Oil consumption growth

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Until recently the main source of consumption growth were China and India. The USA also increase consumption substantially due to low oil prices.

Earth population growth imply the growth of oil consumption.


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[May 30, 2017] Looks like the Chinese have been filling their SPR over the last two years

May 30, 2017 | peakoilbarrel.com
George Kaplan says: 05/24/2017 at 9:57 am
There's a plausible sounding theory, even though posted on Zero Hedge, that the Chinese have been filling their SPR over the last two years, and that is about to stop. This would mostly account for why OECD storage levels only took about 35% of the supply-demand imbalance. If they do stop then about 1 mmbpd of demand would suddenly be lost, but it might also imply that the real economy demand growth in the period since January 2015 has only been half what it looks to have been. Taking account of the sudden drop and a slower growth in demand would mean a longer time would be needed to draw down OECD stocks. However if the China SPR scenario is correct then almost all the drawdown would come from OECD. By my reckoning this would push a balancing out to late 2018 (although by then we may be seeing some bigger supply drops as the pipeline for new project start-ups will be drying up). But if the balancing is pushed out then the chances of many FIDs this year or next will decline and the possibility of a sudden supply crunch in 2019 through 2022 would be greater. The green curve below gives possible drawdown under this scenario. The red one was a previous assumption that the OECD stocks would be drawn down at only about 35% of the imbalance (as happened when they were rising). I seemed a bit iffy when I fitted it that way, and I think the China SPR filling is a better explanation.

Watcher says: 05/24/2017 at 6:00 pm
SPRs in general try to have 90 days of domestic consumption in them. This was a standard put into place mostly in Europe. China has embraced it.

The US at 750ish million barrels and having a consumption (net of production) of about 11 million bpd (remember, this is real stuff . . . consumption, no refinery gain BS allowed) and so not quite 70 days domestic consumption.

China, at net consumption of about 7 million bpd X 90 needs an SPR of 630 million barrels. That's about what they have, but of course with 5% consumption growth they'll have to adjust up, but for now . . . all is well.

There probably is no flow in or out of China for SPR reasons. Already full. Have been for a while.

Dennis Coyne says: 05/25/2017 at 12:30 pm
Hi Watcher,

Crude inputs to refineries and blenders was 16.2 Mb/d for the 2016 average.

https://www.eia.gov/dnav/pet/pet_pnp_inpt_dc_nus_mbblpd_a.htm

So 700/16.2 is 43 days for SPR alone. For commercial crude stocks plus SPR it is 1200 Mb so 1200/16.2=74 days.

https://www.eia.gov/dnav/pet/pet_stoc_wstk_dcu_nus_m.htm

George Kaplan says: 05/25/2017 at 2:29 pm
This is the chart Zero Hedge had, or linked to – the key is Xinhua CFC, who have Chinese data not otherwise available and charge a lot of money for it. I don't know how you'd go about checking if it's correct.

Energy News says: 05/26/2017 at 4:26 am
Hello, don't forget that Xinhua doesn't publish China's SPR figures. The SPR figure in the chart is an estimate based on (Production + Imports – Refinery Inputs). I'm not sure if all the teapots are included in the official refinery data.

I think Zero Hedge borrowed the chart from here:
Scotiabank pdf file: http://www.gbm.scotiabank.com/scpt/gbm/scotiaeconomics63/SCPI_2017-04-12.pdf

Latest figures from Xinhua news agency
2017-05-26 Chinese oil inventories month/month April changes: crude +1.64%, oil products -7.87% (gasoline -0.27%, diesel -14.4%) – OGP/BBG

Chart showing March

Energy News says: 05/26/2017 at 8:49 am
China's April diesel stocks fall for second straight month -Xinhua
http://af.reuters.com/article/energyOilNews/idAFL4N1IS2EJ
George Kaplan says: 05/26/2017 at 1:54 pm
So are the numbers you are posting supporting or not the Zero Hedge theory and/or my projection based on it? And if not why?
Energy News says: 05/27/2017 at 1:34 pm
I guess that Chinese demand must be higher than estimated. Like this article was suggesting

Bloomberg – October 11th 2016
China's appetite for oil.
Fuel use grew by about 5 percent in the first half of 2016, according to China's biggest oil refiner, faster than the 0.4 percent derived from government data. That "official" number is clouded by rising gasoline exports - blends that don't show up in official figures, according to the International Energy Agency, Sinopec Group and Energy Aspects Ltd.
Chinese authorities are also having trouble tracking refinery activity because of the surge of processing by independent refiners, known as teapots, according to Energy Aspects' Meidan.
http://www.bloomberg.com/news/articles/2016-10-10/gasoline-cocktails-mix-with-gaps-in-data-to-cloud-china-oil-view ?

[Apr 17, 2017] China crude oil imports increased to a record 9.21mb/day in March 2017 versus 8.32mb/day in February 2017

Apr 17, 2017 | peakoilbarrel.com
Energy News says: 04/15/2017 at 10:35 am
China crude oil imports increased to a record 9.21mb/day in March 2017 versus 8.32mb/day in February 2017 (7.33 barrels per ton conversion) – Chinese customs data. I guess China is still filling it's SPR.

Before I had read this I had been wondering why news articles were saying that world oil inventories had decreased a little. Inventories often build into April. Also news agencies estimates are still saying that OPEC oil exports are holding steady and have not decreased in line with their production cuts, I guess that they have been exporting from their inventories.

inventory declines, news clips

Reuters Apr 11, 2017 – Nordic bank SEB said global oil inventories in weekly data have dropped by 42 million barrels in the last four weeks.
http://uk.reuters.com/article/uk-oil-opec-storage-idUKKBN17D1NH

Bloomberg 2017-04-04 – Since mid-February, between 10 million and 20 million barrels have left the Caribbean
https://www.bloomberg.com/news/articles/2017-04-03/oil-traders-said-to-drain-caribbean-hoards-as-opec-impact-hits

Clipper Data Apr 6, 2017 – This week we have seen Iranian barrels drop to 5 million barrels, while barrels offshore of United Arab Emirates have halved in the last week, dropping to just under 10 million barrels.
http://blog.clipperdata.com/floating-storage-holding-up-despite-iran-drop

[Feb 21, 2017] Chinese oil demand growth

Feb 21, 2017 | peakoilbarrel.com

Reuters calculated Chinese oil demand growth of 2.5% in 2016, based on official data-a three-year low-down from 3.1% in 2015."

> > > > > > > >

[Feb 12, 2017] Wall Street Pouring Money Back Into Oil And Gas

Feb 12, 2017 | www.zerohedge.com

Submitted by Nick Cunningham via OilPrice.com, Despite the near record increase in U.S. oil inventories last week – an increase of 13.8 million barrels – oil prices traded up on February 8 and 9 as traders pinned their hopes on a surprise drawdown in gasoline stocks, which provided some evidence of stronger-than-expected demand. The abnormal crude stock increase took inventories close to 80-year record levels at 508 million barrels, and is another bit of damming evidence that should worry oil bulls. But the oil markets were not deterred. In fact, that has been a defining characteristic of the market in recent weeks – optimism even in the face of some pretty worrying signals about the trajectory of the market "adjustment" process. More signs of optimism abound. Wall Street is pouring the most money into oil and gas companies in the U.S. since at least 2000, according to Bloomberg. In January alone, drillers and oilfield service companies raised $6.64 billion in 13 different equity offerings. "The mood is absolutely different," Trey Stolz, an analyst at the investment banking firm Coker & Palmer Inc., told Bloomberg. "Go back to a year ago and the knife was still falling. But today, it feels much, much better."

[Jan 28, 2017] Crude Oil: So Much For That Rally by Johanna Bennett

Notable quotes:
"... Light, sweet crude for March delivery recently fell 90 cents, or 1.67%, to $52.88 a barrel on the New York Mercantile Exchange. Meanwhile, brent, the global benchmark, dropped $1.02, or 1.8%, to $55.22 a barrel on ICE Futures Europe. ..."
"... We believe the market will soon get the catalyst it has been waiting for to push higher – better inventory stats. Getting ahead of this catalyst is a good risk-reward proposition in our view. ..."
blogs.barrons.com
If you were hoping crude oil prices would end the week on a positive note after yesterday's rally, you're likely to be disappointed.

U.S. and brent crude futures fell Friday as worries about U.S. drilling activity once again weighed on the market following the release of data showing that the number of active rigs rose for a second consecutive week.

Light, sweet crude for March delivery recently fell 90 cents, or 1.67%, to $52.88 a barrel on the New York Mercantile Exchange. Meanwhile, brent, the global benchmark, dropped $1.02, or 1.8%, to $55.22 a barrel on ICE Futures Europe.

Crude prices have oscillated between gains and losses over the past several weeks as investor sentiment has shifted almost daily. OPEC and its allies have so far followed through on promised production cuts, yet fears linger that U.S. drilling will hurt efforts to curb global supply.

Crude prices settled Thursday at their highest prices in several weeks. But today's decline pushed futures contacts into the red for the week. If U.S. and brent crude contracts settle at current levels, prices will fall more than 0.6% for the week.

But Vikas Dwivedi and his team at Macquaire recommend increasing oil exposure, pointing to a tightening sour crude market and storage trends. But he warns that 2018 looks challenging.

We believe the market will soon get the catalyst it has been waiting for to push higher – better inventory stats. Getting ahead of this catalyst is a good risk-reward proposition in our view. However, we caution against turning a rally into a structural trade. Our balances indicate the market is oversupplied again in 2018. Key 2018 drivers include the return of approximately 1.2 MM BPD of post-deal (OPEC and NOPEC ex U.S.) supply and 0.6 MM BPD of U.S. supply growth + global.

The Energy Select Sector SPDR Energy ETF (XLE) fell 1.3% in recent market action, while the iShares U.S. Energy ETF (IYE) dropped 1.2%.

Elsewhere in the ETF realm, the United States Oil Fund (USO) declined almost 1.8% and the iPath S&P GSCI Crude Oil Total Return Index ETN (OIL lost 2%. The U.S. Brent Oil Fund (BNO) also fell 2%.

[Jan 11, 2017] What percentage of US oil consumption is food transtoration

Jan 11, 2017 | peakoilbarrel.com
Watcher says: 01/10/2017 at 11:36 am
What % of US oil consumption is food transport? This got tricky quickly.

Average US person eats about 5.4 pounds of food a day. That's just the food. Average meal travels 1500 miles to reach your mouth.

First tricky item - packaging. It has to transport, too. Amazing variance on this. Glass jar of pickles vs paper around candy bars. The only estimate out there is numbers for municipal solid waste and estimates of % of that is food packaging. Year 2000 US waste generation 4.5 pounds/day/person, and growing. Probably over 6 by now based on the curve, but will use 5 lbs/day cuz round number.

31% of that is packaging and half of that number is food packaging. Some 2006 study. So 15% of 5 lbs a day is 0.75 pounds added to the 5.4 pounds of food is 6.15 pounds shipped a day per person.

For 1500 miles.

Eyeballing some charts looks like typical/average truck hauling weight for stuff hauled is 60,000 lbs. Typical diesel mileage 6 miles/gallon.

6.15 pounds X 320 million mouths = about 2 billion pounds of food moved each day
1500 miles / 6 = 250 gallons truck burned
2 billion lbs / 60,000 lbs = 33,333 truck trips X 250 gallons/truck trip = 198.4K bpd to move food.

Ain't much. Maybe there's an error in there. Top of my head . . . things not included, hauling spare parts for the food moving trucks, spare parts for the packaging gizmos, plastic packaging, agricultural consumption itself.

[Edit] Blurb says 17% of total US oil use is agricultural, up and downstream (fertilizer plus fuel). This would be far more than food transport.

Oldfarmermac says: 01/10/2017 at 12:26 pm
I am suspicious of that fifteen hundred mile figure, but it may be accurate. Or it may have assumed a life of it's own, after being tossed out by one or two people who really just guessed at it.

Most of the food that is produced in truly huge amounts, staple food, is shipped by water, and or by rail, if it travels a LONG way. A VERY limited amount of food, in relation to the total amount, is air freighted.

Here in the USA, it's not too likely that very much in the way of unprocessed or processed staple food is shipped more than a thousand miles by truck. Exceptions will be mostly fresh high retail value produce, shipped as directly and quickly as possible from grower to retailer.

The REAL food miles come at the very tail end of the distribution chain. I never owned an eighteen wheeler, but I did once own a C70 Chevy which would legally haul about sixteen thousand pounds of apples to market. The farthest local growers usually go with their own truck of this sort is about a hundred miles, one way. Thirty gallons of diesel would take me that far, and home again.

The people who actually bought my apples at retail, after they were picked up at the wholesale market and delivered around town in smaller trucks, usually bought no more than five pounds at a time.

I'm guessing, pulling numbers out of my hat, but I suppose a typical shoppers average grocery purchase weighs from about twenty five to thirty pounds, up to a hundred pounds,depending on family size, and is made on roughly a weekly basis, on average.

And I'm guessing that the average trip to the super market is at least six to ten miles, round trip. THAT's where the food miles really pile up. A liter of gasoline burnt to get fifty pounds home, the last five miles, times around a hundred million households, times fifty weeks, adds up. FAST.

Watcher says: 01/10/2017 at 1:58 pm
Maybe. The pickle jar weighs a LOT and there's not much food weight part of that. The whole packaging thing is a significant thing, and that's another food item I didn't include, disposal of it.

I'm going to guess the 1500 mile thing came from the coasts' pop centers and their daily bread from Iowa and Nebraska. The various websites talking about this like to talk about a head of Imperial Valley California lettuce going to England. X calories burned for 1 or two calories delivered to the mouth. But that sort of thing definitely would drag the average up. 1500 miles maybe is legit.

I am surprised the total transport is south of 1 mbpd, if it truly is. As for shipping, I can't see Iowa bread going to NYC any way but by truck. Not going to fly it there. And the canals don't reach.

Everybody driving the last 5 miles to the store . . . maybe that really doesn't show in the diesel calc. Oh! Of course. The issue is not diesel. It's the 60,000 pounds per trip. A car is carrying the much lower weight per your estimate. Will redo.

Watcher says: 01/10/2017 at 3:20 pm
14 billion pounds of food move the last 5 miles by car per week, probably at 150 lbs per weekly load (family of 4 at 6 lbs/day/mouth incl packaging)

14 billion / 150 lbs = 93 million car trips per week.

5 miles in a 25 mpg car is 0.2 gallons. X 93 million /7 and /42 = an additional 63,000 bpd from the car trips added to the trucks above. About 260K bpd for food transport.

Hmmm of course if it's 5 miles each way that's a X 2 on the 63K. And SUVs for that trip, not a Datsun. Might be up nudging 400K.

Watcher says: 01/10/2017 at 8:07 pm
It occurs to me that Pepsi and Coke may not be food, and they are heavy.

I'm having problems with this 400ish K number because the famous 2004 pie chart of US oil consumption said 65% transportation, and of that 65% it was only 37% passenger cars, 18% heavy trucks and 27% light trucks (sums to 45%), and that was before SUVs (called light trucks) had swept up sales. Though F-150s may have arrived.

0.37 X 0.65 is only 24% of consumption. Trucks light and heavy rather more. So what are they hauling. Food as a daily consumable would seem to be the dominant hauled stuff, but apparently not.

Oldfarmermac says: 01/10/2017 at 5:18 pm
Most of the grain or flour that goes from the midwest to the northeast probably gets there by rail, where it will then be baked into bread, packaged, and shipped by truck to food distribution centers, or directly to supermarkets. But the distribution center food warehouse seems to rule these days, because it's better to load a truck up to the doors with a variety of stuff all destined for one address or maybe two or three, than it is to have a truck stop to deliver bread and nothing but bread to a bunch of different stores. That means a lot more total time and miles invested in stop and go driving, compared to the one stop load. That still happens, but not as often as in the past.

Grain is milled into flour near where it's grown, when possible, because this reduces total shipping costs, being that the weight and volume of flour is less than the weight of whole unprocessed grain, plus the tailings are used mostly in livestock rations, and customer for that product is most definitely NOT in NYC, lol.

Most of the cows,hogs and chickens we eat are raised in confinement, and are raised in the mid west and southeast, closer to the feed supply, and where land and water are cheaper, and neighbors less fussy, and mostly in localities where neighbors are relatively few in number.

Nobody's ever going to operate a modern supersize hog farm anywhere close to the BIG APPLE, 😉

clueless says: 01/10/2017 at 2:08 pm
Watcher's conclusion is probably right – not much fuel used to transport food compared to the total available. On the other hand, some random thoughts. 5.4 pounds/day/person is too high. Babies, young children, seniors, etc. Second, the 1500 miles is too high. Some of the basics make up a significant amount of the weight – like liquid milk, along with other dairy products, cheese and eggs. These products generally will never go 1500 miles. Vegetables, seafood, fruit, etc yes. But, chicken, pork and beef – I think that 1500 miles is too high.

OOPS! Of the 5.4 lbs, 30% – 40% is wasted.

Watcher says: 01/10/2017 at 3:16 pm
Pre oil, railroad cars had no refrigeration to speak of in summer months. That's where the term cattle car came from. Had to ship beef alive to the cities.

40-50% of a steer by weight is not edible.

Oldfarmermac says: 01/10/2017 at 6:04 pm
I am not at all sure just HOW much of a cow winds up as nekkid ape chow these days, but YOU most definitely don't WANT to know much about what goes into processed meat products, if you plan on eating them.

Fifty years ago when I had the "insider tour" of a huge and extremely famous hog slaugher plant that you get only by personal invitation from management,even back then, they bragged about selling everything but the squeal.

I'm pretty sure that well over fifty percent of the live weight of a cow winds up as nekkid ape chow these days, but how much over I can't say. Fifty to fifty five percent would be a reasonable guess. Farmers have been breeding cows for more milk and meat, and less waste, since the beginning. For the last seventy five years or so, this breeding has been based on high tech such as artificial insemination, a solid understanding of genetics, and very sharp pencils. So a typical cow TODAY is going to yield significantly more more than she did a decade or two back.

[Jan 08, 2017] Long carbon based energy perspectives

Jan 08, 2017 | peakoilbarrel.com
texas tea says: 01/05/2017 at 5:00 pm
https://wattsupwiththat.com/2017/01/05/energy-and-society-from-now-until-2040/

long carbon based energy

Key conclusions of the report:

Developing countries, like China and India are urbanizing and their populations are becoming more affluent, this will increase global energy demand 24% by 2040. This includes the ExxonMobil prediction that energy use efficiency will double (figure 4).

The world population will increase from 7.3 billion today to over 9 billion in 2040, with a much larger middle class population (defined as >$14,600 and <$29,200 yearly for a family of 4) using energy than today. World GDP will effectively double by 2040. Living standards will rise dramatically, especially in the developing world.

Natural gas consumption will increase 54 quadrillion BTUs by 2040. Nuclear and renewables will increase 24 and 20 quadrillion BTUs, respectively. The 2040 energy mix will remain about the same as today (figure 5 and Table 1).

Rising electricity demand will drive the growth in global energy between now and 2040. The increase in the number of homes with electricity, industrialization of the developing world and our increasingly digital and plugged-in lifestyles will drive this growth. Half of global electricity demand is from industrial activity; thus good jobs can be lost if electricity costs are too high. Jobs will move to locations where electricity is cheap, an example is the new Voestalpine steel plant in Corpus Christi, Texas.

Crude oil and natural gas will remain the world's primary energy source. Even in 2040 oil and natural gas will supply 57% of all energy demand, this is an increase from 56% today. Oil demand will grow 18% through 2040 and natural gas demand will grow 44%. The developing world will account for the largest increases. Unconventional ("fracked") oil and gas, oil ("tar") sands, and deep water oil production will account for over 25% of the liquid supply in 2040.
Carbon dioxide emissions will increase, at least until 2030."

[Jan 08, 2017] 01/04/2017 at 8:58 am

Jan 08, 2017 | peakoilbarrel.com
High taxes create a "tax shield". The price at the pump in Europe is approx. 1/3 oil and refining and 2/3 tax and duty (see http://euanmearns.com/energy-prices-in-europe/ ). Consumption is therefore less responsive (inelastic) to the international oil market price compared to the USA. Also, Europeans have adapted to this over time and drive smaller and more fuel efficient cars.

Several oil producers have cut back on subsidies during the last couple of years. This should restrict domestic demand increase. Most oil exporters' oil consumption/capita will probably level off and never come close to the US figure. However, given the level of population growth and demographics (young people) in MENA their domestic consumption is unlikely to reduce significantly (slight increase seems more likely).

Watcher says: 01/04/2017 at 11:47 am
"Most oil exporters' oil consumption/capita will probably level off and never come close to the US figure."

US per capita consumption 0.061 bpd.

Exporters:
Canada 0.066
KSA 0.135
Kuwait 0.156
Qatar 0.145
UAE 0.09

The only major exporter not there is Russia at 0.02, but President Trump will help them increase.

Not an exporter but FYI Singapore is highest I've seen at 0.24.

Jeff says: 01/04/2017 at 2:58 pm
_most_ oil exporters.

In 2012 ( http://www.indexmundi.com/map/?v=91000 ): Ecuador (0.11), Libya (0.051), Kazakhstan (0.12), Iran (0.23), Iraq (0.22), Venezuela (0.27), Oman (0.46)

Watcher says: 01/04/2017 at 7:19 pm
mazama says ecuador may drop to imports this year. They don't list any Libya exports. Kazakhstan and Iran are legit. And the bible doesn't track Iraq.
AlexS says: 01/04/2017 at 4:09 pm
"The only major exporter not there is Russia at 0.02, but President Trump will help them increase."

How? Will he help to increase car fleet in Russia?

KSA and its neighbours use a lot of oil for electricity generation.
Russia uses natural gas, nuclear, hydro and coal.

Watcher says: 01/04/2017 at 7:11 pm
How? Will he help to increase car fleet in Russia?

Precisely.

Chris says: 01/05/2017 at 12:58 pm
Just to add information, in Europe, taxes are split in two parts: excise (typically fixed amount) and VAT (variable amount). For gas in Belgium, excise are about 0.60 per litre or half the price of gas. So price variations due to oil international prices are attenuated. Add to these that taxes decreases when oil price increase and increase when oil price decrease. This is a way to guarantee revenue for the State when oil prices decrease.

[Dec 26, 2016] Vehicle Sales Forecast: Sales Over 17 Million SAAR Again in December, On Track for Record Year in 2016

Dec 26, 2016 | www.calculatedriskblog.com
by Bill McBride on 12/26/2016 09:53:00 AM The automakers will report December vehicle sales on Wednesday, January 4th.

Note: There were 27 selling days in December 2016, down from 28 in December 2015.

From WardsAuto: December Light-Vehicle Sales to Push U.S. Market to New Record

December U.S. light-vehicle sales are forecast to finish strong enough for 2016 to top 2015's record 17.396 million units. However, actual volume largely will be determined by results in the final third of the month, because a major portion of December's deliveries typically occur after Christmas.

The forecast 17.7 million-unit seasonally adjusted annual rate is below November's 17.8 million, but above December 2015's 17.4 million.
...
Despite the drop in December's volume, total 2016 sales will end at 17.41 million units, barely edging out the all-time high set last year.
emphasis added

Here is a table (source: BEA) showing the 5 top years for light vehicle sales through November, and the top 5 full years. 2016 will probably finish in the top 3, and could be the best year ever - just beating last year.

Light Vehicle Sales, Top 5 Years and Through November
Through November Full Year
Year Sales (000s) Year Sales (000s)
1 2000 16,109 2015 17,396
2 2001 15,812 2000 17,350
3 2016 15,783 2001 17,122
4 2015 15,766 2005 16,948
5 1999 15,498 1999 16,894

[Dec 22, 2016] Oil Consumption Is Immune To A Transport Transformation

Notable quotes:
"... ...in 2016, 96 percent of all new vehicle sales featured a combustion engine. IHS Markit estimates the average vehicle life globally to be about 15 years, which means that the impact of new vehicle technologies is expected to take time to materially affect the vehicle fleet and overall fuel demand. ..."
oilprice.com

...in 2016, 96 percent of all new vehicle sales featured a combustion engine. IHS Markit estimates the average vehicle life globally to be about 15 years, which means that the impact of new vehicle technologies is expected to take time to materially affect the vehicle fleet and overall fuel demand.

[Dec 13, 2016] A Real Opportunity For An Oil Price Recovery

Dec 13, 2016 | oilprice.com
by Dan Dicker

Dec 11, 2016 | OilPrice.com


The OPEC production agreement, which we called correctly, has already helped hoist the profitable oil stocks we held, but what about 2017? One way I've looked at oil and oil stocks is by looking at the crude curve – the differentials between monthly contract prices. And a recent big move in the curve makes 2017 look very positive indeed.

I've seen all kinds of futures curves in my 30+ years of trading oil, and many analysts believe that the crude curve is really predictive of the future –but more often than not, it is merely an outline of what traders and hedgers are thinking.

here's a look at Thursday's curve:

... ... ...

These numbers represent an enormous change from the numbers we saw even two weeks ago, before the big OPEC deal in Vienna. Since 2014, we had been seeing a deep contango market, where oil prices in the future were a lot higher than where they were trading in the front (present) months. But what does a contango market mean?

Many like to look at contango markets as a signal of crude storage, and that has merit – but I like to look at the curve through the eyes of its participants: when the oil market is collapsing, as it has been since 2014, players in the futures markets know that the costs of oil recovery fall well above the trading price, and will buy future oil contracts banking on a recovery. This drives buying interest away from the present and into the future and creates our contango. This kind of market is dominated by the speculators, who are willing to buy (bet) on higher prices later on.

In contrast, the hedging players are in retreat in busting markets, dropping capex and working wells and trying merely to survive to see the next boom. It's when prices begin to recover and they gain confidence in future prices that they try to hedge and plan for the coming up-cycle. This is when speculators, if they are buying, are likely to move closer to the front months if they're buying while producers (commercials) are looking to sell futures 12-24 months out. Suddenly, you have a curve that is being more dominated by commercial players, selling back months and creating the backwardation we're starting to see right now.

You may remember that I was able to nearly predict this year's bottom in oil prices by looking for that flattening move of the crude curve in February. This latest move from a discount to a premium curve has moved more than two dollars in the last week alone. This gives me added confidence in oil prices for 2017:

Let's look, as a practical matter, why a premium (backwardated) market is absolutely REQUIRED to see a long-term recovery in oil.

Imagine you're a shale producer and you've seen prices move from $45 to $52. You've been waiting for a move like this to restart some non-core acreage that you could have working by the middle of 2017. With a deep contango market, you might have gotten $55 or even more for a hedged barrel of crude in June of 2017.

But you're not alone in looking to come out of your bunker, hedge some forward production and restart some idle wells – every other producer is trying to do the same thing. If all of you could depend on a future premium, every producer would hedge out new production and ultimately add to the gluts that have been already slow to disappear.

Related: The OPEC Effect? U.S. Rig Count Spikes Most In 31 Months

If you think about it, a premium market works to DISCOURAGE fast restarts and quick restoration of gluts that a two-year rebalancing process has only slowly managed to fix – and this is a good thing. Producers have to be wary of adding wells so quickly, even in a market that is clearly ready to again rise in price. In a truly backwardated market, the futures work to keep the rebalancing process on track and production increases slow. That governor on production is the key to keeping a rallying market strong, and the frantic addition of wells at a minimum.

The proof of all this is in the type of curves we see depending on how the markets are trading.

Now, take another look at the December-December spread chart I put up and you'll see that a Contango market was a critical component to the bull markets we saw in oil prior to 2014. Unless something very strange is happening, a Contango curve is indicative of a strong market, while a backwardated one indicates a market under pressure. It's something I've watched closely for more than 30 years to help me find major trends.

And convinces me today that oil will have a constructive 2017.

By Dan Dicker for Oilprice.com

[Dec 13, 2016] Both China and India experienced record crude oil demand in November

Dec 13, 2016 | peakoilbarrel.com
shallow sand, 12/13/2016 at 12:05 am
Read on CNBC that both China and India experienced record crude oil demand in November, 2016, with China up 3.4% yoy and India up 12.1% yoy.
Boomer II, 12/13/2016 at 12:28 am
"Read on CNBC that both China and India experienced record crude oil demand in November, 2016, with China up 3.4% yoy and India up 12.1% yoy."

I went looking for something about this and have found nothing on CNBC or anywhere else. Do you have a link?

Watcher, 12/13/2016 at 2:48 am
China's consumption growth was 5% last year. India 7%.

Of course it's growing, maybe even accelerating. Population does.

There really isn't much doubt how this ends, once ppl get past the pearl clutching.

likbez,, 12/13/2016 at 10:52 am
According to Yahoo ( http://finance.yahoo.com/news/iea-ups-oil-demand-forecast-095410829.html ):

IEA also upped its forecast for global oil demand for this year and next year due to revised estimates for Russian and Chinese demand. It saw growth of 1.4 mb/d for 2016, 120,000 barrels a day above the previous forecast. Growth in 2017 is now seen at 1.3 mb/d, an increase of 110,000 barrels a day from its previous estimate.

likbez, 12/13/2016 at 11:40 am

Realistically the only country that can substantially increase its oil production in 2017 in Libya. But that requires the end of the civil war in the country which is unlikely. Iran card was already played.

Iraq is producing without proper maintenance. At some point they might have substantial difficulties.

