The Economist has an article (from January) on the gyrations of the oil price, reviving their circa-2000 prediction of $10 per barrel oil (this doesn’t look like occurring and if it did it would be for but a fleeting moment) – Who’s afraid of cheap oil?.
The world is drowning in oil. Saudi Arabia is pumping at almost full tilt. It is widely thought that the Saudis want to drive out higher-cost producers from the industry, including some of the fracking firms that have boosted oil output in the United States from 5m barrels a day (b/d) in 2008 to over 9m b/d now. Saudi Arabia will also be prepared to suffer a lot of pain to thwart Iran, its bitter rival, which this week was poised to rejoin oil markets as nuclear sanctions were lifted, with potential output of 3m-4m b/d.Despite the Saudis’ efforts, however, producers have proved resilient. Many frackers have eked out efficiencies. They hate the idea of plugging their wells only for the wildcatter on the next block to reap the reward when prices rebound. They will not pack up so long as prices cover day-to-day costs, in some cases as low as $15 a barrel (see article). Meanwhile oil stocks in the mostly rich-country OECD in October stood at 267 days’ net imports, almost 50% higher than five years earlier. They will continue to grow, especially if demand slows by more than expected in China and the rest of Asia. Forecasting the oil price is a mug’s game (as the newspaper that once speculated about $5 oil, we speak from experience), but few expect it to start rising before 2017. Today’s price could mark the bottom of the barrel. Some are predicting a trough of as low as $10.
twocats on Thu, 10th Mar 2016 11:58 am
And what are we going to do with the remaining oil? Well, David Stockman makes a good case for why its not up to the US anymore. I had a lot of admiration for Chinese culture at one point, but that shine has faded significantly.
http://www.zerohedge.com/news/2016-03-10/world-economy-wreckers-beijing
eugene on Thu, 10th Mar 2016 12:09 pm
Million or so extra barrels of oil and day and we’re “drowning”. I think we should be very thankful for the Chinese. Gives everyone someone to blame and, certainly, bloggers someone to rant about. Personally, I am just tired of the China bashing. So American to refuse responsibility of any kind.
And what would we all do if we couldn’t hang, breathlessly, on everyone’s opinion (that’s what it is-opinion) of what is happening. Nothing so simple as the global economy is slipping everywhere.
penury on Thu, 10th Mar 2016 1:28 pm
In the Middle Ages they used to athuer over how many angels could dance on the head of a pin, welcome to the 21st century version.
geopressure on Thu, 10th Mar 2016 1:31 pm
Haha!!! we won’t have to worry about Chinese Demand anytime soon!!! That’s like the best news possible if you are long on oil…
Well, not the BEST news possible, but it is good…
twocats on Thu, 10th Mar 2016 1:47 pm
eugene,
I agree that there is a lot of mindless, essentially racist, bashing of Chinese. I would argue they learned from the best.
We built the suburbs –> so they built ghost cities.
we built a huge manufacturing empire that now is synonymous with decay (Detroit, Cleveland, Pittsburgh) –> They have a huge rust-belt too now (but in like half the time!).
we build a completely idiotic retail e-trade stock market –> they had millions of people opening accounts, leaving their farmland, to become day traders.
I don’t know if its better or worse than the US, and the Chinese certainly did it with no colonialism, much much less overthrowing of democratically elected leaders, and even less neo-colonialism than we did. But do I want to welcome our new Chinese Overlords? Not really.
Apneaman on Thu, 10th Mar 2016 1:58 pm
twocats, they followed the west’s blue print – neoliberal style. Notice how they even copied every single environmental mistake and then some, even though we had already proven it would come back to bite them? Blinded by greed. See? all apes are the same, just cultural and superficial differences, but incapable of handling technology safely. Round eye, slant eye – they is all suicidal.
shortonoil on Thu, 10th Mar 2016 2:42 pm
To understand what is really happening to oil some figures are needed. It we look at some for the last 30 years it gives us a little more to go on than Saudi hates Shale, and Iran hates everyone:
Between 1986 and 2016:
Production increased by 65%
The price increased by 203%
The energy to produce oil and its products increased by 172%
The price of crude as a % of total production cost fell from 27% to 13%.
