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Uncertainties following the Abqaiq attack have shrunk the world’s safe oil reserves by around half (part 1)

Uncertainties following the Abqaiq attack have shrunk the world’s safe oil reserves by around half (part 1)

The world has returned to business as usual after the Saudis assured oil markets that production will be back soon and as oil prices have returned to pre-attack levels and even lower, indicating that oil traders focus on a weak global economic outlook.

Fig 1: Abqaiq’s oil price spike
Fig2: Saudi crude oil production drop after the Abqaiq attack

The peak oil barrel blog monitors OPEC’s oil production and published the above graph for September 2019, using data from OPEC’s Monthly Oil Market Report. The drop from around 9,800 kb/d to 8,500 kb/d translates into an approximate loss in September of 40 mb Arab Light.  Saudi oil stocks were 180 mb before the attack. Maybe tanks are filled with partially processed oil with a high sulfur content.

Iran’s oil exports

From the IEA Monthly Oil Market Report dated 12/9/2019 (2 days before the Abqaiq attack):

Fig 3: US ended sanction waivers in May 2019
https://www.iea.org/media/omrreports/fullissues/2019-09-12.pdf

The data on Iranian oil exports are fuzzy. On 13 Sep 2019 S&P Global Platts reported 424 kb/d in August (mainly to China and Syria) but warns that Iranian storage is filling up quickly, including 50 mb on tankers (mostly condensate). During the last round of sanctions in 2016 storage reached 55-60 mb.

Fig 4: Iranian oil exports by Platts

 

https://www.spglobal.com/platts/en/market-insights/latest-news/oil/091319-analysis-iran-builds-50-mil-barrel-oil-armada-as-exports-plunge

In July 2019 the Atlantic Council calculated in an article entitled

Iran’s Crude Oil Exports: What Minimum Is Enough to Stay Afloat?

that Iran needs to export 1.5 mb/d to balance the budget and 720 Kb/d as an absolute minimum in survival mode (withdrawals from the National Development Fund, foreign exchange and gold reserves)

Changed balance of power in Middle East

As Iranian oil exports have dropped below these thresholds, attacks have intensified:

12 May:  Fujairah, UAE, 4 tankers damaged in Gulf of Oman by limpet mines

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

More Than 50% Of The Mighty Permian’s 2018 Oil Production Has Vaporized

More Than 50% Of The Mighty Permian’s 2018 Oil Production Has Vaporized

As dark clouds gather on the financial horizon, big trouble is brewing in the U.S. Shale Oil Industry.  While most Americans are focused on the Mainstream media’s coverage of the ongoing Washington D.C. circus, the real threat to the domestic economy lies in the country’s oil heartland.  And, if we look at what is taking place in the United States’ largest shale oil region, the signs are troubling.

The Permian Oil Basin in Texas and New Mexico accounts for nearly half (46%) of the total U.S. shale oil production.   According to the data from Shaleprofile.com, Permian’s oil production peaked in May at 3.43 million barrels per day.  Due to the massive decline rate, production in the Permian has stalled this year.

The chart below shows the Permian oil production declining even though more wells continue to be brought online.  Unfortunately, there aren’t enough wells being added to offset the tremendous decline rate.  You will notice how quickly the oil production that was added in 2018 (Light Blue color) has declined in just half a year:

To give you a better idea of the huge decline rate in Permian oil production, let’s only focus on 2018 and 2019 in the following charts.  But, before doing so, I wanted to let everyone know that this information would not be possible without the data from Shaleprofile.com.  I highly recommend that you check out Shaleprofile.com and consider subscribing to the service if you want to be able to access more details in the shale industry.  It’s worth its weight in gold.

