Oil: WCS at $14.00; the bottom has to be close

[avb3]

Chart as of Jan 18/16. Can't see this lasting much longer.

[avb3]

Or maybe not according to this article.

Oil output fell in December, but don't expect prices to rise any time soon - Read at Business Insider: http://www.businessinsider.com/opec-...=bi-androidapp

[JimPS]

The Global Financial Markets are on the brink of collapse again today.

We are guaranteed to go into the financial record books in the next couple of weeks as the odds of a big crash increase. You ain't seen nothin' yet.

Batten down the hatches. Plan well and don’t panic - and above all remember that the herd is usually wrong.

Blue Monday?

[The Elkster]

There is a quite a bit of overreaction to Iran right now. They certainly have a bunch of stored oil that is not going to help the market as it works its way through the system but they have a lot of work to do to achieve the daily production numbers they are touting. No doubt they will get there eventually with outside help. But the US alone is expected to be down another 700k bbl/d just between now and Nov 2016 (and likely more now that low hanging fruit is gone and financing is drying up same as with other global plays). So total US drop since the start of the downturn accounts for more than half of Iran's expected prod growth . That is on top of the other production drops that are going to start happening to non-OPEC and some OPEC members.

Its going to take awhile to turn around the production declines once we realize we've overshot to the low side. Prices will see $100 again....before we overdrill again. Rinse repeat.

[Twist]

Originally Posted by The Elkster

There is a quite a bit of overreaction to Iran right now. They certainly have a bunch of stored oil that is not going to help the market as it works its way through the system but they have a lot of work to do to achieve the daily production numbers they are touting. No doubt they will get there eventually with outside help. But the US alone is expected to be down another 700k bbl/d just between now and Nov 2016 (and likely more now that low hanging fruit is gone and financing is drying up same as with other global plays). So total US drop since the start of the downturn accounts for more than half of Iran's expected prod growth . That is on top of the other production drops that are going to start happening to non-OPEC and some OPEC members.

Its going to take awhile to turn around the production declines once we realize we've overshot to the low side. Prices will see $100 again....before we overdrill again. Rinse repeat.

That's not what 20 of the biggest banks in the World are saying.

[Twist]

http://www.fox5ny.com/news/76795410-story

WJBK)*- Gasbuddy.com says several stations in Houghton Lake, Michigan have lowered their prices under $1 per gallon, in what appears to be a price war.

According to GasBuddy it appears these stations are currently the first stations in the country to see prices under $1 per gallon in years. As the situation unfolds, it's possible these stations re-raise prices back over $1/gallon.

A price of 78 cents per gallon was recorded at Beacon & Bridge Market while 95 cents per gallon was recorded at the Marathon in Houghton Lake. Prices were verified by GasBuddy after a review of photographs uploaded to GasBuddy's app.

http://www.bloomberg.com/news/articl...s-than-nothing

Oil is so plentiful and cheap in the U.S. that at least one buyer says it would need to be paid to take a certain type of low-quality crude.

Flint Hills Resources LLC, the refining arm of billionaire brothers Charles and David Koch’s industrial empire,*said it would pay-$0.50 a barrel Friday for North Dakota Sour, a high-sulfur grade of crude, according to a list price posted on its website. That’s down from $13.50 a barrel a year ago and $47.60 in January 2014.

While the negative price is due to the lack of pipeline capacity for a particular variety of ultra low quality crude, it underscores how dire things are in the U.S. oil patch. U.S. benchmark oil prices have collapsed more than 70 percent in the past 18 months and fell below $30 a barrel for the first time in 12 years last week. West Texas Intermediate traded at $29.03 as of 11:13 a.m. in New York.

"Telling producers that they have to pay you to take away their oil certainly gives the producers a whole bunch of incentive to shut in their wells,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.

Flint Hills spokesman Jake Reint didn’t respond to a phone call and e-mail outside of work hours on Sunday to comment on the bulletin. The prices posted by Flint Hills Resources and rivals such as Plains All American Pipeline LP are used as benchmarks, setting reference prices for dozens of different crudes produced in the U.S.

Plains All American*quoted*two other varieties of American low quality crude at very low prices: South Texas Sour at $13.25 a barrel and Oklahoma Sour at $13.50 a barrel.*

Canadian Bitumen

High-sulfur crude in North Dakota is a small portion of the state’s production, with less than 15,000 barrels a day coming out of the ground, said John Auers, executive vice president at Turner Mason & Co. in Dallas. The output has been dwarfed by low-sulfur crude from the Bakken shale formation in the western part of the state, which has grown to 1.1 million barrels a day in the past 10 years.



