Oil prices going down

[Mahmoud Etry + 2]

I think it is the price oil producers are feeling comfortable with regardless how the consumers look at it as the consumers need it all the time. Consumers can have tiny effect on oil prices it is driven always by politics (unfortunately) to the producers interests regardless anything else. 

[Dennis Coyne + 82]

15 hours ago, William Edwards said:

For perspective, may I suggest that you view the chart from 2013-2018?

Hi William,

Prices move based on the data available at the time.  In 2014, nobody knew what future oil stocks would be.  So a chart of stock levels from 2013 to 2018 was not available in 2014.  The 2013 to 2018 chart would be relevant for what oil prices might be in 2018 and 2019, but let's not revise history by suggesting that the oil market in Sept or Nov 2014 could predict future oil stock levels in 2016, 2017 or 2018.

Could you produce an oil stock chart for us for 2018 to 2023?  That way we can predict oil prices in 2018.  The data we have is 2013-2018, and that is relevant today.

Using EIA data from

https://www.eia.gov/beta/international/data/browser/#/?pa=00000000000000000000000000000000000004&f=M&c=0000000000000000000000000000000000g&ct=2&tl_id=5-M&vs=INTL.5-5-OECD-MBBL.M&vo=0&v=T&start=200712&end=201802

It is clear that in the middle of 2014 the OECD petroleum stocks (millions of barrels) were near the trailing 5 year average and had been rising sharply since the beginning of 2014, also shown on the chart are the trailing 5 year maximum and minimum level for OECD petroleum stocks.

[Dennis Coyne + 82]

For another perspective on Oil Prices, the chart below is from the EIA's AEO 2018 for real Brent Oil Prices in 2017$.  Three scenarios, the reference scenario (which is the EIA's best guess from Feb 2018) and a low and high case.  In my view a scenario between the reference and high case looks more likely than something below the reference case and closer to the low oil price case.  The full cycle cost for the Permian Basin tight oil (which may become the "swing producer" by 2020 or so) is around $75 to $85/b, so until OPEC expands it's spare capacity or there is more investment in deep water offshore (which would come on line in 2023-2025), I doubt oil will drop below $70/b without a major World recession and $75 to $85/b from now until 2020 seems a best guess from my perspective.

https://www.eia.gov/outlooks/aeo/data/browser/#/?id=1-AEO2018&region=0-0&cases=ref2018~highprice~lowprice&start=2016&end=2050&f=A&linechart=~~~ref2018-d121317a.41-1-AEO2018~highprice-d122017a.41-1-AEO2018~lowprice-d121317a.41-1-AEO2018&sourcekey=0

[Cowpoke + 70]

On ‎6‎/‎11‎/‎2018 at 11:12 AM, Jan van Eck said:

PPS:  If you find that the late split sections are still wet, then to speed-dry, place two cement bricks on the top of your stove, and lay the split pieces next to go in on top of those.  The rising heat will rapidly dry out the wood pieces, and pre-heat them for insertion into the stove. They might take over an hour each, but once you get them seriously dry, and hot, they will burn nicely!  And you are not losing heat to driving out moisture and making your stove run colder.  (Don't get them too close and keep an eye on it, or you will char the wood and create smoke!)

Also, the moisture helps to humidify the room.

[Ian Austin + 131]

14 hours ago, Dennis Coyne said:

For another perspective on Oil Prices, the chart below is from the EIA's AEO 2018 for real Brent Oil Prices in 2017$.  Three scenarios, the reference scenario (which is the EIA's best guess from Feb 2018) and a low and high case.  In my view a scenario between the reference and high case looks more likely than something below the reference case and closer to the low oil price case.  The full cycle cost for the Permian Basin tight oil (which may become the "swing producer" by 2020 or so) is around $75 to $85/b, so until OPEC expands it's spare capacity or there is more investment in deep water offshore (which would come on line in 2023-2025), I doubt oil will drop below $70/b without a major World recession and $75 to $85/b from now until 2020 seems a best guess from my perspective.

https://www.eia.gov/outlooks/aeo/data/browser/#/?id=1-AEO2018&region=0-0&cases=ref2018~highprice~lowprice&start=2016&end=2050&f=A&linechart=~~~ref2018-d121317a.41-1-AEO2018~highprice-d122017a.41-1-AEO2018~lowprice-d121317a.41-1-AEO2018&sourcekey=0

The EIA is stating that oil could be between $40 and $120/Bbl by 2020. How could anybody disagree with that notion!

