Wouldn't fall in demand balance it out?

[Fran Stosic + 1]

Hello everyone,

I am pretty noobish when it comes to oil industry. I have a pretty basic question, so world oil demand is 100mln barrels a day right?

Production is 80mln/day, how does that work and where do the 20 mln come from? 

I am sorry if it s a completely dumb question but I just can't seem to figure it out.

 

Any help is much appreciated! 

[Fran Stosic + 1]

Is the question so illogical that nobody wants to spend time on it or nobody knows?  

[Gerry Maddoux + 3,627]

On 4/7/2020 at 2:14 AM, Fran Stosic said:

Hello everyone,

I am pretty noobish when it comes to oil industry. I have a pretty basic question, so world oil demand is 100mln barrels a day right?

Production is 80mln/day, how does that work and where do the 20 mln come from? 

I am sorry if it s a completely dumb question but I just can't seem to figure it out.

 

Any help is much appreciated! 

Fran, you've got it backwards and upside down: production is probably just a bit north of 100 mm bod and global demand has fallen to somewhere south of 80 mm bod--possibly as low as 70 right now. 

Additionally there is a massive amount of oil in storage--both land-based and floating around in VLCC's and just about anything else that will hold oil. There is so much oil that if we all somehow magically got together and dropped production to 70 mm bod, we'd rebalance in about a year. Going as we are, it'll probably take two years, maybe three. 

The Achilles heel of the oil business has always been the trade stuck on the commodities exchange. Oil should possess the same intrinsic value, no matter how much is sequestered away . . . but it doesn't. So far, don't ask me why, we have allowed a bunch of jackasses with no background in oil whatsoever to set the pricing of a barrel of oil. It's enough to drive a person to drink. 

[Fran Stosic + 1]

Just now, Gerry Maddoux said:

Fran, you've got it backwards and upside down: production is probably just a bit north of 100 mm bod and global demand has fallen to somewhere south of 80 mm bod--possibly as low as 70 right now. 

Additionally there is a massive amount of oil in storage--both land-based and floating around in VLCC's and just about anything else that will hold oil. There is so much oil that if we all somehow magically got together and dropped production to 70 mm bod, we'd rebalance in about a year. Going as we are, it'll probably take two years, maybe three. 

The Achilles heel of the oil business has always been the trade stuck on the commodities exchange. Oil should possess the same intrinsic value, no matter how much is sequestered away . . . but it doesn't. So far, don't ask me why, we have allowed a bunch of jackasses with no background in oil whatsoever to set the pricing of a barrel of oil. It's enough to drive a person to drink. 

Forget about this situation. In a normal one the world oil production is 80mln barrels at least that is the info that I am seeing all around. The world demand is 100m so how is that demand being met is what I don't understand, nothing more.

[Ward Smith + 6,615]

Just now, Fran Stosic said:

Forget about this situation. In a normal one the world oil production is 80mln barrels at least that is the info that I am seeing all around. The world demand is 100m so how is that demand being met is what I don't understand, nothing more.

You're wrong. Look at EIA and IEA numbers. Gerry is right. 

[Fran Stosic + 1]

Just now, Ward Smith said:

You're wrong. Look at EIA and IEA numbers. Gerry is right. 

Yeah just looked on their website and you are right, demand and production, both a hundred. I have made an amateur move of believing Wikipedia. Thanks helped me a bunch!

[Ward Smith + 6,615]

19 minutes ago, Fran Stosic said:

Yeah just looked on their website and you are right, demand and production, both a hundred. I have made an amateur move of believing Wikipedia. Thanks helped me a bunch!

Any moron with a keyboard can pollute Wikipedia. Never a definitive source. 

IEA report for January. The EIA site was down for some reason. 

[JoMack + 547]

On 4/7/2020 at 4:14 AM, Fran Stosic said:

Hello everyone,

I am pretty noobish when it comes to oil industry. I have a pretty basic question, so world oil demand is 100mln barrels a day right?

