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Page added on November 23, 2017

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Will oil touch $100 a barrel again?

Consumption

This seems unlikely, both in the short and long term, and in the context of new energy sources. But there’s always politics

It took the better part of a year but the production cut effected by the 14-member cartel, Organisation of Petroleum Exporting Countries (OPEC), in January is beginning to show results. Prices of the benchmark Brent grade crude have shot up by 36 per cent since the middle of this year and went within touching distance of the $65-a-barrel mark before retracing steps in the last few trading sessions. On Friday, Brent was trading in the $61-62-a-barrel range.

Exactly a year ago OPEC decided to take 1.2 million barrels a day off the market through production cuts in an effort to bring down output to around 32.5 million barrels a day. The cartel persuaded the 11 non-OPEC oil-producing countries led by Russia to cut collective output by 600,000 barrels a day taking the total to 1.8 million barrels, which was a big deal indeed.

Why high prices
This was the first time since 2008 that OPEC reached a consensus on cutting output and scepticism ruled as to whether the members would keep their commitments. Put it down to pressure on national budgets but the cartel largely abided by the agreement and the results are there now for us to see. What the production cuts did was to take off the surplus inventory floating around, literally, and brought balance into the market.

The squeeze coincided with a revival of demand. With global economic recovery and consistent demand from Asia, especially China and India, the oil market began to feel the effect of the supply cuts. Geopolitics, as much as fundamental demand-supply equations, is a major factor in oil pricing, and the recent events in Saudi Arabia’s domestic politics coupled with the ongoing war in Yemen ensured that sentiment in the oil market would turn bullish on prices. That, in short, is the story of the current spell of elevated prices.

The important question now is: Is the oil market headed back to the era of $100 a barrel?

Impact of oil flood
To answer that we need to understand the role played by the shale oil industry in the US. It was the latter that ended OPEC’s party in 2014 by flooding the market with its output. What the massive flood of oil did was not just depress prices but also disrupt the market equilibrium that had prevailed since the formation of the OPEC cartel in the 70s.

Saudi Arabia with its massive reserves of 260 billion barrels and dirt-cheap cost of production was the traditional leader and swing producer with an output between 8 and 10 million barrels a day. The kingdom could influence prices by turning its taps on or off.

The US shale oil industry appropriated this role of swing producer in 2014. For the first time in oil market history, Saudi Arabia faced erosion of its pricing power.

As prices began to fall, shale producers invested in technology that would enable them to consistently bring down break-even level. From between $65-70 a barrel three years ago, the break-even level for shale oil has seen a steady fall, and if the chief of Pioneer Natural Resources Company, one of the biggest producers in the Permian shale oil basin (one of two big basins along with Eagle Ford) is to be believed, it is as low as $20 a barrel now! That should be real bad news for conventional oil producers.

Output from the US, including conventional oil, is projected to shoot past 10 million barrels a day in 2018 according to the Energy Information Administration, relegating Saudi Arabia to second spot. Rig count is consistently rising and so is the monthly output trend.

The US is expected to turn a net exporter of oil by 2020 riding on the back of a second peak for shale oil output. This has tremendous implications not just for the energy market but also for geopolitics, especially in West Asia.

So, where does this leave oil prices?

Opinion, as always, is divided, with traders projecting a pull-back from present levels. The CEO of Vitol, an important oil trader, believes that prices could retrace their way to the $45 a barrel level. Balancing this is the opinion of OPEC’s secretary-general Mohammad Barkindo, who believes that demand will go past 100 million barrels a day (from around 85 million now) by 2020 and thus keep prices elevated.

Energy electrification
An important factor to be kept in mind amidst all this is what the IEA terms “electrification of energy” which is now on in full swing. The first impact is likely to be felt in the passenger cars industry where electric cars are being promoted in a big way. China has said that it will push for alternative fuel vehicles to account for at least a fifth of all vehicles sold by 2025. The UK would like all cars sold to turn electric by 2040 while India is working to a target of 2030. Given the increasing awareness of the ill-effects of environmental pollution caused by fossil fuels, more countries are likely to jump on the electric car bandwagon.

This has tremendous implications for the crude oil market as demand for transportation fuels could peak sooner than expected. To be sure, electrification of the auto industry is not so simple given the tremendous investments that have gone into setting up manufacturing facilities for conventional cars. There is also the question of job losses in the event of a major shift to electric vehicles.