I'll do them one better: I guarantee that oil will be priced between $0 and $1000/Bbl until we no longer use it. I'll be a "right" as the EIA. 

Although I believe you're closer to being right than most on the PB Full cycle costs, I find it peculiar that you'd think the trading price will automatically bend to the will of a few, over leveraged producers. Given that the trend will pretty. much all of the Shale plays is a "fast start, followed by withering shrinkage" (shaleprofile.com), what would be the mechanism here?

[ronwagn + 6,290]

There are strong advocates of many threats to the status quo. 

Natural gas for vehicles. Such as myself.Wind, solar, hydrogen, nuclear, electric vehicles etc.  These people are highly committed to enact change. The inertia of the status quo is powerful but I think change is coming.

My greatest hope, right now, is that China will lead the way with an abundance of natural gas vehicles. China has all the technology it needs or can steal or buy it. It can mandate natural gas to help clean the air or just because it is cheaper and is very likely to do so if it develops its own natural gas resources. 

[John M. Hofstede + 1]

Lady's / Gentlemen,

it's my pleasure to be a Member this forum. Alway's good to reed the comments / tought's from other people. My name : John M. Hofstede, Based in Thailand, from The Netherlands. I work since several years as Official Executive Facilitator for a NNPC Licensed BLCO OFF OPEC seller. Also for a Allocation-Title holder from Rosneft and 5 other Russian refineries.

 

[JunoTen + 118]

11 hours ago, ronwagn said:

There are strong advocates of many threats to the status quo. 

Natural gas for vehicles. Such as myself.Wind, solar, hydrogen, nuclear, electric vehicles etc.  These people are highly committed to enact change. The inertia of the status quo is powerful but I think change is coming.

My greatest hope, right now, is that China will lead the way with an abundance of natural gas vehicles. China has all the technology it needs or can steal or buy it. It can mandate natural gas to help clean the air or just because it is cheaper and is very likely to do so if it develops its own natural gas resources. 

It seems unlikely as China seems to be going for electric vehicles full speed.

[Dennis Coyne + 82]

11 hours ago, Ian Austin said:

The EIA is stating that oil could be between $40 and $120/Bbl by 2020. How could anybody disagree with that notion!

I'll do them one better: I guarantee that oil will be priced between $0 and $1000/Bbl until we no longer use it. I'll be a "right" as the EIA. 

Although I believe you're closer to being right than most on the PB Full cycle costs, I find it peculiar that you'd think the trading price will automatically bend to the will of a few, over leveraged producers. Given that the trend will pretty. much all of the Shale plays is a "fast start, followed by withering shrinkage" (shaleprofile.com), what would be the mechanism here?

Ian,

Nobody knows future oil prices, but $40 to $120/b is a little narrower than 0 to 1000/b   .

Note that my guess is based on what Mike Shellman suggests and he has revised his estimate to $10 million for the Delaware basin (a part of the Permian) and about 9.5 million for Midland section of Permian Basin).  In many ways the Permian Basin has become the marginal producer and IHS Markit is expecting output to double to 5.3 Mb/d by 2023 (I believe this is an optimistic estimate, my guess is 4+/-1 Mb/d depending upon oil prices.  The AEO reference case (about $84/b in 2023) will result in the lower estimate of 3-4 Mb/d.  It is possible we will see Saudi Arabia and Russia expand production and drive down the oil price to under $65/b, if they do Permian output is likely to be far lower than most analysts are predicting, probably 3.5 Mb/d at most, Bakken, Eagle Ford, Niobrara, and Anadarko are all less profitable on average than the Permian basin so overall US tight oil output would expand to only 6.4 Mb/d in 2021 for the AEO reference oil price case (Brent price in 2017$) vs 8.2 Mb/d in 2022 for a higher oil price case ($115/b in 2023 and rising to $147/b by 2027 and then remaining at that level until 2050).  Output declines fairly quickly from the peak to under 2 Mb/d by 2027.  Lack of supply may lead to high oil prices unless substitution for oil occurs more quickly than I foresee.

[Dennis Coyne + 82]

11 minutes ago, JunoTen said:

It seems unlikely as China seems to be going for electric vehicles full speed.