Let’s look at the Permian oil production just for 2018.  Permian oil production brought on in 2018 peaked in December at 2,136,000 barrels oil per day (bopd) or 2,136K bopd, and declined to 1,056K bopd by July 2019. That is a STUNNING 50.5% decline in just seven months:

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

More Than 50% Of The Mighty Permian’s 2018 Oil Production Has Vaporized

More Than 50% Of The Mighty Permian’s 2018 Oil Production Has Vaporized

As dark clouds gather on the financial horizon, big trouble is brewing in the U.S. Shale Oil Industry.  While most Americans are focused on the Mainstream media’s coverage of the ongoing Washington D.C. circus, the real threat to the domestic economy lies in the country’s oil heartland.  And, if we look at what is taking place in the United States’ largest shale oil region, the signs are troubling.

The Permian Oil Basin in Texas and New Mexico accounts for nearly half (46%) of the total U.S. shale oil production.   According to the data from Shaleprofile.com, Permian’s oil production peaked in May at 3.43 million barrels per day.  Due to the massive decline rate, production in the Permian has stalled this year.

The chart below shows the Permian oil production declining even though more wells continue to be brought online.  Unfortunately, there aren’t enough wells being added to offset the tremendous decline rate.  You will notice how quickly the oil production that was added in 2018 (Light Blue color) has declined in just half a year:

To give you a better idea of the huge decline rate in Permian oil production, let’s only focus on 2018 and 2019 in the following charts.  But, before doing so, I wanted to let everyone know that this information would not be possible without the data from Shaleprofile.com.  I highly recommend that you check out Shaleprofile.com and consider subscribing to the service if you want to be able to access more details in the shale industry.  It’s worth its weight in gold.

Let’s look at the Permian oil production just for 2018.  Permian oil production for 2018 peaked in December at 2,136,000 bopd or 2,136K bopd, and declined to 1,056K by July 2019. That is a STUNNING 50.5% decline in just seven months:

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

Our Energy and Debt Predicament in 2019

Our Energy and Debt Predicament in 2019

Many people are concerned that we have an oil problem. Or they are concerned about recession and the need to lower interest rates.

As I see the situation, we have a problem of a networked economy that is not functioning well. A big part of this problem is energy-related. Strange as it may seem, energy prices (including oil prices) are too low for producers. If debt levels were growing more rapidly, this low-price problem would go away. 

The “standard way” of encouraging more debt-based purchases is by lowering interest rates. But we are running out of room to do this now. We also seem to be running out of economic investments to make with debt. If expected returns on investment were greater, interest rates would be higher.

Without economic investments, demand for commodities of all kinds, including energy products, tends to stay too low. This is the problem we have today. Our debt problem and our energy problem are really different aspects of a networked economy that is no longer generating enough total return. History suggests that these periods tend to end badly.

In the following sections, I will explain some of the issues involved.

[1] Our problem is not just that oil prices that are too low. Prices are too low for practically every type of energy producer, and in many parts of the globe.

Oil: OPEC oil producers have cut back production because they view oil prices as too low. OPEC reports a cutback in production of 2.7 million barrels per day between November 2018 and July 2019 (from 32.3 million bpd to 29.6 million bpd).

In the US, there has been an increase in bankruptcies of oil producers during 2019, relative to 2018. There has also been a reduction in the number of oil drilling rigs of 17% since the week of November 16, 2018, according to reports by Baker Hughes. These are signs of producer distress.

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

Yergin: Expect Extreme Volatility In Oil Markets

Yergin: Expect Extreme Volatility In Oil Markets

Flaring

Rising pipeline takeaway capacity in the Permian and global oil demand growth at its weakest in a decade are set to lead to more volatility in oil prices in the near term, a prominent energy expert said, joining a growing number of analysts who see prices further depressed by slowing economies and crude demand.

“The pipeline bottlenecks are in the process of being resolved, so a lot more oil is going to come onto the market by the end of the year. We expect the U.S. (crude oil output) to be up to 13 million barrels a day,” IHS Markit’s vice chairman Daniel Yergin told CNBC on Tuesday.

While U.S. production will continue to add more supply in an already oversupplied global market, on the demand side, expectations are getting increasingly pessimistic.

“We’re in one of the weakest periods since 2008 and we think demand growth this year is under a million barrels per day. So you have that factor at the same time as you have more oil coming to the market. So expect some volatility,” Yergin told CNBC in an interview on the sidelines of a conference in Abu Dhabi.

