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The Energy Information Administration (EIA) of the U.S. Department of Energy has just released its Annual Energy Outlook (AEO) 2018, with forecasts for American oil, gas and other forms of energy production through mid-century. As usual, energy journalists and policy makers will probably take the document as gospel.

That’s despite the fact that past AEO reports have regularly delivered forecasts that were seriously flawed, as the EIA itself has acknowledged. Further, there are analysts inside and outside the oil and gas industry who crunch the same data the EIA does, but arrive at very different conclusions.

The last few EIA reports have displayed stunning optimism regarding future U.S. shale gas and tight oil production, helping stoke the notion of U.S. “energy dominance.” No one doubts that fracking has unleashed a gusher of North American oil and gas on world markets in the past decade. But where we go from here is both crucial and controversial.

The most comprehensive critiques of past AEO forecasts have come from earth scientist David Hughes, a Fellow of Post Carbon Institute (note: I, too, am a Post Carbon Institute Fellow). Since 2013, Hughes and PCI have produced annual studies questioning EIA forecasts, based on an analysis of comprehensive play-level well production data. Their latest report, a critical look at AEO2017, is just out.

“Shale Reality Check: Drilling Into the U.S. Government’s Rosy Projections for Shale Gas & Tight Oil Production Through 2050” explores four big questions crucial to the realization of the EIA’s forecasts:

1. How much of the industry’s recent per-well drilling productivity improvement is a result of better technology, and how much is due to high-grading the best-quality parts of individual plays? Over the past few years, industry has shown the ability to extract increased amounts of oil and/or gas from each well.

…click on the above link to read the rest of the article…

What’s The Limit For Permian Oil Production?

January 18, 2018

What’s The Limit For Permian Oil Production?

The ‘hottest shale play’ has been the media’s favorite cliché for the Permian Basin over the past year. And while cliché, the basin straddling West Texas and New Mexico has lived up to this description—its oil production, unlike that in other basins, did not fall off a cliff during the downturn, it recently beat its own record from the 1970s, and is expected to continue to increase production more than any other U.S. shale play and account for most of the American oil production growth.

The Permian has been pumping oil since the 1920s. Conventional oil production started to decline in the late 1970s, but the fracking boom revitalized the oil-producing region in the early 2010s, and as oil prices rose last year, the Permian beat its previous record for annual oil production dating back to 1973.

The Permian surge in oil production is also revitalizing other industries in small Texas towns, from frac sand trucking and oilfield services to overbooked hotels and full restaurants, as Robert Rapier wrote in Forbes about his recent visit to the Permian.

This shale basin will continue to drive the U.S. oil production growth in the short to medium term, forecasts suggest. But analysts have started to question just how long the Permian can keep pumping at this relentless pace before hitting geological or financial constraints.

The Permian is now nearing 2.8 million bpd of oil production, EIA data shows. To compare, in October 2013, before the oil price crash, Permian production was 1.29 million bpd. In January and February 2016, when oil prices dipped to below $30 a barrel, the Permian production was still ticking up and exceeded 2 million bpd, compared to drops in all other main producing shale regions, including the Eagle Ford and the Bakken.

…click on the above link to read the rest of the article…

New NASA Study Solves Climate Mystery, Confirms Methane Spike Tied to Oil and Gas

January 17, 2018

New NASA Study Solves Climate Mystery, Confirms Methane Spike Tied to Oil and Gas

Global map of percent changes in acres burning

Over the past few years, natural gas has become the primary fuel that America uses to generate electricity, displacing the long-time king of fossil fuels, coal. In 2019, more than a third of America’s electrical supply will come from natural gas, with coal falling to a second-ranked 28 percent, the Energy Information Administration predicted this month, marking the growing ascendency of gas in the American power market.

But new peer-reviewed research adds to the growing evidence that the shift from coal to gas isn’t necessarily good news for the climate.

A team led by scientists at NASA‘s Jet Propulsion Laboratory confirmed that the oil and gas industry is responsible for the largest share of the world’s rising methane emissions, which are a major factor in climate change — and in the process the researchers resolved one of the mysteries that has plagued climate scientists over the past several years.

Missing Methane

That mystery? Since 2006, methane emissions have been rising by about 25 teragrams (a unit of weight so large that NASAnotes you’d need over 200,000 elephants to equal one teragram) every year. But when different researchers sought to pinpoint the sources of that methane, they ran into a problem.