Juroten,

I agree.  In addition natural gas is not unlimited, as coal is replaced with natural gas, natural gas output may also quickly reach peak output (probably between 2030 and 2040 with my best guess at 2035), natural gas will also become expensive and wind, solar and nuclear power will become cheaper sources of electricity than coal and natural gas.

Natrural gas can be used as a bridge fuel for electric power, but as a transport fuel, EVs are a better bet in my opinion.

[BillKidd + 139]

11 hours ago, ronwagn said:

There are strong advocates of many threats to the status quo. 

Natural gas for vehicles. Such as myself.Wind, solar, hydrogen, nuclear, electric vehicles etc.  These people are highly committed to enact change. The inertia of the status quo is powerful but I think change is coming.

My greatest hope, right now, is that China will lead the way with an abundance of natural gas vehicles. China has all the technology it needs or can steal or buy it. It can mandate natural gas to help clean the air or just because it is cheaper and is very likely to do so if it develops its own natural gas resources. 

What is hard to understand is what is going to gain more traction, crude oil or natural gas? Almost every E&P has shifted their focus to oil but then you will see articles or even companies that say, no, nat gas has more potential. I guess meaning the upside is higher. Aubrey McClendon of Chesapeake (and others) tried to establish momentum for natural gas vehicles in the USA and that began about ten years ago and other than fleet use, it seems to have gone not very far, indeed.

[ronwagn + 6,290]

I followed natural gas and promoted it online since the last "energy crisis". It still seems like the logical choice for trucking, ships, locomotives etc. I think it does and will continue to moderate any reach for lasting high oil prices. I look to China and the rest of Asia for the fastest leadership in natural gas vehicle use because of their severe (real) air pollution problems. Europeans and Americans will eventually catch up. Solar and wind are also moderating oil prices but rely on subsidies as do electric cars. I think most electric cars will be relying on electricity produced from natural gas.

See https://search.yahoo.com/search?p=natural+gas+vehicles&fr=yset_chr_cnewtab&type=default

and https://docs.google.com/document/d/1DjSFf0dyd74Wx-OdtmNaHfGiRCmDgrZmRwyIR9NNv8c/edit

Edited June 15, 2018 by ronwagn
punctuation

[ronwagn + 6,290]

3 hours ago, JunoTen said:

It seems unlikely as China seems to be going for electric vehicles full speed.

That is fine but do you think they want to continue to pollute their filthy air with coal to create the electricity for those vehicles. They will be looking at all their options but have the power to dictate what is best in their opinion. 

[HermitMunster + 146]

15 hours ago, ronwagn said:

There are strong advocates of many threats to the status quo. 

Natural gas for vehicles. Such as myself.Wind, solar, hydrogen, nuclear, electric vehicles etc.  These people are highly committed to enact change. The inertia of the status quo is powerful but I think change is coming.

My greatest hope, right now, is that China will lead the way with an abundance of natural gas vehicles. China has all the technology it needs or can steal or buy it. It can mandate natural gas to help clean the air or just because it is cheaper and is very likely to do so if it develops its own natural gas resources. 

Doesn't China have a lack of storage for natural gas?

[ronwagn + 6,290]

It is working very hard to maximize all facets of its natural gas network. It has been moving as fast as possible.

See https://www.forbes.com/sites/judeclemente/2018/03/15/chinas-dash-to-natural-gas-bolsters-u-s-lng/#217158fb742b

and https://www.youtube.com/watch?v=O1amB0VxxTQ  This has scrolling words and is brief. 

and https://www.oilmonster.com/article/china-to-create-78-billion-natural-gas-super-pipeline/413

Edited June 15, 2018 by ronwagn
added reference

[Ian Austin + 131]

11 hours ago, Dennis Coyne said:

Ian,

Nobody knows future oil prices, but $40 to $120/b is a little narrower than 0 to 1000/b   .

Note that my guess is based on what Mike Shellman suggests and he has revised his estimate to $10 million for the Delaware basin (a part of the Permian) and about 9.5 million for Midland section of Permian Basin).  In many ways the Permian Basin has become the marginal producer and IHS Markit is expecting output to double to 5.3 Mb/d by 2023 (I believe this is an optimistic estimate, my guess is 4+/-1 Mb/d depending upon oil prices.  The AEO reference case (about $84/b in 2023) will result in the lower estimate of 3-4 Mb/d.  It is possible we will see Saudi Arabia and Russia expand production and drive down the oil price to under $65/b, if they do Permian output is likely to be far lower than most analysts are predicting, probably 3.5 Mb/d at most, Bakken, Eagle Ford, Niobrara, and Anadarko are all less profitable on average than the Permian basin so overall US tight oil output would expand to only 6.4 Mb/d in 2021 for the AEO reference oil price case (Brent price in 2017$) vs 8.2 Mb/d in 2022 for a higher oil price case ($115/b in 2023 and rising to $147/b by 2027 and then remaining at that level until 2050).  Output declines fairly quickly from the peak to under 2 Mb/d by 2027.  Lack of supply may lead to high oil prices unless substitution for oil occurs more quickly than I foresee.

