The Oil Drum: Europe

In terms of absolute numbers, I agree that stocks are quite high AND it is evident that other liquids, like NGLs, are playing an ever increasing role in stemming the tide.  But my sense of NGLs is that they can fall off very preciptously and make the gap filling situation much worse.  

Since mid-2004, gasoline has been devalued compared to the oil price.  Maybe there is a price decoupling that occurs at around $40/bbl that also has to do with the relative value of US currency.  I don't know, other than it sure is "there" when I look at the normalized graphs of price data for gasoline and oil in the US.  

In the US, the non-SPR stocks of oil are much higher than the lows of early 2001 and the period between 2002-2004 and other historical, same-week tendencies.  However, they are also lower (by over 11 million barrels) than the 2006 high week of June 16th.  Also compared to those historical lows, the current non-SPR stocks are only about two "extra-days" of supply at current usage rates.  

It's not surprising that prices become sensitive to stock volumes when things start getting cloe to razor thin margins for error.  Look at the market reaction to changes in stocks that could be measured in minutes to a couple of hours of consumption.  It's entertaining, in a sense (or maybe as a recovering ChE, I'm just easily entertained).  But it is also illustrative of what happens as the dampening action of the supply chain is slowly removed.

I invited Mike to do a guest post - and I think he agreed - so hopefully in a week or two.

And his best case scenario still has us at a 10+mbd supply deficit by 2020.

Euan,
Its not that subtle! Luis' article states his model includes NGL.  If liquids exports are declining now importers will have to reduce demand now.  This is a supply deficit now, not 2012-2015.  Maybe the discrepancy disappears if Iraq, Angola, and Nigeria are added in.  Anyway, I guess we'll know sooner than later...

There might be a downward trend if there are no hurricanes dirupting production, or flare ups in ME violence, or panic because it becomes obvious to everyone that Saudi production is flaging, or 30 something hedge fund speculators get squashed like cockroaches beneath a puritan's shoe
Its always a gamble unless you're the house.

The SA production figures point to production of ~11.3Mbpd currently, whereas I keep seeing reference to current production being ~9.5Mbpd. I know there are many ways to play with statistics, but which is more correct for this calculations?

Both numbers are correct: 9.5 mbpd is Crude + Condensate (C+C) and 11.3 mbpd includes NGL.  

Peak of what? Exactly. Isn't that the whole point? The whole point.

I would quote JKIssing's "mists" comment, but you already did. It will bear repeating. It will bear repeating. It's F'ing brilliant.

The whole point.

At the moment the peak is hiding in the mists.

Peak of what?

Exactly the point, I think. The peak is hiding in the mists. It's not today or in the past but sometime in the future. Finding just when that might be is an important part of TOD's collective mission, but the actual date depends on peak what, how much non-conventional oil is included and from what sources, and the methodology used to estimate remaining reserves. I'm sure I've missed other factors, but we have estimates here ranging from 2009-2015 to some time in the 2030s.

I and my kids can expect to be here throughout that time. If Euan is right, we don't have 10 years to plan. If CERA is right we do. But regardless, we and (especially) our political leaders have to get on it.

Well, sorry if I was on the wrong thread.  I always enjoy your research and posts, hope you keep them up.

First, all liquids agree with crude + NGL... so far, first 8 months is 130k/d behind 05.  BUt, jul/aug surged above the first six months avg by 1Mb/d.  If all liquids continues at this rate, 06 will be higher than 05, there will be no indication there is a problem.  The world will relax, suv's will remain the weapon of choice.

Second, the 3q surge in all liquids production fully explains the huge increase in storage and the crude price decline.  No doubt the saudis look at ethanol/tar sands as exactly the kind of substitues they've been worrying about - now they have to cut production to accommodate not just traditional hydrocarbons but the production growth in ethanol, too.

Third, while many at tod are focused on crude + NGL (how to put ethanol in the curves?), the world is focused on what they can put in their tank, and don't much care whether it is, or is not, essentially a conversion of ng to liquid fuels such as ethanol and tar sands.  The world will not be listening to tod if crude drops to 40Mb/d and all liquids increases to 100Mb/d, and will not be listening to naysayers that maybe in 20 years there is a ng problem.  So, in both a real and political sense, all liquids is where the action is and always will be.

SAT hit it, no doubt about it.  If he put his money where his mouth is, he might be too rich to bother with any more predictions. I do wonder what his charts saw back in aug... IMO, oil is down because all liquids jumped in jul/aug, probably sep too, for probably the highest q ever, and it was this, or the resulting high stocks, that has driven oil far below the three year trend. Hard to believe his aug charts had much to say regarding 3q production. But what do you think?  And, if SAT gives us another prediction, will you put up your money?

I never tire of making a fool of myself.  What about you? Do you have an opinion of what is going to happen over the next few months? And, if so, what do you think? You can't win if you don't play. Aren't you envious of SAT's current pile of TOD chips?  I am.

I think that OPEC cuts are real and will bite, but maybe only to the extent that they take off the table about the 1M/d that has recently been added to all liquids.  If the latter, and stocks remain high, then I think prices will remain under or around 60. However, (still waffling), I also think that opec will continue cutting until they get the desired result, which imo is mid 60's NYMEX.  So, my guess is another cut by year end (already threatened) and that this will ultimately do the trick, meaning 65 by Feb.  I also think, as I posted before, that we might see russia quietly reduce output, maybe about the same as SA, which would jolt the market if it came about. And, while I do think SA output is falling in spite of a major effort, and that opec cuts might be masking additional unintentional declines, the cuts will clearly take them below their current capacity.

I do not put money on commodity futures, so my opinions of crude future prices have no risk.  Since I bought into PO in dec 04 I have been long US E&P's, never short, exclusively ard/gpor/gmxr since mar 05*.  My attempts to time these stocks (eg move from ng stocks to oil ones when I think oil will outperfrom ng, my strategy since mar 06) have been iffy at best.  05 was my banner year, on account of ard/gmxr warrants.  I am up modestly in 06, but it is worth noting that right now, exclusively in oil stocks and with oil at 55, I am just below peak. I remain modestly bullish through mid-jan, when reserve reports come out, but will prabably halve my oil exposure at that point because my wife is set to retire mid-year.

No matter what, OPEC is back to life, helping save a bit for somebody's future suv and delaying global warming.  Many here, including me, had written their obit.

GOod luck with your fishing trip, sorry I can't join, don't like to fish.  And, I'll be learning hula dances in Hawaii for the next two weeks.  However, I recommend staying away from Alberta...

* As an aside, I originally thought that my formula would stop selecting these stocks as share price, and the number of shares, went higher.  However, for ard/gpor, earnings and reserves have increased fast enough that these two are still ranked far and away at the top of US e&p's, and even as their EV has gone up around 5x.
Good luck to all investors...

I think Simmons has a much larger personal portfolio to manage - could eat into his time.

I do think a lot of people here miss just how involved Simmons really is in these debates. This is not casting aspersions in any sense, it is just that Simmons is not exactly an uninterested observer, he is instead one of the players.

And he seems to be quite, quite concerned. Again, that may have something to with his personal portfolio, and how to best handle it.