AuthorTopic: Oil Glut: IT'S THE DEMAND, STUPID!  (Read 19285 times)

Offline RE

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🛢️ Small Oil Firm Reports Huge Alaska Oil Discovery
« Reply #60 on: April 12, 2020, 01:54:54 AM »
Now, all we gotta do is cut off immigration (not hard since the planes aren't flying), restart the Refinery in Fairbanks and create our own Petrocurrency based on Oil and Coal reserves.  With the world's foremost fisherie in Prince William Sound, numerous top notch Organic Farms in Palmer and a total population for the state of 750K (that's about half the population of Dallas in a state more than 2X the size of all of TX), we'll be self-sufficient in no time!  :icon_sunny:

RE

https://oilprice.com/Energy/Energy-General/Small-Oil-Firm-Reports-Huge-Alaska-Oil-Discovery.html

Small Oil Firm Reports Huge Alaska Oil Discovery
By Tsvetana Paraskova - Apr 09, 2020, 4:00 PM CDT


UK-based oil exploration firm Pantheon Resources believes it has a huge 1.8-billion-barrel oil discovery in Alaska after evaluating an old exploration well with modern technology, the company’s top executives told the Alaska Journal of Commerce.

Despite the low oil prices, Pantheon Resources believes that the discovery could become commercial and viable at oil prices around $30 per barrel, Jay Cheatham, chief executive at Pantheon Resources, told the Alaska Journal of Commerce in an interview.

The discovery is south of Prudhoe Bay and along the Dalton Highway and Trans-Alaska Pipeline System corridor. The proximity to Dalton Highway is very advantageous for the company to develop the resource, according to Cheatham.

The discovery, named Talitha, could be able to produce as much as 500 million barrels of oil, while peak oil production could be almost 90,000 barrels per day (bpd), Cheatham said.

The company has another prospect, Greater Alkaid, for which it believes peak production could be as high as 30,000 bpd, with recoverable oil resources at 76 million barrels.   

The location and the proximity to the highway could allow Pantheon Resources to work all year round and save money for infrastructure such as roads to the oil discovery, the manager said

Pantheon Resources holds majority stakes in prospects in East Texas and the Alaskan North Slope (ANS) with a combined P50 Technically Recoverable Resource estimated to exceed 1.2 billion barrels of oil equivalent, the company says on its website. 

An Independent Experts Report from January 2020 on Pantheon Resources’ 100-percent owned Greater Alkaid found a Contingent Recoverable Resource of 76.5 million barrels of oil.

While Pantheon Resources believes it can make its Alaska resources viable at $30 oil, Alaska, the U.S. state most dependent on taxes and other income from the oil and gas industry, could be in for a severe budgetary headache after the oil price crash. 

By Tsvetana Paraskova for Oilprice.com
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Offline K-Dog

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Re: Oil Glut: IT'S THE DEMAND, STUPID!
« Reply #61 on: April 12, 2020, 05:21:54 AM »
Small Oil Firm Reports Huge Alaska Oil Discovery

The timing is right to attract some panic money from investors perhaps?  The oil could be there but as the old saying goes measure twice cut once.
Under ideal conditions of temperature and pressure the organism will grow without limit.

Offline RE

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Forget Peak Oil Demand, Supply Crisis Could be Hitting First
« Reply #62 on: October 14, 2020, 03:01:22 AM »
https://news.yahoo.com/forget-peak-oil-demand-supply-111341407.html

Forget Peak Oil Demand, Supply Crisis Could be Hitting First


,FX Empire•October 13, 2020
Forget Peak Oil Demand, Supply Crisis Could be Hitting First
In today’s IEA’s annual World Energy Outlook 2020 report, the OECD energy watchdog states that it doesn’t see a peak oil demand before 2040, only a possible oil demand flattening. The energy agency repeats that oil demand is effected by COVID, but all scenarios show that oil demand has not peaked yet. The energy agency contradicts here the views currently being proponed by BP and others that oil demand has peaked already. The report bluntly states that after recovering from the “exceptional ferocity” of the COVID-19 crisis, world oil demand will rise from 97.9 million bpd in 2019 to 104.1 million bpd in 2040.

Even that the agency acknowledges that demand has been hit and is lagging behind 2019 levels, overall demand will increase, only the increase will be slightly slower than expected. The Paris-based agency, financed by the OECD governments, and lately known as a main proponent of energy transition and renewables, expects that a slower increase of oil demand the coming years will be caused by clean transport policies and surging renewable energy. At the same time the IEA also reiterates that demand for petrochemicals and global growth of long-distance transport will be leading to a net increase of oil demand until 2040.

