[Outcast_Searcher]

The final paragraph of the Forbes article on the price of oil with a ten year perspective caught my eye, re oil price prognisticators (including self appointed "experts" re oil price doom on this site. (Red font mine, for emphasis. And note that this author has some credibility re oil and KSA discussions -- not just an ability to quote random doomer blogs)).

Amidst all of the 2018 market predictions it is important to remember that 10 years ago few thought that oil prices would be this low today. The lesson here is that oil prices are fickle and despite the many predictions claiming to pinpoint the price of oil in a year or the average price throughout 2018, no one can forecast the future.

Ellen R. Wald, Ph.D. is a historian & consultant on geopolitics & energy. She is a Non-Resident Scholar at the Arabia Foundation.

Edit: forgot to copy the link to the article:

https://www.forbes.com/sites/ellenrwald ... 67eb7ba191

[GoghGoner]

Here is Ellen's prediction from another article on the net. Although she doesn't name a specific price she does make a statement that market is oversupplied and she says the prices need to be propped up at this level by rising demand.

There is nothing indicating the market is oversupplied, she is probably basing this assumption on her view of how quickly shale supply is going to grow in 2018. Also, if minor incidents are causing swings in prices that also indicates the fundamentals are very tight.

WTI over $61 today! Brent over $67! So far Ellen is wrong but it is only 3 days into 2018

The oil market is likely to remain volatile in 2018. There is still an oversupply of oil and demand from countries like China and the United States is still integral to keeping prices from dropping. We will likely continue to see relatively minor incidents make significant impacts on the oil market.

[ROCKMAN]

goner - And this is where I still have a problem with their concept of an "oversupplied market". In my petroleum world a market is over supplied when I have no buyer for my oil. IOW I have to shut in some of my wells. To the best of my knowledge no producer in the world has had to do so to any meaningful level. IOW every bbl produced has been sold: to a refinery or to a speculating buyer sending it to storage.

It seems many are basing the "oversupplied" concept based on the price of oil. So they say the market is oversupplied when oil was $40-$50 per bbl. I that case the market has been grossly oversupplied for the vast majority of the petroleum age since its average inflation adjusted price has been lower for the vast majority of the period. But I didn't see much oversupply talk when oil hit $40/bbl around 2006. In fact just the opposite: lots of reports about a developing "tight" oil market and concerns over the inflation of oil prices.

Or put it this way: the oil market is "oversupplied" because the current price is significantly higher then it has been for most of the petroleum age. And that makes sense to some people???

And now oil has reached a record high over the last 2 years. In fact it is now selling 100% more then it was at its lowest recent price. So that represents an "oversupplied market": oil prices double in a couple of years???

[Outcast_Searcher]

Here is Ellen's prediction from another article on the net. Although she doesn't name a specific price she does make a statement that market is oversupplied and she says the prices need to be propped up at this level by rising demand.

While I'll certainly acknowledge that while there are various hard to predict issues re supply, including some of the mechanical and geopolitical uncertainties occurring now/recently, the rising demand is certainly there. All one has to do is look at any graph of the global crude supply/demand aggregate numbers, and aside from the 2008-2009 major economic slump, it's steadily rising numbers as a trend, every year. Oh, and consider that recent economic forecasts show an acceleration in global economic growth for 2018.

So barring the economic armageddon the fast-crashers tend to forecast several times a year or more, the odds of increasing demand over the next 5 years or so look pretty solidly baked into the cake. (Net ICE production will FAR outpace any demand reduction from EV's for that timeframe in aggregate, IMO).

[vtsnowedin]

When you look at production vs. consumption graphs I'm stuck by a few base truths. One is that no one can consume it before somebody has in fact produced it. Second that over production for any length of time will use up all available storage and force producers to drop the price to increase demand and consumption. Long term graphs show the lines repeatedly crossing showing that that eventually everything produced has been consumed as you would expect. Some other graphs show production exceeding production over long terms by a percent or so. I expect this is just the fuzzy math in the data that has to be compiled from hundreds of sources some of which have a casual relationship with the truth.