If you added the growing amounts of methane pollution from oil and gas to the rising amount of methane measured from other sources, like microbes in wetlands and marshes, the totals came out too high — exceeding the levels actually measured in the atmosphere. The numbers didn’t add up.

It turns out, there was a third factor at play, one whose role was underestimated, NASA‘s new paper concludes, after reviewing satellite data, ground-level measurements, and chemical analyses of the emissions from different sources.

…click on the above link to read the rest of the article…

Is The EIA Overestimating The U.S. Shale Boom?

December 6, 2017

Is The EIA Overestimating The U.S. Shale Boom?

The American shale boom may be overstated by the U.S. Energy Department, according to a new MIT study that suggests the agency may be over-attributing a rise in shale drilling to technological advances.

“The EIA is assuming that productivity of individual wells will continue to rise as a result of improvements in technology,” MIT researcher Justin B. Montgomery told World Oil. “This compounds year after year, like interest, so the further out in the future the wells are drilled, the more that they are being overestimated.”

Instead, lukewarm oil prices have forced oil majors to drill only in easy-to-access areas, located mostly in the Eagle Ford and Permian basins in Texas, and the Bakken formation in North Dakota. This has led to an exaggerated increase in the number of active wells, and a hyperbolized narrative of growth in the shale industry, the study says.

“The same forecasting methods are used in other plays in the U.S., and the same dynamic is likely to be present,” Montgomery added.

Margaret Coleman, the Energy Information Administration’s chief of oil, gas and biofuels exploration and production analysis, said the “study raised valid points” and offered insights for more accurate analysis of domestic fossil fuel forecasting. Part of the blame can be attributed to an information gap in data available to the EIA team, she added.

Many shale wells lack key pieces of data tracked down by the MIT team, meaning EIA projections over-emphasized geological and capital assumptions as well as technological developments to estimate the shale industry’s growth. Of course, there have been some advances in drill head technology, mapping software, and hydraulic fracking, but that is just one part of the puzzle.

…click on the above link to read the rest of the article…

World’s No.1 Oil Trader: U.S. To See Final Oil Output Spike In 2018

October 10, 2017

World’s No.1 Oil Trader: U.S. To See Final Oil Output Spike In 2018

The best is yet to come for US oil production—but it will be a short-lived hurrah, according to Ian Taylor, head of oil trading giant Vitol.

US oil production has steadily increased throughout 2017 as US drillers regained their footing after the oil price crash. What started out at 8.946 million bpd of crude oil production in the first week of January has now reached an average of 9.561 million bpd as of September 29, according to the EIA.

The EIA is expecting US oil production to reach 9.8 million bpd in 2018, according to the latest Short Term Energy Outlook.

US crude oil exports, too, have taken the world by storm, particularly over the last couple of weeks, as traders seize an opportunity created by the extra wide spread between WTI and Brent, which as of the latter part of September, reached $7 per barrel, according to data provided by S&P Global Platts.

These US exports are now flooding the global market—a global market that is still oil-heavy as OPEC members—well, most OPEC members—continue to dutifully curb oil production to alleviate the overhang. That overhang is smaller today than it was in December 2016—in fact, 130 million barrels smaller, according to OPEC Secretary General Mohammad Barkindo, but is still 171 million barrels too heavy as of August.

Still, Vitol feels that the current U.S. crude oil production growth is unsustainable beyond 2018.

Vitol is anticipating an increase in US crude production of 0.5 to 0.6 million bpd in 2018, at which point the increase in production would cause cost inflation, rendering at least some of today’s current production projects unprofitable. And according to Vitol, some are barely profitable as it is.

“If you look at the economics on most of the big Permian players, not many of them make a lot of money,” Taylor said, speaking to Reuters.

For now, Vitol is expecting “boringly rangebound” prices, but eventually, the expected slowdown in production, along with “robust” demand growth, will inevitably push up prices past that stubborn $50-$60 level.

Energy and Authoritarianism

September 26, 2017

Energy and Authoritarianism

Could declining world energy result in a turn toward authoritarianism by governments around the world? As we will see, there is no simple answer that applies to all countries. However, pursuing the question leads us on an illuminating journey through the labyrinth of relations between energy, economics, and politics.

The International Energy Agency and the Energy Information Administration (part of the U.S. Department of Energy) anticipate an increase in world energy supplies lasting at least until the end of this century. However, these agencies essentially just match supply forecasts to anticipated demand, which they extrapolate from past economic growth and energy usage trends. Independent analysts have been questioning this approach for years, and warn that a decline in world energy supplies—mostly resulting from depletion of fossil fuels—may be fairly imminent, possibly set to commence within the next decade.

