Oil Prices Heading Higher, Maybe $80-ish Before Autumn?

[Tom Kirkman + 8,860]

3 hours ago, Refman said:

My opinion is No, and that they're probably aiming for something like $70 on Brent and $65 on WTI. In other words lower but not too much lower.

Agreed with your opinion, I have the same general impression of the overall intentions.

[William Edwards + 708]

On 7/1/2018 at 5:54 AM, Bhimsen Pachawry said:

KSA has oil reserves to the tune of 110GBL while USA has oil reserves to the tune of 30-35GBL. USA produces 10 million barrels a day while KSA peoduces 10 million barrels a day (increased to 10.7mbd in June). Isn't it obvious that KSA has ability to draw over 25 million barrels a day by putting the same amount strain as USA is putting on its oil fields and wella? Production of 12 million barrel is a small increase and can be easily handled

Only those people guided by rationality instead of emotion will recognize the wisdom of your comment, Bhimsen.

[William Edwards + 708]

22 hours ago, AMR said:

President Donald Trump says Saudi Arabia agreed to raise oil output by 2 million barrels a day, does it mean oil price will head back to sweat spot $50 in coming days?

 

The answer depends entirely upon the cumulative reactions of the speculators. As far as the real oil market, it is and will continue to be comfortably supplied, in spite of ill-informed hysteria.

[Glenn Ellis + 57]

Wholesale LL gas prices, delivered dropped in the ground, are going up.

Wait until you pull up to that self service pump and see prices north of $3.25 a gallon for 87 octane.

[Tim Turley + 27]

On 6/30/2018 at 1:32 PM, Leko said:

I think you are about right. One thing I would add is that if oil was below $65 not many new projects would be undertaken by E&P companies which in turn drives up prices in the future. We are now in that realisation phase from the fairly recent low oil prices, not many new projects coming on stream and those that are carry substantial debt

In order to keep the oil industry alive we probably need $70 oil and price stability. I know Pr. Trump keeps banging on about oil prices, but he doesn't have to pay for deep water exploration etc. and try to make a profit that in turn is used on more exploration. No profit ,no exploration, simple.

Are the gasoline prices in the U.S around $2.50 a gallon? Well in the U.K it's roughly $7.50 a gallon!

 

I agree, in the long run $70 is about right to ensure sustaining E&P to keep up with depletion of about 5%, demand-growth at 1.5%, and inflation of 1-2% per year...  I think we'll see WTI hit $80+ this year due to the lag in E&P investment this cycle.

[Fethi Nouri + 1]

My easy question does AS is able to serve market with all its spare capacity 2Mbbl

others country’s are not able to do it or to use their little spare capacity 

with Venezuela ,Libya and Canada outage 

What’s  their break even  price now 

sorry my English is not perfect 

[Refman + 207]

3 hours ago, Fethi Nouri said:

My easy question does AS is able to serve market with all its spare capacity 2Mbbl

others country’s are not able to do it or to use their little spare capacity 

with Venezuela ,Libya and Canada outage 

What’s  their break even  price now 

sorry my English is not perfect 

It's my understanding that the Saudis lifting price is somewhere between $5-$10 per barrel. 

However, remember one thing, they are still running a budget deficit, and are hoping for a good IPO for Aramco, so 2 very good reasons not to let the price crash too much. 

[Tom Kirkman + 8,860]

On 7/1/2018 at 6:43 AM, Tom Kirkman said:

The thing is, it seems unlikely that Saudi Arabia is able to increase their oil production by 2 million bpd.  

And even if it is possible, 2M bpd increase will create a hellacious havoc in Saudi's producing oil wells. 

Long term mess-up for Saudi oil well production characteristics just to extract a short term spike in production. 

 

On 7/1/2018 at 12:31 PM, AE911truth.org said:

According to the EIA, Saudi Arabia has a spare production capacity of at least 1 1/2 million bpd.

 

On 7/1/2018 at 1:24 PM, Tom Kirkman said:

You are correct.  I appear to have over-reacted.

Maybe I didn't overreact after all...

Saudi Arabia Won’t Bring 2 Million Bpd Online

... Saudi Arabia was producing 10 mb/d in May and recent reports suggest they might add as much as 800,000 bpd to 1 mb/d in July, a massive increase in such a short period of time.

But it’s a far cry from the 2 mb/d that Trump thinks Saudi Arabia will add. That would translate into overall production of around 12 mb/d, which is probably unrealistic for a few reasons.

First, there are technical questions about how far and how fast Saudi Arabia can push its oil fields. Can they ramp up to 12 mb/d? Probably, but there is not a lot of historical evidence to go on. Also, they probably can’t do it immediately, it would take time, perhaps more than a year. ...

