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It’s Official. The collapse of U.S. shale oil production has begun. The mighty Shale Oil BOOM has now finally turned into a BUST. While the pandemic shutdowns sped up the process, the collapse of the U.S. shale industry was going to occur, regardless. According to the U.S. Energy Information Agency, shale oil production will continue to decline below 7.5 million barrels per day in January.

At the peak last year, the top five shale oil fields combined production reached nearly 9.2 million barrels per day. Since the shutdowns during March-April, many of the companies curtailed shale oil production. However, all of these wells have now been brought online, but the massive decline rate is kicking in due to a lack of drilling and completion activity.

As we can see in the chart below, shale oil production in these five fields fell from 9.16 million barrels per day during the peak in 2019 to 7.27 million barrels per day forecasted next month (January).

In a little more than a year, the combined shale production from these five fields declined by 1.9 million barrels. The data in the chart above is shown in thousand barrels per day. According to Shaleprofile.com, these five fields add more than 11,000 new wells in 2019. In looking at the new well trend data for Jan-Oct 2020, I would be surprised to see more than a total of about 5,000 wells added this year.

While the Permian suffered the highest decline in shale oil production, the biggest loser in percentage terms was the Anadarko Field. Oil production from the Anadarko declined from 603,000 barrels per day (b/d) at the peak last year to a forecasted 363,000 bd in January. That’s a stunning 40% decline in a little more than a year.

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

U.S. crude output to decline more than previously forecast in 2020 -EIA

December 8, 2020

U.S. crude output to decline more than previously forecast in 2020 -EIA

NEW YORK (Reuters) -U.S. crude oil production is expected to fall by 910,000 barrels per day (bpd) in 2020 to 11.34 million bpd, the U.S. Energy Information Administration (EIA) said on Tuesday, a steeper decline than its previous forecast for a drop of 860,000 bpd.

Output next year is expected to slide by 240,000 bpd to 11.10 million bpd, a smaller decline compared to the previous forecast for a slide of 290,000 bpd.

U.S. shale production has languished as oil prices collapsed after the coronavirus pandemic eroded global demand. But as hopes for a widespread rollout of a vaccine rise, U.S. crude oil production has recovered from the two-and-a-half-year lows touched in May.

Producers have begun to add drilling rigs and brought wells back online in response to the rebound in prices. [RIG/U]

Still, the EIA said that U.S. crude oil production will decline to less than 11 million bpd in March 2021 mostly because of falling production in the lower 48 states, where declining production rates at existing wells is expected to outpace production from newly drilled wells in the coming months.

The agency also expects U.S. petroleum and other liquid fuel consumption to decline 2.38 million bpd to 18.16 million bpd in 2020, unchanged from its previous forecast.

In 2021, U.S. oil demand is expected to climb by 1.63 million bpd to 19.79 million bpd, a smaller increase than its previous estimate for a rise of 1.69 million bpd.

Global consumption of petroleum and liquid fuels is expected to average 92.4 million bpd for all of 2020, which is down by 8.8 million bpd from 2019, before increasing by 5.8 million bpd in 2021, the EIA said.

What Oil’s Troubles Mean to the Rest of Us

December 6, 2020

What Oil’s Troubles Mean to the Rest of Us

To the extent that stock prices reflect expectations of future value, investors don’t like the prospects for oil, and oil’s demise signals muted prospects for economic growth.

Exxon-Mobil (XOM) was removed from the Dow Jones Industrial Average this past August, ending a run that began when the Dow expanded to 30 stocks in 1928. This leaves Chevron as the sole oil company in the index. For most of those 92 years, there were three oil majors in the Index (Standard of NJ/Exxon, Texaco, and Standard of CA/Chevron) – now there is one. Should you care?

In one sense, no. The Dow is an actively-managed index, and 11 of the current 30 firms have replaced other names since 2000. (Exxon-Mobil was replaced by Salesforce.) The financial media treats changes in the Dow as measures of overall market levels, but little money is actually invested in DJIA-linked products. There’s an interesting article in all that, but it’s not this one.

