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Page added on August 4, 2015
US Oil Production Finally Starting to Decline
There has been very little data to post about recently and as everyone should know by now, I post primarily about data. So if there is no data there is not much to post about. Also I have been very busy for the a week now and have checked in only a couple of times.
A few days ago a very racist post was posted on this blog. I completely overlooked it as I seldom scan the posts because I get an email for every post so I just read the posts in the emails. But when there is a guest post, as the one last week was, I get no emails, the guest poster gets them instead. Anyway I deleted the post and banned the poster. I also banned another poster because he accused me of deliberately letting the post stay up. That outraged me. It was the same thing as accusing me of such racism.
The Monthly Energy Review and the Petroleum Supply Monthly have US production peaking, so far, in March and April. The Petroleum Supply Weekly has US production peaking in June. In the chart above I have averaged the Petroleum Supply Weekly into monthly data. All data is in thousand barrels per day,
Here we have the weekly data from the Petroleum Supply Weekly. The last data point is July 24th. The huge jumps you see are basically just revisions. The huge jump you see for the week of May 22nd, was not really a jump. The EIA explained that their prior numbers were too low and the sudden increase that week was merely an adjustment.
The EIA is finally getting its act together as to Texas C+C production. They have Texas peaking in March at 3,770,000 bpd and declining 106,000 bpd since then.
The EIA had the Gulf of Mexico spiking up in April but falling right back in May. The BSEE data, like Texas, is always delayed but only by about four months.
The EIA admits that they show different data but tries to explain it here:
EIA reports show different aspects of U.S. oil production statistics and trends
EIA publishes several reports covering current crude oil and natural gas production conditions and how recent trends may affect the near-term outlook for the oil and gas industry. Each EIA product is distinct in its purpose, methodology, timeframe, and regional coverage. Some reports are considered estimates of actual production volumes, while others focus on future production.
One analyst suggest the EIA has been fudging the data all along:
EIA Capitulates Under Cover Of Darkness
Many investors know that when a company wants to mitigate media coverage of bad news, they typically release data on a Friday after the close.
Well last Friday, that is exactly what the EIA did, admitting the very thing I and Cornerstone Analytics have been arguing all year: EIA was and still is overstating U.S. production. The amount that they admitted to so far, as of Friday afternoon, was 254,000 barrels per day (b/d) or 1,778,000 barrels per week, 7,112,000 per month or 14,224,000 for June and July alone.
This is the most incredible cover up I have ever witnessed in my decade-long investment career and I have not seen one major media outlet even mention it so far. Instead China demand & Iran output are front and center as per prior posts in an attempt to divert attention (I call it moving the goal posts) away from the fact that both U.S. production and inventories were about to fall. The chart below speaks for itself on what is occurring:
77 Comments on "US Oil Production Finally Starting to Decline"
rockman on Wed, 5th Aug 2015 6:36 am
Thanks Boat. So you don’t think the drilling boom resulted in a production increase? Or you don’t think the cornies ignore that relationship? It appears you disagree with one or both of those statements.
Nony on Wed, 5th Aug 2015 6:59 am
Not this cornie. You can search my statements from before the price crash and see that I said price drop would make rigs stack and would decrease production. I had seen what happened to the Bakken in 2009 and also realized the high decline rates (need for continual drilling).
TBH, I’m surprised it has not fallen faster, harder.
I guess I had not thought through the Pareto logic (80-20 rule) enough. [“80 percent of the sales from 20% of the salespeople”. There has to be some impact like this going on. IOW, when you stop drilling 60% of the projects, you don’t stop the best 60% or even an average 60%. You stop the worst 60%. Of course, there is still some element of luck, so you can’t perfectly predict performance. But you can probably tell which are the marginal prospects and which are “core”. That has probably kept production from dropping so super fast. Along with lag and fracklog (really another form of lag).
It looks more and more like Bakken will go out the year averaging around 1.1 MM bpd which is almost flat for the year. Yeah, we chopped off the 0.2MM bpd expected increase. But it doesn’t look like we will be getting the massive drop that some called for.
US oil overall, will drop from spring peaks, but will average higher production for the year than in 2014 (since that year had growth) and may go out the door at about the same level as it started the year (not an absolute drop beginning to end of year).
2016 should have an absolute drop though. But much more moderate than people were worried about…with all the endless wailing about decline curves and such.