[Dec 13, 2016] IEA ups oil demand forecast for 2017, says next few weeks are 'crucial' for markets after OPEC deal

Notable quotes:
"... The IEA also upped its forecast for global oil demand for this year and next year due to revised estimates for Russian and Chinese demand. It saw growth of 1.4 mb/d for 2016, 120,000 barrels a day above the previous forecast. Growth in 2017 is now seen at 1.3 mb/d, an increase of 110,000 barrels a day from its previous estimate. ..."
finance.yahoo.com

...OPEC ... crude output in November was 34.2 million barrels per day (mb/d) - a record high - and 300,000 barrels a day higher than in October.

The IEA also upped its forecast for global oil demand for this year and next year due to revised estimates for Russian and Chinese demand. It saw growth of 1.4 mb/d for 2016, 120,000 barrels a day above the previous forecast. Growth in 2017 is now seen at 1.3 mb/d, an increase of 110,000 barrels a day from its previous estimate.

[Jul 19, 2016] Monday night the NDA announced they had blown up the 300,000 bpd export line in Nigeria

Notable quotes:
"... It took a while, but Exxon has decreed force majeure on Qua Iboe. That's the export terminal they have repeatedly said was not attacked first of this week. 300,000 bpd that will not be exported, for a while ..."
peakoilbarrel.com

dclonghorn , 07/13/2016 at 1:46 pm

Maybe my imagination has become to active, but I believe the story of the NDA attacking Mobile's Qua Iboe terminal should be getting more interest. Monday night the NDA announced they had blown up the 300,000 bpd export line. Exxon was quick to deny that an attack had taken place. Someone is lying and it is not clear who.
http://footprint2africa.com/nigeria-militants-exxonmobil-tug-words/

Although it seems almost inconcievable that Exxon would lie about this, there are a couple of things that make you consider the possibility. One is that in May there were reports of a militant strike on the facility, which was denied by Exxon. Shortly after that Exxon reported that a malfunctioning rig had caused damage to the facility, and it was shut down for a short while.

Another is that after the latest attack claimed, Shell reportedly shut in the trans-Niger pipeline, and there have been reports of oil companies evacuating 700 staff.

http://www.vanguardngr.com/2016/07/shell-shuts-trans-niger-pipeline-avengers-strikes/

http://www.news24.com.ng/National/News/militant-attacks-oil-companies-to-evacuate-over-700-staff-from-bayelsa-20160712

It remains unclear what the status is of the Qua Iboe terminal, and other facilities in Nigeria. But it is clear that they have some big problems.

dclonghorn , 07/15/2016 at 12:23 pm
It took a while, but Exxon has decreed force majeure on Qua Iboe. That's the export terminal they have repeatedly said was not attacked first of this week. 300,000 bpd that will not be exported, for a while

http://www.dallasnews.com/business/headlines/20160715-irving-based-exxon-mobil-halts-shipments-from-nigeria-oil-rises-in-response.ece

[Jul 17, 2016] China, the worlds fourth-largest oil producer, pumped 5.6% less crude year-on-year in April

Notable quotes:
"... China, the world's fourth-largest oil producer, pumped 5.6% less crude year-on-year in April ..."
"... The Asian nation reduced oil output in May by 7.3% from a year ago ..."
"... In June alone, China pumped 8.9 percent less crude than a year earlier ..."
"... 8,9% in June and the decline just continue to increase!! Lets see what happens in the future, but right now it certainly looks like its collapsing. ..."
"... Some Chinese production is very expensive and they will get their oil from the least costly source. I know this because I've worked there with their senior resource people and had the discussion. Of course, China is facing serious oil depletion as well. ..."
"... In fact, China's production increased 62 kb/d in June vs. May to 4.03 mb/d. But y-o-y decline accelerated to 8.5% in June 2016 (not 8.9% as says Reuters article quoted by oilprice.com). June 2015 was the peak month for China's oil production (4.41 mb/d). ..."
"... China has seen in the past significant drops in monthly oil production, most likely related with maintenance. But this time is different. I agree with Ron that China has peaked. ..."
"... Ok good to know. But 8,5% is still huge. Looking at the graph I see that the number will continue to increase untill end of year unless production levels out or start to increase. ..."
peakoilbarrel.com
FreddyW, 07/16/2016 at 9:42 am
Here is an update on Chinese oil production if you have not seen it already:

8,9% in June and the decline just continue to increase!! Lets see what happens in the future, but right now it certainly looks like its collapsing.

Doug Leighton, 07/16/2016 at 9:51 am

Some Chinese production is very expensive and they will get their oil from the least costly source. I know this because I've worked there with their senior resource people and had the discussion. Of course, China is facing serious oil depletion as well.
AlexS, 07/16/2016 at 10:17 am
In fact, China's production increased 62 kb/d in June vs. May to 4.03 mb/d. But y-o-y decline accelerated to 8.5% in June 2016 (not 8.9% as says Reuters article quoted by oilprice.com). June 2015 was the peak month for China's oil production (4.41 mb/d).

I am using original data from the National Bureau of Statistics and conversion factor of 7.3 barrels/ton

China oil production (kb/d) and year-on-year change

AlexS, 07/16/2016 at 10:35 am
China has seen in the past significant drops in monthly oil production, most likely related with maintenance.
But this time is different. I agree with Ron that China has peaked.

Dave P, 07/16/2016 at 6:01 pm
What's makes this time different for China? I'm curious to hear what you base your thoughts on (as you seem to have a good understanding of what's going on).
FreddyW, 07/16/2016 at 12:26 pm
Ok good to know. But 8,5% is still huge. Looking at the graph I see that the number will continue to increase untill end of year unless production levels out or start to increase.

[Jul 16, 2016] China's Oil Output Tanks , Hits 4 Year Low

Notable quotes:
"... In June alone, China pumped 8.9 percent less crude than a year earlier, with state-owned giants such as PetroChina and CNOOC shuttering unprofitable fields ..."
"... Crude oil imports in January-June jumped 14 percent, China's national Bureau of Statistics said ..."
Jul 15, 2016 | OilPrice.com

China's crude oil output over the first half of the year stood at 101.59 million metric tons, down 4.6 percent and the lowest six-month figure since 2012, Bloomberg reports. The decline reflects China's stated shift from an industry-focused economic model to a more service-oriented one. It is also related to a drive by the government to cut the country's environmental footprint, struggling with a reputation of China as one of the most polluted places on earth. Low oil prices were also a factor in the production trend.

In June alone, China pumped 8.9 percent less crude than a year earlier, with state-owned giants such as PetroChina and CNOOC shuttering unprofitable fields and turning to low-cost imports instead.

Crude oil imports in January-June jumped 14 percent, China's national Bureau of Statistics said, with June recording the weakest growth.

[Jul 04, 2016] The world is seeing ever-stronger competition for resources, and some players try to disregard all the rules

Notable quotes:
"... "The world is seeing ever-stronger competition for resources, and some players try to disregard all the rules, Russian President Vladimir Putin has said , adding that potential for conflict is growing worldwide. " ..."
"... If there was any doubt what Putin was thinking, I don't think there should be any more. ..."
"... "…If production falls under consumption (as opposed to demand) then the result is not a shrug and the price goes up. The result is someone doesn't get the oil they ordered…" ..."
peakoilbarrel.com

SatansBestFriend, 07/02/2016 at 8:35 pm

https://www.rt.com/news/348986-putin-resource-rivalry-rules/

Off topic, but definitely relevant.

If Ron's 2015 prediction is correct ( I think it is, and I never get this kind of stuff wrong … lol)
These are the types of articles we should be seeing.

"The world is seeing ever-stronger competition for resources, and some players try to disregard all the rules, Russian President Vladimir Putin has said , adding that potential for conflict is growing worldwide. "

If there was any doubt what Putin was thinking, I don't think there should be any more.

Even AlekS can't disagree with this.

Watcher , 07/03/2016 at 10:56 am
The new release of BPs data on oil statistics is getting too little focus.

Consumption globally was UP last year. 1.9%. 1.9ish million bpd.

Lotsa talk about global reductions in production . . . sometimes. Other times we hear about new records from someone.

But pay heed here. THERE IS NO DELAY IN THIS. If production falls under consumption (as opposed to demand) then the result is not a shrug and the price goes up. The result is someone doesn't get the oil they ordered.

Cushing has about 100 million barrels of capacity. If there were 1 million bpd shortfall on US imports, you got basically 3 months before . . . someone . . . some truck driver at a gas station . . . doesn't get the diesel he ordered. The SPR would be another few months, but tapping it for such an emergency would pretty much announce to the world . . . there ain't enough.

Petro , 07/03/2016 at 11:22 pm
"…If production falls under consumption (as opposed to demand) then the result is not a shrug and the price goes up. The result is someone doesn't get the oil they ordered…" ~Watcher

Bingo!

WWlll…here we come….

Be well,

Petro

[Jun 18, 2016] North Dakota down over 70K bpd in April

Notable quotes:
"... The production drop is 100% DEPLETION of existing wells. This is a critical distinction because if wells were shut, they could be turned back on. If wells deplete, generally, new ones must be drilled to replacement them, ..."
"... The reality is that the only way this production comes back (or stops decreasing) is the application of massive amounts of new capital, the redeployment of tens of thousands of service workers laid off during the crash, and billions of dollars of equipment. This is even more true internationally. As large mature projects deplete, of which there are thousands in decline, new large projects must be developed to replace them. ..."
"... The typical approach would be to shut in low rate high water cut producers, and any other wells that have been experiencing high costs. When prices rise and wells have been shut in for months they will have built up some pressure. And some of them will come in at 100 % water due to self injection. It can be a real crap shoot. ..."
Peak Oil Barrel
Brad B , 06/15/2016 at 12:23 pm
Just a note to correct a popular misconception; production DID NOT drop in Bakken due to SHUT IN wells. The production drop is 100% DEPLETION of existing wells. This is a critical distinction because if wells were shut, they could be turned back on. If wells deplete, generally, new ones must be drilled to replacement them, implying radically different time, service intensity and capital requirements. The popular press is ate up with the concept that when prices rise, all this production will magically reappear, once again swamping the market with excess supplies.

The reality is that the only way this production comes back (or stops decreasing) is the application of massive amounts of new capital, the redeployment of tens of thousands of service workers laid off during the crash, and billions of dollars of equipment. This is even more true internationally. As large mature projects deplete, of which there are thousands in decline, new large projects must be developed to replace them.

Ves , 06/15/2016 at 12:54 pm
"The production drop is 100% DEPLETION of existing wells. This is a critical distinction because if wells were shut, they could be turned back on."

Brad,
Yes. So essentially oil price does not matter at this point at the end of the game for these marginal and high depletion plays. Price could go even higher but drop in production will just continue.

Fernando Leanme , 06/16/2016 at 7:38 am
I think it's a mix. I've been in these circumstances before. The typical approach would be to shut in low rate high water cut producers, and any other wells that have been experiencing high costs. When prices rise and wells have been shut in for months they will have built up some pressure. And some of them will come in at 100 % water due to self injection. It can be a real crap shoot.

[Jun 15, 2016] Seasonal pattern of oil consumption -- going from Q2 to Q3 increases demand by about one and a half million barrels a day

Notable quotes:
"... Yes it is the normal cycle pattern, but going into Q3, we have been seeing draws over the last few weeks, and world S/D has been close to being balanced. ..."
"... It is normal for Q2 to have storage builds, and this year the builds were on the low side. ..."
"... The market is not expecting to see higher demand than supply, and the next step in prices may be soon than expected. ..."
peakoilbarrel.com

R DesRoches , 06/13/2016 at 11:41 am

I know that this presentation is about production, but on the other side of production, that is demand, according to the IEA demand tables, going from Q2 to Q3 increases demand by about 1.5 million barrels a day.

There is also a additional small increase going from Q3 to Q4.

With supply decreasing and demand increasing looks like oil prices may be headed higher over the next six months.

The Alberta fires along with Nigeras problems came at the right time yo tighten things up a bit.

AlexS , 06/13/2016 at 12:08 pm
"according to the IEA demand tables, going from Q2 to Q3 increases demand by about 1.5 million barrels a day"

This is a normal seasonal pattern. Demand in Q3-4 is always higher than in Q1-2

R DesRoches , 06/13/2016 at 12:36 pm
Yes it is the normal cycle pattern, but going into Q3, we have been seeing draws over the last few weeks, and world S/D has been close to being balanced.

It is normal for Q2 to have storage builds, and this year the builds were on the low side.

The market is not expecting to see higher demand than supply, and the next step in prices may be soon than expected.

[Jun 15, 2016] Global oil demand remand very strong

Notable quotes:
"... Global demand is indeed strong. All key forecasting agencies are still projecting annual demand growth of 1.2mb/d, but it may surprise on the upside (~1.4mb/d). But supply/demand rebalancing is mainly due to declining non-OPEC output and supply outages. ..."
peakoilbarrel.com
AlexS , 06/13/2016 at 12:46 pm
Global demand is indeed strong. All key forecasting agencies are still projecting annual demand growth of 1.2mb/d, but it may surprise on the upside (~1.4mb/d).
But supply/demand rebalancing is mainly due to declining non-OPEC output and supply outages.

Quarterly global oil demand (mb/d)
source: IEA Oil Market Report, May 2016

Reply

[Jun 15, 2016] China oil production decline is accelerating.

Notable quotes:
"... According to data from National Bureau of Statistics released today, oil output in May was down 7.3% from a year ago to 16.87 million metric tons (3.97 m/d, using 7.3 ton/barrel conversion factor). Daily output declined 1.6% from April and 10% from June 2015 peak of 4.41 mb/d. ..."
peakoilbarrel.com

AlexS , 06/13/2016 at 12:05 pm

China oil production decline is accelerating.

According to data from National Bureau of Statistics released today, oil output in May was down 7.3% from a year ago to 16.87 million metric tons (3.97 m/d, using 7.3 ton/barrel conversion factor). Daily output declined 1.6% from April and 10% from June 2015 peak of 4.41 mb/d.

I think the decline is a result of both ageing onshore oil fields and reduced infill drilling due to lower upstream investments.

China oil production (kb/d) and year-on-year change (%)
source: National Bureau of Statistics

[Jun 11, 2016] Oil market is back in balance

peakoilbarrel.com
AlexS , 06/09/2016 at 5:39 am
John Kemp's new article in Reuters:

Oil market is back in balance
http://www.reuters.com/article/us-oil-global-kemp-idUSKCN0YU04Z

[Jun 03, 2016] Oil prices crush lures US drivers back into gas guzzlers

peakoilbarrel.com
AlexS , 06/02/2016 at 6:40 pm
Interesting trends in transportation fuel demand:

OPEC's Cheap Oil Strategy Lures Drivers Back Into Gas Guzzlers

http://www.bloomberg.com/news/articles/2016-05-30/opec-s-cheap-oil-strategy-lures-drivers-back-into-gas-guzzlers

• Decade-long improvement in fuel efficiency in U.S. seen ending
• Light trucks, vans, SUVs account for 60% of U.S. vehicle sales

Last year, SUVs outsold any other type of passenger vehicle in Europe for the first time, according to auto industry consultants JATO Dynamics. The trend has continued in 2016, with demand for SUVs … accounting for a quarter of sales in the biggest European countries.
Europe is a mirror of what's happening across the world. From China to the U.S., drivers are buying bigger vehicles, while sales of fuel-efficient hybrids struggle.

[In the U.S.] the average car sold in April achieved a fuel economy of 25.2 miles per gallon, down from a peak of 25.8 set in August 2014, just before oil prices crashed, according to data from the Transportation Research Institute at the University of Michigan. At current trends, this year will mark the first drop in average U.S. fuel economy since at least 2007, the data show.

"Fuel-economy improvement is really flatlining," said Sam Ori, executive director of theEnergy Policy Institute at the University of Chicago. "The gains completely stopped right at the same time that oil prices started to decline."
Today in the U.S., light trucks, vans and SUVs account for 60 percent of total vehicle sales - a level only reached briefly in 2005, when Brent crude, the global oil benchmark, averaged $55 a barrel. It's now around $50. The International Energy Agency said in May that less-efficient vehicles, including four-wheel drives, "remain very much in vogue, a consequence of persistently lower retail pump prices."

In 2008, when oil prices averaged $100 a barrel, the share of gas guzzlers in U.S. total vehicles sales dropped at one point to just 43 percent.

With larger vehicles hitting the roads and Americans driving longer distances as the economy recovers, U.S. gasoline consumption is set to rise to a record in 2016, according to the Energy Information Administration. U.S. gasoline demand will average 9.3 million barrels a day this year, surpassing the peak set in 2007, the EIA said in its most recent monthly report.

The EIA forecast U.S. drivers will enjoy the cheapest gasoline this driving season in 12 years.

In China, the world's second-biggest oil consumer, drivers are also opting for larger vehicles as never before. While cheaper gasoline and diesel helps, analysts said it's higher incomes - and a desire to impress relatives and friends - that's driving the purchases. According to official data, vehicles such as light trucks and SUVs accounted for almost 35 percent of total Chinese passenger sales in April, up from 10 percent in 2010 and less than 5 percent a decade ago.

U.S. average sales-weighted fuel-economy rating

AlexS , 06/02/2016 at 6:44 pm
chart 2

GoneFishing , 06/02/2016 at 7:03 pm
You are right AlexS, Americans need to be more frugal and forward thinking.

My town wants to allow a gas station to be put in near the highway, there is a gas station a short drive away. Not only will the gas station be mere feet from a Category 1 trout stream, it will be almost at the level of the stream. The three large tanks will be actually buried in the aquifer for the town and have to be held down from floating. Everything runs off wells here, so contamination will effect much of the town and wreck the aquifer.

To top it all off, the land is now a ride-sharing lot, something that reduces fuel use and pollution as well as reduces the wear and tear on cars (slowing down the need for vehicle replacement and all the energy/pollution that involves).

There are gas stations just a few miles in either direction along the highway.

Sound dumb to you?

Lightsout , 06/02/2016 at 10:26 pm
I think the market share argument was always a smoke screen and this was always the Saudi's real intent.

[May 29, 2016] Sinking rig counts worldwide doesnt correspond to these fantastic planned oil production increases

Notable quotes:
"... Financialization is the lubricant that makes it possible to think of everything as an asset that could immediately be liquidated at near full value, including hypothetical growth options. When everything is fully financialized and real world frictions are removed, it will always make more sense to buy and sell the assets and their affiliated options that to actually invest and improve anything. ..."
peakoilbarrel.com
Eulenspiegel , 05/19/2016 at 4:21 am
Sinking rig counts worldwide doesn't correspond to these fantastic planned production increases – if it was that easy to crank up production, why has everyone hasn't done it before?

And opening the chokes, damaging the oilfied only works short term before new infills / CO2 or other expensive stuff is neccessary.

likbez , 05/19/2016 at 10:07 am
Sinking rig counts worldwide doesn't correspond to these fantastic planned production increases – if it was that easy to crank up production, why has everyone hasn't done it before?

A relevant quote:

Financialization is the lubricant that makes it possible to think of everything as an asset that could immediately be liquidated at near full value, including hypothetical growth options. When everything is fully financialized and real world frictions are removed, it will always make more sense to buy and sell the assets and their affiliated options that to actually invest and improve anything.

This is one of the most straightforward ways to visualize how increased financialization can harm the economy. Although simply calling bankers parasites is arguably even more straightforward.

see also http://softpanorama.org/Skeptics/Political_skeptic/Neoliberalism/index.shtml

Oldfarmermac , 05/19/2016 at 11:35 am
We may still have a choice of a prez candidate who is neither the property nor the owner of big business interests.

[May 20, 2016] The current oil price collapse was due to over-production, which was a result of a four times increase of capex over the previous 10 years and was a cyclical event,

Notable quotes:
"... I will tell you how "sane" companies react to down turns like we are going through. They batten down the hatches, cut costs to bare minimum. When prices recover, they do not immediately go great guns. They first get caught up on the maintenance that was delayed due to the downturn. Then, once that is done, they slowly begin to spend money on new wells. ..."
"... Early on, most companies were hoping for a quick recovery. 2015 persistent low prices, followed by the hammer of $20 oil in Q1 has really taken a toll, IMO. This is why we are now seeing many BK. Q1 knocked them out. ..."
"... What I think should worry many people is that those of us considered "marginal" are weathering this storm better than many of the large companies. We are operating stuff that the majors/large independent companies got rid of decades ago, that was deemed to be too costly for them to continue to operate. ..."
"... Now, those majors/large independents are finding there is almost nothing left of "cheap" to develop oil. Deep water, no. Shale, no. Tar sands, no. ..."
"... The shale companies are spending over $5 million per well to obtain 150-400K BO over a period of 20+ years. Folks, they have sold off assets all over the world to go after this stuff. That should be a big concern. ..."
"... In December 2008 oil price was $40. Shale started expansion around that time with the free money from the banks. Today in mid 2016 price of oil is $48 and it is evident that Shale is gradually closing the shop with just additional life-support from the banks to scrape the bottom of the barrel in the remaining sweet spots. ..."
peakoilbarrel.com
AlexS , 05/20/2016 at 5:30 am

"In fact the price has collapsed hasn't it, in spite of steadily worsening EROI and now virtual cessation of exploration and development. Gail's explanation fits the evidence we have in front of us today. Simple EROI or depletion models don't so well. "

The 2014-16 price collapse was due to over-production, which was a result of a 4-fold increase in upstream capex over the previous 10 years. It's a cyclical event, like in 1982-86, 1998, 2001-02 and 2008-09. The global supply and demand are gradually rebalancing. Prices are already recovering (+80% since Fenruary lows) and will rise much further in the next several years due to the current sharp decrease in exploration and development spending.

shallow sand , 05/20/2016 at 8:25 am
AlexS.

I agree with you.

One point I would like to make is that, unlike in response to prior cyclical downturns, OPEC, thus far at least, has not cut production. I question if anyone has spare capacity, outside of that caused by war/political strife.

It took massive amounts of leverage for the US and Canada to ramp up production, along with a relatively stable oil price band of $85-$105.

It remains to be seen if that type of leverage will occur again in the immediate future.

I note, despite the price improvement, the rig count we all follow, North Dakota, is down to 24, with one still listed as stacking.

I will tell you how "sane" companies react to down turns like we are going through. They batten down the hatches, cut costs to bare minimum. When prices recover, they do not immediately go great guns. They first get caught up on the maintenance that was delayed due to the downturn. Then, once that is done, they slowly begin to spend money on new wells.

Early on, most companies were hoping for a quick recovery. 2015 persistent low prices, followed by the hammer of $20 oil in Q1 has really taken a toll, IMO. This is why we are now seeing many BK. Q1 knocked them out.

If OPEC's goal is to finish off US companies, they will figure out a way to keep a lid on prices this summer, and then drive prices back down into the $20s again. However, I am not sure if this can be accomplished, or if OPEC members can even handle that. Further, it is clear to me that Russia can ride out low prices better than most, but not $20s. The Q1 price collapse caused Russia to act.

We are still here, and cautiously optimistic, but it is a very, very cautious optimism.

What I think should worry many people is that those of us considered "marginal" are weathering this storm better than many of the large companies. We are operating stuff that the majors/large independent companies got rid of decades ago, that was deemed to be too costly for them to continue to operate.

Now, those majors/large independents are finding there is almost nothing left of "cheap" to develop oil. Deep water, no. Shale, no. Tar sands, no.

The shale companies are spending over $5 million per well to obtain 150-400K BO over a period of 20+ years. Folks, they have sold off assets all over the world to go after this stuff. That should be a big concern.

This point has been made here repeatedly. Despite this severe price downturn and the alleged glut, I think it is still true. There may be a lot of oil out there left to produce, but it will cost a lot per BO to get it out of the ground.

Dennis Coyne , 05/20/2016 at 9:58 am
Hi Shallow sand,

Agree with all you say.

A question:

You say:

…but it will cost a lot per BO to get it out of the ground.

Can you define "a lot" ?

I think $75/b (2015$) will allow a fair amount of oil to be produced profitably, but agree it will take 6 to 12 months before there will be much of a production increase (say 1 Mb/d Worldwide) in response to oil prices at $75/b. I imagine the slow response will result in a price spike to $100/b as supply starts to run short (probably in 2018).

Ves , 05/20/2016 at 10:52 am
Alex, SS,

In December 2008 oil price was $40. Shale started expansion around that time with the free money from the banks. Today in mid 2016 price of oil is $48 and it is evident that Shale is gradually closing the shop with just additional life-support from the banks to scrape the bottom of the barrel in the remaining sweet spots.

So the price in Shale case did not play ANY role. So where is that "cycle" that you see it? There is no cycle. Shale was drilled regardless of price to kick the can just for few years to mask over-leveraged economy.

Dennis Coyne , 05/20/2016 at 11:03 am
Hi Ves,

Prices did not remain between $40 and $48 per barrel.

The cycle is the large swings in the oil price from $40/b to $120/b to $30/b and now headed back up.

If you believe the change in the oil price does not make a difference, I would disagree.

Dennis Coyne , 05/20/2016 at 11:36 am
Also from Dec 2008 to March 2008 only 27 wells per month were added in the Bakken/Three Forks. Other LTO plays didn't really get going until 2010.

By August 2009 Brent was up to $72/b, from March 2009 to July 2009 the average wells added per month in the Bakken was 40 wells/month.

Also it was the high prices earlier in 2008 that got things started, oil prices were over $80/b from Oct 2007 to Sept 2008, the dip in oil prices was relatively brief, the oil price was under $60/b for only 7 months from Nov 2008 to May 2009. The oil industry takes some time to react to oil price changes. Chart with annual average Brent oil price in nominal dollars below. The price has been above $70/b for all but 2 years from 2007 to 2015 (2009 and 2015).

Ves , 05/20/2016 at 11:55 am
Hi Dennis,

There is no free market CYCLE if OPEC cuts 4.2mbd in January 2009 and then it does not cut single barrel in November 2014. Of course there is always a "cycle" in long term.

"Prices did not remain between $40 and $48 per barrel"

That just shows you that price points are irrelevant. In 2008 when price was $40 did Shale had crystal ball to know that price will go $100 in the next 6-7 years?
400 rigs that are drilling right now in US do they know where the price will be next year? Reply

[May 20, 2016] Hard Landing Coming Soon? Chinese Officials Set Off Red Alert on Debt, Urge Serious Measure to Contain It

Notable quotes:
"... Financial crises are always ultimately credit crises. Even when the proximate cause seems to be a stock market crash, the amount of damage done depends on how much leveraged speculation took place and how that affects critical lending and payment systems. Even though Japan's payment system was never at risk in the implosion of its colossal credit bubble, its banks and economy have been in a zombie state for a full quarter century. Japan's massive bubble took place through a mere 11 massive "city banks" and another three "long term credit banks". By contrast, China has a large shadow banking system. Just like our officialdom in 2007 and 2008, it's very unlikely that they have a good grasp of the extent and the interconnectedness of the risks. They may find out very soon. ..."
"... Remember the shoddy construction in schools – earthquake collapse. Then there is the bubble in unoccupied "ghost cities" that go on forever. ..."
"... Why did Xi burst the bubble. I had suspected the smog and pollution have done more damage in death and disability than admitted. I wonder if the population is even in decline not just the labor force. ..."
"... If China is suddenly officially ready to countenance a huge rise in unemployment, one presumes they have some plan to socialize the pain, to take care of the population. ..."
"... If this is true, what's in store may be something like IIRC Lambert proposed in comments the other day: nationalize the financial institution, file the Chinese equivalent of RICO charges, impound the wealth and tie the former elite up in jail/litigation for the next decade. ..."
"... "impound the wealth" –including all the wealth offshore? including the wealth Chinese oligarchs have invested in foreign real estate? Are Chinese oligarchs any more likely to go against their own class than Western oligarchs? ..."
"... I missed that Telegraph article – it really is quite alarming. I have to say though that anecdotally, my Chinese friends are no more pessimistic than usual, so I don't think that ordinary Chinese are feeling worried yet – property prices are still going up, which is reassuring to most middle class there, and there is no evidence I've heard of any panic in the various 'informal' or shadow investing markets (lots of Chinese run what amount to unofficial banks, borrowing and investing on behalf of friends). ..."
"... AEP suggests that Xi may not be the firm hand on the tiller that everyone assumes – his overt confidence may well be a front for some very confused ideas. I think there is increasing evidence that this may be the case. For all the sound and fury, there is little real evidence of reform from within. But I think the safe bet is that the CCP has enough of a firm hand that they can prevent an outright crash – much more likely is the sort of crippling slow motion collapse that we saw in Japan a quarter of a century ago. But the longer they insist on shovelling fuel on to the fire, the less likely that happens. As Pettis constantly points out, economists consistently underestimate the speed and severity of crashes. ..."
"... Given the huge amount of foreign investment in china and how much it is likely leveraged, the global financial system will collapse again triggering the collapse of many states. proposals of bailouts would be likely met with violent resistance, even revolution. far right politicians would seize power and, where they haven't been politically neutered, maybe some leftists would, too. were it to happen before november, we could welcome into office president trump in january. ..."
May 19, 2016 | nakedcapitalism.com

by Yves Smith

Ambrose Evans-Pritchard has a must-read article on what may be the beginning of the end of the China-as-economic-wunderkind story. The reason for the hesitancy is that the lengthy article that appeared in early May on the front page of the house organ of the Politboro may either be an official declaration or an effort by a powerful minority to press for a meaningful, sustained effort to stop the growth in debt levels. Particularly since the global financial crisis, China has relied heavily on increases in private-sector debt to keep growth levels up. Mind you, borrowing to invest is not necessarily a bad idea if it goes into projects that are sufficiently productive. But as readers know well, China has had investment at an unprecedented proportion of GDP for years, and most of it has gone into assets created for speculation (housing that sits vacant and is seen by investors as an alternative to the stock market) or unproductive increases in industrial capacity. Consider this extract from a March article in the South China Morning Post:

At the peak of its cement production in 2014, China turned out more cement in just two years than the United States had produced in the previous century.