On the other hand, the Dow committee likes to include industries and companies that are growing and successful. Removing XOM is a measure of the decline of the economic status of “big oil.” Over the last two months, both XOM and BP have approached their lows from this past March, which were in turn the lowest prices for those stocks since 1994 (BP) or 1997 (XOM). The S&P 500 has grown by a factor of four since 1997.

The WTI price of oil is (as of October 2020) around $40 per barrel, which is the lowest since 2003 on an inflation-adjusted basis except for a brief period at the start of 2016 and a few weeks this spring. This reflects the abundance of oil supplies after the COVID-induced demand collapse, but it also is a price below what’s necessary to operate much of the industry profitably…

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

GREEN ENERGY DOUBLE-TALK BEGINS: First Major Oil Producer Announces Deadline to End Oil Extraction, But There’s A Catch

December 6, 2020

GREEN ENERGY DOUBLE-TALK BEGINS: First Major Oil Producer Announces Deadline to End Oil Extraction, But There’s A Catch

According to the Washington Post article published yesterday, Denmark was the first major oil-producing country to announce a deadline to end oil extraction. While this may sound like a “Victory” for the Green Energy Movement, there’s a catch. While Denmark announced that it would end all oil extraction by 2050, the country will likely run out of oil reserves well before that date.

I find this quite hilarious because all anyone has to do is look at a bit of data, and you can find out that Denmark’s oil-producing days are quickly coming to an end… WITH OR WITHOUT GREEN ENERGY.

The Washington Post article titled, Denmark becomes first major oil-producing nation to set deadline to end extraction, stated the following:

The decision was applauded by some environmental activists, with Greenpeace celebrating it as a “watershed moment,” although other groups had hoped for a faster timeline.

Denmark’s new rules mean companies will be barred from receiving new licenses to search for and extract oil and gas resources. Previously issued licenses will remain valid until 2050.

Denmark is the top oil producer in the European Union, but it has come under mounting pressure as the E.U. aims to become carbon-neutral within the next 30 years.

“It’s a historic decision for Denmark,” Dan Jørgensen, the Danish climate and energy minister, told The Washington Post in an interview Friday.

Please note the BOLDED text in the quote from the article above. What a laugh indeed. “The decision was applauded by some environmental activists??” Are you kidding me?? Even Greenpeace celebrated it as a “WATERSHED MOMENT.” Listen, I really admire some of the work being done by Greenpeace, but this is pure BOLLOCKS.

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

Africa Is The Undeniable Final Frontier For Oil

September 25, 2020

Africa Is The Undeniable Final Frontier For Oil

The pandemic has been devastating for the oil industry globally. Explorers suspended drilling, producers, idled wells, Big Oil majors put up assets for sale. But the world continues to need oil, albeit lower amounts of it than a year ago, and it will continue to need it. Exploration is not dead. It is especially not dead in Africa—a hot spot in oil and gas before the pandemic.

The East Africa Crude Oil Pipeline

Earlier this month, French Total and the Uganda government signed an important deal, for the construction of a pipeline that will carry Ugandan oil to the Kenyan coast. Two weeks later, the presidents of the two countries signed their own deal about the $3.5-billion infrastructure.

The final investment decision on the pipeline is expected by the end of the year in a rare good sign about the future of oil demand. Uganda and Kenya are both newcomers on the oil scene with hopes to join the oil exporting community soon. If the construction of a $3.5-billion oil pipeline still makes economic sense for countries that are not among the wealthiest in the world, there may be some hope for oil demand.

The South African oil discovery

Africa Energy, a Canadian exploration company, said last week it expected to strike a lot of oil in an offshore block in South Africa with reserves that could exceed those of an earlier discovery made by Africa Energy and Total in the same block. Earlier this year, Africa Energy doubled its stake in the consortium exploring the block to 10 percent. Total is the operator. Africa Energy should announce the results of the drilling project by the end of next month.