But the broad direction is clear and it is only a question of the time-frame now. And then there is the worldwide shift to clean energy sources such as solar and wind for power generation which will cut into the demand for fossil fuel.

While these will determine the long-term price trends, in the short-term, it appears that prices will be capped at a maximum of $65 a barrel, mainly because shale oil is swinging in with its output.

The adherence to production cuts in the face of falling prices by both OPEC and non-OPEC producers needs to be watched closely. We have seen in the past how such agreements have proved short-lived as producers race to make up on volumes for what they lose on price.

In sum, the odds on a return of prices to the three-figure mark appear low at this point in time.

Unless, of course, a major geopolitical crisis breaks out somewhere in the world. All bets will be off then.

hellenicshippingnews



75 Comments on "Will oil touch $100 a barrel again?"

  1. Makati1 on Thu, 23rd Nov 2017 11:12 pm 

    MM: I did my “duty” as a father. I spent 30 years raising my family to be independent. They are. YOU are the one living in a fantasy world that only ever existed in Disney movies and on TV.

    Bragging, with no proof, is possible on the internet. I don’t give a damn what you claim you did. You are still an arrogant punk that is going to get his face punched in someday when you mouth off in person to the wrong guy or gal.

    And, yes I said gal. My daughters would punch your face in if you said negative things about me in their presence. I would just laugh at you. They wouldn’t. And, they are big enough to do it.

    My kids are 40 to 55 years old. One is a grandfather so I am a great-grandfather. My grand kids are from age two to age 33. None of them “need me” and that is the way it should be. In previous times, I would be dead at this age. My business partner’s parents are already dead and they were younger than me when the passed. That modern meds can keep you alive longer does NOT mean that you are needed by your family. It does give you the time and freedom to explore and to learn new things in new places. THAT is what I am doing. Learning, exploring and enjoying life.

    You definitely have mental problems, MM. You need to get them corrected before you are killed by your ignorance.

  2. Anonymouse1 on Thu, 23rd Nov 2017 11:14 pm 

    Notice above how the exceptionalist, is making a concerted attempt to make the sock appear more credible and ‘distinct’. Of course, the socks only real purpose is to bash mak here, so it the exercise is basically futile.

  3. MASTERMIND on Thu, 23rd Nov 2017 11:51 pm 

    Gunmaker Remington faces default as Americans buy the fewest guns in history

    http://www.philly.com/philly/blogs/inq-phillydeals/gunmaker-remington-faces-default-as-americans-buy-fewer-firearms-20171117.html?mobi=true

    Peak Guns?

  4. MASTERMIND on Thu, 23rd Nov 2017 11:56 pm 

    Madkat

    You don’t think a two year old needs to see her grandfather? And i bet your daughter could kick my ass she is most likely a big ole piece of meat isn’t she? Hungry big fella?

  5. Cloggie on Thu, 23rd Nov 2017 11:58 pm 

    Market saturated:

    https://www.vox.com/2016/7/27/12123202/more-guns-than-people-america-charts

  6. MASTERMIND on Fri, 24th Nov 2017 12:02 am 

    Cloggie

    You uneducated cuck..The consumer market increases by several million more consumer each year due to population increases…And guns are basically just toys for adults who never grew out of playing army as children…And Americans love their toys…

  7. MASTERMIND on Fri, 24th Nov 2017 12:09 am 

    Cloggie

    Post Collapse…I will just tell the rich white man NO…One time, then watch him stroke out while me and my ant fa friends breed his daughters..I’ll tell to turn off that Taylor Swift and open up wide for this big dick…I’m going to have more kids than Stanford!

  8. Makati1 on Fri, 24th Nov 2017 12:26 am 

    Your real “education” is going to be painful, MM. Wait and see. “Face, meet fist” or worse.

    And, no, my daughters are not big. Slim and wiry muscles, like me. Neither top 120#. But a knee to the balls doesn’t take much muscle”. Just aim and the opportunity. They will not “play fair” and you would not get a warning.

    I taught them to take down a bully the quickest and most efficient way that involves at least a hospital and maybe surgery for the target. Smashed balls will do both in about 3 seconds. And, if they are quick enough, they can knee your face on its way down. More broken parts to be repaired.

