[Tanada]

$this->bbcode_second_pass_quote('ROCKMAN', 'T') - And something to remember about future Iranian oil production: while their rate may have dropped once the sanctions kicked in: by you chart they produced over 5.5 BILLION BBLS of oil since then. I have no idea how much proved producing oil reserves the Iranians had in 2011 or have today...I don't think anyone has credible numbers. But one thing is certain: they have 5.5 billion bbls less proved producing reserves today then they had 4.5 years ago.

[Plantagenet]

Jim Cramer says oil could fall to $10/bbl over the next few months

cramer-oil-could-go-to-10

Cramer's logic is that nobody seems to be able to predict where oil prices are going. The Iranians are discounting their oil to try to win market share from the Saudis, and that puts downward pressure on oil prices and makes the oil glut worse.

Cramers compares this oil glut with the 1986 oil glut that took oil down to $10/bbl and thinks it could happen again (but note that in constant dollars the equivalent of $10 oil in 1986 would be ca. $22/bbl oil today).


Oil could head to $10 bbl over the next few months.......

[Tanada]

$this->bbcode_second_pass_quote('Plantagenet', 'J')im Cramer says oil could fall to $10/bbl over the next few months

cramer-oil-could-go-to-10

Cramer's logic is that nobody seems to be able to predict where oil prices are going. The Iranians are discounting their oil to try to win market share from the Saudis, and that puts downward pressure on oil prices and makes the oil glut worse.

Cramers compares this oil glut with the 1986 oil glut that took oil down to $10/bbl and thinks it could happen again (but note that in constant dollars the equivalent of $10 oil in 1986 would be ca. $22/bbl oil today).

Oil could head to $10 bbl over the next few months.......

[Tanada]

$this->bbcode_second_pass_quote('pstarr', '')$this->bbcode_second_pass_quote('Tanada', 'O')PEC says Iran has 157 Billion in proven reserves, which begs the question, does this number ever change or do they follow the lead of Saudi Arabia and claim they prove exactly as many new reserves as they pump every year.

[ROCKMAN]

And a reminder about the standard definition of a "proved reserve": it isn't how much physically recoverable oil there is in a reservoir. It’s how much physically and ECONOMICALLY recoverable oil there is in those reservoirs. For instance not only are American pubcos having to write down the value of their proved reserves they also have to reduce the volume by the amount of those reserves no longer economic to develop UNDER CURRENT PRICING. Not nearly as big a hit for PRODUCING proven reserves. But the UNDEVELOPED proven reserves, if Iran (and the rest of OPEC followed our SEC rules) would have to post a huge reduction in PROVED UNDEVELOPED reserves along with that 5 BILLION BBLS that have been produced in the last 5 years.

And that 5 BILLION BBLS of reduced proved reserves is just for Iran: OPEC collectively has depleted about 60 BILLION BBLS OF OIL over the last 5 years.

[misterno]

Say KSA is producing 12MM barrels a day which is 4.4BN barrels/year

It is just unbelievable how deep KSA's wells are. It is really shocking...

1 barrel is 0.15 m3

4.4BN barrels is 0.15*4.4BN=704MM m3 = 0.7 km3

What kind of well they are drilling that allows them to keep pouring almost 1 km3 of space out of the ground?

How deep can a well be? Maybe their wells are keep producing oil?

Somethis is out of whack here

[ROCKMAN]

m - Of let's look at it this way: before the sanctions Iran was producing about 4.2 million bopd and consuming about 1.8 million bopd around 2007-08. So net exports around 2/4 million bopd. Between 1998 and 2008 it increased about 500,000 bopd...about 50,000 bbls/year. Don't know if that trend wil continue increasing at the same rate nor do I know if consumption will continue increasing about 10,000 bopd.

But those are the numbers we have. So say they have 160 billion bbls of proven recoverable reserves. So tossing in some continued production growth it will take them 60 to 80 years to produce those reserves. But here's the very tricky part: that's production...not exports. So of those 160 billion bbls only/maybe/kinda/sorta like 90 to 110 billion bbls will be exported. Of course all we can do is make up such numbers and can't prove any of them valid. Even worse we have no idea if that 160 billion bbls is even close to the truth Nor do we have any idea what price of oil would be needed to produce, let's say, the last 80 billion of those bbls.

