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THE 2017 po.com Oil Price Challenge

Discussions about the economic and financial ramifications of PEAK OIL

Re: THE 2017 po.com Oil Price Challenge

Unread postby GoghGoner » Sat 30 Dec 2017, 16:38:56

Oil could spike above $100, crater below $20, or have little to no movement in 2018. Nobody knows. I went down in flames with my $100 call this year but I haven't ever placed money on a 12 month dated oil future/option (not that I wouldn't, I just haven't came up with any ideas to predict prices that far out -- my models are useful to tell whether the current price is too high or low, that is all). This is only for fun so I am apt to make crazier WAGs.
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Re: THE 2017 po.com Oil Price Challenge

Unread postby vtsnowedin » Sat 30 Dec 2017, 16:54:26

The rank I aspire to is "Protector of the Realm". :)
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Re: THE 2017 po.com Oil Price Challenge

Unread postby Tanada » Sat 30 Dec 2017, 17:04:14

vtsnowedin wrote:The rank I aspire to is "Protector of the Realm". :)


You need a bigger sword for that :twisted: :twisted: :twisted:
I should be able to change a diaper, plan an invasion, butcher a hog, design a building, write, balance accounts, build a wall, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, pitch manure, program a computer, cook, fight efficiently, die gallantly. Specialization is for insects.
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Re: THE 2017 po.com Oil Price Challenge

Unread postby vtsnowedin » Sat 30 Dec 2017, 17:28:08

Tanada wrote:
vtsnowedin wrote:The rank I aspire to is "Protector of the Realm". :)


You need a bigger sword for that :twisted: :twisted: :twisted:

"The pen is mightier than the sword" :-D :roll: 8)
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Re: THE 2017 po.com Oil Price Challenge

Unread postby kublikhan » Sat 30 Dec 2017, 22:56:48

Subjectivist wrote:Interesting! Thanks for giving away your secret, hard work is better than gut feeling...Sounds so cliche put that way but your method is persuasively more effective than mine.

Seems how there is no game for 2018 are you willing to share your estimates anyhow? The record says you will be pretty close even f not perfectly on target.

Your method reminds me of Pup55. He was such a fixture around here I still miss his weekly analisys.

Did world oil consumption go down year over year any time recently? I know America and the EU dropped because of the economy but I was under the impression that China and India increased imports fast enough the world consumption still grew.
Since there is no game for 2018 I never bothered doing estimates.

The only recent time world oil consumption went down was during the great recession of 2008-2009. However by 2010 global oil consumption was back to hitting new records every year.
The oil barrel is half-full.
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Re: THE 2017 po.com Oil Price Challenge

Unread postby Tanada » Sun 31 Dec 2017, 08:24:30

Just saw this, great annual link! Thanx for posting this Master Prognosticator!

When you have a good data set like this it is very easy to see the 1979 revolution/war in Iran caused a large drop in world oil consumption from 1981-1985 with rapid growth picking up in 1986 and consumption hitting all new highs in 1987. Then it was growth every year from 1987-2007 with a brief dip in 2008-2009 before resuming steady growth from 2010-2016.

The only way I see for the Glut to continue would be for world wide fracking to now go into the same kind of growth spurt USA fracking did in 2009. Will this happen? If it does happen will it last for more than a few years to offset conventional sources already long producing?
I should be able to change a diaper, plan an invasion, butcher a hog, design a building, write, balance accounts, build a wall, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, pitch manure, program a computer, cook, fight efficiently, die gallantly. Specialization is for insects.
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Re: THE 2017 po.com Oil Price Challenge

Unread postby vtsnowedin » Sun 31 Dec 2017, 10:00:47

Tanada wrote:....
......
The only way I see for the Glut to continue would be for world wide fracking to now go into the same kind of growth spurt USA fracking did in 2009. Will this happen? If it does happen will it last for more than a few years to offset conventional sources already long producing?

Looking at the inventory numbers and world production vs. consumption I think the glut is already dead and a boost in production is needed somewhere to keep prices reasonable. Perhaps KSA or Russia being the best bets.
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Re: THE 2017 po.com Oil Price Challenge

Unread postby tita » Sun 31 Dec 2017, 10:26:53

kublikhan wrote:Thanks Outcast. Well for one thing I tend to predict less volatility than most. Here was the high low spread in actual annual oil prices for the past 5 years:

year spread kub predicted spread
2017 18 15
2016 28 20
2015 27 30
2014 54 25
2013 22 35

That's an average high-low spread of only $30 a year. And that's including the the highly volatile year 2014. The average spread is only $24 for the other 4 years. After being deluged with oil glut news I started factoring that in as well. I figured the large volumes of oil in storage would act to mitigate any supply side shocks and put a lid on volatility. So I reduced my spread further in 2016 and 2017.