Ok. Good explanation. The only other thing would be transport issues (already having them in the Permian)

[sudhir + 9]

On 6/5/2018 at 11:48 PM, William Edwards said:

Unfortunately, too many of the self-proclaimed "oil specialists" adopt the same basis for assessments that you honestly admitted. "I just assumed". I recommend that ALL analysis begins with a study of the data rather than beginning with an assumed answer. I think that one of my early postings on Oilprice covered the fact that demand DOES NOT set the price -- with supporting data.

If demand doesnot set the price then what sets it ? OPEC cartel ? US "wars on terrorism" ? China India requirements ? Please can you provide the link to your previous article. Thanks in advance, William.

[William Edwards + 708]

4 hours ago, sudhir said:

If demand doesnot set the price then what sets it ? OPEC cartel ? US "wars on terrorism" ? China India requirements ? Please can you provide the link to your previous article. Thanks in advance, William.

For your convenience, Sudhir, I will repeat the answer to your question as that answer appeared in the post "Price Determines Demand (and Supply)".

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.

[Jan van Eck + 7,558]

6 minutes ago, William Edwards said:

For your convenience, Sudhir, I will repeat the answer to your question as that answer appeared in the post "Price Determines Demand (and Supply)".

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.

With the caveat, William, that the Saudi oil can be Landed.  

If a consumer (presumably for political reasons) decides to tariff or embargo Saudi oil, or any offshore oil, then the whole thing goes into chaos, as yet another reality is that Saudi Arabia has a minimum cash requirement to support the vast expenditures it has allowed to develop internally, and for which there are no obvious solutions to modify or take away.  It is one of the big problems of a Petro-State:  you get addicted to the cash from oil, and how do you get "off-oil"?  

Let us assume the (far-fetched, to be sure) situation where the USA decides to place an absolute prohibition on the import of Middle East oil. The USA says, "OK, from here on it we will live with only US, Canadian, Mexican, and Venezuelan oil,and that's it."  Now the other producers have to sell their product to the remaining consuming States. How are they going to do that, when you have more barrels out there than customers? Somebody has to drop out.  Can the Saudis remain the marginal producers under that scenario?  Sure, they have the lowest cost of production (at least, equal to Kuwait). Can they push the other guys out?  Sure, but then there will not be enough total revenue to run the country.  Those demands have now expanded to the point where the Saudis both have to pump, and have to sell, and have to have top dollar. 

Can the Saudis cut their internal costs?  Tough to do; so they expel a hundred thousand Ethiopians.  But that will not cut enough.  Saudi Arabia is in more of a vise than you might expect. 

Is The Donald capable of putting a tariff or absolute bar on Middle East oil?  Sure he is. And that move would be a function of Israeli politics. You have not seen the end of this movie just yet. 

[William Edwards + 708]

2 hours ago, Jan van Eck said:

With the caveat, William, that the Saudi oil can be Landed.  

If a consumer (presumably for political reasons) decides to tariff or embargo Saudi oil, or any offshore oil, then the whole thing goes into chaos, as yet another reality is that Saudi Arabia has a minimum cash requirement to support the vast expenditures it has allowed to develop internally, and for which there are no obvious solutions to modify or take away.  It is one of the big problems of a Petro-State:  you get addicted to the cash from oil, and how do you get "off-oil"?  

Let us assume the (far-fetched, to be sure) situation where the USA decides to place an absolute prohibition on the import of Middle East oil. The USA says, "OK, from here on it we will live with only US, Canadian, Mexican, and Venezuelan oil,and that's it."  Now the other producers have to sell their product to the remaining consuming States. How are they going to do that, when you have more barrels out there than customers? Somebody has to drop out.  Can the Saudis remain the marginal producers under that scenario?  Sure, they have the lowest cost of production (at least, equal to Kuwait). Can they push the other guys out?  Sure, but then there will not be enough total revenue to run the country.  Those demands have now expanded to the point where the Saudis both have to pump, and have to sell, and have to have top dollar. 

