The Magic and Wonders of US Shale Supply: Keeping energy price shock minimised: US oil supply keeping lid on prices despite global risks: IEA chief

 

 

US oil supply keeping lid on prices despite global risks: IEA chief

Growth in US oil production has kept prices at "reasonable levels" despite the recent oil tanker attacks near the Strait of Hormuz and other supply risks around the world, International Energy Agency chief Fatih Birol said.

"There is substantial amount of oil coming from the United States, which puts a strong ceiling on oil prices," Birol said in an interview Friday on the sidelines of the G20 energy ministerial meetings in Karuizawa, Japan.

"Growth from the United States is a welcome addition to oil markets, especially looking at from an oil security point of view and looking at affordability for oil importers, including Japan, Korea and other Asian importers."

The IEA's June Oil Market Report forecast non-OPEC supply growth will rise to 2.3 million b/d in 2020, from 1.9 million b/d this year amid a surge in US shale and strong output from Brazil and Norway as new fields start up.

"According to our numbers, in five years' time, the United States will be the largest exporter in the world," Birol said.

"This is great news for consumers. Think about the fact we are seeing so many developments in the world: Venezuela, Iran, Libya, Nigeria and many [others]. Still, oil prices are staying at reasonable levels."

TANKER ATTACKS A WAKE-UP CALL

The alleged attack on two oil tankers near the Strait of Hormuz Thursday was a wake-up call to stakeholders in oil markets, Birol said.

"We are seriously concerned about the recent attacks, and we are monitoring the situation very closely in consultation with our member governments. We are ready to act if and when it is necessary."

The Front Altair and the Kokuka Courageous were carrying cargoes including naphtha. The incidents followed attacks on May 12 on four tankers near the bunkering port of Fujairah.

"Having lots of supply does not mean that oil security is not important, and this very important incident reminds all of us, all actors in the markets once again, how important an issue oil security is," Birol said.

The Strait of Hormuz was the most important oil choke point, especially for Asian energy importers, he said.

"Today about 18 million barrels of oil on a daily basis flows through this choke point coming from Saudi Arabia, emirates and other countries to China, Japan, India and other Asian customers."

"But at the same time it is a major route for LNG, liquefied natural gas. About 30% of LNG goes through this strait, coming again to Japan, South Korea, and other Asian countries."

Asked whether oil importers will need to seek alternative supplies away from regions so as not to have to transit the Strait of Hormuz, Birol said: "I think this will be a situation observed by oil importers, especially in this part of the world."

Birol said he did not expect a major shift in oil flows any time soon.

The tanker attacks and heightened supply risks came at a time of concerns about lower global oil demand growth.

Asked which was the biggest risk to the oil market, Birol said the IEA cut its oil demand growth forecast in its June report mainly because of a slowing in the global economy -- "not only the advanced economy, but [also] the emerging countries. Chinese economic growth prospects are much lower than previously thought".

The IEA cut its 2019 oil growth again to 1.2 million b/d, but it sees 2020 growth of 1.4 million b/d on petrochemical demand.

 

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Detractors of shale will throw around, anything negative about shale and are in perpetual denial of any benefit from it. I guess there are no benefits to shale.!!!

The jolt would have been deadlier without the US crude oil and liquids and NG supplies breaking records. All the shale detractors, specially in the OG industry, still wont like this.

Without US shale production, we could be seeing prices well lets say WTI to be around , well figure it this way, remove all US production from Shale, subtract the crude oil output from around the world that is shut in for any reason, Venezuela failure, Libya conflict, Iran sanctions, Canadian issues, North Sea decline, Nigeria swamp militancy attacks and theft, increased demands over the last 5 years etc, and we would be looking @ 120$/bbl WTI and 130$/bbl Brent at the low end.

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U.S., Canada, Brazil oil output nearly doubles in last decade -BP SRWE 2019

Global oil production shows the U.S. leading with 16.2% share
- Canada moved to 4th in the world last year from 7th in 2008 h

From 2008 to 2018 the amount of oil produced by the U.S, Canada and Brazil almost doubled. These three countries now produce roughly one quarter of the world's oil, according to BP's annual Statistical Review of World Energy 2019 .

