OPEC, for some quiet moments..

[Thylacine-2]

And the oil price collapse keeps on keeping on......

And it becomes ever more likely, IMO, that the conditions are being put in place for an oil price spike high enough to damage the world economy.  The capacity worldwide to respond quickly to high oil prices to increase production is being destroyed.

Yes, the longer this goes on, the more future supply is challenged.

And there are other scenarios which are pretty likely:

• A supply squeeze as a result of a crisis in the Middle East
• A revolt within OPEC (even Saudi Arabia is bleeding heavily economically, let alone many of the others)
• An economic collapse of an oil producing country

What I don't see is US shale being knocked out:

• Yes, much of it is way overleveraged, but these assets will be taken over for pennies to the dollar when assets get really distressed and bankruptcies start rolling in
• It's much easier to recover production when prices start rising
• It has been forced to increase productivity and reduce cost.

So the Saudi's strategy still doesn't make much sense to me. They're knocking out tar sands, deep sea, arctic, yes, but not US shale, and I think the cost (to themselves and other OPEC members, and to OPEC itself) far outweigh the benefits, IMHO.

We'll find out if US tight oil, production levels dependent on decisions by multiple entities who can not legally collude, can function as a swing producer.

There are many views.

Some (like Art Berman) say the shale boom was a ponzi scheme, an artifact of easy money and high oil prices, that there never was any free cash flow.

At the other end of the spectrum is the American Technology Solves All Problems meme.

My view, for what it's worth, is that the response time of shale production too higher prices, while faster than the mega-projects, will be two slow for shale oil to avert a damaging price spike when/if demand laps supply.

[admin]

Some (like Art Berman) say the shale boom was a ponzi scheme, an artifact of easy money and high oil prices, that there never was any free cash flow.

At the other end of the spectrum is the American Technology Solves All Problems meme.

My view, for what it's worth, is that the response time of shale production too higher prices, while faster than the mega-projects, will be two slow for shale oil to avert a damaging price spike when/if demand laps supply.

Well, as far as that Ponzi scheme goes, it has had remarkable legs.. Rigs are down by 2/3 while production has hardly budged. I agree with you that the supply reaction won't be fast enough to avert a major spike, if and when that happens. The longer we have to wait for it, the bigger it will be.

[Putncalls]

Some (like Art Berman) say the shale boom was a ponzi scheme, an artifact of easy money and high oil prices, that there never was any free cash flow.

At the other end of the spectrum is the American Technology Solves All Problems meme.

My view, for what it's worth, is that the response time of shale production too higher prices, while faster than the mega-projects, will be two slow for shale oil to avert a damaging price spike when/if demand laps supply.

Well, as far as that Ponzi scheme goes, it has had remarkable legs.. Rigs are down by 2/3 while production has hardly budged. I agree with you that the supply reaction won't be fast enough to avert a major spike, if and when that happens. The longer we have to wait for it, the bigger it will be.

Production is down by 500,000BBLs/day in the shale. Productivity per rig has increased but costs haven't come down that much. Much of the production gains per rig is from "high grading" the best spots. The majority of the excess oil is from IRAQ wich was able to increase production by 33% this year.

[admin]

Oil futures prices are below $38 but there is a glimmer of hope in EIA’s Short-Term Energy Outlook (STEO) released today–world consumption increased in November and supply fell. OPEC did what everyone expected last week–nothing–and oil markets reacted badly. Brent futures fell 15% from $47.44 before the OPEC meeting on Friday (December 4) to $40.25 today (December 8). I have been saying that oil prices have been too high based on fundamentals and need to move lower in order for oil markets to balance.

Glimmer of hope for oil price recovery - Business Insider

OPEC raised crude output to the highest in more than three years as it pressed on with a strategy to protect market share and pressure competing producers. Output from the Organization of Petroleum Exporting Countries rose by 230,100 bopd in November to 31.695 MMbopd, the highest since April 2012, as surging Iraqi volumes more than offset a slight pullback in Saudi Arabia. The organization is pumping about 900,000 bopd more than it anticipates will be needed next year.

OPEC says crude production rose to three-year high in November

In an instant, Chesapeake Energy Corp. will erase the equivalent of 1.1 billion barrels of oil from its books. Across the American shale patch, companies are being forced to square their reported oil reserves with hard economic reality. After lobbying for rules that let them claim their vast underground potential at the start of the boom, they must now acknowledge what their investors already know: many prospective wells would lose money with oil hovering below $40 a barrel.

Billions of Barrels of Oil Vanish in a Puff of Accounting Smoke - Bloomberg Business

Honeywell has announced that its natural gas technology and process automation group have been selected by Texas LNG, a Houston-based energy company, to remove contaminants from natural gas in preparation for liquefaction and export to customers around the globe. The two-phase project, located on the north shore of the Port of Brownsville's deepwater ship channel, will produce 4 million tons of LNG beginning in 2020.

