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Predicted Oil Collapse Underway...

Discussions about the economic and financial ramifications of PEAK OIL

Re: Predicted Oil Collapse Underway...

Unread postby GHung » Fri 20 Mar 2020, 16:44:13

Outcast_Searcher wrote: ......
Or, WTI jumped up today by nearly 25 percent to over $25 a barrel (closing price).

More than the big fall yestiddy. Funny how much difference a day can bring in volatile markets. :roll:

But if you're reporting all doom, all the time, only report on down days. :idea:


Yes, and some of you do the same on up days, eh? Funny how that works. (WHOOPS! Down again today)
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Re: Predicted Oil Collapse Underway...

Unread postby kublikhan » Fri 20 Mar 2020, 17:14:05

In the face of record low oil prices, the Railroad Commission of Texas, the state agency that regulates the oil and gas industry, is considering invoking a power not used in almost five decades to boost prices.

Under state law, the Railroad Commission has the authority to order how much oil a lease can produce. The agency hasn’t used that power since 1973, but with Russia and Saudi Arabia flooding global markets as the coronavirus pandemic strangles demand, some producers have asked commissioners to use that authority to help ease the glut.

Railroad Commissioner Ryan Sitton said he favors a free-market approach, but given the extraordinary circumstances, he is open to discussing the move with fellow commissioners and the public. “Right now, we don’t have a set way to do this because it hasn’t been done in 50 years.” State law gives the agency wide latitude to impose production cuts on leases, specific types of wells and even entire fields. “I’ve heard from operators on both sides for and against it,” Sitton said. “But I want an open dialogue. I want to hear from various groups on this issue — operators, economists, statisticians.”

The Railroad Commission canceled its March 31 meeting in response to the coronavirus outbreak, so the soonest the commission could meet in public to discuss the issue would be at its April 21 meeting. Even if the agency were to force production cuts, Sitton said, only similar cuts by Saudi Arabia and Russia would move the price of oil significantly higher.
Texas Railroad Commission eyes production cuts
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Re: Predicted Oil Collapse Underway...

Unread postby Outcast_Searcher » Sun 22 Mar 2020, 14:22:52

kublikhan wrote:
In the face of record low oil prices, the Railroad Commission of Texas, the state agency that regulates the oil and gas industry, is considering invoking a power not used in almost five decades to boost prices.

Under state law, the Railroad Commission has the authority to order how much oil a lease can produce. The agency hasn’t used that power since 1973, but with Russia and Saudi Arabia flooding global markets as the coronavirus pandemic strangles demand, some producers have asked commissioners to use that authority to help ease the glut.

At the risk of stating the obvious, if KSA and Russia and other OPEC producers want to just produce like mad, screwing Texas producers is only going to be a drop in the bucket, relatively speaking.

This would only work if they wanted to ban oil imports, and given how we need plenty of heavy crude as has been pointed out on this site, that isn't practical either.

Or am I missing something really obvious?
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: Predicted Oil Collapse Underway...

Unread postby Outcast_Searcher » Sun 22 Mar 2020, 14:30:02

evilgenius wrote:It's probably not the same "hubris" that assumes that just about any person without three months savings can hold up without some sort of help, or with half the help some richer person is slated for. If there is not a US stimulus package that addresses the reality of American life over the insisted upon perception of it, then we are not going to see higher oil prices any time too soon in the wake of the pandemic.

Given that a LARGE proportion of Americans don't have three months of savings (including quite a few well educated professionals in their 60's, even, that damn well should), oil prices are well down the list of the priorities the stimulus is critical for. Things like eating and paying fairly prosaic bills like utilities are far more important in the short term. For people out of work and hunkered down, it's not like one tanks of gas won't last a LONG time for almost anyone not in a remote rural area.

Hell, even my normal under 300 miles a month on my car is going to go WAY down now.
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: Predicted Oil Collapse Underway...

