Global Oil to Cut Spending by $130 Billion, OPEC Says

Wall Street Journal ^ | Oct. 6, 2015 | BENOÎT FAUCON

[thackney]

Global oil investments are set to be slashed by a staggering $130 billion this year, crimping supplies and ultimately boosting prices, OPEC’s chief said Tuesday, and added that he was open to discuss the current oil market turmoil with the U.S.

The remarks come as many members of the Organization of the Petroleum Exporting Countries have been running deficits as they fight for market share against American tight oil instead of oil prices.

Speaking at the Oil and Money conference here, OPEC secretary-general Abdalla Salem el-Badri said global investments in petroleum projects will be reduced by 22.4% to $521 billion in 2015. “Less supply in the very near future. Less supply means high prices,” he said.

Also speaking at the conference, Fatih Birol, head of the International Energy Agency, which represents oil consumers, also said he expects that expenditure will fall by 20% in 2015, “the highest drop in history.”

Mr. el-Badri said oil consumption was also receiving a boost from lower oil prices—with global demand seen rising by 1.3 million barrels a day next year.

[billyboy15]

How will this help the Saudi’s? If they cut supplies and prices rise (as they will) this makes fracking again profitable and the supplies will again increase driving down the prices.

The technology of fracking is with us forever and can and will only get more efficient thereby the cost of obtaining the oil.

Barring some world wide catastrophic event we will never again see $100 bbl oil.

[The Working Man]

Barring some world wide catastrophic event we will never again see $100 bbl oil.

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In a sane world you might be correct. But we do have inflation to take into account here. So it’ll be over a $100 per barrel again. It’s just a matter of time.

[thackney]

Saudi’s have been drilling more during this slow down. They are getting better positioned for the future production needs.

[Vince Ferrer]

China is in recession, Europe isn't doing well, and there is innovation on the demand side like more efficient cars, self driving cars, road trains, ride sharing services, and electric cars that exist or are about to become reality in the marketplace. The demand for oil is near its peak, at least in the US. Cutting production will become necessary in an era of declining demand, and it won't create the same kind of price spike that a cut in the 1970s did.

[lacrew]

Oil’s cost is not necessarily reflective of what it cost to bring out of the ground...more reflective of the value of our currency.

All this imaginary QE money will someday cause inflation - likely when the economy starts to improve, and there’s a demand for goods.

We’ll see $100 oil....we’ll see $150 oil.

[thackney]

The demand for oil is near its peak, at least in the US.

Wishful thinking...

http://www.eia.gov/forecasts/steo/report/us_oil.cfm

Total U.S. liquid fuels consumption is projected to increase by 340,000 b/d (1.8%) in 2015, up from an increase of 140,000 b/d (0.8%) last year. U.S. consumption has been stimulated by continuing employment and economic growth and lower petroleum product prices.

Consumption growth in 2015 is led by motor gasoline, which increases by 190,000 b/d (2.1%) following growth of 80,000 b/d (0.9%) in 2014. Forecast gasoline consumption averages 9.1 million b/d in 2015, the highest level since the peak of 9.3 million b/d in 2007. Although total nonfarm employment and total highway travel have increased by 2.9% and 3.4%, respectively, over the past eight years, improving vehicle fuel economy has steadily contributed to lower gasoline consumption. Gasoline consumption is forecast to remain flat in 2016, as a long-term trend toward vehicles that are more fuel efficient offsets the effect of continued economic growth on highway travel.

Jet fuel consumption, which grew by 40,000 b/d in 2014, is forecast to rise by 60,000 b/d (3.8%) in 2015. Forecast jet fuel consumption is roughly flat in 2016, with improvement in average airline fleet fuel economy offsetting continuing growth in freight and passenger travel.

Consumption of distillate fuel, which includes diesel fuel and heating oil, is forecast to fall by 30,000 b/d (0.7%) in 2015 and then increase by 50,000 b/d (1.3%) in 2016. The 2016 growth is driven by increasing manufacturing output, foreign trade, and marine fuel use.

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And price is based upon the global commodity. Oil is fungible and we still import a lot of it. Global oil demand continues to grow. The growth rate slowed down, but continues to grow larger.

[billyboy15]

I suppose I should have included that what I meant is we won’t see $100 oil based on TODAY’S purchasing power of the dollar.