Excess production in 2016 is about 2 mb/d, and will be over 3 mb/d in 2017 if present production does not decline by at least 2 mb/d over the year.
The 2016 price, to energy cost still has a slight advantage over 30 years ago. The price of crude as a percentage of total production cost also has a considerable advantage. Growing inventories will further depress prices but producers should be able to maintain production for the next year at pretty close to present levels. Price is likely to decline into the low $30 range to balance the price to energy cost ratio to past levels.
All and all we don’t expect significant declines in price or production until 2018 or later. After that existing fields that can not be replaced in the present price environment will begin to depleted out rapidly. The world economy is likely to decline further putting increased pressure on demand, and prices.
The continued integrity of the world’s monetary financial systems, and the impact of future geopolitical events are unknown.
http://www.thehillsgroup.org/
Boat on Thu, 10th Mar 2016 3:30 pm
Your total collapse of oil in 2 year 10 months seems to be changing.
Iran will be the biggest factor on the over supply time line. How fast will production added compare with dropped production.
Lets not forget the 500+ DUCTs that will be fracked at some point.
Apneaman on Thu, 10th Mar 2016 3:42 pm
Boat person! You have previously stated that you only trust “reputable” sources for numbers and charts, graphs and other overly complicated bullshit, like the government statistician magicians, the world bank and IMF. The IMF has a completely different outlook than you do, so have they switch to team doomer and are now delusional?
IMF says world at risk of ‘economic derailment’
“The IMF has already said it is likely to downgrade its current forecast of 3.4% for global growth when it releases its economic predictions in April.
Last month, the international lender had warned that the world economy was “highly vulnerable” and called for new efforts to spur growth.
In a report ahead of last month’s Shanghai G20 meeting, the IMF said the group should plan a co-ordinated stimulus programme as world growth had slowed and could be derailed by market turbulence, the oil price crash and geopolitical conflicts.”
http://www.bbc.com/news/business-35762618
twocats on Thu, 10th Mar 2016 3:55 pm
Apman – Boat has stated repeatedly that the economic downturn stuff doesn’t impress him. And there is something to be said for that – if you believe in the power of the markets to make stuff work out, then it doesn’t really matter what is happening in economics so long as the energy keeps flowing.
I think Boat might be willing to admit that there has been some troubling signs on the demand sign, but he’d also point out that demand has been increasingly, even if only slightly.
So you have production at all time high (more or less), prices near the bottom of the range for the past 15 years, and demand also at all time highs. Everything else is circumstantial.
I personally disgree with him, but his position is not indefensible.
Apneaman on Thu, 10th Mar 2016 4:05 pm
“demand has been increasingly, even if only slightly.”
Yep, after what 6-7 years of the most massive interventions by governments and central banks in the history of modernity?
What has that gotten other than enriching the already rich?
Talk about not being impressed.
Where is the power of the markets in all this twocats?
The only power left is the one with a split second advantage on their internet pipe for flash trading.
There ain’t no fucking free markets.
Apneaman on Thu, 10th Mar 2016 4:12 pm
twocats, here’s your, so called, free market again “deciding” things.
Draghi Delivers The Bazooka: ECB Announces Surprise Refi, Marginal Rate Cuts; Boosts QE To €80BN, Adds IG Bonds
”
Monetary policy decisions
At today’s meeting the Governing Council of the ECB took the following monetary policy decisions:
(1) The interest rate on the main refinancing operations of the Eurosystem will be decreased by 5 basis points to 0.00%, starting from the operation to be settled on 16 March 2016.
(2) The interest rate on the marginal lending facility will be decreased by 5 basis points to 0.25%, with effect from 16 March 2016.
(3) The interest rate on the deposit facility will be decreased by 10 basis points to -0.40%, with effect from 16 March 2016.