Unread postby kublikhan » Sun 22 Mar 2020, 20:52:36

Outcast_Searcher wrote:At the risk of stating the obvious, if KSA and Russia and other OPEC producers want to just produce like mad, screwing Texas producers is only going to be a drop in the bucket, relatively speaking.
The explosive growth of oil production in Texas was one of the very things Russia was worried about: Shale stealing market share as OPEC+ cuts. If instead Trump and the TRC were part of a cut agreement, that would solve one of Russia's primary concerns. Of course Russia is still pissed at Saudi Arabia for the price war which they see as blackmail. And any additional cut will probably be far under the demand destruction caused by the coronavirus. But it would be a step in the right direction.

Whether or not Saudi Arabia and Russia did the right thing by initiating a production free-for-all, any solution has now gone far beyond both OPEC and its wider OPEC+ coalition. On Thursday, Trump said he could intervene in an oil-price war between Russia and Saudi Arabia that has left U.S. oil drillers reeling. The time to do so is now. Not by slapping trade barriers on their oil, but by using his deal-making skills to bring them together to agree a united response that includes America and the rest of the world.

While striking such a deal won’t be easy, there are signs of willingness to help make it happen. The Texas Railroad Commission has signaled its readiness to be part of a solution. I’m sure other U.S. states and Canada will follow.
To Stop the Oil Price War, Trump Must Step in to Strike a Deal

Personally I am not very optimistic about such a deal happening.
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Re: Predicted Oil Collapse Underway...

Unread postby Outcast_Searcher » Wed 25 Mar 2020, 13:32:00

kublikhan wrote:
Outcast_Searcher wrote:At the risk of stating the obvious, if KSA and Russia and other OPEC producers want to just produce like mad, screwing Texas producers is only going to be a drop in the bucket, relatively speaking.
The explosive growth of oil production in Texas was one of the very things Russia was worried about: Shale stealing market share as OPEC+ cuts. If instead Trump and the TRC were part of a cut agreement, that would solve one of Russia's primary concerns. Of course Russia is still pissed at Saudi Arabia for the price war which they see as blackmail. And any additional cut will probably be far under the demand destruction caused by the coronavirus. But it would be a step in the right direction.

Whether or not Saudi Arabia and Russia did the right thing by initiating a production free-for-all, any solution has now gone far beyond both OPEC and its wider OPEC+ coalition. On Thursday, Trump said he could intervene in an oil-price war between Russia and Saudi Arabia that has left U.S. oil drillers reeling. The time to do so is now. Not by slapping trade barriers on their oil, but by using his deal-making skills to bring them together to agree a united response that includes America and the rest of the world.

While striking such a deal won’t be easy, there are signs of willingness to help make it happen. The Texas Railroad Commission has signaled its readiness to be part of a solution. I’m sure other U.S. states and Canada will follow.
To Stop the Oil Price War, Trump Must Step in to Strike a Deal

Personally I am not very optimistic about such a deal happening.

Ah, I see. Thanks for the explanation. Tooooooooo many things to try to understand which are changing rather quickly these days!
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: Predicted Oil Collapse Underway...

Unread postby wildbourgman » Wed 25 Mar 2020, 18:20:30

It doesn't matter whether or not the Texas Rail Road Commission steps up to the plate or not. The Saudi's and Russian's will get their answer when they see the North American Baker Hughes rig count Friday.
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Re: Predicted Oil Collapse Underway...

Unread postby sparky » Fri 27 Mar 2020, 02:27:51

.
now the guessing game is how much demand will shrink , the numbers are all over the place

The global spread of the coronavirus will cause oil demand to drop by roughly 20 million b/d to about 80 million b/d this year, Fatih Birol, executive director of the International Energy Agency, said Thursday.

S&P Global Platts Analytics forecast global demand to fall by 4.5 million b/d in 2020, with a 15% demand drop in April and May. ...that would be 15 millions barrel/day knocked out .

Goldman Sachs this week forecast oil demand to fall by 10.5 million b/d in March and as much as 18.7 million b/d in April.

I see a contraction in demand of between 5 and 10 millions barrel/day by the last quarter of the year
OK it's a guess off the top of my head but it's a free word and obviously all the other predictions are guesses too
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Re: Predicted Oil Collapse Underway...

Unread postby Outcast_Searcher » Fri 03 Apr 2020, 18:25:15

sparky wrote:.
now the guessing game is how much demand will shrink , the numbers are all over the place

The global spread of the coronavirus will cause oil demand to drop by roughly 20 million b/d to about 80 million b/d this year, Fatih Birol, executive director of the International Energy Agency, said Thursday.