Different grades of oil are priced based on their quality and transport costs to refineries. High-sulfur crudes are generally priced lower because they can only be processed at plants that have specific equipment to remove sulfur. Producers and refiners often mix grades to achieve specific blends, and prices for each component can rise or fall to reflect current economics.

Enbridge Inc. stopped allowing high-sulfur crudes on its pipeline out of North Dakota in 2011,*forcing North Dakota Sour producers to rely on more expensive transport such as trucks and trains, according to Auers.

Producers outside the U.S. are also feeling pain. The price for Canadian bitumen -- the thick, sticky substance at the center of the heated debate over TransCanada Corp.’s Keystone XL pipeline --*fell to $8.35last week, down from as much as $80 less than two years ago.

Negative energy prices are rare but not unprecedented. Propane traded at a negative value in Edmonton,*a key pipeline hub in oil-rich Alberta, for about three months last year. Oil refineries sometimes pay people to take away low-demand products such as sulfur or petroleum coke to free up space. However, those are both processing byproducts, while oil is a raw material, according to Auers.

“You don’t produce stuff that’s a negative number,” Auers said. “You shut in the well.”

http://money.cnn.com/2016/01/18/inve...gan/index.html

Big banks brace for oil loans to implode

January 18

*

NEW YORK

Big banks are cringing as crude oil is crumbling.

Firms on Wall Street helped bankroll America's energy boom, financing very expensive drilling projects that ended up flooding the world with oil.

Now that the oil glut has caused prices to*crash below $30 a barrel, turmoil is rippling through the energy industry and souring many of those loans. Dozens of oil companies have gone bankrupt and the ones that haven't are feeling enough financial stress to slash spending and*cut tens of thousands of jobs.

Three of America's biggest banks warned last week that oil prices will continue to create headaches on Wall Street -- especially if*doomsday scenarios of $20*or*even $10 oil play out.

For instance,*Wells Fargo*(WFC)*is sitting on more than $17 billion in loans to the oil and gas sector. The bank is setting aside $1.2 billion in reserves to cover losses because of the "continued deterioration within the energy sector."

JPMorgan Chase*(JPM)*is setting aside an extra $124 million to cover potential losses in its oil and gas loans. It warned that figure could rise to $750 million if oil prices unexpectedly stay at their current $30 level for the next 18 months.

"The biggest area of stress" is the oil and gas space, Marianne Lake, JPMorgan's chief financial officer, told analysts during a call on Thursday. "As the outlook for oil has weakened, we would expect to see some additional reserve build in 2016."

Citigroup*(C)*built up loan loss reserves in the energy space by $300 million. The bank said the move reflects its view that "oil prices are likely to remain low for a longer period of time."

If oil stays around $30 a barrel, Citi is bracing for about $600 million of energy credit losses in the first half of 2016. Citi said that figure could double to $1.2 billion if oil dropped to $25 a barrel and stayed there.

More oil companies will die

The oil crash has already caused 42 North American oil companies to file for bankruptcy since the beginning of 2015, according to a list compiled by Houston law firm Haynes and Boone. It's only likely to get worse. Standard & Poor's estimates that*50% of energy junk bonds are "distressed,"meaning they are at risk of default.

"There is a lot of distress in the industry. There will be a lot of pain but they'll get through it," said Buddy Clark, a 33-year veteran of the energy finance space and a partner at Haynes and Boone.

The financial pain has gotten so great that now there's murmurs of abail out for the U.S. oil industry, though it's clear any assistance would run into political opposition.

Related: Is it time to bail out the U.S. oil industry?

Are banks ready?

All of this raises the question: Is Wall Street doing enough to prepare for the oil storm?

"One year from now, are you going to look back and say, 'Whoops, we didn't get ahead of this enough,'" outspoken banking analyst Mike Mayo asked JPMorgan boss Jamie Dimon during Thursday's conference call.

Dimon said if it were up to him, he'd reserve against the potential for even greater losses. However, he said those decisions are limited by accounting rules.

Still, Dimon said the energy portfolio makes up just a small portion of JPMorgan's balance sheet and many of the loans are backed by physical assets. That means banks can sell off assets to recover money if a company defaults on its loans.

"We're not worried about the big oil companies. These are mostly the smaller ones that you're talking," Dimon said.

Paul Miller, a banking analyst at FBR, said oil loans don't represent nearly the same threat to banks that mortgages did last decade. He also pointed out that banks have been forced to stockpile capital to help them absorb losses.