The U.S. alone in this time has more than doubled its oil output and effectively grabbed an additional 8 percentage point slice of the world's oil production. Annual oil production data by country shows the U.S. with a world leading 16.2% share of global production last year. In 2008, the U.S. ranked third in the world with an 8.2% share. The top two a decade ago, Saudi Arabia and Russia, now trail at 13% and 12.1% of total 2018 production, respectively.

oil_world_production.jpg

Other countries with the largest gains in production over the last decade, following the U.S., are Iraq, Canada, Brazil, and the United Arab Emirates. Canada ranked seventh in the world in 2008 with a 3.9% world share but it rose to fourth globally with a 5.5% share last year. Iraq moved up six spots to sixth in the world. Kazakhstan and Qatar also each moved up six spots to 13th and 14th among the world producers. The Republic of Congo moved up seven spots, but accounts for a relatively small 0.35% share of global oil output.

oil_world_percentange.jpg

Countries in turmoil were the largest decliners over the past decade, namely Syria, Venezuela, Sudan and Yemen. Syria fell 16 spots, Venezuela 11 and Sudan and Yemen each dropped 10 spots in the global ranking of output. Venezuela, the largest producer among the four, is now ranked 17th in the world with a 1.6% share.

Oil production from countries in the Persian Gulf and Arabian Sea regions rose from a 31.2% global share in 2008 to 33.3% by 2018.

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it may be fixing to go up more....the Halliburton frac crew I am with now said in July ALL 13 crews currently down are all fixing to get to work on ducs.  We're with a small producer out of ND with 2 rigs in Permian Wolfcamp currently drilling on 4 and 5 well pads to be finished drilled in Sept. then another 4 and 5 well pads.  Finishing frac on this one well pad next Friday then onto a couple more down the road outside Pyote but looks like we'll be busy into 2020 with this operation.

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Keeping a lid on prices when you are desperately attempting to get out of debt does not sound like a sound business strategy to me....but then again, I'm not a 'finance guy'.

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Since when has it become the responsibility of the United States of America to provide the rest of the world with cheap, abundant LTO exports...using credit/debt? The IEA talks up American shale oil, naturally, because the entire world is benefiting from it; it could care less about how fast the resource is being depleted in our nation, how woefully unprofitable it is to extract, how much debt there is associated with it, how much gas is getting wasted with it or where the water is going to come from to frac the damn things. OPEC + and Russia, by the way, are loving the whole "revolution" thing; America is growing its production and exports while other world producers are reducing theirs. In 5-6 years other world oil producers who can think past next week will be selling oil back to America for 3 times the cost.   

"Distractors" from shale oil should not be confused with folks who understand decline and depletion of hydrocarbon resources and who want the best for their country...long term. Either/ or, black or white, shale production or no shale production is a weak argument. What we're trying to sort out here, some of us anyway, is  a better way to manage shale oil production in America. Folks who can't get their arms around that have an agenda that's not in the best interest of our future. 

 

AACSYWT.jpg

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(edited)

On 6/15/2019 at 7:27 AM, Mike Shellman said:

Since when has it become the responsibility of the United States of America to provide the rest of the world with cheap, abundant LTO exports...using credit/debt? The IEA talks up American shale oil, naturally, because the entire world is benefiting from it; it could care less about how fast the resource is being depleted in our nation, how woefully unprofitable it is to extract, how much debt there is associated with it, how much gas is getting wasted with it or where the water is going to come from to frac the damn things. OPEC + and Russia, by the way, are loving the whole "revolution" thing; America is growing its production and exports while other world producers are reducing theirs. In 5-6 years other world oil producers who can think past next week will be selling oil back to America for 3 times the cost.   

"Distractors" from shale oil should not be confused with folks who understand decline and depletion of hydrocarbon resources and who want the best for their country...long term. Either/ or, black or white, shale production or no shale production is a weak argument. What we're trying to sort out here, some of us anyway, is  a better way to manage shale oil production in America. Folks who can't get their arms around that have an agenda that's not in the best interest of our future.  

Agreed that debt is generally bad.  On the other hand, debt may be preferable to our previous situation, which was dependence on the whims of violent, unpredictable regimes.  If the government is taking on debt to juice shale oil production, I understand why.  Better that than increased defense expenditures on top of massive exports of wealth to purchase oil. 