[Douglas Buckland + 6,308]

Good Morning Tom,

In the past year or so people seem to have gotten away from looking at the storage numbers, which are becoming a real concern. With the geopolitical situation present at the moment, combined with the storage numbers, I can see the price going up significantly in the later half of this year. Whether this kick starts drilling is another issue. Apparently banks are not interested in lending to oil and gas concerns, so drilling is still in the doldrums.

[Tom Kirkman + 8,860]

2 hours ago, Douglas Buckland said:

Good Morning Tom,

In the past year or so people seem to have gotten away from looking at the storage numbers, which are becoming a real concern. With the geopolitical situation present at the moment, combined with the storage numbers, I can see the price going up significantly in the later half of this year. Whether this kick starts drilling is another issue. Apparently banks are not interested in lending to oil and gas concerns, so drilling is still in the doldrums.

Good morning Douglas, we seem to have arrived at similar conclusions.  My hope for a relative balance between the global economy and global oil producers at around $65 seems outdated lately.  Which is why I am forced to concede a new relative balance around $80 to help spur new exploration and production.

Between the concurrent squeeze of reduced spare capacity, reduced global storage, and outages current and looming in countries such as Venezuela, Iran and Libya, it seems that additional E&P needs to be spurred on to replenish the always-declining existing oil fields.

The global enonomy might need to take a small price hit in Q2 this year, to allow for increased drilling and increased E&P, in order to avoid a larger price escallation in a couple years.  I'm still conflicted about how this is going to play out, but my hope for $65 oil this year is looking increasingly unlikely.  A couple more unexpected outages by oil producers will likely result in an over-reaction by markets, and then we hop on the crazy roller coaster ride of too extreme oil price skyrockets and subsequent bombs.

Relative oil price stability this Summer seems unlikely to me this morning...

[Matt M. + 1]

“The Americans have claimed they want to completely stop Iran’s oil exports. They don’t understand the meaning of this statement, because it has no meaning for Iranian oil not to be exported, while the region’s oil is exported,”  President Rouhani

Ref: Iran's President hints at threat to neighbor's' exports if oil sales halted

[Mahyar + 16]

On 7/1/2018 at 9:01 AM, AE911truth.org said:

According to the EIA, Saudi Arabia has a spare production capacity of at least 1 1/2 million bpd.

The Energy Information Administration (EIA) gives week-on-week data. This data is short term. The issue is whether it will ever be technically feasible for Saudi capacity to go beyond 10 million bpd in the longer term?

[Mahyar + 16]

On 7/2/2018 at 10:14 PM, William Edwards said:

Only those people guided by rationality instead of emotion will recognize the wisdom of your comment, Bhimsen.

My response is NO ! Higher proved reserves doesn't mean that faster recovery will now be feasible.

 

[Mahyar + 16]

On 7/3/2018 at 4:27 AM, Tom Kirkman said:

 

 

Maybe I didn't overreact after all...

Saudi Arabia Won’t Bring 2 Million Bpd Online

... Saudi Arabia was producing 10 mb/d in May and recent reports suggest they might add as much as 800,000 bpd to 1 mb/d in July, a massive increase in such a short period of time.

But it’s a far cry from the 2 mb/d that Trump thinks Saudi Arabia will add. That would translate into overall production of around 12 mb/d, which is probably unrealistic for a few reasons.

First, there are technical questions about how far and how fast Saudi Arabia can push its oil fields. Can they ramp up to 12 mb/d? Probably, but there is not a lot of historical evidence to go on. Also, they probably can’t do it immediately, it would take time, perhaps more than a year. ...

It is not "time" that can raise Saudi production potential. Only technology can do it. But this is also a strong assertion of faith in the further gains to 12 mbpd to be won from technology over the coming years.

[Stockargus + 1]

I feel the Saudis will increase productivity in a measured way in order to hurt Iran not hell the market.  That being said they are trying to get public money for their private enterprise.  

[CWGIII 0]

Looking foreward to exchanging info and opinion on the Energy and related industries while making $$$ at the same time.

[CWGIII 0]

Do you see more or less LP and/or MLP IPO's in the near future (between now and the end of 2020? 

[Bhuppi 0]

On 7/2/2018 at 11:14 PM, William Edwards said:

Only those people guided by rationality instead of emotion will recognize the wisdom of your comment, Bhimsen.