[vtsnowedin]

So barring the economic armageddon the fast-crashers tend to forecast several times a year or more, the odds of increasing demand over the next 5 years or so look pretty solidly baked into the cake. (Net ICE production will FAR outpace any demand reduction from EV's for that timeframe in aggregate, IMO).

I would not be so sure about that. If supply tightens considerably the first response will be a significant rise in prices which may in fact already have begun. While far from Armageddon a significant price rise will hold back or even depress demand world wide. A new ICE vehicle becomes out of the question if you can't afford the fuel for it.
All those forecasts for demand going out five years are based on current forecasts of supply and prices. Change one or both of those assumptions and you will get different results.

[ROCKMAN]

vt - Not so much fuzzy math but the nature of the system. To the best of my knowledge during the last 4 decades I have not worked for a company that has sold a single bbl of oil to a refinery. I know for a fact I haven't sold any oil to a refinery in the last 9 years. I've sold every bbl to an oil marketing company such as Plains Resources. They might have sold some/every one of my bbls to a refinery, an oil speculator that sent it to storage, to the SPR or to an overseas buyer. But regardless I reported every bbl as production.

Which brings up a question: what exact does oil "consumption" mean: oil sold by producers; oil sold by oil marketing companies; oil bought by refineries; oil used to make oil products bought by consumers?

The EIA glossary doesn't define "oil consumption". This is the closest I could find:

Crude oil acquisitions (unfinished oil acquisitions): The volume of crude oil either:
•acquired by the respondent for processing for his own account in accordance with accounting procedures generally accepted and consistently and historically applied by the refiner concerned, or
• in the case of a processing agreement, delivered to another refinery for processing for the respondent's own account.

Crude oil that has not been added by a refiner to inventory and that is thereafter sold or otherwise disposed of without processing for the account of that refiner shall be deducted from its crude oil purchases at the time when the related cost is deducted from refinery inventory in accordance with accounting procedures generally applied by the refiner concerned. Crude oil processed by the respondent for the account of another is not a crude oil acquisition.

[ROCKMAN]

"Change one or both of those assumptions and you will get different results." And thus the usefulness of the term "dynamic". As in "Peak Oil Dynamic". LOL.

[Outcast_Searcher]

So barring the economic armageddon the fast-crashers tend to forecast several times a year or more, the odds of increasing demand over the next 5 years or so look pretty solidly baked into the cake. (Net ICE production will FAR outpace any demand reduction from EV's for that timeframe in aggregate, IMO).

I would not be so sure about that. If supply tightens considerably the first response will be a significant rise in prices which may in fact already have begun. While far from Armageddon a significant price rise will hold back or even depress demand world wide. A new ICE vehicle becomes out of the question if you can't afford the fuel for it.

REALLY? We're going to say that again?

Look, as KJ and others have shown, the projections are for roughly 60ish million new ICE's net a year. What I'm talking about is comparing that to the under 5 million EV's a year we're all but certain to see over the next 5 years.

For people who can afford new cars, the price of gasoline at, say $4 or $5 vs. $2.50 is a mere annoyance for the VAST majority of buyers. If they need another car because theirs has become reliable, do you think they'll walk 5 or 50 miles to work? No, but they might well buy a Corolla instead of an F-150 or equivalent SUV, if finances become a concern.

Buying a $20,000ish Corolla over a $50,000ish fancy truck or SUV saves $30,000ish.

With the average person driving 13,000ish miles a year, the fuel cost for 500ish gallons of gas is in the range of $1200ish to $2500ish under that scenario. And of course, they burn a lot LESS gas buying a reasonably efficient vehicle.

The scale is completely different.