    Do you still want to mess with my family? LOL

  9. Makati1 on Fri, 24th Nov 2017 12:28 am 

    Back to the real subject of the post. Yes, oil could hit $100 but as was noted above, it will take down the economy and crash the financial system. It would end the US as a 1st world country for good. Although, I see oil prices going lower, not higher in the future. Way lower with the resulting bankruptcies and consolidations.

  10. Cloggie on Fri, 24th Nov 2017 12:33 am 

    One time, then watch him stroke out while me and my ant fa friends breed his daughters.

    Smart crooks hide their criminal intent, but Euro trash like you just broadcast it to everybody who wants to hear.

    But that’s OK millimind, as long as you start that civil war, everything else will be forgiven by us Europeans, Russians and Chinese.lol

    Happy shooting!

    Greetings from Eurasia.

    P.S. probably Americans prefer quality guns from abroad, like rockman’s German Luger and shun crappy American produce like Remington.

    http://www.rasmussenreports.com/public_content/politics/current_events/gun_control/why_are_americans_buying_so_many_guns

  11. Cloggie on Fri, 24th Nov 2017 12:50 am 

    How it all works:

    https://www.infowars.com/u-s-state-dept-puts-700000-into-hungarian-media-demands-programming-against-orban-patriots/

    US infiltration at its finest: State Dept pays Hungarian broadcaster money for sending anti-Orban messages, as announced by a (((David Kostelancik)))

    Reason: Orban refuses to take in fake “refugees”.

    There is a cuntry in this world that needs to be destroyed and it ain’t Hungary.

  12. Makati1 on Fri, 24th Nov 2017 1:34 am 

    Cloggie, that is why I cheer it on. Chaos is rampant in the “exceptional/indispensable” country and it is growing. I hope the end of it’s power comes soon, while there is still something left for the world to rebuild with. I doubt that it will last until 2020.

  13. Davy on Fri, 24th Nov 2017 5:09 am 

    “Notice above how the exceptionalist, is making a concerted attempt to make the sock appear more credible and ‘distinct’. Of course, the socks only real purpose is to bash mak here, so it the exercise is basically futile.”

    Mouse, I don’t have time to bash all you dumbass anti-Americans so don’t flatter you yourself with self-assumed brightness that you found a Davy sock puppet. You are not that bright anyway to determine that anyway. You are just emotional seeing your buddy get a grilling. One need only read a comment out of you to see you have a small mind. You anti-Americans have been getting your ass kicked lately. It sucks being on the other end. Where are your gangs of assholes? MM, is another American who is tired of the BS from you, mad kat, and others. This place is an extremist magnet for weird people like you because of people like you. If you are pissed about life then come to peak oil dot come and bad mouth Americans that’s what you do. The mad kat bashing must have you upset and you repeated comments attest to that. Why not man up and go head to head with MM. Are you afraid? BTW, mouse, you are actually worse than mad kat. He is an old man with dementia and you are a Canadian millennial waste case. I imagine you as an anti-American terrorist someday and unfortunately right on the border. I may name call and do personal attacks on those like you that do not deserve respect but sock puppetry is not my thing. I will tell you like it is to your face, pussy. You on the other hand are slimy and morally repugnant so sock puppetry is something you would do. You have great concern for mad kat and the ass kickin he is getting, lol. He is doing fine with MM just a little reeducation for what comes around goes around. He is getting a taste of what he deserves. Mad kat and you are the reason this board has descended into the gutter of lower emotions and anti-intellectual undertakings.

  14. Davy on Fri, 24th Nov 2017 5:10 am 

    “Back to the real subject of the post.” What, mad kat on topic???? what is up???

  15. Davy on Fri, 24th Nov 2017 5:13 am 

    “Greetings from Eurasia.”
    Dumb und dutchy, you Eurotards will be at each other’s throats and it will likely be the Russians and Americans that will come in and clean things up deja vu.

  16. Davy on Fri, 24th Nov 2017 5:20 am 

    No wonder you are in awe at Alex Jones, dutchy, you love conspiracies and fantasy futures.
    “INFO WARS”
    https://tinyurl.com/y75eygbh
    “Alexander Emerick Jones (b. 1974—imminent FEMA takeover) is either a batshit crazy radio entertainer and legally certified[3] self-proclaimed “performance artist”[4] who specializes in making up conspiracy theories to amuse his audience, or the world’s best parodist. He is the world’s most powerful conspiracy pusher: his shows draw millions of views daily.[5] Any time anything interesting happens anywhere on Earth, there’s a 100% chance that Jones has found “proof” that it is either (1) a false flag operation by the New World Order (NWO) or (2) a “massive coverup operation” run by the New World Order (NWO). No exceptions.”