It needs to be reiterated that several major factors are very unsure that could have a major impact on global oil demand growth. The current assessments are all taking into account a wide range of proposed and/or signed energy transition and net-zero emission government policies.

These will have an impact if fully implemented by all. Looking at the current situation, especially due to COVID-related economic issues, renewable and emission reduction policies could however become sidelined, delayed or put on ice. The need for a revamp of the global economies is clear, but choices will be made by respective constituencies without full focus on climate change and renewables.

At the same time, the major future driver for oil and gas demand will be policies implemented by emerging markets. China, India and Middle Eastern countries will become much more important than is currently taken into account in several scenarios. A post-COVID economic planning will have to make choices on where to invest and how to progress. Renewables and climate-related investments could be too expensive to materialize.

Even within the OECD countries itself, high-flying plans such as the EU Green Deal or Net-Zero policies of major industries will have to tackle the call for a stable economic recovery from citizens (voters). The IEA, supported by a report of OPEC several days ago, expects that due to a post-Corona global economic rebound oil demand will be pushed back soon to pre-crisis levels of close to 100 million bpd.

The media will be focusing today largely on the peak oil demand issues, as this is being pushed forward. The discussion however seems to forget that global oil demand is very flexible, and expected to recover quickly, but oil supply is heading towards a crisis. If demand for oil is recovering, the market will be soon facing supply issues.

The latter not due to geopolitical risks, chokepoint closures or a Greek-Turkish war, but simply by a lack of new oil projects being started and hitting the market to counter demand recovery and the production decline of existing production fields. Without more attention for hard-needed investments influx in upstream projects worldwide, markets could be facing a slow but steady decline in supply.

The ongoing onslaught on IOCs and independents by activist shareholders and institutional investors to head for a Net-Zero emission production or even leaving oil and gas totally is resulting in a hidden disaster for the global economy. Demand is going to recover, levels will be reaching at least 5-10 million bpd above 2019 levels by 2030, possibly hitting 115-120 million bpd by 2040. Between 2020-2030 latter extra volumes needed is twice the Saudi Al Ghawar field production.

Where most analysis in the media really goes wrong is that it only looks at demand increase. The main issue at present to deal with is to assess the normal decline of producing fields globally. If taking a very conservative approach of 7% decline per year, we are looking at extra production to be found of 6-7 million bpd to counter yearly decline overall. Putting this in place for the period 2020-2025 we are talking about new production to come onstream of 25-30 million bpd at least.

Without investing in existing and future production, oil storage volumes worldwide will crash, showing empty barrels or tanks very soon. By repeating peak oil demand scenarios and reports, the media and financial analysts are creating a lack of urgency that will bite the hands it feeds. Maybe the IEA assessments will need to some new rational analysis than we have seen before.

For a look at all of today’s economic events, check out our economic calendar .

This article was originally posted on FX Empire
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Offline RE

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🛢️ Oil Investments Are Drying Up As Crude Demand Falters[
« Reply #63 on: October 30, 2020, 12:33:02 AM »
https://oilprice.com/Energy/Crude-Oil/Oil-Investments-Are-Drying-Up-As-Crude-Demand-Falters.html

Oil Investments Are Drying Up As Crude Demand Falters
By Irina Slav - Oct 29, 2020, 7:00 PM CDT


Thirty-five percent: this is the size of the spending cuts oil and gas companies are likely to have made this year in response to the effects that the coronavirus pandemic is having on demand, according to the International Energy Agency. And this is just the spending slump in upstream oil and gas. This is just part of a wider trend of investment cuts in the energy industry, according to the IEA, which earlier this month published an update of its World Energy Investment report, first released in late spring. At the time, some thought we were seeing the worst of the pandemic. They were, apparently, wrong.

Demand for oil has certainly improved in some parts of the world, notably in Asia, where governments have been more successful in containing the spread of the coronavirus than their counterparts in Europe and North and South America. But even in China—the world’s oil demand recovery driver—the rebound is slowing down. After all, even though its domestic demand may be improving, if regional and global demand is stalling, this will have a negative effect on China as well.

