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Page added on February 24, 2017

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Peak Oil. The Energy Report

Consumption

Oil is rising on peak oil concerns. OK, not the old failed ideology of “peak oil” but the fact that U.S. oil supply in the U.S. may have peaked as well as Exxon Mobil’s proven reserve.

The American Petroleum Institute (API) in their weekly report said we had the first crude oil drawdown of the year and the biggest draw in Cushing, Oklahoma since April of last year. This comes as Exxon Mobil Corp. reported what was the deepest reserves cut in its modern history as the crash in oil and natural gas markets dramatically reduced the value of Exxon Mobil Corp. proven reserves. The odds are rising that oil has seen the low for this year especially if the Energy Information Administration (EIA) confirms data and we can now start moving towards are intermediate target of $60.00 per barrel and then our longer-term target of $73.00 dollars. Barring any major economic meltdown, oil supply will start to tighten globally solidifying a market floor.

The API finally reported a draw in crude of 884,000 barrels. Even though it seems like a small draw, it is a step in the right direction. Another big draw in Cushing, Oklahoma of 1.73 million barrels is showing that demand for oil in the county is gaining strength. While Gulf Coast inventories have become a dumping ground for global supply, we should start to see those supplies peak as the last shot of pre-OPEC cut supply has probably already been delivered. Now as U.S. refiners start to come slowly out of maintenance and the growing anticipation of the upcoming summer driving season approaches, not to mention record U.S. crude exports, we should start to reignite the bullish petroleum fires.

The API also reported that gasoline inventories fell last week signaling that perhaps gasoline demand is not as anemic as pervious data might have indicated. Distillate inventories also fell by 4.23 million barrels as well, also signaling strong demand. So, we may have seen the peak of what was previously record petroleum inventories and that should continue to fall as we go forward.

Also, keep in mind that when you look at U.S. oil inventories, you cannot look at them through the same lens as you did before. Now that the U.S. oil export ban has been lifted we will see a new dynamic as oil and product supply should be viewed more in line with global supply. The market is evolving and what was true a few years ago, is no longer true today. The U.S. can export oil and OPEC can adhere to production cuts. The U.S. can be a major global energy hub. Even the former oil bears are starting to come to this realization. Welcome to the bull camp! There is plenty of room to jump on board.

Even as prices rise the oil industry is still trying to recover from what was one of the biggest oil crashes in history. Almost a trillion dollars in capital spending cuts will take its toll and the shale producers will not be able to replace that oil. Exxon Mobil’s announcement of reserve cuts is just one example from the fallout that is not going to be fixed even as oil heads back towards $60 a barrel. Bloomberg News reported that Exxon cut the equivalent of about 3.3 billion barrels of untapped crude and it was removed from the so-called proved reserves category. The revision came as low energy prices made it mathematically impossible to produce many oil and gas fields at a profit soon. The biggest cut came in de-booking Canada’s 3.5-billion barrel Kearl oil-sands project. Bloomberg reports that change amounts to the largest annual cut since at least the 1999 merger that created the company in its modern form. The previous record cut was a 3 percent reduction taken during the height of the global financial crisis in 2008.

Can natural gas make a comeback? Weather warming crushed the market as winter has taken a holiday and spring temperatures has covered for falling production and record non- heat related demand. We still believe that we have risk to the upside if the weather gets back to normal. The structural issues for gas have not been solved but we may have to get over this price collapse for a bit longer. The price crash in gas will lower production expectations going forward.
Thanks,
Phil Flynn

barchart.com



17 Comments on "Peak Oil. The Energy Report"

  1. joe on Fri, 24th Feb 2017 7:34 am 

    This is the modern tight oil economy. I’m suprised it took this long. Interest rates due to rise soon too. Lets see how much Joe Slob and Joanna slob can spend at 3-4% interest. The age of easy money is ending and with it the house of cards that is the post Great Recession economy.