As the first chart shows, the trend finally topped out last year but it still indicates almost 30 times as much cement production in China as in the US, a much larger economy. Is this huge volume of cement really needed? Is this sustainable?

There is certainly an argument for more cement production in China than in the US, which has largely built its cities and its transport infrastructure. China is still in the process of doing so. Its cement requirements are thus proportionately much greater.

True, but 30 times as great with as much cement production in two years as the US recorded in 100 years? That's pushing things.

And while economic growth in China is faster than in the US, much of it represents just this pouring of cement. Fixed capital formation accounts for 45 per cent of gross domestic product, about twice the average of the rest of Asia, and higher multiples yet than the rest of the world.
This sort of excess crashes if demand turns sour. And it could take a lot more with it than just cement and steel plants

The story is told in many more sectors than just cement. The second chart shows you that China's steel production is topping out but is still running at five times the rate of all 28 countries in the European Union combined and almost 10 times steel production in the US.

This steel is still being used but there are reasons to doubt the continued demand. Car production last year of 12 million units, for instance, was three times the equivalent of domestic production in the US.

Yes, I know Americans are importing ever more cars as they begin to share the rest of the world's doubts about their own Chevrolets and Chryslers and, yes, car ownership ratios are still much higher in the US than in China, but three times as much car production in China as in the US still has a feeling of unreality. China is not rich enough yet to afford so large a car market.

AEP recaps the well-known-if-you've been-watching signs that China is in the advanced stages of a monster debt binge. The problem with bubbles, as anyone who has lived through them knows so well, is they typically run much further than clinical observers imagine possible. So the nay-sayers look like gloomy Gusses while the momentum traders party until the whole thing goes kaboom. AEP's danger signals, from his Telegraph account :

China's debt is approaching $30 trillion. The fresh credit alone created since 2007 is greater than the outstanding liabilities of the US, Japanese, German, and Indian commercial banking systems combined…

To put matters in context, leverage rose by roughly 50 percentage points of GDP in Japan before the Nikkei bubble burst in 1990, or in Korea before the East Asia crisis in 1998, or in the US before the subprime debacle. This gauge is an almost mechanical indicator of a future credit crisis.

As we all know, China is in a class of its own. Debt has risen by 120 to 140 percentage points. The scale of excess industrial capacity – and China's power and life and death over commodity markets – mean that any serious policy pivot by the Communist Party would set off an international earthquake.

Yet that is what at least an important group of the officialdom is prepared to do. The logic for a crackdown now is that delaying a day of reckoning will only make the inevitable contraction worse:

China watchers are still struggling to identify the author of an electrifying article in the People's Daily that declares war on debt and the "fantasy" of perpetual stimulus…

The 11,000 character text – citing an "authoritative person" – was given star-billing on the front page. It described leverage as the "original sin" from which all other risks emanate, with debt "growing like a tree in the air".

It warned of a "systemic financial crisis" and demanded a halt to the "old methods" of reflexive stimulus every time growth falters. "It is neither possible nor necessary to force economic growing by levering up," it said.

It called for root-and-branch reform of the SOE's – the redoubts of vested interests and the patronage machines of party bosses – with an assault on "zombie companies". Local governments were ordered to abandon their illusions and accept the inevitable slide in tax revenues, and the equally inevitable rise in unemployment.

If China does not bite the bullet now, the costs will be "much higher" in the future. "China's economic performance will not be U-shaped and definitely not V-shaped. It will be L-shaped," said the text. We have been warned.

The article also describes how China put its foot on the accelerator in recent quarters, so if this article represents a policy change, it would be a real gear shift:

The latest stop-go credit cycle began in mid-2015 and has since accelerated to an epic blow-off, with the M1 money supply now growing at 22.9pc, by the fastest pace since the post-Lehman blitz.

Wei Yao from Societe Generale estimates that total loans rose by $1.15 trillion in the first quarter, equivalent to 46pc of quarterly GDP. "This looks like an old-styled credit-backed investment-driven recovery, which bears an uncanny resemblance to the beginning of the 'four trillion stimulus' package in 2009. The consequence of that stimulus was inflation, asset bubbles and excess capacity," she said.

House sales rose 60pc in April, despite curbs to cool the bubble. New starts were up 26pc. Prices jumped 63pc in Shenzhen, 34pc in Shanghai, 20pc in Beijing, and 18pc in Hefei. Panic buying is spreading to the smaller Tier 3 and 4 cities with the greatest glut.

There is still some fiscal spending in the pipeline, so the robust times will continue at least through the summer. But liquidity is already starting to dry up despite all the money creation as investors are getting more and more evidence that the government will not rescue wealth management products (which are often invested in real estate projects sponsored by local government entities) or the bond issues of state owned enterprises (SOEs). Again from AEP's report :

Moody's warned this month that China's state-owned entities (SOEs) have alone racked up debts of 115pc of GDP, and a fifth may require restructuring. The defaults are already spreading up the ladder from local SOE's to the bigger state behemoths, once thought – wrongly – to have a sovereign guarantee…

The rot in the country's $7.7 trillion bond markets is metastasizing. Bo Zhuang from Trusted Sources said more than 100 firms cancelled or delayed bond issues in April due to widening credit spreads…

Ten companies have defaulted this year, with the shipbuilder Evergreen, Nanjing Yurun Foods, and the solar group Yingli Green Energy all in trouble this month. But what has really spooked markets is the suspension of nine bonds issued by the AA+ rated China Railways Materials, the first of the big central SOE's to signal default. "This has greatly weakened investors' long-standing expectation of implicit government support," he said.

Bo Zhuang said investors have poured money into bonds in the latest frenzy. The stock of corporate bonds has jumped by 78pc to $2.3 trillion over the last year. It is the epicentre of leverage through short-term 'repo' transactions, and it is now coming unstuck.

Financial crises are always ultimately credit crises. Even when the proximate cause seems to be a stock market crash, the amount of damage done depends on how much leveraged speculation took place and how that affects critical lending and payment systems. Even though Japan's payment system was never at risk in the implosion of its colossal credit bubble, its banks and economy have been in a zombie state for a full quarter century. Japan's massive bubble took place through a mere 11 massive "city banks" and another three "long term credit banks". By contrast, China has a large shadow banking system. Just like our officialdom in 2007 and 2008, it's very unlikely that they have a good grasp of the extent and the interconnectedness of the risks. They may find out very soon.

I urge you to read Ambrose Evans-Pritchard's important article in full . Even with my extensive excerpts, there's a lot more unsettling information to ponder. PlutoniumKun , May 19, 2016 at 9:55 am

There is no evidence that cement is being stockpiled to my knowledge – its all being poured. The problem is that the construction projects just don't have a productive return any more.

However, there is a serious point to be made about concrete in China – it is generally low quality. This is ok for regular engineering, but for specialist needs, such as High Speed Rail, it seriously reduces the life span of the structure. I can't find a link to it now, but a few years ago an engineering journal was estimating that Chinas High Speed Rail network would have to reduce its speed limits by several mpg per year as the structures were degrading very rapidly. It estimated that in 20 years the HSR network would be no faster than a conventional railway network.

Minnie Mouse , May 19, 2016 at 10:43 am

Remember the shoddy construction in schools – earthquake collapse. Then there is the bubble in unoccupied "ghost cities" that go on forever.

David , May 19, 2016 at 9:35 am

Our imports from China fell big last month and the department stores that sell the junk are gone down even faster so if we lost half or 200 billion of their junk I an not sure it would be missed or replaced. I do think that this China implosion is important. I have some questions. China has a pork shortage and owns Smithfield but is not importing. Why?

Why did Xi burst the bubble. I had suspected the smog and pollution have done more damage in death and disability than admitted. I wonder if the population is even in decline not just the labor force.

Please keep covering whatever it is that is going on in China.

jsn , May 19, 2016 at 9:40 am

If China is suddenly officially ready to countenance a huge rise in unemployment, one presumes they have some plan to socialize the pain, to take care of the population.

If this is true, what's in store may be something like IIRC Lambert proposed in comments the other day: nationalize the financial institution, file the Chinese equivalent of RICO charges, impound the wealth and tie the former elite up in jail/litigation for the next decade.

I'm a hopeless optimist…

TheCatSaid , May 19, 2016 at 9:54 am

"impound the wealth" –including all the wealth offshore? including the wealth Chinese oligarchs have invested in foreign real estate? Are Chinese oligarchs any more likely to go against their own class than Western oligarchs?

PlutoniumKun , May 19, 2016 at 10:08 am

I missed that Telegraph article – it really is quite alarming. I have to say though that anecdotally, my Chinese friends are no more pessimistic than usual, so I don't think that ordinary Chinese are feeling worried yet – property prices are still going up, which is reassuring to most middle class there, and there is no evidence I've heard of any panic in the various 'informal' or shadow investing markets (lots of Chinese run what amount to unofficial banks, borrowing and investing on behalf of friends).

As one Chinese friend put it to me 'everyone in my town owes more money than they have to everyone else'. I've always suspected its the informal/shadow system that would show stress before the formal system. The only thing I do know is that a friend of mine who runs a business helping Chinese people move to Europe using 'investment' visas has found more and more people of very modest means attempting to do it – its not just the rich who are buying properties.

The usually reliable Michael Pettis also seems his usual gently bullish, but steady self, I'd expect him to write something if there was something nasty growing.

AEP suggests that Xi may not be the firm hand on the tiller that everyone assumes – his overt confidence may well be a front for some very confused ideas. I think there is increasing evidence that this may be the case. For all the sound and fury, there is little real evidence of reform from within. But I think the safe bet is that the CCP has enough of a firm hand that they can prevent an outright crash – much more likely is the sort of crippling slow motion collapse that we saw in Japan a quarter of a century ago. But the longer they insist on shovelling fuel on to the fire, the less likely that happens. As Pettis constantly points out, economists consistently underestimate the speed and severity of crashes.

vidimi , May 19, 2016 at 10:28 am

let's try to imagine the global impact of a Chinese implosion.

as china is the main source of global export demand, if they hit a brick wall it would devastate all but the most diversified or isolated economies. from Australia to Zaire, the impact would be devastating to employment.

Given the huge amount of foreign investment in china and how much it is likely leveraged, the global financial system will collapse again triggering the collapse of many states. proposals of bailouts would be likely met with violent resistance, even revolution. far right politicians would seize power and, where they haven't been politically neutered, maybe some leftists would, too. were it to happen before november, we could welcome into office president trump in january.

domestically, Chinese job losses would be enormous causing mass discontent and protests. indeed, the only thing to do with legions of disgruntled, unemployed, unmarried men would be to draft them into the army. but so much fodder requires cannons, and so, the likelihood of war would be very high.

it's interesting to think about.

[May 15, 2016] China oil production decline is accelerating

Notable quotes:
"... China, the world's fourth-largest oil producer, pumped 5.6 percent less crude year-on-year in April, official data showed, as oil firms struggled with cost pressures with crude prices hovering around $40 a barrel. ..."
peakoilbarrel.com
AlexS , 05/14/2016 at 4:55 am
China oil production decline is accelerating:

China April crude oil output lowest since July 2013

http://www.reuters.com/article/us-china-economy-oil-output-idUSKCN0Y5059

China, the world's fourth-largest oil producer, pumped 5.6 percent less crude year-on-year in April, official data showed, as oil firms struggled with cost pressures with crude prices hovering around $40 a barrel.

Data from the National Bureau of Statistics released on Saturday showed China produced 16.59 million tonnes of crude oil last month, or about 4.04 million barrels per day (bpd), the lowest rate since July 2013 on a daily basis.

Production in the first four months was down 2.7 percent over the same year-ago period to 68.14 million tonnes, or about 4.11 million bpd.

PetroChina, the country's top producer, recorded a 0.2 percent drop in oil and gas production in the first quarter and Sinopec scaled back domestic crude production by 10.35 percent in the same period, companies said in April.

Offshore specialist CNOOC Ltd, however, delivered a 5.1 percent rise in total net oil and gas production in the first quarter over a year ago, thanks to new Chinese offshore fields.

Natural gas output last month rose 5.6 percent on the year to 10.6 billion cubic meters, with production up 5.3 percent in the first four months, the data showed.

[May 15, 2016] China has reported April 2016 production at 4 mbpd. almost 6 percent decline year on year

peakoilbarrel.com
dclonghorn, 05/15/2016 at 7:24 pm
China has reported April 2016 production at 4.04 mbpd. A 5.6% decline year on year. It's down 380,000 bopd (8.6%) from the 4.42 mbpd JODI lists for June 2015.

http://www.hellenicshippingnews.com/china-april-crude-oil-output-lowest-since-july-2013/

Depletion seems to be wining more and more.

[May 07, 2016] Is This The Biggest Red Herring In Oil Markets

Notable quotes:
"... Americans are driving more than ever before. Vehicle miles traveled (VMT) reached an all-time high of 3.15 trillion miles in February 2016 (Figure 2). VMT have increased 97 billion miles per month (3 percent) since the beginning of 2015 and gasoline sales have increased 187 kbpd (2 percent). The rates of increase are not proportional. ..."
OilPrice.com

Americans are driving more than ever before. Vehicle miles traveled (VMT) reached an all-time high of 3.15 trillion miles in February 2016 (Figure 2). VMT have increased 97 billion miles per month (3 percent) since the beginning of 2015 and gasoline sales have increased 187 kbpd (2 percent). The rates of increase are not proportional.

... ... ...

From April 2015 to March 2016, oil production decreased 660 kbpd (-7 percent) but net crude oil imports increased 800 kbpd (+10 percent) (Figure 5).

[May 05, 2016] Low oil prive forever regime in of the verge of breakdown

Notable quotes:
"... meaning Sechin ..."
"... "Mr Sechin warned last week that the current shale boom could be another "dotcom bubble" about to burst after drillers, loaded up on risky debt, and hedge funds piled in to make a quick buck over the last five years." Seems like he was prescient in that observation as well. ..."
"... The elephant in the room is the cost of production which for most countries including the USA and Canada is far higher then the current prices. That means that the wave of bankruptcies and drop in the USA production will continue unabated. The total loss might be above 1 Mb/d for the 2016. Canada also lost some production (currently 0.5 Mb/d due to fires) and needs about $80 for tar sand production to be profitable. Chances that oil price will reach this level in 2016 are slim, so the future of Canadian tar sand oil production is grim. ..."
"... Several oil producing countries are on the verge of bankruptcy (Nigeria, Venezuela, Iraq). Saudi are losing around 100 billion a year in currency reserves while still playing a role of Trojan horse of the West in oil markets. ..."
"... This situation is unsustainable and speculator/HFT driven suppression of oil prices at some point might break and will be replaced by a new price boom. It in highly probable that the price of oil will reach, at least temporary, the level of $55 this year. ..."
"... But oil is a strategic product and high oil prices mean stagnation of Western economies. The key problem is that high oil prices threaten neoliberalism as a social system and derail neoliberal globalization. So they will be fought tooth and nail by the US and the EU elites. That's why agreement to freeze oil production by OPEN was derailed. Another victory of western diplomacy. ..."
naked capitalism

Is Gasoline Demand the Biggest Red Herring In Oil Markets naked capitalism

Jack Heape , May 5, 2016 at 8:41 am

Perhaps Igor Sechin is right (Sechin is head of the Russian energy company Rosneft and a close ally of Putin). In a Telegraph article on 2/2/15, discussing Sechin and the remarks he made at an oil consortium, the author comments that, "However, the real "haymaker" punch he ( meaning Sechin ) aimed at the global energy system came with the accusation that oil futures markets in London and New York, which set the price of the world's most vital energy commodity, are essentially being rigged by a feral cabal of speculators and traders." That would explain the obvious disconnect discussed by the author here concerning the red herrings put out by the oil sector. Interesting as well, in the article mentioned above the author also notes, "Mr Sechin warned last week that the current shale boom could be another "dotcom bubble" about to burst after drillers, loaded up on risky debt, and hedge funds piled in to make a quick buck over the last five years." Seems like he was prescient in that observation as well.

Jack Heape , May 5, 2016 at 8:43 am

The link to that article I mentioned is here .

tegnost , May 5, 2016 at 9:58 am

Berman implies as much, but puts a kinder spin on it
"The collective consciousness that drives the oil market is fed up with low oil prices"

Jim Haygood , May 5, 2016 at 12:24 pm

We're fed up, ain't gon' take it no mo.

June crude is up 2.5% to $44.87 today.

Celebrating Cinco de Mayo … free money, free beer, free gasoline!

likbez , May 5, 2016 at 1:14 pm
The elephant in the room is the cost of production which for most countries including the USA and Canada is far higher then the current prices. That means that the wave of bankruptcies and drop in the USA production will continue unabated. The total loss might be above 1 Mb/d for the 2016. Canada also lost some production (currently 0.5 Mb/d due to fires) and needs about $80 for tar sand production to be profitable. Chances that oil price will reach this level in 2016 are slim, so the future of Canadian tar sand oil production is grim.

Several oil producing countries are on the verge of bankruptcy (Nigeria, Venezuela, Iraq). Saudi are losing around 100 billion a year in currency reserves while still playing a role of Trojan horse of the West in oil markets.

This situation is unsustainable and speculator/HFT driven suppression of oil prices at some point might break and will be replaced by a new price boom. It in highly probable that the price of oil will reach, at least temporary, the level of $55 this year.

But oil is a strategic product and high oil prices mean stagnation of Western economies. The key problem is that high oil prices threaten neoliberalism as a social system and derail neoliberal globalization. So they will be fought tooth and nail by the US and the EU elites. That's why agreement to freeze oil production by OPEN was derailed. Another victory of western diplomacy.

Arthur Berman was a very keen observer of shale bubble in the USA until recently. Then something changed.

[May 05, 2016] Why the worst of the oil rout might already be behind us

Alberta Oil Magazine

The surplus in early 2016 was closer to about 500,000 b/d, he says, and should continue to fall. "The oversupply in the market is grossly overstated," King says.

A lag in output data is partly due to the high estimates, King says, and surpluses are likely to be much lower in the coming months as surplus numbers begin to catch up with the real decreases in supplies. "People are still suggesting it's one million or two million barrels per day-it's nothing even close to that."

FirstEnergy sees prices for West Texas Intermediate averaging $55 for 2017, then rising to $66.25 over 2018 and $74 in 2019, according to its quarterly market update. "In 2017 you'll start to see things look a little bit better," King said. "The market in our view is reaching a balanced position. Inventories are starting to roll over, demand is doing great and supplies are coming off-the three basics you need for better pricing."

Some analysts have suggested the gradual rise in WTI prices could trigger a simultaneous rise in U.S. shale oil production, which would ultimately offset any gains in prices. King said this scenario was unlikely, as many producers have already locked in their 2016 spending programs, and capital markets remain tight and the high-yield debt market continues to sputter.

[May 04, 2016] Of 72 percent of petroleum used is for transportation 63 percent is used by light duty vehicles

Notable quotes:
"... 72% of petroleum used is for transportation. 63% of that is light duty vehicles. So of 90mbod, 40 million barrels are subject to potential substitution by electric vehicles. The adoption curve need only stay ahead of the decline curve. ..."
"... As an ex Mack Trucks sales person. I always considered SUVs and pickups as light duty. I agree they will be electrified but it's going to take a little longer than passenger vehicles. Right now hybrids are much more feasible because of the more extreme workload they preform. Towing a 10k trailer a couple of hundred of miles is going to take a lot of juice. ..."
"... America already runs hybrid buses if you consider that electric. To get were the world needs to be, we're going to need a lot of f'n batteries. Once the world solves the battery issue, there is not much reason class 8's can't be electrified starting with local delivery trucks. ..."
peakoilbarrel.com
05/02/2016 at 8:15 am

Differences of opinion are what make discussion interesting.

72% of petroleum used is for transportation. 63% of that is light duty vehicles. So of 90mbod, 40 million barrels are subject to potential substitution by electric vehicles. The adoption curve need only stay ahead of the decline curve.

Why worry about Caterpillars first when transportation is the biggest slice of the petroleum pie, and the most readily subject to supercession by other energy sources?

Transition may be improbable, but that's different than impossible.

Bob Nickson , 05/02/2016 at 9:06 am
Assuming that an ICE is 20% as efficient as an EV, which seems reasonable as one barrel of oil is energy equivalent to 1628.2kWh, and will produce 19 gallons of gasoline, and 12 gallons of diesel. Assuming 30 mpg economy for each, the barrel of oil provides 930 miles of travel, while 1628.2 kWh at 3mpkWh will provide 4,884 miles of travel.

So if the light duty transport fleet was replaced 100% with electric vehicles, 40.8 mbo/day would require 13.3 TWh of electric power substitution.

We have increased global annual renewable power production by 3,250 TWh's in the last decade, so to increase renewable power production by 2030 to produce 13TWh/day to offset 40.8 MBO/day used in the transportation sector would require that we accomplish in the next fifteen years what we have accomplished in the last ten (+3,250TWhp/decade).

As for the vehicles, all we must do is replace 100% of the light duty fleet with EV's in that same 15 years. Easy as pie, right? :-)

Nick G , 05/02/2016 at 1:31 pm
Heavy duty vehicle can be electrified too. SUVs and pickups are considered heavy duty.

Heck, Chinese buses are going heavily electric: there are projections that they'll be 100% electric in 10 years.

ChiefEngineer , 05/02/2016 at 2:17 pm
Hi Nick,

As an ex Mack Trucks sales person. I always considered SUVs and pickups as light duty. I agree they will be electrified but it's going to take a little longer than passenger vehicles. Right now hybrids are much more feasible because of the more extreme workload they preform. Towing a 10k trailer a couple of hundred of miles is going to take a lot of juice.

America already runs hybrid buses if you consider that electric. To get were the world needs to be, we're going to need a lot of f'n batteries. Once the world solves the battery issue, there is not much reason class 8's can't be electrified starting with local delivery trucks.

Cheers

[Apr 29, 2016] A Great Opportunity To Buy Oil For The Long Term by Dan Dicker

April 15, 2016 | OilPrice.com

the fundamentally unsustainable pricing that we've seen for much of 2016, particularly after the 2nd failed OPEC meeting, has been much more dependent upon speculative short positions in the market, particularly from algorithmic momentum funds. We could track the speculative short positions against the price of crude almost exactly as prices dropped below $40 the first time, with long positions decreasing to their lowest levels in five years as crude dropped under $30 a barrel.

[Apr 27, 2016] Sharp drop in the USA oil production is the harbinger of things to come globally

peakoilbarrel.com

Ron Patterson , 04/26/2016 at 10:59 am

The EIA's Monthly Energy Review is out. US C+C production was down 74,000 bpd in March to 9,038,000 barrels per day.

 photo US CC Productin_zpsvliqvch3.jpg

likbez , 04/26/2016 at 1:37 pm
Ron,

Looks like you was right about timing of peak oil. The trend of production down is becoming more clear with each month. It might be disrupted by some noise (end of Libya civil war, etc), but still with no new major deposits discovered I do not see factors that can change it.

Dennis Coyne , 04/27/2016 at 10:52 am
Hi Likbez,

Higher oil prices might change things and that chart is US only.

IEA expects non-OPEC output to fall 750 kb/d in 2016, some of this may be made up by increases in Iranian, Iraqi, and Libyan output. On an annual basis 2016 may be pretty close to average annual output in 2015 for C+C. It will be interesting to see how things play out, I still like the plateau scenario which I will define as World C+C output remaining between 79 and 81 Mb/d on average for any 12 month period from now until 2025.

likbez , 04/27/2016 at 8:39 pm
Hi Dennis,

Higher oil prices might change things and that chart is US only.

I understand that the chart is the US only but it is the harbinger of things to come globally. As for higher oil prices, they need to get into $70-$80 range first where high cost oil projects including US LTO became profitable to change the current trend. Before that "recovery of oil prices" does not change much for non conventional oil producers. For some (for example the USA) conventional oil producers the lower range you provided before might be OK, but most oil producing countries with national oil companies could not balance budget below $90.

IMHO prices below $70-$80 mean for non conventional producers the continuation of "survival mode" or "extend and pretend". With the only difference that the dates of renewal of credit lines coming closer. And that magic range of prices $70-$80 probably will not be reached this year. So I would say your expectations are too optimistic.

When you cite IEA it make sense to provide some information of their track record of production forecasting accuracy during previous sharp reversals of oil prices trends. My impression is that they are way too "linear extrapolation" type of animal.

This conclusion strengthen considerably if we take into account that this is 50% propaganda agency which needs to support "low oil price forever" regime as a part of their institutional agenda. In other words this an agency that is serving G7 countries interested in low oil prices. That creates certain limits on what they can say so it is natural for them to try to downplay any possible drop in oil production. It would extremely stupid to expect from them any other behavior. So IMHO you can safely double their estimates in such cases.

Reality is pretty grim now for oil producers and you need to understand that a lot of skeletons in the closet (including financial skeletons) remain hidden. So actual situation can be much worse then we assume and another quarter of low prices by which I mean prices below which conventional oil production in the USA is unprofitable (let's say $55) might be the straw that broke the camel's back.

So there is a hope that neoliberals lose control over oil prices at some point.

I agree with you about wild cards like Iran and Libya. But the US is ambivalent about allowing Iran to recover oil production and there are moves directed at confiscation part of their "frozen" funds without which this is almost impossible with the current prices. But still we can expect that both of those cards be played to slow down price recovery (and ayatollahs proved to be extremely stupid, if you ask me; not much different from Wahhabis sheiks. why they did not cooperate with oil price freeze (for six months; only six months!) is beyond me. But even Iran ayatollahs arrogant stupidity can't change general trend, which is down.

Iraq can't meaningfully increase production right now as this is an almost bankrupt by civil war country and chances to restore peace this year are slim. Saudis and friends continue to finance Sunni insurgency. It was inertia from "good old times" that drove their production up in 2015. This is over.

Shale card was already played once (and it was played very well) but that's it. Now "carpet drilling" trick will not be repeated again even if price reach magic level of $80: unlimited financing of shale drilling is gone for good.

My impression is that there are powerful forces that are not interested in oil price recovery and do not care about negative long term consequences of waiting so much oil instead of extending conservation technologies.

Unless those forces (of neoliberalism) are somehow suppressed I doubt that prices can recover to the level that allow expansion of production. And in oil prices world the tail still wags the dog: Wall Street still determine oil prices in a sense that it is able vastly amplify the moves via HFT.

Also oil producers also now are disorganized mob unable to protect their own interests, so I would not expect meaningful actions from OPEC unless there is a coup d'état in KSA that removes the young gambler prince who almost halved country currency reserves.

[Apr 27, 2016] With less than 5 percent of world population, the U.S. uses one-third of the worlds paper, a quarter of the worlds oil, 23 percent of the coal, 27 percent of the aluminum, and 19 percent of the copper

peakoilbarrel.com

Caelan MacIntyre ,

04/27/2016 at 5:25 am
" The scenarios most closely reflecting the reality of our world today are

…found in the third group of experiments (see the scenarios for an unequal society in section 5.3), where we introduced economic stratification. Under such conditions, we find that collapse is difficult to avoid , which helps to explain why economic stratification is one of the elements consistently found in past collapsed societies. Importantly, in the first of these unequal society scenarios, 5.3.1, the solution appears to be on a sustainable path for quite a long time, but even using an optimal depletion rate () and starting with a very small number of Elites, the Elites eventually consume too much, resulting in a famine among Commoners that eventually causes the collapse of society. It is important to note that this Type-L collapse is due to an inequality-induced famine that causes a loss of workers, rather than a collapse of Nature. Despite appearing initially to be the same as the sustainable optimal solution obtained in the absence of Elites, economic stratification changes the final result: Elites' consumption keeps growing until the society collapses . The Mayan collapse -in which population never recovered even though nature did recover- is an example of a Type-L collapse, whereas the collapses in the Easter Island and the Fertile Crescent -where nature was depleted- are examples of a Type-N collapse.

In scenario 5.3.2, with a larger depletion rate, the decline of the Commoners occurs faster, while the Elites are still thriving, but eventually the Commoners collapse completely, followed by the Elites. It is important to note that in both of these scenarios, the Elites -due to their wealth- do not suffer the detrimental effects of the environmental collapse until much later than the Commoners. This buffer of wealth allows Elites to continue 'business as usual' despite the impending catastrophe . It is likely that this is an important mechanism that would help explain how historical collapses were allowed to occur by elites who appear to be oblivious to the catastrophic trajectory (most clearly apparent in the Roman and Mayan cases). This buffer effect is further reinforced by the long, apparently sustainable trajectory prior to the beginning of the collapse. While some members of society might raise the alarm that the system is moving towards an impending collapse and therefore advocate structural changes to society in order to avoid it, Elites and their supporters, who opposed making these changes, could point to the long sustainable trajectory 'so far' in support of doing nothing."

-------------–

"It is well known that Americans consume far more natural resources and live much less sustainably than people from any other large country of the world. 'A child born in the United States will create thirteen times as much ecological damage over the course of his or her lifetime than a child born in Brazil', reports the Sierra Club's Dave Tilford, adding that the average American will drain as many resources as 35 natives of India and consume 53 times more goods and services than someone from China.

