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Challenging (Crude) Convention | Daniel Davis
Challenging (Crude) Convention | Daniel Davis.
Media reports regarding the American crude oil industry have been uniformly positive in the past few months. Oil prices have dropped to their lowest level since 2010 and along with it prices at the pump. According to some reports, the US now produces as much or more oil than either Saudi Arabia or Russia. As the US closes in on energy independence, our reliance on foreign suppliers dwindles. Some suggest we are nearing a time of oil and economic security not seen in decades. If only that were true.
The above rendering of events is taken, almost without examination, as gospel truth in the United States. The only subject of debate seems to be ascertaining whetherhydraulic fracturing (“fracking”) is safe for the environment of if burning the additional hydrocarbons is adding to risks of climate change. We find this near-religious belief in looming US oil “independence” to be troubling, as a considerable body of publicly available information leads to a very different conclusion.
Instead of being on the dawn of a new age of plenty, a careful analysis of all available data indicates the probability of near to mid-term trouble even maintaining current levels of production, let alone eliminating the chasm between US production and consumption.
…click on the above link to read the rest of the article…
Brent Plunge To $60 If OPEC Fails To Cut, Junk Bond Rout, Default Cycle, “Profit Recession” To Follow | Zero Hedge
While OPEC has been mostly irrelevant in the past 5 years as a result of Saudi Arabia’s recurring cartel-busting moves, which have seen the oil exporter frequently align with the US instead of with its OPEC “peers”, and thanks to central banks flooding the market with liquidity helping crude prices remain high regardless of where actual global spot or future demand was, this Thanksgiving traders will be periodically resurfacing from a Tryptophan coma and refreshing their favorite headline news service for updates from Vienna, where a failure by OPEC to implement a significant output cut could send oil prices could plunging to $60 a barrel according to Reuters citing “market players” say.
By way of background, the key reason OPEC is struggling to remain relevant is because, as the FT reported over the weekend, “US imports of crude oil from Opec nations are at their lowest level in almost 30 years, underlining the impact of the shale revolution on global trade flows. The lower dependence on imports from the cartel, which pumps a third of the world’s crude, comes amid advances in hydraulic fracturing that has propelled domestic US production to about 9m barrels a day – the highest level since the mid-1980s.”
The US “shale miracle” is best seen on the following chart showing the total output of the US compared to perennial crude powerhouse, Saudi Arabia:
…click on the above link to read the rest of the article…
OPEC’s Easy Days Setting Oil Production Are Over, Veteran Says; You Need Russia, Norway, Mexico – Bloomberg
The days when OPEC members could all but guarantee consensus when deciding production levels for oil are long gone, according to a veteran of almost two decades of the group’s meetings.
The global glut of crude, which has contributed to a 30 percent decline in prices since June 19, has left the Organization of Petroleum Exporting Countries disunited and dependent on non-members to shore up the market, said former Qatari Oil Minister Abdullah Bin Hamad Al Attiyah. The 12-member group is set to meet in Vienna on Nov. 27.
“OPEC can’t balance the market alone,” Al Attiyah, who participated in the group’s policy meetings from 1992 to 2011, said in a Nov. 19 phone interview. “This time, Russia, Norway andMexico must all come to the table. OPEC can make a cut, but what will happen is that non-OPEC supply will continue to grow. Then what will the market do?”
…click on the above link to read the rest of the article…
The Uncertain Future of Oil Demand | Jeff Rubin
The Uncertain Future of Oil Demand | Jeff Rubin.
At a recent investment conference sponsored by Royal Bank and Suncor I spoke about the likelihood that billions of dollars of carbon assets will never see the light of day. Contemplating the idea of stranded assets isn’t in either company’s interests, so both deserve credit for providing a discussion forum for a topic that’s going to become ever more important to investors.
After laying out my argument for why oil prices must fall in an emission-constrained future, I was asked a question that might seem straightforward on the surface, but in reality is anything but. Won’t falling oil prices always trigger a rebound in oil demand (and, by extension, an equally large bounce in carbon emissions)?
