25 year depression coming soon

[Strychnine]

So how does all of that play into them pumping the shit out of it? Or do you feel this is a demand problem?

Btw, there is an article up on zerohedge offering up the idea that O&G has provided 93% of the jobs gained back since 2008.

I read your post again...

There's definitely a supply / demand mismatch going on too. Here's something I posted in another thread.

The long and short of it is that right now we have to slow down production. Something has to give for a bit. Without cash flow the industry will start pumping the brakes.


But we're hijacking - start a new thread and we can discuss things like Bakken efficiencies and how the rig count up there needs to drop 60% by 2020 to maintain a flat production rate (20% drop needed nationwide) or how we have a 1 million bbl/day demand growth but a 2 million bb/day supply growth and if we don't start exporting crude in 2015 it's only going to get worse as our 2016 supply is expected to hit 3 million bbl/day while the US' gasoline consumption has gone down 8% over the last 5 years (diesel demand is up)

[Broncojohnny]

You did, kind of, i am wondering how them pumping the hell out of it makes sense in an environment of ever declining production.

[Denny]

You did, kind of, i am wondering how them pumping the hell out of it makes sense in an environment of ever declining production.

Biotic and abiotic production of oil from the earth.

[Strychnine]

You did, kind of, i am wondering how them pumping the hell out of it makes sense in an environment of ever declining production.

I've read that they really need the cash - maybe at a detriment to their future? Oil funds make up 80-90% of their national budget. Their post Arab-spring spending went up a ton, they need money to balance the budget now, and they consider youth unemployment a national security concern (number one concern, actually) with all off the extremist groups running around so they are paying for social programs also.

Rumor has it Saudi really needs $100/bbl for Brent and that below $80/bbl they will run a deficit.

They probably saw the US oversupply writing on the wall and decided that they could bluff and try to force shale players to stack rigs and shut in wells - basically trying to buy the pot - or they could just eat the declining prices as they came and slip out of power (though they say they are not making any moves based on US shale production)



Just guesses.

[Broncojohnny]

I've read that they really need the cash - maybe at a detriment to their future? Oil funds make up 80-90% of their national budget. Their post Arab-spring spending went up a ton, they need money to balance the budget now, and they consider youth unemployment a national security concern (number one concern, actually) with all off the extremist groups running around so they are paying for social programs also.

Rumor has it Saudi really needs $100/bbl for Brent and that below $80/bbl they will run a deficit.

They probably saw the US oversupply writing on the wall and decided that they could bluff and try to force shale players to stack rigs and shut in wells - basically trying to buy the pot - or they could just eat the declining prices as they came and slip out of power (though they say they are not making any moves based on US shale production)



Just guesses.

I am just not real sure either to be honest. No theories make sense. If you think about it with your tinfoil hat on, it could be some form of economic warfare based on a one-two punch. If they need money, there are a lot of scenarios. I read a paper about five years ago that had the hypothesis that the Saudi sovereign wealth fund caused the financial crisis. I'll have to see if I can find that.

If one does believe they are pumping it and dumping the shit out of it to bankrupt American producers then I think it is logical to say prices are going to go much lower because they haven't cut to the quick yet.

[Denny]

I am just not real sure either to be honest. No theories make sense. If you think about it with your tinfoil hat on, it could be some form of economic warfare based on a one-two punch. If they need money, there are a lot of scenarios. I read a paper about five years ago that had the hypothesis that the Saudi sovereign wealth fund caused the financial crisis. I'll have to see if I can find that.

If one does believe they are pumping it and dumping the shit out of it to bankrupt American producers then I think it is logical to say prices are going to go much lower because they haven't cut to the quick yet.

I don't think the heavy hitters will fold before the Saudis do irreversible damage to themselves. I'm sure they have advisors on both sides of the argument.

[Strychnine]

Agreed, every theory is crazy. Have you seen the charts with the Russian economy and oil prices overlaid (close match!)? Another theory is that it's all a play to destabilize Russia (further?)

Will put more thought into it later tonight but for now...

Congratulations on the most apt non-sexual use of "pump and dump" ever lol

[inline 6]

[Strychnine]

Also I'll dig it up later but some guesses this week were that the bottom wouldn't come until we see $30-40/bbl.


Edit:

More than 50% lower.

That is how far Canadian billionaire Murray Edwards, chairman of Canadian Natural Resource, thinks oil prices can fall from here.

Speaking with the Canadian business publication Financial Post, Edwards said: "Prices could spike down to $30, $40. It got down to $35 in 2008, for a very short period of time."

Edwards told Financial Post's Claudia Cattaneo: "On a given day you can have market fluctuations where prices fluctuate far more than the underlying economic value of the unit." He added, though, that if oil were to fall to $30 or $40 a barrel, he didn't expect it would stay that low.

