[ROCKMAN]

Spike - A tad more complicated: oil prices crashed and global oil production increases to historic levels. For now...and for how much longer? The time lag of the feedback loops are difficult for many to appreciate. Look how US NG production has been increasing despite prices falling from $12+/MCF in '08 to less the $2/mcf. That's 8 years of lower NG prices and fewer rigs drilling NG prospects: 2008 - 450+; Oct 2015 - 225; Oct 2016 - 87. And yet after peak US NG production in Aug 2015 it has finally started to decline but only by 2.3% in 12 months.

[AdamB]

It's probably better to look at oil production costs instead of just prices.

So as they go down, this is an improving environment then?

[AdamB]

"...bringing on more supply, reversing declines..." Actually as of the summer of 2015, 20 months ago, US has less supply
and thus reversing increases in production rates.

Maybe some armchair "economists" should work on their basic arithmetic skills. LOL.

I was speaking in the general, but if you think that the supply response to price...which approached nearly 5 million barrels a day in the US, is an economist not knowing arithmetic, who might you recommend as knowing maths in their stead, texas geologists?

http://www.artberman.com/tight-oil-prod ... y-by-june/

Mike Lynch once said that you don't send an accountant to do a reservoir engineers job when referring to Matt Simmons and his ridiculous analysis of reservoir water cut, based on Art's blog, we could also say that you don't send a geologist to do an economists job.

[sparky]

.
I'm now looking at the mix of crudes being extracted ,
From the mining industry experience , one would think the sweet stuff would be the first to deplete
I'm trying to get some quantity numbers on the various grades and would appreciate any pointers

[AdamB]

.
I'm now looking at the mix of crudes being extracted ,
From the mining industry experience , one would think the sweet stuff would be the first to deplete
I'm trying to get some quantity numbers on the various grades and would appreciate any pointers

When in doubt, the experts come in handy.

http://www.eia.gov/tools/faqs/faq.cfm?id=547&t=6

Crude types and the lifting of export restrictions

http://www.eia.gov/analysis/requests/crude-exports/

http://www.eia.gov/analysis/studies/petroleum/morelto/

[sparky]

.
thanks Adam , I get close but not quite answers my query , how many barrels are made of which grade ?
fracking release quite a lot of sweet light crude , this can be seen in the differential between the three main crude grades
West Texas , Brent and Dubai , west Texas crashed as there was a glut of light sweet and no exports
Urals is a bit more sour and has been holding itself quite well
for memory West Texas , Brent and Tapis are extinct as actual production ,
the grade is made up of a blend of analog field production
it's a bit like if the price of beef was referenced to the price of Unicorn meat

[sparky]

.
Well , finally got something , from Oxford energy

https://www.oxfordenergy.org/wpcms/wp-c ... h-2008.pdf

it doesn't give me the historical trend but it is an "in depth" paper on crude oil indexes prices linkage
while somewhat dated (2008) its conclusion fit well with subsequent events .

The indexes move in a seamless fashion for sweet/light crude with a large and active futures market
it move with trigger threshold for heavy/sour grades when the market is on a physical purchase basis
this would reflect the technical problem of re-tooling refineries for "dirtier" grades and the lower content of the gasoline cut

[ Rockman is going to love this ]
"Crude oil is of little use before refining and is traded for its final petroleum products that consumers demand. The intrinsic properties of the crude oils determine the mix of the final petroleum products."


"Despite the wide variety of internationally traded crude oils with different qualities and characteristics
(the 2006 International Crude Oil Market Handbook describes more than 160 traded crude oil streams),
many observers consider the world oil market as ‘one great pool’ (Adelman, 1984).
Others argues that oil markets are ‘globalized’ in the sense that supply and demand shocks that affect prices in one region are transferred into other regional markets (Weiner, 1991).
One implication of the globalization thesis is that prices of similar crudes in different markets should move closely together such that their price differential is more or less constant."
This is in contrast to oil markets being ‘regionalized’ in which oil prices of similar qualities move independently to each other in response to shocks. "


"Given the large variety of crude oils traded in the international market, it is important to limit our analysis to few crude streams. we focus our analysis on the following seven types of crude oils imported into the USA:
Nigerian Bonny Light (37º), Algerian Saharan Blend (44º), Mexican Maya (22º), Canadian Lloyd Blend (22º), West Texas Intermediate (40º), Brent (38º), and Dubai’s Fateh (32º). "

the paper anticipate the great reversal of the indexes of 2011
when WTI was CHEAPER than Brent ,
this led to a very sharp drop in demand for the sour crude from Saudi Arabia ,
hence , presumably , their price war .