It’s a belief that many energy investors are likely clinging to these days. A 30 percent drop in global oil prices so far this year is stoking expectations that a big pick up in demand is just around the corner. In a world before climate change became a household term that may have been the case, but not any more.
…click on the above link to read the rest of the article…
Why The Current “Oil Glut” Could Lead To A Price Spike
Why The Current “Oil Glut” Could Lead To A Price Spike.
Back in March 1999 “The Economist” magazine carried a cover photo of two men drenched in oil as they attempted to close a faulty valve that was spraying a huge stream of crude skyward. Over the photo was the headline: “Drowning in oil.” At the time it really did seem as if the world were drowning in oil.
The previous December crude oil on the New York Mercantile Exchange touched $10.72 per barrel. That month U.S. gasoline prices averaged 95 cents per gallon. “The Economist” opined that oil might go down to $5 per barrel.
But, of course, in retrospect the magazine’s cover proved to be the perfect contrarian indicator, for oil had already begun its historic ascent toward $147 per barrel. The 2008 price spike was the culmination of a 10-year bull market that had begun in December 1998.
…click on the above link to read the rest of the story…
Resource Insights: Is there really an oil glut?
Resource Insights: Is there really an oil glut?.
Back in March 1999 “The Economist” magazine carried a cover photo of two men drenched in oil as they attempted to close a faulty valve that was spraying a huge stream of crude skyward. Over the photo was the headline: “Drowning in oil.” At the time it really did seem as if the world were drowning in oil.
The previous December crude oil on the New York Mercantile Exchange touched $10.72 per barrel. That month U.S. gasoline prices averaged 95 cents per gallon. “The Economist” opined that oil might go down to $5 per barrel.
But, of course, in retrospect the magazine’s cover proved to be the perfect contrarian indicator, for oil had already begun its historic ascent toward $147 per barrel. The 2008 price spike was the culmination of a 10-year bull market that had begun in December 1998.
After dipping briefly to around $35 per barrel at the end of 2008 in the wake of the financial crisis, the new oil bull market sent world benchmark Brent Crude to a daily average of more than $100 per barrel for all of 2011, 2012 and 2013. Through October 27 the average daily price for this year has been $104.86, not all that different from the last three years.
…click on the above link to read the rest of the article…
World Crude Oil Production and the Oil Price | FRACTIONAL FLOW
World Crude Oil Production and the Oil Price | FRACTIONAL FLOW.
In April 2012 I published this post about World Crude Oil Production and the Oil Price (in Norwegian)which was an attempt to describe the developments in the sources of crude oils (including condensates), tranches of total life cycle costs (that is [CAPEX {inclusive returns} + OPEX] per barrel of oil) and something about the drivers for the formation of the oil price.
Rereading the post and as time passed, I learnt more and therefore thought it appropriate to revisit and update the post as it in my opinion contains some topics from what I have observed, learned and discussed that have been given poor attention and appears poorly understood.
I will continue to pound the message that oil prices are also subject to the reality of;
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Why Oil Prices Are About To Settle
Why Oil Prices Are About To Settle.
If you are paying attention, you will be aware that oil prices have been falling dramatically since the end of June, losing over 20 percent from the highs at that time. This is bad news for investors in the energy sector and for the companies that produce the black stuff, but for the global economy as a whole it will provide an unexpected boost to growth. All energy costs are benchmarked against oil, so declining oil prices equate to declining energy costs, and that is a positive for growth. Whether you are benefitting from that or worried about your energy investments, however, there is one obvious question…”How low can it go?”
The answer, it seems, is not much lower.
The drop has been caused by two factors, one on the supply side, and one on the demand side. Supply of oil has been growing as unconventional recovery methods, primarily hydraulic fracturing of “fracking”, have gained ground, particularly in the U.S. At the same time, the growing demand for oil has come into question due to a slowing growth rate in China and the prospect of deflation in Europe. Economics 101 tells us that if supply is increasing faster than demand, price will fall.