S&P Global Platts Analytics forecast global demand to fall by 4.5 million b/d in 2020, with a 15% demand drop in April and May. ...that would be 15 millions barrel/day knocked out .

Goldman Sachs this week forecast oil demand to fall by 10.5 million b/d in March and as much as 18.7 million b/d in April.

I see a contraction in demand of between 5 and 10 millions barrel/day by the last quarter of the year
OK it's a guess off the top of my head but it's a free word and obviously all the other predictions are guesses too

Given the supposed expert guesses are obviously round numbers like 20% or 15%, 10% or 5%, you certainly don't have any apologies to make for your educated (or not) guesses. In fact, YOU get props for at least being honest about it!

(And as always, I freely admit any number I give would be guesses. Except to say I'd be DAMNED surprised if the demand didn't drop in 2020 and 1H'2021, vs 2019, I have no clue. Just too many variables and open questions, boss! :)
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: Predicted Oil Collapse Underway...

Unread postby onlooker » Fri 03 Apr 2020, 19:04:20

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Re: Predicted Oil Collapse Underway...

Unread postby Azothius » Thu 09 Apr 2020, 19:53:56

Exclusive: U.S. banks prepare to seize energy assets as shale boom goes bust
https://www.yahoo.com/finance/news/excl ... 21633.html

Major U.S. lenders are preparing to become operators of oil and gas fields across the country for the first time in a generation to avoid losses on loans to energy companies that may go bankrupt, sources aware of the plans told Reuters.

JPMorgan Chase & Co <JPM.N>, Wells Fargo & Co <WFC.N>, Bank of America Corp <BAC.N> and Citigroup Inc <C.N> are each in the process of setting up independent companies to own oil and gas assets, said three people who were not authorized to discuss the matter publicly. The banks are also looking to hire executives with relevant expertise to manage them, the sources said.
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Re: Predicted Oil Collapse Underway...

Unread postby sparky » Fri 10 Apr 2020, 02:53:19

.
Saw this one too ,it could make a reduction in production more organized ,
banks are quite used to rigging markets in a synchronized manner without breaching ( much ) the law
they would be amenable to take the long term view
while local producers ,fighting to keep their ledgers above water , couldn't
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Re: Predicted Oil Collapse Underway...

Unread postby C8 » Thu 14 May 2020, 16:12:45

Here is an article that addresses a question I have wondered about: is the oil price war and Covid obscuring a rapid decline in shale production that would have occurred anyway. I have been following shale production curves on several wells and group sites and have noticed a very sharp decline since last Nov.

Bold text is by me

Is EIA Data Disguising A Disastrous Decline In US Shale?

U.S. oil production continues to decline as drillers shut in wells and cut back spending. Output has already declined by 1.1 million barrels per day (mb/d), and more losses are likely. New data from Rystad Energy predicts U.S. oil production declines of roughly 2 mb/d by the end of June.

“Actual production cuts are probably larger and occur not only as a result of shut-ins, but also due to a natural decline from existing wells when new wells and drilling decline,” Rystad said in a statement.

Energy expert Philip Verleger, in an article for Energy Intelligence reports that the magnitude of output declines is much larger. His latest research shows that production as of May 10 is down by almost 4 million bpd from its peak as the below chart shows.

But in the face of a historic meltdown in the oil market, even handouts from Uncle Sam won’t stop declines. The U.S. oil industry continues to idle drilling rigs at a tremendous clip, and the rig count is down by more than half in two months. “[W]e think that the last time there was so little drilling activity in the US was the 1860s during the first decade of the Pennsylvania oil boom,” Standard Chartered analysts said. The investment bank said that the contraction was notably acute in Oklahoma, where rigs fell to just 11 across the state, down 89 percent from the same period a year earlier.

The sharp decline in rigs, drilling and completion activity means that the steep decline rates endemic to shale drilling will overwhelm what little new production comes online. Standard Chartered said that if activity were to remain stuck at current levels, U.S. production in the five main shale basins would fall by 2.89 mb/d by the end of 2020.

Those declines would come on top of the output that has only been shut in temporarily. Standard Chartered envisions a “squashed-W pattern” for supply, in which temporarily idled output comes back online in a few months, but more structural declines continue thereafter.