The other question you raise is reserves, and I gather you don't think North American shale production will last.  I admit I'm not an expert, so please fill in details I'm missing.  I suspect now is the time to use these allegedly limited resources.  The world is on the verge of a technological revolution.  Oil consumption will be displaced by a combination of natural gas (of which we have plenty), electricity (of which we also have plenty), and waste-to-oil production.  If we know domestic oil demand will decline, shouldn't we extract everything we have now while it still has value?  I doubt we'll end up importing in the future, but even if we did, the quantities would be far lower than they are today.  Now seems like a strategically optimal time to produce shale oil.  Why do you think we should wait? 

On that note, I'm not convinced North American shale oil production will decline so rapidly.  There have been plenty of losses, but when I read about oil majors investing heavily and talking about lower costs, I wonder if the massive debt, bankruptcies, and losses are old news.  The same thing happens in every new industry: initially, many players enter the market.  Most go bankrupt.  A few hold on long enough to make serious profits.  Is shale oil so different from past technologies? 

There's also non-shale oil.  I read about new technology lowering costs in off-shore oil, untapped fields in Alaska, coastal waters we haven't touched, the massive oil sands in Canada, and possibilities for oil shale in Utah.  Will these resources never be tapped? 

Edited by BenFranklin'sSpectacles
Typo.
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4 hours ago, Douglas Buckland said:

Keeping a lid on prices when you are desperately attempting to get out of debt does not sound like a sound business strategy to me....but then again, I'm not a 'finance guy'.

On the other hand, it is keeping the costs down for US consumers, otherwise we would probably be seeing 3+-4+$/gal gas. Nothing comes easy, there is always a trade off, some one pays a price for some other people to enjoy luxuries (necessities) at a lower cost.

Imagine the outrage that would exist right now about gas prices among other things, if 4-6mil bpd of US shale was removed from the market?

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(edited)

3 minutes ago, ceo_energemsier said:

Imagine the outrage that would exist right now about gas prices among other things, if 4-6mil bpd of US shale was removed from the market?

We would be back to $100 oil in Mike Shellman's balanced market pre-shale.

Edited by wrs
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1 hour ago, wrs said:

We would be back to $100 oil in Mike Shellman's balanced market pre-shale.

And good ole Mike will be very happy with sending US$ , US$ earned by Americans, of all ages and what nots, and his kids and grand kids sending all those  hard earned dollars from every single half a barrel or a barrel of oil pumped out of every single stripper well to Q8, KSA, UAE, Iraq, Nigeria, Brazil and wherever else we will get the 4-6 mil bpd of crude. And all the gas station business owners having to take extraordinary measures to prevent fuel theft and people driving off without paying and paying a lot extra for just about everything else.

I think I am going to go to some store that sells crayons so I can buy them now while they are cheaper:D🤣

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7 hours ago, Mike Shellman said:

Since when has it become the responsibility of the United States of America to provide the rest of the world with cheap, abundant LTO exports...using credit/debt? The IEA talks up American shale oil, naturally, because the entire world is benefiting from it; it could care less about how fast the resource is being depleted in our nation, how woefully unprofitable it is to extract, how much debt there is associated with it, how much gas is getting wasted with it or where the water is going to come from to frac the damn things. OPEC + and Russia, by the way, are loving the whole "revolution" thing; America is growing its production and exports while other world producers are reducing theirs. In 5-6 years other world oil producers who can think past next week will be selling oil back to America for 3 times the cost.   

"Distractors" from shale oil should not be confused with folks who understand decline and depletion of hydrocarbon resources and who want the best for their country...long term. Either/ or, black or white, shale production or no shale production is a weak argument. What we're trying to sort out here, some of us anyway, is  a better way to manage shale oil production in America. Folks who can't get their arms around that have an agenda that's not in the best interest of our future. 

 

AACSYWT.jpg

There is a lot of truth in that cartoon. It makes me want to laugh and cry at the same time. If only people realized what it means for the future of Americans. We could repeat the whole FDR chicken in every pot scenario. I don't see a scenario where the American voters ever demand less benefits and services so that we can someday balance the budget. It should be the main thing discussed on the news. 

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