AuthorTopic: Record Oil Glut!  (Read 32661 times)

Offline RE

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Record Oil Glut!
« on: November 30, 2013, 03:01:36 AM »
Lots of Oil!  Happy Daze are Here Again!

This would be the Oil Industry version of Channel Stuffing.  There are not enough Konsumers wit enough money to buy, so the product is accumulating in every storage tank avaialble.  At some point here, they either SELL at what the market will bear, or the tanks will overflow.

Look for a crash in Oil Prices pretty soon if this keeps up.

RE

U.S. Oil Supplies in Storage Set to Pass the 400 Million Threshold         
 
 
   
Submitted by EconMatters on 11/29/2013 11:15 -0500
By EconMatters
 
Trend is to Store more Oil

A year ago oil in storage stood at 274 million barrels, and with another robust year of domestic production, and despite curtailed imports, the US Oil Inventory stands at 391 million barrels and climbing.
 
We are still technically in the building season for oil supplies which peaked in late May just shy of 400 Million Barrels, before the drawing season kicked off with the exporting of gasoline through increased refinery utilization led by the gulf coast refiners with their increased capacity to take advantage of the spread differential and cheaper operational energy in natural gas to export refined products more competitively than peer nations.

New Records Coming Soon

The domestic need for refined products was stagnant at best, the real demand was in the export market, without a robust export market for refined products, oil supplies would have crushed the 400 Million Barrier this summer, and prices at the pump would have been much cheaper here stateside.
 
So the drawing season accounted for roughly a 40 million barrel retracement in US supplies, and we are not even close to the  middle of the building season, which even by conservative estimates should continue until mid-March of 2014.
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We might have some year-end selling of US inventories due to tax reasons, especially in Texas, but after all is said and done, if we go by the recent historical barometer of last year where we added roughly 25 million barrels of oil supplies to inventories, this puts supplies around the 416 Million Barrels of Oil level in the heart of the building season.

If domestic production continues ahead of pace and imports are not properly managed then maybe 425 Million Barrels in storage is possible, all modern records at this point in the data.

Fundamentals & Price: A Path Less Traveled in Recent Years

What effect this has on Oil prices is an entirely different matter as the Oil market is one of the most manipulated markets in the trading world, just look at the Brent-WTI Spread Trade this year for proof of that, and over the last 4 years for that matter. 


[/B]
[/FONT]All markets are pretty bad these days when it comes to market shenanigans, and when the Federal Reserve has basically gotten into the business of artificially created wealth through artificially pushing up asset prices all bets are off when it comes to predicting price adhering to fundamentals in the marketplace.

Fundamentals have become irrelevant in most markets these days. But some of us analyst types like to do fundamental analysis just for old time`s sake, who knows it might become a useful tool again sometime in the future once markets lose this unprecedented liquidity injection phenomenon. 

Domestic Production

In looking at Domestic production, the US produces over 8 million barrels per day compared with 6.8 million this time last year, quite a significant jump year on year, and ahead of where my most optimistic forecast was for this metric earlier in the year in March of 2013. This increase in Domestic production is being offset by a reduction in Oil imports with the US importing 7.7 Million barrels per day versus over 8.1 million barrels this time last year.

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Managing Imports

So the goal is to control supplies through managing imports to align with the substantial increases in Domestic production over the last several years, and this trend continues to play out at present. How far this strategy can go before world oil prices start reacting with considerable downward pressure is anybody`s guess but definitely something to keep track of in 2014. 
 
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But the last several months have had several weeks where Domestic production is more than Imports, and this milestone is quite an achievement for an ‘Outsourcer’ Nation with its core economic strategy of the last 30 years for goods and services.

2014 & Oil Metrics

Thus if we go by recent historical trends is the 9 million barrels per day of Domestic Oil production really possible for 2014? Can the US hit the 9.5 Million Barrel per day mark? And if so what does this mean for Global Oil prices?

All these dynamics will be worth watching in 2014, to be sure there are other factors revolving around China, Iran and Venezuela not to mention Saudi Arabia`s strategy in regard to Oil production, but nonetheless 2014 ought to be an interesting one for the Oil Market.
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Offline roamer

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Re: Record Oil Glut!
« Reply #1 on: November 30, 2013, 09:04:15 AM »
Doesn't at all dissprove peak oil that we have a temporary glut on supply.  Net energy yields are the real variable to track, that we can produce more gross amounts doesnt mean shit if net energy yield per barrell is continually declining.  There was enough surplus capital available for low net energy to be pulled from the ground, but there is not enough consumer capital for it all to be spent, and the reason for that is that net energy per capita is in deep decline and that means surplus wealth is in decline.  So the system will surge and pulse and just cause we got a short term glut does not at all mean we got long term energy growth, its just noise in a system of large scale temporal patterns, general trend of per capita energy decline availability remains.

