Enlarge GraphPosted on 08/21/2014 4:09:40 PM PDT by ckilmer
First, here’s a quick look at my expectations for oil supply and demand. Currently, oil prices remain elevated because global demand has continued to climb, despite slower growth in China (FXI), and supply overall has been unexpectedly constrained by both geology and geopolitical unrest. Looking forward, oil supply is likely to remain constrained and oil demand is likely to continue to grow.
Oil supply: There’s a good chance that future oil supply may be tighter than expected. Currently, oil prices remain in a somewhat precarious balance, supported by a long-term rise in North American production, but at the mercy of falling production and exports in much of the Middle East and Africa.
However, U.S. production growth is likely to decelerate in the coming years, placing more of a burden on OPEC, where rising geopolitical risks put supply increases in jeopardy. In other words, at a time when stable North American production will be decelerating, there will be an increasing call on production from the most unstable parts of the world, particularly Iraq. This in no way suggests that the world is somehow “running out of oil,” but it does mean that given the low likelihood of a clear resolution in the Middle East, supply is likely to disappoint.
Market Realist – The graph above shows the forecasted estimates of U.S. crude oil production (XOP). The estimates are provided by the U.S. Energy Information Administration (or EIA). According to the EIA, the total crude oil (XLE) production in the U.S. is expected to increase from 7.4 million barrels per day (or bpd) to 8.4 million bpd in 2014. It’s expected to increase to 9.3 million bpd in 2015. The rate of increase is expected to fall after 2015.
According to Russ, the fall in production of U.S. oil (USO) can be attributed to the increasing amount of supplies. This requires a higher breakeven price, increased concentration of cash flow instead of acquisition of new acreage, and decreased resource estimates on undeveloped shale plays.
The constraints on supply could strengthen energy prices. This would make the energy sector a good investment opportunity compared to other U.S. equities (SPY).
I’m not buying the EIA’s estimate of flattening supply increase after the end of 2015 and the topping of US production at 9.4 million barrel’s @ day.
Unless lower prices chop back drilling, production increases from 2016 through 2019 are will likely be at least 700,000 barrels @ day annually. That number may rise to 1 million barrels@ day increase annually 2016-2019—if the Permian basin production keeps rising ever faster.
Idiotic article. First, production is rising (thanks, fracking!). Second, demand growth is constrained by hybrids and electrics and more efficient ICE’s.
Third, Shell/Pennzoil is converting natural gas into a million tons of oil per year in Qatar, and new companies are bringing room-temperature natural gas into liquid ethyline/gasoline conversion plants online...and natural gas is essentially limitless for our current lifespan (Syluvia?).
Long on oil?
Can you please provide a reference for the Shell/Penzoil claim. Where are they getting all this natural gas? thank you.
My thought too.
The curve on the graph can be improved, for the U.S. outlook, by very large initiatives in very large conversions, and new productions, for engines consuming natural gas. The cost is not even great measured against what looks like higher gas/diesel prices at the pump in the U.S.
It’s already happening and the ground freight industry is leading the way. They are a business sector and as businesses they, before the consumer, are planning ahead and trying to cut costs too. With natural gas having a price advantage of $1 per gallon on an energy equivalent basis, they, the freight industry is willing to make the first wave of large scale moves to natural gas, before consumers, because they have a business need to cut fuel costs.
And they are doing it.
“Leading truck manufacturers including Freightliner, International, Kenworth, Peterbilt, Mack and Volvo all offer natural gas trucks using Cummins’ ISX 12G engine, which one major fuel supplier hopes will be a “game changer” for the industry.” [see link below]
And now Shell is going to build a network for natural gas refueling at truck stops along the Interstate Highway system (they’ve been reading my posts). Shell won’t be the last one doing that. THAT will be the “game changer” in bringing along the automobile owners, as it will assure them that they will be able to get refueling for themselves when making long distance trips form home - a current issue for a natural gas fueled car owner.
As natural gas refueling gets more populated across the Interstate Highway system, more autos using natural gas will follow.
http://www.reuters.com/article/2014/08/21/lng-autos-usa-kemp-idUSL5N0QR1AQ20140821
Get real. If anything the demand is dropping. The US is drilling unprecedented amounts of oil. China is slowing down as is Russia and most of the rest of the world. The EU is in depression as is the US even though the govt lies about it. 93 million people out of work are not driving too much.
What BS...
Sounds like that 1973 National Geographic article I run across sometimes.
Fascinating.
Crap, to be sure. If I had paid any serious attention to the market bs posted on Free Republic, I would be much poorer than I am now.
Seriously, it’s a bane on the website. A whole bunch of so-called reliable sources ought to be banned.
JMHO
What’s the historical accuracy rate for EIA estimates?
My experience with government is that it’s no better than random chance at estimating the future.
You mean to say you don’t believe we are going to become energy independent at the current consumption rates?
You also mean to suggest that fracing source rocks and depleted reservoirs will not result in endlessly high production rates?
I’ll be dashed. Knock me over with a feather.
You mean to say you don’t believe we are going to become energy independent at the current consumption rates?
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current consumption is relatively flat. we will become energy independent by great expanding production. energy independence won’t take that long either. about 5 years.
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You also mean to suggest that fracing source rocks and depleted reservoirs will not result in endlessly high production rates?
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from the beginning of the production of oil back in the mid 19th century, the total oil that has been taken out of the ground has been only about 5-10% of the oil that’s commercially available. New techniques and higher prices are enabling drillers to take another 5-15% of the oil out of the ground. As the technology improves that percentage will go up. If prices and demand stayed high they drillers could go on high production rates for another 30 years or so.
However, the end of the oil age is in sight. 10-15 years from now demand for oil will decline and so will the price and so will drilling.
much of the oil in the ground will remain there.
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I’ll be dashed. Knock me over with a feather.
What’s the historical accuracy rate for EIA estimates?
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The EIA has been raising their estimates for oil & gas reserves and production increases every year
Well, one of us may be right but I don’t share your views.
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