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

How much oil left in America? Not much

September 21, 2020

How much oil left in America? Not much

Preface. If you think we have no worries because we can get arctic oil, think again. We can’t because icebergs mow drilling platforms down in the ocean. On land, massive amounts of expensive new drilling rigs, roads, rail lines, platforms, buildings and other infrastructure need to be built, and maintained every year as permafrost soil bucks and heaves like a bronco trying to shake infrastructure off.

In the first two oil shocks in the 1970s, many intelligent people proposed we should buy oil from other nations to keep ours in the ground for when foreign oil declined. But hell no, Texas, Oklahoma, and other oil states said that we need jobs and CEO/shareholder profits more than national security. Over half of all remaining oil is in the Middle East, which China, Russia, and Europe are much closer to than the U.S.

What saved the U.S. and the world, from conventional peak oil and natural gas decline since 2005 is fracking. But fracking began to decline as early as 2020 according the first report below. The second article is about oil discoveries in the U.S. declining.

This just in: John Hess, CEO of Hess Corporation, told his audience that “key U.S. shale fields are starting to plateau” and will not the next Saudi Arabia. U.S. shale oil production has been a major driver in the growth of world oil supplies. Last year the United States accounted for 98% of global growth in oil production. Since 2008 the number is 73%. so a slowdown or decline in U.S. oil production growth would mean trouble for the whole world. With 81 percent of global oil production now in decline, even a plateau in U.S. production would likely result in a worldwide decline (Kobb 2020).

Peak Fracking in the news:

2020 U.S. Shale Oil Production – All That’s Left Is The Permian And That Won’t Last Forever Either.

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

The End of Oil is Near, or Maybe Not

September 12, 2020

The End of Oil is Near, or Maybe Not

The cover of the September/October 2020 issue of Sierra magazine states “The End of Oil is Near”. The corresponding story “The End of Oil?” was paralleled with a recent segment on Democracy Now. I think that is wishful thinking. To the extent that oil demand goes down in the future, it will go down because people can’t afford oil distillates at the price producers need to produce the corresponding oil.

The “The End of Oil?” article describes weak oil demand in recent years although it should be stated that global oil consumption increased over 5 million barrels/day from 2015 to 2019. A major factor for weak oil demand growth in recent years is the increasing level of inequality in the U.S. and world. There is an increasing population that can’t afford to buy oil distillates, or the devices that use them. Oil distillates offer the ability to avoid manual physical effort which people tend to select when they can afford to.

“The End of Oil?” article emphasized the increase in global oil production in recent years. Most of that production increase was associated with unconventional oil resources such as shale oil in the U.S. and oil sands in Canada. The problem with those unconventional oil resources is that they are considerably more expensive to produce compared to conventional oil. Conventional oil production is declining over much of the globe which has forced oil companies to move to unconventional resources.

The author describes oil majors, like ExxonMobil and Chevron, as getting into the shale oil business in recent years. That is not a wise business decision but due to the lack of new conventional resources to exploit.

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

“It’s Happening Again” – Traders Store Oil At Sea As Recovery Falters

September 10, 2020

“It’s Happening Again” – Traders Store Oil At Sea As Recovery Falters

Crude prices slid Thursday as the stalled global economic recovery from the virus pandemic triggers a “second wave” of demand fears and sparks renewed interest in floating storage as the oil market flips bearish.

Reuters said a “fresh build-up of global oil supplies, pushing traders including Trafigura to book tankers to store millions of barrels of crude oil and refined fuels at sea again.”

Floating storage, onboard crude tankers, comes as traditional onshore storage nears capacity as supply outpaces demand.

Total Oil Inventories

Refinitiv vessel data shows trading house Trafigura has recently chartered at least five crude tankers, each capable of 2 million barrels of oil.