    “Like all good showmen, you must understand his early work to truly appreciate his art: Jones got his start in 1995 on Access TV in Austin. He first tasted the limelight with Y2K. And he was ready: grunting about the end of money, reporting on millions of deaths worldwide, and shilling for his survivalist’s shop called “The Hardware Store”: guns, ammo, MREsWikipedia’s W.svg and 8-stage water filtration systems.[6][7] And we all awoke on 01 January 2000 to… absolutely nothing. Most Texans assumed he was done. Then 9/11 swooped in and bailed the charlatan out. Then Obama became the antiChrist of choice. (Literally.[8]) Then Trump became Jones’ best pal.[9] In short: Jones has been predicting the end of the world for 22 years. And it gets worse from there. Goat help us all.”

  17. Davy on Fri, 24th Nov 2017 5:22 am 

    “Cloggie, that is why I cheer it on. Chaos is rampant in the “exceptional/indispensable” country and it is growing.

    Lookie at mad kat, dumb und dutchy comes to his rescue. Two old men who live in revisions and fantasy futures.

  18. Davy on Fri, 24th Nov 2017 5:51 am 

    “Putin Crowns Himself OPEC King”
    https://tinyurl.com/y6vsk7et

    “While OPEC’s gatherings still influence prices, it’s not Saudi Arabia’s voice that matters most, but the voice of a non-member: Russia, specifically Vladimir Putin. Since engineering Russia’s pact with the Organization for Petroleum Exporting Countries to curb supplies a year ago, Putin has emerged as the group’s most influential player. As one senior OPEC official put it on condition of anonymity, the Russian leader is now “calling all the shots.” The Kremlin’s growing sway within the cartel reflects a foreign policy that’s designed to counter U.S. influence across the globe through a wide mix of economic, diplomatic, military and intelligence measures. That strategy, which is undergirded by Russia’s vast natural-resource wealth, appears to be working. “Putin is now the world’s energy czar,” said Helima Croft, a former Central Intelligence Agency analyst who directs global commodity strategy at RBC Capital Markets LLC in New York.”

    ‘Mutually Beneficial’ For Russian producers, the cuts are getting increasingly painful. With Brent, the global benchmark, at about $63 a barrel, almost 30 percent higher than a year ago, they’re anxious to start cranking up production. Rosneft this month even said it needs to be ready to open the spigots in December — a surprising date since it’s three months before the current agreement expires. “There are three scenarios we’re looking at, okay, that the OPEC cuts stop end of the year, end of March next year, or they continue throughout 2018,” Eric Liron, Rosneft’s first vice president for upstream, said on a conference call. Still, current prices — and geopolitical realities — suggest the accord will be rolled over, according to Edward C. Chow, a fellow at the Center for Strategic and International Studies in Washington and a former Chevron Corp. executive. “It’s mutually beneficial,” Chow said. “The Saudis need a large oil-producing partner to effectively influence the market and the p otential for a greater geopolitical and economic role in the Middle East for Russia makes compliance with production cuts an expedient move for Moscow.”

    “For Saudi Arabia, having to share output decisions with Russia, an ally of its arch-enemy Iran in the Syrian civil war, is a bitter pill to swallow…..But now the Saudi economy is reeling and the kingdom needs higher crude prices as much as everyone else. By some measures, including its fiscal break-even point, Saudi Arabia needs even higher prices than Iran or Russia, which is basing its budget for next year on oil averaging $40 a barrel. Crown Prince Mohammed bin Salman’s sweeping crackdown on corruption, including the sudden arrests of scores of royals and billionaires, appears to have only increased the kingdom’s newfound reliance on Russia. The purge upended the decades-old model that held the elite together and turned the success of his ambitious economic-reform program into a battle for survival, according to Amrita Sen, chief oil analyst at Energy Aspects Ltd. in London. “Because of this vulnerability, we believe the kingdom, and more importantly Mohammed bin Salman, needs strong oil revenues — and hence higher oil prices — to ensure he stays in power,”

  19. Anonymouse1 on Fri, 24th Nov 2017 5:55 am 

    Put a ‘sock’ in it exceptionalist. Don’t you know sock-puppeting can lead to bipolar disorder? Look what happened to your buddy marmi-tard.You’ve got enough mental problems as it is, without trying to remember which personality disorder you are going to post with.