Despite expectations of volatility, IHS Markit’s vice chairman sees Brent Crude prices range-bound in the US$55-65 range.

Yergin is not alone in predicting substantially lower oil demand growth this year than originally anticipated.  

The International Energy Agency (IEA) revised down its demand growth estimates for 2019 in its latest Oil Market Report, by 100,000 bpd to 1.1 million bpd, after seeing that between January and May demand growth was just 520,000 bpd, the lowest increase for the period since 2008.     

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

US Surpasses Saudi Arabia, Russia To Become World’s Top Oil Exporter

US Surpasses Saudi Arabia, Russia To Become World’s Top Oil Exporter

The US has once again surpassed Saudi Arabia and Russia to reclaim the No. 1 spot as the world’s largest oil exporter, according to data from the International Energy Agency.

Record shale production helped the US ship nearly 9 million barrels of crude and other oil products a day in June, surpassing Saudi Arabia, Bloomberg reports. And as more companies build the infrastructure necessary to transport oil from fields in Texas and New Mexico to the coast, the amount of oil exported by the US is expected to climb. 

The increase in US crude exports in June was helped by a surge in crude-oil shipments to more than 3 million barrels a day, according to the IEA report. Meanwhile, Saudi Arabia was cutting exports in line with the OPEC+ agreement on production cuts, while Russia’s output was hampered by the Druzhba pipeline crisis.

Saudi Energy Minister Sees No Radical Change in Oil Policy

As OPEC members adhere to an agreement to cut production for the third year, swelling US output is hampering the cartel’s effort to drain stockpiles and ‘rebalance’ the global energy market in a way that drives up prices.

Rising American output, combined with concerns about global demand fueled by the ongoing US-China trade war have prompted a nearly 20% drop in Brent crude prices – the global benchmark – from the April high.

However, the US’s spot at the top of the global oil-exporting heap already appears to be short-lived. Saudi Arabia appears to have reclaimed the top spot for July and August as hurricanes disrupted US production, while the trade dispute “made it more difficult for shale shipments to find markets,” according to the IEA.

But in the coming months, the US could easily wind up back in the No. 1 spot as American crude exports are expected to climb by one-third from June levels to as much as 4 million barrels a day as new infrastructure is being built to handle more oil flows.

USA Oil Production

USA Oil Production

The Real Reason Why US Oil Production Has Peaked

Raymond James recently estimated that over the last three years the U.S. decline rate for oil has doubled from 1.6 to 3.2 million barrels per day. The drilled but uncompleted well inventory (“DUC”) is back to normal, so the number of wells being drilled and the number of wells being completed is now about the same. We need over 12,000 new horizontal oil wells completed each year to hold production flat and the number of completed wells will need to go up each year. 

The U.S. Energy Information Administration (“EIA”) forecast at the beginning of this year was that the U.S. shale oil plays were just getting started and that production would increase by at least 2 million barrels of oil per day (“MMBOPD”) each year for several more years.

Now if you believe that U.S. shale production will increase by 2 million barrels per day each year for several more years, then I have a bridge that I think you might be interested in. But let’s just play “what if”, or what if it really did increase by 2 million barrels per day for the next five years.

According to the EIA’s Drilling Productivity Report, December 2018 shale production, all basins, was 8,232,750 barrels per day and the legacy decline, for all basins, averaged 6.14 percent per month or 505,737 barrels per day.

Legacy decline of over one million barrels per day would be a crippling requirement of shale producers. But not to worry, that is simply not going to happen. Now total US production did increase by two million barrels per day 2018. In fact, according to the EI.s Monthly Energy Review, US production increased by 2,064,000 barrels per day in 2018. But for the first 7 months of 2019, total US production has declined by 54,000 barrels per day.