Offline roamer

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Re: Record Oil Glut!
« Reply #2 on: November 30, 2013, 09:49:09 AM »
Why are net energy arguments irrelevant MKing?  Its the single most important variable for modern man to consider IMO.

Offline roamer

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Re: Record Oil Glut!
« Reply #3 on: November 30, 2013, 12:20:34 PM »
Why are net energy arguments irrelevant MKing?  Its the single most important variable for modern man to consider IMO.

Because we don't live in a system where BTUs are created equal. Otherwise I would trade you 1000 BTUs of sunlight for 1000 BTUs of gasoline and it would be an even trade, much like we wanting change for a $10 bill, and you giving me 10 $1's.

Because EROEI all centers on "energy" invested and "energy" return, it does not allow these differences in energy value to become involved in the conversation. A BTU is a BTU, be it in sunlight or gasoline. But us smart chimpanzees sure want one over the other.

Doesn't stop folks from TRYING to use EROEI of course, but the problem is to do it, they must step outside the basic "energy" component and begin talking about how money represents energy, and the instant that happens, you have just disconnected from the energy basis. Once you start down this rabbit hole, there is no stopping. Many of the TOD folks who moved onto blogging do this type of exercise, instantly trying to link money and credit and geopolitical gyrations into some unified field theory of all things human nonsense.

But the core disconnect happens right there in the beginning, with their misunderstanding about what EROEI really means.

I agree BTU for BTU analysis is retarded, one BTU worth of lean wild protein is worth massively more than one BTU of crude oil, particularly as the our energy descent gets underway.  The one BTU of protien represents in actuality probably at least 40,000BTUs or more of solar energy, obviously apples to oranges.  You should read Howard T Odums work on transformities if you have not already, its not a perfect, but it is a good stab at trying to create better metrics for evaluating energy on more equal footing.  It is too all based on the fundamental insight that most all of our energy does come from solar driven energy gradients.

Net energy gain is fundamental to the value of money, but it is the complexity of transformationas of energy and information which make it a difficult thing to look at, at least from within boundary conditions.  The boundary conditions though are this, our centralized industrial infrastructure was built to optimize productivity for an energy source at a particular EROEI.  It is deeply centralized and hierarchal so that it could minimize labor costs and maximize total overall system productivity.  The problem now is that we are committed to the the concrete, iron and oil beast we have created wether the margin of surplus for that particular infrastructure topology is there or not.   There are very hard limits to how far down we can go on net energy yields and still maintain this infrastructure we are dependent on.  The social fabric our society has constructed can only take so much stress of bulging poverty, only so much stress of continually cheapened food and products, all of which measures are done to shed energy load and allow for enough net margin to keep a system designed for higher EROEI up and running.  Shit is getting brittle and is going to break, and i bet when you distill it all down its got more to do with a reduction of net energy availability per capita than anything else. 

So i do not understand your stance at all about where the world is heading, are you insinuating that industrial progress is going along just fine, that the problems are not deep and systemic and have little correlation with resource and in particular energy limitations?  Do you travel, have you seen small town america, or the larger section of any big shitty, or do you live in a surburban bubble where the wealth conveyor still flows??   Whatever your opinions are on energy availability it seems pretty much a given real wealth is declining pretty much across the board, though pockets of extreme concentrations do exist.  People have less time, general lower quality diet, lower quality health, are more stressed, and seem to me to by in large be of less and less quality of sentience all signs to me wealth is declining.  Yet you don't think this correlates at all with a decline of net energy per capita??

Here is a simplistic story i used it to try to explain to a friend what i thought about net energy and wealth:
Imagine two farmers in the countryside have to build a fire to keep their house warm in the winter, they both have the same size house and they both don't have chainsaws, trucks or even horses to haul the wood back to their house and they have gather the wood in every single step by hand.  The first farmer though has a very nice and thick woodlot 1/4 mile away from his house, he only needs to chop down one very large tree and split it and haul it in a sled to his wood pile for the winter.  It is hard work but after  working on it for a few hours each day for a month he is able to get all the wood he needs to keep his house warm for the year.  The second farmer is not as lucky, he has worse soil and doesn't have a woodlot, he instead has smaller lower quality trees scattered all over his land, he has to gather 1.5 times the total mass of wood as the other farmer with good oak trees, and to make it worse his trees are all scattered throughout his farm.  He needs 5-10 of these smaller poorer burning trees to heat the same size house.  He ends up having to work very hard , it in fact takes him 4 times times the amount of total hours to gather the wood he needs to heat the same size house as the oak farmer. As a result he spends all his free time during the summer gathering wood just to heat his house in the winter.