For the price levels I pick, I tend to first look at forecasts by the major banks and/or energy organisations. I figure they must have whole teams of guys looking at this stuff, why not leverage their work? If they differ widely I use my own judgment to choose. For example, for 2017 I factored in the OPEC deal raising prices off of their 2016 values. And the global economy doing well enough to cause oil demand to continue to grow. I figured prices at the end of the year would be higher than at the beginning so I made the close closer to my high. All values rounded to the nearest $5 for simplicity.

Pretty smart! I see that for 2017, you just used a spread of 15$ (no big change in sight), split it around the value of 50$ ending 2016, with a trend upward (so 60$ high, 45$ low). This is a very good observation to see that the spread usually doesn't get wild.

I see that for my two predictions, I thought too much about pre-2015 highs, without thinking about how much volatility could happened. Big spreads like in 2009 or 2014 are uncommon. Even the 2016 spread is quite high, as the price doubled from its low (26$) to its high (54$).

Being in the 5 best 5 years in a row is impressive! Chapeau!
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Re: THE 2017 po.com Oil Price Challenge

Unread postby kublikhan » Sun 31 Dec 2017, 14:43:39

Tanada wrote:The only way I see for the Glut to continue would be for world wide fracking to now go into the same kind of growth spurt USA fracking did in 2009. Will this happen? If it does happen will it last for more than a few years to offset conventional sources already long producing?
I have a dim view on the potential of global fracking. There may be a fair amount of shale oil formations in other countries however formations with commercial value are rare. Plus the US also had several non geological factors that were critical to the fracking boom. These factors are lacking in other countries. So while I do expect to see some non-US fracking activity continue, I do not expect the same kind of boom the US experienced.

ROCKMAN wrote:sparky - "Is fracking a viable worldwide source of crude or is it a flash in the pan ?
if it is viable and expandable , deep offshore will die a slow death". First the facts:

1) The vast majority of the VOLUME of US shale formations haven been PROVEN to have little or no oil frac'ng potential. That includes the tens of thousands of feet of shales that sit immediately above and below the 400' thick Eagle Ford Shale formation. I would guess about 95+% of that volume has no commercial value. The conditions required for a shale formation to have commercial oil potential via hz drilling and frac'ng is very unique. In fact is has already been PROVEN that the great majority of the volume of the Eagle Ford Shale formation itself has no commercial oil potential.

2) We've discussed before the other very unique aspects of commercial oil production from US shales: private ownership of US mineral rights, the pressure on the oil pubcos who would drill anything that has a chance of adding reserves and keeping Wall Street happy, the huge drilling and frac'ng infrastructure that is present in the US compared to the rest of the world and, lastly, a stable political environment.

So even if one ignores the geologic requirements name any country on the planet where the other factors exist to any significant degree. Just think if Chevron had found a shale similar to the EFS productive interval in Poland before they abandoned the project. Can you picture hundreds of companies taking tens of thousands of leases from their govt and then getting 1,000+ drill rigs turning to the right? BTW according to Baker Hughes this last June there were a total of 7 RIGS DRILLING IN THE ENTIRE COUNTRY OF POLAND. I have more rigs drilling in my backyard. LOL. Not really but I'm sure everyone gets the point.
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rockdoc123 wrote:Not all shales are equal....North America has been particularly lucky in a lot of shales having all of the necessary elements present over the majority of the basins.
It might end up being that the sweet spots in the Eastern European shale basins is a small subset of the basin extent.
That being said Shell are not experts in shale gas/oil, in fact they suffer from the big company approach which doesn't work in this niche industry. Generally it has been the small independents who have been successful.

ROCKMAN wrote:A shale like the Eagle Ford isn't just unique in the rest of the world but in the US also. There are shale formations in the US that are collectively tens of thousands of feet thick compared to the EFS being just several hundred feet thick. And some are pricing to be productive but after hundreds of test wells the vast majority don't work.

As Doc pointed out "shales" don't produce commercial oil/NR. Only uncommon shales with a unique charascters do. And then only if there is a significant effort in that region to do so. That combination is much more rare then just the right rocks. For instance imagine how long it would take the "right rocks" to boom in Poland...a country with less the 1/2 dozen drill rigs.

ROCKMAN wrote:
Subjectivist wrote:Just how unique are you talking about, 1% of shales or .001% of shale formations?
...
globallly? Crap, just making up a realistic number IMHO: less the 0.02%. Of course none of those numbers are exactly correct. But it should give some sense how unique those two formations are.
Chevron abandons $10 billion Ukraine fracking deal
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Re: THE 2017 po.com Oil Price Challenge

Unread postby Subjectivist » Mon 01 Jan 2018, 16:29:28

Doesn’t that raise the question how you define commercial?