Even before the onset of decline in gross world energy production we are probably already beginning to see a fall in per capita energy, and also net energy—energy that is actually useful to society, after subtracting the energy that is used in energy-producing activities (the building of solar panels, the drilling of oil wells, and so on). The ratio of energy returned on energy invested (EROEI) for fossil energy production has tended to fall as high-quality deposits of oil, coal, and natural gas are depleted, and as society relies more on unconventional oil and gas that require more energy for extraction, and on coal that is more deeply buried or that is of lower energy content. Further, renewable energy sources, especially if paired with needed energy storage technologies, tend to have a lower (some say much lower) EROEI than fossil fuels offered during the glory days of world economic growth after World War II. And renewables require energy up front for their manufacture, producing a net energy benefit only later on.

…click on the above link to read the rest of the article…

U.S. Shale’s Most Productive Play May Peak By 2021

September 25, 2017

U.S. Shale’s Most Productive Play May Peak By 2021

The world’s top shale play, the Permian, has shown remarkable resilience amid the lower-for-longer oil prices. Permian production has grown and should continue its rise into the foreseeable future.

Technological advances spurred the rapid rise of the Permian, but as drillers are set to continuously develop the hottest U.S. shale play, they may soon start to test the region’s geological limits.

If E&P companies can’t overcome the geological constraints with tech breakthroughs, Permian production could peak in 2021, putting more than 1.5 million bpd of future production in question, and potentially significantly influencing oil prices, energy consultancy Wood Mackenzie said in an analysis this week.

According to EIA’s September Drilling Productivity Report, the Permian will pump 2.580 million bpd of oil this month. Crude oil output is set to rise by another 55,000-bpd next month, to 2.635 million bpd. The Permian, as usual, contributes the most to the expected production growth out of the top U.S. shale plays.

Wood Mackenzie’s report, “Geology vs. technology: how sustainable is Permian tight oil growth?”, modeled three scenarios for the Permian’s production. Under the reference-case scenario, Permian production is set to rise to more than 5 million bpd in 2025. Peak production could increase by 500,000 bpd over WoodMac’s base case in a modeling scenario where new technology adoption accelerates more aggressively, the consultancy said. However, “downside risks related to tighter well spacing and well-on-well interference could bring peak Permian production forward by 4 years compared to the upside case—putting more than 1.5 million b/d of future production in question,” Wood Mackenzie reports.

The analysis points out that many other shale plays prove that the initial years of development are typically the easiest. In order to keep well performance on par with the initial flows, drillers need more tech breakthroughs “to keep their barrels at the bottom of the cost curve.”

…click on the above link to read the rest of the article…

Risk, double-edged swords and imagining the worst

February 11, 2017

Risk, double-edged swords and imagining the worst

A friend of mine recently said that intellectual honesty often requires imagining the worst. Of course, in the study of climate change and natural resources one needs only to read the analyses of scientists to imagine the worst.

Imagining the worst in not necessarily the same as believing the worst is inevitable or even likely. It can be merely a standard part of both scenario and emergency planning. Of course, imagining the worst can also be a double-edged sword with a sinister edge, sometimes eliciting Richard Hofstadter’s paranoid style of politics.

When we imagine the worst concerning our political opponents or our enemies (sadly often placed into the same category), this is merely a reflex designed to justify our own hatreds and also a tool for broadly smearing those with whom we disagree. Clearly, this is not the same as seeking out solid evidence and using logic to construct a worst-case scenario.

In scenario planning the whole point is to consider seriously a range of possible outcomes and formulate plans for dealing with those outcomes. For example, the U.S. Energy Information Administration (EIA) reference case for world oil production (defined as crude oil and lease condensate) shows it rising from about 76 million barrels per day (mbpd) in 2012 to 99.5 mbpd in 2040. The low production case is 92 mbpd and the high production case is almost 103 mbpd.

You may feel that this range doesn’t reflect more extreme scenarios, but at least the agency offers a range. Some forecasters pretend to know to the second decimal point the future of oil production and reserves decades hence. It’s hard to put this down to anything but hubris.