"The better question is where does it stabilize, and that $70-$75 area is probably not a bad place to stabilize for a period of time until you get more balance in term of growth in demand and some supply response," Edwards said.

[Strychnine]

Or do you feel this is a demand problem?

Seeing stuff this morning point that way. Lack of demand and the Saudis don't want to be the only losers.

OPEC Is A Band-Aid; Lack Of Global Demand Is The Wound

*snip*

One of the challenges cited by energy investment analysts and crude oil traders interviewed in various media stories speculating on an OPEC production cut is determining the volume of oil needing to be removed from the market to support global oil prices at higher levels. It is estimated that 1.5 to 2.0 million barrels a day of oil needs to be cut from OPEC’s current production of 30.25 million barrels a day, as reported in the November OPEC Oil Monthly Report, to balance supply and demand. How that volume reduction would be shared among the 11 nations that make up OPEC, and any other producers willing to contribute, is difficult to ascertain. Moreover, there is already an estimated 2.0 million barrels a day of output already on the sidelines due to chaos and violence in the Middle East and Africa.

Prior to the meeting, it was our assessment that if OPEC merely cut production to try to bring global oil supply in line with current and near-term projected consumption levels it would only lead to a short-term price fix. The ongoing issue is that the world appears to have slipped into an era of lower oil demand as a result of weak economic activity. The length of time the world lived with high oil prices – both before and after the 2008 financial crisis – has impacted the operation of world economies, which in turn has undercut oil demand. At the same time, this extended period of high oil prices worked its magic to increase supply, i.e., new deepwater discoveries, maintenance of mature conventional production and growth in shale output.

A recent column by Financial Times economic columnist Martin Wolf summed up the global economic challenge. He called it: “The curse of weak global demand” – what he termed “chronic demand deficiency syndrome.”

*snip*

Reports Suggest Saudi Would Cut Production If It Has Company; Crude Oil Pares Losses

*snip*
Specifically, the report cites former intelligence chief Prince Turki bin Faisal as saying: "The Kingdom is not going to give up market share at this time for anybody and allow producers whether in Russia, Nigeria, Iran and other places to sell to Saudi customers because we cut our production." In his statement, bin Faisal stops short of calling out the US by name. He goes onto say that Saudi would be willing to cut if there was a reasonably guaranteed oversight of production quotas.

The removal of the OPEC put (more specifically, the Saudi put) has shaken the oil markets. This datapoint is a small one, but it is a sign that there could be some openness within the Kingdom to a future arrangement that would restore group price setting as a goal rather than unilateral actions to protect market share. Reading between the lines, it also shows that Saudi feels backed into a corner by other producers right now - the most dangerous animal is one that is cornered.
*snip*

And now I'm heading to CO. See you bitches Monday.

[2011GT]

As long as it cost less to fill my car up!

[Trip McNeely]

Yeah, they are pumping the shit out of it, but it's not as easy to get the same output as in the past.

Compare Saudi output to rig count. Generally this blue block is in the same range (8-11 mm bbl/d) over 8 years,but look at the jump in rig count (black line) over that period. From 2005-2007 there was a doubling of the fleet, but production numbers didn't exactly follow.


C+C+NGL = crude + condensate + natural gas liquids



You can look at a similar graph for the US, but we have new resources coming online all the damn time. Saudi has fields from the early to mid 1900s full of water.



(or maybe i misunderstood the question)

Yeah I always laugh at analysts who see the Rig Counts and think that has any measure of success.
Rig counts these days are really not a good way to measure production.
Rig Counts are down, but we(Producers) are doing different completions methods that don't require as many wells to be drilled to be profitable and have good output numbers.

[tribaltalon]

a couple years ago when I was offshore on the q4000 I talked to a company man who spent alot of time in Saudi who said they were quietly in full blown panic. they saw the writing on the wall with US shale and he said they are just trying to make as much money as possible before the middle east implodes so the Saudi oil barons can move all their people and money to America. lol.

This is all very interesting to me and I hope like hell we dont back down a single barrel. fuck those camel jockeys.

[YALE]

I am just not real sure either to be honest. No theories make sense. If you think about it with your tinfoil hat on, it could be some form of economic warfare based on a one-two punch. If they need money, there are a lot of scenarios. I read a paper about five years ago that had the hypothesis that the Saudi sovereign wealth fund caused the financial crisis. I'll have to see if I can find that.

If one does believe they are pumping it and dumping the shit out of it to bankrupt American producers then I think it is logical to say prices are going to go much lower because they haven't cut to the quick yet.

Prisoner's dilemma comes to mind.

[Snatch Napkin]

I'm subscribing to a portion of the Russia theory.
We want that Bazhenov play. We've nearly fucked up our political ties with Russia.
Pure speculation here, but if the money squeeze becomes successful then we may lose our only string left keeping us attached to it.
Then Middle Eastern or even Chinese companies can make a run for it.
We have been training both of them on our fracking techniques.