Hmmm, sounds oddly familiar... "$70 Oil Could Be Right Around The Corner"

[Illurion + 894]

4 minutes ago, NickW said:

Have the good grace then to notify the other party that you are switching subject. Going off on a tangent to discuss US grace and favour to non OPEC members is poor discussion form when the crux of the conversation is about US - OPEC interrelations. 

But on subject then . 

Why should OPEC listen to Trump? 

Look who's talking...

You have been arguing the same thing over and over again for many hours....

Please have the "good grace" to accept that you lost on global warming,   and you will lose on Venezuela when Maduro is gone,  and that you lost when i mentioned some "favors" examples that you asked for.........

.........

 

[NickW + 2,714]

12 minutes ago, TXPower said:

You are the one on about that.  I’m pointing out that shale oil from the US on the world market can affect world oil prices.  Just as a loss of production or an increase from other oil producing nations can affect world oil price.  I never said the US is, was or will be a net exporter of oil.

This started with your comment that maybe the USA should join OPEC. 

I simply pointed out that a key entry requirement is to be a net oil exporter. 

The USA is not a net oil exporter. 

[NickW + 2,714]

14 minutes ago, Illurion said:

Look who's talking...

You have been arguing the same thing over and over again for many hours....

Please have the "good grace" to accept that you lost on global warming,   and you will lose on Venezuela when Maduro is gone,  and that you lost when i mentioned some "favors" examples that you asked for.........

.........

 

Go on stay on thread for once. Don't conflate this with other issues.

Why should OPEC listen to Trump? 

Are the US the only suppliers of weaponry on the planet. I hear the British, French, Swedes and Russians also do a good line in aircraft. 

Edited February 25, 2019 by NickW

[Illurion + 894]

11 minutes ago, NickW said:

Why should OPEC listen to Trump?  

(A)   because they always have....

(B)   because there can be consequences if they do not...

[NickW + 2,714]

Just now, Illurion said:

(A)   because they always have....

(B)   because there can be consequences if they do not...

Assuming this time round they don't. 

What consequences? 

[Illurion + 894]

1 minute ago, NickW said:

Assuming this time round they don't. 

What consequences? 

I assume nothing.........

Wait and see.........

[NickW + 2,714]

9 minutes ago, Illurion said:

I assume nothing.........

Wait and see.........

Well we know what happens when countries propose to trade oil in an alternative to the dollar. 

I don't particularly like the regime in Iran (coincidentally my wife is Iranian) but I was amused when Rouhani put out the offer that he will happily trade oil for Euros, Yuan, Yen, Won, Rupees etc. 

[Tom Kirkman + 8,860]

8 hours ago, Illurion said:

What i have yet to see mentioned anywhere are 'NEW REFINERIES........

Will we not need NEW REFINERIES to come online to handle all of this new oil ?

U.S. environmental regulations and environmental deliberate red tape have ensured that no new major oil refineries have been built in the U.S.for decades.  Only minor expansions of existing, legacy, oil refineries.

The "keep oil & gas in the ground" crowd has won on that front.  Don't expect any new oil refineries in the U.S. any time soon.

[John Foote + 1,135]

When was the last one in the USA was what, '77?

There has always been Texas and LA willing to allow them. New Jersey and California, maybe not so much. Our friends from the KSA are expanding their refineries in the USA. And there have been significant expansions to existing ones.  So not really a gasoline capacity shortage, though the buffer/surge capability is not what it was, and the odd hurricane brings that to light. Americans drive more than ever, but fuel efficiency has effected demand, and the goofy corn/ethanol business has had an impact. Actual consumption is down since 2008. I think we have even always exported some gasoline, mostly to Mexico.

Edited February 28, 2019 by John Foote
miss typed the year, by a decade

[TXPower + 643]

4 hours ago, NickW said:

This started with your comment that maybe the USA should join OPEC. 

I simply pointed out that a key entry requirement is to be a net oil exporter. 

The USA is not a net oil exporter. 

You usually are so clever and I thought it was pretty clear that was a JOKE, hence the ++ designation I added.  We don’t want to join the cartel we want to weaken it.

[NickW + 2,714]

19 hours ago, TXPower said:

You usually are so clever and I thought it was pretty clear that was a JOKE, hence the ++ designation I added.  We don’t want to join the cartel we want to weaken it.

I assume and majority of people on here work in the oil Industry so wouldn't a collapse of OPEC work against those interests?

If OPEC collapses its odds on there won't be the political pressure to moderate outputs and that will lower oil prices. 

Good for general economy and oil importing countries but not so good for US Oil producers. 

