Donate Bitcoin

Donate Paypal


PeakOil is You

PeakOil is You

THE Price of Crude pt 14

General discussions of the systemic, societal and civilisational effects of depletion.

Re: THE Price of Crude pt 14

Unread postby Tanada » Wed 07 Feb 2018, 11:38:41

kublikhan wrote:The spike in oil production was not Iran draining it's tankers. Iran's production increased because the sanctions were lifted. And it continued to increase long after Nov 2016. Even now, Iran's oil production is higher than Nov 2016:

Table 5 - 9: OPEC crude oil production based on secondary sources, tb/d

Iran, I.R. 3,710 3,829

OPEC Monthly Oil Market Report 18 January 2017

OPEC Monthly Oil Market

I already mentioned sanctions being lifted on Iran and their increased production.


You have proven yourself to be the Master Prognosticator, but I personally do not see the Iran increase of 119,000 bbl/d as being all that significant. While every oil exporter naturally wants to sell as much as they can at the highest value possible declines in legacy fields like the North Sea and Cantrell continue to take a toll on world supply. Sure right now the USA is surging, but I remain unconvinced this fracking supply will last for the long term simply because it has been a success for the last nine years.

Just look at the fracking decline rate in second half 2015 through first half 2016, it is a near perfect mirror of the increase rate for the prior five years. That was despite the fact that drilling continued at a pace of about 25% of the 2015 peak. Yes delivered supply is once again growing in the USA and has made up for that 2015-16-17 decline period and is setting new production records today. But how long will that last? We have evidence to support the contention that drilling has to proceed at least at 50% of the peak 2015 rate just to maintain near steady production rates from LTO. If all we wanted to do was maintain we could probably hold that production rate for a decade or so by expanding the number of wells as the less sweet spots become more and more dominant in the picture. But to keep increasing the total production rate we have to drill at more than the 50% of peak drilling rate of 2015, and pretty soon you start running into the law of diminishing returns.

All IMO of course.
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.
User avatar
Tanada
Site Admin
Site Admin
 
Posts: 14817
Joined: Thu 28 Apr 2005, 02:00:00
Location: South West shore Lake Erie, OH, USA

Re: THE Price of Crude pt 14

Unread postby kublikhan » Wed 07 Feb 2018, 12:28:56

GoghGoner wrote:It depends on the subject. On this subject I am aware of and I have consumed about every detail. I was invested in oil during the OPEC announcement and I had a very nice vacation last year because of it. I have skin in the commodity cycle now and do a lot of my own analysis. Sorry I got annoyed with you, I have generally agreed with your posts in the past.
Sall good :) I lose my cool at times as well :)

Tanada wrote:You have proven yourself to be the Master Prognosticator, but I personally do not see the Iran increase of 119,000 bbl/d as being all that significant. While every oil exporter naturally wants to sell as much as they can at the highest value possible declines in legacy fields like the North Sea and Cantrell continue to take a toll on world supply. Sure right now the USA is surging, but I remain unconvinced this fracking supply will last for the long term simply because it has been a success for the last nine years.

Just look at the fracking decline rate in second half 2015 through first half 2016, it is a near perfect mirror of the increase rate for the prior five years. That was despite the fact that drilling continued at a pace of about 25% of the 2015 peak. Yes delivered supply is once again growing in the USA and has made up for that 2015-16-17 decline period and is setting new production records today. But how long will that last? We have evidence to support the contention that drilling has to proceed at least at 50% of the peak 2015 rate just to maintain near steady production rates from LTO. If all we wanted to do was maintain we could probably hold that production rate for a decade or so by expanding the number of wells as the less sweet spots become more and more dominant in the picture. But to keep increasing the total production rate we have to drill at more than the 50% of peak drilling rate of 2015, and pretty soon you start running into the law of diminishing returns.

All IMO of course.
The point was that Iran's production surge wasn't the result of dumping of their accumulated oil stocks from tankers. As here we are over a year later and Iran is still producing at the same elevated level as Nov 2016, indeed an even higher level. Iran's production is up nearly a million bpd over it's 2015 level.

As for my broader view on the global oil supply situation, it mirrors your own view. Declines in legacy fields coupled with several years of curtailed oil investments point to a further tightening of the oil market further down the road. Shale is increasing at a good clip but this won't be enough to cover demand increases and conventional supply declines in the medium to long term.