[AdamB]

.
the paper anticipate the great reversal of the indexes of 2011
when WTI was CHEAPER than Brent ,
this led to a very sharp drop in demand for the sour crude from Saudi Arabia ,
hence , presumably , their price war .

it isn't their price war. it is just market economics. New supply from a place that wasn't supposedly capable of creating new supply, in volumes approaching that of a new Ghawar was turned on in the US, is quite an excellent apple-cart up setter.

Even more amusing were the early Saudi attempts to attach rate reduction hopes on US producers as though the US oil production is run by an NOC. That was just for show, they knew there wouldn't be any action to reenact a prorationing scheme ala TRCC in this country.

But it did change their entire global sales strategy, and nothing else has since the late 70's, so there is no dispute as to the magnitude of what the US did to global oil markets.

[sparky]

.
after the Vienna agreement ,it would seems that Saudi Arabia has thrown the towel .
it will be interesting to watch the fracking rebound , how much and how soon
the first time around there was a lot of exuberance and punter money .
now the industry is mature ,

[ROCKMAN]

Sparky - Meant to respond sooner about your thoughts about oil grades. Nothing I'm saying now may be new to you.

Very little oil is sold at the posted WTI, Brent, etc. Those are benchmarks used in contracts. For instance one KSA crude sold to a South African refinery for (Brent + $3) per bbl. The same oil might have a long term contract with a Texas refinery for (Brent - $4) because of transport distances. Or a sour heavy KSA crude might sell to the same SA refinery for (Brent - $8) but to an Italian refinery for (Brent - $1) because they have a good source of light oil to blend plus cheaper transport.

As I've mentioned before I've sold a lot of Texas oil identical to many oils benchmarked to WTI but sold it to a Louisiana refinery at the higher LLS benchmark. Even a deduct for the barging makes it worthwhile. And LLS isn't actually a type of natural oil: "LLS is a blended grade that can be created by mixing either foreign or domestic crudes. It can benefit uniquely from the growth in shale production. As a result, its production lifespan is evergreen. LLS is traded as a differential to WTI, which is backed by a deep financial market with a robust regulatory structure."

Which also brings me back to the silly assertions the the Eagle Ford condensate was less valuable and had little demand. Prior to the shale boom Texas refineries were IMPORTING a lot of condensate to blend with their heavy crudes. Remember our refineries are optimised to crack a very narrow gravity range...31 to 33 API. Since the EFS began to boom tens of bbls of that condensate was shipped half way around the country by tanker to east coast Canadian refiners to blend with heavy crude. Not only did they have to compete with Gulf Coast refineries they also had to pay for the shipping. And the Canadians were willing to pay such a premium pipeline companies paid to reverse two pipelines that had been used to move imported oil from the S Texas port of Corpus Christi to the Sasn Antonio refinerties. And one point a dozen or more tankers would be lined up at Corpus waiting to take on loads of EFS condensate for those Canadians.

Do you know that last year Venezuela had to import light oil all the way from Libya for blending?

I'll stop there. I avoid going into much detail since marketing/refining isn't my game. But I think you get the point that those bumper sticker generalities don't come close to expressing the complexity of the actual dynamics.

[sparky]

.
Rockman , thanks for the insight , I was aware of some of those trades but not of their ever-changing complexity

A small comment , all the crude now in storage is just worth a lot more ,
those holding a right to it have made some very impressive dough , few more than Harold Hamm of continental resources
he just made a cool 3 billions dollar nominal in three hours
a good friend and confident of Donald Trump he declined the job of energy secretary .
Still he got his man in , Rep. Kevin Cramer from North Dakota.

Now we will all sit back and watch what happen to the drill count and the production.
If it is true that prez Putin made the Vienna deal happen , there will be a few cheers for the man back on the oil patch

[Subjectivist]

.
after the Vienna agreement ,it would seems that Saudi Arabia has thrown the towel .
it will be interesting to watch the fracking rebound , how much and how soon
the first time around there was a lot of exuberance and punter money .
now the industry is mature ,

I don't think they threw in the towel at all. The damage to the American frackers was huge. Also under the SEC rules that Rockman explained to us ver and over the value of those fields in America will be calculated on average prices of 2016 for all of 2017, so getting loans will still be very difficult all next year while KSA will benefit from the higher prices for the next 13 months plus whatever time it takes for them to ncrease drilling in 2018.

[Tanada]

Now that the glut is abating, helped along at least mentally by the new OPEC plus other exporters quota's just announced hopefully people will resume discussing Peak oil.

It is not 11 plus years since this website went live to discuss our predicament, finite resources can not support infinite growth.

How do you think things will play out now that we have traveled so much further down the road from where we met?