"The big banks might have 1% to 6% of exposure. That's not going to kill them. This is not like 2006 or 2007," Miller said.

Despite the turmoil, JPMorgan isn't planning to run away from the oil patch.

"To the extent we can responsibly support clients, we're going to. And if we lose a little bit more money because of it, so be it," Dimon said

[Twist]

And some more:

http://ca.equities.com/2016/01/tsx-f...-sector-drags/

TORONTO*(Reuters) – Canada’s main stock index slipped in early trade on Monday, with the energy group weighing after oil hit 2003 lows while Canadian Oil Sands COS.TO surged on Suncor Energy Inc’s SU.TO revised bid.

The Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE was down 45.79 points, or 0.38 percent, at 12,027.67 shortly after the open.

http://mobile.reuters.com/article/idUSKCN0UV13E

LONDON*(Reuters) - European shares fell on Monday, following Asia lower and led by banks after the European Central Bank said it would quiz euro zone lenders about high levels of bad loans, while oil prices tumbled on the prospect of more supply from Iran.

With U.S. markets closed for the Martin Luther King Day holiday, U.S. stock index futures slipped 0.3 percent SPc1.

European shares opened higher but any prospect of a rally after stocks hit their lowest since December 2014 on Friday quickly fizzled out.

The pan-European FTSEurofirst 300 index.FTEU3, which has lost more than 10 percent this year, dropped a further 0.2 percent, with an index of euro zone banks .SX7E down 3.3 percent.

An ECB spokesman said on Sunday a number of banks would be asked about high levels of non-performing loans. The burden of such loans, particularly in Greece, Portugal, Spain and Italy, is curbing the euro zone's economic recovery by limiting banks' ability to lend.

Portuguese stocks*.PSI20*were down 3.4 percent and Italy*.FTMIB*lost 2.3 percent

"The uncertainty in the market, be it in Europe or wherever else, is causing these banks to suffer," Mark Foulds, sales trader at ETX Capital, said, adding that the sector was also under pressure from recent volatility linked to China.

"When the markets fall like they have done, everyone feels on edge. The market is dire, and there's not the liquidity that there used to be, which can mean the market gets oversold."

Britain's FTSE 100*.FTSE*index fell 0.4 percent.

Earlier, MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell to its lowest since October 2011, down 0.7 percent.



Japan's Nikkei*.N225*tumbled as much as 2.8 percent to a one-year low before closing down 1.1 percent. It has lost 20 percent from a peak hit in June, meeting a common definition of a bear market.

The volatile Shanghai Composite index*.SSECtouched intraday lows last seen in August but closed up 0.4 percent. It remains down nearly 18 percent this month.

In oil markets, the prospect of a jump in Iranian crude exports after international sanctions against the country over its nuclear program were lifted at the weekend weighed heavily on oil.

Brent crude, the global benchmark, was last down 18 cents a barrel at $28.76 LCOc1, having earlier dipped below $28 for the first time since December 2003.

"The lifting of key sanctions should allow it (Iran) to increase crude exports this year by at least 500,000 barrels a day on average, putting further downward pressure on oil prices in the near term," Barclays analysts said in a note on Monday.

Analysts at JPMorgan said oil-producing countries will need to sell large quantities of stocks and bonds this year to cover shortfalls in their budgets resulting from the oil price slump.

They estimate sales of $110 billion bonds this year, up from $45 billion last year, and $75 billion of equities compared with $10 billion.

YUAN

In currency markets the Chinese yuan rose 0.5 percent CNH= in offshore trade to 6.5830 per dollar, as Chinese authorities continued to stamp down on speculative yuan selling.

China will start implementing a reserve requirement ratio on some banks involved in the offshore yuan market, the People's Bank of China said on Monday, in what appears to be its latest attempt to stem speculation in the currency.

The safe-haven yen gave up some of its gains after having risen to a five-month high of 116.51 to the dollar JPY= on Friday. It stood at 117.34, down 0.3 percent on the day. The euro weakened 0.2 percent to $1.0890 EUR=.

The dollar has struggled to gain ground since the Federal Reserve's historic interest rate rise a month ago. After data on Friday indicating U.S. economic growth braked sharply in the fourth quarter, short-term interest rate futures price in only one hike by year-end, compared with two priced in as the year began.

In European bond trading, yields were mostly flat.

(Additional reporting by Alistair Smout and Nigel Stephenson; Editing by Catherine Evans and John Stonestreet)

[CanuckShooter]

Originally Posted by Twist

That's not what 20 of the biggest banks in the World are saying.