In that story the farmer with the good oak woodlot has a net energy yield of 4x greater than the poorer farmer has (assuming they both burn similar amount of food calories while working).  It clearly had a very big impact too on the poor farmer to have to work so much harder to get the same amount of energy.


Now i understand we can evolve as a society, we can make the house more efficient, and we can get clever about lowering the amount of energy it takes to harvest more dispersed sources, but there are limits, and ultimately when you boil it all down if our foundational energy source is declining in EROEI so is our general wealth and well being.  We will be like that farmer with a shitty woodlot and end up working harder and harder with less and less free time, but in our case more and more corn syrup and shiny distracting gadgets will keep us stupid and entertained long enough many will not notice.

Offline RE

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Re: Record Oil Glut!
« Reply #4 on: November 30, 2013, 01:37:50 PM »
The reasons for the woodlot analogy are clear here, but I do want to point out that for all but the coldest climates, you really shouldn't have to burn wood at all for home heating purposes.  Remember, Inuit lived in Igloos with no fire in winter.  It is mainly about good clothing insulation.

Also of course as long as we still have some Glass around, building Passive Solar heating houses is not very hard.

Mainly I think burning wood is necessary only for Cooking, not home heating.  Even there, you can use Solar Ovens quite a bit.  Plus do Fermentation and other means to prepare foods for easy human digestion.

RE
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Offline roamer

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Re: Record Oil Glut!
« Reply #5 on: December 01, 2013, 12:16:34 PM »
The earth is finite, oil is finite, growth is exponential.  The story about the farmer could with a few tweaks be replaced for a story about 1950's America oil industry vs 2013 America oil industry.    We are moving around and working harder for smaller and smaller resources, our net energy is declining.  There is less surplus to go around.

Yes we are adapting in many unforseen ways, the tech age has increased efficiencies in the operation of many systems and machine, but there are limits and diminishing returns to those gains.  The hard limits will be encountered when we lack high enough EROEI to maintain current infrastructure deep hiearchy and centralization topology.  We can likely shed much more load, tolerate yet higher unemployment or partial unemployement and probably even find yet more ways to squeeze blood from the turnip of tech and computers.  I think the big shift in that regards will be using networks to outsource and replace large scale rigid corporate structures, the information sector of the economy will be razed.....All the while though we are setting up deeper unbalances and debts, more overall poverty, more disgruntled displaced former middle class people.  The kindling pile is growing.

The long term adaptation that must be made is to develop infrastructure with a low net energy gain solar energy budget.  This will likely resemble more of a networked solar village topology, but we can't get there quick and we have to create bridges to get there, but nothing in the status quo direction will create those bridges.  It will require people conciously checking out of current economic paradaigm and embracing a low energy future and the different order it entails.

Offline WHD

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Re: Record Oil Glut!
« Reply #6 on: December 01, 2013, 02:51:09 PM »
<yawn>

What else is there to say….no wonder TOD had to tuck tail and run..when you can only forecast decline, you look really stupid when reality reveals your ignorance on the topic to the world.


What I loved most about that article was this graph. What, we aren't even back to 1985 levels of production? LOL. Didn't US supply peak in like what, 1970?


Oh wait, this one's even better:


Oh, shit. Ignorance sucks.



WHD

Offline WHD

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Re: Record Oil Glut! Speaking of MKing Ignorance
« Reply #7 on: December 01, 2013, 03:05:26 PM »
MKing:
Quote
Thank god for more efficient farmers!

Translation: Cuz god is all about 4 tons of topsoil down the river per acre, per year. Atrazine in the water? Suck it up. Roundup in the food (recently raised allowance 30x by the EPA from 200ppm to 6000ppm.) Eat it. Collapsing bee and general pollinator numbers? Fuck them bugs. GMO as science experiment, contributor to Health Care Industry 20% of economy and growing? Fat asses get what they deserve. 6000 sq mile dead zone in Gulf of Mexico. Fish, blow. Exhausting of soil to starve city dwellers some day? So what, I got mine now. Habitat destruction, specie extinction? Suburbia is PARADISE!