(4) The monthly purchases under the asset purchase programme will be expanded to €80 billion starting in April.
(5) Investment grade euro-denominated bonds issued by non-bank corporations established in the euro area will be included in the list of assets that are eligible for regular purchases.
(6) A new series of four targeted longer-term refinancing operations (TLTRO II), each with a maturity of four years, will be launched, starting in June 2016. Borrowing conditions in these operations can be as low as the interest rate on the deposit facility.
The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 14:30 CET today.”
http://www.zerohedge.com/news/2016-03-10/draghi-whips-out-bazooka-ecb-announces-surprise-refi-marginal-lending-rate-cuts-boos
Boat on Thu, 10th Mar 2016 4:27 pm
Apneaman,
You and a few of your doomer buddies get all excited on any hint of bad news. I will respond the same way I have for over 10 years. When I look out over 10 years I see no total crash coming. I see no shortage of oil, nat gas or heating oil ect.
I think a shrinking of world GDP for a couple decades would be good. After 2 plus years on this site you still have no clue as to what I think. If we had an economic derailment for awhile does not make it a system crash. The experts will tell you were due for a recession. It’s been 8 years. The average time between recesions is 7 years. Stick with me ape and you might get some learning.
Boat on Thu, 10th Mar 2016 4:47 pm
twocats,
You might be the first person ever to have a clue as to what I type on this site. I seriously worry about comprehension skills of doomers.
To your point about demand. I have posted multiple charts from multiple sites with the history of demand for decades. Nobody with 1/2 brain could call 1.2-1.4 growth weak even if that growth was down graded from 1.8.
shortonoil on Thu, 10th Mar 2016 4:50 pm
“Lets not forget the 500+ DUCTs that will be fracked at some point.”
Let’s not forget that in 2013 the world burned 32 Gb of oil, and discovered 4 to replace it. That was at a cost of $75 billion, or about $20/ barrel. When the present fields are worked out , and many of them are over 60 years old, and more than 90% depleted, production collapses because there is nothing to replace them. The price of oil will never again be high enough to allow for the development of reserves in sufficient enough quantity to maintain the world’s present production level.
500 DUCs might represent 0.0024 % of world production. That is grasping at straws in the middle of a flood. We are nearing the end of our petroleum rope, and there is still a long, long ways down to go!
Practicalmaina on Thu, 10th Mar 2016 5:02 pm
Apneaman when it comes to Asia and record setting polluters you cant leave out India, they may have a few areas with incredible success using sustainable farming or being green, but they also have 3 of the top 5 most polluted city’s in the world. Caste system at work I guess… somehow kids end up breaking apart container ships in the ocean in a country that at the same time is on the forefront of some aspects of sustainability.
shortonoil on Thu, 10th Mar 2016 6:09 pm
“demand has been increasingly, even if only slightly.”
The energy to produce oil and its products is going up. That is a property of depletion for any extractive resource. Here is a graph that was sent to us recently from an adherent and, student of the Etp Model that does a very good job of demonstrating this phenomenon.
http://www.jayhanson.org/MoreCurves.html
“Thanks Bill”
Between 2015 and 2016 the Etp Model informs us that the energy to produce petroleum and its products increased by 2.4%. The ever so slightly is not slightly enough. It is not even sufficient to compensate for the additional energy that it took to produce what was produced. Your claim that demand is going up (if ever so slightly) is a red herring. Demand on the consumer side is going down. As production begins to decline, demand will fall even faster.
Students of the Model have a much better perspective of the impact of petroleum depletion than those who ignore it, or dismiss it out of hand. They will tell you that the significant effort needed to comprehend it is more than compensated for by their increased understanding of events now transpiring.