Thing is the price of oil can only go down so far, but the upside has no limits. Anyone that thinks the price won't rebound and/or head into the stratosphere in the future is trying to pull the wool over your eyes.

[JustMe]

It will rebound without a doubt. The concern for most tho is that it won't be tomorrow, or next month and probably not even next year! Can we hang on? That remains to be seen....

Originally Posted by CanuckShooter

Thing is the price of oil can only go down so far, but the upside has no limits. Anyone that thinks the price won't rebound and/or head into the stratosphere in the future is trying to pull the wool over your eyes.

[79ford]

Originally Posted by The Elkster

There is a quite a bit of overreaction to Iran right now. They certainly have a bunch of stored oil that is not going to help the market as it works its way through the system but they have a lot of work to do to achieve the daily production numbers they are touting. No doubt they will get there eventually with outside help. But the US alone is expected to be down another 700k bbl/d just between now and Nov 2016 (and likely more now that low hanging fruit is gone and financing is drying up same as with other global plays). So total US drop since the start of the downturn accounts for more than half of Iran's expected prod growth . That is on top of the other production drops that are going to start happening to non-OPEC and some OPEC members.

Its going to take awhile to turn around the production declines once we realize we've overshot to the low side. Prices will see $100 again....before we overdrill again. Rinse repeat.

The united states had a brief dip in production from 9.6 million to 9.07 or so last year and has actually been creeping production back up, they are back at 9.220 and they tend to add about 5-10k bbl/day each week. The thesis that america declining will lead to higher oil prices has yet to really start panning out since they are currently back to adding oil production for the mean time.


Lots currencies are getting pounded so the oil price isnt really going down much in most countries terms. Oil in alot of countries is probably in the 50$ range or more because of collapsing currencies,

[Holy Grounds Coffee]

My question is what's the objective? Why are countries producing oil full steam ahead when they know it's only making things worse. Who's gaining from this situation? And what are they trying to achieve by lowering oil prices?

Another question I have is despite oil being so low in price countries like America and Saudi are still producing more than ever. Why is that Alberta isn't doing the same? Oil prices went south and now alberta is like barley drilling anymore...why isn't that happening to these other countries?

[The Elkster]

Other countries are cutting big time. This is causing big problems around the world. US companies have been layed off well over 100k and companies across the globe are slashing. US companies are going bankrupt at an accelerating rate as with here.

[ForwardBias]

Originally Posted by Holy Grounds Coffee

My question is what's the objective? Why are countries producing oil full steam ahead when they know it's only making things worse. Who's gaining from this situation? And what are they trying to achieve by lowering oil prices?

Another question I have is despite oil being so low in price countries like America and Saudi are still producing more than ever. Why is that Alberta isn't doing the same? Oil prices went south and now alberta is like barley drilling anymore...why isn't that happening to these other countries?

Though cap expenditures are being slashed produces are pumping as hard as ever to try and keep revenue coming in. I liken it to the following analogy. "Bob has a standard of living he enjoys, that's costs X amount. Bob just took a 50% pay cut. Bob is trying to maintain that standard of living via working twice as many hours." Now more than ever companies that have the capacity to produce must produce to their fullest extent.

[Twist]

The bottom is nowhere close yet.

It looks like it is going to be another chaotic week for global financial markets.* On Sunday, news that Iran plans to dramatically ramp up oil production sent stocks plunging all across the Middle East.* Stocks in Kuwait were down 3.1 percent, stocks in Saudi Arabia plummeted 5.4 percent, and stocks in Qatar experienced a mammoth 7 percent decline.* And of course all of this comes in the context of a much larger long-term decline for Middle Eastern stocks.* At this point, Saudi Arabian stocks are down*more than 50 percent*from their 2014 highs.* Needless to say, a lot of very wealthy people in Saudi Arabia are getting very nervous.* Could you imagine waking up someday and realizing that more than half of your fortune had been wiped out?* Things aren’t that bad in the U.S.*quite yet, but it looks like another rough week could be ahead.* The Dow, the S&P 500 and the Nasdaq are all down at least 12 percent from their 52-week highs, and the Russell 2000 is already in bear market territory.* Hopefully this week will not be as bad as*last week, but events are starting to move very rapidly now.

Much of the chaos around the globe is being driven by the price of oil.* At the end of last week the price of oil dipped below 30 dollars a barrel, and now Iran has announced plans*“to add 1 million barrels to its daily crude production”…

Iran could get more than five times as much cash from oil sales by year-end as the lifting of economic sanctions frees the OPEC member to boost crude exports and attract foreign investment needed to rebuild its energy industry.