Texas LNG selects Honeywell technology for facility in South Texas

[admin]

The Drilling Productivity Report uses recent data on the total number of drilling rigs in operation along with estimates of drilling productivity and estimated changes in production from existing oil and natural gas wells to provide estimated changes in oil and natural gas production for seven key regions. EIA's approach does not distinguish between oil-directed rigs and gas-directed rigs because once a well is completed it may produce both oil and gas; more than half of the wells produce both. While shale resources and production are found in many U.S. regions, at this time EIA is focusing on the seven most prolific areas, which are located in the Lower 48 states. These seven regions accounted for 92% of domestic oil production growth and all domestic natural gas production growth during 2011-14.

U.S. Energy Information Administration (EIA)

Maxim Oreshkin, the deputy finance minister, said the country is drawing up plans based on a price band fluctuating between $40 to $60 as far out as 2022, a scenario that would have devastating implications for Opec. It would also spell disaster for the North Sea producers, Brazil’s off-shore projects, and heavily indebted Western producers. “We will live in a different reality,” he told a breakfast forum hosted by Russian newspaper Vedomosti. The cold blast from Moscow came as US crude plunged to $35.56, pummelled by continuing fall-out from the acrimonious Organisaton of Petrol Exporting Countries meeting last week. Record short positions by hedge funds have amplified the effect. Bank of America said there was now the risk of “full-blown price war” within Opec itself as Saudi Arabia and Iran fight out a bitter strategic rivalry through the oil market.

Russia plans $40 a barrel oil for next seven years as Saudi showdown intensifies - Telegraph

The International Energy Agency said in its monthly market report that Opec has stopped operating as a cartel and is “pumping at will”, aiming to drive out rivals at whatever cost to its own members. Opec revenues will fall to $400bn (£263bn) this year if current prices persist, down from $1.2 trillion in 2012. This is a massive shift in global wealth.

Russia plans $40 a barrel oil for next seven years as Saudi showdown intensifies - Telegraph

The Russian contingency plans convey a clear message to Riyadh and to Opec’s high command that the country can withstand very low oil prices indefinitely, thanks to a floating rouble that protects the internal budget. Saudi Arabia is trapped by a fixed exchange peg, forcing it to bleed foreign reserves to cover a budget deficit running at 20pc of GDP.

Russia plans $40 a barrel oil for next seven years as Saudi showdown intensifies - Telegraph

[admin]

The decline in the weekly rig count continued this week as drillers in the U.S. cut 21 oil-directed rigs, according to the latest data from Baker Hughes. The news follows last Friday’s decision by OPEC to abandon its production quota and comes as oil falls to a seven-year low. The Houston-based service company reported 524 rigs seeking oil on Friday after the biggest weekly contraction in the rig count since Oct. 2.

U.S. rig rout deepens as drillers idle 21 oil-directed rigs

Woodside, as operator of the North West Shelf (NWS) project, said Friday that the project participants have approved the Greater Western Flank Phase 2 (GWF-2) project off the north-west coast of Australia. The GWF-2 project will develop 1.6 Tcf of raw gas from the combined Keast, Dockrell, Sculptor, Rankin, Lady Nora and Pemberton fields using subsea infrastructure and a 35-km, 16-inch pipeline connecting to the existing Goodwyn A platform.

Woodside gets approval for $2-billion North West Shelf project

Cheniere Energy Inc.’s board has voted to replace Chief Executive Charif Souki, as the company prepares to become the first to export natural gas from the mainland U.S. The shake-up comes four months after activist investor Carl Icahn took a big stake in the company and won two board seats. Souki couldn’t be reached for comment. The decision occurred at a weekend board meeting, where directors looked to clamp down on Souki’s goal of building the company beyond its core plan of exporting liquefied natural gas, or LNG, according to people familiar with the matter.

Cheniere Energy ousts CEO Charif Souki in strategy shift - MarketWatch

Total has brought the Moho Phase 1b project, located 75 km off the coast of Pointe-Noire in the Republic of the Congo, on stream. The project is operated by Total and has a production capacity of 40,000 boed. Moho Phase 1b, located in water depths ranging from 750 m to 1,200 m, involves the drilling of 11 new subsea wells and the installation of the two most powerful subsea multiphase pumps in the world. It is tied back to the existing floating production unit (FPU) on Moho Bilondo field, which has been producing since 2008.

Total brings Congo’s Moho Phase 1b project online

[Tusker]

$2-billion for 1.6 Tcf of raw gas ? Perhaps lots of condensates?

[admin]

Oil markets are waiting for a much greater supply contraction before prices rebound, and the deeper downturn in prices will test the current pace of adjustment. With WTI dipping to $35 per barrel, it will likely spark deeper cuts to spending and drilling, which could perhaps contribute to an accelerated pace of adjustment. In other words, a sharper fall from the mid-$40s per barrel to the mid-$30s per barrel could sow the seeds of a faster rebound than we might have otherwise witnessed.

