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In the medium to longer term at least, I'm thinking that the only way is up.
In recent years if you look at production then for the world as a whole but excluding the US and Canada it was flat at best despite the high prices. So it was really only the US and Canada that were growing.
Now we've got a huge slump in US drilling that is already resulting in production declines, various reports suggest that production is now 0.3 - 0.5 million barrels per day below the recent peak and falling fast. Shale wells rapidly deplete, so you have to keep drilling in order to keep production up, but drilling has collapsed as the price has fallen.
For Canada it has been the tar sands projects leading to growth. But they're coming to a halt for new development since costs are high and at the present price it's just not a goer.
Then there's Shell pulling out of Arctic exploration.
Also I wonder if the VW emissions scandal will have an effect on future sales of diesel passenger cars generally? VW itself was a leader in that market but it's plausible that other brands may also see a shift away from diesel. Trouble is, petrol engines are almost always less efficient than diesel, especially when compared to VW's artificially efficient engines (one upside of the high emissions was reduced fuel consumption).
So overall it's demand rising, production falling, and a possible additional source of future demand if there's a shift away from diesel and back to petrol.
What about the Saidis etc? Well if they and everyone else is already pumping flat out then they can't easily increase production like they did in the past. Today, the Saudis are basically sitting just below their all time peak output which suggest they probably don't have too much, if anything, that could be added without spending $$$ to do so.
Anything could happen to the oil price in the short term, it could well go lower from here, but I don't see how the current price can be sustained if it's leading to falling production and rising consumption. At some point it goes up surely? When and how high - that's the hard part.
The big wildcard would be if the global economy really fell in a heap and kills demand.
Just my thoughts. Plenty of sources online relating to the situation with US shale drilling and the more recent production falls.
In recent years if you look at production then for the world as a whole but excluding the US and Canada it was flat at best despite the high prices. So it was really only the US and Canada that were growing.
Now we've got a huge slump in US drilling that is already resulting in production declines, various reports suggest that production is now 0.3 - 0.5 million barrels per day below the recent peak and falling fast. Shale wells rapidly deplete, so you have to keep drilling in order to keep production up, but drilling has collapsed as the price has fallen.
For Canada it has been the tar sands projects leading to growth. But they're coming to a halt for new development since costs are high and at the present price it's just not a goer.
Then there's Shell pulling out of Arctic exploration.
Also I wonder if the VW emissions scandal will have an effect on future sales of diesel passenger cars generally? VW itself was a leader in that market but it's plausible that other brands may also see a shift away from diesel. Trouble is, petrol engines are almost always less efficient than diesel, especially when compared to VW's artificially efficient engines (one upside of the high emissions was reduced fuel consumption).
So overall it's demand rising, production falling, and a possible additional source of future demand if there's a shift away from diesel and back to petrol.
What about the Saidis etc? Well if they and everyone else is already pumping flat out then they can't easily increase production like they did in the past. Today, the Saudis are basically sitting just below their all time peak output which suggest they probably don't have too much, if anything, that could be added without spending $$$ to do so.
Anything could happen to the oil price in the short term, it could well go lower from here, but I don't see how the current price can be sustained if it's leading to falling production and rising consumption. At some point it goes up surely? When and how high - that's the hard part.
The big wildcard would be if the global economy really fell in a heap and kills demand.
Just my thoughts. Plenty of sources online relating to the situation with US shale drilling and the more recent production falls.
