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  1. 13 points
    Brushing up on my Oil Kingdom Official-Speak parlance, I think the non-official version of the announcement roughly translates to something like this: Dear world consumers, we have been pushing for $80 to $100 oil prices to prop up our Aramco IPO. But some hawks are pushing for $300 oil - that's crazy talk, as we tend to like having our heads firmly attached to our necks. So we plan to push for weekly increases in oil prices, to see just how far we can go. Next week we'll run the idea of $120 oil up the flagpole to see if anyone salutes. And the week after that, we'll push for $130 oil, because of risk of supply disruptions. And stuff. Risk stuff. We want consumers to be happy with a balance of oil prices somewhere between $80 and $300, depending on what the market will bear, with us creating fear and highlighting risk. Did we mention risk yet? Because oil prices need to increase because of risk. Trust us, we are doing what is best for us. Have a nice day, consumers.
  2. 11 points
    "Saudi Arabia “will work with major producers and consumers within and outside OPEC to limit the impact of any supply shortages,” a Saudi energy ministry official said on Wednesday, according to state news agency SPA." It does my ole heart good to see how the Saudis care about the world's needs. So selfless. So generous. Excuse me while I wipe a tear.
  3. 8 points
    It was reported yesterday by CNN that Khalid al Falih, Oil minister of Saudi Arabia, said "Two years ago we pulled supply. I think in the near future there will be time to release supply," Al-Falih said. "It's likely that it will happen in the second half of this year. We've had intensive discussions [with Russian energy Minister Alexander Novak], and I think we're aligned on that," . Apparently most observers accept this statement with an attitude of "Of course - no problem". But is a bit more thought and critical questioning needed to understand the consequences of such an action? Let us examine these consequences. It may turn out that the Saudi's and Russia's increasing production is more complicated than they imagine. In fact, since oil can only be produced if you have an empty receiving vessel awaiting delivery of oil, neither country can produce more oil without enticing potential customers to provide a means for receiving such additional oil. Currently we know of no empty tankers at anchor outside either the Saudi or Russian loading ports that are awaiting acceptance of their nomination for a cargo of oil. So how do they accomplish this promised increase in production? The only control lever that Russia and the Saudis possess is the pricing lever. There is no lever, no on/off switch, to force the customer to accept an increase in production. So, in order to entice additional vessels to enter the loading port, ready to receive cargo, the producers must offer a price advantage. This leads to the inevitable conclusion that for the Saudis and Russia to fulfill their promise to increase production they must become more price aggressive. Since demand is currently being readily supplied, and the Saudi/Russian wish to increase production will not increase that demand, the only way that the Saudis and Russia can increase production is to cut the price below that of another producer so that that producer's oil is displaced from the market. In other words, the actions of 2014 are about to be repeated. A similar price decline is possible. One would have thought that the Saudis would have learned from the 2014 experience. But that was Al Naimi. This is Al Falih. Neither minister can put ten gallons of oil in a five gallon bucket. Al Naimi thought that he could regain market share by undercutting the shale oil price. He did not gain market share from doing this, he only lost revenue, as did the entire industry. What suggests that Al Falih will fare any differently? He will not. If OPEC tries, this year, to regain the 1.8 million barrels a day of market share that they conceded to others two years ago, prices will likely return to the $30's. If you lived through the 2014/15 time period, you will recall that, initially, when the price dropped from $110/B to $90/B the industry was sure that this "low" price would soon be reversed. When the price dropped to the $80's, the idea of a quick recovery persisted. When the price keep falling and reached $70, even al Naimi assured the industry that the price would go no lower. He was wrong. The fall continued into the $20's. In spite of the falling prices, the talk of "recovery" did not subside. First it was believed that a "V" shaped price recovery would occur. Then, as time marched on and prices did not recover, the industry shifted to the expectation of a "U-shaped" recovery. When it became obvious that it was more likely an "L-shaped" profile, OPEC gave up. They quit trying to maintain market share through price cutting and conceded 1.8 million barrels a day of the market to non-OPEC. By removing the downward price pressure of trying to maintain market share, the speculative trading community was able to restore the higher prices through persistent demand for and accumulation of the "long" side of the futures market. This same trading community had the usual knee-jerk reaction to the Saudi/Russian announcement of planning to regain markets. The futures price dropped. But will the drop persist? If the marginal producers, the Saudis and the Russians, follow through with their expressed intention of pushing back into the already-satisfied market, the drop in price will continue through the pressure of liquidation of the long side of the futures contracts, while the buyers of real oil take advantage of the producers' price war. A repeat of 2014/15 seems quite likely. For those of you who've become convinced that inventory levels dictate the price, I might point out that the figures for US total stocks, the only numbers reflecting the current time period, show inventories now at essentially the same level as they were at this time in 2015. The price then was comparable to the current level. By early 2016, nine months later, the price had halved and US oil stocks had increased by 100 million barrels. If you believe that surplus inventories at that time contributed to the price drop, then do you similarly believe that inventory levels will again place downward pressure on prices? Will the price drop by 50% again? This is an important time for the oil industry. The developing events remind us again that without an understanding of how prices are actually formed - the pricing mechanism - the industry is left with a random, hit or miss system of oil prices. Good luck!