A dearth of new investment in oil production is stoking a risk of tighter crude supply and unstable prices, even as demand growth is expected to slow over the next five years. The worldwide cushion of spare production capacity will shrink without further investment in exploration and output. “There are still not enough signs of investment beginning to return, and that raises the risk of tightening of the market in the next five years and a risk to the stability of oil prices.” Oil prices at current levels are “better” but still not spurring investment. There is a supply challenge coming up.”
IEA Sees Risk of Volatile Oil Prices on Weak Upstream Investment

But I'm guessing that in the short term shale revival is going to overwhelm declines in conventional supply:
U.S. oil output is set for “explosive” growth this year as prices rally, the International Energy Agency said on Friday. That was just one of a chorus of voices from Goldman Sachs group Inc. to OPEC itself warning of a looming output surge reminiscent of the “heady days” of the first shale boom. “The big 2018 supply story is unfolding fast in the Americas” the IEA said in its monthly report. “Explosive growth in the U.S. and substantial gains in Canada and Brazil will far outweigh potentially steep declines in Venezuela and Mexico.”
IEA: Oil prices to squeeze over shale boom
The oil barrel is half-full.
User avatar
kublikhan
Master Prognosticator
Master Prognosticator
 
Posts: 4202
Joined: Tue 06 Nov 2007, 03:00:00
Location: Illinois

Re: THE Price of Crude pt 14

Unread postby tita » Wed 07 Feb 2018, 18:05:03

kublikhan wrote:But I'm guessing that in the short term shale revival is going to overwhelm declines in conventional supply:
“Explosive growth in the U.S. and substantial gains in Canada and Brazil will far outweigh potentially steep declines in Venezuela and Mexico.”

Indeed. I quickly looked at the latest STEO from the eia, and the projected LTO growth for 2018 is impressive. In fact, it seems that consumption (projected to pass 100Mb/d in the middle of the year) can only be fulfilled by LTO and canadian syncrude (+2Mb/d, among +1.56 from USA), while the rest of the world only have to grow a little bit (+0.86Mb/d).

Of course, much can happen through the year.
User avatar
tita
Lignite
Lignite
 
Posts: 355
Joined: Fri 10 Jun 2005, 02:00:00

Re: THE Price of Crude pt 14

Unread postby GoghGoner » Fri 09 Feb 2018, 11:38:26

tita wrote:Of course, much can happen through the year.


WTI is back under $60 right now. Drilling won't look so attractive all of the sudden.
GoghGoner
Heavy Crude
Heavy Crude
 
Posts: 1732
Joined: Thu 10 Apr 2008, 02:00:00
Location: Stilłwater subdivision

Re: THE Price of Crude pt 14

Unread postby Outcast_Searcher » Fri 09 Feb 2018, 12:17:47

GoghGoner wrote:
tita wrote:Of course, much can happen through the year.


WTI is back under $60 right now. Drilling won't look so attractive all of the sudden.

Perhaps global market jitters are causing concerns about exuberant short term economic forecasts? Global oil demand correlates very strongly with global economic strength over time.

If there is insufficient drilling to keep supply meeting demand, then the price will go up when that becomes obvious to the majority of investors. If that's an issue the price of oil will rise. The question will be when.

And if oil is cheaper, gasoline, etc. will also be cheaper for consumers in the mean time.

In the economy, there are often trade-offs to much of the news. It's not all glass-half-empty.
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
User avatar
Outcast_Searcher
COB
COB
 
Posts: 5563
Joined: Sat 27 Jun 2009, 20:26:42

Re: THE Price of Crude pt 14

Unread postby rockdoc123 » Fri 09 Feb 2018, 12:42:46

In the economy, there are often trade-offs to much of the news. It's not all glass-half-empty.


given the vast majority of selling in the market over the past week has nothing to do with fundamentals it is hard to put a finger on the exact cause of sell off in the oil market. There are always theories (worries about increased US production, UK oil coming back on stream etc) but until the market settles down it is pretty hard to discern how much selling isn't being done by institutional investment houses who were hedged against volatility, lost a ton of money and may have been subject to margin calls elsewhere requiring they unload any stocks that someone might buy.
User avatar
rockdoc123
Expert
Expert
 