The inventory build up, driving up demand for floating storage comes as OPEC+ recently trimmed supply curbs from earlier this year on expectations demand would improve. Though with the peak summer driving season in the US now over, demand woes and oversupplied markets are pressuring crude and crude product prices.

Very large crude-oil carrier (VLCC) storage has started to rise once again.

“Despite the recent slide in oil prices, we think that the OPEC+ leadership will continue to direct its efforts towards securing better compliance rather than pushing for deeper cuts at this stage,” RBC analysts said.

Another catalyst for the bearish tilt in crude markets is that China’s oil imports are likely to subside as independent refineries have reached maximum annual oil import quotas.

Reuters notes, in a separate report, that other top commodity traders are booking tankers to store crude products at sea, including diesel and gasoline.

Refinitiv vessel data also shows Vitol, Litasco, and Glencor have been booking tankers in the last several days to store diesel for the next three months.

“The market is soft and bearish, and floating storage is returning again,” a market source told Reuters.

Private Equity Is Bargain Hunting In Canada’s Oil Patch

September 10, 2020

Private Equity Is Bargain Hunting In Canada’s Oil Patch

After two months of an encouraging—if not half-hearted–rebound, oil prices have gone into reverse gear once again. Futures tied to WTI crude were down a whopping 8% on Monday morning to trade at $36.35/barrel, a level they last touched two months ago as the markets come under a fresh wave of pressure from a stalling recovery in demand as well as a mistimed expansion of production by OPEC that threatens to reverse the gains by the cartel’s latest production cuts. The latest rout has elicited another round of price cuts by Saudi Arabia in a situation eerily reminiscent of the oil price war that sent the markets crashing into negative territory for the first time ever.

But as the debt-riddled U.S. shale patch braces for a new reality of ‘Lower Forever’ with massive asset writeoffs amid a growing wave of bankruptcies, its equally distressed neighbor further north has resorted to a different trick: Mergers and Acquisitions.

Starved of vital capital by weary banks and shareholders, small- and mid-sized oil and gas companies in Canada are scrambling to find partners in a bid to become bigger and– hopefully–more solvent.

Meanwhile, bargain-hunting private equity firms have pounced on the opportunity, hoping to buy distressed assets for pennies on the dollar.

WTI Oil Price 30-Days Change

Source: Business Insider

Source: Visual Capitalist

Orphaned Businesses

After years of continuous underperformance and paltry returns following a six-year downturn by the sector, cheap credit for Canada’s oil and gas companies has dried up, forcing them to look for less conventional means to survive.

The Covid-19 crisis has only served to worsen the situation, with the S&P/TSX Capped Energy–Canada’s equivalent of the U.S.’ Energy Select Sector SPDR Fund (XLE)–down 46.8% in the year-to-date vs. -41.9% return by XLE.

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

Today’s Energy Predicament – A Look at Some Charts

September 1, 2020

Today’s Energy Predicament – A Look at Some Charts

Today’s energy predicament is a strange situation that most modelers have never really considered. Let me explain some of the issues I see, using some charts.

[1] It is probably not possible to reduce current energy consumption by 80% or more without dramatically reducing population.

A glance at energy consumption per capita for a few countries suggests that cold countries tend to use a lot more energy per person than warm, wet countries.

Figure 1. Energy consumption per capita in 2019 in selected countries based on data from BP’s 2020 Statistical Review of World Energy.

This shouldn’t be a big surprise: Our predecessors in Africa didn’t need much energy. But as humans moved to colder areas, they needed extra warmth, and this required extra energy. The extra energy today is used to build sturdier homes and vehicles, to heat and operate those homes and vehicles, and to build the factories, roads and other structures needed to keep the whole operation going.

Saudi Arabia (not shown on Figure 1) is an example of a hot, dry country that uses a lot of energy. Its energy consumption per capita in 2019 (322 GJ per capita) was very close to that of Norway. It needs to keep its population cool, besides running its large oil operation.