The Persian Gulf nation will be able to access all of its revenue from crude sales after the U.S. and five other global powers removed sanctions on Saturday in return for Iran’s curbing its nuclear program. The fifth-biggest producer in the Organization of Petroleum Exporting Countries had been receiving only $700 million of each month’s oil earnings under an interim agreement, with the rest blocked in foreign bank accounts.*Iran is striving to add 1 million barrels to its daily crude production and exports this year amid*a global supply glut that has pushed prices 22 percent lower this month.

It doesn’t take a genius to figure out what this is going to do to the price of oil.

The price of oil has already fallen more than 20 percent so far in 2016, and overall it has declined*by more than 70 percent*since late 2014.

When the price of oil first started to fall, a lot of people out there were proclaiming that it would be really good for the U.S. economy.* But I said*just the opposite.* And of course since that time we have seen an endless parade of debt downgrades, bankruptcies and job losses.* 130,000 good paying energy jobs were lost in the United States in 2015 alone because of this collapse, and things just continue to get even worse.* At this point, some are even calling for the federal government to intervene.* For example, the following is an excerpt from a CNN article that was just posted entitled “Is it time to bail out the U.S. oil industry?“…

America’s once-booming oil industry is suddenly in deep financial trouble.

The epic crash in oil prices has wiped out tens of thousands of jobs, caused dozens of bankruptcies and spooked global financial markets.

The fallout is already being felt in oil-rich states like Texas, Oklahoma and North Dakota, where home foreclosure rates are spiking and economic growth is slowing.

Now there are calls in at least some corners*for the federal government to come to the rescue.

Is it just me, or is all of this really starting to sound a lot like 2008?

And of course it isn’t just the U.S. that is facing troubles.* The global financial crisis that began during the second half of 2015 is rapidly accelerating, and chaos is erupting all over the planet.* The following summary of what we have been seeing in recent days comes*from Doug Noland…

The world has changed significantly – perhaps profoundly – over recent weeks.*The Shanghai Composite has dropped*17.4%over the past month (Shenzhen down 21%). Hong Kong’s Hang Seng Index was down*8.2%*over the past month, with Hang Seng Financials sinking*11.9%. WTI crude is down*26%*since December 15th. Over this period, the GSCI Commodities Index sank*12.2%. The Mexican peso has declined almost*7%*in a month, the Russian ruble*10%*and the South African rand*12%. A Friday headline from the Financial Times: “Emerging market stocks retreat to lowest since 09.”

Trouble at the “Periphery” has definitely taken a troubling turn for the worse. Hope that things were on an uptrend has confronted the reality that things are rapidly getting much worse.*This week saw the Shanghai Composite sink*9.0%. Major equities indexes were hit*8.0%*in Russia and*5.0%*in Brazil (Petrobras down*9%). Financial stocks and levered corporations have been under pressure round the globe. The Russian ruble sank*4.0%*this week, increasing y-t-d losses versus the dollar to7.1%. The Mexican peso declined another 1.8% this week. The Polish zloty slid 2.8% on an S&P downgrade (“Tumbles Most Since 2011”). The South African rand declined 3.0% (down 7.9% y-t-d). The yen added 0.2% this week, increasing 2016 gains to 3.0%.*With the yen up almost 4% versus the dollar over the past month, so-called yen “carry trades” are turning increasingly problematic.

Closer to home, the crisis in Puerto Rico continues to spiral out of control.* The following is an excerpt from a letter that Treasury Secretary Jack Lew sent to Congress*on Friday…

Although there are many ways this crisis could escalate further, it is clear that Puerto Rico is already*in the midst of an economic collapse…

Puerto Rico*is already in default. It is shifting funds from one creditor to pay another and has stopped payment altogether on several of its debts. As predicted, creditors are filing lawsuits. The Government Development Bank, which provides critical banking and fiscal services to the central government, only avoided depleting its liquidity by halting lending activity and sweeping in additional deposits from other Puerto Rico governmental entities. A large debt payment of $400 million is due on May 1, and a broader set of payments are due at the end of June.

It isn’t Michael Snyder from*The Economic Collapse Blog*that is saying that Puerto Rico is “in the midst of an economic collapse”.

That is the Secretary of the U.S. Treasury that is saying it.

Those that have been eagerly anticipating a financial apocalypse are going to get what they have been waiting for.