No matter how many times pstarr and the ETPers claim that people buying new cars can't afford gasoline if the price rises a little (or even a lot), in the main, is, complete BULLSH*T. (I'm not talking about a few people on the borderline of affording a new ICE -- I'm talking about mainstream consumers).

Look, even my POOR friends, including one who literally lives in his car, don't quit driving a LOT when gas gets to $4.00 or so. They rant and rave and complain and bitch -- and they buy the gasoline, keep right on driving as normal, and presumably buy less or cheaper other things to make up the difference.

Now, imagine this scenario for "comfortable" people buying new ICE's at an average transaction price of meaningfully over $30,000. Even $5.00 a gallon is just an annoyance (and lots and lots of braying/whining), for such people.

[vtsnowedin]

vt - Not so much fuzzy math but the nature of the system. To the best of my knowledge during the last 4 decades I have not worked for a company that has sold a single bbl of oil to a refinery. I know for a fact I haven't sold any oil to a refinery in the last 9 years. I've sold every bbl to an oil marketing company such as Plains Resources. They might have sold some/every one of my bbls to a refinery, an oil speculator that sent it to storage, to the SPR or to an overseas buyer. But regardless I reported every bbl as production.

Which brings up a question: what exact does oil "consumption" mean: oil sold by producers; oil sold by oil marketing companies; oil bought by refineries; oil used to make oil products bought by consumers?

The EIA glossary doesn't define "oil consumption". This is the closest I could find:

Crude oil acquisitions (unfinished oil acquisitions): The volume of crude oil either:
•acquired by the respondent for processing for his own account in accordance with accounting procedures generally accepted and consistently and historically applied by the refiner concerned, or
• in the case of a processing agreement, delivered to another refinery for processing for the respondent's own account.

Crude oil that has not been added by a refiner to inventory and that is thereafter sold or otherwise disposed of without processing for the account of that refiner shall be deducted from its crude oil purchases at the time when the related cost is deducted from refinery inventory in accordance with accounting procedures generally applied by the refiner concerned. Crude oil processed by the respondent for the account of another is not a crude oil acquisition.

Your talking bureaucratize to an ex bureaucrat
Except for KSA very little crude in the world is used as it came from the well so it all the rest goes through a refinery sooner or later. You can count it when it comes from the well or when it goes into the refinery or blender plant but the total should come out the same. Into storage,out of storage into a boat and tour the world it will all get turned into usable products somewhere some time.

[vtsnowedin]

So barring the economic armageddon the fast-crashers tend to forecast several times a year or more, the odds of increasing demand over the next 5 years or so look pretty solidly baked into the cake. (Net ICE production will FAR outpace any demand reduction from EV's for that timeframe in aggregate, IMO).

I would not be so sure about that. If supply tightens considerably the first response will be a significant rise in prices which may in fact already have begun. While far from Armageddon a significant price rise will hold back or even depress demand world wide. A new ICE vehicle becomes out of the question if you can't afford the fuel for it.

REALLY? We're going to say that again?

Look, as KJ and others have shown, the projections are for roughly 60ish million new ICE's net a year. What I'm talking about is comparing that to the under 5 million EV's a year we're all but certain to see over the next 5 years.

For people who can afford new cars, the price of gasoline at, say $4 or $5 vs. $2.50 is a mere annoyance for the VAST majority of buyers. If they need another car because theirs has become reliable, do you think they'll walk 5 or 50 miles to work? No, but they might well buy a Corolla instead of an F-150 or equivalent SUV, if finances become a concern.

Buying a $20,000ish Corolla over a $50,000ish fancy truck or SUV saves $30,000ish.

With the average person driving 13,000ish miles a year, the fuel cost for 500ish gallons of gas is in the range of $1200ish to $2500ish under that scenario. And of course, they burn a lot LESS gas buying a reasonably efficient vehicle.

The scale is completely different.

No matter how many times pstarr and the ETPers claim that people buying new cars can't afford gasoline if the price rises a little (or even a lot), in the main, is, complete BULLSH*T. (I'm not talking about a few people on the borderline of affording a new ICE -- I'm talking about mainstream consumers).