Posts: 6040
Joined: Mon 16 May 2005, 02:00:00

Oil Prices: Collapse Now, Spike Later

Unread postby AdamB » Wed 14 Feb 2018, 11:17:18

Oil prices closed out the week sharply down, wiping out all the gains posted since the start of the year. Surging U.S. shale production, along with broader financial turmoil, has clearly put an end to the bullish mood in the oil market. U.S. shale struck several blows against oil prices this week. First, the EIA dramatically overhauled its forecasts, predicting U.S. oil production would hit 11 million barrels per day (mb/d) this year, rather than late next year. Then, on Wednesday, it revealed estimates that put U.S. oil production at 10.25 mb/d for the week ending on February 2, a staggering 330,000 bpd increase from a week earlier. Those weekly estimates are subject to revision when more data becomes available, but if those figures hold, it would point to a significant ramp up in drilling activity and new supply coming online. As a


Oil Prices: Collapse Now, Spike Later
Peak oil in 2020: And here is why: https://www.youtube.com/watch?v=2b3ttqYDwF0
AdamB
Volunteer
Volunteer
 
Posts: 4304
Joined: Mon 28 Dec 2015, 16:10:26

Re: THE Price of Crude pt 14

Unread postby GoghGoner » Wed 14 Feb 2018, 14:41:28

Well, that didn't take long. Today will be the biggest daily gain in the the last couple of months. A bullish EIA report triggered the mood swing. WTI firmly back above $60.
GoghGoner
Heavy Crude
Heavy Crude
 
Posts: 1732
Joined: Thu 10 Apr 2008, 02:00:00
Location: Stilłwater subdivision

Re: THE Price of Crude pt 14

Unread postby Outcast_Searcher » Wed 14 Feb 2018, 14:50:00

GoghGoner wrote:Well, that didn't take long. Today will be the biggest daily gain in the the last couple of months. A bullish EIA report triggered the mood swing. WTI firmly back above $60.

Short term, financial markets will make you scratch your head until it bleeds (IMO).

So this morning, it was fears of "high" inflation, due to a one month spike, led by fuel prices.

So early on it's "bad, bad bad, scary", and the markets fall.

And I, growing up in the 70's, am like, "What? Core inflation MIGHT be increasing to a more normal rate of 3ish percent, so it's time to panic? Since when?"

So later in the day we have the markets strong, with many economists dropping GDP targets and raising inflation targets due to the early report.

And I noticed, like you say, oil got strong. But oil is a KEY component of overall inflation. So why do the markets continue strengthening with oil up over $1.50 as I write this, if "the markets" are so scared of inflation?

...

I suppose a sore head is what I get from trying to use logic and cause and effect.... :?
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
User avatar
Outcast_Searcher
COB
COB
 
Posts: 5563
Joined: Sat 27 Jun 2009, 20:26:42

Re: THE Price of Crude pt 14

Unread postby tita » Tue 20 Feb 2018, 05:38:54

WTI and Brent going in opposite directions today. The spread is now very close to 3$.

Not sure what effect this will have on exports for the US.
User avatar
tita
Lignite
Lignite
 
Posts: 355
Joined: Fri 10 Jun 2005, 02:00:00

Oil Price Outlook: Can OPEC Stick To The Deal?

Unread postby AdamB » Sun 18 Mar 2018, 19:29:13


As demand remains stable, it is clear that OPEC and its allies’ ability to adhere to the agreed upon output levels, combined with the pace of U.S. shale production growth will be the key determining factors for prices over the next two years. Currently, OPEC has extended the production deal agreed to in 2016 through the end of 2018 and had even added provisions for dealing with strong growth out of Nigeria or Libya. However, as the organization’s June 22 meeting is rapidly approaching, the risk is rising that the group decides to scale back, either officially or unofficially, its commitment to managing production in the face of strong growth from the United States. Monthly data from the U.S. Energy Information Administration indicates that U.S. producers have passed the 10 million barrels per day (MMbbl/d) mark with weekly supply and rig data


Oil Price Outlook: Can OPEC Stick To The Deal?
Peak oil in 2020: And here is why: https://www.youtube.com/watch?v=2b3ttqYDwF0
AdamB
Volunteer
Volunteer
 