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

2005-2018 Conventional crude production on a bumpy plateau – with a little help from Iraq

2005-2018 Conventional crude production on a bumpy plateau – with a little help from Iraq

This post is an update of a graph done in 2015:

Conventional_oil_plateau_2005_2014
Fig 1: Conventional oil production on bumpy plateau 2005-2014
In http://crudeoilpeak.info/latest-graphs

When adding the new data for 2015-2018 it was discovered that the 1980-2014 data had been changed – mainly increased by up to 1.24 mb/d in 2014 as shown in this graph:

EIA_oil_supplies_stat-changes_2014_in_2018
Fig 2: Total EIA oil supplies were retrospectively changed

When (re-)calculating conventional crude oil production the increase in crude oil (528 kb/d in 2014) matters most so the following graph shows this difference.

EIA_crude_stat-changes_2014_in_2018
Fig 3: Changes in EIA crude oil statistics

US shale oil production

This is unconventional oil as the source rock has low permeability and low porosity and therefore needs to be fracked.

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

Debunking ‘Lower Oil Supply Will Raise Prices’

Debunking ‘Lower Oil Supply Will Raise Prices’

We often hear the statement, “When oil supply is lower, oil prices will rise because of scarcity.” Now, we are getting to see firsthand whether oil prices really do rise, as oil supplies become more scarce.

Figure 1. Figure from the OPEC Monthly Oil Market Report for August 2019 showing world and OPEC oil production by month.

Figure 1 shows that world oil supply hit a peak in November 2018 and has declined since then, mostly because of a decline in OPEC’s production. So, total oil production seems to be down for about eight months, relative to the peak in November 2018.

Despite this big cutback by OPEC in its oil production, prices have not responded as OPEC had hoped:

Figure 2. Average monthly spot Brent Oil prices, based on EIA data.

In fact, as I write this, Brent oil price is currently quoted as $60.48, which is back in the range of December 2018 and January 2019 low prices. Also, reducing production doesn’t seem to be reducing inventories. Figure 3 suggests that they are now higher than they were before the reduction in oil supply took place.

Figure 3. Figure from the OPEC Monthly Oil Market Report for August 2019 showing OECD commercial oil stocks.

Why aren’t oil prices rising and oil inventories falling, if oil production has fallen?

The basic issue is that the economy is very much interconnected under the laws of physics, because energy is required for every activity that is considered part of GDP. Energy is required for any kind of heat or any kind of movement. Energy is even required for electricity. Without energy from the sun, food can’t grow; without supplemental energy of some kind (such as using electricity to heat an electric stove or burning animal dung or sticks), it becomes impossible to cook food or smelt metals.

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

USA and World Oil Production

USA and World Oil Production

The USA data below was taken primarily from the EIA’s Petroleum Supply Monthly while some were taken from the EIA’s Monthly Energy Review.

I have some bad news to report. The EIA no longer published World production data or Non-OPEC production data. This data had previously been published in the Monthly Energy Review.

The Monthly Energy Review’s data was one month behind the Petroleum Supply Monthly but now they jumped two months and are now one month ahead of the Petroleum Supply Monthly. They now publish the previous month’s numbers, June in this case, but now publish only US data. The Petroleum Supply Monthly is unchanged.

EDIT: The Petroleum Supply Monthly does publish some, incomplete, world data… through April or one month behind their USA data. I will use that with an explanation and comments next month.

The closest I can come to World oil production, through June, is the combined production of OPEC, Russia, the USA, and Canada. This is 70% of total World Production.

Here is the other 30% of World oil production. However, this data is only through March. Unfortunately, I can never update this chart because the EIA no longer publishes the data

This 30% of World oil production peaked in late 2015 and has declined an average of 450,000 barrels per day per year every year since.

Actually, in 2015 these countries averaged about 32% of World oil production but now averages about 29%.

I have no other source for World oil production. The IEA publishes quarterly projected data for the World and Non-OPEC. But this data is total liquids and only quarterly projections that bears little resemblance to actual C+C production.

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

THE UNITED STATES A NET OIL EXPORTER?? The Dirty Little Secret

THE UNITED STATES A NET OIL EXPORTER?? The Dirty Little Secret

The United States became a net oil exporter for the first time in 75 years, or so they say.  While the U.S. may indeed be exporting more petroleum than it imports from time to time, there’s a dirty little secret behind the data.  And one of those secrets overlooked by some energy analysts and the press is that the U.S. still imports 7 million barrels per day of oil.

