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The Long Term Impact Of The Oil Rig Crash

(oilprice.com) The North American Baker Hughes Rig Count came out Friday. The decline continues. Baker Hughes gives an oil and gas breakout for every basin and state with five years of historical data. Baker Hughes has twenty eight and one half years of historical data for total U.S. rigs but only five years for individual basins. Gas rigs peaked in August 2008 at 1,606 rigs, over six years before the peak in Oil rigs. On February, 26, gas total U.S. gas rig count stood at 102, a decline of over 93 percent. A closer look at the total U.S. total rig count.

October 10, 2014 1,609 rigs
February 26, 2016 400 rigs
Percent decline 75 percent

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Oil Prices Should Fall, Possibly Hard

(Forbes) Oil prices should fall, possibly hard, in coming weeks. That is because fundamentals do not support the present price.

Prices should fall to around $30 once the empty nature of an OPEC-plus-Russia production freeze is understood. A return to the grim reality of over-supply and the weakness of the world economy could push prices well into the $20s.

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bakken production
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Shale Oil Industry Announces Production Declines Across the Board

(The Fuse) The U.S. oil industry seemed to be defying gravity in 2015, keeping oil production elevated even as oil prices crashed to lows not seen in more than a decade. But now, over 1.5 years into the price collapse, production declines in shale oil are finally starting to appear as low oil prices have slashed company investments in new supply, and production begins to decline from existing wells.

The latest data from the EIA shows that U.S. output is steadily declining, although perhaps at a slower rate than shale’s competitors might prefer. In December, the latest month for which final data is available, total U.S. production declined to 9.26 million barrels per day (mbd), a loss of 43,000 barrels per day from the month before and down from a peak of 9.69 mbd in April 2015. But December’s small decline hides the decrease in shale production, as losses were offset by output increases from the Gulf of Mexico.

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IEA: oil prices have bottomed out, but growth will not be sharp

(Reuters) Global oil prices appear to have bottomed out and are expected to rise through this year as investment cuts help to reduce a supply glut, a senior analyst at the International Energy Agency said on Tuesday.

Benchmark Brent crude futures LCOc1 were up 44 cents at $37.01 a barrel at 1304 GMT (06:04 EST), the highest in eight weeks. They hit a more than 12-year low of $27.10 on Jan. 20.

“Oil prices appear to have bottomed out,” Neil Atkinson, the new head of IEA’s oil industry and market division, told a seminar in Oslo.

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Billion-Barrel Stockpile May Take Years to Clear

(Bloomberg) Even if Saudi Arabia wins its struggle with U.S. shale producers over market share, it will face a new billion-barrel adversary.

It won’t be regional nemesis Iran, a resurgent Iraq or long-standing competitor Russia. The answer will be more prosaic: Even when overproduction ends, a stockpile surplus of more than 1 billion barrels built up since 2014 will remain, weighing on prices. Inventories will keep accumulating until the end of 2017, the International Energy Agency forecasts, and clearing the glut could take years.

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Cushing-oklahoma-tank-farm
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What Really Controls Oil Prices?

(Forbes) World oil prices are controlled by the amount of crude oil stored at Cushing, Oklahoma. That’s because Cushing is the pricing point for WTI (West Texas Intermediate) oil prices, the most-traded oil futures contract in the world.

Cushing Storage Rules World Oil Prices.

WTI (and Brent) oil prices have good negative correlation with the volume of crude oil stored at Cushing.

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U.S. shale’s message for OPEC: above $40, we are coming back

(Reuters) For leading U.S. shale oil producers, $40 is the new $70.

Less than a year ago major shale firms were saying they needed oil above $60 a barrel to produce more; now some say they will settle for far less in deciding whether to crank up output after the worst oil price crash in a generation.

Their latest comments highlight the industry’s remarkable resilience, but also serve as a warning to rivals and traders: a retreat in U.S. oil production that would help ease global oversupply and let prices recover may prove shorter than some may have expected.

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Why Oil Booms And Busts Happen

(oilprice.com) What if I told you that there was a period in history where oil demand declined by 5 million barrels per day and non-OPEC supply increased by 5 million barrels per day, yet oil price rallied more than 50 percent? Would you believe me?

If your answer is yes, then you guessed right. This was the period from 1979 to 1985; it was a period during which global oil demand declined from over 61 million barrels to 56 million barrels and non-OPEC supply increased from 32 million barrels to 37 million barrels. Yet prices rallied from $17 a barrel in 1979 to $26 a barrel in 1985, while reaching as high as $35 in 1981.

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JODI World C+C
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Oil Price And Its Effect On Production

(peakoilbarrel.com) The JODI Oil World Database came out a few days ago. The data is through December 2015. The JODI C+C production numbers differs somewhat from the EIA numbers. The JODI OPEC numbers are crude. Also there are a few very small producers that do not report to JODI so their numbers will be slightly less than the EIA. But otherwise they are pretty accurate.

Also, JODI, for some reason, does not count all of Canada’s oil sands production. So for Canada I use Canada’s National Energy Board numbers instead.

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Category:

Why Oil Fell To $30

(Forbes) One of the questions I am most frequently asked is “What factors led to the precipitous drop in oil prices?” Some have suggested that this is all OPEC’s fault, while others have blamed either surging U.S. shale oil production or falling demand.

I addressed the demand issue back in December in The Fallacy of Peak Oil Demand . To summarize, since 1983, annual global demand for crude oil has only fallen twice; a small decline in 1985 and another decline in 2009 in response to the financial crisis. The growth rate for crude oil has been remarkably consistent, adding an average of almost exactly a million barrels per day (bpd) for more than 30 years.

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