In the end these are numbers can be believed or not. But nothing can come even close to being proven. Just the same with that chat which so clearly shows exactly what costs to produce (or develop?) a bbl of oil everywhere in the world.

[ralfy]

Ultimately, a glut will take place only when oil production costs drop significantly.

[Plantagenet]

oil up 4% today after KSA and Russia said they were talking about cutting their oil production.

Unfortunately theres no deal yet so the oil glut continues.

[vtsnowedin]

$this->bbcode_second_pass_quote('ralfy', 'U')ltimately, a glut will take place only when oil production costs drop significantly.

[ROCKMAN]

"Rather the owners of old Mega fields have pumped up production at a loss..." Not even close to reality . Even in the US where operating vost are more expensive then anywhere rlse in the world cost are typically $10/bbl or less. Sometimes much less. I have 1 well making 400 bopd that cost me $2/bbl to produce. The bigger revenue bite is the 25% royalty and the 12.5% severence tax I have to pay the state. And that's before my expenses. THE KSA does pay a royalty or severence tax: they own all the oil. As far as US producers no company is going to run a negative cash flow on an ecisting well very long...if at all. But they'll keep producing the wells that would be net money loser: cost $10 million to drill and complete but ultimately produce $5 million in oil. But if the well is making 80 net bopd at $35/bbl and has a lifting cost of $10/bbl that's still $730,000 of net income per year. They might lose $5 million drilling the well but no company deep in debt trying to stay solvent is going to walk away from that amount of net revenue.

No OPEC country is losing money producing their wells. But they are receving much less revenue then in the recent past. The KSA increased production for a very simple reason: to increase the consumer demand for oil so it can max its income. The KSA, just like the Rockman, cannot dictate the price of oil. The buyers (the refiners) set the price they'll pay. The only control the KSA and the Rockman have is how much oil we sell. If the refiners won't pay more the $35/bbl the only way the KSA can increase revenue is to sell more oil.


But that's producing existing wells...not drilling new ones.

[Plantagenet]

$this->bbcode_second_pass_quote('ROCKMAN', 'T')he KSA increased production for a very simple reason: to increase the consumer demand for oil so it can max its income.

[ralfy]

$this->bbcode_second_pass_quote('vtsnowedin', '
') Not following you there Ralfy. We have a "Glut" and there has been no such drop in production costs. Rather the owners of old Mega fields have pumped up production at a loss to kill higher production cost competition. It doesn't make sense to me. They could cut back production just five percent or so and sell half as much for twice the price and save the rest for later.

[Plantagenet]

Deutsche Bank see the oil glut lasting "a lot longer", with prices possibly getting down to $7-17/bbl.

deutsche-bank-downgrades-oil-lower-lot-longer

According to Deutsche Bank's analysis, the longterm average price of oil is about $47 bbl----so they don't think the current price is all that low. To have really low oil prices in this oil glut we'd have to get down around $7-17/bbl, and that is where Deutsche Banks thinks the price will go at some point.


Oil prices headed down to $7-17 bbl?

[vtsnowedin]

$this->bbcode_second_pass_quote('ralfy', '')$this->bbcode_second_pass_quote('vtsnowedin', '
') Not following you there Ralfy. We have a "Glut" and there has been no such drop in production costs. Rather the owners of old Mega fields have pumped up production at a loss to kill higher production cost competition. It doesn't make sense to me. They could cut back production just five percent or so and sell half as much for twice the price and save the rest for later.

[ennui2]

"$100 oil threw the rest of the economy into a tailspin"

The credit crisis threw the economy into a tailspin.

The economy can withstand $100 oil.

[vtsnowedin]

$this->bbcode_second_pass_quote('ennui2', '&')quot;$100 oil threw the rest of the economy into a tailspin"

The credit crisis threw the economy into a tailspin.

The economy can withstand $100 oil.

[ennui2]

$this->bbcode_second_pass_quote('vtsnowedin', '
')if a credit crisis is really going down even $10/bl oil would not save us.

[Tanada]

Personally while a credit crisis is not good it is easily the most survivable 'doom' scenario because all the physical equipment and workforce are still there after the crisis. They just have to work out a new accounting system for work in and rewards out. Far better than World War III or someone blowing up the middle east oil export terminals, or even a repeat of Hurricane Katrina/Sandy.