Tilford cites a litany of sobering statistics showing just how profligate Americans have been in using and abusing natural resources. For example, between 1900 and 1989 U.S. population tripled while its use of raw materials grew by a factor of 17. ' With less than 5 percent of world population, the U.S. uses one-third of the world's paper, a quarter of the world's oil, 23 percent of the coal , 27 percent of the aluminum, and 19 percent of the copper', he reports. 'Our per capita use of energy, metals, minerals, forest products, fish, grains, meat, and even fresh water dwarfs that of people living in the developing world.'.

He adds that… Americans account for only five percent of the world's population but create half of the globe's solid waste.

Americans' love of the private automobile constitutes a large part of their poor ranking . The National Geographic Society's annual Greendex analysis of global consumption habits finds that Americans are least likely of all people to use public transportation-only seven percent make use of transit options for daily commuting. Likewise, only one in three Americans walks or bikes to their destinations… the U.S. remains the per capita consumption leader for most resources.

Overall, National Geographic's Greendex found that American consumers rank last of 17 countries surveyed in regard to sustainable behavior. Furthermore, the study found that U.S. consumers are among the least likely to feel guilty about the impact they have on the environment…" ~ Scientific American

"The American way of life is not up for negotiation." ~ George Bush Sr.

R Walter , 04/27/2016 at 7:59 am
China uses a little more than forty percent of the world's coal.

The US uses about twelve percent of world coal production, not 23 percent.

https://en.wikipedia.org/wiki/List_of_countries_by_coal_production

906 million tonnes for the US, China consumes 3.87 billion tonnes, total is 8.1 billion tonnes per year.

Jef , 04/27/2016 at 8:15 am
Yes but China is burning that coal to make all of the "stuff" that the US buys so you could argue that the US is consuming that coal. I may even be greater than 23%.
Ves , 04/27/2016 at 9:04 am
exactly Jef. this whole globalization is just a buzzword to hide what is really trashing the mother earth by the global 1%. Pointing fingers who trash more is illusion fed to us so we can chew on it and be distracted because the real game is played between 1% versus 99% no matter where they live.
Caelan MacIntyre , 04/27/2016 at 3:37 pm
You are definitely greater than 23%, except maybe with ethanol.

[Apr 26, 2016] Oil Bulls Plunge Into Market as U.S. Gasoline Demand Hits Record

Bloomberg

U.S. gasoline consumption, averaged over four weeks, rose 3.9 percent from a year earlier to 9.39 million barrels a day through April 15, Energy Information Administration data show. Demand this summer will increase 1.4 percent to a record, the EIA said April 12. Americans drove 232.2 billion vehicle miles in February, up 5.6 percent from a year earlier, Transportation Department data show.

"Gasoline demand is quite strong and that's all price driven," said Thomas Finlon, director of Energy Analytics Group LLC in Wellington, Florida. "Demand for gasoline should provide support for crude."

The average price of regular gasoline at the pump nationwide was $2.136 a gallon on Sunday, down 15 percent from a year earlier, according to data from Heathrow, Florida-based AAA, a national federation of motor clubs.

Speculators' net-long position in WTI gained by 30,357 futures and options combined to 245,987, CFTC data show. Long positions, or bets that prices will rise, increased 4.8 percent, while shorts tumbled 19 percent.

In other markets, net bullish bets on Nymex gasoline climbed 15 percent to 23,357 contracts. Gasoline futures declined 3.5 percent in the period. Net bearish wagers on U.S. ultra low sulfur diesel decreased 11 percent to 7,773 contracts, the least since June as futures slipped 1 percent.

[Apr 25, 2016] China Stockpiling Oil At Highest Rate In Over A Decade

Teapot refiners continue to show ability to process additional volumes of oil, which suggest that a Chinese economy might be turning a corner
Notable quotes:
"... In the first quarter of this year China diverted about 787,000 barrels per day into its strategic stockpile, the highest rate since Bloomberg has been tracking the data in 2004. Overall, as of March, China was importing around 7.7 million barrels per day. ..."
"... These so-called "teapot refineries," with capacities of around 20,000 to 100,000 barrels of production per day, struggled under the old restrictions, producing at only 30 to 40 percent of capacity because of an inability to import oil. That has changed, and domestic refining production is set to rise, and with it, so are imports. ..."
OilPrice.com

In the first quarter of this year China diverted about 787,000 barrels per day into its strategic stockpile, the highest rate since Bloomberg has been tracking the data in 2004. Overall, as of March, China was importing around 7.7 million barrels per day.

... ... ...

Another source of additional demand comes from a policy change in the downstream sector. The central government recently loosened the rules on oil imports, allowing smaller refineries to import more crude oil. These so-called "teapot refineries," with capacities of around 20,000 to 100,000 barrels of production per day, struggled under the old restrictions, producing at only 30 to 40 percent of capacity because of an inability to import oil. That has changed, and domestic refining production is set to rise, and with it, so are imports.

[Apr 24, 2016] Irreversible Decline by Mike Whitney

Notable quotes:
"... "U.S. Secretary of State John Kerry sidestepped the issue (of a US-Saudi plot) after a trip to Saudi Arabia in September. Asked if past discussions with Riyadh had touched on Russia's need for oil above $100 to balance its budget, he smiled and said: "They (Saudis) are very, very well aware of their ability to have an impact on global oil prices." ( Saudi oil policy uncertainty unleashes the conspiracy theorists , Reuters) ..."
"... Of course, they're in bed together. Saudi Arabia is a US client. It's not autonomous or sovereign in any meaningful way. It's a US protectorate, a satellite, a colony. They do what they're told. Period. True, the relationship is complex, but let's not be ridiculous. The Saudis are not calling the shots. The idea is absurd. Do you really think that Washington would let Riyadh fiddle prices in a way that destroyed critical US domestic energy industries, ravaged the junk bond market, and generated widespread financial instability without uttering a peep of protest on the matter? ..."
"... Dream on! If the US was unhappy with the Saudis, we'd all know about it in short-order because it would be raining Daisy Cutters from the Persian Gulf to the Red Sea, which is the way that Washington normally expresses its displeasure on such matters. The fact that Obama has not even alluded to the shocking plunge in prices just proves that the policy coincides with Washington's broader geopolitical strategy. ..."
"... It happened again in 1986, when Saudi Arabia-led OPEC allowed prices to drop precipitously, and then in 1990, when the Saudis sent prices plummeting as a way of taking out Russia, which was seen as a threat to their oil supremacy. In 1998, they succeeded. When the oil price was halved from $25 to $12, Russia defaulted on its debt. ..."
"... Bottom line: Falling oil prices and the plunging ruble are not some kind of free market accident brought on by oversupply and weak demand. That's baloney. They're part of a broader geopolitical strategy to strangle the Russian economy, topple Putin, and establish US hegemony across the Asian landmass. It's all part of Washington's plan to maintain its top-spot as the world's only superpower even though its economy is in irreversible decline. ..."
December 29, 2014 | www.counterpunch.org

"Saudi oil policy… has been subject to a great deal of wild and inaccurate conjecture in recent weeks. We do not seek to politicize oil… For us it's a question of supply and demand, it's purely business."

– Ali al Naimi, Saudi Oil Minister

"There is no conspiracy, there is no targeting of anyone. This is a market and it goes up and down."

– Suhail Bin Mohammed al-Mazroui, United Arab Emirates' petroleum minister

"We all see the lowering of oil prices. There's lots of talk about what's causing it. Could it be an agreement between the U.S. and Saudi Arabia to punish Iran and affect the economies of Russia and Venezuela? It could."

Russian President Vladimir Putin

Are falling oil prices part of a US-Saudi plan to inflict economic damage on Russia, Iran and Venezuela?

Venezuelan President Nicolas Maduro seems to think so. In a recent interview that appeared in Reuters, Maduro said he thought the United States and Saudi Arabia wanted to drive down oil prices "to harm Russia."

Bolivian President Evo Morales agrees with Maduro and told journalists at RT that: "The reduction in oil prices was provoked by the US as an attack on the economies of Venezuela and Russia. In the face of such economic and political attacks, the nations must be united."

Iranian President Hassan Rouhani said the same thing,with a slightly different twist: "The main reason for (the oil price plunge) is a political conspiracy by certain countries against the interests of the region and the Islamic world … Iran and people of the region will not forget such … treachery against the interests of the Muslim world."

US-Saudi "treachery"? Is that what's really driving down oil prices?

Not according to Saudi Arabia's Petroleum Minister Ali al-Naimi. Al-Naimi has repeatedly denied claims that the kingdom is involved in a conspiracy. He says the tumbling prices are the result of "A lack of cooperation by non-OPEC production nations, along with the spread of misinformation and speculator's greed." In other words, everyone else is to blame except the country that has historically kept prices high by controlling output. That's a bit of a stretch, don't you think? Especially since–according to the Financial Times - OPEC's de facto leader has abandoned the cartel's "traditional strategy" and announced that it won't cut production even if prices drop to $20 per barrel.

Why? Why would the Saudis suddenly abandon a strategy that allowed them to rake in twice as much dough as they are today? Don't they like money anymore?

And why would al-Naimi be so eager to crash prices, send Middle East stock markets into freefall, increase the kingdom's budget deficits to a record-high 5 percent of GDP, and create widespread financial instability? Is grabbing "market share" really that important or is there something else going on here below the surface?

The Guardian's Larry Elliot thinks the US and Saudi Arabia are engaged a conspiracy to push down oil prices. He points to a September meeting between John Kerry and Saudi King Abdullah where a deal was made to boost production in order to hurt Iran and Russia. Here's a clip from the article titled "Stakes are high as US plays the oil card against Iran and Russia":

"…with the help of its Saudi ally, Washington is trying to drive down the oil price by flooding an already weak market with crude. As the Russians and the Iranians are heavily dependent on oil exports, the assumption is that they will become easier to deal with…

John Kerry, the US secretary of state, allegedly struck a deal with King Abdullah in September under which the Saudis would sell crude at below the prevailing market price. That would help explain why the price has been falling at a time when, given the turmoil in Iraq and Syria caused by Islamic State, it would normally have been rising.

The Saudis did something similar in the mid-1980s. Then, the geopolitical motivation for a move that sent the oil price to below $10 a barrel was to destabilize Saddam Hussein's regime. This time, according to Middle East specialists, the Saudis want to put pressure on Iran and to force Moscow to weaken its support for the Assad regime in Syria… (Stakes are high as US plays the oil card against Iran and Russia, Guardian)

That's the gist of Elliot's theory, but is he right?

Vladimir Putin isn't so sure. Unlike Morales, Maduro and Rouhani, the Russian president has been reluctant to blame falling prices on US-Saudi collusion. In an article in Itar-Tass, Putin opined:

"There's a lot of talk around" in what concerns the causes for the slide of oil prices, he said at a major annual news conference. "Some people say there is conspiracy between Saudi Arabia and the US in order to punish Iran or to depress the Russian economy or to exert impact on Venezuela."

"It might be really so or might be different, or there might be the struggle of traditional producers of crude oil and shale oil," Putin said. "Given the current situation on the market the production of shale oil and gas has practically reached the level of zero operating costs." (Putin says oil market price conspiracy between Saudi Arabia and US not ruled out, Itar-Tass)

As always, Putin takes the most moderate position, that is, that Washington and the Saudis may be in cahoots, but that droopy prices might simply be a sign of over-supply and weakening demand. In other words, there could be a plot, but then again, maybe not. Putin is a man who avoids passing judgment without sufficient evidence.

The same can't be said of the Washington Post. In a recent article, WP journalist Chris Mooney dismisses anyone who thinks oil prices are the result of US-Saudi collaboration as "kooky conspiracy theorists". According to Mooney:

"The reasons for the sudden (price) swing are not particularly glamorous: They involve factors like supply and demand, oil companies having invested heavily in exploration several years ago to produce a glut of oil that has now hit the market - and then, perhaps, the "lack of cohesion" among the diverse members of OPEC." (Why there are so many kooky conspiracy theories about oil, Washington Post)

Oddly enough, Mooney disproves his own theory a few paragraphs later in the same piece when he says:

"Oil producers really do coordinate. And then, there's OPEC, which is widely referred to in the press as a "cartel," and which states up front that its mission is to "coordinate and unify the petroleum policies" of its 12 member countries…. Again, there's that veneer of plausibility to the idea of some grand oil related strategy." (WP)

Let me get this straight: One the one hand Mooney agrees that OPEC is a cartel that "coordinates and unify the petroleum policies", then on the other, he says that market fundamentals are at work. Can you see the disconnect? Cartels obstruct normal supply-demand dynamics by fixing prices, which Mooney seems to breezily ignore.

Also, he scoffs at the idea of "some grand oil related strategy" as if these cartel nations were philanthropic organizations operating in the service of humanity. Right. Someone needs to clue Mooney in on the fact that OPEC is not the Peace Corps. They are monopolizing amalgam of cutthroat extortionists whose only interest is maximizing profits while increasing their own political power. Surely, we can all agree on that fact.

What's really wrong with Mooney's article, is that he misses the point entirely. The debate is NOT between so-called "conspiracy theorists" and those who think market forces alone explain the falling prices. It's between the people who think that the Saudis decision to flood the market is driven by politics rather than a desire to grab "market share." That's where people disagree. No denies that there's manipulation; they merely disagree about the motive. This glaring fact seems to escape Mooney who is on a mission to discredit conspiracy theorists at all cost. Here's more:

(There's) "a long tradition of conspiracy theorists who have surmised that the world's great oil powers - whether countries or mega-corporations - are secretly pulling strings to shape world events."…

"A lot of conspiracy theories take as their premise that there's a small group of people who are plotting to control something, to control the government, the banking system, or the main energy source, and they are doing this to the disadvantage of everybody else," says University of California-Davis historian Kathy Olmsted, author of "Real Enemies: Conspiracy Theories and American Democracy, World War I to 9/11″. (Washington Post)

Got that? Now find me one person who doesn't think the world is run by a small group of rich, powerful people who operate in their own best interests? Here's more from the same article:

(Oil) "It's the perfect lever for shifting world events. If you were a mad secret society with world-dominating aspirations and lots of power, how would you tweak the world to create cascading outcomes that could topple governments and enrich some at the expense of others? It's hard to see a better lever than the price of oil, given its integral role in the world economy." (WP)

"A mad secret society"? Has Mooney noticed that - in the last decade and a half - the US has only invaded nations that have huge natural resources (mainly oil and natural gas) or the geography for critical pipeline routes? There's nothing particularly secret about it, is there?

The United States is not a "mad secret society with world-dominating aspirations". It's a empire with blatantly obvious "world-dominating aspirations" run by political puppets who do the work of wealthy elites and corporations. Any sentient being who's bright enough to browse the daily headlines can figure that one out.

Mooney's grand finale:

"So in sum, with a surprising and dramatic event like this year's oil price decline, it would be shocking if it did not generate conspiracy theories. Humans believe them all too easily. And they're a lot more colorful than a more technical (and accurate) story about supply and demand." (WP)

Ah, yes. Now I see. Those darn "humans". They're so weak-minded they'll believe anything you tell them, which is why they need someone as smart as Mooney tell them how the world really works.

Have you ever read such nonsense in your life? On top of that, he gets the whole story wrong. This isn't about market fundamentals. It's about manipulation. Are the Saudis manipulating supply to grab market share or for political reasons? THAT'S THE QUESTION. The fact that they ARE manipulating supply is not challenged by anyone including the uber-conservative Financial Times that deliberately pointed out that the Saudis had abandoned their traditional role of cutting supply to support prices. That's what a "swing state" does; it manipulates supply keep prices higher than they would be if market forces were allowed to operate unimpeded.

So what is the motive driving the policy; that's what we want to know?

Certainly there's a strong case to be made for market share. No one denies that. If the Saudis keep prices at rock bottom for a prolonged period of time, then a high percentage of the producers (that can't survive at prices below $70 per barrel) will default leaving OPEC with greater market share and more control over pricing.

So market share is certainly a factor. But is it the only factor?

Is it so far fetched to think that the United States–which in the last year has imposed harsh economic sanctions on Russia, made every effort to sabotage the South Stream pipeline, and toppled the government in Kiev so it could control the flow of Russian gas to countries in the EU–would coerce the Saudis into flooding the market with oil in order to decimate the Russian economy, savage the ruble, and create favorable conditions for regime change in Moscow? Is that so hard to believe?

Apparently New York Times columnist Thomas Freidman doesn't think so. Here's how he summed it up in a piece last month: "Is it just my imagination or is there a global oil war underway pitting the United States and Saudi Arabia on one side against Russia and Iran on the other?"

It sounds like Freidman has joined the conspiracy throng, doesn't it? And he's not alone either. This is from Alex Lantier at the World Socialist Web Site:

"While there are a host of global economic factors underlying the fall in oil prices, it is unquestionable that a major role in the commodity's staggering plunge is Washington's collaboration with OPEC and the Saudi monarchs in Riyadh to boost production and increase the glut on world oil markets.

As Obama traveled to Saudi Arabia after the outbreak of the Ukraine crisis last March, the Guardian wrote, "Angered by the Soviet invasion of Afghanistan in 1979, the Saudis turned on the oil taps, driving down the global price of crude until it reached $20 a barrel (in today's prices) in the mid-1980s… [Today] the Saudis might be up for such a move-which would also boost global growth-in order to punish Putin over his support for the Assad regime in Syria. Has Washington floated this idea with Riyadh? It would be a surprise if it hasn't." (Alex Lantier, Imperialism and the ruble crisis, World Socialist Web Site)

And here's an intriguing clip from an article at Reuters that suggests the Obama administration is behind the present Saudi policy:

"U.S. Secretary of State John Kerry sidestepped the issue (of a US-Saudi plot) after a trip to Saudi Arabia in September. Asked if past discussions with Riyadh had touched on Russia's need for oil above $100 to balance its budget, he smiled and said: "They (Saudis) are very, very well aware of their ability to have an impact on global oil prices." (Saudi oil policy uncertainty unleashes the conspiracy theorists, Reuters)

Wink, wink.

Of course, they're in bed together. Saudi Arabia is a US client. It's not autonomous or sovereign in any meaningful way. It's a US protectorate, a satellite, a colony. They do what they're told. Period. True, the relationship is complex, but let's not be ridiculous. The Saudis are not calling the shots. The idea is absurd. Do you really think that Washington would let Riyadh fiddle prices in a way that destroyed critical US domestic energy industries, ravaged the junk bond market, and generated widespread financial instability without uttering a peep of protest on the matter?

Dream on! If the US was unhappy with the Saudis, we'd all know about it in short-order because it would be raining Daisy Cutters from the Persian Gulf to the Red Sea, which is the way that Washington normally expresses its displeasure on such matters. The fact that Obama has not even alluded to the shocking plunge in prices just proves that the policy coincides with Washington's broader geopolitical strategy.

And let's not forget that the Saudis have used oil as a political weapon before, many times before. Indeed, wreaking havoc is nothing new for our good buddies the Saudis. Check this out from Oil Price website:

"In 1973, Egyptian President Anwar Sadat convinced Saudi King Faisal to cut production and raise prices, then to go as far as embargoing oil exports, all with the goal of punishing the United States for supporting Israel against the Arab states. It worked. The "oil price shock" quadrupled prices.

It happened again in 1986, when Saudi Arabia-led OPEC allowed prices to drop precipitously, and then in 1990, when the Saudis sent prices plummeting as a way of taking out Russia, which was seen as a threat to their oil supremacy. In 1998, they succeeded. When the oil price was halved from $25 to $12, Russia defaulted on its debt.

The Saudis and other OPEC members have, of course, used the oil price for the obverse effect, that is, suppressing production to keep prices artificially high and member states swimming in "petrodollars". In 2008, oil peaked at $147 a barrel." (Did The Saudis And The US Collude In Dropping Oil Prices?, Oil Price)

1973, 1986, 1990, 1998 and 2008.

So, according to the author, the Saudis have manipulated oil prices at least five times in the past to achieve their foreign policy objectives. But, if that's the case, then why does the media ridicule people who think the Saudis might be engaged in a similar strategy today?

Could it be that the media is trying to shape public opinion on the issue and, by doing so, actually contribute to the plunge in oil prices?

Bingo. Alert readers have probably noticed that the oil story has been splashed across the headlines for weeks even though the basic facts have not changed in the least. It's all a rehash of the same tedious story reprinted over and over again. But, why? Why does the public need to have the same "Saudis refuse to cut production" story driven into their consciousness day after day like they're part of some great collective brainwashing experiment? Could it be that every time the message is repeated, oil sells off, and prices go down? Is that it?

Precisely. For example, last week a refinery was attacked in Libya which pushed oil prices up almost immediately. Just hours later, however, another "Saudis refuse to cut production" story conveniently popped up in all the major US media which pushed prices in the direction the USG wants them to go, er, I mean, back down again.

This is how the media helps to reinforce government policy, by crafting a message that helps to push down prices and, thus, hurt "evil" Putin. (This is called "jawboning") Keep in mind, that OPEC doesn't meet again until June, 2015, so there's nothing new to report on production levels. But that doesn't mean we're not going to get regular updates on the "Saudis refuse to cut production" story. Oh, no. The media is going to keep beating that drum until Putin cries "Uncle" and submits to US directives. Either that, or the bond market is going to blow up and take the whole damn global financial system along with it. One way or another, something's got to give.

Bottom line: Falling oil prices and the plunging ruble are not some kind of free market accident brought on by oversupply and weak demand. That's baloney. They're part of a broader geopolitical strategy to strangle the Russian economy, topple Putin, and establish US hegemony across the Asian landmass. It's all part of Washington's plan to maintain its top-spot as the world's only superpower even though its economy is in irreversible decline.

MIKE WHITNEY lives in Washington state. He is a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press). Hopeless is also available in a Kindle edition. He can be reached at fergiewhitney@msn.com.

[Apr 23, 2016] This short term glut will probably accentuate the coming problems because it gives the impression that there is no peak oil

Notable quotes:
"... This short term glut will probably accentuate the coming problems because it gives the impression that there is no peak oil. People have trouble understanding that there are short-term cycles within a long-term cycle. This bad signal is giving us the impetus to continue investing in energy intensive projects instead of reshaping our economy. And this will make things even worse in 5-10 years. ..."
"... A country's most important asset is energy and historically, countries have never willingly cut total energy consumption. They might increase efficiencies but the total does not drop. This means that most countries, as long as there exist other sectors that can be squeezed, will continue to subsidize the energy sector squeezing out these sectors that are deemed less important or simply those with less clout. ..."
"... It is quite obvious that our lives are even more energy dependent than they were when this monetary cycle started in the early 70s. And our system is still based on growing this even more. With NIRP, we are getting very close to the end of this cycle. ..."
"... There is no glut. All the oil is being bought. The problem is that there in not yet enough of a shortage to drive the price up. A small distinction but huge ramifications if you understand it. And by the way higher prices is not a solution to what ails us. ..."
"... The author blames the oil patch bust on a geophysical crisis. There is some truth to this argument but by far the biggest driver of the bust is Fed policy. Artificially cheap debt financing led to overcapacity and a vicious cycle of continued overproduction as drillers desperately try to avoid defaulting. ..."
www.nakedcapitalism.com
Moneta , April 23, 2016 at 7:56 am

This short term glut will probably accentuate the coming problems because it gives the impression that there is no peak oil. People have trouble understanding that there are short-term cycles within a long-term cycle. This bad signal is giving us the impetus to continue investing in energy intensive projects instead of reshaping our economy. And this will make things even worse in 5-10 years.

If the total cost of extraction is more than 40$ and consumers are paying $40 or less, then somewhere along the way, someone is subsidizing the cost. It could be low tax rates, eZ money, growing deficits, underfunded pensions, underfunded restoration funds, etc.

A country's most important asset is energy and historically, countries have never willingly cut total energy consumption. They might increase efficiencies but the total does not drop. This means that most countries, as long as there exist other sectors that can be squeezed, will continue to subsidize the energy sector squeezing out these sectors that are deemed less important or simply those with less clout.

It is quite obvious that our lives are even more energy dependent than they were when this monetary cycle started in the early 70s. And our system is still based on growing this even more. With NIRP, we are getting very close to the end of this cycle.

Jef , April 23, 2016 at 10:19 am

There is no glut. All the oil is being bought. The problem is that there in not yet enough of a shortage to drive the price up. A small distinction but huge ramifications if you understand it. And by the way higher prices is not a solution to what ails us.

Fantastic tour de force article.

Eduardo Quince , April 23, 2016 at 11:23 am

The author blames the oil patch bust on a geophysical crisis. There is some truth to this argument but by far the biggest driver of the bust is Fed policy. Artificially cheap debt financing led to overcapacity and a vicious cycle of continued overproduction as drillers desperately try to avoid defaulting.

[Apr 17, 2016] The Telegraph has a story indicating Chinese oil imports are jumping from 6.7 million barrels per day in 2015 to 8 million barrels per day in 2016.

Notable quotes:
"... The Telegraph has a story indicating Chinese oil imports are jumping from 6.7 million barrels per day in 2015 to 8 million barrels per day in 2016. Estimated to be 10 million barrels per day in 2018. Barclays estimates. Chinese production is set to fall slightly in 2016. ..."
"... US production looks to fall to 8 million bopd by end of 2016. US oil demand is also rising. ..."
"... Yeah I'm biased. I'm sick of sub $40 in the field. We have been below $40 in the field since 7/15. Haven't seen above $55 in the field since 11/14. Havent seen these oil prices since 2003-2004. ..."
"... Oil is still very low, yet gasoline has popped up over $2. Low here was $1.29. ..."
"... Refining friends say US gasoline demand will be very high this summer. Their turnaround is winding down, they are going to refine a record number of barrels this year. Just observations. ..."
peakoilbarrel.com
shallow sand , 04/16/2016 at 11:20 pm
The Telegraph has a story indicating Chinese oil imports are jumping from 6.7 million barrels per day in 2015 to 8 million barrels per day in 2016. Estimated to be 10 million barrels per day in 2018. Barclays estimates. Chinese production is set to fall slightly in 2016.

US production looks to fall to 8 million bopd by end of 2016. US oil demand is also rising.

Yeah I'm biased. I'm sick of sub $40 in the field. We have been below $40 in the field since 7/15. Haven't seen above $55 in the field since 11/14. Havent seen these oil prices since 2003-2004.

Great weather here today. People driving all over the place in our little burg. Didnt see one electric car today. Still know of one Tesla in town. There is, however, also one used Leaf. That is new in the past year. It is driven by a teenager to and from school. Her father has an F350 diesel, her mother has a Chevy Suburban. The Tesla owner also has two gasoline powered vehicles.

Oil is still very low, yet gasoline has popped up over $2. Low here was $1.29.

Refining friends say US gasoline demand will be very high this summer. Their turnaround is winding down, they are going to refine a record number of barrels this year. Just observations.

[Apr 17, 2016] Kuwait Oil Company (KOC) has lowered crude output to 1.1 million barrels per day (bpd) from its normal production level of about 3 million bpd

Notable quotes:
"... This could be a really big deal. First sign that the people of the GCC are not going to take reduced living standards easily. ..."
"... Good! I will go with Ron. They are all maxed out anyway. If they had signed a freeze agreement, then everyone would say that the price is rigged and blame the oil companies. I am willing [lost my ass on a lot of oil stock investments] to just wait and see how everything plays out without artificial agreements, that, in my opinion, would have meant nothing. ..."
"... Clueless. I understand where you are coming from. Given early signs from Kuwait, there may be no need for a cut or freeze. Assuming Kuwait just went down about 2 million, wouldn't it be prudent for the rest to wait and see what happens? I think austerity in the kingdoms maybe is not going so smoothly? ..."
"... As for us, we are kind of like Russia, don't want to see another sub $30 test. Would like to get to $55-60 WTI and see how shale, tar sands, etc react. So, if freeze talk is why we had a bounce, and we drop back below $30 WTI, we wont be happy campers about no freeze deal. ..."
peakoilbarrel.com

Amatoori, 04/17/2016 at 11:58 am

Kuwait Oil Company (KOC) has lowered crude output to 1.1 million barrels per day (bpd) from its normal production level of about 3 million bpd, company spokesman Saad Al-Azmi said in a posting on the KOC Twitter account.

Now thats a cut to write home about. So not sure about that how much the "glut" is but if they take of 2mb/d does it mean we are below daily demand now.

Some talk about freeze – the are definitely not talking, :-)

http://uk.reuters.com/article/kuwait-oil-strike-idUKL5N17K0GX

JN2 , 04/17/2016 at 12:39 pm
Amatoori, due to a labor strike. You forgot to mention that. But with 2 mbpd less and Doha, tomorrow's markets should be interesting!
Amatoori , 04/17/2016 at 2:42 pm
Oh sorry. Just copied a slice of the article and missed that vital information. Anyway, let the market party start. It will definitely test the fundamentals of the oil market. Words vs. Supply
shallow sand , 04/17/2016 at 1:12 pm
This could be a really big deal. First sign that the people of the GCC are not going to take reduced living standards easily.
Doug Leighton , 04/17/2016 at 2:45 pm
DOHA OIL PRODUCERS MEETING ENDS WITHOUT AN AGREEMENT

"A summit in Doha between the world's largest oil producing countries ended without an agreement on Sunday, as country leaders failed to strike a deal to freeze output and boost sagging crude prices."

http://www.cnbc.com/2016/04/17/doha-oil-producers-meeting-ends-without-an-agreement.html

clueless , 04/17/2016 at 3:12 pm
Good! I will go with Ron. They are all maxed out anyway. If they had signed a freeze agreement, then everyone would say that the price is rigged and blame the oil companies. I am willing [lost my ass on a lot of oil stock investments] to just wait and see how everything plays out without artificial agreements, that, in my opinion, would have meant nothing.

