OPEC, for some quiet moments..

[kommonsents]

Perhaps the well read, power posters on this board could share their views.  I would appreciate your views.

I'm seeing a confluence of events which could very soon lead to a perfect storm scenario limited to the USA IF Congress and the POTUS do not very quickly pass legislation to expand the right to export crude oil.  Some of these events are.

1.  US crude production is continuing to increase.

2.  Exporting of unprocessed or unrefined crude products is essentially banned in most cases, keeping most of the crude in the USA.

3.  Onshore storage capacity is about full.

4.  Many independents hedge their production 1-3 years out.  So that was done at much higher prices before the collapse and will take that long to unwind.  So at least that amount of volume will be producing no matter what the market price.

5. Much of the US production is light oil due to the advancement of shale drilling and horizontal wells.  However, US refineries were built to handle heavy crude which accounted for the majority of oil at that time.  So light crude  must compete for limited light crude refinery access if it can't be exported.

6.  Reportedly there are 3000 onshore wells that were drilled and cased, but not completed.  In most cases completing the well does not require a drilling rig to perforate and conduct up to ~30 separate frac treatments per well.  These wells may start off near 1000 BOPD and can be completed in ~a month.  Industry is continually advancing the performance of these wells so that initial rates are higher than e.g., 5 years ago, and decline rates are lower and recoveries are higher.  Nothing is stagnant in this business.  So projections or production capacity are easily under estimated by experts.

7.  Because of the longer field lives in deepwater (up to 50 years) these projects ignore these cycles and just keep moving forward as long as there is cash to invest.

One counter point is news of the US gov't buying 5 Mln BBls to refill the strategic petroleum reserve.  So that's ~1/2 day of US production.  No impact in my view.

Another counter point is that summer is approaching and consumption of fuel will pick up.  Strikes at oil refineries will end.  But reportedly these plants are already at the high end of their capacity.  So maybe not much more can be processed.

So in the very short term IF the Feds don't allow the crude oil to leave the country very soon, we could soon be drowning in it.  I can see domestic crude prices plummeting when there is no place to put it and a lack of customers to consume it.  And how will futures prices work?  IF there is no place to put these excess future deliveries and no one to sell it to, what will happen to those prices?  Could there be mass exodus and price collapse?  I.e., well under $30/bbl as is my current prediction since January?

The Feds say they are just now drafting legislation.  But what will POTUS do?  Part of me thinks his leftist thinking is to try and kill the domestic oil and gas industry, just as he helped do to the coal industry with his EPA executive orders helped of course by a slow steel industry (big met coal consumer) and lower cost competing, clean natural gas.  This would please many of his supporters and give him an opening to press harder for renewable energy.  The tradeoff here might collapse the economy but I don't think that concern would stop him as basded on his track record he seems to be heaviliy ideology driven to transform the nation into something else.

Would appreciate if you could keep your ODS garbage off this board. Thanks.

OK, I give up, what is ODS?  it really doesn't take much more effort to spell it out so we actually know exactly what you are talking about, that is unless you don't want us to know.  But, I really want to know what ODS is.

And what makes it garbage?  Is that because someone else wrote it?  Or because it is political in your opinion?  Please explain so we know what your point is.

Is this a political opinion?

Or are you just trying to make a PC statement unsuccessfully?  Really confused here.....

I really want to understand.

[Kaliboo]

AU74 Wrote;  [/quote] Would appreciate if you could keep your ODS garbage off this board. Thanks. [/quote]

KOMMONSENTS WROTE:  OK, I give up, what is ODS?  it really doesn't take much more effort to spell it out so we actually know exactly what you are talking about, that is unless you don't want us to know.  But, I really want to know what ODS is.

And what makes it garbage?  Is that because someone else wrote it?  Or because it is political in your opinion?  Please explain so we know what your point is.

Is this a political opinion?

Or are you just trying to make a PC statement unsuccessfully?  Really confused here.....

I really want to understand.

[/quote]

Hello Kommonsents,

The poster who responded to my posting possibly thought I was making a political statement or insult to the POTUS.  For those who don't know.  POTUS is the offical  acronym used by many for President of the United States.  Just as FLOTUS is First Lady of the United States and SCOTUS is Supreme Court of the United States.  The first time I saw these terms I had not idea what they meant, but some people don't bother to look it up and assume it is derogatory, like perhaps the above poster.  It's not at all a disrespectful term.  Just like SHU is not derogatory.

Regarding the term ODS used by the poster above, that statement is a a very derogatory term looking at the context and the possible meanings I saw on the internet.  But I'll leave that answer for someone else.