  4. 8 points
    My view on oil prices are pretty clear. I've been pretty consistent about my views on oil prices since 2015. But since I'm new to this forum, guess I need to reiterate. In 2015 and 2016 I commented ad nauseum (mostly on the new defunct Oilpro forum) that I would be happy if oil was a stable average around $50 to $60, but closer to $50. In 2017, I changed my view and comments to I would be happy if oil was a stable average around $50 to $60, but closer to $60. This year, I changed my view and comments to I would be happy if oil was a stable average around $65. And I would be happy if oil was a stable average around $70 for 2019. Note that I think the value of the US Dollar will be devalued a bit later this year and early next year as the PetroYuan starts gaining international acceptance. So in real terms, I'm actually hoping for oil prices to average $65 for 2018 and 2019. $100 oil is not sustainable long term. $300 oil is just nuts. Excessively high oil prices would kill global economies, and crash oil prices all over again. Here is one of my old articles from 3 years ago. Seems like it is still relevant today. (This was one of my articles for the old Oilpro forum, which I also posted to LinkedIn... All my old Oilpro articles are gone : ( Why Oil is Unlikely to Hit $200 in the Next Decade https://www.linkedin.com/pulse/why-oil-unlikely-hit-200-next-decade-tom-kirkman
  5. 7 points
    This has been a fascinating discussion. My thanks to all of you who have contributed. My only comment is that we should not underestimate the effect big money investment, rising oil prices and other economic factors can have on multiple layers of decisionmaking. Certainly all of these combined could produce a great deal of “will” and as they say, “where there is a will there is a way.” Depending upon the circumstances leading up to the January 1, 2020 deadline, might not that deadline turn out to be more of a goal coupled with lots of exceptions and grace periods that might extend out as far as 2025? And, if so, in the interim might not the market find a way to more economically scrub, process or otherwise use Canadian bitumen such that the proposed pipeline turns out to be economically viable? I expect there has been and will continue to be a lot of money being spent exploring all of these possibilities. It will certainly be interesting to see how this works out.
  6. 6 points
    North Dakota – update through March 2018 This article contains still images from interactive dashboards available on the blog post. To follow the instructions detailed here, use the interactive dashboards. You can also explore the dashboards to uncover different insights and trends. --- This interactive presentation contains the latest oil & gas production data from all 13,341 horizontal wells in North Dakota that started production since 2005, through March 2018. February oil production in North Dakota came in at 1,162 kbo/d, after a month-on-month drop of 1%. The wells that started in 2018 show so far a similar production profile as the ones from the year before (see the ‘Well quality’ tab. You can click on the 2018 vintage in the color legend to highlight the related curves). In the final tab the performance of the 5 leading operators is shown. EOG, the largest US shale oil operator, hasn’t completed any new wells in North Dakota since October last year , and produced just 43 kbo/d in March, vs 70 kbo/d in June 2017. In the ‘Advanced Insights’ presentation displayed below, the “Ultimate recovery” overview shows how all these horizontal wells are heading towards their ultimate recovery, with wells grouped by the quarter in which production started. The far better early-life well productivity in newer wells is also visible in this basin. But as the 9th tab shows (‘Gas oil ratio’), the gas/oil ratio is rising faster for wells than it used to be. There are concerns emerging that this leads to a loss in formation pressure, and therefore may steepen declines. There are already spots where this is visible. For example, in the 2 largest fields, Sanish & Parshall (see the 2nd tab ‘Cumulative production ranking’, where these 2 fields are at the top), well performance has steadily declined since 2007/2008, even though more recent wells started at rates pretty similar as before. You can see this by choosing just these 2 fields in the ‘Fields’ selection (tip: click on ‘All’ to deselect all fields, and then search for these 2 fields), and selecting to show wells by the year, instead of the quarter in which production started; wells that started in these 2 fields in 2007/2008 recovered on average around 450 kbo before dropping to 50 bo/d, while this is just around 200 kbo for wells starting since 2014. Next week I plan to have new posts on the Haynesville, and the Marcellus. For these presentations, I used data gathered from the following sources: DMR of North Dakota These presentations only show the production from horizontal wells; a small amount (about 30 kbo/d) is produced from conventional vertical wells. FracFocus.org Visit our blog to read the full post and use the interactive dashboards to gain more insight https://shaleprofile.com/index.php/2018/05/17/north-dakota-update-through-march-2018/ Follow us on Social Media: Twitter: @ShaleProfile Linkedin: ShaleProfile Facebook: ShaleProfile
  7. 6 points
    What FACTS concerning imbalance between supply and demand in the oil market do you have to support your claim of bias on analysts who are bullish? Perhaps the ones who are bearish are biased? Your claim overall is vague and seems to be based on "feelings." What is your supply/demand argument showing global oil supply growth is exceeding global oil demand growth (which has been soaring in the last 10 years and will be almost 100 million barrels per day this year), that would justify lower prices? I would be interested in hearing specifics about the global market.
  8. 6 points
    Possibly it is time for a refresher regarding the history of crude prices. Here is the chart from 1861 onward, courtesy of BP, expressed in 2016 dollars. Please take note of the fact that the price has been above today's price for only ten percent of the time, with the average being below $40/B. The past forays above $40/B appear as temporary spikes. It makes it difficult to justify the expectation of a sustained price even as high as today's level.
  9. 5 points
    Thank you for your kind words and encouragement, Mr. Owens. I will try to pass along some of my perspective on the Canadian situation. First we set the stage. The International Maritime Organization has decreed that, beginning January 1, 2020, the maximum sulfur content of international bunker fuels will drop from 3.5% to 0.5%. This change creates the worst kind of problem for high sulfur bunker fuel producers and the heavy crude producers from whom they obtain their feedstock. These producers are already making a product with limited uses. Now a key end market is evaporating. So what happens when you deprive 2-3 million bbls per day from its long-time end market? The analogy I use to describe the impact is that of a broken garbage disposal. For years, the shipping industry was the garbage disposal for the oil industry. Ships burned the dirty, heavy stuff that no one else wanted. The IMO’s new regulations just broke the oil industry’s garbage disposal. In order to understand the impact of this regulation change on the Canadian situation, we need to understand what is going on in the rest of the world. Most of the high sulfur bunker fuel now used is not produced in North America. It is produced primarily in simple refineries in the Eastern Hemisphere. These refineries take the motor fuels out of crude oil and dump the heavy bottom of the barrel into the bunker fuel market. What happens when that dumping ground disappears? The refiners will try to avoid shutting down their capacity, so they will look for an alternate disposition for the high sulfur bottoms product. The US Gulf coast is only a $5 tanker move away, so why not send it to the US and displace the current supplies of Venezuelan, Mexican and Canadian high sulfur oils that those refineries currently purchase? Does this not set up a price war? Who wins? My view is that it will be the lowest cost supplier. Production will be shut in. Since there is not sufficient room for much of the newly supplied high sulfur bottoms to be refined, two million barrels a day of oil will be rejected and facing shut-in of production. Since Canadian oil is the highest cost, probably about $20 per barrel higher than Venezuelan, Mexican, Iraqi or Arabian oil, delivered to the US Gulf coast, Canada is in the worst position. All is not completely lost. There are already commercial processes that remove asphaltenes from oil sands crude. If the cost can be made competitive, some portion of Canadian production can be maintained. However, timing is of the essence. I hope that this recitation is helpful.
