybe tomorrow you can ask uncle marmi to help you tie your shoes.

    You run along now – the adults need to have a big people conversation.

  38. Kenz300 on Fri, 22nd Apr 2016 7:19 am 

    The world needs to speed up its transition away from fossil fuels.

    Oil Giants Spend $115 Million A Year To Oppose Climate Policy

    http://www.huffingtonpost.com/entry/oil-companies-climate-policy_us_570bb841e4b0142232496d97

    Busted! Fracking Chemical Found in Wyoming Water Supply | CleanTechnica

    http://cleantechnica.com/2011/11/13/epa-finds-fracking-chemical-and-other-pollutants-in-drinking-water-of-pavillion-wyoming/


Leave a Reply

Your email address will not be published. Required fields are marked *