[Plantagenet]

The world is in an oil glut.

Global oil production is outpacing demand by about a million barrels per day. Global GDP is growing very slowly, so the oil glut may go on for some time. But how long will the current oil glut continue?


The world is in an oil glut now----but how much longer can this oil glut last?

[onlooker]

Looks like not much longer check out both these links:
http://www.zerohedge.com/news/2016-01-1 ... ale-assets
http://www.peakprosperity.com/blog/9630 ... t=FaceBook

[sparky]

.
It's pretty obvious that crude oil price is a boom and bust cycle ,
the reasons can only be guessed at ,
the fundamentals of the industry are not helping to understand why
exploration , development and transport cost are on the whole steadily rising
demand is not very variable , the customers can swallow a fair bit of price movement without crashing their demand


what make the market unstable is the great amount of speculation ,
the contracts for WTI are one of the biggest playground for traders there is .
often on a day the quantities of orders exceed real deliveries by a factor of 20/1
It's so easy ....bid , sell and you've made some money in a few hours from the comfort of your office
I suppose there is even some automated trading in the millisecond range

none of those trade care a fig about crude oil supply ,
it could be yogurts or wingnuts for the difference it would make ,but crude is way bigger and better

I propose that what make the price in market unstable , when the price is driven way past it's natural price
further one can make money when buying AND selling , both in a rising market and a falling one .

Of course there is the supply/demand driver
but fluctuations of more than triple ratio don't come from fluctuations of less than 10%
unless something is pushing the price change

as for the present "glut" for sure there is one ...... what 2% , that's a year worth of depletion !
The old cheap super-giants are the lonely dinosaures ,
they ruled the Earth for a long while but have no successors
smaller fields deplete fast and rely on a constant stream of new babies to replace the old ones

the oil industry financial model is simple ,
you look for a do-able prospect ,
spend a lot of money to get the stuff to customers
get the cash and use a small part to keep the operation going for as long as possible

you can buy a seat into any stage , but if you don't know much about what you are buying it usually end in tears

now the present production exploration is winding down ,
development plans have stopped for anything but the near completion
within two years the "glut" and storage will have vaporized ,
the price will remain down until traders cannot trade it down ,
then reality strike and the bidding will switch to up

cautiously at first then , as the gains are so easy , with wild exuberance .... welcome back to the future !

[ennui2]

The so-called oil glut will last forever even as production falls. The world is going into a deflation, characterized by contraction or shrinking purchasing power. It is a condition where prices are falling but there is a corresponding decrease in employment, total output, and thus income. This has already begun.

Would you care to codify that into a formal prediction that can be judged at a specific future date?

[onlooker]

This has already begun.

I think this disqualifies it as being a prediction as the contention is it is already happening.

[KaiserJeep]

The glut will last until widespread warfare exists in the ME. Then we abruptly switch from glut to shortages as ME production ends.

[Tanada]

I hesitate to believe anything zerohedge posts any more, every day the sky is falling and after a while you get tired of the tune.

On the other hand oil demand grew a LOT in 2015, here is what the EIA published just a few days ago.

EIA estimates global consumption of petroleum and other liquid fuels grew by 1.4 million b/d in 2015, averaging 93.8 million b/d for the year. EIA expects global consumption of petroleum and other liquid fuels to grow by 1.4 million b/d in both 2016 and 2017. Forecast real gross domestic product (GDP) for the world weighted by oil consumption, which increased by an estimated 2.4% in 2015, rises by 2.7% in 2016 and by 3.2% in 2017.

Consumption of petroleum and other liquid fuels in countries outside the Organization for Economic Cooperation and Development (OECD) increased by an estimated 0.8 million b/d in 2015, considerably lower than the 1.4 million b/d increase in 2014 mainly because of the slowdown in Eurasia, which saw a contraction in its consumption, and to a lesser degree because of China's slightly slower demand growth. Non-OECD consumption growth is expected to be 1.1 million b/d in both 2016 and 2017, reflecting higher growth in the Middle East and Eurasia.