Davy on Wed, 5th Aug 2015 7:29 am
Jimmy you’re just a pussy with a foul mouth preaching anti-Americanism. You are a coward that is afraid to say more about who you are probably because you are just another piece of shit like who you complain about. You have been here a few weeks and act like you are somebody. A foul mouth does not buy you respect. Let’s see if you manage to stick around awhile. I doubt it because I have seen pieces of shit like you come and go here over the months. You may just be a sock puppet reincarnation of several fly-by-night numb-nuts that bop in and out of here like homeless idiots.
Davy on Wed, 5th Aug 2015 8:09 am
NOo, good point that we will find out over time.
NOo said “I guess I had not thought through the Pareto logic (80-20 rule) enough. [“80 percent of the sales from 20% of the salespeople”. There has to be some impact like this going on.”
joe on Wed, 5th Aug 2015 8:12 am
The math is so simple on this one.
Easy oil is peaking. Tight oil is plentiful but more costly. To get a plentiful supply of oil we need a higher price, higher prices bring on floods of supply. Nobody wants to regulate supply so price wars are inevitable, because of supply side economics. If the price goes up the consumer is hurt, if the price goes down the rich suffer a weaker currency and thus lower profit just like mc Donalds announced this week. We will probobly see ups and downs in both price and supply. It’s one of the normal ‘peak oil’ scenarios.
http://oilprice.com/Energy/Crude-Oil/Against-Odds-Conventional-Crude-Oil-Production-Reaches-New-High.html
charts here are as dense as anything you might have seen on a bernie maddoff balance sheet.
Even during the highest oil price days, the basket case non-opec economies couldn’t get sorted out. Now because of war and politics the US has been forced to come to terms with Iran. If that is not a signal of what the US thinks of its needs both in economic but in political terms then nothing will convince most people. The US is trying to shield itself from the bumpy plateau as much as it can. In a globalised world on the cusp of a period of global warming, that’s going to be impossible.
The world doesnt need all of the US cities to be flooded by rising tides, look at what happened during hurricane katrina , imagine the best case scenario ahead, if even 10-20% of each US city is hit by rising sea levels (even 5%), millions of people will be looking for help. What happens to the perfect economic theory then? Special cheap global warming loans to help people keep consuming? Face it guys we are on a path to very hard days ahead, and mostly badly hit of all will be people born today, not us.
shortonoil on Wed, 5th Aug 2015 9:21 am
“I am still lost that folks can’t understand simple logic. The market looking for equilibrium seems exactly right. The market won’t wait for a shortage before prices start eeking up. The market always looks for a leveling of supply and demand.”
Still deceived by the notion that we live in a boundless world. Where anything is possible! Reality brings about another conclusion. The market will pay no more for oil than what it can afford, and producers will stop producing when they are not paid enough. The spread between what the market can afford, and what producers need to produce is shrinking. When they meet the supply/ demand hypothesis dies. Only then has equilibrium been reached – zero!
The price is bound by market affordability on the top, and producer cost on the bottom. It is anything but an unlimited supply. “I am still lost that folks can’t understand simple logic.” And “They lived happily for ever and ever”, only happens in fairy tales.
The logic does become simple when you leave out half the details. We want to believe that we can control the price of oil; Nature has another agenda!
GregT on Wed, 5th Aug 2015 11:54 am
The eCONomists are going to be in for a rather rude awakening, when the basic laws of physics smack them squarely between the eyes like a two by four.
shortonoil on Wed, 5th Aug 2015 3:32 pm
Crude just hit $44 in the face of a substantial inventory draw. At these prices the industry is really FUBARred (if you don’t know what it means ask someone in the military). Almost no producer can now afford to replace reserves being extracted. Majors will have to cut dividends that feed the nation’s pension funds, high cost, low production wells will have to be shut-in, and the debt pyramid will explode higher as their asset base sinks ever deeper into the earth from which it came. As petroleum is the world’s most valuable booked commodity, with hundreds of $trillion of derivatives behind it, the world’s economy revolves around it. King Oil is now starting to look a bit decrepit. Its health is poor, and the prognosis isn’t good.
idontknowmyself on Wed, 5th Aug 2015 3:53 pm
The world does not revolve around debt derivatives. Debt derivatives will be patch up like they did with the banks bad loans and bad mortgage.
This world functioned because there is some net positive energy after oil extraction and processing going to society. As long as there is gasoline, electricity, food, there is net positive energy keeping society functioning. Only when global shortage will appear, then we will know we are short on net positive energy.
