Oil price discussion and analysis

[Smurf1976]

Re: OIL AGAIN!

The Saudis reckon they can knock our 12.5m barrels a day if they have to, when the market turns. I think they will have to do that and more, as unconventional oil is presently too expensive and monies to ramp output are not being invested.

Worth noting that they have claimed 12 - 12.5 mmbpd capacity for around three decades now and have never actually produced at that level, at least not for any significant period, according to accepted data sources.

Even more worth noting that Saudi output during 2007 and 2008's high prices was lower than in 1980 and well below the claimed 12.5 million barrel per day capacity.

So I'd say that if they really do have that capacity then either there's some technical reason why they don't want to use it (can't be sustained, poor quality oil, ports can't handle the volume etc) or they've decided that $145 per barrel was not a high enough price to warrant that level of production.

My personal thinking is that this is their capacity to export from all sources which includes drawdown of above ground stocks. That is, they can ship 12.5mmbpd but the amount taken from the ground would be lower. So in effect it's the capacity of the ports and not the capacity of the oil fields.

That observation is simply based on the evidence that, for whatever reason, they have never appeared to want to go to that level and that whenever production approaches 10.0 mmbpd it is soon scaled back even if prices and demand are still rising, a scenario that points to them not being able (or willing) to sustain output at that level no matter what the market situation at the time.

Time will tell but I'll be truly surprised if we see Saudi production average more than 10.0 mmbpd over any calendar year. If they really do have the capacity then they've been incredibly disciplined at not using it thus far.

 

[gooner]

Re: OIL AGAIN!

Worth noting that they have claimed 12 - 12.5 mmbpd capacity for around three decades now and have never actually produced at that level, at least not for any significant period, according to accepted data sources.

Even more worth noting that Saudi output during 2007 and 2008's high prices was lower than in 1980 and well below the claimed 12.5 million barrel per day capacity.

So I'd say that if they really do have that capacity then either there's some technical reason why they don't want to use it (can't be sustained, poor quality oil, ports can't handle the volume etc) or they've decided that $145 per barrel was not a high enough price to warrant that level of production.

My personal thinking is that this is their capacity to export from all sources which includes drawdown of above ground stocks. That is, they can ship 12.5mmbpd but the amount taken from the ground would be lower. So in effect it's the capacity of the ports and not the capacity of the oil fields.

That observation is simply based on the evidence that, for whatever reason, they have never appeared to want to go to that level and that whenever production approaches 10.0 mmbpd it is soon scaled back even if prices and demand are still rising, a scenario that points to them not being able (or willing) to sustain output at that level no matter what the market situation at the time.

Time will tell but I'll be truly surprised if we see Saudi production average more than 10.0 mmbpd over any calendar year. If they really do have the capacity then they've been incredibly disciplined at not using it thus far.

Smurf1976

I agree with your analysis as I do not think they are that disciplined.

Peak oil is coming (or is here) and we better get used to it

 

[Smurf1976]

Re: OIL AGAIN!

Peak oil is coming (or is here) and we better get used to it

High oil prices in the recent past resulted in only very slight production growth.

Given the fall in oil prices has made many projects uneconomic (the small and hard to get ones that were the only thing pushing total output up) and the financial crisis has made financing even the better projects much harder, I think it's fair to assume that total world production capacity would trend down once the effects of all this flow through to actual wells in production.

Given that scenario, which I do think is what's happening, we've just passed at least an interim peak in oil production that won't easily be surpassed.

 

[Wysiwyg]

Re: OIL AGAIN!

It's unbelievable to me that the Australian government is not doing something serious about Peak Oil, eg implementing a hydrogen economy.

Either there isn`t any near to medium term oil problems or the powers-that-be are blind to any near to medium term oil supply problems. I can`t believe it is the latter. Especially the Americans.

And I'll buy everyone on here a beer if I can't make at least a 1000% return over that time on my oil trades!

Ha! Profits should cover the higher fuel costs then. :

 

[Smurf1976]

Re: OIL AGAIN!

Either there isn`t any near to medium term oil problems or the powers-that-be are blind to any near to medium term oil supply problems. I can`t believe it is the latter. Especially the Americans.

In my opinion the "is there a problem" debate has been settled and the answer is "yes". The world didn't produce enough oil at $20 to keep prices at that level in the face of surging consumption - that in itself is a problem.

 

[Wysiwyg]

Re: OIL AGAIN!

In my opinion the "is there a problem" debate has been settled and the answer is "yes". The world didn't produce enough oil at $20 to keep prices at that level in the face of surging consumption - that in itself is a problem.