OECD petroleum and other liquid fuels consumption rose by 0.6 million b/d in 2015. OECD consumption is expected to continue rising in both 2016 and 2017 by 0.3 and 0.4 million b/d, respectively, driven by an increase in U.S. consumption. OECD Europe demand is also expected to increase through the forecast period, albeit at a slower pace than the 0.3 million b/d increase in 2015. U.S. consumption is forecast to increase by 0.2 and 0.3 million b/d in 2016 and 2017, respectively. Consumption in Japan is forecast to decline by less than 0.1 million b/d in both 2016 and 2017.

https://www.eia.gov/forecasts/steo/repo ... al_oil.cfm

Now the EIA is projecting their usual rosy scenario that supply will continue to be high through all of the current year while also estimating a demand growth of 1,400,000 bbl/d through the end of the year. Now it doesn't take a genius to know that if over supply is 1,000,000 bbl/d and growth is 1,400,000 bbl/d that at some point there will be a cross over from surplus to balance or short fall.
Look at it another way, in December 2014 with not too horrible oil prices the USA produced 292,278,000 bbl/month aka 9,428,322 bbl/d. The latest month in their table is October 2015 with 289,744,000 bbl/month aka 9,346,580 bbl/d. I prefer comparing daily averages because I am more familiar with using them to compare with world consumption. The numbers do bounce around a bit, 5 of the months before October were higher, four were lower, so it is fairly representative of the trend. From 1971 until 1977 after lower 48 peak every year the USA produced less oil than the year before. Then the TAPS began feeding oil into the market and from 1977 to 1986 the increase supply from Alaska boosted the USA back up again, until the pipeline maxed out its capacity. From 1986 to 2009 USA+Alaska+Off Shore declined relentlessly, some years more than others. Then the 'fracked miracle' started in 2009 in the tight shale beds and Viole' production shot back up like a rocket! Because of low prices starting in fall 2014 drilling in the shale beds started falling off pretty steeply and has sunk even further this year as prices have continued to sink. As a result by the end of 2015 the USA was declining once again. At these prices if they are sustained very long we will eventually decline back to where we were in 2008 because most well drilling does not make economic sense at $29/bbl or lower. A lot of those 400,000 stripper wells in the USA are losing money at current prices and will be capped this year.
You can find all the data I just used in the EIA table here,
https://www.eia.gov/dnav/pet/hist/LeafH ... RFPUS1&f=M

[Outcast_Searcher]

The so-called oil glut will last forever even as production falls. The world is going into a deflation, characterized by contraction or shrinking purchasing power. It is a condition where prices are falling but there is a corresponding decrease in employment, total output, and thus income. This has already begun.

Not if you look at the actual economic statistics. Take the US, as an example. How are rapidly growing rent and many house prices a sign of this? How is a shrinking unemployment rate a sign of this? How is a US (and global) fairly steadily increasing real GDP a sign of this?

Expecting or demanding that it happen "real soon now" doesn't mean it has been happening.

This site doesn't need to constantly produce false economic doom pronouncements by the bucketload. zerohedge already has that job.

(When it actually happens, like happened in fall of 2008 through spring of 2009, with objective data to back it up, then I'll be happy to agree with you).

[JV153]

I don't think it will last much longer - that said with prices this low US LTO and especially Canadian tar sands oil are getting hit hard along with heavy oil from other areas and offshore projects.

Apparently Mexico has potential to the upside but security concerns are an issue.

[GHung]

Tanada said;

On the other hand oil demand grew a LOT in 2015, here is what the EIA published just a few days ago.

EIA estimates global consumption of petroleum and other liquid fuels grew by 1.4 million b/d in 2015, averaging 93.8 million b/d for the year.