I wonder if Shallow Sand agrees?

shallow sand , 04/17/2016 at 4:32 pm
Clueless. I understand where you are coming from. Given early signs from Kuwait, there may be no need for a cut or freeze. Assuming Kuwait just went down about 2 million, wouldn't it be prudent for the rest to wait and see what happens? I think austerity in the kingdoms maybe is not going so smoothly?

As for us, we are kind of like Russia, don't want to see another sub $30 test. Would like to get to $55-60 WTI and see how shale, tar sands, etc react. So, if freeze talk is why we had a bounce, and we drop back below $30 WTI, we wont be happy campers about no freeze deal.

In retrospect, costs got out of hand at $100 oil. Pretty much everything is cheaper now, except for electricity.

$55-60 WTI would be wonderful. It would better if the market achieves it than through a cut. However, history is that a cut is necessary to get the traders to dump their shorts.

There are a lot of John Kilduff's out there who are almost maniacal in their desire to drive WTI back below $26.

I long ago quit trying to figure out why oil trades like it does, or how it can get so high or low for periods of time.

I'd say the new Saudi prince who is apparently now in charge seems to be taking a different approach than his predecessors.

We will see.

[Apr 17, 2016] Oil producers fail to agree deal to freeze output after Saudi Arabia-Iran standoff

www.theguardian.com

A victory for the US diplomacy. Using KSA as a Trojan horse again and again.

The Guardian

The world's major oil producing nations failed to strike an agreement on Sunday night to freeze production, saying they needed more time to agree a deal to try to buoy the price of oil.

What producers had hoped would be the first deal in 15 years ran into difficulty after Saudi Arabia – the largest exporter of oil – demanded that Iran join an agreement to freeze output.

Iran has been reluctant to agree to hold back on oil production while it attempts to return its market share to pre-sanction levels.

The meeting in Doha had been called on Sunday for 18 countries to sign off on a deal that would helped to put a floor on the price of crude oil which, at $45 a barrel , has risen 60% from its lows in January.

But Reuters quoted sources saying that Saudi Arabia wanted all Opec members to attend talks, despite insisting earlier on excluding Iran, its political rival in the region, because Tehran had refused to freeze production.

If a deal cannot be struck soon, it is possible that recent rises in the price of oil will stall.

Economists at French bank Société Générale said: "When it comes to oil, the principle of Goldilocks applies in full. Too low a price raises fear of a vicious circle of default, spillover to bank balance sheets, eroding financial conditions and a new headwind for the real economy.

"Too high a price, on the other hand, erodes the welcome boost to purchasing power. But, if higher oil prices are driven by stronger demand, then this is good news."

They noted that a recent report by the International Energy Agency warned that a mere production freeze would have a limited effect on physical oil supply.

Even so, expectations had been high before the Sunday meeting that a deal could be struck between Opec and non-Opec oil producers to hold output at January's levels until October. Reuters was reporting that producers were instead agreeing to freeze oil production at "an agreeable level" as long as all Opec countries and major exporting nations participated.

"If there is no deal today, it will be more than just Iran that Saudi Arabia will be targeting. If there is no freeze, that would directly affect North American production going forward, perhaps something Saudis might like to see," Natixis oil analyst Abhishek Deshpande told Reuters.

!-- dashingwhitesergeant , 2016-04-18 01:58:05
Expect oil-prices to drop about $5/bbl tomorrow.

One of the factors discussed is Iran's determination, and its right, to produce more oil since sanctions were lifted.

Another factor is Saudi Arabia's determination to restrict Iran's oil production.

Now Iran is back in the market, why should Iran settle for a deal that means they are still, in effect, under sanctions - only now it's OPEC restrictions (that suit Saudi Arabia) as opposed to legal international (US, EU) sanctions.

One of the problems with the sanctions policy is that it gave Saudi Arabia more leverage in the oil-markets; and anything that's good for Saudi Arabia is bad for the world.

I would say that sanctions on Iran were unjustified to begin with. Anyway, now those sanctions are lifted it will be harder, and take longer, to bring the market into balance.

My solution would be to immediately put sanctions on Saudi Arabia.

majamer , 2016-04-18 00:54:51
The US foreign policies are irreversibly damaging the US economy. Giving Iran the upper hand in the Middle East, playing dirty games with the Saudis, lifting the ban on the US oil export, exposing the US dollar to high risk, etc. are all taking the oil prices for a wild ride and destabilizing the already fragile and flatulent US economy. Plunging oil prices are severely damaging the US banks, the financial backbone of US and global economies. Also, Saudi Arabia is the third largest US T-Bill holder, if its economy collapses it won't be alone in the global morgue!
Aspadana majamer , 2016-04-18 01:37:09

, Saudi Arabia is the third largest US T-Bill holder, if its economy collapses it won't be alone in the global morgue!

Well, guess we'll have to wait and see if those threats pay off ...or...The U.S. sees Saudi bet and raises ... ?

http://www.nytimes.com/2016/04/16/world/middleeast/saudi-arabia-warns-ofeconomic-fallout-if-congress-passes-9-11-bill.html?_r=1

DogsLivesMatter Aspadana , 2016-04-18 01:51:54
Holy shite! There are now two countries in the Middle East that have the US by the balls. It's getting more interesting all the time.
SirWillis , 2016-04-18 00:43:26
Anyone excited about Russia's plan to start flooding the market with Gas? Should be a fun year. Not if you're a US fossil fuel company though.

Can the US economy survive? I hope so, I have three houses there.

Shatford Shatford , 2016-04-18 00:39:50
Sadly, oil is still a geopolitical tool after almost 100 years. I had hoped we would've moved on to the next best thing by now, like fusion batteries or some other sci-fi tech-tree advancement. Let a new line of oligarchs and dynastic families be born. The super-rich are the worst kind of burrowing tick there is.
SirWillis , 2016-04-18 00:38:28
It was pretty obvious Iran would never stand for this. Saudi keep pumping to hold their share of the market; Iran won't slow production until they are handed a bigger share of the market by OPEC (ie: Saudi). Saudi is basically in a stalemate with itself, and they are too greedy and too anti-Shia to see a way past that.
Aspadana , 2016-04-17 23:49:11
Excellent article from Rachel Marsden. Small but encompassing;
http://www.chicagotribune.com/news/columnists/sns-201604121430--tms--amvoicesctnav-b20160412-20160412-column.html

Saudi Arabia is enjoying a series of new Chinese investment deals -- including a $2.5 billion deal to host a nuclear facility -- and has moved past Russia to become China's largest oil supplier. Meanwhile, the resulting crash in oil prices is taking a toll on the U.S. and Russia. There have been significant job losses in America's oil and gas sector, and Russia has had to smash the glass on its reserve funds in order to diversify its economy.

This sort of scenario was envisioned in a now-declassified CIA report from January 1999 that emphasized China's interest in Middle Eastern oil and the resulting development of ties that "could create bilateral tensions" and "increasingly challenge U.S. policy in regions in turmoil, such as the Middle East."

The Saudi-China alliance has the potential to undercut Russian and American interests. Saudi Arabia effectively leads OPEC, and its lucrative business dealings with China eliminate the incentive to increase oil prices

Magali Luna , 2016-04-17 23:44:17
Keep it in the ground. Gaia is ill so lets give her a chance to recover. I am sure SA, Iran, Russia, Venezuela et al can diversify their economies and ween themselves off oil. Anything else is just suicidal.
SirWillis Magali Luna , 2016-04-18 00:26:35
Easier said than done. Venezuela is on the verge of catastrophic failure of all its utilities due to corruption and intense mismanagement. The country is broke and it is utterly dependent on oil revenue. How do you diversify with no money?
Shatford Shatford SirWillis , 2016-04-18 00:41:26
Sling dope, like the rest of their South American governments.
SirWillis Shatford Shatford , 2016-04-18 00:55:45
To who? The US ain't importing no dope no more, y'know, like.
chovil , 2016-04-17 23:38:46
Iran has a lot of high quality very cheap oil. The extent of their oil reserves is currently unknown because nobody has been allowed in there, but we can assume they have a lot of oil, and without sanctions, they are just coming online, and they want market share. So no increase in the price of oil for a long time. It's the worse thing that could happen for a warming climate. You can expect oil to be really cheap for at least 50 years. Iran and OPEC, mostly Saudi Arabia have huge reserves. Neither one is going to blink. I've seen maps dating back thousands of years. Persian and Arabic cultures have always been at war, and that line between the two was decided a very long time ago. I could be wrong. Most of these people making decisions went to Cambridge or Oxford, but the green revolution is not going to happen any time soon. Everyone loves a Mercedes. They are very nice cars. And my children are getting an excellent education with the money I have.
Shatford Shatford chovil , 2016-04-18 00:43:43
I'm fine with oil being cheap. The suppression of its price is meant to alter the actions of Russia and Iran and anyone else who disagrees with western foreign policy.

If oil is cheap for long enough, those who fatten themselves on its profits may have to rethink their world views to a better alternative.

eclogite chovil , 2016-04-18 00:51:40
So, "excellent education" is leading us into this conundrum!?
Magali Luna Shatford Shatford , 2016-04-18 01:03:18
I think the Saudis disagree with a lot of western foreign policy but that doesn't stop them from extracting and being exposed to the slings and arrows of the market. Also, how would you like governments to alter the actions of other governments: force of arms?
Peter Bracken , 2016-04-17 23:36:47
Crude is currently over 5% down. Wait for a spike and then fill your boots.
sportman1 , 2016-04-17 23:35:33
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mosquitohippy , 2016-04-17 23:21:51
Venezuela's world is getting tinier and tinier.
MacMeow , 2016-04-17 23:11:47

Remember when Saddam said he would trade oil in Euros ?

No

Remember when Qaddafi said he would trade oil in gold instead of dollars?

No

Shatford Shatford MacMeow , 2016-04-18 00:46:20
I think you meant to use the reply function to the post below yours instead of starting a new post.
MacMeow Shatford Shatford , 2016-04-18 00:59:19
I'm a free spirit.
Arweni , 2016-04-17 22:40:25
"Iran wants to recover tens of billions of dollars it is owed by India and other buyers of its oil in euros and is billing new crude sales in euros, too, looking to reduce its dependence on the U.S. dollar following last month's sanctions relief."
Remember when Saddam said he would trade oil in Euros ? He got murdered, invaded.

Remember when Qaddafi said he would trade oil in gold instead of dollars? He got invaded and murdered.

I would like to be a fly on the wall in the CFR think tank board room right now...

Iran will not be so easily invaded, murdered, or taken out by the west. They must use economics to do so. If I were a smart person, I could figure out the link between this play being made by the western owned Sauds, and the petro dollar which keeps the American dollar from crashing due to rampant inflation..

Good move by Iran, and they would only make if they knew Russia had their back. Which they do.

Any smart people here, to fill me in ?

http://www.reuters.com/article/us-oil-iran-exclusive-idUSKCN0VE21S

dikcheney Arweni , 2016-04-17 23:34:41
I doubt anyone will chance invading Iran (other than the Saudis and they would be routed in the first week). Rather I view the low oil price as a major threat to the US Banksters as they have huge loans out on all those high cost oil deposits that are more difficult to extract. Those same banks are also exposed to the false promise of perpetual high cost coal. They are living in the carboniferous times and are doomed. Note last weeks sudden urgent pressure on the US banks to produce rational 'living wills' to manage collapse.

Iran is 'fortunate' in that it is not dependent on a high oil price plus its oil is relatively easy to extract. I say fortunate as it is not subject to a sudden depression in social expectation as its society is not artificially floating on oil as is Saudi Arabia, Venezuela, etc.

The Saudis cant resist insulting the shia faction of islam and simple mindedly ensured the OPEC failure by their inept equivocation of the Iranian invitation. (The Saudis managed over the last 25 years to extract the totality of their aquifer of some 20,000 years old water and they import much of their food as the water is way too deep now for economic extraction. The brief wheat export decades that diversified their economy is over).

The carbon economic concentration bodes ill for the global economy as the oil bubble has definitely burst and coal is in a landslide to hell and is taking the banksters with it.

SirWillis dikcheney , 2016-04-18 00:33:06
Hooray!
003003 , 2016-04-17 22:40:01
Saudi Arabia will need to complexify their economy, things like foreign tourism.
MacMeow 003003 , 2016-04-17 23:09:57
Camels and beheadings have always been a big drawcard.
LorenzoStDubois 003003 , 2016-04-17 23:18:20
Yeah, I can see the stag do market being a big earner for them.
SirWillis 003003 , 2016-04-18 00:34:57
They already do a pretty roaring trade on religion. Lucky that one of the Pillars of Islam is a holiday to Saudi.
LorenzoStDubois , 2016-04-17 22:27:36
The notion that Iran would possibly agree to a freeze which sees Saudi (and Russia) pumping at historically high levels while they are stuck with significant post-sanctions headroom is just bizarre. So bizarre, in fact, that you have to assume it's posturing with some different end in mind.

Or possibly desperation, I suppose. But even the Saudis can't be stupid enough to believe it's a realistically possible outcome.

Peter Bracken LorenzoStDubois , 2016-04-17 22:34:02
Exactly.

The hubris of last weeks rise in WTI and crude will evaporate tomorrow.

LorenzoStDubois Peter Bracken , 2016-04-17 23:09:17
It might fall tomorrow, but in the longer term, it's going to reach the point at which shale kicks in as a de facto cap on the manipulability of prices. ie probably about $60. It's just a question of what route it takes getting there.

The deeper problem the Saudis and Russians have though is that shale's break-even point is not fixed. And the current price collapse is accelerating the process of financial and technical innovation which moves it lower.

Basically, they can't kill shale; they can just make it temporarily uneconomic. And their capacity to do that is slowly shrinking. They might hope that they can use this experience, plus the implicit threat of another future price collapse, to deter people from investing in shale when it becomes marginally profitable again. But American capitalism doesn't really tend to work like that. And meanwhile, the technology advances.

Peter Bracken LorenzoStDubois , 2016-04-17 23:27:25
Smart post, Lorenzo. And I don't doubt the thrust of your analysis.

But I'm a day trader, not an investor. Which is why I'll never be rich.

Peter Bracken , 2016-04-17 22:09:50
Jesus. The Dollar is collapsing against the Yen. 105 is becoming a distinct possibility. And that equates to an SPX in the low 1600s.

Which is probably where it belongs.

Kiselev Peter Bracken , 2016-04-17 22:18:53
Well Perfect storm is already here...
I still bet that Global crisis will start at august ...as usual...
Peter Bracken Kiselev , 2016-04-17 22:25:30
Seasonally, perhaps not.

The Doha shenanigans are likely to provide an excuse for a broader sell-off.

I'm inclined to SHORT the rips in markets as April gives way to May.

Arweni Peter Bracken , 2016-04-17 22:41:33
petro dollar is soon ending. So then , will the American economy.
Foracivilizedworld , 2016-04-17 22:08:40
Saudi Arabia is acting as a spoiled child....
Peter Bracken Foracivilizedworld , 2016-04-17 22:19:13
No. it's acting rationally.

The agenda is to force US shale producers out of business. Trouble is, Iran is taking up the slack in any US fall in rig count.

Cheap oil is set to stay.

Arweni Foracivilizedworld , 2016-04-17 22:45:40
actually, they are a beheading, terroristic nation sending terrorist into syria to murder women, children and anyone else that actually lives there. ...They tried to ruin Russia by dropping their roil prices, yet end up being broke, and desparate now...

Nope, no children that I see. Only psychopaths.

Peter Bracken Arweni , 2016-04-17 23:31:50
Not going there, Arweni. Not on a makets thread.
KillerMarmot , 2016-04-17 22:08:34
I guess my Chevron stocks are taking a dive Monday morning then.
Kiselev KillerMarmot , 2016-04-17 22:13:20
I buy ETFs...They are more safe and balanced....
Peter Bracken , 2016-04-17 22:03:23
It's the effect on equities that now predominate.

They surged last week in hope of a deal. Carnage beckons in light of news out of Doha.

Triple750 , 2016-04-17 21:58:49
China is busy filling a massive strategic petroleum reserve and at low prices to prevent oil shock threats to themselves
50% increase in demand from China projected to 2018
Smart planning
SirWillis Triple750 , 2016-04-18 01:04:41
As long as that? I was under the impression that they would be nearly fully topped up as early as Q1-2017. Maybe it's wishful thinking as I just want to see Saudi tank - pun intended.
Kiselev , 2016-04-17 21:57:16
So Saudites play their game very well..
Up prices to 40 dollars to never give chances for hedge-fond money for shale oil..
And then wait then till dozens billions shale oil investments becomes dead in reality....

100 dollars in 2017??? Now i am no sure that it couldn`t be 150 dollars in 2017 year..

Imnotscared Kiselev , 2016-04-17 22:22:27
A post both banal and illiterate, a true pleasure.
Arweni Kiselev , 2016-04-17 22:47:35
You sure it is about money?

I do not think that is the case. It is about globalism. That is the major geo-political play behind everything happening in the middle east.

---------------
"Some even believe we [Rockefeller family] are part of a secret cabal working against the best interests of the United States, characterizing my family and me as 'internationalists' and of conspiring with others around the world to build a more integrated global political and economic structure - One World, if you will.If that's the charge, I stand guilty, and I am proud of it "
| David Rockefeller

""We're going to take out seven countries in 5 years, starting with Iraq, and then Syria, Lebanon, Libya, Somalia, Sudan and, finishing off, Iran" –General Wesley Clark. Retired 4-star U.S. Army general, Supreme Allied Commander of NATO

"That is the phenomenon of the US. Since 1945 they've destroyed 73 countries and were directly involved in the deaths of 26 million people. It is a horror show. It just must stop!"
John Shipton, journalist and executive officer of Wiki Leaks.

DogsLivesMatter , 2016-04-17 21:48:50
Now, stupid question, but if the US's oil output is greater than Saudi Arabia why do they have to buy KSA oil?
Triple750 DogsLivesMatter , 2016-04-17 21:56:41
Not stupid
Crude varies a lot in its composition
I'm no expert but I believe some crude is best used for lubricants and heating oil and others for petrol and aviation fuel
It's a net swap going on
Kiselev Triple750 , 2016-04-17 22:00:28
IN USA answer is easy...They don`t produce enough oil...
Though yes...
Light oil is used mainly for petrol (because it is light)
and .....Heavy oil mainly for lubricants production..

Shale oil is light one..Thats why USA actually must to buy oil from Canada or Mexico or Venezuela..

DogsLivesMatter Triple750 , 2016-04-17 22:01:03
Thank you for your decent response.
MacMeow , 2016-04-17 21:42:33
Flogging a dead horse there oil boys, thrash around as much as you like but it's on its way out.
DogsLivesMatter MacMeow , 2016-04-17 21:50:21
WHEN???? I keep hearing that US oil output is now greater than the House of Saud so what gives?
MacMeow DogsLivesMatter , 2016-04-17 23:07:35
8:64 pm, The 7th of October, 2026.
DontRileMe , 2016-04-17 21:31:24
A $50 barrel of oil will cost around $250 at the pomp. About 60 to 70% of price difference is government tax. The other 30 to 40 percent is decided between oil companies, transportation, refining, middle men.....and finally the producing countries.

Reducing government taxes can definitely help .

GeeDeeSea DontRileMe , 2016-04-17 22:17:22
How much per gallon? How much per litre?

https://en.wikipedia.org/wiki/Barrel_(unit)#Oil_barrel

Succe55 , 2016-04-17 21:23:06
Markets in the red tomorrow, who knew..
SirWillis Succe55 , 2016-04-18 01:16:05
Not to worry, some representative member of OPEC's, brother's, best-mate's, housemaid's, former lover's, step-sister's, pet rabbit, will hint that a deal can be reached with Iran, and oil prices will boom by 5% again baby! !--
whiskyeyes , 2016-04-17 21:06:36
I never thought I would ever say this but three cheers for Iran, who told the OPEC cartel to go stuff themselves.
Kiselev whiskyeyes , 2016-04-17 21:10:09
This is barely against OPEC...more shale oil companies will bankrupt...more money Iran will got in less then half -year..

Just business..

Kiselev , 2016-04-17 21:04:23

​Texas-based Energy XXI Ltd. filed for bankruptcy Thursday, becoming the latest heavily indebted oil-and-gas company to collapse amid volatile fuel prices.

The company sought chapter 11 protection after striking a tentative deal on the terms of a $1.45 billion debt-for-equity swap with a group of its bondholders.

U.S. shale oil producer Goodrich Petroleum Corp GDPM.PK said on Friday that it filed for Chapter 11 bankruptcy protection with a plan to eliminate $400 million in debt from its balance sheet while it rides out a slump in commodities markets.

Somebody will asks how many it is...1,85 billions...
There is one example....oh wait???!!!

Arweni Kiselev , 2016-04-17 23:12:12
So who is left to take over the oil business . Banks been eating each other for quite some time. This is in the nature of their kind of business.

Yet....

"heavily indebted oil-and-gas company"

I know who will end up owning everything...

""So no, it's not a hyperbole to say the Banking System is One. We're not overstating the case when we say it's just one massive cartel. That the banks own everything, including all the major industries. Oil, Weapons, Pharmaceuticals, Food, Telecom and IT, etc. It's all one massive monopoly. Controlled from the top down. "

'A total of 737 control 80% of it all"
The Money Power is real and these Swiss gentlemen have done us a favor by crunching the numbers."

Please Google "The network of global corporate control"
======

"If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks…will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered…. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs." – Thomas Jefferson in the debate over the Re-charter of the Bank Bill (1809)

"… our whole monetary system is dishonest, as it is debt-based… We did not vote for it. It grew upon us gradually but markedly since 1971 when the commodity-based system was abandoned." The Earl of Caithness, in a speech to the House of Lords, 1997

"The few who understand the system will either be so interested in its profits or be so dependent upon its favours that there will be no opposition from that class, while on the other hand, the great body of people, mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear its burdens without complaint, and perhaps without even suspecting that the system is inimical to their interests." The Rothschild brothers of London writing to associates in New York, 1863.

meanqueeny , 2016-04-17 20:58:36
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DontRileMe , 2016-04-17 20:35:28
For many years Saudis played the world with their oil embargos. They plagued the world with their jihadists and terrorists. They feared Americans becoming independent of Saudi oil, so they devised devious ways of sabotaging American oil industry. But all their fiendish plans have failed and backfired. Now like spoiled brats, they're stumping their feet and angrily accuse others are of not play the game according to their rules! Mommy's boy is not getting his toys!
Kiselev DontRileMe , 2016-04-17 20:49:24
Like those plans you mean???

SandRidge Energy Inc (SDOC.PK) confirmed on Wednesday it has hired advisers to evaluate options including a bankruptcy filing, in what could be the most high-profile reorganization yet in U.S. shale oil industry.
Oklahoma City-based SandRidge, which reported a loss on Tuesday after delaying the filing, had about $3.63 billion in total debt as of Dec. 31.

Kiselev Kiselev , 2016-04-17 20:59:43
Somebody asks - how many it is - 3,63 billions..
There is one example ..All Russia`s crude oil export revenues in january 2016 are 4,1 billions..
But Russia has got it billions While USA will lose them..
MacMeow Kiselev , 2016-04-17 21:48:50
Russia is going down the drain.

To corrupt, to stupid.

the_thoughtful_one , 2016-04-17 20:31:25
Its not a free market is it. If it were then the price of oil would be at the cost of production/ transport etc plus profit margin of the cheapest producers. Once states are involved then it becomes political. No such thing as a free market any place any time any product. Its all deceipt.
KillerMarmot the_thoughtful_one , 2016-04-17 22:01:44

Its not a free market is it. If it were then the price of oil would be at the cost of production/ transport etc plus profit margin of the cheapest producers.

That is incorrect. In free markets, the profit markets of the cheapest producers makes no difference. Rather the profit margins of the most expensive (that is, the marginal) barrels of oil drive supply.

In the shorter run, the fact that it takes many years to explore and develop oilfields also comes into play. The industry can't turn on a dime.

SicknTired7 the_thoughtful_one , 2016-04-17 22:55:09
Agriculture isn't a free market either.
carlygirl , 2016-04-17 20:27:31
What a bunch of tossers, holding the world hostage and affecting millions of lives and jobs just because they're arguing about 'whose is bigger' - that's really all its about at the end of the day. Cripes you had them all in a room, a perfect chance to just gas them all and send a message that we don't bow down to religious crack pots.
Arweni , 2016-04-17 20:18:01
"after Saudi Arabia – the largest exporter of oil – demanded that Iran join an agreement to freeze output."

So Saudi Arabia, the nation which imports bodies and money in order to do terrorism in Syria, and is also the nation which is running out of oil.

And now Saudi Arabia wants Iran to agree to join an organization called OPEC, which is determined to help the west affect regime change in Syria, Iran, and Russia. Wants Iran to help ruin Russia economically, its only real ally on the planet :P


too effin funny....and not likely either.

Iranians can read just as well as non fluoridated north Americans can...

""We're going to take out seven countries in 5 years, starting with Iraq, and then Syria, Lebanon, Libya, Somalia, Sudan and, finishing off, Iran" –General Wesley Clark. Retired 4-star U.S. Army general, Supreme Allied Commander of NATO

Kiselev Arweni , 2016-04-17 20:46:39
Iran already in OPEC!!!!
Saudites just asks them to do what they must to do...to cooperate..
Ashikaga Kiselev , 2016-04-17 21:49:30
No BS. Saudis are desperate and ignorant. If you stay patient, they will implode soon.
Arweni Kiselev , 2016-04-17 22:34:51
poorly worded. Kislev, sorry. Should have said...

SA wants IRAN to join other OPEC countries in destroying Russia...

Because not all of OPEC participates in that. Yet it is my understanding that SA is over 70% of OPEC production right now, and Iran is the next highest producer.

Iran would be suicidal to try and make a pact with the bankers. So would their religion, their NON usurious monetary system, and their leadership.

Remember when Saddam said he would trade oil in Euros ? He got murdered, invaded. Remember when Qaddafi said he would trade oil in gold instead of dollars?

He got invaded and murdered.

I would like to be a fly on the wall in the CFR think tank board room right now...

http://www.reuters.com/article/us-oil-iran-exclusive-idUSKCN0VE21S

"Iran wants to recover tens of billions of dollars it is owed by India and other buyers of its oil in euros and is billing new crude sales in euros, too, looking to reduce its dependence on the U.S. dollar following last month's sanctions relief."
"

John Hunter , 2016-04-17 20:13:50
Fix the price of bread or milk then it is...

Price Collusion is a non-competitive agreement between rivals that attempts to disrupt the market's equilibrium. By collaborating with each other, rival firms look to alter the price of a good to their advantage.

Fix the price of oil well, that's how it works... Because if it's good for the banks it's good for you etc.

Not that I am a free market fan either.

KillerMarmot John Hunter , 2016-04-17 22:07:10

By collaborating with each other, rival firms look to alter the price of a good to their advantage.

We're not talking firms or bankers here but nations - Saudi Arabia, Iran, Venezuela, and so on.

Arweni KillerMarmot , 2016-04-17 22:54:47
bankers OWN your FIAT banking nation...They didn't own Iraq before they invaded it, and nor did they own Libya. They do now.

And guess who owns the oil companies ?

""So no, it's not a hyperbole to say the Banking System is One. We're not overstating the case when we say it's just one massive cartel. That the banks own everything, including all the major industries. Oil, Weapons, Pharmaceuticals, Food, Telecom and IT, etc. It's all one massive monopoly. Controlled from the top down. "

'A total of 737 control 80% of it all"

The Money Power is real and these Swiss gentlemen have done us a favor by crunching the numbers."

Please Google "The network of global corporate control"

=====

"Let me issue and control a nation's money and I care not who writes the laws." Mayer Amschel Rothschild (1744-1812), founder of the House of Rothschild.

=========
"Until the control of the issue of currency and credit is restored to government and recognized as its most conspicuous and sacred responsibility, all talks of the sovereignty of Parliament and of democracy is idle and futile... Once a nation parts with the control of its credit, it matters not who makes the laws....Usury once in control will wreck the nation."

William Lyon MacKenzie King, former Prime Minister of Canada

If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks…will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered…. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs." – Thomas Jefferson in the debate over the Re-charter of the Bank Bill (1809)

"… The modern theory of the perpetuation of debt has drenched the earth with blood, and crushed its inhabitants under burdens ever accumulating." -Thomas Jefferson


"History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and its issuance." -James Madison

"The Government should create, issue, and circulate all the currency and credits needed to satisfy the spending power of the Government and the buying power of consumers. By the adoption of these principles, the taxpayers will be saved immense sums of interest. Money will cease to be master and become the servant of humanity." -Abraham Lincoln

GeeDeeSea , 2016-04-17 20:00:06
Saudi Arabia wanted Iran excluded from the the meeting. But now Saudi Arabia is demanding that Iran join the agreement!

Saudi Arabia is sounding like a spoiled child.

Kiselev , 2016-04-17 19:59:56
Well this perfectly mean that we could face 100$ oil already in one-two years..
LorenzoStDubois Kiselev , 2016-04-17 22:33:09
That might be today's script from Kremlin HQ, but it's not going to happen.
bubbleballs , 2016-04-17 19:34:21
No real mention of the warmongers, America the UK and France!
France no longer getting it oil from Libya and America and the UK holding back on weapons for the Saudi's and hinting at Iranian sanctions.
Lets hope the Opec countries see sense and continue breaking the arc of crisis warmongers.
Keep pump the black gold guys sanity isn't that far away.
DubaiJonny bubbleballs , 2016-04-17 20:47:50
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Arweni bubbleballs , 2016-04-17 23:04:40
""We're going to take out seven countries in 5 years, starting with Iraq, and then Syria, Lebanon, Libya, Somalia, Sudan and, finishing off, Iran" –General Wesley Clark. Retired 4-star U.S. Army general, Supreme Allied Commander of NATO during the 1999 War on Yugoslavia .
------------
"That is the phenomenon of the US. Since 1945 they've destroyed 73 countries and were directly involved in the deaths of 26 million people. It is a horror show. It just must stop!"