I see what you type Smurf but Chinese new car sales are out pacing the Americans at present which doesn`t indicate any government concern about lack of oil. Jobs and money is of far greater importance if there is a real oil problem.

Over I million cars in March this year!

Published: April 14, 2009

New York, NY, United States, — For three months in a row China has sold more cars than the United States. According to statistics released by the China Association of Automobile Manufacturers, the country’s March new car sales reached a record of 1.11 million, compared to the United States’ 858,000, making China the world’s largest automobile market, at least for the time being.

Second, rising car ownership is not good news for China, which already is heavily dependent on foreign oil. Not only does the oil come from the Middle East and travel over sea routes controlled by the U.S. Navy, increasing gasoline consumption in China is likely to drive up oil prices again in the international market. Eventually, drivers as well as ordinary consumers will feel the pain caused by skyrocketing fuel prices.

Can you pinpoint why any of these large countries are adding more and more fuel guzzlers to the world if there is an oil supply problem? Thanks Smurf.

 

[gooner]

Re: OIL AGAIN!

I see what you type Smurf but Chinese new car sales are out pacing the Americans at present which doesn`t indicate any government concern about lack of oil. Jobs and money is of far greater importance if there is a real oil problem.

Over I million cars in March this year!

Can you pinpoint why any of these large countries are adding more and more fuel guzzlers to the world if there is an oil supply problem? Thanks Smurf.

wysiwyg

The issue is that China is much more free market now, so if the punters want cars, they get cars. Governments tend not to interfere in these decisions. The GFC choked off some demand so oil price fell. But as demand rises and given inelasticity of oil price, the price will start going through the roof

 

[Wysiwyg]

Re: OIL AGAIN!

But as demand rises and given inelasticity of oil price, the price will start going through the roof

This consumption chart (someone may have better) shows, there is a steep rise for the Chinese. With car sales presently going beserk then we can expect this rise to be massive AND immediate!

China's frightening consumption rise from chart C8 is made clearer when it has its own scale. An increase of 3,328%, from 0.08 Gb in 1965 to 2.72 Gb in 2006. It is frightening to extrapolate into the next decade.
Source: BP

 

[lsj84]

Re: OIL AGAIN!

China remains as a wild card. The past years growth was mainly driven by the export led activities. around 50% of the products made in China are sold overseas, of which 1/3 is to the US. domestic consumption is weak and remains weak until the gov. can dish out a proper welfare system. Car sales growth wont be sustainable if there is no more roads to be built as quickly.

but with money printing going on in the US, there is a fundamental support to the oil price. but in aussie terms, oil price remains calm, which may not be relevent to the stock prices though.

 

[jonojpsg]

Re: OIL AGAIN!

I see what you type Smurf but Chinese new car sales are out pacing the Americans at present which doesn`t indicate any government concern about lack of oil. Jobs and money is of far greater importance if there is a real oil problem.

Over I million cars in March this year!




Can you pinpoint why any of these large countries are adding more and more fuel guzzlers to the world if there is an oil supply problem? Thanks Smurf.

The problem is that most, if not all, governements don't look more than a few years ahead. Agreed the Chinese might look further ahead than most given their centralised government, but the issue still stands. People want to drive around, they need affordable cars, and at this point the only way car makers can make cheap cars is petrol power. The crunch is coming, they (governments) just put their heads in the sand ala GFC.

 

[Smurf1976]

Re: OIL AGAIN!

I see what you type Smurf but Chinese new car sales are out pacing the Americans at present which doesn`t indicate any government concern about lack of oil. Jobs and money is of far greater importance if there is a real oil problem.

Over I million cars in March this year!

Can you pinpoint why any of these large countries are adding more and more fuel guzzlers to the world if there is an oil supply problem? Thanks Smurf.

If the roof blows of my house tomorrow then I have a rather big problem. That I took shelter in the garden shed doesn't change the fact that I've still got a rather big problem with the house.

What most don't realise is that oil has become increasingly uneconomic for many uses. The roof has been coming off piece by piece for the past 35 years and by 2007 even those in the basement realised something was happening.

It's no longer economic to heat the house, run industry or generate electricity from oil, all of which were once major uses of it that have since been abandoned. Now it's getting expensive to run transport but we don't have an alternative for that one.

Whilst switching to alternative heating, boiler fuel etc softened the blow, the reality is that we didn't use them in the first place because oil was better and/or cheaper. The world didn't spend a fortune on polluting, dangerous and/or controversial coal, nuclear, hydro and wood energy systems for the fun of it. It was done because oil could no longer economically perform that role and alternatives were urgently needed.