Considering that the price of oil is about half of what it was at the beginning of the year, I don't consider that demand grew by " a LOT". According to your EIA numbers, it grew about 1.5%. Maybe your definition of "a LOT" differs from mine.

Interesting that, in the US alone, VIO (vehicles in operation) grew by 2.1%, and the average age of VIO went up slightly to 11.5 years.
http://press.ihs.com/press-release/auto ... hs-reports

[ennui2]

This site doesn't need to constantly produce false economic doom pronouncements by the bucketload. zerohedge already has that job.

But since so many people here consult zerohedge as their economic sage, it's no wonder that their predictions become our predictions. And people think I'm being unfair by bashing people's predictions? The bad calls people make here are a all public record. It just hasn't been organized into a statistical report.

(When it actually happens, like happened in fall of 2008 through spring of 2009, with objective data to back it up, then I'll be happy to agree with you).

That goes for me too. I have no problem with the idea of a financial collapse. It's actually been my point that these boom/bust cycles happen on their own without peak-oil as a catalyst. I was watching the housing boom on its own parallel track to the oil spike and I knew that bubble was going to pop. I also think gas prices were a minor factor in the popping, because the timing was mainly based on ARM resets all happening in one big burst. Likewise, the current boom in IT could very well bust just like the dot com boom did in 2000. Manias and panics can and do happen on their own.

What I see lacking here is true holistic thinking. There's such tunnel-vision on oil geological depletion that it becomes this grand unification theory intended to explain everything, and I don't think it's the cause and effect is nearly that simple. It is a theological cosmology, an eschatology, to these people.

[Tanada]

Tanada said;

On the other hand oil demand grew a LOT in 2015, here is what the EIA published just a few days ago.

EIA estimates global consumption of petroleum and other liquid fuels grew by 1.4 million b/d in 2015, averaging 93.8 million b/d for the year.

Considering that the price of oil is about half of what it was at the beginning of the year, I don't consider that demand grew by " a LOT". According to your EIA numbers, it grew about 1.5%. Maybe your definition of "a LOT" differs from mine.

Interesting that, in the US alone, VIO (vehicles in operation) grew by 2.1%, and the average age of VIO went up slightly to 11.5 years.
http://press.ihs.com/press-release/auto ... hs-reports

You can consider an increased consumption of 1,400,000 bbl/d as nothing significant, I however beg to differ. That adds up to half a Billion barrels of oil over the course of one year, and given the inelastic nature of demand it will be with us as long as the market can afford the price. All told last year the world consumed 34 Billion barrels of liquids, mostly oil in one form or another. Unless something drastic happens we will do the same thing this year, and next. At a rate of 100 Billion every three years it doesn't take long at all to run into reserve replacement problems. The whole of the Bakken combined might have as much as 15 Billion barrels of frackable recoverable oil. How many Bakkens do we have to deplete every year just to keep our production steady?

[GregT]

Longer than our economies can remain solvent.

[JV153]

Longer than our economies can remain solvent.

Probably longer than it takes the oil to run out. Banks these days have notoriously expansionist credit policies.

[Plantagenet]

The sanctions on Iran are now officially over.

UN certifies Iran compliance, Obama signs executive order ending sanctions on Iran

This will bring another ca. 500,000 bbl/day of oil onto the world market. Considering that the market is already oversupplied by ca. 1,000,000 bbl/day, the global oil glut just got a lot more gluttier.

[Newfie]

Not making a prediction, I'm really bad at them, but I like KJs thinking above. The glut will continue until there is a ME war or some other disruption.

[ennui2]

Not making a prediction, I'm really bad at them, but I like KJs thinking above. The glut will continue until there is a ME war or some other disruption.

When hasn't there been a ME war or some other disruption going on at any one time?

[Shaved Monkey]

The glut will last until widespread warfare exists in the ME. Then we abruptly switch from glut to shortages as ME production ends.

Not really
Oil tankers are given free passage to pay for the weapons.