[NickW + 2,714]

21 hours ago, Tom Kirkman said:

U.S. environmental regulations and environmental deliberate red tape have ensured that no new major oil refineries have been built in the U.S.for decades.  Only minor expansions of existing, legacy, oil refineries.

The "keep oil & gas in the ground" crowd has won on that front.  Don't expect any new oil refineries in the U.S. any time soon.

I read somewhere that capacity at those refineries have doubled since 1970. 

Surely this is a good example of efficiency - squeezing far more product out of the same same area of land. My understanding of refineries is that economy of scale is important. Better to have fewer larger refineries than many small ones. 

Edited February 26, 2019 by NickW

[TXPower + 643]

3 minutes ago, NickW said:

I assume and majority of people on here work in the oil Industry so wouldn't a collapse of OPEC work against those interests?

If OPEC collapses its odds on there won't be the political pressure to moderate outputs and that will lower oil prices. 

Good for general economy and oil importing countries but not so good for US Oil producers. 

Well, it dropped to $50/barrel and shale oil continued to pump.  We are already pumping shale on credit and some of us here know that.

Of course I don’t want anyone to lose their job.  Oil represents what, 3% of the US GDP.  American oil workers, especially shale workers, are used to the pink slips of the boom/bust.  

Other producers pumping with abandon, increasing the world supply and driving the prices even lower, it doesn’t seem that would help them either.  Especially places like SA and those who don’t produce anything else. The effects of such action would certainly hurt them more.

But then, some argue lots and lots of cheap oil stimulates economic growth.  I am happy to admit I don’t have the answers.

[Old-Ruffneck + 1,177]

16 hours ago, TXPower said:

Well, it dropped to $50/barrel and shale oil continued to pump.  We are already pumping shale on credit and some of us here know that.

Of course I don’t want anyone to lose their job.  Oil represents what, 3% of the US GDP.  American oil workers, especially shale workers, are used to the pink slips of the boom/bust.  

Other producers pumping with abandon, increasing the world supply and driving the prices even lower, it doesn’t seem that would help them either.  Especially places like SA and those who don’t produce anything else. The effects of such action would certainly hurt them more.

But then, some argue lots and lots of cheap oil stimulates economic growth.  I am happy to admit I don’t have the answers.

Saudi oil in the old fields cost break-even 5.00 dollars. The newer fields pressure upwards 7.50 a bbl. If they need 80 a barrel then their society has sponged way too much off the oil tit. Not our fault their government hands cash out like candy on Halloween. I say keep drilling and as long as we are still somewhat profitable, go for it. Our Hydraulic Fracturing is now a science and the steep decline in well output once re-frac'd tends to come to 30% plus of original and is somewhat steady. The new wells are being drilled differently than that in the few year past. So anyone who thinks the Permian is going to magically stop producing should do research, just as I have done talking with the people making it happen. You don't spend hundreds of billions on the whole infrastructure for it to be done in 4 years. 

[TXPower + 643]

4 hours ago, Old-Ruffneck said:

Saudi oil in the old fields cost break-even 5.00 dollars. The newer fields pressure upwards 7.50 a bbl. If they need 80 a barrel then their society has sponged way too much off the oil tit. Not our fault their government hands cash out like candy on Halloween. I say keep drilling and as long as we are still somewhat profitable, go for it. Our Hydraulic Fracturing is now a science and the steep decline in well output once re-frac'd tends to come to 30% plus of original and is somewhat steady. The new wells are being drilled differently than that in the few year past. So anyone who thinks the Permian is going to magically stop producing should do research, just as I have done talking with the people making it happen. You don't spend hundreds of billions on the whole infrastructure for it to be done in 4 years. 

I am with you and hope you are right about frac technology improvements and Permian Oil continuing to be pumped.  My comment about US Shale being pumped on credit describes most wells best I can understand it from the information gleaned here on this forum.  That includes charts and graphs from well data and from professionals in the field, as well as Analysts like @Tom Kirkman and old fashioned guys who started as Texas Roughnecks and worked and managed almost every phase of production like @Mike Shellman. No age offense meant.

The available information indicates most wells, save a few, are not cash positive because they don't produce enough, long enough to become truly profitable.  This may be evidenced by the sheer number of wells being drilled but not completed.  Caveat, I am not an expert and believe you know way more than I do(and hope to learn from you), I just wanted to make sure I explained my comment about shale and credit.  I have interest in a frac sand transport company and want, need and hope this to continues.  Thus I hope you are right.

[Old-Ruffneck + 1,177]

6 hours ago, TXPower said:

I am with you and hope you are right about frac technology improvements and Permian Oil continuing to be pumped.  My comment about US Shale being pumped on credit describes most wells best I can understand it from the information gleaned here on this forum.  That includes charts and graphs from well data and from professionals in the field, as well as Analysts like @Tom Kirkman and old fashioned guys who started as Texas Roughnecks and worked and managed almost every phase of production like @Mike Shellman. No age offense meant.