Posts: 4304
Joined: Mon 28 Dec 2015, 16:10:26

Re: THE Price of Crude pt 14

Unread postby GoghGoner » Wed 21 Mar 2018, 08:17:28

$64 this morning. Oil prices have gained $4 over the last few days and have reached the same level as one month ago. The EIA report coming out in the next hour should be pivotal on the next direction. Slightly bearish and we could retrace the entire gain and even go back below $60. Bullish and I think we could breach $70 within a short time period.
GoghGoner
Heavy Crude
Heavy Crude
 
Posts: 1732
Joined: Thu 10 Apr 2008, 02:00:00
Location: Stilłwater subdivision

Re: THE Price of Crude pt 14

Unread postby Outcast_Searcher » Wed 21 Mar 2018, 12:34:49

GoghGoner wrote:$64 this morning. Oil prices have gained $4 over the last few days and have reached the same level as one month ago. The EIA report coming out in the next hour should be pivotal on the next direction. Slightly bearish and we could retrace the entire gain and even go back below $60. Bullish and I think we could breach $70 within a short time period.

Why is now so pivital? (I'm a long term investor in various things, but never have a good/accurate feel for the short term price action for things.) So I'm just curious about the reasoning.

(It looks like we got a roughly $1.50 bump from a report showing inventories dropping a little, thus far, per the 1:00 weekly highlights PDF).
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
User avatar
Outcast_Searcher
COB
COB
 
Posts: 5563
Joined: Sat 27 Jun 2009, 20:26:42

Re: THE Price of Crude pt 14

Unread postby GoghGoner » Wed 21 Mar 2018, 14:48:44

$64 was just an approximate pivot point b/w the high and low prices since the market went all jittery. I was thinking the report would shed light on the direction but I found it to be mixed (imports fell by over 0.5 mbd which caused crude stocks to fall). It didn't do anything to deter the bullish pattern the last few days that is for sure.

Just hit a high of $65.50. Brent is getting close to breaking $70 again. The recent correlation with the stock market has gone out the window.

The rate hikes continued as planned.

On Wednesday, the central bank announced an increase in its benchmark interest rate target range by 0.25% to a new band of 1.5%-1.75%. This move puts the effective fed funds rate at around 1.63%, the highest since September 2008. All eight voting members of the FOMC voted in favor of Wednesday’s decision.
GoghGoner
Heavy Crude
Heavy Crude
 
Posts: 1732
Joined: Thu 10 Apr 2008, 02:00:00
Location: Stilłwater subdivision

Re: THE Price of Crude pt 14

Unread postby ROCKMAN » Wed 21 Mar 2018, 16:00:44

“It didn't do anything to deter the bullish pattern the last few days that is for sure.” Just a friendly reminder: the prices you’re discussing are not what oil is currently selling for. Those are the prices being paid for 30 day future prices. IOW bets. And they aren’t even bets on the price of oil in 30 days: they are bets on what futures contract prices will be in 30 days. IOW bets based on the expectations of how others will be betting on futures contracts in a month.

The price the Rockman sells his oil for does use the average closing price of futures. But that’s only one component of the calculation. And it’s not the average futures price for this month or even last month. Depending on the contract it goes back 2 or 3 months. Obvious with daily futures contracts often exceeding 1 BILLION BBLS they do not represent physical oil sales. Not unknown for as little as 1% of that volume representing physical oil that changes hands.

As such the price bid for futures can be extremely volatile going up a huge % in just a couple of hours. And do so based on emotions of the traders/gamblers and not on actual variations in production, storage, etc.
User avatar
ROCKMAN
Expert
Expert
 
Posts: 11057
Joined: Tue 27 May 2008, 02:00:00
Location: TEXAS

Re: THE Price of Crude pt 14

Unread postby Cog » Wed 21 Mar 2018, 16:14:17

You know Rockman, that even old men like our self can figure out the quote feature. There is an actual button for it on the post which you wish to quote.
User avatar
Cog
Fission
Fission
 