So, why would the United States continue to import 7 million barrels per day (mbd) of oil if it is indeed… a Net Oil Exporter??  Good question.  And, the answer to that question is hidden in the details, or as they say, “The devil is in the details.”

According to the EIA, the U.S. Energy Information Agency, the U.S. first became a net oil exporter during the week of Nov 30th, 2018 by exporting 211,000 barrels per day more than it imported.  Please understand the figures below also include petroleum products:

The graph shows the data as negative because it is presented as “net oil imports.”  Thus, a negative number means the U.S. is exporting more than it imports.  I have changed my figures in the chart to represent “net oil exports.”  As we can see, the U.S. had an even higher amount of net oil exports this past week at 675,000 barrels per day.  Regardless, the U.S. has been a net exporter for three weeks out of the past seven months. However, if we look into the details of this data, we will find out that the United States isn’t exporting this oil and petroleum because it “WANTS” to, but because it’s “FORCED” to. There’s a big difference.

NOTE: The charts in this article come directly from the U.S. Energy Information Agency website, with my added annotations.

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

TROUBLE AT THE BAKKEN: Oil Production Finally Peaking?

TROUBLE AT THE BAKKEN: Oil Production Finally Peaking?

Is the mighty Bakken Shale Oil Field finally peaking?  Well, according to the data from the folks at the North Dakota Department of Mineral Resources, oil production in the Bakken has been flat for the past six months.  And, to make matters worse, production has been flat even though oil prices increased from a low of $42 in January to the mid $60’s in April.

So, something seriously wrong is going on in North Dakota.  What a difference in the Bakken’s recent oil supply compared to the field’s heyday when production surged from 300,000 barrels per day in 2011 to over 1.1 million barrels per day in 2014.  Furthermore, the oil price the shale companies in the Bakken are receiving is now $48 a barrel versus the West Texas Intermediate price of $57.

If we look at the past seven months, the North Dakota Bakken has only added 36,000 barrels per day (bd) of new oil production compared to 114,000 bd during the same period last year:

As we can see in the chart above, the output from Sep 2017 to Apr 2018 enjoyed an upward trend, while the Sep 2018-Apr 2019 has been flat.  You can see this better in Enno Peters chart from ShaleProfile.com.  I highly recommend followers check out his site as he provides updates on the top shale oil and gas fields in the United States using state data from over 100,000 wells.

These charts from ShaleProfile.com show the annual change production by different colors.  Here we can see that Bakken oil production increased steadily from 2011 to 2014, plateaued in late 2014 and 2015, declined in 2016, raised in 2017-2018, and has plateaued once again in 2019. The likely culprit for the plateau in Bakken oil production has to do with the lower oil price and the reduction of investment funds available to the shale companies that continue to spend more money than they make.

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

Alkylation Unit At Largest East Coast Refinery “Completely Destroyed” After Inferno, Restart Unclear

Alkylation Unit At Largest East Coast Refinery “Completely Destroyed” After Inferno, Restart Unclear

Following the explosion and subsequent inferno at Philadelphia Energy Solutions’ oil refinery last week, its alkylation unit has been “completely destroyed”. After fire tore through the east coast’s largest refinery, workers are now getting a chance to finally assess some damage that will hamper the normal production of fuel going forward.

According to Reutersthe refinery could remain shut down for an extended period of time even though NBC Philadelphia reported on Sunday that the blaze had finally been extinguished and air quality testing in the area was taking place. Philadelphia Deputy Fire Commissioner Craig Murphy said that the cause of the fire remained unclear on Friday, but reports did say that “the gas valve that had been fueling the blaze was shut off and the tank involved in the explosion was isolated”.Following the plume from the explosion – NBC Philadelphia

So far, air quality testing has not found anything unsafe, according to officials. 