  10. 5 points
    I am new to Oilprice.com. But I am not new to the oil business. I personally experienced much of the industry history that most of you have learned by reading. Incidentally, most historical descriptions are filled with errors. In many cases the errors result from the author presenting the common wisdom and following that, he has tried to match that recitation with historical facts. The accuracy of history usually suffers. A similar inaccuracy results from attempts to fit historical data to commonly-accepted pricing ideas. Usually the result is to ignore historical facts by beginning history five or ten years ago, rather than the appropriate 150+ years. This article is my attempt to set the record straight on one important element of industry assessments, namely the price setting sequence. The price comes first, followed by demand and its numeric equal, supply.Being the lazy person that I am, rather than re-writing my assessment, I have copied the description that I posted in OilPro a few years back, as we entered the demise of the previous price bubble. The additional four years of elapsed time with its additional confirming data have not altered the assessment, since if is soundly based and should have perpetual value. I hope that the readers find this analysis beneficial. Understanding Oil Demand and Price As we continue our quest to replace fiction with fact, we now turn to the subject of demand and price. Most of the participants in the oil business have succumbed to the simplistic explanation that “High prices are evidence of strong demand”. Therefore most efforts of price forecasting begin with a demand forecast. Although it is counterintuitive, this results in forecasts of, simultaneously, high prices and high demand. Such forecasts are common as evidenced by the EIA, the IEA and most major oil companies’ forecasts. But if anyone is asked “Will people buy more oil at a higher price or a lower price, reason always answers “You will buy more at the lower price, Silly!”. Oil industry forecasts say differently. Then which is it? The fact, as substantiated by history and reason, is that higher prices create lower demand. What is the underlying factor that has allowed most people to adopt the wrong sense of the demand/price relationship? The answer is the lag time between demand’s occurrence and the knowledge of its quantitative measure. While we know prices instantly, knowledge of demand figures take a year or so for us to have the demand number. In the absence of data the knee-jerk assumption is that demand must have been high in order to create the high price. This idea will have been firmly adopted long before demand numbers are available and almost no one looks back at the data to confirm or deny that assumption. The following chart gives us that historical information. In the time periods when prices were above $80/B, 1979-1985 and 2008-2013, we had growth rates of less than 1% and in some years we had negative growth rates. Hardly a period of strong demand. Looking at the other side of the coin, that is, the period when growth rates were high, in other words, times of high demand; between 1947 and 1970 we had growth rates of 6-12% with prices of $10/B in today’s dollars. These facts prove that high demand is not the cause of high prices. This then leaves us with the question ”If demand does not set the price, what does?” The uncomfortable, but accurate answer is “Price is an independent variable which is set by the marginal producer.” Whether that marginal producer sets the price overtly or by acquiescence, that is still the price setting mechanism. In today’s world, the marginal producer is Saudi Arabia. The floor price of crude is the price that the Saudis are willing to accept for their sales. If they accept the futures price, then that will be the price of oil. If they, instead, select a number — any number — and abide by it, then that will be the price of oil. The real takeaway from this situation is that if producers around the world want a good price for their production, they will do whatever is necessary to convince Saudi Arabia to set a good price and stick with it. Non-Saudi producers should beg, plead, negotiate, educate, cooperate or anything else that convinces Saudi Arabia to set a desirable price. Incidentally, production level is not a meaningful tool as it is determined by demand and needs no management. Production level will take care of itself. The following chart adds perspective to the demand picture. Here is global demand, by year, since 1920. This time span encompasses cold wars, hot wars, droughts, depressions, booms, famine, pestilence, Democrats, Republicans, Peak Oil, running out of oil, China, Russia, etc. Of particular note are two facts: 1. There are no demand spikes. 2. The only significant deviations from a steadily growing curve are two demand drops — both following price spikes. If anything in the oil business is predictable it is demand growth. Since 1985 demand growth is like the Energizer bunny — it just keeps going and going and going, at its 1.5% growth rate. In spite of the popular sentiment expressed in the past ten years, there have been no demand surprises on the high side. If thoughtful consideration is given to the data presented herewith, one must reject the common notion that demand sets prices.
  11. 5 points
    Oil prices are starting to rise too high in my opinion. $80 oil (as forecasted for later) is simply not sustainable. I really wish KSA and MbS would shut the heck up about $80 to $100 oil, which they want in order to artificially jack up the potential cash windfall for their supposedly impending Aramco IPO. I have my doubts that an Aramco IPO will actually happen. You can read my recent opinion piece about that here: Saudi Aramco IPO Seems Unlikely Anyway, Goldman seems to politely agree with my sentiments that $80 oil is not sustainable. Here is the last sentence of the Zero Hedge article: Goldman's Clients Are Getting Concerned About Rising Oil Prices =============================== Goldman's conclusion is that while "current crude oil price dynamics and recent stock momentum create an appealing shorter-term opportunity for tactical investors", those looking for sustainable, longer-term price appreciation should look elsewhere.