The available information indicates most wells, save a few, are not cash positive because they don't produce enough, long enough to become truly profitable.  This may be evidenced by the sheer number of wells being drilled but not completed.  Caveat, I am not an expert and believe you know way more than I do(and hope to learn from you), I just wanted to make sure I explained my comment about shale and credit.  I have interest in a frac sand transport company and want, need and hope this to continues.  Thus I hope you are right.

The main reason for 9000 wells not completed is two-fold. Not enough take away capacity by far, and 2nd is they're drilling much faster now than even 2 year ago. The technology now has improved vastly and is getting better each month. Around Pecos and Coyanosa to Monahans areas, 4-5k down laterals 15 to 20k 6 per hole. All in 30 days per rig. 2 days ago I was driving around and in this area saw no less than 40 t0 50 rigs. Just what the eye sees. Some hills so surely more out there. More than when I first arrived 6 weeks ago. Takes about 2 weeks for completion crew to come in and frac the well. Less equipment by far on the completion side, so I see the why so far behind. Today I was over by McCamey, Tx and 2 big lines being run close together. Looked to be 36'' lines. So they are putting pipelines in, and when you see the amount of Hi-Hoes and Dozers and trenchers, a lot of money. And you see this in different spots throughout West Texas. If they stopped drilling this weekend, there is about 2.5 years of completions. My neighbor in RV next to me is pipe weld inspector. He figures he'll be here at least that long. 

I can tell you Frac Sand movers and Rigs and Completion companies are all high risk. Ask @Tom Kirkman about the last couple crashes and the volatility of the nature of the oilfield in general. 84 was totally devastating, and 14 another catastrophic failure. I can take you to spots In and around Odessa, Tx where all the 84 crash rigs and supply line crap is at. One big pile of rust that was at one time valued in the billions. They don't even scrap it here. Stack it out and forget about it.

[Mike Shellman + 548]

@TXPower  Its hard not to be overwhelmingly impressed with the level of activity in the Permian Basin. Everyone working in that play, or even remotely associated with it, is going to talk it up; their livelihood depends on it. Its occurring, however, mostly on credit/debt and a quarter, or even on year of meager, disappointing (to Wall Street) earnings (2018) does not mean anything has changed financially for those guys. They are all still deeply in debt and hanging on by a thread. Nothing exemplifies that more that observing net operating losses (NOL) and NOL carry forwards in SEC filings. All but two, as far as I can tell, shale oil companies have ever paid federal income tax on "profit." Most in the Bakken have NOL carry forwards whereby they will never have to pay federal income taxes. That pretty much sums it up for me. Drill Baby Drill is an old antiquated term that has been around a long time; it assumes we will never run out of oil, ever, that the stuff grows on trees and that more production always means more profit. Those days are long gone. 

Remember, re-frac's (if they are already re-fracing in the Permian, that is really only 5 years old, yikes!) cost big bucks and take many more BO to pay back. Here is an editorialized summary of a recent SPE paper about well spacing, frac hits, etc : https://www.oilystuffblog.com/single-post/2019/02/28/Kids-Can-Be-A-Real-Pain-In-the-Ass . 

 

[TXPower + 643]

31 minutes ago, Mike Shellman said:

@TXPower  Its hard not to be overwhelmingly impressed with the level of activity in the Permian Basin. Everyone working in that play, or even remotely associated with it, is going to talk it up; their livelihood depends on it. Its occurring, however, mostly on credit/debt and a quarter, or even on year of meager, disappointing (to Wall Street) earnings (2018) does not mean anything has changed financially for those guys. They are all still deeply in debt and hanging on by a thread. Nothing exemplifies that more that observing net operating losses (NOL) and NOL carry forwards in SEC filings. All but two, as far as I can tell, shale oil companies have ever paid federal income tax on "profit." Most in the Bakken have NOL carry forwards whereby they will never have to pay federal income taxes. That pretty much sums it up for me. Drill Baby Drill is an old antiquated term that has been around a long time; it assumes we will never run out of oil, ever, that the stuff grows on trees and that more production always means more profit. Those days are long gone. 

Remember, re-frac's (if they are already re-fracing in the Permian, that is really only 5 years old, yikes!) cost big bucks and take many more BO to pay back. Here is an editorialized summary of a recent SPE paper about well spacing, frac hits, etc : https://www.oilystuffblog.com/single-post/2019/02/28/Kids-Can-Be-A-Real-Pain-In-the-Ass . 