The EIA, characteristically, is much more optimistic about the state of U.S. supply. The agency said on Tuesday that it only sees a 0.5 mb/d decline in oil production this year, compared to 2019 levels. Notably, Secretary of Energy Dan Brouillette says production will increase in the third and fourth quarters as the economy roars back.

Others aren’t so sunny. A report from Wood Mackenzie released on Wednesday says that oil demand will take years to recover.

“Production is falling sharply in the US, and some producers are reluctant to sell forward,” Commerzbank wrote in a note.

But while some oil drillers have hesitated to lock in hedges, others have decided that they can stomach hedges at extremely low prices, not because they can profit at such low levels, but likely only to guard against another meltdown. “The strike prices achieved in the latest surge of hedging have been low, these appear to be hedges designed to improve the probability of survival should market conditions deteriorate further,” analysts at Standard Chartered wrote in a report.

“Some of the hedges have been fixed at very low prices: one company has a USD 20.73/bbl WTI hedge for Q2, another has three-way collars for Q3 and Q4 with a floor of USD 25/bbl Brent,” Standard Chartered added.


https://oilprice.com/Energy/Crude-Oil/I ... Shale.html
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Re: Predicted Oil Collapse Underway...

Unread postby sparky » Fri 15 May 2020, 11:16:37

.
For US producers the critical element is if they have a good pipeline access to take the crude away and/or good contract with customers
edging is also a factor
the fracking industry can ramp up production reasonably fast to compensate for the depletion , about one quarter/year seems reasonable
keep in mind that the more wells are drilled , the more the depletion increase too
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Re: Predicted Oil Collapse Underway...

Unread postby C8 » Fri 15 May 2020, 18:00:30

sparky wrote:.
For US producers the critical element is if they have a good pipeline access to take the crude away and/or good contract with customers
edging is also a factor
the fracking industry can ramp up production reasonably fast to compensate for the depletion , about one quarter/year seems reasonable
keep in mind that the more wells are drilled , the more the depletion increase too


yeah, I keep remembering those production curves from fracked wells- its like they go down 90% in the first year or two and slowly after that- but those low tails are also really long and you can suck the oil out for quite a while after the daily rate is down 90%.

What I want to know is this, is it worth it for a drilling company to restart a well that is only producing 10% of what it once did? Are the restart costs too great or can the long tail of low returns make up for it?
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Re: Predicted Oil Collapse Underway...

Unread postby rockdoc123 » Fri 15 May 2020, 18:55:14

What I want to know is this, is it worth it for a drilling company to restart a well that is only producing 10% of what it once did? Are the restart costs too great or can the long tail of low returns make up for it?


In most cases restart is pretty simple on shale wells that are high gas content as there is enough energy to lift any fluid left in the well bore. Where you might have problems is if perforations get plugged with fines (if the well has been producing without much fines this shouldn't be a problem). So if you don't need to re-complete and don't need to bring in a gas lift unit all that has to happen is the well is flowed and cleaned up for a period of a day or so and it should be back to the rate it was at prior to shut-in. This isn't always the case if you have wax in the oil (unusual in the shale basins) or the gas content is too low (most of those areas have been ignored for the last year or so due to the rate issue). But lets say oil prices get back to $30/bbl. The low rate decline in these wells is anywhere from 50 to 100 boe/d. At a netback of $20/bbl a 50 bbl/d well will generate ~$3000/month. Let's say there is some expenditure required to get that well back on but that work would be amortized over many wells and a number of pads. For arguments sake lets say the well takes 2 months to pay out those costs. That is a loss of ~ 3000 bow. If the average EUR of wells is say 250K boe and you have already produced 50% of that then the remaining well reserve is 150K - 3 k or 147K. The value of that is somewhere close to $2.6 MM once you take into account time value of money and abandonment costs.
This is a general case of course and doesn't contemplate issues at surface with separators, power sources, gathering lines etc. As well if you have to reinstall a downhole pump that drives your cost up. That being said in the case described above the remaining reserve is healthy enough to warrant paying quite a bit for a restart.
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Re: Predicted Oil Collapse Underway...