  12. 5 points
    The difference between 270Gb and 261Gb should be irrelevant to market valuation. What matters is production over a ten to 20 year time frame. Much beyond that has practically no present value. So at current production rate near 10mb/d, the R/P ratio is 73 to 76 year. Reserves of this R/P are simply candidates for future stranded assets. But that, too, is financially irrelevant due too ordinary discounting. The only way Aramco's massive reserves become relevant is if they were to multiply production rates. For example 30mb/d would lead to a 25 year R/P ratio, most of which would have material present value. Of course, the downside is that doubling or tripling production would destroy the price of oil. If you double production while the price of oil falls 50%, you've done nothing to increase revenue. So basically, Aramco is stuck producing only 10 mb/d because there is not enough demand for them to substantially increase production. And this makes most of their legendary reserves worthless. They will keep producing a mere 10 mb/d, not because they are constrained by reserves, but because they are constrained by demand. The present value of that cash flow is all the stock will ever be worth.
  13. 4 points
    To me, it seems very apparent that various writers are consciously making blatant efforts to constantly boost oil price increase expectation. It seems quite unprofessional. I am wondering why editors do not discourage some of the wild claims. Am I wrong? Fortunately, it seems that other writers soon follow with more realistic forecasts. Is anyone else disturbed by this? Actually, the same tactic seems to be used by advocates of solar plants and wind turbine farms. They have a more religious zeal to their unfounded claims though. It reminds me of the Tesla fanatics who cannot logically show how individuals or society will actually benefit from buying their cars. My bias is clearly toward natural gas powered vehicles with special emphasis on trucks, ships, locomotives, etc.
  14. 4 points
    Nice to see the OILPRO.COM pundits/refugees have found a new home !
  15. 4 points
    Well, well, well, look what we have here! The same anti-drilling Democrats that have prohibited oil companies from drilling offshore and in onshore sweet spots on BLM land now want Trump to stand up to OPEC to fight rising oil prices? Send Trump a bill to open up more drilling and permit more pipelines so we can further increase our production. Where were these Democrats in 2013 when Obama was in office? Did they ask Obama to stand up to OPEC? No! They didn't give a damn about high oil prices back then, and oil prices today are significantly less than were. They are only saying this now to put more Mainstream Media pressure on Trump while at the same time, doing their best to block Trump's efforts to help expand our oil and gas industry here at home. Yes, our shale oil production has increased a lot in recent years, but there is also plenty of untapped conventional oil in the Western States and Alaska as well as offshore. There are plenty of sweet spots with ultra low break even prices that the Democrats have continued to keep off limits. The more oil drilling we permit, the faster we eventually reach energy independence, further reducing OPEC's control on the market. As far as fuel costs go, the Democrats are, again, hypocrites! Jerry Brown has raised gasoline taxes in California. Other Democrat governors have done the same. They want to pin all the blame on the increase in cost of fuel on OPEC, Oil Companies, and Trump when their raising taxes on gasoline hurts poor families the most. If the Democrats had their way, they would ban all fracking and new drilling, increasing both oil prices and our dependence on foreign oil.
  16. 4 points
    European law is different from US law too. In the US, if you own a piece of land, drill it and find oil, gas or water, it's yours and you can sell the rights and so on. This allowed the surge in drilling and exploitation. In several EU countries, like Italy for example, if you own a piece of land, drill it and find oil o gas, that is owned by the state. You may get some compensation, but it will be minimal. This doesn't encourage the same kind of activity.
  17. 4 points
    My first interview in russian on Iran nuclear deal. I dont know if we have russian speakers or russian native in the forum and if its allowed but i would like to share my latest publication and interview by Eurasia Expert on Iran nuclear deal and Washington being out of it and its implications.
  18. 4 points
    My latest analysis on Venezuela's elections for Political Insights. Feel free to read my latest analysis on venezuelan elections... @Tom Kirkman@CMOP@TraderTate@Marina Schwarz@Rodent
  19. 4 points
    Eric, with respect to my friend, Art Berman, and Yahoo finance, the possibility that 27% of shale oil companies in America made money in 2017 is a stretch to me. In my opinion, there was a lot of non-GAPP, funky accounting that created this illusion based on asset sales and enormous, one time tax charges. We have to rely on SEC data, of course, but personally I don't think anybody made money in 2017, in spite of lower costs, higher productivity, and production cuts from OPEC. More importantly, at least to me, they did not make enough money to put a dent in debt (Devon reduced debt, EOG added debt). The shale oil industry, even the mighty Permian, is sustainable only as long as the money holds out. Or until they saturate core, sweet spots and have to start drilling the really lousy rock, then things will go from bad to worse. In the mean time the shale industry is facing some hefty debt maturities coming up in a few years, with interest rates going up. Here is a statistic that will knock your socks off, about 75% of all unconventional HZ wells drilled in the Permian, since the beginning, now make less than 40 BOPD (IHS, shaleprofile.com); the answer to your question might lie there. But pat yourself on the back; you are on the right track. Question everything. Dig out the facts. Do your own math. This might be interesting to you also: https://www.scribd.com/document/370742449/Shale-Reality-Check-Drilling-into-The-U-S-Government-s-Rosy-Projections-for-Shale-Gas-Tight-Oil-Production-Through-2050#fullscreen&from_embed
  20. 4 points
    William, how wonderful for you to say that. I have tried to clean my act up a little since the last time we communicated but, alas, every time I hear this ridiculous "Saudi America" thing, and how many decades of imaginary oil reserves we have left in America, I just can't seem to hep' myself. Art Berman's work clearly shows there is nothing Middle Eastern about Western West Texas. The more trade wars, tariffs, embargos and sanctions America can impose on others, bingo!... the higher the price of oil goes. Its a miracle of globalization. I met a shale oil CEO the other day who was thinking they were out of the woods now and was thanking Trump profusely for higher oil prices. I reminded him that instead of thanking Trump he should be thanking Ben, and particularly Janet. The US shale oil phenomena would have never gotten off the tarmac without low to no interest capital. I hope you are well, sir. Thanks, Tom!