Debt derivatives will be patch up and oil companies will be nationalized. Will it work. Time well tell.
Boat on Wed, 5th Aug 2015 7:04 pm
Short,
Once again you wrote a great post except for one thing.
King Oil is now starting to look a bit decrepit. Its health is poor, and the prognosis isn’t good.
There are always winners and losers. the losers get bought up by the winners at cents on the dollar and when prices jump they will be back drilling and making huge profits. Just supply and demand capitalism. Meanwhile my gasoline bill will be $4,000 less
shortonoil on Wed, 5th Aug 2015 7:57 pm
“Only when global shortage will appear,”
Something much more signification occurs first; the oil producers start going broke.
By the time shortages become very apparent, you’ll be eating the weeds out of your lawn. Without a working Model – your throwing darts with a blind fold on!
http://www.thehillsgroup.org/
shortonoil on Wed, 5th Aug 2015 8:16 pm
http://peakoil.com/publicpolicy/saudi-arabia-plans-to-borrow-27bn
When the world’s richest oil nation has to start borrowing money to pay its bills; image how the poorest are doing? Somewhere on PO News is an article about Venezuela. Its next president is going to be TP Forall.
GregT on Wed, 5th Aug 2015 8:29 pm
“Meanwhile my gasoline bill will be $4,000 less”
Gas prices at the pumps here today are at $1.359 per litre. 13 cents off of the all time high reached in 2008, and 60 cents higher than in 2005. The only way that folks here are saving money on gas compared to 10 years ago, is if they are burning much, much less of it.
Boat on Wed, 5th Aug 2015 8:37 pm
So oil collapse for an entire industry including many counties. Is all because the world is producing 2-2.5 mbpd over demand which will keep growing as production decreases. What a crock.
The fun part of this discussion is the short time span to whose right and wrong. If I am wrong I hope to get the chance to eat humble pie as I look for supplies and battle the 1.4 million in Houston.
Boat on Wed, 5th Aug 2015 8:42 pm
Greg T
We were paying $3.80, now the last filled tank was $2.18. 13 cent difference seems crazy. I am cherry picking numbers but that is the high and low locally over a 1-1/2 time period.
Davy on Wed, 5th Aug 2015 8:55 pm
Boat you want salt and pepper for your humble chicken pot pie or hot sauce? Boat your problem is you have no concept of systematic shifts. This is a typical cornucopian mental condition. You guys just can’t comprehend drastic change at least the kind that is outside your econ 101 world. When it hits you will be eating more than humble pie. You will be trying mud cakes:
http://www.theguardian.com/world/2008/jul/29/food.internationalaidanddevelopment
GregT on Wed, 5th Aug 2015 8:56 pm
Boat,
2.18 is still twice the national average of 10 years ago. People are not saving money on gasoline compared to historical prices, and those high prices have done, and are continuing to do, irreversible damage to the overall economy.
Boat on Wed, 5th Aug 2015 9:46 pm
DAVY,
As usual your throwing insults with exaggeration with a cornucopian reality. Reality says no one promised it would be easy. If your country doesn’t engage with the capitalists in today’s world. Nobody can be blamed but yourself.
It used to be so much worse. These are the best of times historically.
http://listverse.com/2013/04/10/10-terrible-famines-in-history/
https://en.wikipedia.org/wiki/List_of_wars_by_death_toll#List_of_wars_by_death_toll_with_over_1.2C000.2C000_deaths
Boat on Wed, 5th Aug 2015 9:56 pm
Greg T,
A more and fair way to look at gasoline would be to say the commodity ran in two different price ranges about the same amount of time.
http://zfacts.com/gas-price-history-graph
We need a few years to tell the next trend.
GregT on Wed, 5th Aug 2015 10:10 pm
Boat,
Your graph shows the results of US oil production peaking, and the results of global conventional oil peaking. The difference this time? We don’t have another planet to extract cheap oil from.
The next trend will be a vastly reduced lifestyle for all, and an end to the modern school of economics. Oil is not just a commodity. It is the key resource that fuels modern industrial society, and the world’s economies. We are already witnessing the beginnings of the end of the age of oil.
antaris on Wed, 5th Aug 2015 10:37 pm
And no one besides us is watching Greg. So where did you go ? Up north or the prairies ?
Boat on Wed, 5th Aug 2015 10:41 pm
Thanks Boat. So you don’t think the drilling boom resulted in a production increase? Or you don’t think the cornies ignore that relationship? It appears you disagree with one or both of those statements.