Right now we are about halfway through January, and this is the worst start to a year for stocks ever.* The Dow is down a total of*1,437 pointssince the beginning of 2016, and*more than 15 trillion dollars*of stock market wealth has been wiped out globally since last June.

Unfortunately, there are still a lot of people out there that are in denial.

There are a lot of people that still believe that this is just a temporary bump in the road and that things will return to “normal” very soon.

They don’t understand that this is just the beginning.* What we have seen so far is just the warm up act, and much, much worse is yet to come.

I'm quite sure we've got a long unstable ride down yet.

EVERY indicator is there a al 2007/8, except it is worse.

This will be a big depression, but I bet we still have worse coming.

Remember, nearly 7 million people in the USA alone died of hunger related issues in the dirty thirties. That was a decade long depression. We're not immune here. The same mistakes are being allowed to be made again.

Best of luck everyone. Remember this saying:

"the bigger the bubble, the smaller the pin needed to burst it."

[I_forget]

Claiming low oil is causing most financial problems is a bit off. The worry of a slowdown in China has been a bigger issue thus far in 2016. And flight to safety of the US dollar hurts the price of oil as well.

[Twist]

Originally Posted by I_forget

Claiming low oil is causing most financial problems is a bit off. The worry of a slowdown in China has been a bigger issue thus far in 2016. And flight to safety of the US dollar hurts the price of oil as well.

All correct.

As globalization of markets increase, so do the downfalls. The interconnectivity means when even emerging markets hiccup, so do the rest.

The banks and ultra rich have built this system for their own gain.

Your average person isn't even IN the markets, and if so, and has even ALL of their retirements in, it is likely only a few hundred thousand to a million dollars.

These people like Ackman, Buffet, and other hedge funds have BILLIONS in, and even at losses, hedge them and the "little" guys end up the biggest losers.

Sanctioned theft, but, it supposedly is a free Country, so lose all you please.

Hope my pension funds lasts the 21 years until retirement.

[JimPS]

Originally Posted by I_forget

Claiming low oil is causing most financial problems is a bit off. The worry of a slowdown in China has been a bigger issue thus far in 2016. And flight to safety of the US dollar hurts the price of oil as well.

You're right, China is an interesting place to watch right now.

Their economy could crash. Their only option is to stimulate consumption and force-build a middle class. If they don’t do that they could come tumbling down as the Former Soviet Union did.

This would have terrible implications for the Globalists and Canada is part of that gang now. That's one reason why China is making a big deal about ending its “One Child per Couple” policy. They're up to two, now.

They desperately need consumption. Roughly 300 villages in China disappear each day as about one million people migrate from the rural areas to the cities each week.

That's a staggering number of people internally migrating.

Their leadership and their people at least appear to be preparing for impending doom as we just sit around and whine about the price of oil, gloat about the cheap price of gas and wonder if our pension funds will be around in 21 years.

Have another beer and change the channel and see what's on Jerry Springer.

[Mangosteen]

I wonder where that little dude is that was promising Peak Oil prices a few years ago? What does he have to say for his theory now

[The Elkster]

Originally Posted by Mangosteen

I wonder where that little dude is that was promising Peak Oil prices a few years ago? What does he have to say for his theory now

How are you defining peak oil? Production peak? 50% reserve depletion? Production rates aside resource depletion is an undeniable issue and one we better consider when forming future public policy. Production is not inherently indicative of reserves. If I turn a hose on at 5 gallons/min and one on at 15 gal/min can you tell me (based solely on production rates) which is being fed by the 500 gallon or 50000 gallon reservoir ?

As someone who deals with reservoirs and well performance every day I will say without a doubt that reserves are seriously depleting. Thus the reason we are chasing crumby tight source rock. In my 20 years in the industry is disturbing to see how quickly we have been forced to turn to the dregs. Well performance on a bbl/$ basis has been dropping steadily thus the reason we need +$50 today and not $20.

What isn't getting any press is that much of the world is in the same position. Keep an eye on the rising cost of that marginal barrel of oil over the next 20 years. That is going to be the biggest effect of what most are calling "peak oil". Cost will kill oil before we've produced every last drop.

[JimPS]

Originally Posted by The Elkster

How are you defining peak oil? Production peak? 50% reserve depletion? Production rates aside resource depletion is an undeniable issue and one we better consider when forming future public policy. Production is not inherently indicative of reserves. If I turn a hose on at 5 gallons/min and one on at 15 gal/min can you tell me (based solely on production rates) which is being fed by the 500 gallon or 50000 gallon reservoir ?