  21. 4 points
    I am sure that as soon as the Iranian leaders reach your level of understanding as to how good this withdrawall is for them, they will express their heartfelt gratitude to Mr. Trump for his generosity toward them.
  22. 4 points
    Both Hillary and Bhimsen might find it instructive, in fact, eye-opening, to test their ideas against the past fifty years of oil industry growth and pricing. Demand grows at 1-1.5% every year, except for the sporadic dampening effect of huge price spikes. Supply growth has always kept pace. The industry has not suffered a true supply tightness for almost fifty years. I suspect that you both are in for a big surprise from the upcoming drop in the speculatively-determined price.
  23. 4 points
    Let us all keep in mind the fact that there is currently no mechanism that controls the price of oil at any level. It is the random result of speculative trading and has no bearing on needs, wishes or potential problems. It’s just what it is.
  24. 4 points
    I think Pierre could be right if one or both of the following events happens. 1) USD collapses causing very high inflation compared to others currencies. 2) The Saudis/Israelis start a hot war with Iran. Other than that Pierre is full of natural gas.
  25. 4 points
    To get EV's to scale not to mention a large electric base to accommodate the power is a monumental undertaking. Oils high price will damage ecomomies long before electric transportation has it's place as a leading industry.
  26. 3 points
    The irony of this hypothetical scenario makes my heart happy. EVs are only as green as the power that charges them. I snarkily suggested in another thread some time ago that we should just make a coal-fired car, and stop all this middle-man-battery nonsense. Not that I want to wreck the earth. Only that I'd love to bring some common sense and practicality to some of the environmental crusaders who seem to reside somewhere other than on planet earth.
  27. 3 points
    OK, let's look at Mr. Tesla's famous Class 8 over-the-road heavy tractor truck. Tesla plans to run that with a monster battery, something weighing in at about 10,000 lbs. To recharge that in a reasonable time, considering that heavy trucks tend to be in-service for 20 hours a day, it would have to recharge with a current flow rate of 2,000 amps. Tesla's market pitch is that he will build or modify truck stops to handle a dozen to 19 tractors for simultaneous recharge - all at prices below the cost of the power. So you are looking at inflow currents of 20,000 to 30,000 amps. (Don't stand too close.) And how do you propose to do that? You are not going to be able to pull that from some local town grid, not from the installed service at that truck stop, so you have to figure something else out. And you have to do that on the cheap as you are all fresh out of CAPEX. My guess is that Elon will do that by going to those ship breakers in India and picking up monster ship's diesels. Then he will mate those with giant generators, and put the package a discreet 1/2 mile down the road from that truck stop that is re-charging his electric trucks. Then Musk can go buy heavy fuel oil from the Canadian Tar Sands producers, truck it to his truck-stop, and burn that in the 60,000-hp ship's diesel to get the juice to recharge those electric trucks. Hey, should work.
  28. 3 points
    OK, here we go. First off, I think Mr. William Edwards is correct in his analysis, yet the result proposes certain implicit assumptions. The major assumption would be that the IMO actually goes through with the 0.5% sulfur limit, and has the ability to make it stick against cheaters. And there are reasons to suppose that that is not certain. First off, note that the cost of converting an existing ship, say a containership running HFO (heavy fuel oil) in the 88,000-ton size range, is going to be about $2.75 million (that is for the scrubber). That is a lot more than if you build that scrubber into the ship in the shipyard. The big engine in there can run straight diesel, but the cost of diesel (before any crowding-out factors that will drive the price of Diesel up relative to HFO or IFO (Intermediate fuel oil) will more than double the fuel bill. The shipper can lower that a bit by "slow steaming," but then the daily charter fees start to eat up the potential savings; also, continued slow steaming means that engine runs cooler and carbon will start to cake up inside, increasing maintenance costs considerably. So you will see new-builds incorporating diesels able to run HFO and with the scrubber built in. Now this leaves the existing fleet. Remember that ships are typically owned and then time-chartered out, so the outfit doing the shipping has different interests than the owner. Once a ship gets older, the charter fees it can command start to slip; also, at a certain point the ship has to be pulled from service, put in a dry-dock, and given a "special survey," a bit akin to an aircraft reaching a certain number of hours and going in for a "C" check. Those special surveys can be quite pricey, and then the ship will require more frequent surveys to remain "in class," without which it cannot sail. This then puts pressure on the shipowner to consider scrapping. You will find that, against the day that the IMO really puts its foot down and insists on low-sulfur fuels, a lot of these ships will be scrapped. And that will drive the replacements to be built with scrubbers. So the market for heavy crude will not disappear. Now, what about the ships that are not scrapped, but the owners do not want to spend that $2.75 million each on an older ship that will soon enough go to the breakers? Will those ships end up running on diesel? Likely not, as diesel will start to get expensive fast. Instead, I predict those ships will go to a drop-in fuel fully compatible with the tanks now in those ships that hold bunker. And that magic fuel is methanol. Methanol is a liquid at operating temperatures and thus is a drop-in. Methanol will require some small rebuilding of the engine and the fuel injection system,but that is not really a big deal. And, big bonus, methanol, as an alcohol,will drop the insurance policy premium as, if the ships wrecks and breaks up, the alcohol will cause zero harm to the environment and require zero clean-up effort. So instead of an oil-spill cleanup bill for that old ship of $150 million, the insurer only pays out $5 million for wreck removal to the salvors. Although methanol can be manufactured from biomass distillation, the more logical source will be conversion of natural gas. That process is well understood and easily done. Methanol can be safely shipped by rail tankcar, or fuel barge, so none of the refuelling is going to be a problem. And it is not going to bust the piggy-bank to keep that old ship running a few more years until it finally gets scrapped. Will the large-scale use of methanol put upward pressure on natural gas pricing? I dunno. It might. But there is lots of gas out there and more coming on-line, so that effect would be more likely mild. In sum: the ship owner can avoid installing those pricey scrubbers by going to either diesel or methanol. the older ships will head for the breakers soon enough. The new stuff coming down the ways will have new scrubbers installed. Ultimately the transition will continue to provide an outlet for HFO and IFO. And if the IMO is less stentorian than it is portrayed, and the deadlines end up elastic, then the impact will not be that severe. Will Canada take the hit in the short term, as Mr.Edwards predicts? Probably. Will that market eventually come back? Probably. Cheers.