According to the IEA, the impact that the pandemic is having on investments in the oil industry will continue to be felt for years to come. This is hardly surprising: the agency noted a 45-percent cut in investments by U.S. shale oil companies this year, combined with a 50-percent jump in financing costs. The number of active drilling rigs in the U.S. may be rising, suggesting the beginning of a recovery, but the total was still down 564 rigs on the year as of last week, so that recovery will take a while.

Related: Washington Greenlights Conoco Oil Project In Alaska
Meanwhile, fuel stock updates from the Energy Information Administration are offering mixed signals: last week, for instance, saw a major drawdown in distillate fuel stocks, which should be good news suggesting demand for distillates is improving. The problem is that it is likely that this improvement is a temporary occurrence rather than a trend. Air travel is still greatly constrained, and the chances of any change in the status quo are slim.

Uncertainty: this is the keyword for not just the oil industry but for all others affected by the pandemic to such a grave extent as to force changes in business models. Europe’s Big Oil majors are doing just that with their push into renewables and plan to greatly reduce the contribution of their core business to overall earnings. U.S. majors are sticking with oil, and they may well have a good reason to do it.

There has been a lot of government and activist talk about a green recovery from the pandemic crisis. But the pandemic is still raging, and not only is it not abating, but it is gathering strength. This would mean more money needed for stimulus measures. This, in turn, would mean less money to spend on renewables, because despite the celebrated cost declines in solar and wind, financial and regulatory support from governments remains essential for their increased deployment.

Related: Hedge Funds Boost Bullish Oil Bets

The future remains marred in uncertainty that extends to the possibility of a rebound in oil investments. According to some, such as BP, we are already past peak oil demand, so that would mean less investment in oil production growth globally. Others, such as OPEC producers, hope things will sooner or later return to normal, and the world’s appetite for more oil will continue to grow for at least a few more years before plateauing. And yet even OPEC is preparing for a worst-case scenario.

The extended cartel OPEC+ is considering a delay in the next relaxation of oil production cuts, from January 2021 to April, in response to the latest trends in Covid-19 infections. One thing seems relatively clear, however. The longer the surge in new infections continues, the longer it would take the industry to return on the path of recovery and growth.

By Irina Slav for Oilprice.com
« Last Edit: October 30, 2020, 12:35:53 AM by RE »
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Offline John of Wallan

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Re: Oil Glut: IT'S THE DEMAND, STUPID!
« Reply #64 on: December 14, 2020, 10:32:10 AM »
Most interesting article from Charles Hugh Smith:

Link:
https://www.oftwominds.com/blog.html


Text:

One Little Problem with the "All-Electric" Auto Fleet: What Do We Do with all the "Waste" Gasoline?
December 14, 2020

Regardless of what happens with vaccines and Covid-19, debt and energy--inextricably bound as debt funds consumption-- will destabilize the global economy in a self-reinforcing feedback.
Back in the early days of the oil industry (1880s and 1890s), the product that the industry could sell at a profit was kerosene for lighting and heating. Since there was no automobile industry yet, gasoline was a waste product that was dumped into streams.
Why couldn't the refiners produce only kerosene? Why did they end up with "worthless" gasoline?

The answer is a barrel of oil produces a variety of products. While there is some "wiggle room" to produce more diesel and less gasoline, etc., it isn't possible to turn a barrel of oil into only one product.
John D. Rockefeller became very wealthy by cornering much of the oil market in the 19th century. But he didn't become fabulously wealthy until the 20th century, when the rise of automobiles created a market for all the "waste" gasoline.
Rockefeller became super-wealthy when all the products of each barrel of oil could be sold at a premium rather than just a portion of the products.
This reality has been forgotten: the price that can be fetched for a barrel of oil depends on the demand for all the products, not just a few of the products.
Those demanding an all-electric auto-truck fleet as a "green" alternative will re-create the dilemma of what to do with the "waste" gasoline. The world will still want fuel for all those container ships bringing all the goodies of a consumerist society, all those cruise ships visiting ports of call, jet fuel for all those exotic vacations enabled by 550 mile-per-hour aircraft, and oil-based lubricants, plastics and petro-chemicals, and so oil will still be pumped and refined, and almost half of it will be gasoline.

We can either use it or throw it away but we can't magically turn a barrel of oil into only one product.
This is a topic worthy of your understanding, so grab a vat of your favorite beverage and turn off all distractions.
Longtime readers know I've focused on energy-oil markets for 15 years. Despite ups and downs in price, the oil market has been remarkably stable.
This stability is about to transition to chronic instability: wild swings in price, shortages, and social chaos in both producing and consumer nations.
Let's start with the most basic dynamics in the cost of producing oil, refining it and selling the products at a profit.