…click on the above link to read the rest of the article…
WTI Crude Tumbles Under $80 Following Goldman Downgrade | Zero Hedge
WTI Crude Tumbles Under $80 Following Goldman Downgrade | Zero Hedge.
While large shifts in positioning precipitated a sell-off in oil prices that far exceeded the actual weakening in fundamentals, Goldman Sachs’ confidence in a 2015 oversupplied global oil market has increased. As a result, they have brought forward their medium-term bearish oil outlook (WTI crude oil forecast is $75/bbl for 1Q15 and 2H15 (from $90/bbl previously)). WTI just broke below $80 back to June 2012 levels once again as Goldman also downgraded the entire oil service space (happily buying up muppets’ positions as they sell).
As Goldman Sachs notes,
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Saudi Arabia: Producing More Crude, Selling Less?
Saudi Arabia: Producing More Crude, Selling Less?.
Media reports are quoting an anonymous source as saying Saudi Arabia, the world’s leading oil exporter, supplied foreign and domestic customers with less crude during September even though its oil production was up slightly.
The source, identified only as being familiar with the Saudi oil industry, said it extracted, on average, 9.7 million barrels of crude each day of the month, a rise from 9.597 million barrels per day in August. At the same time, the source said, Saudi Arabia supplied customers with 9.36 million barrels per day in September, down from 9.688 million barrels per day the month before.
Sources – perhaps a single source – supplied the same data to several prominent news outlets, including Reuters, Bloomberg News and The Wall Street Journal.
…click on the above link to read the rest of the article…
Our Finite World | Exploring how oil limits affect the economy
Our Finite World | Exploring how oil limits affect the economy.
A person might think that oil prices would be fairly stable. Prices would set themselves at a level that would be high enough for the majority of producers, so that in total producers would provide enough–but not too much–oil for the world economy. The prices would be fairly affordable for consumers. And economies around the world would grow robustly with these oil supplies, plus other energy supplies. Unfortunately, it doesn’t seem to work that way recently. Let me explain at least a few of the issues involved.
1. Oil prices are set by our networked economy.
As I have explained previously, we have a networked economy that is made up of businesses, governments, and consumers. It has grown up over time. It includes such things as laws and our international trade system. It continually re-optimizes itself, given the changing rules that we give it. In some ways, it is similar to the interconnected network that a person can build with a child’s toy.
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Resource Insights: Oil decline: Price makes the story
Resource Insights: Oil decline: Price makes the story.
When the world’s business editors sent their reporters canvassing to find out what is behind the recent plunge in the world oil price, they were doing what they do almost every day for every type of market: stocks, bonds, currencies, commodities and real estate.
In financial journalism more often it’s the price that makes the story rather than the story that makes the price. If a story is about something very surprising which almost no one can know in advance–a real scoop–say, an unexpected outcome in a major court case affecting a company’s most profitable patent, then the story will move the price of the company’s stock.
But much more often prices move, and then business editors send their reporters to find out why. Usually, a number of financial and industry professionals are asked: Why do you think prices went up/down? Then, the story is written and published.
…click on the link above to read the rest of the article…
Peak Oil Notes – Oct 16
The price plunge which began in mid-June when New York oil futures trading around $105 a barrel continued this week with oil touching $80 on Wednesday before recovering to close at $81.78. London’s Brent crude underwent a similar collapse to close yesterday at $83.46. Weak demand: increasing US shale oil production: a stronger dollar; and the refusal of the Saudis and its Gulf Arab allies to cut production combined to trigger the decline. US retail gasoline fell to an average of $3.17 a gallon, the lowest since February 2011. The weekly stocks report will be delayed until Thursday, but analysts are expecting a 2 million barrel increase in US crude inventories.
The IEA confirmed the weakness in the world oil markets this week by cutting their forecast for the increase in global oil demand by this year by 250,000 b/d from last month’s estimate. The Agency now believes that growth in consumption this year will be only 700,000 b/d, but will increase to 1.1 million b/d in 2015 as the global economy improves.
…click on above link for the rest of the article…