  29. 3 points
    EV sales are not just difficult to forecast, they are impossible to forecast, but one thing can be said for certainty - they depend largely on government intervention. About 40 per cent or so of new cars being sold in Norway (a big oil exporter) are electric, but that is due to very substantial subsidies by the government. In fact almost all cases of EV sales success can be attributed to government intervention of some kind. When government intervention/subsidies are withdrawn, sales collapse. This has been the case in China and Denmark - two cases that I can think of off-hand. Apart from a wealthy, green conscious fringe - the sort that orders Tesla 3s - there does not seem to be a natural market for them. No amount of activists pointing to savings in petrol has changed that to day.
  30. 3 points
    it gets a bit dusty at times. May need to keep an army of slaves foreign laborers to keep it clean...
  31. 3 points
    Example 1. Will $100 Oil Kill the U.S. Economy? https://oilprice.com/Energy/Energy-General/Will-100-Oil-Kill-The-US-Economy.html Headline starts with a freaky question that seems to go against any logic short of war. The second part creates fear that the U.S. economy will possibly fail due to high oil prices. After alarming the average reader he ends his story with a statement that $100 oil is still a long way off. I call this click bait and see little value in the story.
  32. 3 points
    The Saudi situation is unique. Clearly they can influence pricing, and have. But they have internally politicized their situation beyond market forces. It reminds me of the Hunt Brothers trying to buy up the silver market in the 80s. In the end they failed. But in the run up created competition that didn't exist before, and then realizing it couldn't be bought, sold off quite a bit, dragging things back down. A lot of people made money in the instability. Lot of folks got burned.
  33. 3 points
    As long as I'm at it, how about another one of my rants on this topic, posted on LinkedIn a couple months ago. You might notice that my response a month later in April (see my comment directly above) is a bit more nuanced than my earlier rant here from March: US Threatens Sanctions For European Firms Participating In Russian Gas Pipeline Project The U.S. should butt out of EU energy policy. The U.S. has no business threatening sanctions on EU companies that participate in the construction of a gas pipeline destined for distribution to the EU. I'm a very strong supporter of oil & gas & LNG, and I fully support developing infrastructure and pipelines that support the hydrocarbon industry. The U.S. is dead wrong in trying to impose its vested interests in selling its exported higher priced LNG to the EU by trying to block a new Russian gas pipeline. Russia's Nord Stream 2 project is good for long term energy infrastructure for natural gas distribrution to the EU. If EU countries want to diversify their energy supply by buying LNG at a higher price than piped natural gas from Russia, fine, no issue. Their choice. But the U.S. has no business trying to stop another natural gas pipeline to the EU from being built - that is just stupid, counter-productive and arrogant. Russia is *not* the enemy, regardless of how MSM screams hysterically about RUSSIA RUSSIA RUSSIA ! ! ! ELEVENTY !
  34. 3 points
    I've commented numerous times on this topic in the last few months on LinkedIn (before I joined Oil Price forum). Here's one of my rants on LinkedIn a month ago, verbatim: Why American LNG is no substitute for Russian gas in Europe This Russian article about energy supply to the EU totally misses the point, and it does so deliberately. Yes, LNG from the USA is more expensive than Natural Gas piped from Russia. No argument. What is needed for EU energy security is *diversity* of energy supply. If Putin throws another temper tantrum and restricts supply of natural gas to the EU next winter, a supply of LNG from the USA and other countries would resolve the energy security issue, rather than have the bulk of the EU freeze their butts off during the winter. The USA should stop trying to fight Nord Stream 2. And Russia should stop trying to stop USA LNG from entering EU markets. Monopolies suck. Supply diversity is good for energy consumers. In much the same way that I support both the PetroYuan and the PetroDollar (rather than just a PetroDollar monopoly) I support both piped Natural Gas from Russia and also LNG imports for the EU. Competition. Diversity, not monopoly. Choice, not force.
  35. 3 points
    Among all my Petroleum Engineering courses at the University of Oklahoma, I have never seen such high-quality data. How long did it take to create all these charts, Enno? Also, how'd learn how to do all this? If you do not mind me asking.
  36. 3 points
    Economy Minister Peter Altmeier just gave a very simple lesson in defending national interest to at least half of the European Union: “They are looking for markets, which we can understand, and they can land it here easily,” he said. “But it is much more expensive than pipeline gas, so blocking Nord Stream 2 on its own won’t guarantee exports. The U.S. are our friends and partners, and we want to defend our common values. But if it’s America first, and they put their economic interest before others, then they have to expect Europe to define their own interests and fight for them.” I think the sanction threat was over the top. It's perfectly normal for every single (responsible) government to look out for its own interests but threatening sanctions left and right when other countries' interests are not aligned with yours is kinda rude.
  37. 3 points
    Just a reminder that Brent averaged $110 for 2011 to 2013 inclusive, and averaged $99 in 2014. 2015 was $52, 2016, $44 and 2017, $49.