John Shipton, journalist and executive officer of Wiki Leaks.

=====

Seems to me, the silliness lays with you. And the barbarism lies with us...

"last month, the Washington DC-based Physicians for Social Responsibility (PRS) released a landmark study concluding that the death toll from 10 years of the "War on Terror" since the 9/11 attacks is at least 1.3 million, and could be as high as 2 million.

The 97-page report by the Nobel Peace Prize-winning doctors' group"

"The PSR report is authored by an interdisciplinary team of leading public health experts, including Dr. Robert Gould, director of health professional outreach and education at the University of California San Francisco Medical Center, and Professor Tim Takaro of the Faculty of Health Sciences at Simon Fraser University."

http://www.psr.org/assets/pdfs/body-count.pdf

So here they are....and I have much respect for these folks. No one paid them to speak

========
"Johanna Congleton, MSPH, PhD, Maryland

Robert Dodge, MD, California

David Drake, DO, Iowa

Richard Gibson, CPA, Kansas

Steven Gilman, PMP, North Carolina

Robert Gould, MD, California; Past President; Co-chair, Leadership & Governance Committee

Ira Helfand, MD, Massachusetts; Chair, Security Committee

Katie Huffling, RN, MS, CNM, Maryland

Edward Ifft, PhD, Virginia

Andrew Jameton, PhD, Minnesota

Andrew S. Kanter, MD, MPH, FACMI, Illinois

Alan H. Lockwood, M.D., F.A.A.N., New York; Co-chair, Environment & Health Committee

Alfred Meyer, New York; Chair, Radiation & Health Committee

Trish O'Day, MSN, RN, Clinical Nurse Specialist-Community Health, Texas

Cindy Parker, MD, MPH, Maryland; Co-chair, Environment & Health Committee

John Rachow, MD, Iowa; Treasurer; Chair, Development Committee

Lynn Ringenberg, MD, FAAP, Florida; President

Karin Ringler, PhD, Wisconsin

Callum Rowe, California

Pouné Saberi, MD, MPH, Pennsylvania

Todd Sack, MD, FACP, Florida

Alli Stradiotto, Nebraska

Catherine Thomasson, MD,

Kami Veltri, MS-1, District of Columbia

Peter Wilk, MD, Maine; Co-chair, Leadership & Governance Committee

Lauren Zajac, MD, MPH, New York

YorenOfTheNorth , 2016-04-17 19:32:53
Broadly I'd say the Saudi's should get real and get used to making deals rather than commanding everyone else to obey.
John Ouimet , 2016-04-17 18:17:15
maybe they can make glass, or sell sand bags to low coastal regions flooding from risind oceans. If they don't find something there will be more wars, and more people crossing borders here and in Europe.
URFullofShit , 2016-04-17 17:50:58
I just hope they all understand that once their oil dries up and it will dry up sooner or later that all the money in the world they made from the world won't save their ass from the food shortage they'll have.
Because they can't grow crap in that sand and the world will stop sending all the food sent today because they charged so much for the precious product they have. Oh' it will be offered to them but at their prices.
I'd say $500 for a bag of apples sounds about right?
What goes around comes around OPEC...
TomRoche URFullofShit , 2016-04-17 19:26:34
But you forget: we have so much food precisely *because* of cheap fossil fuels, and "Saints" Fritz und Carl .[1">https://en.wikipedia.org/wiki/Carl_Bosch#Legacy">Carl.[1] Ultimately--i.e., Real Soon Now--humanity must return to organic agriculture not because it's The Right Thing to Do, but because today's conventional agriculture relies on cheap energy and (especially in the central US) fossil water .[2] "Once their oil dries up" the Saudis won't be the only ones with a food shortage.

[1]: Not the first "Saints" of ambiguous character and works--Saint Augustine and Saint John Paul II come readily to mind.
[2]: Of course the latter relies on the former for its extraction.

bubbleballs URFullofShit , 2016-04-17 19:39:15
Saudi is already having problems with fresh water having drained many of their aquifers.
SicknTired7 URFullofShit , 2016-04-17 22:52:36
They own half of London, they won't be short of money.
djarvis77 , 2016-04-17 17:11:31
what happens if u.s. gets outta opec?
import only from our north american neighbors and doubles the price at the pump?
It really looks like china is hoarding oil federally, since oil isn't federalized in the u.s.; the people of the u.s. are being cheated massively by opec and their own oil companies.
Idk much about this topic, and it is very hard to find good info.
Lone Rider djarvis77 , 2016-04-17 17:38:56
US ISN'T A MEMBER OF OPEC!
jvillain djarvis77 , 2016-04-17 18:09:53
We will never know becuase that isn't what is happeneing. The US is trying to shut down oil non-American oil production in the Americas using climate change laws as the weopon. But those laws don't apply the the US allies in the Middle East. Or to put it another way North America is putting worker in the Americas out of work while ramping up the amount of oil from the ME. There is a reason the ME countries spend so much money on lobbying in the US.
DogsLivesMatter Lone Rider , 2016-04-17 22:06:54
But Chevron, Shell, BP, Texaco, Mobil, Esso and Gulf are all western companies so in that respect the USA is an OPEC member.
IranianSoldier , 2016-04-17 16:45:57
Iran can run Saudi into bankruptcy soon with war in Yemen and Syria draining Saudi money and resources. Iranian invented the chess!
bubbleballs IranianSoldier , 2016-04-17 19:43:52
No two Jewish Bitiish and Americans invented it, Bresenski and Lewis, its called the " arc of crisis" the arc from Pakistan to the Baltic in turmoil keeps the "commies" at bay, the reason for American and British involvement with Ukraine.
Hamed Abadi , 2016-04-17 16:33:39
sory i was trying to rply to somone else.
Hamed Abadi , 2016-04-17 16:32:40
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joinupthedots , 2016-04-17 14:50:11
Saudi is heading for bankruptcy inside the next 36 months and is shitting itself.

Iran has 30 years of catch up to do.

Russia smells blood and is going after the kill.

Expect Saudi to disintegrate into civil war and Iran to become the swing producer in the next 36 months. Iran will be quite happy with 40USD barrel and Russia will suffer it but Saudi is dead in the water.

Sieggy joinupthedots , 2016-04-17 16:15:37
Couldn't happen to a nicer place. Except for Russia, maybe . . .
StevenShelwick joinupthedots , 2016-04-17 16:34:39
"Expect Saudi to disintegrate into civil war and Iran to become the swing producer in the next 36 months"

Wishful thinking. The Saudis can weather this, which is why they won't cut production.

All the Gulf states are run by obnoxious regimes. I hope the price of oil stays low for a lot longer and weakens them all.

jamiediamond007 StevenShelwick , 2016-04-17 17:26:06
In the UK context, a low oil price is good, it keeps costs down and the Scots in their place.
Michael Schwister , 2016-04-17 14:48:52
Tesla and other electric autos will look more attractive as opec tries to squeeze the world for high priced oil. Any producing Nations that haven't used their wealth to create a diverse economy for themselves will suffer from the collapse of the oil industry as we try to save the planet.
bubbleballs Michael Schwister , 2016-04-17 19:55:06
But electric cars are priced off the road, the huge taxes paid by us when oil prices were high hasn't led to Government making electric or any other environmentally power car cheaper, the answer is when they tried to put charging points in motorway service stations, BP said it wanted control of the pricing, in other words the oil companies want to keep control of their rip off prices and government is quite happy to let them as long as we continue to be ripped off by high taxes.
The world has to change, our dinosaur government need to die out quickly if the world is going to survive.
Foracivilizedworld , 2016-04-17 14:46:11
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djarvis77 , 2016-04-17 14:36:01
This recent oil slump and opec meetings has really showed me how little i understand about the oil business.
Is the u.s. involved in the meeting at all, and if so who is the u.s. representative?
And where is oil federalized and where is it not? How can countries partaking in the free market system put a freeze on oil production?
And if somehow the free market american system can put a freeze on oil production how come they can't put a freeze on oil prices at the pump? And why would the free market system want anything to do with the federalized opec countries at all?
shiran djarvis77 , 2016-04-17 15:02:08

Is the u.s. involved in the meeting at all


Iunderstood that initially Saudi was interested in keeping the price low to combat US shale oil extraction which is more expensive, and which is making US almost self sufficient in oil. They appear to have overstretched their arm though and are almost going bust themselves.
BrapMobile djarvis77 , 2016-04-17 15:52:37
Basically, OPEC used to cut production to support global oil prices. However, every time they cut production, they would lose market share, so in effect, they were underwriting more expensive production elsewhere, notably US shale, Canadian tar sands and various deepwater projects.

In Nov 2014 they switched from a price supporting strategy to a market share strategy. They would no longer cut production to restrict supply and raise prices. They would produce at full tilt to damage the higher cost producers. Oil is not something that can be switched on and off quickly, so the present price collapse is the turbulence from that decision.

The more expensive oil producers have been a lot more resilient than OPEC thought they would be, via various financial instruments like hedging etc. It's taken longer than expected, but these protections are now starting to unwind, hence the delayed but increasing decline in US production etc.

With the collapse in future oil field project development, instability in many large producer countries, and little excess capacity on the supply side, I see a major oil shock coming in the next few years as current fields deplete and are not replaced. Global oil demand is actually still increasing year on year, and the supply side isnt keeping up at these prices.

shiran BrapMobile , 2016-04-17 16:11:37

Global oil demand is actually still increasing year on year,


But isn't that because its cheap? If and when prices start to rise, the increasing demand will slow. This has already happened in China where there is a drop in oil demand, albeit, still marginally higher than last year.
Ashikaga , 2016-04-17 12:59:12
Iran should double their production and bring their oil production to parity with Saudi, and then demand Saudis reduce their production and stop funding international terror.
laguerre Ashikaga , 2016-04-17 13:12:52
Yes, you're right. The Saudis do use their oil money for funding international terror. Even more, they use it for funding Islamic extremism, and have done so for forty years. Ever since the Belgian king asked them in 1976 to build and fund the new (at the time) central mosque in Brussels. That's why there are so many jihadis in Belgium.
SonOfRekab Ashikaga , 2016-04-17 13:38:33
Production costs are radically different for both countries.
When it comes to cheap oil, no country can compete with KSA and the emirates.
Whatever Iran is selling in today's prices, it is selling at a lost just to keep the industy alive.
the Saudis know this, and will do their very best to keep the prices at a place where Iran would not profit from them.
KSA can sell oil for 10$ a barrel and still see a profit.
BrapMobile SonOfRekab , 2016-04-17 14:15:34
And see their own economy collapse
MrConservative2016 , 2016-04-17 12:32:49
Good.

Hopefully oil prices will start falling again, squeezing Wahhabi Arabia and the other Gulf monarchies.

Jeffrey Buderer MrConservative2016 , 2016-04-17 14:40:03
KSA is the heartland of radical Islam Oman UAE Bahrain Qatar all the outlying kingdoms seem more moderate than Saudi
YorenOfTheNorth MrConservative2016 , 2016-04-17 19:34:36
The regimes of Syria and Egypt being so much more noble.........
DogsLivesMatter YorenOfTheNorth , 2016-04-17 21:45:34
It's a bloody shame that Hollande and a group of businessmen are in Egypt right now. They are expected to close a 1 billion dollar deal.
Miogarar , 2016-04-17 12:32:39
Fossil fuel. Dirty smelly stuff. The Sun and wind and water is better. Let them squat on their oil and complain all they like. They have us over a barrel, as it stands. On the other hand, if we persued solar/wind/water we we be free of their nasty ways.
SonOfRekab Miogarar , 2016-04-17 13:39:49
My god, you are a genius, where have been all this time?
Miogarar SonOfRekab , 2016-04-17 13:55:15
Thanks! But it is really that simple. The dead hand of inertia is motivated by vested interests.
SonOfRekab Miogarar , 2016-04-17 14:07:37
No it isn't.

Those methods are still not cost effective enough to use on mass scale and provide 24/7 availability.

In Israel we had a few years where people actually got subsidies to build the solar panels on their roofs and were able to see access electricity into the grid, and still most people who did it say eventually they hardly broke even, and for the most part those were people with large properties or agricultural buildings with large roof areas.

If anything i would hope that the new research for 4th generation nuclear reactors finally produce s !--

laguerre , 2016-04-17 12:09:38
Perfectly reasonable position from Iran, I would say. Better that the Saudis cut back for a bit. The money only goes into the pockets of the Saudi royal family anyway, the wealthiest people in the world.
shiran laguerre , 2016-04-17 12:22:14
And Iranian money only goes to supporting international terror.
Realcfc98 shiran , 2016-04-17 12:50:40
Yeah that Saudi funded Wahhabi terrorism. That has gone global.
newbag shiran , 2016-04-17 12:56:19
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[Apr 13, 2016] The increase in Chinas oil imports

peakoilbarrel.com
AlexS , 04/13/2016 at 10:19 am
The increase in China's oil imports is due to several factors:

1/ Healthy demand growth, which is due to:

(a) stabilizing GDP growth

China's Exports Jump Most in a Year, Boosting Growth Outlook
http://www.bloomberg.com/news/articles/2016-04-13/china-s-exports-rebounded-in-march-boosting-growth-outlook

China's exports jumped 11.5%, the most in a year, and declines in imports narrowed to 7.6% , adding to evidence of stabilization in the world's second-biggest economy.

(b) continuing growth in vehicle sales, supporting strong growth in gasoline consumption

"Vehicle sales in China rose 8.8 percent in March from a year earlier to 2.4 million, the China Association of Automobile Manufacturers said on Tuesday, supporting strong gasoline demand in the country."
http://www.reuters.com/article/us-global-oil-idUSKCN0X800I

Average oil demand in the world's second-largest crude consumer is expected to grow by 420,000 barrels a day this year, the bank [Standard Chartered] said, adding that apparent oil product demand expanded 6.2 percent last year to 9.4 million barrels a day. China will account for 37 percent of global demand growth this year, Standard Chartered estimates.
http://www.bloomberg.com/news/articles/2016-03-25/china-seen-sustaining-strong-crude-imports-on-refining-reserves

2/ Falling domestic oil production (for the first time in many years)

"China Petroleum and Chemical Corp, or Sinopec Corp., plans to … cut crude production by 5% in 2016 as a result of cutting capital expenditures by 10.6% from 2015"
"Total upstream production last year fell 1.7% to 471.91 million barrels of oil equivalent, with crude output down 3.1%"
[ Hong Kong (Platts)–30 Mar 2016
http://www.platts.com/latest-news/oil/hongkong/chinas-sinopec-expects-steady-throughput-5-lower-27408416 ]

"PetroChina Co. sees oil and gas output falling the first time in 17 years as it shuts high-cost fields that have "no hope" of making profits at current prices."
"PetroChina forecasts crude production this year at 924.7 million barrels, down 4.9 percent."
"China's output in 2016 will decline as much as 5 percent from last year's record 4.3 million barrels a day, according to estimates last month from Nomura Holdings Inc. and Sanford C. Bernstein & Co. That would be the first drop in seven years, and the biggest in records going back to 1990."

[ http://www.bloomberg.com/news/articles/2016-03-24/-no-hope-oil-fields-spur-1st-petrochina-output-cut-in-17-years ]

3/ Rising commercial and strategic inventories

China end-February commercial fuel stocks at four-year high
Mar 28, 2016
http://www.reuters.com/article/us-china-oil-stocks-idUSKCN0WU0P1

China Can't Resist $30 Oil
http://www.bloomberg.com/news/articles/2016-02-01/china-can-t-resist-30-oil-as-african-north-sea-cargoes-surge

4/ Permission to import crude oil by independent "teapot" refineries.

China teapot refiner oil buying spree creates tanker jam at Qingdao
Thu Apr 7, 2016
http://www.reuters.com/article/us-china-oil-tanker-traffic-idUSKCN0X419L

"A total of 27 independent refiners, known as teapots, have obtained or applied for crude-import quotas, totaling 89.5 million tons as of the end of February, Zhang Liucheng, chairman of China Teapot Alliance, said on March 31"
http://www.bloomberg.com/news/articles/2016-04-13/china-imports-record-crude-oil-as-higher-margins-boosts-buying

5/ Strong refining margins, which encourage increasing processing volumes and contribute to increasing oil product exports (which means that the increase in net imports was less than gross imports)

"China awarded additional 230,000 tons of oil product export quotas to teapot refineries in a second-batch allocation, according to ICIS China.
The teapot plants are very sensitive to refining margins and profitable oil processing in the first quarter certainly boosted their appetite for crude"
http://www.bloomberg.com/news/articles/2016-04-13/china-imports-record-crude-oil-as-higher-margins-boosts-buying

"Refining volumes will stay "robust" to satisfy growing gasoline and jet fuel demand in the world's largest automobile market, the bank [Standard Chartered] said. The country has boosted exports of diesel as slowing industrial production damps consumption."
http://www.bloomberg.com/news/articles/2016-03-25/china-seen-sustaining-strong-crude-imports-on-refining-reserves

[Apr 13, 2016] Maduro has been alleging that the US is seeking to scrap the OPEC freeze plan

peakoilbarrel.com

dclonghorn , 04/13/2016 at 4:28 pm

Schlumberger has announced that they will be reducing work in Venezuela because they have not been paid.

http://www.bloomberg.com/news/articles/2016-04-12/schlumberger-to-pare-services-in-venezuela-on-lack-of-payments

They are owed almost a billion. I wonder how that works. They say if you owe a bank a million and can't pay, you have a problem. If you owe a billion, the bank has a problem. I wonder if they will actually pull out or be forced to continue to provide services to protect their receivables.

Maduro has been alleging that the US is seeking to scrap the OPEC freeze plan.

[Apr 09, 2016] Looks like China is importing a lot of oil

Notable quotes:
"... Looks like China is importing a lot of oil as there is also a traffic jam in Qingdao, China. ..."
"... A surge in oil buying by China's newest crude importers has created delays of up to a month for vessels to offload cargoes at Qingdao port, imposing costly fees and complicating efforts to sell to the world's hottest new buyers. ..."
"... China's independent refiners, freed of government constraints after securing permission to import just last year, have gorged on plentiful low-cost crude in 2016. This has created delays for tankers that have quadrupled to between 20 to 30 days at Qingdao port in Shandong province, the key import hub for the plants, known as teapots, according to port agents and ship-tracking data. ..."
peakoilbarrel.com
daniel , 04/07/2016 at 12:53 pm
Am i just too dumb or does this article make no sense at all? http://oilprice.com/Energy/Crude-Oil/Shocking-Photo-Nearly-30-Oil-Tankers-in-Traffic-Jam-Off-Iraqi-Coast.html

If everybody is overproducing why tie up your tankers like this. I could understand this jam in an offloadingpoint, but not at a loading point

aws. , 04/07/2016 at 9:09 pm
Contango
Heinrich Leopold , 04/08/2016 at 4:39 am
Daniel,

Looks like China is importing a lot of oil as there is also a traffic jam in Qingdao, China.

http://oilpro.com/links/detail/30965/photo-nearly-30-oil-tankers-traffic-jam-off-iraqi-coast

This is very good news for the Chinese and World economy.

Daniel , 04/08/2016 at 6:34 am
Indeed good news and a tanker jam which I can understand :-)
AlexS , 04/08/2016 at 8:30 am
China has recently allowed imports of crude oil by small independent "teapot" refineries. So tanker jams do not necessarily mean an increase in final demand.

From Reuters:

China teapot refiner oil buying spree creates tanker jam at Qingdao

Thu Apr 7, 2016
http://www.reuters.com/article/us-china-oil-tanker-traffic-idUSKCN0X419L

A surge in oil buying by China's newest crude importers has created delays of up to a month for vessels to offload cargoes at Qingdao port, imposing costly fees and complicating efforts to sell to the world's hottest new buyers.

China's independent refiners, freed of government constraints after securing permission to import just last year, have gorged on plentiful low-cost crude in 2016. This has created delays for tankers that have quadrupled to between 20 to 30 days at Qingdao port in Shandong province, the key import hub for the plants, known as teapots, according to port agents and ship-tracking data.

[Apr 01, 2016] Qatar says 12 countries confirmed for oil cap meeting bakken.com

bakken.com

Those confirmed so far are Saudi Arabia, Russia, Kuwait, the United Arab Emirates, Venezuela, Nigeria, Algeria, Indonesia, Ecuador, Bahrain, Oman and Qatar.

[Mar 30, 2016] Investors see shale production falling and demand continuing to rise

www.yahoo.com
Oil prices have hovered at $40 per barrel for much of the last week, as the markets try to avoid falling back after the strong rally since February. Investors see shale production falling and demand continuing to rise, which point to the ongoing oil market balancing. But it is unclear at this point if the rally from $27 per barrel in February to today's price just below $40 per barrel is here to stay. Fundamentals, while trending in the right direction, are still weak.

[Mar 30, 2016] India consumed 4.2 million barrels per day in 2016, overtaking Japan as the world's third largest oil consumer

www.bloomberg.com
India consumed 4.2 million barrels per day (mb/d) in 2016, overtaking Japan as the world's third largest oil consumer. The Indian government is hoping to incentivize domestic oil production to help meet rising demand.

[Mar 29, 2016] Looks like Libya' civil war is far from over

Notable quotes:
"... The problem for the international community is while destroying ISIS is their stated priority, both Libya's rival camps see each other as the greater threat. ISIS is a threat, but neither camp believes it is an existential threat, so the priority for both camps is fighting each other. ..."
peakoilbarrel.com

likbez, 03/29/2016 at 10:51 pm

Looks like Libya' civil war is far from over. From Richard Galustian ( https://twitter.com/bd_richard )

The problem for the international community is while destroying ISIS is their stated priority, both Libya's rival camps see each other as the greater threat. ISIS is a threat, but neither camp believes it is an existential threat, so the priority for both camps is fighting each other.

[Mar 29, 2016] Government admits oil was the reason for war in Iraq

Notable quotes:
"... Iraq war and its aftermath failed to stop the beginning of peak oil in 2005 ..."
"... I think the Iraq war was instigated by an alliance of neocon/Israel lobby plus oil/service company and weapons complex interests. But the overriding interest seems to have been the neocon strategy to get the USA tangled in Middle East wars. This in turn would weaken Israel's enemies and increase animosity between the Muslim and Christian worlds. Such animosity plays very well if it leads to all out war between "the West" and Muslims. As long as the USA keeps behaving as an Israeli puppet the conflict will intensify. ..."
"... What I outlined above is a distilled version of writings/books by former CIA analyst Michael Scheuer, former CIA operatives, and books such as "Fiasco" by Thomas E. Ricks. I've also incorporated recent material written about ISIS and its birthing at the US Army's Camp Bucca. ..."
crudeoilpeak.info
Matt Mushalik, 03/24/2016 at 3:37 pm
Tony Blair is right: without the Iraq war there would be no Islamic State
http://www.theguardian.com/world/2015/oct/25/tony-blair-is-right-without-the-iraq-war-there-would-be-no-isis

16/3/2013
Iraq war and its aftermath failed to stop the beginning of peak oil in 2005
http://crudeoilpeak.info/iraq-war-and-its-aftermath-failed-to-stop-the-beginning-of-peak-oil-in-2005

Uploaded 5/7/2007
Government admits oil is the reason for war in Iraq
https://www.youtube.com/watch?v=j7t_u641NyM Reply

Fernando Leanme , 03/25/2016 at 4:58 am
I think the Iraq war was instigated by an alliance of neocon/Israel lobby plus oil/service company and weapons complex interests. But the overriding interest seems to have been the neocon strategy to get the USA tangled in Middle East wars. This in turn would weaken Israel's enemies and increase animosity between the Muslim and Christian worlds. Such animosity plays very well if it leads to all out war between "the West" and Muslims. As long as the USA keeps behaving as an Israeli puppet the conflict will intensify.

What I outlined above is a distilled version of writings/books by former CIA analyst Michael Scheuer, former CIA operatives, and books such as "Fiasco" by Thomas E. Ricks. I've also incorporated recent material written about ISIS and its birthing at the US Army's Camp Bucca.

[Mar 24, 2016] EIA reports that US production is down 30 thousand barrela a day

peakoilbarrel.com

Amatoori , 03/23/2016 at 1:26 pm

EIA weekly today, production down 30.000/day
Hello cliff!
http://ir.eia.gov/wpsr/overview.pdf
AlexS , 03/23/2016 at 7:03 pm
Production down 30 kb/d;
Total crude and product stocks up 6.9 million barrels (to new records);
Net crude imports up 691 kb/d in just one week (!) and 1.1 mb/d from a year ago.
Despite a glut in the local market, U.S. refiners and traders are rapidly increasing crude imports.

[Mar 22, 2016] Libya joins Iran in snubbing oil freeze source by Alex Lawler

A typical disinformation bunged with the obvious attempt to amplify differences within the OPEC. In spite of all this noise about oversupply i t will be difficult to return to the lows of the year. Oil prices have surged more than 50 percent from 12-year lows since the OPEC floated the idea of a production freeze, boosting Brent up from around $27 a barrel and U.S. crude from around $26. 15 oil-producing nations representing about 73% of oil production have agreed to take part.
Notable quotes:
"... Qatar, which has been organizing the meeting, has invited all 13 OPEC members and major outside producers. The talks are expected to widen February's initial output freeze deal by Qatar, Venezuela and Saudi Arabia, plus non-OPEC Russia. ..."
"... Iran produced about 2.9 million bpd in January and officials are talking about adding a further 500,000 bpd to exports. So far though, Iran has sold only modest volumes to Europe after sanctions were removed. ..."
finance.yahoo.com

finance.yahoo.com (Reuters)

...Libya has made its wish to return to pre-conflict oil production rates clear since four countries reached a preliminary deal on freezing output in February. Other producers understand this, the delegate said. "They appreciate the situation we are in."

Qatar, which has been organizing the meeting, has invited all 13 OPEC members and major outside producers. The talks are expected to widen February's initial output freeze deal by Qatar, Venezuela and Saudi Arabia, plus non-OPEC Russia.

The initiative has supported a rally in oil prices, which were about $41 a barrel on Tuesday, up from a 12-year low near $27 in January, despite doubts over whether the deal is enough to tackle excess supply in the market.

Iran has yet to say whether it will attend the meeting. But Iranian officials have made clear Tehran will not freeze output as it wants to raise exports following the lifting of Western sanctions in January.

The potential volume Libya and Iran could add to the market is significant. But conflict in Libya has slowed output to around 400,000 barrels per day since 2014, a fraction of the 1.6 million bpd it pumped before the 2011 civil war.

Iran produced about 2.9 million bpd in January and officials are talking about adding a further 500,000 bpd to exports. So far though, Iran has sold only modest volumes to Europe after sanctions were removed.

[Mar 21, 2016] IEA as the key player in staging oil price drop by creating a false impression of glut via manipulated statistics

Notable quotes:
"... Crude Mystery: Where Did 800,000 Barrels of Oil Go? Last year, there were 800,000 barrels of oil a day unaccounted for by the International Energy Agency, the energy monitor that puts together data on crude supply and demand. Where these barrels ended up, or if they even existed, is key to an oil market that remains under pressure from the glut in crude. ..."
"... "The most likely explanation for the majority of the missing barrels is simply that they do not exist," said Paul Horsnell, an oil analyst at Standard Chartered. ..."
peakoilbarrel.com

Sarko , 03/19/2016 at 3:13 pm

Nobody talk about this?

Crude Mystery: Where Did 800,000 Barrels of Oil Go? Last year, there were 800,000 barrels of oil a day unaccounted for by the International Energy Agency, the energy monitor that puts together data on crude supply and demand. Where these barrels ended up, or if they even existed, is key to an oil market that remains under pressure from the glut in crude.

Some analysts say the barrels may be in China. Others believe the barrels were created by flawed accounting and they don't actually exist. If they don't exist, then the oversupply that has driven crude prices to decade lows could be much smaller than estimated and prices could rebound faster.

Whatever the answer, the discrepancy underscores how oil prices flip around based on data that investors are often unsure of.

"The most likely explanation for the majority of the missing barrels is simply that they do not exist," said Paul Horsnell, an oil analyst at Standard Chartered.

http://www.wsj.com/articles/crude-mystery-where-did-800-000-barrels-of-oil-go-1458207004

[Mar 21, 2016] Overthrowing regime of Kaddafi was essentially color revolution financed by the West and Arab monarchies

Notable quotes:
"... It looks more like the chaos of a failed state rather than a popular uprising to remove an authoritarian government. The implication of this difference is that a return of Libyan oil production to prior levels is highly unlikely until there is a massive stabilization achieved, and I wouldn't be holding my breathe for that. ..."
"... The people are hungry and without hope as long as conditions remain the way they are so they riot to try to change them. It is, very likely, just the first stages of world collapse. ..."
"... Arab spring is a variant of a "color revolution". From Google search of the term: ..."
peakoilbarrel.com

Hickory, 03/15/2016 at 11:13 am

Minor quibble Dennis. You commented- "Libya is struggling with their own Arab Spring" I think that characterization of what is going there on is off base.