WHD  :icon_sunny: 

Offline jdwheeler42

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Re: Record Oil Glut!
« Reply #8 on: December 01, 2013, 03:53:33 PM »
The reasons for the woodlot analogy are clear here, but I do want to point out that for all but the coldest climates, you really shouldn't have to burn wood at all for home heating purposes.  Remember, Inuit lived in Igloos with no fire in winter.  It is mainly about good clothing insulation.

Also of course as long as we still have some Glass around, building Passive Solar heating houses is not very hard.
Therein lies the rub.... once we have to start making the glass, I am pretty sure the balance will go wildly in favor of burning wood... and I don't need to use fancy computational analysis of scientific data, historical reasoning suffices.  Before the fossil fuel era, glass was quite expensive compared to wood.  HOWever, I can think of a couple alternatives: one, it should be possible to make glass using solar-thermal processes.  On the one hand, heating a crucible of silicon dioxide to the point it melts on a sunny day should not be too difficult as long as we have the ability to make mirrors on movable frames, and the cost could be even less than current methods, as no fuel would be required.  On the downside, smaller batches would be required and the machinery would have a lot of downtime, which would tend to raise costs.  The second possibility is bioplastics instead of glass using chemurgy.  These could be made fairly cheaply and renewably but would likely need to be replaced regularly.  The third possibility, is to use waste heat from small-scale industrial processes to heat homes when needed.  I could foresee winter being the time for industry with summer being the time for agriculture -- unless of course global warming makes winter obsolete.
Making pigs fly is easy... that is, of course, after you have built the catapult....

Offline jdwheeler42

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Re: Record Oil Glut!
« Reply #9 on: December 01, 2013, 04:08:55 PM »
Doesn't at all dissprove peak oil that we have a temporary glut on supply. 

All gluts are temporary. Why? 1) Because it changes the supply/demand equilibrium point, thereby affecting price, folks buy SUVs thinking the price will stay down, it doesn't, and presto, another balancing takes place. 2) Industry is a victim of its own success, and the lower price clobbers them.
DING DING DING!!!!

I'm surprised no one has put this in here yet:

Probably because most of us know it so well, but obviously not MKing.

One important thing to note: when the graph was first put out, the area in yellow was entirely in the future.  So far oil prices have behaved within predictions.

But you are absolutely right.  The oversupply causes a glut, causes the price to go down, drives companies out of business, drives the supply down.  We're just starting to see the prices go down in oil.  They've been down for a while in natural gas -- based on their experience, the oil companies will likely be able to hold on for a few years before they start going out of business.  You know one reason there is such a glut in oil drilling?  Because they've pretty much stopped drilling for natural gas (at least in my neck of the woods) -- just what they need to in order to hang on to the leases they paid dearly upfront for.  Oil they can export, natural gas is not so easy.
Making pigs fly is easy... that is, of course, after you have built the catapult....

Offline roamer

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Re: Record Oil Glut!
« Reply #10 on: December 01, 2013, 04:45:08 PM »



Quote from: roamer
The story about the farmer could with a few tweaks be replaced for a story about 1950's America oil industry vs 2013 America oil industry.    We are moving around and working harder for smaller and smaller resources, our net energy is declining.  There is less surplus to go around.

Oil production last year grew faster year over year than at ANY time in the history of America. Administrator of the EIA himself said that one. So if you want to call the fastest growth in the history of the country as "smaller and smaller",I recommend a recalibration as to how you measure such things.


I have  been talking about net energy yields, and i argue that even though we have managed to raise our gross output some by fracking hard, that the extreme efforts required to harvest the hard to get oil will mean there is less wealth generated from said oil.  It doesn't mean shit that we have increased our gross output temporalily at the expense of lots more relative labor and tech.  We have not shed the net energy decline monster from our backs and its definetely ripping through our economy.  Also just because some naive peak oilers failed to study general systems dynamics and naively forecasted steady decline does not at all mean decline is not occuring.  Boom bust cycles of unpredictable scales can and will happen even as we continue our march through net energy descent. 

I still do not understand your position MKing, you on the one hand suggest you have an apocalypse bent and on the other argue in favor of technological progress and seem to suggest that it may be able to carry us well out from your lifespan.  I think you are uncomfortable with the myth of progress and technology unravelling within your lifetime, and when you see it as a possibility you tend to jump to apocalypse thoughts rather than a longer messier process of continued social and infrastructure decay where everyone becomes poorer and poorer year in and year out.  Don't know though just a guess.....