Production is 80mln/day, how does that work and where do the 20 mln come from? 

I am sorry if it s a completely dumb question but I just can't seem to figure it out.

 

Any help is much appreciated! 

Oversupply occurs when demand is down and creates storage issues for U.S. producers since we produce about 13 million bbls of oil a day and import about 5 million bbls a day, but the 18 million bbls we consume is now down to around 15 million.  The industry needs to store the excess production or curtail production since the demand is down.  On top of that, the OPEC and non-OPEC producers which have excess crude are putting it out in the global market where, due to the virus, demand in the world has collapsed, so their oil is sitting in tankers, etc. and we're all getting prices that are uneconomic. This happened in 6 weeks.  So, you'll see a price for WTI (West Texas Intermediate) which shows on the NYSE as $23.00 a bbl.  A month or so ago it was $55.00+ a bbl.  Plus the crude sold is at a discount at Cushing (our main hub for storage) due to certain factors.  Oil and Gas Producers have many people who work in their office, along with field operations so when the price collapses so drastically, it's like your boss coming into your office and saying "so, we can only pay you $200.00 this week instead of $2,000  and then the next month they have to let you go.  

This unfortunately happens to the oil and gas industry about every 3 to 4 years, when OPEC and non-OPEC producing countries decide to go in the boxing ring and throw the world market into chaos, as they are currently doing by oversupply (crude they don't use in their country).  

Unfortunately, as they did in 2015-2017, when OPEC jerked the US. oil and gas industry into low prices with over supply, the companies were able to upgrade their technology, come up with different engineering and succeeded in waiting OPEC out.

This time, OPEC has the industry in the U.S. in its fist and is dragging it down to its knees since the coronavirus has collapsed demand in the U.S. and prices unfortunately are not going to adjust to OPEC and non-OPEC overtures of production cuts. 

[Douglas Buckland + 6,308]

“...the companies were able to upgrade their technology, come up with different engineering and succeeded in waiting OPEC out.”

I am NOT intending to start a pissing contest here...but could someone the “different engineering” and the ‘upgraded technology’ mentioned?

I have seen this repeatedly yet can get no specific definition as it relates to the shale patch....just curious.

[James Regan + 1,776]

 

27 minutes ago, Douglas Buckland said:

I have seen this repeatedly yet can get no specific definition as it relates to the shale patch....just curious.

Douglas I have also searched for some time now, I think there is a lot of smoke and mirrors, the new technology IMO is more rigs hammering the land like Swiss cheese, it seems to be a buzz word this "New Technology" to appease the stake holders who are about to lose a bunch of cash, bullshit baffles we all know the saying, but in the end the numbers tell the story. I am no LTO fan but we all know the knock on affects from these cliff diving events, we have all been there, normally the sector comes back leaner and meaner. CV19 will pass and we will all be better for it as humans and fiscally more savvy, of this I have no doubts.

• Impressive gains in efficiency have significantly reduced the time it takes to drill, frac and complete each well. Some producers I've talked to report that wells that used to take 25-30 days to drill and complete now take only 10-12 days to get done. Thus, each active rig is able to drill more wells than was formerly possible;
• Rapid advancements in drilling, fracking and completion technologies are resulting in impressive per-well productivity gains. These advancements include things such as more powerful rigs able to drill longer horizontal laterals; more sophisticated drill stem and surface technologies that allow drillers to more accurately target the formation's sweet spots during the drilling process; advancements in fracking fluids that result in more formation rock being fractured, thus freeing up more gas and liquids to flow into the pipes, and many others.

https://www.forbes.com/sites/davidblackmon/2018/09/18/technology-and-efficiency-gains-create-a-new-normal-for-u-s-shale/#6d9baed76591

[Douglas Buckland + 6,308]

Same old deflection!

What were the actual ‘impressive gains in efficiency’ which significantly reduced the times? How were these efficiencies gained?

What exactly were the ‘rapid advancements in drilling, fracking and completion technologies?

The actual mechanisms in both cases are NEVER identified.