Some seek knowledge; most others solace!
http://www.thehillsgroup.org/
GregT on Thu, 10th Mar 2016 6:12 pm
“Nobody with 1/2 brain could call 1.2-1.4 growth weak”
The pickup in global growth is weak and uneven across economies, with risks now tilted toward the emerging markets, says the IMF’s latest World Economic Outlook.
http://www.imf.org/external/pubs/ft/survey/so/2016/RES011916A.htm
WASHINGTON, Jan 6, 2016— Weak growth among major emerging markets will weigh on global growth in 2016
http://www.worldbank.org/en/news/press-release/2016/01/06/anemic-recovery-in-emerging-markets-to-weigh-heavily-on-global-growth-in-2016
The global economy is growing at a stubbornly weak pace and governments should be deploying fiscal tools alongside monetary policy to stoke growth, the Organisation for Economic Co-operation and Development said in its latest outlook Thursday.
http://business.financialpost.com/news/economy/oecd-downgrades-global-growth-says-worlds-economy-needs-urgent-fiscal-response-from-governments
makati1 on Thu, 10th Mar 2016 7:16 pm
$100 oil or $1 oil? Who gives a damn? I don’t. Bring it on and collapse this suicidal system we are snared in. There is no “growth” only lies. There will be no more growth in the real world. Ever. Just more finger pointing and lies until it all collapse’ into rubble. Those few who survive, if any, will live in a world of survival of the fittest, not the richest.
Fun to watch. Pass the popcorn.
Boat on Thu, 10th Mar 2016 7:23 pm
GregT,
I was responding to twocats about global oil demand. Did you even read the previous comments?
shortonoil on Thu, 10th Mar 2016 7:46 pm
“Nobody with 1/2 brain could call 1.2-1.4 growth weak”
Considering that over the last 55 years (1960 to 2014) demand increased at an average rate of 2.75% per year, I wouldn’t call that weak, I’d call it pathetic!
Apneaman on Thu, 10th Mar 2016 8:34 pm
Boat, stop trying to weasel your way out of it. Not long ago you said things have never looked better and the future is bright and you feel secure in your investments, like the s&p 500. Now I’m supposed to believe you are ok with “a shrinking of world GDP for a couple decades would be good”?
BTW when a train derails, that means it has crashed you fuckin moron. It’s not considered an opportunity for spiritual reflection.
You’re right Boat, I have no idea what the fuck you are talking about since you are constantly contradicting yourself and back peddling and/or talking gibberish.
Maybe twocats works with retards in the real world and can understand your nonsensical babblings – I can’t.
Apneaman on Thu, 10th Mar 2016 8:37 pm
Boat on a game show.
https://www.youtube.com/watch?v=eTDsJd1l7Aw
GregT on Thu, 10th Mar 2016 8:46 pm
Oops sorry Boat,
Missed that. Considering that global economies would love to be humming along at ~ 6% growth, the world’s population continues to grow at 1.2% per annum, and China alone is adding some 30 million more vehicles to their roads every year, I would not consider a 1.4% growth rate in petroleum demand to be weak, I would consider it to be anemic. Unless one considers it from the point of view of the future of mankind, and all life as we know it on Earth, then it would be a large step in the right direction. Just not soon, or quickly enough.
shortonoil on Fri, 11th Mar 2016 6:57 am
The EIA (where all of these demand numbers are coming from) considers oil that is SOLD as part of demand, even if that oil winds up in a storage unit along the Gulf Coast. More than half of that reported 1.2% increase wound up in a storage unit; it was not consumed by the economy!
Either the devil is in the details, or the devil uses the details to his advantage. Take your pick?
Donviril on Fri, 11th Mar 2016 9:35 am
Today i had a little chat with a man who is working since 30 years at our refinery in Austria, and he told me that about 10-15 years ago they had wouldn’t accept the low quality oil, which is coming in to the refinery nowadays! And it’s getting worser and worser. Very much sulfur, saltwater etc. Personally i thing that’s big sign for the EROEI
Boat on Fri, 11th Mar 2016 12:02 pm
GregT,
” I would not consider a 1.4% growth rate in petroleum demand to be weak, I would consider it to be anemic”.
Of course you would consider 1.4 growth to be anemic because you are a no chart reading fool.