  20. Davy on Fri, 24th Nov 2017 6:00 am 

    “Put a ‘sock’ in it exceptionalist.”
    What’s da matter mouse, did my last comment get to you? LOL, is that all you have dumbass. Go back to the Xbox you are better suited for that intellectual level.

  21. Davy on Fri, 24th Nov 2017 6:18 am 

    “Tesla’s Newest Promises Break the Laws of Batteries”
    https://tinyurl.com/y83uan5o

    “Elon Musk touted ranges and charging times that don’t compute with the current physics and economics of batteries.”

    “Take the Tesla Semi: Musk vowed it would haul an unprecedented 80,000 pounds for 500 miles on a single charge, then recharge 400 miles of range in 30 minutes. That would require, based on Bloomberg estimates, a charging system that’s 10 times more powerful than one of the fastest battery-charging networks on the road today—Tesla’s own Superchargers.”

    “When Musk took the stage in an airport hanger in Hawthorne, California, his first proclamation was the Tesla Semi’s range: A fully-loaded truck would be able to travel at highway speeds for 500 miles. The previous record-holder, unveiled by Daimler in October, is a truck that maxes out at 220 miles. A heavy-duty, long-range truck is the toughest vehicle to electrify while still turning a profit, said Menahem Anderman, president of Total Battery Consulting Inc., in Oregon House, California. Tesla may be doing it to prove a point. “If you can make a semi truck with batteries,” Anderman said, “then you can make everything else with batteries.”

    “Tesla is making its trucks more efficient by reducing wind drag to levels that are comparable to those of sports cars. But even if Tesla achieves record-breaking efficiency for the truck, it would still require a battery capacity somewhere from 600 kilowatt hours to 1,000 kilowatt hours to deliver on Musk’s claims, according to estimates from Bloomberg New Energy Finance. Split the difference, at 800 kWh, and it would mean a battery that weighs more than 10,000 pounds and costs more than $100,000—even before you build the truck around it. Tesla has priced the truck with 500-mile range at $180,000, less than the estimated prices of seven analysts surveyed by Bloomberg, and says fuel savings will result in a two-year payback when compared to diesel.”

    “While the economics of such a plan vary by region, under any scenario that BNEF’s Morsy expects, Tesla will be heavily subsidizing those electricity rates for customers. He estimated that Tesla will pay a minimum of 40 cents per kilowatt hour, on average, for every 7 cents paid by a trucking company. “There’s no way you can reconcile 7 cents a kilowatt hour with anything on the grid that puts a megawatt hour of energy into a battery,” Morsy said. “That simply does not exist.”

  22. tita on Fri, 24th Nov 2017 7:19 am 

    Another article about how US oil shale is gonna push the oil price lower while KSA is losing his title of “king of oil” and also while the world is expected to consume less oil due to peak oil… demand.

    So boring… I though scratched vinyls were a thing of the past, but it appear that MSM can tell the same story over and over for years until proven wrong. Then they create another story for some years again.

    Fortunately, this one is probably over as the supply/demand is changing.

  23. Cloggie on Fri, 24th Nov 2017 2:38 pm 

    European Defense Union taking shape:

    https://www.geenstijl.nl/5139585/farage-had-gelijk/

  24. Makati1 on Fri, 24th Nov 2017 5:19 pm 

    “$40 WTI Is Now More Realistic Than $60”

    https://oilprice.com/Energy/Energy-General/40-WTI-Is-Now-More-Realistic-Than-60.html

    Up. Down. Sideways. Up. Down ….

    THIS is why I ignore oily topics. They are all just talking out their asses. No-one knows what tomorrow will bring. Too many paychecks for too many tea leaf readers. Not worth my time.

  25. Boat on Wed, 29th Nov 2017 7:51 pm 

    Mak,

    Oily stuff is why the site exists. No wonder you don’t get it. Being a parasite requires no oily stuff research to keep up. Your forta.

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