If the entire world population could adopt the lifestyle of Bangladesh or India, we could indeed get our energy consumption down to a very low level. But this is difficult to do when the climate doesn’t cooperate. This means that if energy usage needs to fall dramatically, population will probably need to fall in areas where heating or air conditioning are essential for living.

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

North Dakota blues: The legacy of fracking

September 1, 2020

North Dakota blues: The legacy of fracking

When oil drillers descended on North Dakota en masse a decade ago, state officials and residents generally welcomed them with open arms. A new form of hydraulic fracturing, or “fracking” for short, would allow an estimated 3 to 4 billion barrels of so-called shale oil to be extracted from the Bakken Formation, some 2 miles below the surface.

The boom that ensued has now turned to bust as oil prices sagged in 2019 and then went into free fall with the spread of the coronavirus pandemic. The financial fragility of the industry had long been hidden by the willingness of investors to hand over money to drillers in hopes of getting in on the next big energy play. Months before the coronavirus appeared, one former oil CEO calculated that the shale oil and gas industry has destroyed 80 percent of the capital entrusted to it since 2008. Not long after that the capital markets were almost entirely closed to the industry as investor sentiment finally shifted in the wake of financial realities.

The collapse of oil demand in 2020 due to a huge contraction in the world economy associated with the pandemic has increased the pace of bankruptcies. Oil output has also collapsed as the number of new wells needed to keep total production from these short-lived wells from shrinking has declined dramatically as well. Operating rotary rigs in North Dakota plummeted from an average of 48 in August 2019 to just 11 this month.

Oil production in the state has dropped from an all-time high of 1.46 million barrels per day in October 2019 to 850,000 as of June, the latest month for which figures are available. Even one of the most ardent oil industry promoters of shale oil and gas development said earlier this year that North Dakota’s most productive days are over. CEO John Hess of the eponymous Hess Corporation is taking cash flow from his wells in North Dakota and investing it elsewhere.

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

Saudi Arabia Refuses To Learn From Its Two Failed Oil Price Wars

August 21, 2020

Saudi Arabia Refuses To Learn From Its Two Failed Oil Price Wars

Having failed to achieve the slightest semblance of success in the two oil price wars that it started – the first running from 2014 to 2016, and the second running from the beginning of March to effectively the end of April this year – it might be assumed that key lessons might have been learned by the Saudis on the perils of engaging in such wars again. Judging from various statements last week, though, Saudi Arabia has learned nothing and may well launch exactly the same type of oil price war in exactly the same way as it has done twice before, inevitably losing again with exactly the same catastrophic effects on it and its fellow OPEC members. At the very heart of Saudi Arabia’s problem is the collective self-delusion of those at the top of its government regarding the Kingdom’s key figures relating to its oil industry that underpins the entire regime. These delusions are apparently not discouraged by any of the senior foreign advisers who make enormous fees and trading profits for their banks from Saudi Arabia’s various follies, most notably oil price wars. It is, in the truest sense of the phrase, a perfect example of ‘The Emperor’s New Clothes’, although in this case, it does not just pertain to Crown Prince Mohammed bin Salman (MbS) but to all of the senior figures connected to Saudi Arabia’s oil sector. One of the most obvious examples of this is the chief executive officer of Saudi Arabia’s flagship hydrocarbons company, Saudi Aramco (Aramco), Amin Nasser, who said last week – bewilderingly for those who know even a modicum about the global oil markets – that Aramco is to go ahead with plans to increase its maximum sustained capacity (MSC) to 13 million barrels per day (bpd) from 12.1 million bpd.

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

ASIA, AUSTRALIA, BP STATISTICAL REVIEW, SOUTH EAST ASIA, VIETNAM

August 17, 2020

Peak oil in Asia Update June 2020 (part 3)

Fig 22: The peak of the largest producer China determined the Asian peak

From the countries in Fig 22 the 3rd and 4th largest oil importers are Thailand and Indonesia with approximately 1 mb/d each.