  38. 3 points
    I will elaborate, possibly overdoing it. Here is an excerpt from another publication's interview of me on this subject. When William mentioned to us last week that he has identified another shoe to drop in the oil markets, our ears perked up. Your garden variety bear cases these days are mostly predicated on rising US tight oil production or OPEC quota failure. When William said his warning was worth $10-$20/barrel and had nothing to do with either of these risk factors, we picked up the phone and called him. Here is what we learned. Bunker Fuel Specs At Sea Are Changing William’s new concern centers on a structural transformation in an end market for the heavier end of the barrel. He believes the change could weigh on the entire global crude pricing complex to the tune of $10-$20/barrel. It all starts with new International Maritime Organization (IMO) regulations. The UN gives the IMO jurisdiction over environmental issues in international waters, thus governing the global shipping industry. In October 2016, the IMO set January 1, 2020 as the implementation date for a significant reduction in the sulfur content of the fuel oil used by ships at sea (see announcement here). The IMO will cap sulfur content in global shipping fuel oil at 0.50% m/m (mass/mass). The current global limit is 3.5% m/m, and the average sulfur content of residual fuels on ships tested during 2015 was 2.45%. The current 3.5% rule was implemented in 2012 (the previous limit was 4.5%). Further restrictions have been discussed for several years now, but we finally have a firm go live date (the IMO has been debating going live in 2020 vs. 2025). The global shipping industry has used high sulfur bunker fuel for decades. It has provided the BTUs ships need to steam across the ocean at the lowest possible cost. Sulfur regulation has been closing in on the oil consumers in mature markets for half a century, but only recently (relatively speaking) have regulators focused on sulfur emissions on the open seas. The sulfur being released from ships at sea is considerable. The change from 3.5% m/m to 0.5% m/m will take out 25 times more sulfur from the air than the change in gasoline requirements on land produced per William Edwards’ estimates. The maritime industry has two options for compliance: 1. ships can burn high sulfur bunker fuel if they equip vessels with scrubbers (exhaust gas cleaning systems which clean emissions before release into the atmosphere), or 2. ships will have to switch fuel sources to low sulfur fuels like gas, methanol, or LNG instead. Scrubbers are costly and complicated, so most shippers will simply change the fuel they buy to lower sulfur grades. The primary replacement fuel of choice will most likely be diesel, and shippers have the next three years to figure out how to pay for the higher costs. To the ship owners’ benefit, current diesel fuel prices are actually lower today than the price of high sulfur bunker fuels was three years ago. So the ship owners can accommodate a switch to diesel without major cost ramifications by historical standards (another reason more will opt to switch rather than scrub). Scary Implications For Heavy Crude Producers This change creates the worst kind of problem for high sulfur bunker fuel producers and the heavy crude producers from whom they obtain their feedstock. These producers are already making a product with limited uses. Now a key end market is evaporating. So what happens when you deprive 2-3 mmbbls per day from its long-time end market? The analogy William Edwards uses to describe the impact is that of a broken garbage disposal. For years, the shipping industry was the garbage disposal for the oil industry. Ships burned the dirty, heavy stuff that no one else wanted. The IMO’s new regulations just broke the oil industry’s garbage disposal. So where does the garbage go starting in 2020? It starts to pool up. This will put heavy price pressure on high sulfur oil blends. Oil price is the mechanism that shuts in production, and until it falls severely, supply-side fundamentals will continue to deteriorate. Some may speculate that excess barrels could go to power plants, say for example in India. This would put a floor under bunker fuel at a parity price with coal, maybe something like $15/barrel on the water. If bunker fuel is selling for $15/barrel on the water, what is the price of crude at the source considering that some of the world’s crudes are 2/3rds bunker fuel by content when they come out of the ground? To answer that, location of production comes into play, and Canada will be ground zero for the garbage disposal problem. The Canadian bitumen industry is the ultimate balancing source for much of the bunker fuel supply consumed by the shipping industry today – the high sulfur stuff. Canadian exports are about 3-3.5 mm bpd, and about 2/3rds of that is bitumen. If Canadian bitumen has to be moved to a coal burning location to be sold at a price that backs out coal, then you probably add $10-$15/barrel in transportation costs plus another $10-15/barrel for the cost of diluent to meet viscosity requirements. If your end price is $15/barrel (parity with coal), then the price as it comes out of the ground in Canada is a negative number. Canadian Oil Sands producers would have to pay for their garbage removal instead of getting paid for production. With current production costs trending around $30-$40/barrel, the IMO regs have the potential to shut down most Canadian bitumen production other than what is going to a local upgrader or a local facility that’s already invested in the capacity to utilize the oil. The remaining barrels will flow out and down, maybe to the Midwest, but even in the Midwest, where there is pipeline to the Gulf Coast, they’ll face competition from international sources. What price do you have to get down to in order to cut down 1 mmbbls/d from current Canadian production? It’s hard to say precisely, but it is significantly lower than where the price is today. So IMO regs will drag Canadian bitumen prices down significantly, maybe more than $25/bbl, into negative netback territory. More Than A Canadian Problem, This Has Global Implications The drag into negative netback territory for Canadian bitumen gets William Edwards concerned about global oil prices. If you have Canadian oil competing in the market considerably lower (say half of its current price), then the rest of the world must lower their prices to stay competitive – at least to the extent that they have the heavy component in their blends. So what happens in Canada as high sulfur fuels are phased out will impact oil prices around the world. This is another shoe to drop in new oil price paradigm. The significance of the logic we’ve just described cannot be overstated. The thesis put forth by William Edwards means Canada won’t have oil to supply competitively on the global market after 2020. It means they will dump excess barrels on the global market, forcing everyone else’s price lower too. The rest of the world can get along just fine without Canadian oil, but Canada needs the rest of the world to purchase their oil if they want to maintain a healthy oil industry. To this point, we’ve seen several analyses of the pending IMO regs by various analysts, including guesses on how many vessels will add scrubbers vs. move to diesel and some assessments of demand. But critically, the oil market is not yet thinking about the global price impact here, perhaps because the go-live date is still three years away or perhaps because the perception is it just impacts the heavy end of the barrel. Shipper behavior will start to change well before the January 1, 2020 deadline, and as it does, we’ll see much earlier if William Edward’s global concerns are warranted.