1. As a general rule, a barrel of oil (42 gallons, 196 liters) yields a range of heavier and lighter products.
The price the producers can charge for each product--gasoline, diesel fuel, heating oil, jet fuel, propane, etc.-- depends on demand for each product.
If the price for one product falls drastically, the oil producer can't increase the price of some other product to compensate for the loss of income unless demand for the other products will support higher prices.
Consider the huge decline in demand for jet fuel as a result of global air travel dropping in the pandemic. Oil producers can't just raise the price of gasoline to compensate for the drop in the price of jet fuel.
If gasoline demand continues declining (due to fewer commutes, etc.) then producers can't charge more for diesel to make up the drop in the price of gasoline.
In other words, there has to be strong demand for all the products in a barrel of oil for producers to get enough money to extract, refine and transport the products globally.
Unlike the old days when producers could afford to throw away some petroleum products because their costs of extraction and refining were so low, now producers need more than $45/barrel just to break even.
This is what I'm calling Oil Paradox #1: if demand for any of the primary products is weak, producers can't afford to continue extracting and refining oil, even if there is strong demand for some products.

2. Transportation is the primary use of oil: 68% of all petroleum products are consumed by transport, 26% by industrial and 6% residential/commercial. (These are U.S. statistics, but the global demand is roughly the same.)
If demand for gasoline, diesel and jet fuel remains weak, the value of each barrel of oil will remain below break-even, even if the industrial need for some products (lubricants, etc.) is strong because these industrial products are essential to the world's industrial economy.

3. Much of the consumption of the past 20 years was funded by debt, which is now $277 trillion globally and accelerating. Humanity has borrowed and spent trillions on consumption, and what remains is the interest due on the debt.
This interest constrains future borrowing. The "solution" to interest is inflation, which devalues the interest due. But it also devalues the purchasing power of the currencies being inflated, and so everyone's money buys fewer goods and services.
This is the Debt-Inflation Paradox: the more interest you owe, the greater your need to inflate away the burden of interest. But inflation destroys the purchasing power of money, impoverishing everyone who needs the money to live.
There is no way out of this paradox: either the global economy defaults on its debts, destroying trillions in phantom wealth, or its currencies lose value, impoverishing everyone.
Since so much consumption is funded by debt, any reduction in borrowing, no matter how modest, will destroy demand for petroleum, triggering the Oil Paradox (producers can't charge enough to justify pumping and refining oil).

4. The pandemic has accelerated consumption trends that reduce demand for fuels. Remote work is here to stay, regardless of what you may read. Corporations can no longer afford to staff centralized offices in costly cities. Making everyone commute to offices is no longer financially viable.
Corporate travel is also no longer financially viable. As profit margins fall, the luxury of jetting to physical meetings is no longer justifiable except for senior management-- a few dozen people, not hundreds or thousands.
Tourism thrived in an economy of easy, low-cost credit and secure incomes. Lenders can no longer afford to lend to those with poor credit--notice how credit card limits have been drastically reduced--and incomes are no longer secure.
If the pandemic were the only issue, it would be possible to see a return to 2019-level consumption. But unsustainable debt loads will only get more unsustainable, so much of the consumption that was funded by debt will go away and not come back: the interest on all the existing debt remains to be paid, one way or another.
This decline in consumption has lowered the price of oil far below break-even for most producers. As the article below explains, there are two break-even prices for petroleum: one to get it out of the ground, refine it and deliver it to market, and the second for the social costs the oil pays for.
This is the famous Oil Curse: nations with oil reserves end up depending on selling oil for virtually all their revenues because it doesn't make sense to invest in less reliable, less profitable sectors.
As a result, Saudi Arabia can pump the oil for $45/barrel, but it needs a price of $85/barrel to pay all the social welfare costs it has promised its people.
If you glance at the charts in this article, you'll see the full break-even price of oil for OPEC nations is extremely high.
Breakeven crude oil prices are one metric of the economic constraints facing OPEC+ members