Compare these forecasts to a forecast based on much sounder data, this one made by an EIA researcher in 2009 about how much oil we would have to find and deliver to meet rather extravagant future demand expectations:

…click on the above link to read the rest of the article…

Bakken July Production Data

September 17, 2016

Bakken July Production Data

North Dakota has just come out with their oil production numbers for July 2016. Bakken production was up by 3,046 barrels per day while all North Dakota production was up 2,376 barrels per day.

bakken-bpd

The EIA’s Drilling Productivity Report missed it for July. They will make the correction next month.

bakken-bpd-per-well

Barrels per day per well held steady in July, 91 for the Bakken and 79 for all North Dakota.

bakken-monthly-change

The trend is down in spite of the slight increase in July.

From the Director’s Cut

Oil Production

June 30,813,924 barrels = 1,027,131 barrels/day
July 31,914,711 barrels = 1,029,507 barrels/day (preliminary)(all time high was Dec 2014 at 1,227,483 barrels/day)
977,342 barrels per day or 95% from Bakken and Three Forks
52,165 barrels per day or 5% from legacy conventional pools

Producing Wells

June 13,248
July 13,255 (preliminary)(all time high) 11,168 wells or 84% are now unconventional Bakken Three forks wells 2,087 wells or 16% produce from legacy conventional pools

Permitting

June 65 drilling and 0 seismic
July 86 drilling and 0 seismic
August 99 drilling and 1 seismic (all time high was 370 in 10/2012)

ND Sweet Crude Price

June $38.75/barrel
July $35.57/barrel
August $33.73/barrel
Today $32.00/barrel (all time high was $136.29 7/3/2008)

Rig Count

June 28
July 31
August 32
Today’s rig count is 33 (all time high was 218 on 5/29/2012)

Comments:

The drilling rig count increased three from June to July, then increased one from July to August, and increased one more from August to today. Operators remain committed to running the minimum number of rigs while oil prices remain below $60/barrel WTI. The number of well completions dropped from 45(final) in June to 41(preliminary) in July. Oil price weakness is the primary reason for the slow down and is now anticipated to last into at least the fourth quarter of this year and perhaps into the second quarter of 2017. There was one significant precipitation event, 12 days with wind speeds in excess of 35 mph (too high for completion work), and no days with temperatures below 10F.

Over 98% of drilling now targets the Bakken and Three Forks formations.

…click on the above link to read the rest of the article…

World Energy 2016-2050: Annual Report

June 23, 2016

World Energy 2016-2050: Annual Report

The purpose of this annual report is to provide an analytical framework evaluating the development of world energy supply and its impact on the global economy. The report projects the world supply of oil, natural gas, coal, nuclear, hydro, wind, solar, and other energies from 2016 to 2050. It also projects the overall world energy consumption, gross world economic product, and energy efficiency from 2016 to 2050 as well as carbon dioxide emissions from fossil fuels burning from 2016 to 2100.

The basic analytical tool is Hubbert Linearization, first proposed by American geologist M. King Hubbert (Hubbert 1982). Despite its limitations, Hubbert Linearization provides a useful tool helping to indicate the likely level of ultimately recoverable resources under the existing trends of technology, economics, and geopolitics. Other statistical methods and some official projections will also be used where they are relevant.

Past experience with Hubbert Linearization suggests that Hubbert Linearization exercise tends to underestimate the ultimately recoverable oil and natural gas resources. To mitigate this “pessimistic” bias, I use the US Energy Information Administration (EIA)’s official projection to project US oil and natural gas production from 2016 to 2040, which may prove to be too optimistic.

About two years ago, I posted “World Energy 2014-2050” at Peak Oil Barrel (Political Economist 2014). The posts can be found here:

World Energy 2014-2050 (Part 1)

World Energy 2014-2050 (Part 2)

World Energy 2014-2050 (Part 3)

The 2014 report drew the following conclusion:

It finds that world production of oil, natural gas, and coal may peak between 2016 and 2031. As the supply of fossil fuels declines and the renewable energies do not grow sufficiently rapidly, the world energy consumption is projected to peak in 2035 and the world economy is projected to enter into a prolonged depression after 2040. World carbon dioxide emissions from fossil fuels burning are projected to peak in 2027.