Do you think we are better or worse prepared than we were in 2004-05 as a world, or in your nation?

Are you personally better or worse prepared to deal with the effects of Peak Oil?

[Plantagenet]

How do you think things will play out now that we have traveled so much further down the road from where we met?

I think the development of tight oil shale in the US is a HUGE factor that has been underestimated by many in the peak oil community

The predictions of peak oil occurring ca 2005 have been proven wrong. Why? US oil production quickly GREW by ca 5 million bbls/day as shale oil came on line over the last decade

Just a few weeks ago the CEO of Pioneer Exploration said the Permian basin has 70 BILLION bbls of shale oil --- that's an amazing amount of oil

I've yet to see a new estimate of when peak oil will occur that includes these new shale oil resources

Cheers!

[rockdoc123]

I've yet to see a new estimate of when peak oil will occur that includes these new shale oil resources

my own view is that will be an extremely tough prediction simply because the rate of drilling which has a direct effect on maximum production rate as far as LTO is concerned is completely dependant on access to capital. There are only a few shale players that can fund extensive programs internally and very few that can actually get equity or debt financing at this point. The quick run up to the production peak in the US recognized in 2014 was driven by cheap plentiful capital being made available in the way of debt from many banks which will not be doing that in the foreseeable future. I suppose one could run a bunch of scenarios but I suspect the outcomes will be all over the map. The various forces (economics, price, capital access) serve to give peak oil a somewhat unpredictable up and down pattern that speaks to the "roller coaster" plateau I suggested a number of years ago that peak would look like.

[Pops]

Good.

The biggest change for me is I no longer think I have some inside track, greater insight, special perception of the world or a jump on the sheeple. I also no longer reject "official" or corny statements out of hand and accept contrarians and doom-for-profits as prophets without reservation. I actually feel like challenging the sacred cows of PO is important even thought I was a big herder of said cows. Most of all, I don't see myself as Cassandra, I proved to myself my inability to see the future.

The most obvious lesson for me is consumers can adjust to expensive oil, mainly because I have. And that, to some extent anyway economics can overcome geology if only for a time. Once I would have said (did in fact) that $100 would kill the economy and $500 would kill it dead, perhaps forever. Oil is still an important commodity and because it is, demand is very sticky short term, but longer term people can adjust. How rapidly and completely is still up in the air. But simple straight line prognostication is basically worthless in this case because there are essentially a world of inputs and a world of responses.

Back in the day I had hopes for alts but was a skeptic due to price & sustainability. Prices are close to parity are they not? I'd venture that we aren't even close to the maturity stage as yet, innovation is still happening.

Ditto conservation.

Crystal ball, dusty tho it is, says we'll see a production plateau until the market balances. I'd guess price might be $60-80 while we drain the LTO sweet spots and then rise. How long that takes I have no clue. $80-$120 is my personal Goldilocks zone for the transition initially, high enough to induce mitigation, low enough to enable a change.

Like I said from day one here, the big question is how long to prepare before preparation is unaffordable?

[Ibon]

Good summary pops..... Elasticity on all fronts more than we originally thought makes predictions cloudy indeed. Non conventional fossil fuels alternatives, conservation, innovation, cultural responses, financial shenanigans, government shenanigans, geopolitical twists and terns, globalization, global recession, China going up or down, global warming consequences, Population and consumption growth or decline.

Good Luck predicting anything when there is elasticity in all of the above

[onlooker]

I have to say I am surprised by the resiliency of the world economy and its ability to keep humming along. I ascribe that mainly to the attitude of live for today the heck with tomorrow. You see that in the way that even as some entrepeneurs and start up companies have propelled the Renewable Alternatives, Governments have maintained the pedal to the metal in terms of Fossil fuels. I mean that is certainly to be expected. You also, seem this attitude I referred to by the continuance of Lending and Debt and the frenzied attitude of the markets to hitch a ride on any and all bubbles. On the other hand as per the question is the world better prepared the answer to me is a resounding NO. Am I better yes.

[sparky]

.
@ Onlooker , the capitalist System is a very solid system , it is using natural forces and deep realities
it exist in the present modern form since the 16th century , it predate the industrial revolution and has survived some horrendous crisis .
it will NEVER lay down and die ,if buried under , it will rise from the grave and whip out its competitors
if someone want to finish it , good luck with that

[onlooker]

Yes sparky but it's greatest strength is also it's greatest weakness. Meaning it's built on competition, greed and selfishness as the basis of its strength yet those attributes have blinded individuals and the collective species to the full scale assault on Earth that is wrecking the life support systems that developed on Earth. So over the longer term it's victories have laid the groundwork to uncover the ultimately destructive nature of this type of
Economic system in the hands of humanity