Unread postby C8 » Fri 15 May 2020, 22:25:39

rockdoc123 wrote:
What I want to know is this, is it worth it for a drilling company to restart a well that is only producing 10% of what it once did? Are the restart costs too great or can the long tail of low returns make up for it?


In most cases restart is pretty simple on shale wells that are high gas content as there is enough energy to lift any fluid left in the well bore. Where you might have problems is if perforations get plugged with fines (if the well has been producing without much fines this shouldn't be a problem). So if you don't need to re-complete and don't need to bring in a gas lift unit all that has to happen is the well is flowed and cleaned up for a period of a day or so and it should be back to the rate it was at prior to shut-in. This isn't always the case if you have wax in the oil (unusual in the shale basins) or the gas content is too low (most of those areas have been ignored for the last year or so due to the rate issue). But lets say oil prices get back to $30/bbl. The low rate decline in these wells is anywhere from 50 to 100 boe/d. At a netback of $20/bbl a 50 bbl/d well will generate ~$3000/month. Let's say there is some expenditure required to get that well back on but that work would be amortized over many wells and a number of pads. For arguments sake lets say the well takes 2 months to pay out those costs. That is a loss of ~ 3000 bow. If the average EUR of wells is say 250K boe and you have already produced 50% of that then the remaining well reserve is 150K - 3 k or 147K. The value of that is somewhere close to $2.6 MM once you take into account time value of money and abandonment costs.
This is a general case of course and doesn't contemplate issues at surface with separators, power sources, gathering lines etc. As well if you have to reinstall a downhole pump that drives your cost up. That being said in the case described above the remaining reserve is healthy enough to warrant paying quite a bit for a restart.


Very detailed- thanks. Any idea the price of crude/gas needed to get this going for most wells? As in, eastern Ohio? (not that I receive, hrrrmmghhh, any money from this).
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Re: Predicted Oil Collapse Underway...

Unread postby rockdoc123 » Sat 16 May 2020, 11:53:07

Eastern Ohio would be Utica shale. The break even prices that have been published are all over the place . I've seen as low as $35/bbl and as high as $55/bbl. It has to do with liquid content in the gas, whether it is volatile oil or instead condensate. Some parts of the basin are a bit deeper so not surprising there would be higher breakevens there. The upside for the Utica (in my opinion) is that with all the "oil" wells being shut in or drilling being suspended we should see a significant reduction in natural gas supply as most of the shale wells that are profitable have a substantial amount of gas production and the Utica is generally gas with liquids. If we get a reasonable cooling season decline in natural gas storage then there could be a decent uptick in natural gas price (maybe $3/MMbtu?).
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Re: Predicted Oil Collapse Underway...

Unread postby C8 » Sat 16 May 2020, 16:50:14

rockdoc123 wrote:Eastern Ohio would be Utica shale. The break even prices that have been published are all over the place . I've seen as low as $35/bbl and as high as $55/bbl. It has to do with liquid content in the gas, whether it is volatile oil or instead condensate. Some parts of the basin are a bit deeper so not surprising there would be higher breakevens there. The upside for the Utica (in my opinion) is that with all the "oil" wells being shut in or drilling being suspended we should see a significant reduction in natural gas supply as most of the shale wells that are profitable have a substantial amount of gas production and the Utica is generally gas with liquids. If we get a reasonable cooling season decline in natural gas storage then there could be a decent uptick in natural gas price (maybe $3/MMbtu?).


thanks for that detailed reply. Any idea when this uptick may be kicking in? According to this website (below) we are near a screaming 3 year low on natural gas prices and a million miles away from the $35 to $55 range you referred to.

https://markets.businessinsider.com/com ... price?op=1
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Re: Predicted Oil Collapse Underway...

Unread postby rockdoc123 » Sat 16 May 2020, 18:42:36

anybodies guess is probably the answer as there are lots of moving parts to the equation.
I think the weekly EIA report should be a decent guide to how much is being produced. Demand will come back slowly I would expect but with things opening up and there still being most of the summer driving season ahead of us we might see gasoline supplies start to decrease at which point the refineries increase their throughput and the overall supply of oil starts to drop further.
I think the rate of demand increase is probably going to be the driver here which will be helped along by lower production.
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