Fig 23: Thailand is the 3rd largest net importer in Asia …

Fig 24: … closely followed by Indonesia

Fig 25: Indonesia had higher oil consumption growth rates

Number 5 net importer is Australia with half million barrels/day

Fig 26: Australia’s net imports have dropped by 150 kb/d in 2019 due to a production increase

Fig 27: Vietnam experienced a tripling of net oil imports in the last 4 years
Fig 28: Malaysia is net importer since 2011

Fig 29: Other Asian countries have doubled net imports since 2015

Fig 30: By 2010 all these countries had become net oil importers

Previous links:

Peak oil in Asia Update June 2020 (part 2)
https://crudeoilpeak.info/peak-oil-in-asia-update-june-2020-part-2

Peak oil in Asia Update June 2020 (part 1)
https://crudeoilpeak.info/peak-oil-in-asia-update-june-2020-part-1

CHART OF THE WEEK: The Surprising Drop In U.S. Crude Oil Production

August 16, 2020

CHART OF THE WEEK: The Surprising Drop In U.S. Crude Oil Production

U.S. crude oil production experienced a surprising drop last week, even though domestic demand for oil and petroleum products increased. This came as a surprise to some energy analysts. Furthermore, the IEA, International Energy Agency came out with a forecast for global oil demand to fall 8.1 million barrels per day in 2020.

I have to say, this is terrible news coming from the IEA. Just last month, the IEA stated that global oil demand could fall to 7.1 mbd (million barrels per day), but only recently updated their forecast for an 8.1 mbd decline in 2020 due to “gloomy airline travel.”

Actually, we don’t really know what global oil demand will look like by the end of the year. There are way too many variables. Even though the Fed and central banks are planning to pump in more stimulus plans over the next few months, the negative SNOWBALL EFFECT of all the closed stores, unemployment, commercial real estate armageddon, collapse in airline travel, supply chain disruptions, and so forth, will likely impact oil demand to a greater degree by the end of 2020 and into 2021.

Another CURVEBALL to hit the United States is the coming collapse in U.S. Shale oil production. While some companies have curtailed production, and are now bringing some of it back online, total U.S. crude oil production surprisingly declined to 10.7 mbd last week.

U.S. crude oil production reached a peak of 13.1 mbd in late February, right before the global contagion and shutdown of economies. It fell to a low of 10.5 mbd in mid-June, then rebounded to 11.0 mbd for the next two months. However, in the lasted EIA, U.S. Energy Information Agency weekly report, U.S. oil production fell from 11.0 mbd to 10.7 mbd last week.

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

Massive Surge In U.S. Gold Imports Signals BIG TROUBLE Ahead For The Financial System

August 14, 2020

Massive Surge In U.S. Gold Imports Signals BIG TROUBLE Ahead For The Financial System

The U.S. imported a record amount of gold bullion in April during the global contagion and shutdown of many economies. The United States imported more gold in April than it did during all of last year. A lot of the gold imported into the U.S. was due to delivery issues, as many of the large gold refineries were shut down.

While the huge surge in U.S. gold bullion imports during April was mainly due to supply disruptions, it’s an IMPORTANT SIGNAL that all is not well in the Global Financial System. The panic to get more gold to the U.S. exchanges suggests that there is way too much paper gold leverage in the system.

The highly leveraged gold trading system has worked fine for decades due to an important factor not considered by most in the precious metals community… and that’s rising global oil production. Let me explain. World GDP growth is tied to global oil production growth… PERIOD. While a few other analysts and I have made this point, Jean-Marc Jancovici explained this to a large group of the OECD.

Total world oil consumption on a three-year average corresponding closely to total world GDP per capita on a three-year average. While investors may deny this relationship, do so at your peril.

Because the world has been able to add 1-2% of new global oil production on average each year, except for the down-turns, the highly leveraged Financial Ponzi Scheme can continue to grow and expand. However, when global oil production stops increasing on an annual basis, then global GDP growth is DEAD for good. And, I mean it.

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

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