[TonyPrep]

As a counter to the hypothesis that consumption is diving and stocks are rising, the recently released Short Term Energy Outlook, from the EIA, estimates that consumption exceeded production for the last 3 months of 2008. The eye-popping estimate for December has consumption running 4.04 million barrels per day above production.

Are we about to experience a hyper spike in the oil price, or are the recent estimates from the EIA complete garbage?

[TheDude]

Good catch, Tony. Ostensibly OPEC is just getting warmed up with production cuts, and I've wondered if this couldn't lead to shortages at some point, noticing other indicators of demand rebounding. Or OPEC achieving their desired goal of a higher price for crude - possibly mucking up the desired economic rebound, giving pols more slabs of nice fresh scapegoat.

This will be yet another rollercoaster ride of a year, I'm thinking.

[TonyPrep]

$this->bbcode_second_pass_quote('TheDude', 'O')stensibly OPEC is just getting warmed up with production cuts

[ROCKMAN]

Tony,

I see things pretty much the same as you and the Dude. I just think it takes a bit longer then most expect these changes to take place. For instances I think we're many months away from seeing the final DD caused by the economic slump. I'll also guess we won't see OPEC cuts materialize significantly for another 2 or 3 months at least. Those two factors along make price prediction foolish IMO. All depends on who wins the race: DD or OPEC cuts. Other then the stock market and futures the system is just too big to react quickly to changes.

But I do think NG might be a shocker to many in a year or so. The unconventional NG plays are cutting back big time. Those high depeltion rates will cut supply significantly in the nest 12 - 18 months. But then it get's back to the rate of DD...especial on the commercial side of the fence.

[dissident]

Let's not forget that a lot of demand was destroyed by the high oil price. This component of the demand is recovering in places where the demand was reduced not out of choice but out of necessity.

The current price low is just as transient as the summer price spike. The oil price in 2009 will not average $35 or less.

[JohnDenver]

$this->bbcode_second_pass_quote('TonyPrep', 'A')re we about to experience a hyper spike in the oil price, or are the recent estimates from the EIA complete garbage?

[centralstump]

The 881/2 mbd in December is a record is it not? That has got to be wrong.

[TonyPrep]

$this->bbcode_second_pass_quote('JohnDenver', '')$this->bbcode_second_pass_quote('TonyPrep', 'A')re we about to experience a hyper spike in the oil price, or are the recent estimates from the EIA complete garbage?

[TonyPrep]

$this->bbcode_second_pass_quote('centralstump', 'T')he 881/2 mbd in December is a record is it not? That has got to be wrong.

[ROCKMAN]

Tony,

Pretty good summery of where we're at right now IMO. Not that cycles repeat themselves exactly, but my memory is that the big demand destruction of the early 80's took many months to materialize in a significant manner. Granted the boom/bust cycles seems to be occurring every quicker but I still suspect commercial DD has a way to go before we see the bulk of its related drop. And given what appears to be worsening economic conditions it's bottom may be as much as a year off. That's one reason I believe OPEC will maintain ever increasing efforts to lower production levels to prevent a prolonged and, perhaps greater, price destruction. Gasoline consumption can and did seem to drop over night. But it has the same ability to rebound just as rapidly. Certainly if the economy hadn't taken a hit we would probably be setting record gasoline consumption with today's low prices.

So we're back to the same foot race between DD and production cuts by OPEC. But the rapid decline in Cantarell Field and the likely suspension of many new oil projects might make the race an even money bet IMO.

[TonyPrep]

Spot on ROCKMAN, although if the economy hadn't taken a hit, I doubt that we'd see oil prices so low. Low prices are bound to mitigate DD, to some degree but it's not clear just how much mitigation. I think it'll take a few months before we've got a clear idea on that. By then, however, the point may be moot, depending on how the economy goes.

[aahala2]

$this->bbcode_second_pass_quote('TonyPrep', 'A')s a counter to the hypothesis that consumption is diving and stocks are rising, the recently released Short Term Energy Outlook, from the EIA, estimates that consumption exceeded production for the last 3 months of 2008. The eye-popping estimate for December has consumption running 4.04 million barrels per day above production.

[TonyPrep]

$this->bbcode_second_pass_quote('aahala2', 'I') don't see what you see on this. I see the 4 mbd difference, butwhy is this eye-popping?

[Electric_Economy_2025]

If production is 4mbpd below consumption then why is the price of oil so cheap ?

[misterno]

$this->bbcode_second_pass_quote('Electric_Economy_2025', 'I')f production is 4mbpd below consumption then why is the price of oil so cheap ?

[dohboi]

Perhaps we have already passed the peak for realiable and accurate information on anything having to do with oil?

Who knows? Maybe we passed that peak long ago and we've all been using funny figures for years.

The fact that standard measures shifted from crude oil to "all fluids" a couple years ago tells me that someone is having a bit of fun with the numbers on that front at least. Since "all fuels" presumably include various biofuels that take enormous quantities of oil to produce, probably in some cases more in energy terms than they get out, there is clearly some double counting going on with that which makes it quite a bit worse than useless.

[ROCKMAN]

I would agree with you at least partially dohboi. But I think the basic problem is the same it has always been: rough estimates combined with a time slower then most want to accept. Oil production (and its estimates) just don't work well with the 24 hour news cycle. Looking at reported numbers effective 3 or 4 months ago can work. Given the fast changing environment I just don't think estmates work very well right now. OPEC may be keeping to their targeted cuts but it takes a couple of months to see the net results. I'm sure that 3 or so months down the road what actually happened the first two months of this year will be much clearer.

[TonyPrep]

$this->bbcode_second_pass_quote('dohboi', 'S')ince "all fuels" presumably include various biofuels that take enormous quantities of oil to produce, probably in some cases more in energy terms than they get out, there is clearly some double counting going on with that which makes it quite a bit worse than useless.

[yesplease]

$this->bbcode_second_pass_quote('dohboi', 'S')ince "all fuels" presumably include various biofuels that take enormous quantities of oil to produce, probably in some cases more in energy terms than they get out, there is clearly some double counting going on with that which makes it quite a bit worse than useless.

[yesplease]

$this->bbcode_second_pass_quote('TonyPrep', '')$this->bbcode_second_pass_quote('aahala2', 'I') don't see what you see on this. I see the 4 mbd difference, butwhy is this eye-popping?