After a leak in an alkylation unit, an explosion sent the complex ablaze, forcing the Girard Point section of the refinery to shut down. The Point Breeze section had already been under repair due to a fire earlier this month. Due to the fact that it is a chemical fire, officials said last week that it could burn for a lengthy amount of time.

Embedded video

@6abc @CBSPhilly @FOX29philly Philadelphia energy Solutions Refining Complex at about 4:15 am

Four staff members are reported to have suffered minor injuries as a result of the explosion.  Mayor Jim Kenney said: “My initial reaction was ‘Damn, this is bad. It was a frightening scene. I’m thankful that no one got killed or seriously injured.”

“We will see what the federal and state authorities say, if that’s what is called for that’s what we will do,” Kenney continued.

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

THE END OF THE OIL GIANTS: And What It Means

THE END OF THE OIL GIANTS: And What It Means

Recently, Saudi Aramco, the world largest oil exporter, has acknowledged that Ghawar, the world largest oil field, is in decline. The news went mostly unnoticed except in the specialised media.  OK, so the Saudi have a bit of bother, so what?  In fact, this piece of news is extremely important. Previously the oil world had been led to believe that Ghawar was producing over 5 Million barrels/day (Mb/d).[1] As part of its fund-raising, Aramco has disclosed that it is in fact down to 3.8Mb/d.

THE END OF THE OIL GIANTS:  And What It Means

GUEST POST: By Dr. Louis Arnoux

The meaning of this news snippet takes a bit of explaining.  What the specialised media did not emphasise is what follows:

When giant oil fields go into decline, they usually decline abruptly. Ghawar’s decline is ominous. It was discovered in 1948 and until recently represented about 50% of the oil crude production of the Kingdom of Saudi Arabia (KSA). Ghawar is representative of some 100 to 200 giant oil fields. Most of them are old.  The most recently discovered giants are of a diminutive size compared with those old giants.[2]

Giants represent about 1% of the total number of oil fields and yet produce over 60% of conventional oil crude.[3]Very few real giants have been discovered in recent years. The geology of the planet is now known well enough and prospects for new significant giant oil discoveries are known to be low.  In recent decades, discoveries of smaller oil fields have not been able to compensate for the eventual loss of the giants. Figure 1 illustrates the matter. It shows the net flux of addition to reserves per year (additional volumes less volumes used). 

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

Australian Fuel Security Review ignores peak oil in China 2015 (part 3)

Australian Fuel Security Review ignores peak oil in China 2015 (part 3)

Australia increased its internal oil dependency & vulnerability

Let’s summarize what we covered in part 1 and 2

  • Australian oil production peaked in the year 2000 while oil consumption is going up relentlessly
  • 3 Australian refineries closed, resulting in fuel imports dramatically increasing, mainly from South Korea and Japan. This is a big problem if there is a military conflict in the South China Sea
  • Australia’s emergency oil stock is only 60% of IEA requirements since 2014. The government has no firm plans to improve this situation
  • Asian oil production started to peak in 2010 while consumption is still going up
  • China’s oil production started to decline after 2015. Oil imports are now around 10 mb/d. No one really knows where China will import its oil from in the next 5-10 years, not to mention in the next decades
  • China’s maritime silk road project is to be seen as securing China’s oil import routes
  • Asia imports around 16 mb/d from the Middle East, making it highly vulnerable to the next ME war
  • US shale oil will peak in a yet unknown year, but it will peak due to extraordinarily high decline rates
  • The Fuel Security Review argues that the global oil industry will always solve problems of supply disruptions and return to business as usual. This is an untested assumption because there will be fierce competition as Asia has entered the era of peak oil.

So what should Australia have done to prepare for this change? It should have REDUCED its oil use by

  1. developing alternative transport fuels and building up associated infrastructure
  2. introducing bio-fuels for sole use in agricultural production and for transport of food to the cities
  3. electrifying rail: intercity, freight and urban rail including expanding and modernising manufacturing capacities for rolling stock and other rail equipment
  4. NOT planning and building additional oil dependent infrastructure like freeways, road tunnels and airports

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

Olduvai IV: Courage
In progress...

Olduvai II: Exodus
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