Look, even my POOR friends, including one who literally lives in his car, don't quit driving a LOT when gas gets to $4.00 or so. They rant and rave and complain and bitch -- and they buy the gasoline, keep right on driving as normal, and presumably buy less or cheaper other things to make up the difference.

Now, imagine this scenario for "comfortable" people buying new ICE's at an average transaction price of meaningfully over $30,000. Even $5.00 a gallon is just an annoyance (and lots and lots of braying/whining), for such people.

Where to begin?
I must say that is one of the most mindless posts here in a long time.
Do you need to check your meds or lay off the booze?
Gas going from $2.50 to $5.00 is important even for a middle class American that is considering a new truck vs a Corolla. Over 100,000 miles which is how far you will go while the payments last the truck will consume 6250 gallons of gas or $31,250 making truck and gas cost over 100K. If he chooses the Corolla that same 100,000 miles will eat up just 2860 gallons of gas or $14,300 so with a 20K price tag you are looking at about 34K for the same 100,000 miles. Maybe 66K is a drop in the bucket for you but a lot of Americans that would like to drive around in that big honking truck would run out of debit card somewhere between the truck with $2.50 gas and the truck and $5.00 gas and would choose the Corolla or something in between them. Everyone that chooses the Corolla will have reduce their fuel demand by half. But now let us turn and look at world demand for ICE cars. The bulk of that is now in China and India where very few would even aspire to a full sized American SUV or pickup and are much closer to the end of the money each month. A doubling of gas prices will of course push them to cars even more efficient then the Corolla if not push them out of the market altogether leaving them to carry on as they are now.
There is now a strong demand for new cars in these countries at present fuel prices but let prices double and that demand will evaporate faster then gas on a hot manifold.

[Outcast_Searcher]

Where to begin?
I must say that is one of the most mindless posts here in a long time.
Do you need to check your meds or lay off the booze?

If THAT"s going to be the level of your discourse, I'm happy to shove you in the ignore bin along with pstarr. How about acting like an adult?

[Outcast_Searcher]

A doubling of gas prices will of course push them to cars even more efficient then the Corolla if not push them out of the market altogether leaving them to carry on as they are now.
There is now a strong demand for new cars in these countries at present fuel prices but let prices double and that demand will evaporate faster then gas on a hot manifold.

Sigh. Demand being reduced is NOT demand evaporating. But dream on.

If you're going to just ignore all reasonable arguments and resort to name-calling, fine.

My point that people can buy much cheaper and more fuel efficient ICE's if they need or want a new car stands. My point that much more fuel efficient cars burn a lot less gas stands.

In my example of a Ford F-150 vs a Corolla, even a doubling of the gas price would result in little change in the annual fuel expense. But they buyer would still save a considerable amount on the purchase. Even if they actually "couldn't afford" more expensive gas.

Exaggerating and making stuff up will only convince people who are already on the economic fast crash doom kool-aid.

I never said it made no difference. But subtlety seems to escape you in this discussion as much as arithmetic.

[vtsnowedin]

Where to begin?
I must say that is one of the most mindless posts here in a long time.
Do you need to check your meds or lay off the booze?

If THAT"s going to be the level of your discourse, I'm happy to shove you in the ignore bin along with pstarr. How about acting like an adult?

Feel free. I thought I would not embarrass you by pointing out every stupid point in your post.
This little gem here for example.

For people who can afford new cars, the price of gasoline at, say $4 or $5 vs. $2.50 is a mere annoyance for the VAST majority of buyers. If they need another car because theirs has become reliable, do you think they'll walk 5 or 50 miles to work? No, but they might well buy a Corolla instead of an F-150 or equivalent SUV, if finances become a concern.

Whose old car becomes reliable? And you agree that people will choose a car with better gas mileage which would decrease fuel demand , that proves my point.