As someone who deals with reservoirs and well performance every day I will say without a doubt that reserves are seriously depleting. Thus the reason we are chasing crumby tight source rock. In my 20 years in the industry is disturbing to see how quickly we have been forced to turn to the dregs. Well performance on a bbl/$ basis has been dropping steadily thus the reason we need +$50 today and not $20.

What isn't getting any press is that much of the world is in the same position. Keep an eye on the rising cost of that marginal barrel of oil over the next 20 years. That is going to be the biggest effect of what most are calling "peak oil". Cost will kill oil before we've produced every last drop.

I've read articles that suggest that Saudi Arabia fields and economy are in serious decline. Consequently the friction with Iran - who are next in line to be the big mid east oil player.

Any truth to the SA decline rumours?

[The Elkster]

Originally Posted by JimPS

I've read articles that suggest that Saudi Arabia fields and economy are in serious decline. Consequently the friction with Iran - who are next in line to be the big mid east oil player.

Any truth to the SA decline rumours?

Saudi Arabia keeps it very close to the vest so its hard to discern stuff with any certainty but one can generalize. What is known is that most of their production has come from 6-8 pools. One pool Ghawar doing the lion's share of that and a good portion of global production for decades. All these pools have been known about for a long time. A couple smaller one's were held in reserve until recently and apparently (based on one article) brought on to help to stem declines elsewhere. There haven't been any recent big oil discoveries to replace these and not for lack of looking.

The other issue I have as a reservoir guy is that the SA reservoirs are extremely permeable. Their characteristic depletion model would be opposite to our tight gas and oil. Instead of dropping off quick at the start then leveling for a low slow decline high perm stuff comes on strong and flows strong until the end...then dies or waters out abruptly. That quick drop at say Ghawar could cause some shocks. They are producing the last of their known big fields not much left to bail them out other than spending more money on secondary recovery schemes. They are already well into secondary recovery.

As and aside: I did work with a ME reservoir engineer who had worked with Saudi's and his indication was that SA is having issues and potentially doing damage to reservoirs. I would tend to look at SA reserve estimates as optimistic as with most companies and countries.

All of this positive oil spin has created the perception that we are awash in oil. It disturbs me. Oil IS our modern way of life. If we run into high cost supply issues (doesn't have to run out to cause issues) before a meaningful alternative has come along things will get ugly. We're using +90mmbbl/d and growing! That simply can't go on forever.

[KGB]

Posts like this one is the main reason why I LOVE this forum. Tons of info here that you won't get from CBC news...

[avb3]

Originally Posted by The Elkster

Saudi Arabia keeps it very close to the vest so its hard to discern stuff with any certainty but one can generalize. What is known is that most of their production has come from 6-8 pools. One pool Ghawar doing the lion's share of that and a good portion of global production for decades. All these pools have been known about for a long time. A couple smaller one's were held in reserve until recently and apparently (based on one article) brought on to help to stem declines elsewhere. There haven't been any recent big oil discoveries to replace these and not for lack of looking.

The other issue I have as a reservoir guy is that the SA reservoirs are extremely permeable. Their characteristic depletion model would be opposite to our tight gas and oil. Instead of dropping off quick at the start then leveling for a low slow decline high perm stuff comes on strong and flows strong until the end...then dies or waters out abruptly. That quick drop at say Ghawar could cause some shocks. They are producing the last of their known big fields not much left to bail them out other than spending more money on secondary recovery schemes. They are already well into secondary recovery.

As and aside: I did work with a ME reservoir engineer who had worked with Saudi's and his indication was that SA is having issues and potentially doing damage to reservoirs. I would tend to look at SA reserve estimates as optimistic as with most companies and countries.

All of this positive oil spin has created the perception that we are awash in oil. It disturbs me. Oil IS our modern way of life. If we run into high cost supply issues (doesn't have to run out to cause issues) before a meaningful alternative has come along things will get ugly. We're using +90mmbbl/d and growing! That simply can't go on forever.

If the reserves and what kind of reserves can't be trusted, how does ARAMCO expect and float that huge stock offering?

Hype?

[Sundancefisher]

Originally Posted by Mangosteen

I wonder where that little dude is that was promising Peak Oil prices a few years ago? What does he have to say for his theory now

The same may be said in a few years where the guy went that said low prices were here to stay for a while.

I figure once everyone says the price is going down the price will start going up. If these guys were so good at predicting prices they would be filthy rich living on a beach in Fiji.

[Mangosteen]

Originally Posted by avb3

Chart as of Jan 18/16. Can't see this lasting much longer.