$30 Oil Will Accelerate Much Needed Rebound | OilPrice.com

The head of Europe’s coal lobby has said that his industry will be “hated and vilified in the same way that slave-traders were once hated and vilified” as a result of the Paris climate deal, in an extraordinary diatribe sent to his members and press outlets. Last weekend, the world’s governments agreed to cut greenhouse gas emissions in a momentous pact aiming at holding global warming to 2C. While oil and gas associations professed themselves happy with a Paris agreement they believe gives a fillip to natural gas prospects, the coal industry fears it will be squashed by a clean energy juggernaut.

Coal lobby boss says industry 'will be hated like slave-traders' after COP21 | Environment | The Guardian

Global crude oil prices at seven-year lows will not continue and could swing upwards in as little as a year, OPEC Secretary-General Abdullah al-Badri said on Tuesday, as the low-price cycle leads to cuts in output from some producers. Oil prices have fallen by about two-thirds since mid-2014, with Brent crude on Monday flirting with its lowest level since 2004 at just above $36 a barrel.

OPEC says low oil price won't continue, may rise within a year

The demand for energy is expected to increase by more than 50% by 2050. At the International Gas Union (IGU) Forum on Tuesday, DNV GL asserted that gas will play a major role in a safer, more sustainable energy supply, but called for the market to become more efficient. Gas is widely recognized as the cleanest of the fossil fuels in terms of greenhouse gases and as a relatively low-carbon, cost-effective fuel that can help meet CO2-reduction goals. The challenge is to ensure that gas can help solve the ‘energy trilemma’ by being available, affordable and clean.

Gas is the best bridging fuel towards a low-carbon future, says DNV GL

[admin]

China is on track to miss its shale gas production target for this year as its biggest producers throttle back output amid weakening demand growth and a collapse in energy prices. PetroChina Co., the country’s largest oil and gas company, may produce about 1.6 Bcm of the unconventional gas this year, lagging behind its stated target of 2.6 Bcm, according to people with direct knowledge of the matter.

PetroChina, Sinopec shale gas output said to be below China’s goal

Congressional leaders agreed on a fiscal plan that would avert a U.S. government shutdown and lift the 40-year-old ban on crude oil exports, House Speaker Paul Ryan told fellow Republicans during a closed-door meeting Tuesday night. Ryan said the House planned to vote Thursday on the $1.1-trillion government spending bill and a separate measure to revive a series of expired tax breaks, according to Representative John Kline of Minnesota. The measure would finance the government through September 2016.

Congress reaches fiscal deal that ends U.S. oil export ban

Oil rebounding to $100 a barrel by the end of 2016? A strong euro amid quantitative easing? These are just some of the "outrageous predictions" from Saxo Bank for 2016. The Danish investment bank's 10 "unlikely, yet perhaps underappreciated" events that could have significant consequences on the financial landscape also include the Russian ruble rising 20 percent versus the US dollar/euro basket.

Oil at $100? 'Outrageous' forecasts for 2016 - Yahoo Finance

Nigeria is in perhaps the most dire straits of the group – Libya aside. President Muhammadu Buhari would like to extract more revenue from the nation’s vital offshore oil fields, but his untimely review of the fiscal terms has sparked tensions among already anxious investors. The ongoing reform of the oil industry has already cost Nigeria more than $50 billion in investments, and threatens to deter some $150 billion more over the next 10 years. In all, Nigeria’s oil output could drop as much as 15 percent by 2017 as a result of cash shortages and investment gaps.

OPEC Members In Jeopardy, How Long Can They Hold Out? | OilPrice.com

[admin]

Wood Group has secured a front-end engineering and design (FEED) contract for the Woodside-operated proposed Browse floating liquefied natural gas (FLNG) development. Under a new 12-month contract awarded by Shell, Wood Group Kenny (WGK) will carry out flow assurance and process integration studies for the proposed development’s three offshore gas-condensate fields—Brecknock, Calliance and Torosa.

Shell awards Wood Group FEED contract for Browse FLNG development

Oil markets are becoming dangerous with no grown-up in charge. Spare capacity is wafer-thin, despite the glut, and any upset could trigger an oil shock. Opec will be forced to call an emergency meeting within weeks to stabilize the market if crude prices fail to rebound after crashing to seven-year lows of $35 a barrel, two of the oil cartel's member states have warned.

Emergency Opec meeting aired as Russia braces for sub-$30 oil - Telegraph

As crude prices plunged below $35 a barrel Thursday, the world's top investment bank warned that domestic oil needs to drop another 40 percent to spur a recovery that the industry hopes will come late next year. The 18-month oil bust wiped out dozens of small drillers, but it hasn't knocked down the biggest U.S. oil companies, which produce 85 percent of the nation's crude. Those companies are facing financial stress, Goldman Sachs said, but they aren't expected to cut their spending or sideline enough drilling rigs to guarantee that daily U.S. production will fall enough to cut into the global supply glut that is suppressing prices.

Goldman says only $20 oil can guarantee market recovery - Houston Chronicle

An Iranian official claims that Shell and Total had proposed the cost of construction of Iran's LNG projects at so high a cost that the Iranian government was forced to supply natural gas feedstock of the LNG plants for less than 8 cents per cubic metre to make the produced LNG economically justifiable for export.

Iranian official: Why Shell and Total failed in Iran’s LNG projects