Offline WHD

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Re: Record Oil Glut! Speaking of MKing Ignorance
« Reply #11 on: December 01, 2013, 04:57:02 PM »
MKing:
Quote
Thank god for more efficient farmers!

Translation: Cuz god is all about 4 tons of topsoil down the river per acre, per year. Atrazine in the water? Suck it up. Roundup in the food (recently raised allowance 30x by the EPA from 200ppm to 6000ppm.) Eat it. Collapsing bee and general pollinator numbers? Fuck them bugs. GMO as science experiment, contributor to Health Care Industry 20% of economy and growing? Fat asses get what they deserve. 6000 sq mile dead zone in Gulf of Mexico. Fish, blow. Exhausting of soil to starve city dwellers some day? So what, I got mine now. Habitat destruction, specie extinction? Suburbia is PARADISE!

WHD  :icon_sunny:

Don't know about paradise, but it sure beats farming. Let those capable of, limited to, religiously vested in, or whatever,  farm. By their efforts others are able to stand on the shoulders of scientists and innovators who went before, research new things to improve the lives of millions, every farmer or farmer hopeful on this board wouldn't be able to communicate their wonderful ways of maintaining gainful employment while growing a little food for themselves on the side. :icon_sunny:

Translation: Praise those who pollute the land and the waters, for greed! Ignore, shun, mock and ridicule those who speak against the defiling of your posterity. Cast the care and concern for the earth as a low, wretched, slavish thing; lift on high, aspire to and emulate the monied, materialist, rapacious destroyer, manipulator and enslaver of natural, ecological earth systems - that you might be FREE! :exp-evil:


Offline RE

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Re: Record Oil Glut!
« Reply #12 on: December 01, 2013, 08:46:34 PM »
You just claimed that is why oil production is growing faster than at any time in US history

The problem is not so much in production in the short term as in consumption.  The cost to bring the oil to market is more than the consumers can bear, so you get demand destruction.


If the Petroleum Engineers cannot bring the Oil to the Refineries at a price that consumers can afford to pay, they STOP BUYING.

When they can Frack Up Oil at $30/bbl, maybe you get back to BAU.  Currently however, Break Even for most of the production appears to be in the $100+ range.

The system is running on inertia, funded by debt.  It won't last.

RE
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Offline WHD

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Re: Record Oil Glut!
« Reply #13 on: December 01, 2013, 08:52:52 PM »
MKing:
Quote
In 2011 I went to the Canadian Heavy Oil conference (CHOA) in Calgary, and spent some time hanging out just for fun


WHAT MKING AND HIS FRIENDS DO TO THE EARTH FOR FUN









Offline WHD

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Re: Record Oil Glut! Speaking of MKing Ignorance
« Reply #14 on: December 01, 2013, 09:06:29 PM »
Translation: Praise those who pollute the land and the waters, for greed!

Who EXACTLY do you think the largest polluters in America are? I have news…it isn't the oil and gas companies making sure that you, and probably most people you know, can run down to the corner extortion store and cough up your liquid fuel convenience money to subsidize alternately A) the US trade imbalance or B) jihadists.

http://www.livestockweekly.com/papers/98/06/04/whlblamfarm.asp

Quote from: WHD
Ignore, shun, mock and ridicule those who speak against the defiling of your posterity. Cast the care and concern for the earth as a low, wretched, slavish thing; lift on high, aspire to and emulate the monied, materialist, rapacious destroyer, manipulator and enslaver of natural, ecological earth systems - that you might be FREE! :exp-evil:

Wow. What a windup. I suppose it is too much to ask that you apply all this to someone it might stick to? Unlike most around here I violently object to using copious amounts of liquid fuels and have a car that doesn't most of the time. I object to even using copious amounts of natural gas to heat my house, preferring insulation, a southern exposure and minimal indoor temps. I vigorously object to flying because goodness do you know how much CO2 that produces per person? I live close to work, the kids are all within walking distance to school, my eco-footprint is undoubtedly quite a bit smaller than the defiler you seem to have a fascination with.

Follow the thread. Just earlier you were praising efficient Ag for your freedom from such indignity as tending to plants, which I called you out for, which you chose to ignore.

Which, I and everyone else are supposed to believe that anything you say about where you live in proximity to what is true, that you abject to flying because you care so much about your eco-footprint, etc? Besides, you can be all that, and still, being the apologist for BAU that you are, nay, the Glorifier!, associates you with those who make of the earth and the waters what we see in the pictures above, that you would support doing that, wherever there is oil to be found, happy motoring for the rest of your days and those of the "younglings".

WHD

 

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