Posts: 10558
Joined: Sat 17 May 2008, 02:00:00
Location: Metro-East Illinois

Re: THE Price of Crude pt 14

Unread postby ROCKMAN » Wed 21 Mar 2018, 16:34:26

Cog, you and other "old timers". LOL. But enough here that don't. Look at the posts that try to relate A to changes in what oil sells for when in fact A is only impacting the futures market. Look how often I have to remind others how something as simple (and easily researched) as oil refining works.
User avatar
ROCKMAN
Expert
Expert
 
Posts: 11057
Joined: Tue 27 May 2008, 02:00:00
Location: TEXAS

Re: THE Price of Crude pt 14

Unread postby Outcast_Searcher » Wed 21 Mar 2018, 17:00:20

ROCKMAN wrote:“It didn't do anything to deter the bullish pattern the last few days that is for sure.” Just a friendly reminder: the prices you’re discussing are not what oil is currently selling for. Those are the prices being paid for 30 day future prices. IOW bets. And they aren’t even bets on the price of oil in 30 days: they are bets on what futures contract prices will be in 30 days. IOW bets based on the expectations of how others will be betting on futures contracts in a month.

The price the Rockman sells his oil for does use the average closing price of futures. But that’s only one component of the calculation. And it’s not the average futures price for this month or even last month. Depending on the contract it goes back 2 or 3 months. Obvious with daily futures contracts often exceeding 1 BILLION BBLS they do not represent physical oil sales. Not unknown for as little as 1% of that volume representing physical oil that changes hands.

As such the price bid for futures can be extremely volatile going up a huge % in just a couple of hours. And do so based on emotions of the traders/gamblers and not on actual variations in production, storage, etc.

ROCKMAN, with respect, in this case you're stating the blindingly obvious.

But the spot price will tend to have a strong correlation to the front month crude futures price (regardless of which oil contract), so the details of the oil futures contracts seem beside the point for this discussion -- when the front month oil futures contract changes, it's a strong indication of what the spot oil market is doing (or is about to do, if you prefer).

And yeah, clearly production factors in oil won't change MANY times a second the way oil futures prices do. Just like the stock market gyrations in, say, IBM common stock don't reflect meaningful changes in what IBM is doing or plans to do, many times a second. I don't see oil futures markets being meaningfully different than ANY financial market in this respect.
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
User avatar
Outcast_Searcher
COB
COB
 
Posts: 5563
Joined: Sat 27 Jun 2009, 20:26:42

Re: THE Price of Crude pt 14

Unread postby GoghGoner » Thu 22 Mar 2018, 07:04:01

My gyration value is and has been for over a decade set at $10. It hasn't seemed to change but that is definitely more intuitive than empirical. So if the futures prices stays within a $10 range I don't consider that a change in fundamentals just speculation moving the price up and down. Right now, that range is appproximately $59-$69. It has to go above or below that to signal anything to me but noise.

Yes, like OS, I think future prices are a reasonable way to value oil.
GoghGoner
Heavy Crude
Heavy Crude
 
Posts: 1732
Joined: Thu 10 Apr 2008, 02:00:00
Location: Stilłwater subdivision

Re: THE Price of Crude pt 14

Unread postby ROCKMAN » Thu 22 Mar 2018, 11:45:50

Goner - "... I don't consider that a change in fundamentals just speculation moving the price up and down.". That was my point above: given the "oil price" folks are discussing is the futures price that number is 100% SPECULATION. There's no impact from the "fundamentals" other then how the futures speculators/gamblers react. Remember that for every $ made by one futures speculator a $ is lost by another futures speculator. Actually a little less the a $ on either side: the brokers get their commissions. And all the speculators, winners and losers, have access to the same data about the fundamentals.

Despites Cog's comment I'm sure there are folks here that don't understand the basics of how the oil futures market works. And thus don't understand the "oil price" being tossed around. For one thing the Rockman has not sold a single bbl of oil for years whose price was based on the WTI futures price. I suspect many that read "$X per bbl" don't even understand they are just talking about WTI futures contract prices. Speculators are not betting on the price of oil: they are betting on the price of futures contracts when their current contracts expire. IOW they are betting against another speculator that is interpreting the fundamentals differently then they are.
User avatar
ROCKMAN
Expert
Expert
 
Posts: 11057
Joined: Tue 27 May 2008, 02:00:00
Location: TEXAS

PreviousNext

Return to Peak Oil Discussion

Who is online

Users browsing this forum: No registered users and 36 guests

cron