…click on the above link to read the rest of the article…

Energy Wars of Attrition: The Irony of Oil Abundance

March 9, 2016

Energy Wars of Attrition: The Irony of Oil Abundance

Three and a half years ago, the International Energy Agency (IEA) triggered headlines around the world by predicting that the United States would overtake Saudi Arabia to become the world’s leading oil producer by 2020 and, together with Canada, would become a net exporter of oil around 2030. Overnight, a new strain of American energy triumphalism appeared and experts began speaking of “Saudi America,” a reinvigorated U.S.A. animated by copious streams of oil and natural gas, much of it obtained through the then-pioneering technique of hydro-fracking. “This is a real energy revolution,” the Wall Street Journal crowed in an editorial heralding the IEA pronouncement.

The most immediate effect of this “revolution,” its boosters proclaimed, would be to banish any likelihood of a “peak” in world oil production and subsequent petroleum scarcity. The peak oil theorists, who flourished in the early years of the twenty-first century, warned that global output was likely to reach its maximum attainable level in the near future, possibly as early as 2012, and then commence an irreversible decline as the major reserves of energy were tapped dry. The proponents of this outlook did not, however, foresee the coming of hydro-fracking and the exploitation of previously inaccessible reserves of oil and natural gas in underground shale formations.

Understandably enough, the stunning increase in North American oil production in the past few years simply wasn’t on their radar. According to the Energy Information Administration (EIA) of the Department of Energy, U.S. crude output rose from 5.5 million barrels per day in 2010 to 9.2 million barrels as 2016 began, an increase of 3.7 million barrels per day in what can only be considered the relative blink of an eye. Similarly unexpected was the success of Canadian producers in extracting oil (in the form of bitumen, a semi-solid petroleum substance) from the tar sands of Alberta.

…click on the above link to read the rest of the article…

IA’s Dire Oil Forecast: $34 Crude Due To Far More Resilient Production, Oversupply And Lower Demand

March 8, 2016

IA’s Dire Oil Forecast: $34 Crude Due To Far More Resilient Production, Oversupply And Lower Demand

Now that the massive USO-driven squeeze appears to be over (congratulations to whoever managed to sell equity and their secured lenders) the bad news can return. First, it was Goldman slamming the “unsustainable rally, and then just a few hours ago, the EIA released its latest monthly short-term outlook report in which it brought even more bad news for long-suffering bulls who thought the pain was finally over.

Instead, the pain is only just beginning, after the EIA revised its 2016 supply forecast higher as “production is more resilient to lower prices than previously expected” – why thank you desperate momentum chasing “investors” of other people’s money, who can’t wait for that secondary offering to repay JPMorgan’s credit facility.

The EIA also revised its forecast demand lower as a result of a decline in global economic growth.

Yes, someone finally admitted that demand is lower.

End result: a cut in forecast oil prices for 2016 and 2017 from $37 and $50 to just $34 and $40.

Here is the summary, with the troubling parts highlighted:

Global oil inventories are forecast to increase by an annual average of 1.6 million b/d in 2016 and by an additional 0.6 million b/d in 2017. These inventory builds are larger than previously expected, delaying the rebalancing of the oil market and contributing to lower forecast oil prices. Compared with last month’s STEO, EIA has revised forecast supply growth higher for 2016 and revised forecast demand growth lower for both 2016 and 2017. Higher 2016 supply in this month’s STEO is based on indications that production is more resilient to lower prices than previously expected. Notably, revisions to historical Russian data, which raised the baseline for Russian production, carry through much of the forecast. Additionally, lower expectations for global economic growth contributed to a reduction in the oil demand forecast.

And the details:

…click on the above link to read the rest of the article…

U.S. Has Too Much Oil. So Why Are Imports Rising?

March 4, 2016

U.S. Has Too Much Oil. So Why Are Imports Rising?

Despite domestic production declining and demand surging, the EIA reported oil inventories surge by more than 10 million barrels, or more than three times what was expected.

The 10.4 million barrel increase was mostly due to a near record increase in imports of 490,000 b/d (3.4 million barrels weekly) and an adjustment swing of 352,000 b/d (2.5 million barrels weekly) by the EIA. The latter has been a repeated pattern to exaggerate the levels of inventory, a pattern going back to 2015.

Thus, over half of the said increase in inventory was driven by higher imports and an arbitrary adjustment that seems routine by the EIA. Domestic production actually fell by 25,000 B/D in the week ending on February 26. Also gasoline inventories fell 455,000 barrels, or nearly 5 percent, as capacity utilization rose 1 percent. Total gasoline supplied, which is a gauge of demand over last 4 weeks, has risen a whopping 7 percent.

