Posted on 03/17/2015 5:21:34 AM PDT by thackney
The IEA (International Energy Agency) made the following statement in its Oil Monthly Report on Friday that supposedly sent oil prices lower by $2.41 per barrel for Brent and $2.21 per barrel for WTI:
“Steep drops in the US rig count have been a key driver of the price rebound. Yet US supply so far shows precious little sign of slowing down. Quite to the contrary, it continues to defy expectations. Output estimates for 4Q14 North American supply have been revised upwards by a steep 300 kb/d.”
IEA’s comments on U.S. oil production trends are misleading. When IEA says “oil” they mean “liquids” so their number includes natural gas liquids which add more than 3 million barrels per day on top of U.S. crude oil supply that largely come from natural gas production and not from oil production.
Also, IEA is talking about the 4th quarter of 2014 which is history and was unaffected by rig count declines that did not begin in earnest until mid-December.
The chart below shows EIA (U.S. Energy Information Administration) U.S. crude oil production data through February 2015 and forecasted volumes for the rest of the year. The greatest monthly increase was in December (190,000 barrels per day). This helps explain why IEA has revised its 4th quarter 2014 ouput numbers upward. Much lower monthly increases, however, of 60,000 barrels per day, characterized January and February and decreasing monthly volumes are forecasted going forward.
I believe that production will fall much sooner than either IEA or EIA suggest. IEA is giving an unduly pessimistic outlook that emphasizes production data before rig counts began falling and that downplays strong world demand data....
...no one knows what U.S. production is yet for December, January or February....
State reporting on oil production is lagged by at least 3_months...
(Excerpt) Read more at oilprice.com ...
What happens when sanctions on Iranian oil exports are lifted?
This looks like a plan to destroy the fossil fuel companies in the USA. Obama has had that as one of his goals from the beginning. That will also affect the entire economy, of course, but he will take his hidden loot and live like a king in some other country.
Iran continued to export oil during the sanctions, but was limited in their market. However, enough nations continued to buy their oil.
EIA estimates that OPEC crude oil production averaged 30.1 million bbl/d in 2014, unchanged from the previous year. Crude oil production declines in Libya, Angola, Algeria, and Kuwait offset production growth in Iraq and Iran.
I’ve read articles here in FR that oil could drop to between $10 and $20 a barrel. gas prices where I live are down again, by $.20. They’re flirting again with under $2.
When gas was $1.84, one of my local stations had that price on regular and 93 octane (what my FR-S- requires). It was a really cheap three weeks, and I go through a tank every three days. This whole thing is saving me gobs of money, with all the driving we do.
That will not happen. They will reduce production eventually with falling oil prices. And they will grow production again when oil prices climb.
If you look around, you can almost always find an article that supports prices falling by half, to doubling. And that has gone on for many years.
If folks could accurately predict the future price of oil, and when, they would not have to work for a living writing articles.
Thanks. Based on your charts, if it reverts to what it was before sanctions, we are looking at anywhere between 750K and 1m bpd more barrels of oil on the market. Given where oil prices are today, they will need those additional sales to feed the government budget.
I don’t think it will jump back up immediately. More likely a gradual rise as they recover from the lack of investment into maintaining their flow rates.
It will not be a matter of just opening a few valves.
If we get $50 oil for 5 years (bottoming out at $30 for a few months), what’s your assessment of the fallout in the US oil industry?
Yeah, it was the reasons that I thought were interesting. Glut, ridiculously low demand, etc.
We will produce less oil than we do today and import more oil from other nations, probably...
IEA’s comments on U.S. oil production trends are misleading. When IEA says “oil” they mean “liquids”
So let's look for the word "oil" in the IEA's comments shall we?
“Steep drops in the US rig count have been a key driver of the price rebound. Yet US supply so far shows precious little sign of slowing down. Quite to the contrary, it continues to defy expectations. Output estimates for 4Q14 North American supply have been revised upwards by a steep 300 kb/d.”
Just picking nits.
Those comments are from their monthly report that is titled:
Oil Market Report
https://www.iea.org/oilmarketreport/omrpublic/currentreport/
Since that is the subject of every page in the report, they really don’t need to say oil in every sentence.
You don't think process and technical advancements will lower the break-even price to under $50 for most of the existing E&P locations stateside?
I am not sure about most. But if it is 51% of our new production areas, I don’t think that will keep up with natural declines.
We certainly have significant production that will continue and even grow at that price, but not near the amount we saw over the past 4 years.
Take the Bakken for example:
https://www.dmr.nd.gov/oilgas/presentations/HENR010915.pdf
Page 49
At $55, they expect a small drop in total production, almost steady. at $45, they expect a bigger drop.
Also see page 7 at:
https://www.dmr.nd.gov/oilgas/presentations/FullHouseAppropriations010815.pdf
Correct. But my barb was aimed at the author of the article. If they are going to print such a sentence then it makes sense to include an example of what they are trying to convey.
” made the following statement in its Oil Monthly Report”
The first sentence does not cover that?
If oversupply has already been cut in half to 500k before US oil production has stopped growing— and US production growth has been shrinking fast — and oil prices are still falling thereby forcing still more closures— then its quite reasonable to say supply and demand will balance in the not distant future.
In the 1990’s oil prices went down and stayed down for a decade. Oil prices seemed to be much more inelastic than they now seem to be.
Certainly the point of the article is that oil supply and demand are moving into balance faster than is currently anticipated so while lower prices may not be unwarranted—it is also not unreasonable to guess that prices will just as rapidly turn back north when supply and demand balance.
But we’ll see.
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