To clarify the point I think Mr. Obama may not allow the export of crude oil.  This is based on his prior track record on coal with the issuing of his EPA regulations.  So he has very strong convictions about his environmental policy.  Realize that coal is struggling to survivie due to lower demand and the price collapse, and most of the miners are union members, i.e., I presume previously strong Obama supporters.  So his environmental supporters and convictions virtually killed what is already a near death industry.  The E&P upstream business is largely nonunion.  So I think his environmental leanings which undeniably are left of center, could trump again and go against oil exporting.  This is also consistent with his veto on the Keystone pipeline as an anti oil, pro environmental position.  I think this is a reasonable prediction based on some his more recent actions that many conservatives and pro Obama supporters might agree on, except for maybe the prior poster.  Not sure where he's coming from.

Best regards,

Kaliboo

[ArtM72]

I don't know what ODS is and don't care.

With refined petroleum products already being America's largest export in dollar volume maybe that industry should respond by increasing its capacity. It doesn't suffer from government restrictions that have provided a small measure of energy independence. After all, refined product profits don't depend upon the price of crude, only the crack spread.

Then again I continue to have a hard time understanding how cheap energy can bring our economy to its knees. Also a hard time understanding how flooding an already flooded world oil market will accomplish anything.

The oil industry has throughout its history undergone nothing but boom and bust cycles. If you want that history pick up Daniel Yergen's Pulitzer winning "The Prize" and read it. This is just another one of those cases.

I would also suggest that 6 years ago we were told POTUS was shutting down the American oil industry and nationalizing the American automotive industry. Many have long tired of hearing the continuing litany of unfounded, failed and otherwise completely erroneous accusations against the President over these many years. Others delight in the cheap thrills it provides. It is well past time people reading that nonsense discover how the exercise of critical thinking skills can broaden one's world view. The trigger for the need of such thinking skills can easily be recognized.

Now let's bring some more crude oil down from Canada. It might be more expensive to mine, transport and refine but nothing works better to beat obesity than another big dinner and desert.

[admin]

["If you want that history pick up Daniel Yergen's Pulitzer winning "The Prize" and read it."]

Great advice!

Otherwise people, let's keep the politics out of this, or if you must, discus this in the appropriate forum, not here..

[admin]

The dramatic drop in oil prices and the transfer of wealth to consumers is going to be very painful for the oil and gas industry, Bob Dudley, CEO of BP, told CNBC Saturday.

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China and India are set to fill up their strategic petroleum reserves this year, taking advantage of lower oil prices, according to the International Energy Agency. The two nations are building emergency stockpiles with millions of barrels of crude that mirror the reserves of oil and refined products that the U.S. and its western allies amassed after the first oil crisis of 1973 to 1974.

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[admin]

U.S. oil output could start to take a hit by late 2015, OPEC said on Monday, suggesting the exporter group will have to wait beyond its next meeting in June to see if the oil price collapse is beginning to dent the shale oil boom.

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The global crude-oil market will return to balance in the second half of this year as demand growth picks up and high-cost producers trim output amid lower prices, OPEC Secretary-General Abdalla El-Badri said.

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The Energy Department announced it Friday evening when no one was supposed to pay attention. It proposed to buy 5 million barrels of sweet crude for the Strategic Petroleum Reserve, Reuters reported. It could accommodate some oil in May but most of it would be for delivery in June and July. How much is 5 million barrels? On first sight, not much, given the size of the oil markets. It represents over half a day of US production. But US crude oil inventories in the latest reporting week rose by 4.5 million barrels. Only about 70 million barrels in working storage capacity remain available. When storage is full, all sorts of heck is going to break lose.

US Department of Energy adding 5 million barrels of oil to the Strategic Petroleum Reserve - Business Insider

[admin]

Robert Rapier tackles the argument that we are running out of space to store crude oil with the above graph. It shows the amount of oil stored at the nation’s main depot in Cushing, Oklahoma. At first glance it looks as if the recent shoot up of oil production is taxing the storage capacity. Inventories are now at 55 million barrels, which equals the highest level ever achieved, back in 2012. But he points out that the total storage capacity available is 71 million barrels. That means it would take another four months to achieve maximum capacity in Cushing. But he also notes that refineries are doing their spring repairs and will soon be back to full speed

Are We Really Running Out of Oil Storage Space? | RealClearEnergy

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[admin]

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[admin]

Soon after the OPEC meeting, various theories were put forward about OPEC's and Saudi Arabia's intentions. The conspiracy theory shifted completely. From being against Russia and/or Iran, to being all about hurting US shale oil production. And others said OPEC was dead! It was like staring into a mirage. It was all nonsense, but it does have an impact on the direction of the oil price, at least for a couple of weeks. Instead, he said, the decision not to cut production was taken because non-OPEC producers (specifically, Russia and Mexico) would not agree to cut in a meeting the day before the official OPEC meeting.

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Yet OPEC is underestimating one of the most important characteristics of shale: its incredible flexibility. Unlike traditional producers, shale companies can easily stop pumping on completed wells when prices drop and then quickly return to them. When prices rebound, so should U.S. production, making dips in output short-lived.

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U.S. crude oil storage capacity utilization now up to 60% - Today in Energy - U.S. Energy Information Administration (EIA)

[admin]

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