Can the Saudis cut their internal costs?  Tough to do; so they expel a hundred thousand Ethiopians.  But that will not cut enough.  Saudi Arabia is in more of a vise than you might expect. 

Is The Donald capable of putting a tariff or absolute bar on Middle East oil?  Sure he is. And that move would be a function of Israeli politics. You have not seen the end of this movie just yet. 

First, Jan, let me repeat the caveat that accompanies all of my full-treatment discussions of the swing producer -- "with the current configuration of world supply capabilities". Saudi Arabia is the swing producer only as long as conditions allow that role to be bestowed upon that supplier. Becoming swing producer is not a choice that the swing producer makes, even though choices by the swing producer and others can alter the recipient of that designation. The role of swing producer occurs as a result of the configuration and operation of the system. A major change in the key elements can alter who inherits that role.

You have proposed a significant alteration to the current global supply situation, but actually similar to previous historical situations. The situation that you suggest would, effectively, fence off one part of the global supply and demand area. In my view, that would not necessarily change the designation of swing producer, but it would change the pricing pattern and the resulting prices. Two similar "fencing off" situations occurred historically, but were later changed. The first was the time before 1970 when the US was blocked off from free imports of oil. At that point there was a US-oriented system and a rest-of-the-world system. The import allocations set the flow into the US, and the tariff, or "ticket" price set the price differential. Effectively we had two swing producers, the US and the one for the outside of the US, but tied together through the US mandated price and quantity restrictions. As I read your description, this was similar to the system that you hypothesize.

The other "build a fence around the US" was in place while crude exports were not allowed. Again, that did not change the designation of the swing producer, but it changed the arithmetic fr both prices and supply/demand variables. During this forty-year period the Saudis remained the swing producer.

But, as history reveals, "fencing or]ff" the US did not change the designation of the global swing producer. It altered conditions within the "fenced off" zone.

Now turning to the subject of the Saudi income "hopes" versus the reality of their actual earnings, my response is "they will adjust to reality". And the entire system will adjust as well. Theses adjustments will not be either smooth or painless or rapid, but they will occur. (Similarly the world economy will eventually painfully adjust to the "credit" bubble)  Our assignment is to try to come up with a reasonable guess as to the fallout of all of that turmoil. Good luck!

The Saudis survived for centuries with their desert sand having little commercial value. The unknown reserves of oil had the same zero value until it was discovered and produced. The Saudi situation changed dramatically for many decades as the oil reserves became commercially desirable and the Saudis benefitted therefrom. But if situations change, and the reserves of oil resume the same value as the desert sand, Saudi Arabia will accommodate. There is no law that says they are guaranteed a life of luxury. Therefore there is no guarantee that the price of oil will become consistent with their wishes.

It is true that as long as conditions still allow the Saudis to be the swing producer they can set the price of oil at any level they desire. But for that to happen they would first have to learn how to accomplish this action and, then, implement it. Neither action is likely. But if it occurred, the demand for their crude would adjust accordingly. Higher price, lower demand, and vice versa. This then gets back to the question of how long their reserves are commercially desirable versus the price that they choose. This decision in itself requires the application of a superb intellect.

The Saudi vice is the same one that we all live in, which is, you cannot forever get something for nothing. Like it or not, economic fundamentals rule.

Edited June 17, 2018 by William Edwards

[Jan van Eck + 7,558]

14 minutes ago, William Edwards said:

 

The Saudis survived for centuries with their desert sand having little commercial value. the unknown reserves of oil had the same value until it was discovered and produced. The Saudi situation changed dramatically for many decades as the oil reserves became commercially desirable and the Saudis benefitted therefrom. But if situations change, and the reserves of oil resume the same value as the desert sand, Saudi Arabia will accommodate. There is no law that says they are guaranteed a life of luxury. Therefore there is no guarantee that the price of oil will become consistent with their wishes.

It is true that as long as conditions still allow the Saudis to be the swing producer they can set the price of oil at any level they desire. But for that to happen they would first have to learn how to accomplish this action and, then, implement it. Neither action is likely. But if it occurred, the demand for their crude would adjust accordingly. Higher price, lower demand, and vice versa. This then gets back to the question of how long their reserves are commercially desirable versus the price that they choose. This decision in itself requires the application of a superb intellect.