This generates Oil Paradox #2: low demand/low prices for oil may be financially viable in terms of extracting the oil, but the societies that depend on vast oil revenues will unravel if oil prices stay low, and that will disrupt production.
Roughly half of U.S. petroleum production is from tight shale and other unconventional oil sources. Many of these wells are no longer profitable and will be shut down once the producers' credit lines dry up. (This is already happening, triggering mass bankruptcies in the fracking industry).
The oil producing nations are basically surviving on $40/barrel oil by borrowing against future revenues. This is a dangerous game because if oil prices remain low their credit lines will eventually be withdrawn.
The oil producers need supply to fall drastically enough to raise prices back to the $80/barrel or higher level. But nobody can afford to cut their own production enough to reduce global supply enough to matter.
This introduces Oil Paradox #3: should petroleum producers succeed to slashing supply so oil goes to $85/barrel, the higher cost will push the fragile consuming nations into recession or depression, which will slash demand even more, which will require even deeper production cuts to maintain prices.
If we put all these paradoxes together, we see that oil markets are now intrinsically unstable and cannot return to stability because the mix of high break-even prices, declining demand and the end of debt-funded consumption cannot be resolved: high prices crush demand, low prices crush producers, and debt is crushing both consumers and producers.
Much hope is being placed on so-called renewable energy, most of which is not renewable but replaceable, as I've learned from Nate Hagens. A forest is renewable, a solar panel or windmill must be replaced every 20 years at enormous expense.
Right now all alternative energy sources--wind, solar, etc.-- generate no more than 4% of global energy consumption. (see chart below) Despite hundreds of billions of dollars invested, all the alternative energy sources are a tiny fraction of global consumption, and their supposed fantastic rates of growth is revealed on this chart as inconsequential: all this new energy doesn't replace a single drop of oil, it simply fuels additional consumption.
It will take a monumental investment and many years to get this to 10%. The reality is the vast majority of the global economy still depends entirely on petroleum for transport and industrial essentials such as lubricants.

How (Not) to Run a Modern Society on Solar and Wind Power Alone
Petroleum is now an unstable system and for all the reasons outlined above it cannot be restored to stability: just as time is a one-way arrow, so is the loss of stability.
What can we expect? Unstable systems are prone to wild swings to extremes and unpredictable collapses. So we may see collapses in the price of oil as we saw in March, and then rapid ascents in price above $100/barrel, which then crash once demand declines.
This unpredictability complicates projections and generates uncertainty. This is the final paradox (#4): the unpredictability of oil markets is itself a destabilizing force. Decisions on future production and consumption cannot be long-term, and this constrains investment in future production.
Regardless of what happens with vaccines and Covid-19, debt and energy--inextricably bound as debt funds consumption-- will destabilize the global economy in a self-reinforcing feedback.


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Offline John of Wallan

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Re: Oil Glut... Oil supply crunch
« Reply #65 on: January 16, 2021, 01:18:05 AM »
Interesting video.

Link:
https://www.youtube.com/watch?v=7PjXDrP5OG0&feature=emb_logo

Related text:
SCHEDULE YOUR FREE PORTFOLIO REVIEW with Mike & John and the New Harbor Financial team here: https://www.greylockpeak.com/
Like it or not, our modern way of life remains extremely dependent on oil. And even using the rosiest of forecasts, that's not going to change anytime soon.
Which is why petroleum geologist Art Berman's prediction of a 30% spike in oil prices later this year is so worrisome.
If it indeed occurs, it will be another painful gut-shot to a global economy still struggling to recover from the damage inflicted by the pandemic.
When the price of oil rises, the price of everything goes up. And there are many vulnerable businesses that simply won't be able to withstand this double-digit increase to their cost structure in today's environment.
The ripple effects will be severe and widespread.
More company closures. More lost jobs. Lower stock prices. But higher prices at the gas pump and the grocery store.
Which is why now, more than ever, is the time to partner with a financial advisor who understands the nature of the risks and opportunities in play, can craft an appropriate portfolio strategy for you given your needs, and apply sound risk management protection where appropriate.
Anyone interested in scheduling a free consultation and portfolio review with Mike Preston and John Llodra and their team at New Harbor Financial can do so by clicking here:
https://www.greylockpeak.com/
And if you're one of the many readers brand new to Peak Prosperity over the past few months, we strongly urge you get your financial situation in order in parallel with your ongoing physical coronavirus preparations.
We recommend you do so in partnership with a professional financial advisor who understands the macro risks to the market that we discuss on this website. If you've already got one, great.
But if not, consider talking to the team at New Harbor. We've set up this 'free consultation' relationship with them to help folks exactly like you.
https://www.greylockpeak.com/

 

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