Very true 

[Stephen T. Harris, CPL + 23]

In my humble opinion, being a 40 year third generation oilman, I believe the single largest political and economic factor that will influence the oil markets, is the assumption that KSA has the ability to produce 2MMBPD from their strategic surplus capacity. I think we realized KSA and most of the rest of the OPEC producers were over-estimating their reserves twenty years ago and since then, they have actively boasted about their spare capacity which could be utilized in the event of wars or other geopolitical disturbances in the market. We, or at least most of us that make a living in this industry, are also quite aware that supply and demand is just one factor, and not necessarily the most important factor compared to what a 27 year old commodity trader might be thinking any particular day. In the next few weeks or months, the request from Trump for KSA to increase output will show whether the King (dom) is wearing any clothes. Trump, intentionally or not, has called their 30 year old bluff as to whether KSA, without drilling new wells, actually has much, if any, spare capacity. I think they have been lying for decades and soon we will know. If they can pump more oil, then oil prices will go down a bit, but if they are all hat and no cattle, then who knows where the oil prices will land north of today's price.  

[Top Oil Trader + 469]

so many opinions who is right?

 

Edited July 4, 2018 by Top Oil Trader
posted as separate thread

[NickW + 2,714]

On 6/30/2018 at 11:43 PM, Tom Kirkman said:

Update:

The thing is, it seems unlikely that Saudi Arabia is able to increase their oil production by 2 million bpd.  

And even if it is possible, 2M bpd increase will create a hellacious havoc in Saudi's producing oil wells. 

Long term mess-up for Saudi oil well production characteristics just to extract a short term spike in production.  Or maybe that's part of the plan (yah, I know, that's a bit tin foily).

They can for a bit but they can't sustain it. It involves restarting all the old stripper wells that they can run for a few months before they send them back into retirement. They use the old Damman field for this. 

[NickW + 2,714]

17 minutes ago, Stephen T. Harris, CPL said:

In my humble opinion, being a 40 year third generation oilman, I believe the single largest political and economic factor that will influence the oil markets, is the assumption that KSA has the ability to produce 2MMBPD from their strategic surplus capacity. I think we realized KSA and most of the rest of the OPEC producers were over-estimating their reserves twenty years ago and since then, they have actively boasted about their spare capacity which could be utilized in the event of wars or other geopolitical disturbances in the market. We, or at least most of us that make a living in this industry, are also quite aware that supply and demand is just one factor, and not necessarily the most important factor compared to what a 27 year old commodity trader might be thinking any particular day. In the next few weeks or months, the request from Trump for KSA to increase output will show whether the King (dom) is wearing any clothes. Trump, intentionally or not, has called their 30 year old bluff as to whether KSA, without drilling new wells, actually has much, if any, spare capacity. I think they have been lying for decades and soon we will know. If they can pump more oil, then oil prices will go down a bit, but if they are all hat and no cattle, then who knows where the oil prices will land north of today's price.  

I worked for Aramco from 2010 to 2012 and there was a quiet panic going on in Exploration. They were not finding oil in any significant quantity anymore and gas finds were useful but at best would keep domestic supply even. 

Its why Khuriyah Beach Sea Water injection plant is going flat out (probably masking rising sea levels😄) and they are investing big time in EOR technology.

 

[NickW + 2,714]

On 6/30/2018 at 8:00 PM, Bhimsen Pachawry said:

Saudis have already started to pump 10.7 million barrels a day in June which was the highest production levels, similar to 2016. They are looking to increase it further to 11 million barrels a day. Their allies UAE and Kuwait will increase oil production to be 3.2-3.3 million barrels a day from today's 2.9 million barrels a day. 

This is to make the sanctions on iran effective. Iran was causing too much problems in Syria, yemen, Lebanon, Palestine, Iraq and pretty much everywhere in middle east to gain dominance by its cultural soft power and monetary and military hard power.

I doubt they have the export capacity to sustain 10 MBPD export let alone>20MBPD. 

 

[NickW + 2,714]

On 7/2/2018 at 8:47 PM, Tim Turley said:

I agree, in the long run $70 is about right to ensure sustaining E&P to keep up with depletion of about 5%, demand-growth at 1.5%, and inflation of 1-2% per year...  I think we'll see WTI hit $80+ this year due to the lag in E&P investment this cycle.

I recall the Saudi's view $80 as the Goldilocks spot. Not too high that it over stimulates alternatives and not so low that it threatens internal stability through lower govt revenue. 

[Tom Kirkman + 8,860]

2 hours ago, NickW said:

I recall the Saudi's view $80 as the Goldilocks spot. Not too high that it over stimulates alternatives and not so low that it threatens internal stability through lower govt revenue. 

Yes, that's what I recall as well.