  2. Apneaman on Fri, 24th Feb 2017 8:16 am 

    “Weather warming crushed the market as winter has taken a holiday and spring temperatures has covered for falling production and record non- heat related demand”?

    “Weather warming..”

    ya, that’s denier tard speak for AGW.

    Winter has taken a holiday – A permanent vacation.

    As algae, detritus, and meltwater darken Greenland’s ice, it is shrinking ever faster.

    http://science.sciencemag.org/content/355/6327/788.full

  3. Apneaman on Fri, 24th Feb 2017 8:45 am 

    “Weather warming..”

    Weird Climate
    In Siberia there is a huge crater and it is getting bigger

    A crater formed in Siberia’s permafrost is growing at an alarming rate

    “Near the Yana river basin, in a vast area of permafrost, there is a dramatic tadpole-shaped hole in the ground: the Batagaika crater.
    The crater is also known as a “megaslump” and it is the largest of its kind: almost 0.6 miles (1km) long and 282ft (86m) deep. But these figures will soon change, because it is growing quickly.”

    “…the acceleration of the growth gives an immediate insight into the impact of climate change on the increasingly fragile permafrost.”

    “Many of the ice deposits that are now being exposed formed during the last Ice Age. This ground ice contains a lot of organic matter, including plenty of carbon that has been locked away for thousands of years.
    “Global estimations of carbon stored in permafrost is [the] same amount as what’s in the atmosphere,” says Günther.

    There is no indication that the erosion of this crater will slow down any time soon
    As more permafrost thaws, more and more carbon is exposed to microbes. The microbes consume the carbon, producing methane and carbon dioxide as waste products. These greenhouse gases are then released into the atmosphere, accelerating warming further.
    “This is what we call positive feedback,” says Günther. “Warming accelerates warming, and these features may develop in other places. It’s not only a threat to infrastructure. Nobody can stop this development. There’s no engineering solution to stop these craters developing.””

    http://www.bbc.com/earth/story/20170223-in-siberia-there-is-a-huge-crater-and-it-is-getting-bigger

    “This is what we call positive feedback”

    “Nobody can stop this development”

  4. forbin on Fri, 24th Feb 2017 9:39 am 

    mmm, “OK, not the old failed ideology of “peak oil” ”

    that killed the article for me

    peak oil is not an “ideology” just the mathematical point in time of the peak production/output of oil

    nothing more , nothing less

    Forbin

  5. BobInget on Fri, 24th Feb 2017 9:56 am 

    Looks like folks topping off gas tanks for a run to the (Canadian) border.

    It’s hard to say exactly when Republicans turned on DJT.

    A few guesses;
    When civil rights were stripped from transgenders. (intersex babies favor no political parentage)

    When we realized all that promised ‘infrastructure buildout’ comprised entirely of walling off Mexico.

    When we heard that ‘ Mexican Border Tax’ would cost tens of thousands of US jobs.

    When we found out poor people’s health insurance would be cancelled.(back on tax-payers bills)

    When everything DJT says is false..
    (including words: I,THE,TO,BE, A, OF, THAT, AND HAVE)

    When the Trump Administration told the FBI to lay off Russian ties. (then leaked that news)

    Ignoring the oldest rule in politics, don’t pick a fight with honest reporters who buy ink by the barrel.

    ‘Forgot’ we can’t lie to the FBI OR CIA. Then, call them ‘Nazis’.

    IMO: the next ‘Trump affect stock market rally’ will be when he, DJT leaves office.

  6. Davy on Fri, 24th Feb 2017 10:01 am 

    Bob, does selective blame occur with people in their 80’s. Just asken.

  7. rockman on Fri, 24th Feb 2017 10:08 am 

    “Oil is rising on peak oil concerns. OK, not the old failed ideology of “peak oil” but the fact that U.S. oil supply in the U.S. may have peaked as well as Exxon Mobil’s proven reserve.” First, oil prices are set by the oil buyers…the refineries. And they don’t make such decisions based upon fears of PO but based upon what they project the product buyers will be paying in the future.