The Saudi vice is the same one that we all live in, which is, you cannot forever get something for nothing. Like to or not, economic fundamentals rule.

Yup, all true.  

My personal speculation is that the Saudis may no longer be the swing producer; that title falls to the Kuwaitis. 

I further speculate that the Saudis cannot survive, at least not as a "kingdom" of the House of Saud, if they cannot maintain large cash receipts for large amounts of pumped oil.  You already saw one nasty gun battle, with several Princes ending up dead and MbS shot up, as a direct result of an attempt to change distribution of wealth policies. And this is the big fear of the Saudis: that there will be some export barrier, or that product substitution (including methanol) (including biomass for heating fuel) that dramatically alters the demand side of the oil equation. Once that happens, oil pricing can and likely will drop like a stone. And if Kuwait and/or Iraq becomes the swing producer, then the fate of Saudi Arabia is sealed. They get pushed out.  Implausible?  Sure.  Impossible? Nope.

As you say, "Good Luck!" 

Cheers,

Jan

Edited June 17, 2018 by Jan van Eck

[William Edwards + 708]

14 minutes ago, Jan van Eck said:

Yup, all true.  

My personal speculation is that the Saudis may no longer be the swing producer; that title falls to the Kuwaitis. 

I further speculate that the Saudis cannot survive, at least not as a "kingdom" of the House of Saud, if they cannot maintain large cash receipts for large amounts of pumped oil.  You already saw one nasty gun battle, with several Princes ending up dead and MbS shot up, as a direct result of an attempt to change distribution of wealth policies. And this is the big fear of the Saudis: that there will be some export barrier, or that product substitution (including methanol) (including biomass for heating fuel) that dramatically alters the demand side of the oil equation. Once that happens, oil pricing can and likely will drop like a stone. And if Kuwait and/or Iraq becomes the swing producer, then the fate of Saudi Arabia is sealed. They get pushed out.  Implausible?  Sure.  Impossible? Nope.

As you say, "Good Luck!" 

Cheers,

Jan

Thanks, Jan. Very interesting, although the quality of Kuwaiti reserves raises significant questions in my mind as to the possibility that they could land as swing producer.

I might toss in another angle for you to include in your speculation. Suppose that two significant holders of reserves with large production capabilities joined forces and together they coordinated activities and thereby became the swing producer. Since the swing producer has price-setting power, how might that look, particularly if one of the participants were someone like Russia? That could shake up the world order.

Knowledge and understanding are dangerous assets.

Thanks for your input, Jan.

[Jan van Eck + 7,558]

1 hour ago, William Edwards said:

Suppose that two significant holders of reserves with large production capabilities joined forces and together they coordinated activities and thereby became the swing producer. Since the swing producer has price-setting power, how might that look, particularly if one of the participants were someone like Russia? That could shake up the world order.

 

All true.  You have to wonder who would have confidence in the Russians,though, given their track record in Crimea, Donbas, Georgia, and various assassinations in England.  Might be a bit risky. 

But if Brasil ever did some serious drilling and tapping of that gigantic offshore field of theirs, and then joined up with another producer in a real rough-tough cartel, it would be a whole new world. Cheers.

[William Edwards + 708]

1 minute ago, Jan van Eck said:

All true.  You have to wonder who would have confidence in the Russians,though, given their track record in Crimea, Donbas, Georgia, and various assassinations in England.  Might be a bit risky. 

But if Brasil ever did some serious drilling and tapping of that gigantic offshore field of theirs, and then joined up with another producer in a real rough-tough cartel, it would be a whole new world. Cheers.

Fun to consider. However, as long as the leaders of the world's major producers think that price control works through production manipulation we are safe from anything other than today's randomness. If no understanding exists of operating mechanisms, then operations are pretty erratic.

[Jan van Eck + 7,558]

14 minutes ago, William Edwards said:

 If no understanding exists of operating mechanisms, then operations are pretty erratic.

Product substitution, including methanol, ethanol, wood and grass biomass, remain the major threats to the traditional oil producers. 

I am of the thinking that at some point The Donald simply says to the Middle East:  "We have had quite enough of this, from here on in you guys are shut out of our market." Meanwhile I predict that Russia will install a gas pipeline to China overland, and the Chinese will use gas as a feedstock to produce methanol as a drop-in fuel.