  39. 3 points
    magical thinking =like COAL can BE CLEAN
  40. 3 points
    amazing, now that Iran is grabbing all the headlines, Venezuela kinda of vanished.. well in my view iran is 20 times more important than Venezuela today for oil markets and prices... and well Saudi Arabia will do whatever it wishes now in the OPEC in my opinion.
  41. 3 points
    Interested to hear the thoughts from the members of the forum on what the knock on effect would be to oil prices and energy stocks this coming week prior to the US administration making a decision on extendeding the current Iran nuclear agreement or withdrawing from it. personally I think the market has priced in a lot of the effect looking at the current oil price and energy stock prices in the last couple of weeks but interested to hear other viewpoints on possible outcomes and longer term effects on the market.
  42. 3 points
    Overly high oil prices would in the final analysis hurt thee world economy on the overall! A fair oil pricing regime should be between $60-70 per barrel .
  43. 3 points
    $300 oil would definitely crash the global economy. Energy is a key factor in labor productivity. As the price of oil climbs, labor loses its productivity, which leads to a collapse in labor markets and consumer demand. Oil in excess of $150 can suffice to inflict a global recession. Any talk of $300 being good for any industry is foolishness. As a mental exercise, suppose oil is at $300. This easily puts gasoline and diesel over $8/gal in places like the US. Try to imaging how a consumer economy dependent on private automobiles would function. How much would you drive to go shopping? How expensive would delivery from Amazon become? Would you be able to find work as an Uber driver? Would you even bother buying a new car? Even if you wanted to buy an EV, would you have enough confidence in your own employment situation to make the purchase? As all these things come to a halt, unemployment rates surge while investment and consumption freeze up. $300 oil may seem like a dream to oil bull, but is an economic nightmare for everyone else.
  44. 3 points
    This is the one element that most people forget: State-run companies have far different goals than independent companies in this industry. Consider China for instance, which cares less about making money than it does in gaining a foothold strategically somewhere through its natural resources companies. It's impossible to compare OPEC to the US oil industry in any way.
  45. 3 points
    thank you all for your comments, definitely my point raised here about Venezuela is first all being a venezuelan second of all having worked at venezuelan oil industry for more than 10 years so i have a little knowledge to say this, with sadness though, that right now venezuela does not count with the production to have a say in the organisation, especially having been one of the top 5 to found the organisation and being the main inspirer of the bloc, so this is the main motivation of this. I dont want to see Venezuela being a laughing stock of global oil markets after being one of the main sayers in the global markets. Definitely my point was based on technicalities and not political motivations, which by the way i have many also but this is not the space not the forum to discuss my political ideologies in my country which by no means is close to this disaster we, VENEZUELANS, are living right now. @lahcene mebarek
  46. 3 points
    Actually 300$ a bbl would be useful. Why - 1) Tax on Petroleum would increase and allow Governments to balance more useful spending 2) Quality would be the name of the game - oil would be used on the basis that its products are so precious that C02 emission control would mean new advances in catalytic converters and such like would be developed so that C02 is captured and potentially is a powersource of its own. 3) More money for Renewables to be done properly . Its rather stupid to see people trying Geothermal in places where its too dangerous and ridiculous issues such as shareholder trash whinging on how expensive it is to fund Wind... eg GE Capital & GE Power issues... 4) It would alllow companies like mine PetroStars to buy housing for the homeless for every well we drill
  47. 3 points
    I am amazed that Maduro is still in power. The historical role of the military in Venezuela in overturning failed governments has been delayed due to Maduro replacing the leaders. When the police and military can no longer be paid, there will be a change in government, in my opinion.
  48. 3 points
    The rapid deterioration of infrastructure combined with the tribal knowledge loss with the disappearing work force is driving the oil companies ability to come back to years. I am convinced one large leak on a supplying pipeline and the industry is dead. Is there knowledge and resources to respond or will they close the valves on both ends and just go home? If China or Russia come in where will they get their heavy oil extraction expertise and support? Off hand I am unfamiliar with the Russian equalevant of Halliburton? The industry will witness for the first time the collapse of a state oil company. Thinking there is someone out there who will rescue Venezuela is a fools errand. Unless one has worked in this business the accumulated destruction happening because of lack of maintenance cannot be overstated. Some of the equipment that will require replacing has a year or more lead time. And that is after the inspections and prep time needed for the inspections to happen. At this point in time if a magic wand was waved and everything went back to normal they would be looking at least 3 years to be even close to operating normally. But I see Maduro applying bus driver thinking to a problem way above his level of understanding.
  49. 3 points
    For quite a while I've suspected that China and Russia will "privatize" PDVSA as a National Oil Company "colony" under their respective state controls. Without the long term financial assistance (loans) so far from China and Russia, PDVSA would have like already completely collapsed. The O&G infrastructure inside Venezuela is badly corroded, and who knows exactly how far gone from neglect and corrosion some of the downstream equipment is today. The debts that PDVSA owe China and Russia will eventually come calling. PSVSA these days is kinda like an indentured servant, in debt servitude to China and Russia. So, when China and Russia get fed up enough, I suspect they will make economic claims against PDVSA, and make Venezuela their "economic colony". Jose, it's great to bump into here on Oilprice. I just registered on this Oilprice forum. And it's nice to see your new weekly summary of geopolitics + Oil & Gas over on LinkedIn.
  50. 3 points
    How much fossil fuel is burned during all the mining and building of the mining vehicles? I support natural gas as the best choice for the optimum fuel. Price is very low and it is superabundant. See: https://docs.google.com/document/d/19Yf0MWpo91vrlu-mmJtjB1ERukjJo5W41oi4RZVQBug/edit