[onlooker]

"when every bbl of oil being produced has a ready and capable buyer. " Sorry Plant your are misquoting Rockman. Also, his reference to the supply/demand equation is right on. Alot of oil is being produced more then ever in fact and demand is also at its highest level. In turn the price reflects that equilibrium between supply and demand. Where do you people get the idea of glut just because the price is relatively low.

[AdamB]

Out of curiosity, for the long timers here, why weren't these basic economic concepts accounted for back in the bad old days of peak oil? Why weren't people screaming that peak oil was irrelevant in the face of behavorial change related to transport choices, or how increased prices would obviously make more supply available, while pinching demand? This was all common economic knowledge back then, why wasn't it utilized?

[onlooker]

It is true Adam some people jumped the gun, that does not invalidate peak oil dynamics and we have to wait yet to see the more extreme repercussions.

[Plantagenet]

$this->bbcode_second_pass_quote('onlooker', ' ') Sorry Plant your are misquoting Rockman.

[vtsnowedin]

I'm still amazed that a one and one half percent 1.5% oversupply in a commodity has reduced it's price by 70%. Can we expect that in a couple of years when increased demand creates a 2% shortage that the price will double? Triple? How high would the price have to be to reduce demand two percent? Does anybody know for sure?

[KaiserJeep]

$this->bbcode_second_pass_quote('vtsnowedin', '8')) I'm still amazed that a one and one half percent 1.5% oversupply in a commodity has reduced it's price by 70%. Can we expect that in a couple of years when increased demand creates a 2% shortage that the price will double? Triple? How high would the price have to be to reduce demand two percent? Does anybody know for sure?

[vtsnowedin]

$this->bbcode_second_pass_quote('KaiserJeep', ' ') As it relates to human behavior, there simply is no authoritative answer. (If there was such an answer, we could both make our fortunes in the oil market.)

[AdamB]

$this->bbcode_second_pass_quote('vtsnowedin', '8')) I'm still amazed that a one and one half percent 1.5% oversupply in a commodity has reduced it's price by 70%. Can we expect that in a couple of years when increased demand creates a 2% shortage that the price will double? Triple? How high would the price have to be to reduce demand two percent? Does anybody know for sure?

[Plantagenet]

People who think a glut means there is so much of something you have to give it away, your moment has come---UAE has so much oil they can't store it so they are giving it to India

uae-offers-india-free-oil-to-ease-storage-woes

The global oil glut is getting to the point that storage tanks in Cushing OK in the USA and most of the available storage elsewhere around the world is almost full. As the UAE shows, as the oil glut continues the storage is being filled, and whenthere is no more storage available, then the price of oil is going to plummet even further.


During an oil glut the oil goes in, but it doesn't come out.

[AdamB]

$this->bbcode_second_pass_quote('onlooker', 'I')t is true Adam some people jumped the gun, that does not invalidate peak oil dynamics and we have to wait yet to see the more extreme repercussions.

[Tanada]

There are a lot of reasons to expect supply to shrink quite a bit at these prices going forward even a few weeks.

$this->bbcode_second_pass_quote('', 'T')he speed at which oil wells spitting out their final drops of unprofitable crude will be shut may hold the key to an eventual rebound if prices fall further.

Crude prices tumbling to $30 a barrel would threaten the profitability of about 206,000 barrels per day of production from older wells that produce minimal amounts of oil, according to a report Thursday from Bloomberg Intelligence.

The wells, which are most prevalent in Texas’ Permian Basin, are about 25 years old on average and produce no more than 15 barrels a day. They require regular maintenance to help pump even that much after years of sagging pressure.

"These wells dance on the edge of profitability," Peter Pulikkan and William Foiles, analysts at Bloomberg Intelligence, wrote in the report. "The reaction of smaller mom-and-pop operators to sustained low oil prices will dictate how quickly uneconomic supply is removed from the market."

Stripper wells represent more than 80 percent of total wells in the U.S. and 12 percent of total production, according to the report. In total, they generate about 1.1 million barrels of oil a day, nearly as much as Algeria, the third-largest African crude producer.

The key decision will be whether operators continue to let the wells produce at losses to hold the lease in hopes that oil prices soon recover, or shut in production and potentially surrender the well, the analysts wrote. While most of the little wells are operated by tiny producers, the two companies with the greatest production from stripper wells are Chevron Corp. and Occidental Petroleum Corp.

[JV153]

Local pump price is 5.50 USD/ US gallon here in Finland, about the same from the UK to Turkey. The pump price might be low *somewhere*, but it isn't here. Pump price is low in the US, Canada and Mexico, a bit lower in Russsia and Nigeria, and lower yet in Saudi Arabia and Kuwait.

http://www.globalpetrolprices.com/gasol ... ces/#hl193

[onlooker]

JV, is it accurate to say that your prices are high relative to the US lets say because first your oil industries are not subsidized. Second, you import most of your oil and third since you do not drive that much and thus use less gas, sellers must raise prices to maintain a certain level of income?