It looks more like the chaos of a failed state rather than a popular uprising to remove an authoritarian government. The implication of this difference is that a return of Libyan oil production to prior levels is highly unlikely until there is a massive stabilization achieved, and I wouldn't be holding my breathe for that.

Ron Patterson , 03/15/2016 at 11:49 am
It's Ron, not Dennis. It all depends on your definition of "Arab Spring" And I see you have provided your own definition, "a popular uprising to remove an authoritarian government."

Definition of the Arab Spring Bold mine.

The Arab Spring was a series of anti-government protests, uprisings and armed rebellions that spread across the Middle East in early 2011. But their purpose, relative success and outcome remain hotly disputed in Arab countries, among foreign observers, and between world powers looking to cash in on the changing map of the Middle East….

But the events in the Middle East went in a less straightforward direction.

Egypt, Tunisia and Yemen entered an uncertain transition period, Syria and Libya were drawn into a civil conflict, while the wealthy monarchies in the Persian Gulf remained largely unshaken by the events. The use of the term the "Arab Spring" has since been criticized for being inaccurate and simplistic.

The Arabs themselves cannot agree on the definition of "Arab Spring". It is basically just an uprising of the general population protesting the hardships of their lives. I would say that the Arab Spring, in any country, is just the first stages of a failed state. I think there is no doubt that what is happening in Libya was caused by the same conditions that has caused similar uprisings throughout the Arab world. The people are hungry and without hope as long as conditions remain the way they are so they riot to try to change them. It is, very likely, just the first stages of world collapse.

Hickory , 03/15/2016 at 12:34 pm
Hi Ron. Good points made. Agreed.
likbez , 03/15/2016 at 5:33 pm
Ron,

Arab spring is a variant of a "color revolution". From Google search of the term:

[Mar 21, 2016] China Car Sales Suffer Biggest Crash On Record To Start 2016

www.zerohedge.com
Submitted by Tyler Durden on 03/20/2016 - 21:15

The dream of transition to a 'consuming' economy just crashed into the wall of excess debt and leverage. 2016 has started with a 44% collapse in China passenger car sales . This is the biggest sequential crash and is 50% larger than any other plunge in history. Coming at a time when vehicle inventories are near record highs relative to sales, the world's automakers - all toeing the narrative line that growth will be from China - now face a harsh reality of massie mal-investment deja vu.

[Mar 20, 2016] Light tight oil is not your average crude oil

Notable quotes:
"... Light tight oil is not your average crude oil. I suspect it is clogging up US inventories after the import substitution phase ended and after some modifications to US refineries were completed. This glut created the perception in markets that there is a global glut (and contributed to bring down oil prices) while it is not ..."
"... Where actually is that much-hyped global oil glut? http://crudeoilpeak.info/where-actually-is-that-much-hyped-global-oil-glut ..."
peakoilbarrel.com

Matt Mushalik , 03/20/2016 at 8:07 am

Light tight oil is not your average crude oil. I suspect it is clogging up US inventories after the import substitution phase ended and after some modifications to US refineries were completed. This glut created the perception in markets that there is a global glut (and contributed to bring down oil prices) while it is not

29/12/2015
Where actually is that much-hyped global oil glut? http://crudeoilpeak.info/where-actually-is-that-much-hyped-global-oil-glut

That shale oil surplus is the reason why the crude oil export ban was lifted but not much is exported. See slide 4 in Art Berman's latest presentation

http://www.artberman.com/wp-content/uploads/HGS-Presentation-14-MAR-2016.pdf

In fact crude imports went up again in the last months. Anyway, shale production has peaked now according to the latest drilling productivity report. The following 2014 report describes the mismatch between shale oil production and US refinery capabilities (slides 7-9)

http://www.aspeninstitute.org/sites/default/files/content/docs/ee/3_Kah.pdf

[Mar 11, 2016] Peak Oil Review A Midweek Update - March 10

www.resilience.org

Chinese crude imports hit a record of 8 million b/d in February despite severe economic problems and contracting imports and exports. One reason for the surge may have been the extremely low oil prices in January which attracted more buying for strategic stocks and to refine for exports. China's small independent refiners were only recently allowed to import oil for their needs rather than procuring it domestically.

[Mar 10, 2016] ESAI Libyan production will not recover

Notable quotes:
"... All of this is to say that the level of effort and the focus of Western states in Libya, at least as regards ISIS, are on strict counterterrorism as opposed to creating conditions in which competing claimants to governing legitimacy can work out a compromise. In the meanwhile, the competing governing factions will have to defend themselves against not only other claimants to legitimacy but also ISIS and other smaller groups that have begun to attack Libyan oil production and export facilitates with increasing regularity. ..."
"... The recent attack in neighboring Tunisia also points to the problem of ISIS presence in Libya not only helping to continue the instability and political stalemate there but also spreading unrest further in Northern Africa. ..."
March 9, 2016 | bakken.com

Sarah Emerson, Managing Principal, Petroleum & Alternative Fuels | Energy Security Analysis Inc. (ESAI)

... ... ...

While there are ongoing negotiations, or attempts at negotiations pushed by Washington and key European states, so far it does not look at all hopeful. In the meanwhile, the efforts of the West are focused on two issues. First is conducting strikes against ISIS leaders and key operatives who might be either planning on targeting Western targets or who might be consolidating control over parts of Libya. Second is keeping refugees from flowing into southern Europe (whether they are Libyans or Africans who are taking advantage of the lack of governance in Libya to launch from its shores).

News reports indicate that the United States, France, the United Kingdom and Italy all have Special Forces on the ground in Libya largely to support intelligence gathering and targeting ISIS cells or leaders. The recent U.S. airstrikes two weeks ago against ISIS leaders and a training camp in Libya may or may not reflect this small ground presence, but the attacks indicate that Washington is focusing on elements of the terrorist group that might be planning attacks on Western targets. The news information on the French aircraft carrier also hints that any strikes that Paris may carry out will be against those potentially plotting against French targets. All of this is to say that the level of effort and the focus of Western states in Libya, at least as regards ISIS, are on strict counterterrorism as opposed to creating conditions in which competing claimants to governing legitimacy can work out a compromise. In the meanwhile, the competing governing factions will have to defend themselves against not only other claimants to legitimacy but also ISIS and other smaller groups that have begun to attack Libyan oil production and export facilitates with increasing regularity.

The recent attack in neighboring Tunisia also points to the problem of ISIS presence in Libya not only helping to continue the instability and political stalemate there but also spreading unrest further in Northern Africa.

Sarah Emerson, Managing Principal, Petroleum & Alternative Fuels | Energy Security Analysis Inc. (ESAI)

[Mar 10, 2016] resource nationalist are quickly running out of money

Notable quotes:
"... We all are living under neoliberalism , aren't we? And current fascinating developments with Bernie and Trump is nothing more than unorganized protest of shmucks against " masters of the universe " - neoliberal elite that captured Washington, DC (along with London, Paris, Berlin and other G7 capitals). And they still have quite strong fifth column in Moscow too (Yeltsin was their man) ..."
"... The revolt which BTW have little chances for success. As Orwell aptly stated, contrary to Marx delusions "the lower classes are never, even temporarily, successful in achieving their aims". ..."
"... The key idea of neoliberalism is redistribution of wealth up from shmucks to international (predominately financial) elite. So nobody care that either camel lovers or Putin lovers lose money on oil and that they are selling it below the cost. What is important that the "masters of the universe" became richer. And sustainability is provided by grabbing asset of distressed countries and companies when they go too deeply in debt slavery. So the key idea here is get those countries and companies "conditioned" enough to grab them on a cheap. In old days that was called "shock therapy" now it is called "disaster capitalism". ..."
"... Destabilization as in "drop of oil prices to unsustainable levels" can be extremely profitable (see The Shock Doctrine: The Rise of Disaster Capitalism. ). This is the way the neoliberalism enforces its Washington consensus rules on other countries, especially resource nationalists like Putin's Russia. ..."
"... This was not done in case of "shale bubble" and other countries were implicitly stimulated by it to rump up production as well as by regime of high oil prices and cheap Western credits. Now we have a real crisis when "resource nationalist" are quickly running out of money. If Washington is able to crush them, it is also will show the other countries who are trying to oppose neoliberal globalization "who is the boss". It is not accidental that all establishment candidates in the current presidential race are extremely, pathologically jingoistic and are ready to bomb yet another half-dozen of countries in short order after coming to power. In this sense differences between H, C and R are superficial. They all are servants of neoliberal oligarchy in Washington and Wall Street (for H in the opposite order). ..."
peakoilbarrel.com
likbez, 03/09/2016 at 6:59 pm
clueless,

Art Berman looks at the numbers and says oil should go back to $30, or even lower. It does take capitalism time to work.

This looks like too theoretical post well outside the scope of this blog, but still there are some basic facts that everybody needs to be aware of.

  1. We all are living under neoliberalism, aren't we? And current fascinating developments with Bernie and Trump is nothing more than unorganized protest of shmucks against "masters of the universe" - neoliberal elite that captured Washington, DC (along with London, Paris, Berlin and other G7 capitals). And they still have quite strong fifth column in Moscow too (Yeltsin was their man)

    The revolt which BTW have little chances for success. As Orwell aptly stated, contrary to Marx delusions "the lower classes are never, even temporarily, successful in achieving their aims".

  2. The key idea of neoliberalism is redistribution of wealth up from shmucks to international (predominately financial) elite. So nobody care that either camel lovers or Putin lovers lose money on oil and that they are selling it below the cost. What is important that the "masters of the universe" became richer. And sustainability is provided by grabbing asset of distressed countries and companies when they go too deeply in debt slavery. So the key idea here is get those countries and companies "conditioned" enough to grab them on a cheap. In old days that was called "shock therapy" now it is called "disaster capitalism".

  3. Destabilization as in "drop of oil prices to unsustainable levels" can be extremely profitable (see The Shock Doctrine: The Rise of Disaster Capitalism.). This is the way the neoliberalism enforces its Washington consensus rules on other countries, especially resource nationalists like Putin's Russia.

    The countries and companies in question were gently pushed to increase the production to the level that assured the crisis to happen. While this sounds like another conspiracy theory, and can well be such, the simple logic suggests that in XXI century the elite understands the natural dynamics of capital accumulation well enough to freeze too enthusiastic Ponzi schemers before they do the major damage, if they want it. At least suppress them enough to avoid "Minsky moment."

    This was not done in case of "shale bubble" and other countries were implicitly stimulated by it to rump up production as well as by regime of high oil prices and cheap Western credits. Now we have a real crisis when "resource nationalist" are quickly running out of money. If Washington is able to crush them, it is also will show the other countries who are trying to oppose neoliberal globalization "who is the boss". It is not accidental that all establishment candidates in the current presidential race are extremely, pathologically jingoistic and are ready to bomb yet another half-dozen of countries in short order after coming to power. In this sense differences between H, C and R are superficial. They all are servants of neoliberal oligarchy in Washington and Wall Street (for H in the opposite order).

    It can well be that US shale was a part this Brzezinski's The Grand Chessboard " gambit and now is a pawn sacrificed in a wider geopolitical game.

[Mar 09, 2016] China oil consumption in 2016

peakoilbarrel.com
Heinrich Leopold , 03/08/2016 at 1:57 am
shallow sand,

China did increase its oil imports over the last few months to over 30 mill tons per month (see below chart). Together with natgas and cyclical hydrocarbon imports this adds up to 40 mill tons of hydrocarbons per month, which is around 10 mill barrels per day.

Slowly the fundamentals are building up for an oil price rise, although I think we will get a pullback over summer.

clueless , 03/08/2016 at 12:01 pm
"The data also showed China's February crude oil imports jumped 20 percent on year to their highest ever on a daily basis, driven by import quotas and stockpiling."

From a China article today.

Heinrich Leopold , 03/08/2016 at 12:35 pm
clueless,

In addition to the surge of oil imports, natgas is up year over year 100%, copper 50%, copper ore and extractives up 92%. The increase is all up in volume as imports in dollar terms are still very low due to low prices. However these numbers are huge as China is one of the largest importers in the world.

To me this looks like the early sign of a nascent commodity recovery.

AlexS , 03/08/2016 at 2:56 pm
3 main drivers of China's higher oil imports are:

1) state and commercial stockpiling
2) robust gasoline demand (not closely correlated with economic growth, as opposed to weak diesel demand).
3) rising fuel exports

"Fuel exports in February rose 71.8 percent on a daily basis compared to the same month last year, reaching 2.99 million tonnes, or 721,700 bpd, after hitting a record 975,500 bpd in December, as China continues to export more diesel amid weakening domestic demand for the industrial fuel."

http://www.reuters.com/article/us-china-economy-trade-crude-idUSKCN0WA0A2

Synapsid , 03/08/2016 at 6:15 pm
Alex S,

"…as China continues to export more diesel amid weakening domestic demand for the industrial fuel."

Plus: There's increasing demand in China for gasoline as more cars are built and sold. More gasoline coming from refineries means more diesel coming from refineries, as they produce both.

The small "teapot" refineries are being given permission to import gasoline now, I believe, so that will help reduce overproduction of diesel, and the government has imposed a price floor too; that helps reduce the panic exporting.

Heinrich Leopold , 03/09/2016 at 12:56 am
AlexS,

The driving forces of Chinese oil imports are exploding car registrations:
http://www.tradingeconomics.com/china/car-registrations

The Chinese car market is much bigger than the US car market. And also growing much faster.

When a commodity cycle starts, metals (gold, silver, base metals…) are first to soar. Oil is actually the last to rise as oil in most cases brings a commodity cycle to its end due to higher inflation.

Yes, China exports diesel and gasoline, yet it also imports oil products of 2.66 mill tons per month.
http://info.hktdc.com/hktdc_offices/mi/ccs/index_static_type/ChemicalImport.htm

Net exports are close to zero.

There is little doubt that China is in the early stage of a massive upswing. Anyone who hopes for higher oil prices should hope also for a Chinese recovery. Oil prices will not go up without a Chinese recovery.

AlexS , 03/09/2016 at 3:01 am
Heinrich Leopold

Changes in China's imports and exports of crude and refined products are obviously important.

But what really matters for global supply/demand balance is
1)China's oil consumption.
2) China's oil production

China's demand for diesel, which is an indicator of economic activity, is weakening.

Demand for gasoline, which is an indicator of growing car ownership, is robust.

Overall, demand growth is slowing.

But this is partially offset by projected decline in oil production in 2016, the first in many years.

China: demand by product
source: IEA OMR Feb 2016

Enno , 03/09/2016 at 3:09 am
Thanks Alex. Indeed quite a reduction in growth compared with the last years.
Heinrich Leopold , 03/09/2016 at 3:19 am
AlexS,

As the demand growth in 2015 has been way underestimated in 2014, it is again underestimated for 2016.

The IEA numbers for 2016 are just an estimate and not yet a fact. Car registrations and import numbers reveal way higher numbers are likely for China in 2016.

A strong sign of a Chinese recovery is the recent strength of the yuan, record high of new loans (2500 bn yuan) and strong money suppley (+14%).

AlexS , 03/09/2016 at 6:14 am
Heinrich Leopold,

You are right, the IEA has significantly increased its estimate of China's oil demand for 2015.
Last year, incremental demand was actually higher that in the previous 4 years.
I also agree with you that IEA likely underestimates China's demand growth in 2016.
But this growth will still be slower than last year; it will not accelerate.
Growing imports reflect buying by the government and oil companies for stockpiling and increasing exports.

China's y-o-y oil demand growth, 2000-2016
source: IEA

AlexS , 03/09/2016 at 6:27 am
As I said above, there is also a serious structural shift in China's oil consumption.
It is now driven by gasoline, which is due to growing private car ownership.
By contrast, demand for diesel, which is mainly consumed in the industry and construction, has sharply decelerated.
And this seems to be a long-term trend, as China is gradually changing its economic model from export-oriented, based on heavy industries and construction, to a more focused on private consumption.

China: y-o-y growth in gasoline consumption
source: IEA

AlexS , 03/09/2016 at 6:30 am
China: y-o-y growth in diesel consumption
source: IEA

Dennis Coyne , 03/09/2016 at 7:40 am
Hi AlexS,

It is possible that diesel fuel is being used more efficiently by the Chinese economy. For example diesel is essentially the same as heating oil and as China develops less will be used for heating buildings as natural gas pipeline infrastructure expands, there might also be some switching to heat pumps for heating. These switches take time and there is a significant time lag between high oil prices (from 2011 to mid-2014) and when we see the long run demand effects.

Also the expansion of auto sales tends to increase employment and economic activity throughout the economy.

For these reasons I think a focus on total oil demand makes more sense than a focus on only diesel demand.

AlexS , 03/09/2016 at 12:01 pm
Dennis,

Yes, there is an effect of fuel substitution.
I'm not sure if a lot of diesel is used for heating in China (I think they are mostly using LPG, coal, firewood, etc.), but certainly there are sectors of the economy where it can be substituted or used more efficiently.

For example, in the 2000s, a lot of diesel and residual fuel was used for power generation, as despite a rapid growth in generation capacity China often experienced serious power shortages. In particular, that explains a spike in oil consumption in 2004. China now has sufficient generation capacity, so diesel use for power generation in the commercial and residential sectors is diminishing.

But more important is a structural shift in China's economy and energy consumption patterns. The country is undergoing a gradual transition to an economy oriented toward private consumption. The share of less energy-intensive sectors, such as services, in GDP is increasing. Fixed investment/GDP ratio is declining from 40-50% to more sustainable levels, which means relatively slower growth and less infrastructural developments. All this should lead to a less energy-intensive economy and relatively lesser use of industrial fuels, including diesel.

By contrast, gasoline demand is driven by rising living standards, growing middle class, and hence rapidly increasing car ownership. Gasoline consumption will continue to grow at a high rate, even though economic growth is slowing.

Dennis Coyne , 03/09/2016 at 3:28 pm
AlexS,

Nice analysis, agree 100%.

islandboy , 03/09/2016 at 8:20 am
Here's the deal. China may actually be the country where EVs take off in a big way first (if you leave Norway out of it). The following insideevs.com piece rates China as the number one EV market in the world. I don't understand the metrics used by the author for the countries below China on the list but, it is hard to deny that China is the fastest growing market for EVs or that the highest absolute numbers of EVs are being sold in China.

World's Top 7 Electric Vehicle Adoption Countries for 2015

1. China

up from #3; local sales 207,000, plus a lot more buses and commercial trucks. Claim to fame: easily overtook USA this year for the global volume title; increased 300% over 2014; most sales locally made by a diverse domestic industry; makes and deploys the vast majority of the world's EV Buses.

China has once again proven that despite its huge size, it can turn its economy and industry on a dime. They've been doing this every few years now, in a manner rivaling what the USSR and USA accomplished during World War II.

As always, when you crank out an omelette this big, eggs will break. Indeed, the sooty fallout of last decade's massive industrial push is one big reason why China is in such a hurry now to clean up its energy grid, and its car and bus fleet. Hopefully they are learning some lessons, and not just causing problems just as big downstream.

This concern is important. For example, in January Amnesty International published a meticulous report, showing that China's Huyaou Cobalt company buys cobalt mined off of Congolese child and slave labor. It then sells the cobalt directly or indirectly to Li-ion battery makers, including BYD and interestingly, Korean LG Chem and Samsung. This must stop.

That said.

It is simply mind-boggling, that in 2012 China had all of 3,000 EV sales. The US was already at 52,000 at the time. Three years later, they have apparently crossed 200,000 sales for the year, with 35,000 EV sold in December 2015 alone.

China To Increase Annual Purchase Ratio To 50% Electric Cars For Some Government Departments

he Chinese government intends to further augment plug-in electric vehicle sales by increasing purchases from various government departments.

The latest move sets buying guidelines of more than 50% of new purchases to be NEVs (New Energy Vehicles – electric or plug-in hybrid).

What this means for future gasoline consumption growth in China is anybody's guess but, it appears to me that EVs are in the early stages of an exponential growth phase.

[Mar 07, 2016] How Traders Benefit from the Crude Oil Contango Market - Market Realist by Gordon Kristopher

Feb 5, 2016 | marketrealist.com

contangoEnlarge Graph

Cost of storing crude oil

Crude oil traders like Vitol Group and BP (BP) take advantage of the broader contango market. These traders buy front-month crude oil futures contracts and take delivery upon their expiration. They store this crude oil in Cushing, Oklahoma, and then sell it at higher prices in six months. Industry surveys estimate that leasing costs at large tanks in Cushing were 25–35 cents per barrel per month compared to the 12-month contango price of $8.27 per barrel, as shown in the chart above. Thus, the storage cost of crude oil for 12 months could be $4.20 per barrel at most, keeping administrative fees and other pumping costs at $1 per barrel for 12 months. This means traders could make a profit of $3 per barrel.

Further, the EIA (U.S. Energy Information Administration) estimates that storing crude oil in large oil tankers for several months is expensive. It estimates that the trade will be unviable until contango conditions reach $10–$12 per barrel. Citigroup suggests that if oil prices fall below $30 per barrel, it would be unviable to store crude oil at sea.

Effect on crude oil tankers

However, long-term oversupply and the broader contango market have benefited oil tankers like Nordic American Tankers (NAT), Teekay Tankers (TNK), Frontline (FRO), Euronav (EURN), DHT Holdings (DHT), and Tsakos Energy Navigation (TNP).

The steep contango conditions in the ultra-low sulfur diesel market provide opportunity for contango traders and supertankers. Ultra-low sulfur diesel inventories in the United States have risen more than total motor gasoline inventories since the middle of June 2014.

ETFs and ETNs like the United States Oil Fund (USO), the iPath S&P GSCI Crude Oil Total Return Index ETN (OIL), the VelocityShares 3X Long Crude Oil ETN (UWTI), and the ProShares UltraShort Bloomberg Crude Oil ETF (SCO) are also influenced by the rises and falls in crude oil prices.

In the next part of this series, we'll shift our focus to the US crude oil rig count.

[Mar 07, 2016] What is it like being an oil trader?

Notable quotes:
"... The trader's life is also made trickier by the volatility in the market, which has seen prices rise and fall by several dollars a barrel in a day. "Over the last two or three years we've seen a huge increase in volatility and that's probably due to moving more from a physical group of companies trading to a financial-based scenario," he says. ..."
"... "It's the momentum of these big hedge funds and financial institutions, which makes the market move by percentage points rather than the 30 or 40 cents you used to get three or four years ago." ..."
"... Those sudden, big movements make it difficult for traders to be off-duty. "You can never leave your position, even if technically you've left it, ie you've gone home," Ms Clubley says. ..."
www.bbc.com

24 February 2008 | BBC News


Oil traders never stop talking to each other. Oil traders have to weigh up a great deal of information


The most popular software among oil traders is not an oil trading package or even a news service such as Reuters - it is Yahoo Instant Messenger.

"Trading oil is about getting information and knowing where the market is," says Eivind Lie who runs the trading desk at the Norwegian oil company StatoilHydro's offices in London.

"So being a trader your life is pretty much either on Yahoo or on the telephone trying to get an overview of the market."

Keeping in touch

While people trading shares or currencies can get a lot of their information from analysts' notes and computerised trading systems, the oil trader still relies on chatting to a wide range of people, ranging from other traders to specialist oil trading journalists, to try to find out what is going on in the world.

Everything from war or natural disasters to more mundane events such as seasonal changes to temperatures or elections can affect oil prices, so for the traders it pays to be informed.

Richard Wickham, one of the crude oil traders at Statoil, makes his first call to the office on the way to the station after he has dropped his children off at the nursery.

Then as soon as he gets to the office he will read price reports and messages from Statoil staff who have been trading in the US and Asia and talk to the London-based analyst.

After that, the less formal process of talking to people really gets going.

"Collating information is more than half the job," Mr Wickham says.

"Executing trades is almost small in comparison - if you don't have the information you're blind," he says, staring at the four computer screens on his desk, which display a bewildering array of graphs, figures, reports and message windows.

There is little else on the desk besides family photographs and a strategically-placed Norwegian dictionary, for when he is trying to understand messages from the company's head office in Stavanger.

Distressed cargoes

Statoil is one of the world's largest exporters of oil and, with oil topping $100 a barrel on supply concerns, its products are in great demand.

Yet it has a relatively small trading desk in London, with just a handful of traders. "If it's a weak market then we have to go out and sell it more actively, if it's a strong market they come and buy it from us," Mr Lie says. Currently, demand is strong, though the traders are nevertheless on the phone, talking to other traders, analysts and brokers.

Everyone in the market for physical oil - as opposed to paper market traders, who do not want to end up owning any oil - is looking for that precious piece of information that will allow them to sell oil for more, or buy it for less.

"From our side, as the seller of oil, we want to get to know the buyer's position," Mr Lie says. "Are they short of oil, do they really need more?" The holy grail for buyers is to find a seller having difficulty selling a shipment. "If you get too close to the delivery date, when it's taken aboard a ship in the North Sea, and it's not sold, then the buyers know that we have what's called a 'distressed cargo', so they will try to get a cheap price for that," he adds.

Volatile market

It may be a good time to be a seller of oil, but the way oil is traded means it can still be nerve-wracking. "There are a lot of market price contracts where I would sell you oil today, but we price it the day the ship loads, which might be in three of four weeks time," says Sally Clubley, an independent oil consultant who trains oil traders.

"So we've done the deal today, but we don't know the price today and there's a lot of oil traded on that basis."

The trader's life is also made trickier by the volatility in the market, which has seen prices rise and fall by several dollars a barrel in a day. "Over the last two or three years we've seen a huge increase in volatility and that's probably due to moving more from a physical group of companies trading to a financial-based scenario," he says.

"It's the momentum of these big hedge funds and financial institutions, which makes the market move by percentage points rather than the 30 or 40 cents you used to get three or four years ago."

Those sudden, big movements make it difficult for traders to be off-duty. "You can never leave your position, even if technically you've left it, ie you've gone home," Ms Clubley says.

"It really is a 24-hour job because they don't trust anybody else with it."

Mr Lie agrees.

"I think some of the traders always carry their phones, even on vacations," he says. "It's a lifestyle more than a job so you have to enjoy it."

[Mar 07, 2016] US Oil Rig Count Points To A Sharp Decline In Production

Peak Oil Barrel
likbez, 03/06/2016 at 10:56 pm
Looks like the range of oil prices below $70 which represents the "death valley" for US LTO production also exists for UK North Sea fields.

Most fields might degrade at natural depletion rate already in 2016. Which is up to 22%.

Investment in the UK's embattled oil and gas industry is expected to fall by almost 90 per cent this year, raising urgent industry calls for the Government to reform its North Sea tax regime to safeguard the industry's future, reports

The Telegraph.

RT reports that if Brent price in 2016 stays in 0-70 range capex in the North Sea fields might be reduced by almost 90%.

According to the report of the British Association of oil and gas industry, with current prices, almost half of the oil fields in the UK produce oil at a loss.

Google translation of the RT article (abridged, and slightly edited) https://russian.rt.com/article/150621

The fall in oil prices has a negative impact on the UK economy. According to the report of the British Association of oil and gas industry, the country plans to reduce by 90% investments in the development of offshore fields in the North Sea. According to the expert in the field of oil industry of Mamdouh Salamah, for the United Kingdom will be cheaper to import crude, not to invest in new projects.

With current prices, almost half of the oil fields in the UK produce oil at a loss.

An expert in the field of oil industry Mamdouh Salama believes that in this situation for the United Kingdom would be more profitable to import oil, not to invest in new projects. According to him, for resumption of capital investments, the level of oil prices should be higher than $60-70 per barrel.

"Given the fall in oil prices it's more profitable for the UK to import crude oil and refine it locally, rather than invest in the North sea fields" said Salam.

[Mar 04, 2016] If the US Has Too Much Oil. So Why Are Imports Rising

Notable quotes:
"... Bullshit. Imports are rising because oil from shale is shitty shitty oil. It is barely better than condensate. ..."
"... Refineries dont make much money on very light crude, API 45. It doesnt produce a very high volume of fuels. It is feedstock material, and there is a limited market for feedstock. Much of US LTO production is greater than API 45. ..."
www.zerohedge.com

Zero Hedge

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?

SelfGov

Bullshit. Imports are rising because oil from shale is shitty shitty oil. It is barely better than condensate.
fiatmadness

And yet the US started exporting this month (Exxon to Sicilly)

Richard Head

US refiners are largely set up to process heavier crude than WTI.

gookempucky

Although raw shale oil can be immediately burnt as a fuel oil, many of its applications require that it be upgraded. The differing properties of the raw oils call for correspondingly various pre-treatments before it can be sent to a conventional oil refinery . [35]

Particulates in the raw oil clog downstream processes; sulfur and nitrogen create air pollution . Sulfur and nitrogen, along with the arsenic and iron that may be present, also destroy the catalysts used in refining. [36] [37] Olefins form insoluble sediments and cause instability. The oxygen within the oil, present at higher levels than in crude oil , lends itself to the formation of destructive free radicals . [32] Hydrodesulfurization and hydrodenitrogenation can address these problems and result in a product comparable to benchmark crude oil . [31] [32] [38] [39] Phenols can be first be removed by water extraction. [39] Upgrading shale oil into transport fuels requires adjusting hydrogen–carbon ratios by adding hydrogen ( hydrocracking ) or removing carbon ( coking ). [38] [39]

Shale oil produced by some technologies, such as the Kiviter process , can be used without further upgrading as an oil constituent and as a source of phenolic compounds . Distillate oils from the Kiviter process can also be used as diluents for petroleum-originated heavy oils and as an adhesive-enhancing additive in bituminous materials such as asphalt

johnnycanuck

Some possibilities.

shortonoil

Refineries don't make much money on very light crude, API >45. It doesn't produce a very high volume of fuels. It is feedstock material, and there is a limited market for feedstock. Much of US LTO production is greater than API 45.

http://www.nrcan.gc.ca/sites/www.nrcan.gc.ca/files/energy/images/eneene/...

http://www.thehillsgroup.org/

[Mar 03, 2016] The meeting of oil-producing countries will be held on March 20th in Russia

Notable quotes:
"... The meeting of oil-producing countries will be held on March 20th in Russia, the Minister of oil of Nigeria, Emmanuel Kachikwu, announced. According to him, it will be attended by representatives of countries who are OPEC members and countries that are not members in the organization. Mr. Kachikwu noted that producers seek to restore oil prices to $50 per barrel ..."
peakoilbarrel.com
Ves, 03/03/2016 at 8:36 am
SS,

here is some good news. You have heard it first from me here on POB 2 weeks ago. We are moving in direction of restoring the prices to acceptable level that major producers can live temporarily.