The drilling boom resulted in production.
I have always looked at the relationship between rig count and production.
When you stated, But now that the rig count has crashed they’ll completely ignore the connection they bragged about for so long.
I said:
I don’t think that statement is true.
I am not sure who you were talking about but I don’t brag about numbers, but I try to look at all of them to pick out trends.
Davy on Wed, 5th Aug 2015 10:53 pm
Boat obviously I struck a chord because you took offense to a normal doomer observation of the cornucopians. You must be new to the whole idea there is even doom and corn. I think you came on this site to kick ass and take names and it is you that have the black eye. Boat, we doomers just have to be patient. You corns have so much to prove and maintain. It is like the weight of the world is on your shoulders. We doomers are free of the denial and cognitive dissonance. Live free or die Boat. Come on lighten up man it won’t be that bad, Hunger takes time to kill. You can manage with mud pies for months Haitians do.
Boat on Wed, 5th Aug 2015 11:08 pm
Davy lol,
Quite the opposite. Doomers have been wrong since the beginning of religion. Do this or you die, don’t do this or you die. HERE COMES THE COMET, grab it’s tail or you die. I have been following the doomer idea and energy for around 10 years and every year you and your ilk have been wrong. At some point you or some future generation will be doomer right, but until then your wrong every day.
GregT on Wed, 5th Aug 2015 11:25 pm
“I have been following the doomer idea and energy for around 10 years and every year you and your ilk have been wrong.”
You must have missed 2008? The part where congress was told that unless the TBTF banks were bailed out to the tune of 4.3 Trillion US dollars, that there would be blood in the streets?
What do you believe has changed since then Boat? I’ll give you a clue. Nothing, other than our situation has become even more unsustainable. We are living on borrowed time Boat, with borrowed ‘wealth’, on a planet that is in a death spiral.
MrNoItAll on Thu, 6th Aug 2015 12:31 am
“What do you believe has changed since then (2008) Boat?”
Many trillion$ more in debt. QE1,2,3,4. ZIRP. Dramatic and intensive increase in official monitoring of digital communications. Increasingly militarized police forces. National Defense Authorization Act (NDAA) for Fiscal Year 2012, allowing vastly increased use of military forces on American soil under proscribed conditions. Oil price long term spike to $100 range compliments of QE, ZIRP and propaganda blitz — followed by oil price plunge to current price.
Just to name a few…
A lot has changed since 2008. But one thing hasn’t changed. We are still on a straight line trajectory to devastating economic collapse, and the government is preparing for it. All the unsustainable measures taken since 2008 to keep BAU limping along till now have had one major goal — to buy time, to extend and pretend, to stretch “the end” out until… they’re ready? Or until they just can’t keep it together anymore? Or both?
Davy on Thu, 6th Aug 2015 7:04 am
Boat said “Doomers have been wrong since the beginning of religion.” Doomers here on this board tend to be grounded in science. I have been here far longer than you boat and I have seen no regulars with the usual doomer rapture mentality. The corns here are bought into a cultural myth of economics, technology, and progress. We doomers are only calling into question a way of life that appears to not have a future. Cultural myths exhibit similar traits to religion like faith and belief. In that respect corns are exhibiting religious convictions in growth and progress despite overwhelming science to the contrary in multiple disciplines against growth and progress.
The myth of growth and progress is not sustainable in a finite world. Doomers here on this board are calling this growth meme into question. I am a doomer but not by choice but by reality. I am smart enough to see you corns have no solid basis for optimism. Cornucopianism is at all levels of the global system. It is an effective message of the elites to contain and herd the masses. If the truth got out there would be social unrest. Doomers are seeking the truth not expediency of immediate social stability. Doomers are saying tough questions must be dealt with at some point social stability or not. Doomers are saying problems will only get worse unless difficult steps are taken and quickly.
Fantasy technology that cannot scale or is futuristic is a favorite of the cornucopians. We are constantly seeing technologies that will result in fixes for resource depletion. Climate change can be fixed by green tech and so on. Other times it is bogus economic statistics to prove a fantasy of economic health. We constantly see a positive goal seeking on population and food supply. We all know population and food productivity cannot continue to grow yet you corns talk like it can. Predicaments have no solutions so cornucopians talk like they are problems and offer vague solutions. Boat who is preaching a religion and who is being sober?