 

Stated and explained way better than I will ever be able to.  Thanks @Mike Shellman

[TXPower + 643]

@Mike Shellman going deeper on the article you linked and your own personal/professional opinions, I would like to know your thoughts on the thrust of the article as a way forward for tapping some of our last known domestic LTO reserves.   Is it advisable from a long-term supply/demand, jobs/economics and geopolitical viewpoint?

[Mike Shellman + 548]

@TXPower, shale oil is expensive to extract and not profitable. It declines like an anchor dropped in the open ocean. There is not as much of it as we are being led to believe. I do not believe that American oil should be used for geopolitical reasons; most every one in the world with a computer knows that shale oil extraction in the US is dependent on credit/debt and that America is sinking in debt. We are the 2nd largest oil consuming nation in the world; hydrocarbon security use to be, and still is important. Jobs are important but I'd rather have 500,000 men and women on the permanent payroll than 800,000 on a 5 years on/15 years off plan. The complete transition to renewables will be a long bumpy road therefore America should have an oil savings account, and IRA, and not be exporting oil to foreign countries. The 3.6MM BOPD we averaged exporting a month ago should stay in the ground... until America needs it.  

[TXPower + 643]

1 hour ago, Mike Shellman said:

@TXPower, shale oil is expensive to extract and not profitable. It declines like an anchor dropped in the open ocean. There is not as much of it as we are being led to believe. I do not believe that American oil should be used for geopolitical reasons; most every one in the world with a computer knows that shale oil extraction in the US is dependent on credit/debt and that America is sinking in debt. We are the 2nd largest oil consuming nation in the world; hydrocarbon security use to be, and still is important. Jobs are important but I'd rather have 500,000 men and women on the permanent payroll than 800,000 on a 5 years on/15 years off plan. The complete transition to renewables will be a long bumpy road therefore America should have an oil savings account, and IRA, and not be exporting oil to foreign countries. The 3.6MM BOPD we averaged exporting a month ago should stay in the ground... until America needs it.  

Understood sir, thank you for taking the time to share your thoughts.

[tetonper + 17]

Tom, I would tend to agree.  Depends on which index they are saying will top $70.  I will say as a long time industry worker I have missed catastrophically (for my own finances), more then once.  I have also nailed it a few times.  Bought back into O&G stocks the week after Christmas and the first week of Jan, I also said in Jan of 2015 oil would go t0 $25 before we would recover, told that to Robert Rapier at a conference in Denver in 2015 and he laughed at me and explained all the reasons I was wrong and the drivers were not there to cause it to go below $35.  My argument was, it is not the drivers, it is the investor and industry sentiment and emotions that will get it there.  

All said, this qualifies me to make an educated guess just like before.  WTI does not have the drivers to get there, simply too much oil in that index already and with the SCOOP/STACK ramping up with Exxon/XTO active in the south and others active in the north we will see significant new finds driving inventory higher.  There is no market for the light WTI crude that now dominates that index.  And, investors are not heavily touting oil and gas.  O&G producers are laying off people in relatively good economic times DVN, ECA/NFX and most likely CHK with their recent acquisition.  O&G is already cutting rig counts in most basins.  So the investors nor the producers are passionate about finding more oil.  Emotions are the drivers that hits those peaks. 

One thing that could help but I think Trump is keeping a lid on is the stopping the heavy crude from Venz.  It does not appear he is willing to curtail it.  There are good reasons to put a heavy sanction in place and shut it down, it would end Maduro quickly, but Trump understands that USA refineries have to have a good supply of heavy crude or their outputs are severely curtailed using WTI light.  We are not designed to refine light crude and cannot 'flip a switch' to go to full gear light gravity processing.  If he curtailed Venz crude, the Saudis would have us by the short hairs and price would jump by dollars overnight.  Saudis are not going to work with Trump after he let Iran go almost unchecked so he is powerless. 

The big driver is Saudi/OPEC and they have said over and over they want $65 - $75 oil so don't expect them to keep the foot on the brakes too much longer.  So at $65 to $75 OPEC, that looks a lot like today!  We got about $5 to $10.  Hmmm... okay if they are talking $70 OPEC or Brent, yep it is 'right around the corner'.  WTI, good luck all, convince the management as stockholders to quit drilling so many shale wells and you will get there.  If you hold Valero and Holly ownership get them to build new refineries, for WTI oil but that won't happen for 5 to 10 years and by then aoc will have us in the new green deal (more like the socialist mode) and you will be a lot more worried about surviving then oil prices.  Sorry I digressed.  New refineries aren't happening unless we get about 8 to 12 more years of conservative, deregulating of EPA and permitting laws.  We may see a binge of micro refineries to avoid those painful processes and that would help the light crude situation but again, not 'just around the corner'!!!