"The meeting of oil-producing countries will be held on March 20th in Russia, the Minister of oil of Nigeria, Emmanuel Kachikwu, announced. According to him, it will be attended by representatives of countries who are OPEC members and countries that are not members in the organization. Mr. Kachikwu noted that producers seek to restore oil prices to $50 per barrel."

[Mar 03, 2016] Russia can not replace the European customers but US neocons are trying to kick Russia out of Europe

Notable quotes:
"... Instead, it reprieved the fading remnants of the military-industrial-congressional complex, the neocon interventionist camp and Washingtons legions of cold war apparatchiks. All of the foregoing would have been otherwise consigned to the dust bin of history. ..."
"... The Saudis geopolitical goal is to contain the economic and political power of the kingdoms principal rival, Iran, a Shiite state, and close ally of Bashar Assad. The Saudi monarchy viewed the U.S.-sponsored Shiite takeover in Iraq (and, more recently, the termination of the Iran trade embargo) as a demotion to its regional power status and was already engaged in a proxy war against Tehran in Yemen, highlighted by the Saudi genocide against the Iranian backed Houthi tribe. ..."
"... But the Sunni kingdoms with vast petrodollars at stake wanted a much deeper involvement from America. On September 4, 2013, Secretary of State John Kerry told a congressional hearing that the Sunni kingdoms had offered to foot the bill for a U.S. invasion of Syria to oust Bashar Assad. In fact, some of them have said that if the United States is prepared to go do the whole thing, the way weve done it previously in other places [Iraq], theyll carry the cost. Kerry reiterated the offer to Rep. Ileana Ros-Lehtinen (R-Fla.): With respect to Arab countries offering to bear the costs of [an American invasion] to topple Assad, the answer is profoundly yes, they have. The offer is on the table. ..."
"... Gazproms gas exports to Europe – including Turkey – had increased to 158.6 billion cubic meters in 2015 with a 8.2 percent increase compared to 2014 ..."
peakoilbarrel.com
Longtimber , 03/02/2016 at 7:35 pm
Stockman's Tales of western intervention into the ME Oil Puzzle.
"The Trumpster Sends The GOP/Neocon Establishment To The Dumpster"
"And most certainly, this lamentable turn to the War Party's disastrous reign had nothing to do with oil security or economic prosperity in America. The cure for high oil is always and everywhere high oil prices, not the Fifth Fleet"

http://davidstockmanscontracorner.com/the-trumpster-sends-the-gopneocon-establishment-to-the-dumpster/

likbez , 03/02/2016 at 10:50 pm
Longtimber,

Thank you.

It goes all the way back to the collapse of the old Soviet Union and the elder Bush's historically foolish decision to invade the Persian Gulf in February 1991. The latter stopped dead in its tracks the first genuine opportunity for peace the people of the world had been afforded since August 1914.

Instead, it reprieved the fading remnants of the military-industrial-congressional complex, the neocon interventionist camp and Washington's legions of cold war apparatchiks. All of the foregoing would have been otherwise consigned to the dust bin of history.

Yet at that crucial inflection point there was absolutely nothing at stake with respect to the safety and security of the American people in the petty quarrel between Saddam Hussein and the Emir of Kuwait.

Compare with the recent article by Robert F. Kennedy, Jr. in Politico:
http://www.politico.eu/article/why-the-arabs-dont-want-us-in-syria-mideast-conflict-oil-intervention/

Having alienated Iraq and Syria, Kim Roosevelt fled the Mideast to work as an executive for the oil industry that he had served so well during his public service career at the CIA. Roosevelt's replacement as CIA station chief, James Critchfield, attempted a failed assassination plot against the new Iraqi president using a toxic handkerchief, according to Weiner. Five years later, the CIA finally succeeded in deposing the Iraqi president and installing the Ba'ath Party in power in Iraq. A charismatic young murderer named Saddam Hussein was one of the distinguished leaders of the CIA's Ba'athist team.
… … …

The EU, which gets 30 percent of its gas from Russia, was equally hungry for the pipeline, which would have given its members cheap energy and relief from Vladimir Putin's stifling economic and political leverage. Turkey, Russia's second largest gas customer, was particularly anxious to end its reliance on its ancient rival and to position itself as the lucrative transect hub for Asian fuels to EU markets. The Qatari pipeline would have benefited Saudi Arabia's conservative Sunni monarchy by giving it a foothold in Shia-dominated Syria. The Saudis' geopolitical goal is to contain the economic and political power of the kingdom's principal rival, Iran, a Shiite state, and close ally of Bashar Assad. The Saudi monarchy viewed the U.S.-sponsored Shiite takeover in Iraq (and, more recently, the termination of the Iran trade embargo) as a demotion to its regional power status and was already engaged in a proxy war against Tehran in Yemen, highlighted by the Saudi genocide against the Iranian backed Houthi tribe.

Of course, the Russians, who sell 70 percent of their gas exports to Europe, viewed the Qatar/Turkey pipeline as an existential threat. In Putin's view, the Qatar pipeline is a NATO plot to change the status quo, deprive Russia of its only foothold in the Middle East, strangle the Russian economy and end Russian leverage in the European energy market. In 2009, Assad announced that he would refuse to sign the agreement to allow the pipeline to run through Syria "to protect the interests of our Russian ally."
… … …

But the Sunni kingdoms with vast petrodollars at stake wanted a much deeper involvement from America. On September 4, 2013, Secretary of State John Kerry told a congressional hearing that the Sunni kingdoms had offered to foot the bill for a U.S. invasion of Syria to oust Bashar Assad. "In fact, some of them have said that if the United States is prepared to go do the whole thing, the way we've done it previously in other places [Iraq], they'll carry the cost." Kerry reiterated the offer to Rep. Ileana Ros-Lehtinen (R-Fla.): "With respect to Arab countries offering to bear the costs of [an American invasion] to topple Assad, the answer is profoundly yes, they have. The offer is on the table."

Ulenspiegel , 03/03/2016 at 7:10 am
"The EU, which gets 30 percent of its gas from Russia, was equally hungry for the pipeline, which would have given its members cheap energy and relief from Vladimir Putin's stifling economic and political leverage."

That is nonsense. The issue is that Russia has quite limited leverage: They can not replace the European customers on short notice – pipeline chain producer to certain customers – and they urgently need the income.

The more interesting question for Russia is how to cope with a customers who may reduce the demand for NG by 1% per year for the next few decades.

Ves , 03/03/2016 at 8:25 am
"The issue is that Russia has quite limited leverage: They can not replace the European customers on short notice"

Leverage is always mutual in the gas trade that involves long term contracts and long gas supply lines. It is like marriage :-)

"The more interesting question for Russia is how to cope with a customers who may reduce the demand for NG by 1% per year for the next few decades."

I am not sure that this is the case.

"Gazprom's gas exports to Europe – including Turkey – had increased to 158.6 billion cubic meters in 2015 with a 8.2 percent increase compared to 2014."

[Mar 02, 2016] Hedge funds turn bullish on Brent but not WTI by John Kemp

Reuters
Hedge funds and other money managers held a combined net long position in the three main crude oil futures and options contracts amounting to 383 million barrels on Feb. 23.

The combined net long position has increased in eight of the last 11 weeks from a recent low of 230 million barrels on Dec. 8. (tmsnrt.rs/1XUWJih)

But the increase in hedge fund and other money manager net long positions has been concentrated in Brent rather than WTI. (tmsnrt.rs/1XUWS5i)

The net long position in Brent futures and options traded on ICE Futures has jumped by more than 100 million barrels to 320 million barrels from 183 million barrels.

The net long position in WTI futures and options traded on ICE and the New York Mercantile Exchange has risen less than 20 million barrels to 63 million barrels from 47 million barrels. (tmsnrt.rs/1XUWVy1)

Extreme pessimism about the near-term outlook for prices, which reached its height in December and early January, seems to have dissipated a little.

There is more confidence that the long-awaited rebalancing of supply and demand is now underway in earnest which could help stabilize stockpiles and prices later in 2016.

U.S. shale producers seem to be finally cracking under the strain from low prices, with more than 100 oil drilling rigs idled over the past month, and many producers now openly talking about producing less in 2016.

[Mar 02, 2016] Why the next world war will be fought over food

peakoilbarrel.com
Jeffrey J. Brown, 12/22/2014 at 2:19 pm
A somewhat surprising article in Fortune:

Why the next world war will be fought over food
http://fortune.com/2014/12/21/why-the-next-world-war-will-be-fought-over-food/

[Feb 29, 2016] Based on old data of 2007 we use close to half for passenger travel, and only 2 percent of oil for farm use

Notable quotes:
"... In the USA we use crude for various purposes. Based on old data of 2007 we use close to half for passenger travel, and only 2% for on farm use, for example. Probably hasn't changed much. How much of the passenger travel is important to GDP, or is "productive" vs "frivolous"? ..."
"... An even better question is how much of GDP itself is "productive" or "frivolous"? ..."
"... Households spent $306 billion on gasoline in 2015 which is ~1.7% of ~$18 trillion of GDP. If 2016 gasoline prices average $1.98 per gallon (EIA February STEO report), household spending on gasoline relative to total household spending will be the lowest in the 69 year history of the data set. ..."
"... Gasoline on its own it is pretty much useless unless you want just to start camp fire for marshmallows. If you want to include the true cost of using gasoline in the household you have to include the cost of vehicles that have never been higher in the history, you have to include the cost of insurance that is also marching higher every year. And let's not even go into ever increasing cost of building and maintaining each mile of highway network. So you have to look at built in price inflation in today's monetary system to realize the true costs. And anyway example that you provide for 2016 that "gasoline relative to total household spending will be the lowest in the 69 year history" is anomaly. Do you understand why it is anomaly? It is anomaly because at that price nobody in oil industry makes any profit. So you won't have this anomaly for very long. ..."
peakoilbarrel.com
Hickory, 02/28/2016 at 11:47 am
In the USA we use crude for various purposes. Based on old data of 2007 we use close to half for passenger travel, and only 2% for on farm use, for example. Probably hasn't changed much. How much of the passenger travel is important to GDP, or is "productive" vs "frivolous"?

Here is the source article for this analysis

https://grist.files.wordpress.com/2010/06/newoilage.pdf

and an article which provides the data in pie chart form-
http://grist.org/article/how-we-can-end-our-addiction-to-oil/

Patrick R , 02/28/2016 at 8:16 pm
Thanks hickory, nice work.
likbez, 02/29/2016 at 12:07 am
Hickory,

An even better question is how much of GDP itself is "productive" or "frivolous"?

See http://www.softpanorama.org/Skeptics/Financial_skeptic/Casino_capitalism/Number_racket/gdp_is_a_questionable_measure_of_economic_growth.shtml

marmico, 02/29/2016 at 4:47 am
Households spent $306 billion on gasoline in 2015 which is ~1.7% of ~$18 trillion of GDP. If 2016 gasoline prices average $1.98 per gallon (EIA February STEO report), household spending on gasoline relative to total household spending will be the lowest in the 69 year history of the data set.

https://research.stlouisfed.org/fred2/graph/?g=3CRQ

Ves, 02/29/2016 at 9:04 am
Gasoline on its own it is pretty much useless unless you want just to start camp fire for marshmallows. If you want to include the true cost of using gasoline in the household you have to include the cost of vehicles that have never been higher in the history, you have to include the cost of insurance that is also marching higher every year. And let's not even go into ever increasing cost of building and maintaining each mile of highway network. So you have to look at built in price inflation in today's monetary system to realize the true costs. And anyway example that you provide for 2016 that "gasoline relative to total household spending will be the lowest in the 69 year history" is anomaly. Do you understand why it is anomaly? It is anomaly because at that price nobody in oil industry makes any profit. So you won't have this anomaly for very long.

[Feb 28, 2016] China crude output in 2016 may decline by as much as 5 percent or 200 thousand bpd

Notable quotes:
"... Chinas output in 2016 will decline between 3 percent and 5 percent from last years record 4.3 million barrels a day, according to analysts from Nomura Holdings Inc. and Sanford C. Bernstein Co. That would be the first decline in seven years and the biggest drop in records going back to 1990. The country is the worlds fifth-largest producer and biggest consumer after the U.S. ..."
"... Fellow state-run energy giant China Petroleum Chemical, also known as Sinopec, said on Jan. 27 that oil and gas output in 2015 fell for the first time in 16 years as a slump in domestic crude production outweighed record volumes of natural gas ..."
"... While some Middle East suppliers can operate with oil at $25 a barrel, the break-even cost for Chinas Cnooc is closer to $41, according to Nomura Holdings Inc. analyst Gordon Kwan, who predicts the countrys domestic crude production will fall by 5 percent this year. ..."
"... The plateau, 2008 – 2014, was made possible by infill drilling. I suspect that the decline curve will be steeper than indicated in the above chart. ..."
peakoilbarrel.com
AlexS, 02/28/2016 at 11:10 am
It seems that China's oil production will decline this year.

From Bloomberg:

China Oil Output Seen Cracking Under Pressure of Price Collapse

http://www.bloomberg.com/news/articles/2016-02-05/china-oil-output-seen-cracking-under-pressure-of-price-collapse

• Domestic production forecast to fall first time since 2009
• Crude output may decline by as much as 5 percent: Nomura

China's output in 2016 will decline between 3 percent and 5 percent from last year's record 4.3 million barrels a day, according to analysts from Nomura Holdings Inc. and Sanford C. Bernstein & Co. That would be the first decline in seven years and the biggest drop in records going back to 1990. The country is the world's fifth-largest producer and biggest consumer after the U.S.

"We expect significant cuts in upstream production as the companies cut output at loss-making fields," said Neil Beveridge, a Hong Kong-based analyst at Sanford C. Bernstein & Co. "Chinese explorers need to take more radical action to cut operating costs and increase efficiency."

CNPC plans to maintain crude output near 2015 levels, Deputy General Manager Wang Dongjin was quoted in a statement posted last month on the company's website. The country's biggest producer has only a "limited amount" of money to invest this year and will spend on oil and gas projects that improve efficiency or promote sales, Wang said.

Fellow state-run energy giant China Petroleum & Chemical, also known as Sinopec, said on Jan. 27 that oil and gas output in 2015 fell for the first time in 16 years as a slump in domestic crude production outweighed record volumes of natural gas.

Cnooc. Ltd., the country's biggest offshore crude explorer, said last month that output will fall this year, the first time in more than a decade, as it accelerates spending cuts.

While some Middle East suppliers can operate with oil at $25 a barrel, the break-even cost for China's Cnooc is closer to $41, according to Nomura Holdings Inc. analyst Gordon Kwan, who predicts the country's domestic crude production will fall by 5 percent this year.

China announced last month fuel prices won't be cut in line with crude as long as it trades below $40 a barrel. The National Development and Reform Commission said the floor is designed in part to shield domestic oil producers from the global price collapse.

"The policy is designed to provide explorers room to breathe," said Laban Yu, head of Asia oil and gas equities at Jefferies Group LLC in Hong Kong. "China cannot afford to shut down domestic production no matter how cheap crude gets."

dclonghorn says: 02/28/2016 at 1:17 pm

The articles I referred to above show a decline in actual Chinese production of 2.5 percent in one month. China produces around 4 million bopd, so it is a top producer. Any producing area can show a lot of variability from one month to another and production could rebound or have a small decline next month, however 2.5 percent decline in a month is big.

As a comparison, If the EIA came out with actual USA production falling 2.5 percent in January that would be a decline of around 230,000 barrels per day from December 2015. That's big!

On the other hand, Ron's historical production charts for China do show a lot of variation from one month to next. I don't know anything about xinhuanet which ran this report, or the National Development and Reform Commission which is supposedly reporting this information.

Javier , 02/28/2016 at 1:41 pm
So that's a 215 mbpd predicted reduction from the world's fourth producer.
Watcher , 02/28/2016 at 3:08 pm
http://www.tradingeconomics.com/china/crude-oil-production

Click on 5 Yrs. Looks like relentless increase in Chinese oil production since mid 2014 when price decline started and when oil was > $100. Apparently EIA data.

No reason this can't be so given they have their own central bank.

dclonghorn , 02/28/2016 at 3:16 pm
Nope, its an actual reported one month reduction of 2.5%. The data is in tons and I'm not sure how it would convert but it would probably be a little over 100,000 bopd.

My point was that rate of decline in the US would be about 230,000 bopd in a month, so it is a large percentage decline.

AlexS , 02/28/2016 at 3:37 pm
Changes of 2-4% in China's monthly oil production are not unusual. More important, if this marks a change in long-term trend.

China oil production kb/d
(converted from tons using 7,3 ratio)
Source: National Bureau of Statistics of China

oldfarmermac , 02/28/2016 at 4:56 pm
It is hard to say how free oil companies are in China to go their own way, as they see fit, when it comes to production policy. The government exercises an enormous amount of power over Chinese industry.

Now if I were a Chinese commie, in a high position, knowing my country has a huge stash of dollars possibly subject to depreciation due to inflation, I would opt to buy oil, and hold on to domestic oil in the ground inside the country.

It seems like a damned safe bet it will be worth a lot more in a few years than it is now, and the interest China earns on dollars is trivial.

AlexS , 02/28/2016 at 5:09 pm
"Now if I were a Chinese commie, in a high position … I would opt to buy oil, and hold on to domestic oil in the ground inside the country."

That's what they are doing. China is planning to increase its Strategic oil reserve capacity to 500 million barrels in 2020

source for the chart below:
http://www.bloomberg.com/news/articles/2015-09-17/even-a-slowing-china-is-oil-s-best-defense-against-deeper-slump

Javier , 02/28/2016 at 5:01 pm
I was referring to Nomura's prediction of a 5% yearly fall in China's 2016 oil production. If it comes to happen this should set back production to 2012-13 levels.
Ron Patterson , 02/28/2016 at 4:16 pm
China's production has been increasing at an average of almost 2% per year for about 10 years now.

 photo China_zpsayhxd9bh.jpg

AlexS , 02/28/2016 at 4:25 pm
…. and even longer-term

China's oil production, 2002-Jan 2016

sources: JODI, National Bureau of Statistics of China
(JODI uses conversion rate of 7.32 barrels/ton)

AlexS , 02/28/2016 at 4:58 pm
China's mature onshore oil fields are declining.
This includes Daqing, China's largest field, currently accounting for a fifth of the country's output.

excerpts from an article:

"In late 2014, CNPC essentially threw in the towel on its workhorse field, Daqing, announcing that it would allow the field to essentially enter a phase of managed decline over the next five years. Under this new approach, the field's oil production will fall from 800,000 barrels per day (kbd) in 2014 to 640 kbd by 2020: a 20 percent decrease.

Daqing's oil production has declined relentlessly, despite PetroChina's significant increase in drilling activity in the field during recent years. This suggests a significant risk that production could fall faster than planned. For reference, PetroChina drilled 1,975 development wells in 2002 when oil production averaged 1.079 million barrels per day, but was forced to boost this to 4,498 development wells in 2014, when oil output at Daqing averaged 792,000 barrels per day. In short, the number of development wells drilled increased by nearly 250 percent while oil production fell by roughly 27 percent."

source: "China Peak Oil: 2015 Is the Year. By Gabe Collins. The Diplomat, July 07, 2015 [ http://thediplomat.com/2015/07/china-peak-oil-2015-is-the-year/ ]

The chart below is from the article

Daqing field oil production, '000 bpd

Ron Patterson , 02/28/2016 at 8:48 pm
The plateau, 2008 – 2014, was made possible by infill drilling. I suspect that the decline curve will be steeper than indicated in the above chart.
AlexS , 02/28/2016 at 9:57 pm
China's second largest field is Shengli, operated by Sinopec (China Petroleum & Chemical Corp.). Although Shengli is a mature field (discovered in 1961, developed since 1964), production there remained relatively stable within a range between 510 and 540 kb/d for many years, thanks to intensive drilling program.

While Shengli's output was plateauing, Sinopec's other fields in China have delivered impressive growth, having doubled oil production from around 150 kb/d in 1999 to 310 kb/d in 2014 (see the chart below).

The growth trend was reversed in 2015, when Sinopec's output in China declined by 4.7% – the first decline since the company's IPO in 2000. Further decline is expected in 2016.

The quote below is from Bloomberg:

"Sinopec has been maintaining output in its aging oil fields by over-investing and this is no longer possible in the current oil price environment," said Neil Beveridge, a Hong Kong-based analyst at Sanford C. Bernstein, who estimates the company needs oil to stay above $50 a barrel to break even. "We expect Sinopec's domestic oil production to drop 5 percent to 10 percent this year as it shuts down aging high-cost oil fields."

"Sinopec Shengli Oilfield Co. [Sinopec's subsidiary – AlexS] will shut the Xiaoying, Yihezhuang, Taoerhe and Qiaozhuang fields to save as much as 130 million yuan ($19.9 million) in operating costs, the company said in a statement.
The four oilfields are among the least profitable among 70 run by Sinopec Shengli, according to the statement.
Fu Chengyu, the former chairman of Sinopec, said last year that output at the unit was being cut "proactively" because of low oil prices."

http://www.bloomberg.com/news/articles/2016-02-17/oil-rout-echoes-in-china-as-sinopec-unit-shuts-crude-fields

Sinopec's oil production in China (kb/d)
Source: Sinopec F-20 annual reports, Operational Statistics for 2015

dclonghorn , 02/28/2016 at 10:24 pm
Thanks for the information.

[Feb 27, 2016] China's crude production for January is down two percent year on year

Notable quotes:
"... Just saw a press release on China's crude production for January. It says they are down 2.1 percent year on year to 17.69 million tons. ..."
"... An earlier release shows them producing 18.15 million tons in December 2015. That's a one month decline of 2.5 percent. ..."
peakoilbarrel.com
dclonghorn, 02/27/2016 at 6:19 pm
Just saw a press release on China's crude production for January. It says they are down 2.1 percent year on year to 17.69 million tons.

http://news.xinhuanet.com/english/2016-02/26/c_135133603.htm

An earlier release shows them producing 18.15 million tons in December 2015. That's a one month decline of 2.5 percent.

http://news.xinhuanet.com/english/2016-01/25/c_135043850.htm

[Feb 26, 2016] Despite all the Chinese slowdown talk, China is importing commodities at a record pace

Notable quotes:
"... Despite all the Chinese slowdown talk, China is importing commodities at a record pace (see below the chart for natgas imports, which increased by over 100% year over year). ..."
peakoilbarrel.com
Heinrich Leopold, 02/26/2016 at 12:54 pm
clueless,

Despite all the Chinese slowdown talk, China is importing commodities at a record pace (see below the chart for natgas imports, which increased by over 100% year over year).

Although 6 bcf/d (or 1 mill boe/d) of natural gas imports are much lower than the 7 mill b/d oil imports, the impressive growth rate reveals there is much room for future growth for natgas exports here.

The main question remains if the US can produce enough natgas at low costs. 9 bcf/d is nearly 15% of US production. The US is currently still a net importer of natgas.

[Feb 18, 2016] United Arab Emirates backs oil producers' output freeze plan - Fuel Fix

fuelfix.com

Posted on February 18, 2016 | By Associated Press

DUBAI, United Arab Emirates - The United Arab Emirates threw its support on Thursday behind a plan by major oil producers to freeze output levels in an attempt to halt a slide in crude prices that has pushed them to their lowest point in more than a decade.

Russia, Saudi Arabia, Qatar and Venezuela announced their willingness to cap output at last month's levels at a surprise meeting in Qatar this week - but only if other major oil producers join them. OPEC member Kuwait has since said it supports the proposal.

The support from the Emirates, a close Saudi ally, does not come as a major surprise but is still significant. The seven-state federation is OPEC's third-largest oil producer.

Energy Minister Suhail Mohammed al-Mazrouei said in a statement to state news agency WAM that the Emirates supports any proposal to freeze output through consensus with OPEC and Russia, which is not part of the oil-producing bloc.

"We believe that freezing production levels by members of OPEC and Russia will have a positive impact on balancing future demand based on the current oversupply," he said.

He was also quoted as saying he believes current conditions will prompt producing countries to cap existing output, if not cut supply. The UAE, he said, "is always open for cooperation with everyone in order to serve the higher interests of the producers and the balance of the market."

A day earlier, Iranian Oil Minister Bijan Namdar Zanganeh said after talks with counterparts from Iraq, Venezuela and Qatar that his country "supports any measure to boost oil prices" but stopped short of committing Iran to capping its own output. Iran has previously said it aims to boost production above its roughly 2.9 million barrels a day now that sanctions related to its nuclear program have been lifted.

[Feb 13, 2016] Shale production with its rapid decline rate and high costs can not act as a cap on the price of oil

Notable quotes:
"... I don't see how shale production, with it's rapid decline rate and high costs, can act as a cap on the price of oil. Wouldn't it be more likely that foreign producers with lower costs for production will keep a cap on the price of oil? ..."
"... I think oil price will remain somewhat volatile over the next decade since it is heavily tied to transport. ..."
"... However, in a way the oil industry people may be correct in the long run. Every time the price of fuels go up, society will make more permanent changes to reduce the use of those fuels. So the long term outlook for the oil industry is downhill. Short term, probably not. ..."
"... Rep. Jared Huffman (D-CA) introduced the Keep It in the Ground Act on Thursday. Under the bill, there would be no new leases for extraction of fossil fuels - such as coal, oil, and gas - on all federal lands. ..."
"... Don't worry, none of this "keep it in the ground" noise will last very long. When prices go back up, and when peak oil ceases to be called a theory, then the "keep it in the ground" folks will be looking for a hole in the ground to hide. ..."
peakoilbarrel.com
Doug Leighton, 02/12/2016 at 9:39 am
...THE OIL INDUSTRY GOT TOGETHER AND AGREED THINGS MAY NEVER GET BETTER

"The thousands of attendees seeking reasons for optimism didn't find them at the annual International Petroleum Week. Instead they were greeted by a cacophony of voices from some of the largest oil producers, refiners and traders delivering the same message: There are few reasons for optimism. The world is awash with oil. The market is overwhelmingly bearish."

http://www.bloomberg.com/news/articles/2016-02-12/the-oil-industry-got-together-and-agreed-things-may-never-get-better

GoneFishing, 02/12/2016 at 10:13 am
"Producers are bracing for a tough year. Prices will stay low for up to a decade as Chinese economic growth slows and the U.S. shale industry acts as a cap on any rally"

Doug,

I don't see how shale production, with it's rapid decline rate and high costs, can act as a cap on the price of oil. Wouldn't it be more likely that foreign producers with lower costs for production will keep a cap on the price of oil?

I think oil price will remain somewhat volatile over the next decade since it is heavily tied to transport. As that scenario changes, oil production will be in natural descent anyway so alternatives and efficiency might just be playing catch-up for quite a while.

However, in a way the oil industry people may be correct in the long run. Every time the price of fuels go up, society will make more permanent changes to reduce the use of those fuels. So the long term outlook for the oil industry is downhill. Short term, probably not.

Frugal, 02/12/2016 at 10:08 am
Energy loan worries climb as oil companies max out credit lines

Struggling oil and gas companies are maxing out revolving credit lines typically used to cover short-term funding gaps, raising fresh concerns about banks' exposure to the decline in energy prices.

And yet the oil industry seems to think prices will stay low for the next decade.

GoneFishing, 02/12/2016 at 10:36 am
Just another indicator of economic downturn, CSCL has warned of loss.

"China Shipping Container Lines (CSCL) has issued a profit warning announcing an expected loss of RMB 2.8 billion (USD 425 million) for the financial year ending December 31st."

http://worldmaritimenews.com/archives/181462/cscl-warns-of-loss/

At least they finally freed the CSCL container ship "Indian Ocean" stuck in the Elbe River.

http://worldmaritimenews.com/archives/182581/cscl-indian-ocean-finally-freed-bound-for-hamburg/

wharf rat, 02/12/2016 at 11:13 am
Rat's congressman proposes Stranded Assets International Bioreserve

Rep. Jared Huffman (D-CA) introduced the Keep It in the Ground Act on Thursday. Under the bill, there would be no new leases for extraction of fossil fuels - such as coal, oil, and gas - on all federal lands. It would also stop new leases for offshore drilling in the Pacific and the Gulf of Mexico and prohibit offshore drilling in the Atlantic and Arctic Oceans.

http://thinkprogress.org/climate/2016/02/11/3748675/house-keep-it-in-the-ground-introduced/

Ron Patterson, 02/12/2016 at 11:20 am
Don't worry, none of this "keep it in the ground" noise will last very long. When prices go back up, and when peak oil ceases to be called a theory, then the "keep it in the ground" folks will be looking for a hole in the ground to hide.