Now this is something new. You have to pay to get rid of your crude in Dakota.
http://oilpro.com/post/21619/negativ...=Article_4_txt

[ETOWNCANUCK]

So it's not like there was a shortage
Because if there was the price would be higher right?

There does have to be a pendulum effect

We saw it go one way, and now it's going the other.

During the high cost of oil, everything went up,

House, vehicles, food, fuel.

The price of oil is bottoming,

Yet housing prices remain high,
Food prices have increased,
Vehicle prices remain high,
And fuel is trickling down at a snails pace.

Of course there is more going on, than the price of oil

There has to be.

Western countries rely on the price of oil,

A resource that today seems to be a lot,
Tomorrow not so much

Maybe, I don't know.

Maybe we should be happy because oil is low, not because of the economy and because of people that have lost jobs, but because our view of oil is changing,

Is that necessarily a bad thing?

Maybe, maybe not.

I don't have the answer, and I don't think any one person can answer it.

It's definitely an interesting time,
But what decade in recorded history wasn't.

[79ford]

The drop in oil price might bring along more hydrocarbon processing in alberta as companies rake in big dollars refining oil and making plastics or other chemicals. Williams wants to get propylene processing going here, stuff like that will create a whole new value chain. Then when oil does come back eventually there will be a stronger base economy to start with.

I agree with Ravyak, alberta booms arent about the baseline economy, its all about construction. The boom factor dissapears as soon as stuff stops getting built.

I would take that a step further.... if we didnt build every project every company and its dog concieved we probably wouldnt have much of a boom or bust. If it stayed the way it is right now, some drilling going on, couple tarsands projects being put together, everyone else just keeping status quo refining and processing hydrocarbons life would be pretty good if this was the new normal. (Plus a couple more dollars on the oil to atleast break even)

Building everything at once and trying to do that all the time isnt sustainable and causes some pretty rough dips when everything skids to a halt. For the average person who lives in alberta it is pretty annoying during the boom, life is much better when it is calm and quiet. Think of all the young people here in this province watching home prices leap 50k or more each year, all our elderly people renting or trying to pay property taxes etc on the same income they had 20 years ago?

[I_forget]

Originally Posted by 79ford

The drop in oil price might bring along more hydrocarbon processing in alberta as companies rake in big dollars refining oil and making plastics or other chemicals. Williams wants to get propylene processing going here, stuff like that will create a whole new value chain. Then when oil does come back eventually there will be a stronger base economy to start with.

I agree with Ravyak, alberta booms arent about the baseline economy, its all about construction. The boom factor dissapears as soon as stuff stops getting built.

I would take that a step further.... if we didnt build every project every company and its dog concieved we probably wouldnt have much of a boom or bust. If it stayed the way it is right now, some drilling going on, couple tarsands projects being put together, everyone else just keeping status quo refining and processing hydrocarbons life would be pretty good if this was the new normal. (Plus a couple more dollars on the oil to atleast break even)

Building everything at once and trying to do that all the time isnt sustainable and causes some pretty rough dips when everything skids to a halt. For the average person who lives in alberta it is pretty annoying during the boom, life is much better when it is calm and quiet. Think of all the young people here in this province watching home prices leap 50k or more each year, all our elderly people renting or trying to pay property taxes etc on the same income they had 20 years ago?

Ya lets let the government run every aspect of our lives. Jobs, homes etc. No way that could backfire !

[79ford]

Originally Posted by I_forget

Ya lets let the government run every aspect of our lives. Jobs, homes etc. No way that could backfire !

More tepid growth would probably be better in the long run and the fluctuations wouldnt be soo violent. Also the market would be less flooded with oil, the more oil staying in the ground the higher the price gets, too much oil coming out of the ground is bad for the economy here in alberta as we are noticing right now,lol.

The slow growth will allow pipelines to catch up and companies to re-jig costs. The revamped oil sector will be much less wastefull and waaay more efficient. Much more profitable in the long run as a conservative sector vs a flamboyant heavy spender live for today sector.

Look at exxon mobil, conservative investing, processes the whole value chain of hydrocarbons, doesnt slash jobs on a temporary down turn, still rakes in billions and is still spending money on value added projects. The calm quiet status quo conservative long term management idea obviously works much better than the build build build borrow borrow borrow then slash slash slash and cancel projects left right and center then turf every employees you can idea most companies seem to run on.


Maybe the government should have a longer timeline than the next land sale?lol

[Sigg]

What would Alberta look like if we kept the previous boom going for.... Say another 20 years?

I think it would look like an industrial wasteland.