What I mean is, most of the oil fields Russia is using today were discovered and developed bythe USSR initially, mostly to power their economy and those of the Warsaw Pact nations. Yes there was a lot of inefficiency, but many of the fields developed would have been ignored by commercial developers because buying oil from OPEC was a easier cheaper option. Once we are over the peak why won’t Russia or China or OPEC fund exploiting world shale fields because prices will as high as the world trade can fund?
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Re: THE 2017 po.com Oil Price Challenge

Unread postby kublikhan » Mon 01 Jan 2018, 18:35:30

Well it seems likely a long stretch of high oil prices combined with declining conventional reserves will act as a strong incentive to take a long hard look at unconventional oil. It might even act to change some of the barriers to entry like political and legal barriers, attract qualified talent, fund needed infrastructure development, etc. However that still leaves the problem of the geology. Rockman or Rockdoc would be better suited to address this point. However they have spoken of a multitude of geological factors that have to be just right to make fracking a formation viable. Of the plethora of global tight oil resources, how much will ultimately be recovered? A small fraction I'd wager. Getting a better idea of the exact fraction will require more test wells to be drilled.

rockdoc123 wrote:I liken this to the same thing we saw with the rush to Poland shale gas 2 years ago with trillions of cubic feet predicted. In reality what has happened is that a few wells drilled have shown the shales aren’t necessarily conducive to fraccing, they don’t have the right mineraology and they aren’t over-pressured. Yes they have the organic content and you can estimate huge resources based on that but you can’t get that gas/oil out of the rock and never will.
Why we shouldn't worry about end times

We might get a better idea on which countries have shale potential in the years ahead as activity picks up in other countries:
Let’s start in Argentina, which contains the Vaca Muerta shale formation, one of the world’s largest. Argentina has more shale gas than the United States, and is second only to China, but thus far has yet to ramp up commercial production. But companies are spending more money on exploratory drilling in the region (to the tune of $1 billion per year), and according to Argentinian Energy Minister Juan José Aranguren, the Vaca Muerta will attract $15 billion annually in investment by 2020.

Moscow was slow to embrace the shale boom, initially dismissing it as a fringe phenomenon, but thanks to the current price of oil (in large part a result of surging American output from fracking), it now recognizes the importance of these unconventional reserves. Gazprom Neft—the oil division of the state-owned gas company Gazprom—has begun trying to frack without American assistance. As Gazprom Neft’s director of exploration Alexei Vashkevich put it, “it’s not a question of will we do it or not: it’s a question of time. It might take a little bit longer but we will get there.”

China may be the closest to replicating the American shale experience. China doesn’t have much tight oil, but it has far and away the world’s largest reserves of shale gas, and it has strong reasons to want to develop them, both in terms of pursuing greater energy security (and reducing reliance on energy imports), and also in order to reduce the amount of coal it burns for electricity and heat—and all of the toxic smog that that entails. China’s Ministry of Land and Resources said that in 2016 it upped shale production more than 75 percent to 7.9 billion cubic meters, and hopes to hit 30 billion cubic meters by 2020 and between 80 and 100 billion cubic meters by 2030. The certainty of those numbers is suspect, as are most official statistics coming out of China, but there’s no doubt that a lot of natural gas is lying fallow in Chinese shale formations, and that Beijing is working hard to extract it.

Closer to home, Mexico just opened up its most promising shale region for business, as the country’s Energy Ministry offered foreign private companies access to onshore blocks of its Burgos basin—the same geologic formation that underlies Texas’s highly productive Eagle Ford region, one of America’s shale hotspots. Mexico has nearly as much shale gas as the United States, and now that it has denationalized its hydrocarbon reserves and opened them up to private companies, firms with the know-how and the profit motivation can start trying to get a foothold in the country. Canada has been fracking since 2008, so if Mexico were to join in, it would make the shale boom a North American phenomenon.
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Re: THE 2017 po.com Oil Price Challenge

Unread postby PeakOiler » Sun 07 Jan 2018, 03:24:09

Here's the final scorecard for the 2017 Oil Price Challenge:

Image

Congratulations Salinsky!
There’s a strange irony related to this subject [oil and gas extraction] that the better you do the job at exploiting this oil and gas, the sooner it is gone.

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Re: THE 2017 po.com Oil Price Challenge

Unread postby kublikhan » Mon 08 Jan 2018, 11:45:40

Thanks for all your work on the Oil Price Challenge PeakOiler!
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Re: THE 2017 po.com Oil Price Challenge

Unread postby Revi » Mon 08 Jan 2018, 14:03:34

Thanks! It was a good time. I wonder what will happen this year? I ended in the middle of the pack. C'est la vie!
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Re: THE 2017 po.com Oil Price Challenge

Unread postby Subjectivist » Mon 08 Jan 2018, 19:57:14

Not as good as I hoped but way better than last place where I ranked last year.
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Re: THE 2017 po.com Oil Price Challenge

Unread postby onlooker » Tue 09 Jan 2018, 10:13:56

Will they're be a 2018 OPC? IF so when can we start voting?
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Re: THE 2017 po.com Oil Price Challenge

Unread postby Cog » Tue 09 Jan 2018, 10:36:16

onlooker wrote:Will they're be a 2018 OPC? IF so when can we start voting?


Contact peakoiler if you want to run one. He has the excel document and the links to where he gets the price. It will give you something to do in your spare time.
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