Take the last 10 to 15 years of world growth and divide by 10 and you will see 1.4 oil demand growth is above average. Prove me wrong anybody.
https://www.eia.gov/cfapps/ipdbproject/iedindex3.cfm?tid=5&pid=5&aid=2&cid=ww,&syid=1980&eyid=2014&unit=TBPD
Davy on Fri, 11th Mar 2016 12:24 pm
“Oil Crash Risks $19 Billion Wave of Junk Debt Defaults”
http://www.bloomberg.com/news/articles/2016-03-11/oil-boom-fueled-by-junk-debt-faces-19-billion-wave-of-defaults
“The wave could begin within days if Energy XXI Ltd., SandRidge Energy Inc. and Goodrich Petroleum Corp. fail to reach agreements with creditors and shareholders. Those are three of at least eight oil and gas producers that have announced missed debt payments, triggering a countdown to default.”
“Goodrich Petroleum is asking shareholders and bond investors to approve a restructuring deal that would convert its unsecured debt and preferred shares into common stock. For the plan to work, shareholders must approve it at a March 14 meeting and enough bondholders need to participate by the March 16 exchange deadline. “Absent a successful completion of the recapitalization plan, the company will have no alternatives other than to seek protection through the bankruptcy courts”
twocats on Fri, 11th Mar 2016 1:13 pm
Good find Davy. To me, the Energy Industry Bankruptcy Contagion is the most important issue right now.
Oil is back up to almost $40/barrel on essentially no news whatsoever. I don’t think anyone can say for certain why this has happened, but it will certainly make negotiations in restructuring deals easier for energy companies.
Boat on Fri, 11th Mar 2016 2:08 pm
twocats,
Oil out of Iran is around 125 thousand bpd new sales after early projections of 500 thousand right after sanctions. Then up 1 mbpd a year later. Looks like the market isn’t buying those projections.
twocats on Fri, 11th Mar 2016 2:41 pm
Good point boat.
Usually by this time Ron Patterson would have posted the EIA Monthly Energy Review that would include US production #’s for January, and World #’s for November. Anybody have any information on January US/Novemeber World production? That would probably be the most recent available.
twocats on Fri, 11th Mar 2016 2:43 pm
The EIA report itself published on February 24th is 235 pages. I’m interested, but I’m not THAT interested 🙂
Boat on Fri, 11th Mar 2016 3:52 pm
twocats,
http://www.eia.gov/beta/MER/index.cfm?tbl=T11.02#/?f=M
Here are a few fun charts. Is this where Ron gets his stats?
GregT on Fri, 11th Mar 2016 4:31 pm
“Take the last 10 to 15 years of world growth and divide by 10 and you will see 1.4 oil demand growth is above average.”
The world has been in economic crisis mode for 8 of those last 10-15 years.
Fucking moron.
twocats on Fri, 11th Mar 2016 4:49 pm
as far as I can tell here is where he gets the raw data for the particular postings for major production updates. That’s why i’m always appreciative of his posts because its a bit of leg work – looking at the raw data gives me a headache.
http://www.eia.gov/totalenergy/data/monthly/
here was his last post on this topic:
http://peakoilbarrel.com/is-non-opec-beginning-serious-decline/
which is the january report update.
Oh well, there’s a new report on Coal from his buddy Dennis Coyne and its pretty weighty so that will occupy me for the next day or two.
cheers.
marmico on Fri, 11th Mar 2016 5:42 pm
The global petroleum consumption growth rate has been tightly correlated to the global population growth rate for the last 35 years. With pop growing ~1.1% per year, expect consumption to follow at the same trend rate.
http://tinyurl.com/hjuzba4
Boat on Fri, 11th Mar 2016 6:56 pm
marmico,
Thats an interesting idea. Could you repost that link?
GregT on Fri, 11th Mar 2016 10:52 pm
Yes, very interesting indeed, considering that 5% of the world’s population consumes 20% of the world’s oil.