[vtsnowedin]

My point that people can buy much cheaper and more fuel efficient ICE's if they need or want a new car stands. My point that much more fuel efficient cars burn a lot less gas stands.

And burning less gas reduces demand for gas.
I don't need to call you names. You are embarrassing yourself.

[kublikhan]

goner - And this is where I still have a problem with their concept of an "oversupplied market". In my petroleum world a market is over supplied when I have no buyer for my oil. IOW I have to shut in some of my wells. To the best of my knowledge no producer in the world has had to do so to any meaningful level. IOW every bbl produced has been sold: to a refinery or to a speculating buyer sending it to storage.

It seems many are basing the "oversupplied" concept based on the price of oil. So they say the market is oversupplied when oil was $40-$50 per bbl. I that case the market has been grossly oversupplied for the vast majority of the petroleum age since its average inflation adjusted price has been lower for the vast majority of the period. But I didn't see much oversupply talk when oil hit $40/bbl around 2006. In fact just the opposite: lots of reports about a developing "tight" oil market and concerns over the inflation of oil prices.

Or put it this way: the oil market is "oversupplied" because the current price is significantly higher then it has been for most of the petroleum age. And that makes sense to some people???

And now oil has reached a record high over the last 2 years. In fact it is now selling 100% more then it was at its lowest recent price. So that represents an "oversupplied market": oil prices double in a couple of years???

If you want to see if the market is oversupplied, don't look at price. Look at oil inventory levels. In 2006 there was not an abnormal amount of oil in storage. Today there is. There is more oil in storage now than at anytime in the last 30 years. You can view OECD data here:

OECD End-of-period Commercial Crude Oil and Other Liquids Inventory, Annual

Notice the spike in the amount of oil going into storage during 2014 and 2015? Since OECD storage tends to be the cheapest way to store oil, it also tends to be the first to fill up and the last to drain. The graph shows oil storage not growing during 2016 however this does not include other oil storage options like floating storage, Non-OECD storage, etc which continued to grow in 2016. Now that the market has moved into backwardation, storing oil is a less attractive option for speculators and some of the excess oil in inventory has started to drain. The sharpest decrease in oil storage are naturally coming from the more expensive storage locations like floating storage. However even the OECD inventories saw a bit of a dip in 2017 as inventories drain. So the oil market tightened up a bit in 2017. IE, the OPEC cuts are working. For now anyway. There is some speculation that inventories could start growing again if OPEC floods the market with oil after the cuts expire.

OECD refining centers contain lots of inexpensive storage options which make them the preferred choice for holding non-operational or speculative inventories. The result is that storage tanks in the OECD tend to be the first to fill during a period of oversupply and the last to empty when global stocks are falling.

There is some evidence excess global inventories have already fallen, with reductions in oil-exporting countries, floating storage and remote locations. Excess stocks are gradually being pulled along the supply chain from producers, floating storage and remote locations toward the major refining centers in the OECD. But the behavior of the supply chain introduces an important non-linearity into the response of OECD stocks to OPEC’s production policy. OECD stocks are likely to fall slowly at first, then accelerate once producer stocks and floating storage have been emptied. As a result, OPEC’s production policy often tends to appear relatively ineffective at first before gaining traction later. In this instance, the stubbornly high level of OECD oil inventories during the first quarter of 2017 may have masked a broader tightening in the supply-demand-inventory balance.

Oil inventories become more visible

The amount of oil stored on tankers around Singapore has dropped sharply in the last months, the latest indication that OPEC-led supply cuts are successfully tightening crude markets even as U.S. exports have soared. Shipping data in Thomson Reuters Eikon shows around 15 super-tankers are currently filled with oil in waters off Singapore and western Malaysia. That is half the number of ships in June and down from 40 tankers holding surplus fuel in mid-2017.