[tita]

$this->bbcode_second_pass_quote('onlooker', 'J')V, is it accurate to say that your prices are high relative to the US lets say because first your oil industries are not subsidized. Second, you import most of your oil and third since you do not drive that much and thus use less gas, sellers must raise prices to maintain a certain level of income?

[JV153]

$this->bbcode_second_pass_quote('onlooker', 'J')V, is it accurate to say that your prices are high relative to the US lets say because first your oil industries are not subsidized. Second, you import most of your oil and third since you do not drive that much and thus use less gas, sellers must raise prices to maintain a certain level of income?

[ROCKMAN]

JV - "I was actually more addressing the point as to where the demand might be increasing based on ability to pay." In my 4 decades in the oil patch I've never seen a situation where demand wasn't determined by the ability to pay and not by the amount of supply available. When oil hit $117/bbl (adj. for inflation) in1980 demand was provided by those with the ability to pay that price. Just as when oil went to $17/bbl in 1986: demand was met by those who could only afford to pay that price. It's no different today. WE DO NOT HAVE A GLUT OF OIL: demand has never been higher today than ever before. Every bbl that is being produced is being bought…understand that oil put into storage by speculators is “bought oil”. The world is not FLOODED WITH OIL...the world is FLOODED WITH BUYERS that can afford $30/bbl. What the oil patch has a great shortage of is buyers willing and able to pay $100/bbl for oil.

The $30/bbl price of oil doesn't define a "glut" any more then $100+/bbl of oil defined a shortage. All the $100+/bbl oil met demand at that time: those that could afford it had all the oil they wanted...i.e. no shortage. And today every buyer that can afford $30/bbl oil has all they want to meet their demand…i.e. no glut. Oddly enough the only theoretical time there can be a real oil shortage is when oil is priced low enough (say $10/bbl) there are more buyers with that price then the max that can be produced. But difficult for us to get to that point for any length of time since market forces would drive the price up to where demand (what buyers can afford and not want to buy) and supply are in balance.

[JV153]

$this->bbcode_second_pass_quote('ROCKMAN', ' ')In my 4 decades in the oil patch I've never seen a situation where demand wasn't determined by the ability to pay and not by the amount of supply available.

[Plantagenet]

$this->bbcode_second_pass_quote('onlooker', '.').. is it accurate to say that [EU] prices are high relative to the US lets say because first your oil industries are not subsidized. Second, you import most of your oil and third since you do not drive that much and thus use less gas, sellers must raise prices to maintain a certain level of income?

[Plantagenet]

KSA, Russia, Venezuela and Nigeria just agreed not to increase their oil exports from current levels. Thats nice, except these countries are already pumping full out and couldn't increase oil production if they wanted to.

Iran just sent its first shipments of oil to Europe. Iran isn't part of the new agreement and they look set to continue to ramp up their oil production. They may make the oil glut even worse.

[Subjectivist]

Saudi Arabia, Russia, Quatar and Venezuela have pledged to freeze their production rates at January 2016 levels and not increase their exports. There is some reporter type analysis I skipped over in the quote, you can find it at the link below.

$this->bbcode_second_pass_quote('', 'T')he deal to fix production at January levels will be "adequate" and Saudi Arabia still wants to meet the demand of its customers, Oil Minister Ali Al-Naimi said in Doha after talks with Russian Energy Minster Alexander Novak. Qatar and Venezuela also agreed to participate, Al-Naimi said. Oil pared gains in London, after rising before the meeting amid speculation the countries would discuss production cuts.

"This is an announcement of a production freeze among countries whose production didn't even grow recently," said Eugen Weinberg, head of commodities research at Commerzbank in Frankfurt. "If Iran and Iraq are not a part of the agreement, it's not worth much — and even then there is still a question of compliance."

"A freeze would not create an immediate U-turn, but it creates a better foundation for the price recovery in the second half," Olivier Jakob, managing director of consultant Petromatrix GmBh, said in a note to clients before the meeting concluded.

The freeze deal comes after months of competition for market share between Russia and Saudi Arabia. Riyadh has taken the rare step of selling crude into Moscow's backyard of eastern European, while Russia overtook Saudi Arabia in oil exports into China. The two nations are also backing opposite sides in the Syrian civil war.

According to the IEA, Saudi Arabia produced 10.2 million barrels a day in January, below the most recent peak of 10.5 million barrels a day set in June 2015. Russia produced nearly 10.9 million barrels a day in the same month, a post-Soviet record, according to official data. Venezuela pumped 2.4 million barrels a day and Qatar produced 680,000, according to the IEA.

Qatar will lead monitoring of the output freeze agreement, the nation's Energy Minister Mohammad bin Saleh al-Sada said at a news briefing. Low oil prices haven't been positive for the world, he said.