Now the real question is with U.S. production declining and inventories at record levels, why are refiners still importing at such heights? The 8.2 million barrels per day imported in the week came very close to the record in December, missing by some few percentage points. U.S. commercial domestic crude oil stocks are now nearly 17 percent above last year levels. None of this adds up: We are producing less, inventories are rising, while demand is at records and yet we are using more imported oil? The chart below depicts these very odd phenomena.

(Click to enlarge)

Moreover, most incremental U.S. output is light sweet crude from shale regions, as is the imported oil. The only logical answer that seems possible is that OPEC is undercutting light sweet U.S. crude pricing, so as to incentivize refiners to use imports. So are we then to believe Saudi Arabia that it isn’t at war with U.S. shale?

…click on the above link to read the rest of the article…

World outside US and Canada doesn’t produce more crude oil than in 2005

February 14, 2016

World outside US and Canada doesn’t produce more crude oil than in 2005

After a delay of several months the US Energy Information Administration has published the latest international energy statistics for October 2015

This is an opportunity to update crude oil graphs
http://crudeoilpeak.info/latest-graphs

Fig 1: World’s incremental crude oil production

How Fig 1 is created: for each country, the minimum production in the period Jan 2001 (original IPS start month) to October 2015 is taken (=base production) and deducted from the country’s total production, giving the incremental production which is then stacked in a way that allows to interpret which changes occurred. The stacking order is:

(a)    Base production
(b)   Countries with growing production
(c)    Countries with flat, peaking or declining production
(d)   OPEC and Middle East countries
(e)    Canada (mainly tar sands)
(f)    United States (mainly shale oil)

The numbers denote following events:

(1)   Venezuela strike
(2)   Iraq peak oil war
(3)   Saudi production declines
(4)   High demand for China Olympic Games
(5)   Iran sanctions introduced
(6)   Iraq reaches pre-war production level
(7)   US shale oil boom takes off

The red horizontal line is the maximum crude oil production level in May 2005 (the Katrina year). We can see that almost all additional oil produced now above that level is US shale oil. In other words: without US shale oil (which required cheap money from quantitative easing), the world would be in a deep oil crisis.

The grey line shows the September 2005 production level outside the US and Canada. The graph shows that the October 2015 production level is only slightly higher than in 2005, possibly within the accuracy of statistics.

We can therefore confidently say that growth of the world economy managed to make itself completely dependent on unconventional oil from the US and Canada.

…click on the above link to read the rest of the article…

OPEC Will Not Blink First

February 11, 2016

OPEC Will Not Blink First

An OPEC production cut is unlikely until U.S. production declines by about another million barrels per day (mmbpd). OPEC won’t cut because it would accomplish nothing beyond a short-term increase in price. Carefully placed comments by OPEC and Russian oil ministers about the possibility of production cuts achieve almost the same price increase as an actual cut.

Bad News About The Oil Over-Supply from IEA and EIA

The International Energy Agency (IEA) and U.S. Energy Information Administration (EIA) shook the markets yesterday with news that the world’s over-supply of oil has gotten worse rather than better in recent months. IEA data shows that the global liquids over-supply increased in the 4th quarter of 2015 to 2.24 million barrels per day (mmbpd) from 1.62 mmbpd in the 3rd quarter (Figure 1).

Figure 1. IEA world liquids market balance (supply minus demand). Source: IEA and Labyrinth Consulting Services, Inc.

(click image to enlarge)

Supply increased 70,000 bpd and demand decreased 550,000 bpd for a net increase in over-supply of 620,000 bpd. The sharp decline in demand is perhaps the most troubling aspect of IEA’s report. The agency forecasts tepid demand growth of only 1.17 mmbpd in 2016 compared with 1.61 mmbpd in 2015. The weak global economy is the culprit.

EIA’s monthly data showed the same trend. Over-supply in January increased to 2.01 mmbpd from 1.35 mmbpd in December, a 650,000 bpd net change (Figure 2). Supply fell by 370,000 bpd but consumption dropped by a stunning 1.02 mmbpd.

Figure 2. EIA world liquids market balance (supply minus consumption). Source: EIA and Labyrinth Consulting Services, Inc.

(Click image to enlarge)

The January 2016 Oil Price Head-Fake

Recent comments about a possible OPEC cut were largely responsible for the late January “head-fake” increase in oil prices (Figure 3). WTI futures increased 27 percent from $26.55 to $33.62 per barrel between January 20 and 29.

..click on the above link to read the rest of the article…

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