The drop in floating storage around Asia’s main oil-trading hubs comes in the wake of voluntary production cuts led by the Organization of the Petroleum Exporting Countries (OPEC) and Russia as they look to choke off a supply overhang that has dogged markets for years. “There are less incentives for traders to hold crude given rising crude oil prices and premiums. So to some extent, the OPEC cuts have worked.” Brent crude futures are up more than 40 percent since July to almost $64 per barrel. Also, the Brent forward curve shows contracts for future delivery are cheaper than spot supplies, a condition known as backwardation which makes it unattractive to store oil. “The (backwardation) structure has flushed out oil in storage.” Tighter supplies are also evident in physical oil markets.

Despite the tighter market, energy consultancy FGE warned this week that due to rising U.S. shale production and a potential jump in OPEC supplies after the end of its voluntary cuts, a supply glut could re-emerge. “This may result in lower prices in 2019.”

Sinking feeling: Asian floating oil storage declines as crude market tightens

[GoghGoner]

K, thanks for that Quandl link -- I didn't know EIA data was available thru their API which I absolutely love -- my gawd, I have some work to do now

There is something wrong with the graph of the OECD inventories, though. It doesn't match anything that I am looking at. I don't have time right now to sort it out right now but when I get to it, I'll post something.

[GoghGoner]

Since that number above includes liquids, I am not sure what to think about it. I did notice that looking at the same data on the EIA website, they show that the last 3 years are estimated.

Here are the latest crude numbers (all show a sharp drop in 2017):

OPEC estimates that total stocks were around 137 million barrels higher than the five-year average in October, down by around half since May (“Monthly Oil Market Report”, OPEC, December 2017).

IEA puts commercial stocks about 111 million barrels above the prior five-year average at the end of October (“Oil Market Report”, IEA, December 2017).

EIA data shows commercial stocks 167 million barrels above the five-year seasonal average at the end of October, down from a surplus of 380 million barrels in July 2016

[Outcast_Searcher]

My point that people can buy much cheaper and more fuel efficient ICE's if they need or want a new car stands. My point that much more fuel efficient cars burn a lot less gas stands.

And burning less gas reduces demand for gas.
I don't need to call you names. You are embarrassing yourself.

Where did I say or imply that burning less gas does NOT reduce demand for gas.

Are you now going to lie to try to make a point?

If semantics games and name calling is the level of discourse, look in the mirror and consider who should be embarrassed.

[kublikhan]

Since that number above includes liquids, I am not sure what to think about it. I did notice that looking at the same data on the EIA website, they show that the last 3 years are estimated.

Here are the latest crude numbers (all show a sharp drop in 2017):

OPEC estimates that total stocks were around 137 million barrels higher than the five-year average in October, down by around half since May (“Monthly Oil Market Report”, OPEC, December 2017).

IEA puts commercial stocks about 111 million barrels above the prior five-year average at the end of October (“Oil Market Report”, IEA, December 2017).

EIA data shows commercial stocks 167 million barrels above the five-year seasonal average at the end of October, down from a surplus of 380 million barrels in July 2016

I think including all liquids is the best way to go. That way you get a better picture of the total supply picture instead of potentially getting a skewed view because crude stocks might fall sharply but gasoline/diesel stocks spike up. As for measuring month to month, if you do it that way you end up picking up seasonal variations. So I prefer to look at annual data. Annual EIA data shows a fall of only 25 million barrels in total liquids for 2017. And are projecting a growth of 43 million barrels for 2018.

IEA is projecting stocks flatlining overall in 2018:

Our current outlook 2018 may not necessarily be a happy New Year for those who would like to see a tighter market. Total supply growth could exceed demand growth: indeed, in the first half the surplus could be 200 kb/d before reverting to a deficit of about 200 kb/d in the second half, leaving 2018 as a whole showing a closely balanced market. A lot could change in the next few months but it looks as if the producers' hopes for a happy New Year with de-stocking continuing into 2018 at the same 500 kb/d pace we have seen in 2017 may not be fulfilled.

Oil Market Report