    Second, while XOM had to remove some of its “proved reserves” from its books due to lower oil prices those bbls still physically exist. Some of which will be added back since oil prices have increased. But more important: we are in the midst of the largest petroleum wealth transfer in history. Companies are acquiring proved reserves at a price much lower then they’ve been able to do by drilling in more then a decade. And XOM is part of that feeding frenzy thanks to the tens of $BILLIONS in cash reserves it’s sitting on. And the reserves it’s currently buying are PRODUCING A PROFIT AT THE CURRENT OIL PRICE. Why? Because acquisition prices are calculated using the current price. Historically reserves acquired by purchase or drilling during a bust eventually generate much better profit margins then during boom times.

    The biggest benefit of boom times is the increased ability to borrow a lot of capex. As Dr. Phil would ask: How’s that working for ya? LOL.

  8. Cloggie on Fri, 24th Feb 2017 10:16 am 

    Can natural gas make a comeback? Weather warming crushed the market as winter has taken a holiday and spring temperatures has covered for falling production and record non- heat related demand.

    Global warming causes a negative feedback loop in fossil fuel consumption for space heating purposes. What’s not to like.

    Just finished working in the garden in a very nice weather. No reason to yearn for hibernating in Spain.

  9. Sissyfuss on Fri, 24th Feb 2017 10:17 am 

    “Risk to the upside if weather gets back to normal.” Weather is tracking on a new normal now so does that eliminate the risk or drive it sky-high into the GHG?

  10. _________ on Fri, 24th Feb 2017 10:21 am 

    There is another failed ideology called gravity.

  11. GregT on Fri, 24th Feb 2017 11:07 am 

    “Global warming causes a negative feedback loop in fossil fuel consumption for space heating purposes.”

    Woke up to anther 4cm of snow this morning. By my count that would be a total of 148cm so far this winter. Last year we had less than 6cm all season, the year before that, none.
    We still have around 25cm on the level, and haven’t seen the snow disappear since the beginning of December. This has never happened here before in living memory.

    At this time last year the tulips (an invasive species) were in full bloom. Not sure how they’re doing this year, as they are still buried under about 10 inches of snow.

    We went through just slightly less than 1 cord of firewood for the entire winter last year. This year, closer to 4. Not to worry though, there is enough firewood within a 10 minute walk from the house to last for many
    generations.

    Climate change is already becoming problematic around the globe, and will continue to intensify at an exponentially growing rate. Sadly, there are still those who are unable to figure out the effects of global warming on the Earth’s climatic systems. Natural selection at it’s finest. Too bad that they’re going to take the rest of us with them.

  12. Newfie on Fri, 24th Feb 2017 1:30 pm 

    The old failed ideology of “peak oil” ? Ha ha. So nice to know we will never run out of oil.

  13. GregT on Fri, 24th Feb 2017 1:47 pm 

    10cm of snow so far this morning, and still coming down hard. Expected to turn to rain showers by this afternoon, and then freeze hard over night. Sunny tomorrow, with more snow on the way for Sunday.

    Absolutely un-freaken-believable. There is nothing normal about the weather here at all anymore. Craziness.

  14. onlooker on Fri, 24th Feb 2017 1:58 pm 

    Same to be said about NY Greg. 71 degrees right now.Amazing

  15. GregT on Fri, 24th Feb 2017 2:19 pm 

    Last year at this time onlooker, most of the kids around these parts were in shorts and T-shirts.

  16. onlooker on Fri, 24th Feb 2017 3:28 pm 

    Hope your faring well with your off grid preparations Greg, not much anybody can do about the weather

  17. Kevin Cobley on Fri, 24th Feb 2017 5:29 pm 

    “Peak Oil” is an Ideology, no it’s simply a mathematical fact. The supply of Oil is finite if it’s consumed production the it must peak and then decline. It’s mathematics and only mathematics can be “proven”.

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