The world has an awful lot of huge coal-fired power plants that came online in the 1980's. Likewise there's still a lot of oil-fired plants sitting around that haven't regularly run since those coal-fired plants came online. That was a fairly direct swap along with plenty of nuclear and some hydro plants.

Closer to home, we had the debates about uranium and hydro dams. Uranium to fuel an international switch from oil to nuclear. And the most controversial dam ever proposed in Australia was for the specific purpose of switching household heating and industrial fuel in Tasmania from oil to electric. The dam wasn't built, industry went almost exclusively to coal and households went largely to wood, the latter at massive cost in terms of urban air pollution.

Oil was easier than all of those. As long as it's not spilled into the water, it's a lesser evil environmentally than most of the alternatives. No flooded valleys, no radioactive waste, no mountain tops chopped off and, compared to wood, minimal air pollution when it's burned. Add to that it's easy to transport and store and that's why we relied so heavily on it in the first place.

That we keep going with petrol-fuelled vehicles is due to two reasons. We don't have a low capital cost alternative that can be rolled out on a large scale. Even if the roof comes off, you'll likely stay in or near the house if you have no alternative place to live.

And it's for the same reason people bought dot.com stocks in 1999 or speculative shares in 2008 - most people do not realise what's going on and governments aren't about to tell them until it becomes undeniable as with every other foreseeable disaster. It's profitable to sell SUV's today and nobody's stopping anyone from doing that.

 

[Wysiwyg]

Re: OIL AGAIN!

Oil was easier than all of those. As long as it's not spilled into the water, it's a lesser evil environmentally than most of the alternatives. No flooded valleys, no radioactive waste, no mountain tops chopped off and, compared to wood, minimal air pollution when it's burned.

Thanks for your input.
Two things on this that I think you over-looked and they be 1) the environmental impact with oil e/p i.e. land & sea clearing for e/p, the fracturing fluids (oils/acids/polymers).
and 2) the derivatives, mainly petrol and diesel, when burnt emit toxic fumes which are both visible and invisible and from a daily global view would have to be the largest air polluter. Also oil burns a thick, black, acrid smoke and a good example was the wells in Iraq set alight during the wars.

$$

 

[Smurf1976]

Re: OIL AGAIN!

Thanks for your input.
Two things on this that I think you over-looked and they be 1) the environmental impact with oil e/p i.e. land & sea clearing for e/p, the fracturing fluids (oils/acids/polymers).
and 2) the derivatives, mainly petrol and diesel, when burnt emit toxic fumes which are both visible and invisible and from a daily global view would have to be the largest air polluter. Also oil burns a thick, black, acrid smoke and a good example was the wells in Iraq set alight during the wars.

$$

Agreed that oil pollutes. But I've seen what happens when households switch from oil to wood. The end result is the cleanest air in the country becomes officially unsafe and far worse than Sydney's.

If you want to see what household use of wood does then here's a photo of Launceston about a decade ago. It was clean before wood replaced oil (and it's getting clean again now with the switch from wood to electric).

 

[sandybeachs]

price of oil again moving up US$59.53bbl

i'm sure plenty of investors are happy with seeing the POO increasing.

short term i'd like to see it settle around US$80bbl.

 

[weatherbill]

Re: OIL AGAIN!

price of oil should continue on a slight path up in price this season.

I think it take s abreak this spring and comes back down after us travel season is over and more financial woes are announced in a october.
aug sept is hurricane season in US and sometimes, oil spikes if a gulf of mexico hcane takes out oil refineries and platforms

 

[trendtrader]

Re: OIL AGAIN!

Any technical traders think thats a double top forming on oil???

 

[MRC & Co]

Re: OIL AGAIN!

Sheesh! Is this oil sell-off a result of the G8 committment to reduce emissions? It's the only thing I can think of.

 

[Naked shorts]

Re: OIL AGAIN!

Sheesh! Is this oil sell-off a result of the G8 committment to reduce emissions? It's the only thing I can think of.

I think deflation sentiment is coming back a little bit, Gold has fallen recently aswell

 

[MRC & Co]

Re: OIL AGAIN!

I think deflation sentiment is coming back a little bit, Gold has fallen recently aswell

Ah yes, sorry, I mean just the open of tonight in the pit.......

 

[Trembling Hand]

Re: OIL AGAIN!

Sheesh! Is this oil sell-off a result of the G8 committment to reduce emissions? It's the only thing I can think of.

Some good volume last night. As many contracts traded as on the 1st when the busting of the rouge trades took place.

Probably just the busting of the trades put on following the busting of the rouge trades which caused the false break. :