And there was much rejoicing in the land.... Gas Prices

[KBScobravert]

Keep drilling. Takes 3 drills to keep 1 frac crew busy. We are running out of work in West Texas middle of June then off to Oklahoma.

[Strychnine]

$6,000,000,000. No biggie.

How do you lose 100 million barrels of oil?

May 20, 2015


(John Kemp is a Reuters market analyst. The views expressed are his own)

LONDON – Oil-market watchers are struggling to reconcile the large estimated oversupply in the market with the much smaller buildup of reported inventories and narrowing contango in futures prices.

Some blame the barrel counters who compile official statistics on supply, demand and stocks. But the truth is that information on the world oil market is incomplete and it is easy for hundreds of millions of barrels of oil to disappear from the supply chain without being counted.

According to the three main statistical agencies, the global market has been oversupplied by between 1.5 million and 2.5 million barrels per day (bpd) since the start of the year. Stockpiles should have increased by between 200 million and 350 million barrels, according to the International Energy Agency, OPEC and the U.S. Energy Information Administration. U.S. crude stocks have indeed increased by around 100 million barrels since the start of the year while China’s stocks appear to have risen by between 50 and 100 million barrels.

But that still leaves more than 100 million barrels that have simply vanished from the international statistical system.

These lost barrels show up under error terms such as “miscellaneous-to-balance” and “unaccounted for” in reports published by statistical agencies which could be over-estimating supplies, under-estimating demand and inventories, or a combination of all three – because all data on oil production, consumption and stocks, especially outside the United States, is only a very rough approximation.

Once we accept that the numbers are fuzzy, it follows that any analysis and forecasts based upon them must be fuzzy too. The danger is that analysts try to over-interpret small changes in the published data without allowing for the enormous amount of uncertainty which shrouds them.


MISSING BARRELS

The “missing barrels” problem is not a new one: it was the hot topic during 1998 and 1999 when I first began writing about the oil industry. “It is just over a year since the saga of the ‘missing barrels’ began,” the International Energy Agency wrote in June 1999. “Oil prices tumbled as a result of the Asian financial crisis, a mild winter, increasing production from Iraq and an OPEC quota increase in November 1997.”

The agency went on to wonder: “Millions of barrels of unneeded oil were placed in storage around the world; many of them have yet to reappear … Did the barrels reported as produced, but that have not shown up in OECD stocks, ever really exist?” Fast-forward six months and the agency was confident it had found the answer. Its December 1999 monthly report entitled “an un-fond farewell to the missing barrels” explained:

“During the first half of 1998 a large amount of the excess supply in the oil market was unaccounted for … There was strong disagreement at the time as to whether these ‘missing barrels’ were the result of statistical errors, or whether they represented a large increase in oil stored in non-OECD areas. “Almost two years later … the weight of evidence is that the missing barrels did exist and that they have now returned to the market. The return was triggered by the reversal in the shape of the forward price curve and the need for additional barrels following OPEC’s effective production limitation which began last March” (1999).


INCOMPLETE DATA

The three major statistical agencies each publish lavishly detailed monthly reports on supply, demand and stocks for crude oil and the main refined products such as gasoline and diesel. The wealth of detail can fool the unwary reader into thinking that the global oil market is transparent and well-measured.

In fact, the market is extremely opaque and the data are mostly stale, incomplete and inaccurate.

The best data are available for the United States, where the Energy Information Administration administers mandatory surveys to oil refiners, importers and distributors and publishes results quickly and in comprehensive detail.

But European statistics are a patchwork of mostly aggregated numbers that appear too slowly to be useful for contemporary analysis, while much of the oil stored in the giant tank farms in the Bahamas, South Africa’s Saldanha Bay and third party storage facilities in Asia is essentially outside the statistical system.

Most Middle Eastern oil producers treat information about production, consumption and exports as a state secret and release only very limited data.

Across the fast-growing fuel markets of Latin America and Asia, data on consumption is limited and out of date.

China, now the world’s second-largest oil consumer, presents a particular challenge. It is building a strategic petroleum reserve but, unlike the United States, releases no data on how much crude is held at sites around the country and virtually no information on production, consumption or stocks. Analysts rely on data for refining runs and imports and exports of crude and products to estimate consumption.


GUESSING DEMAND

There have been some improvements in data collection and publishing since the “missing barrels” saga. Energy ministers agreed in April 2001 to launch what later became the Joint Organizations Data Initiative (JODI). JODI promotes harmonized standards of data collection and publishes data on production, consumption, trade and stocks from about 100 countries. But the data is better on production than consumption and even then much of it is published with a delay.

Across the world, data on the consumption of refined fuels is almost always less comprehensive and timely than information about the production, shipping and refining of crude oil. The number of companies involved in the production and processing of crude oil is no more than a few thousand worldwide. But the number of companies and individuals involved in the consumption of refined fuels runs into the millions.

Once fuels leave the refinery, there is almost no information on how much consumers are using or how much they are holding in storage for their own use. Errors in estimating demand are one of the most common problems in analyzing the oil market. While data on production is often available, demand is always modeled until harder numbers become available months later, by which time the market has moved on.


COST-CONSCIOUS CONSUMERS

Analysts deal with the lack of data on consumption and stocks held towards the end of the supply chain by assuming they change only very slowly even if prices change by a large amount. In practice, there is evidence consumers and distributors can and do change the amount of fuel they consume and store by a large amount in response to a big change in prices.

Traffic surveys and fuel tax collections show the amount of driving and fuel use responding to a large change in prices, even in the short term. And the volume of stocks held by fuel distributors (“secondary stocks”) and end-users (“tertiary stocks”) can also change.

In 1989, the U.S. National Petroleum Council estimated distributors and consumers in the United States held one-third of all gasoline stocks and 60 percent of all diesel and heating oil. If motorists choose to keep their fuel tanks topped up to 65 percent rather than 60 percent full because fuel is cheaper, or homeowners and businesses choose to fill their heating oil tanks earlier and more than usual, the resulting shift in secondary and tertiary stocks can be very large at global level.

[Mysticcobrakilla]

Schlumberger told us today to gear up. They are about to drop a fuckton of R2a 3512s on us.

[Unicorn Jeff]

Schlumburger told us today to gear up. They are about to drop a fuckton of R2a 3512s on us.

For you guys to fix while there stuff is just chillin?

[Ruffdaddy]

Schlumburger told us today to gear up. They are about to drop a fuckton of R2a 3512s on us.

English mother ufker...what does that mean?

[Jewrrick]

English mother ufker...what does that mean?

CAT Engine

[Mysticcobrakilla]

For you guys to fix while there stuff is just chillin?

Your guess is as good as mine. They did hire back 50 people in denton to get frac units ready to go on line ASAP.

English mother ufker...what does that mean?

it means they are wanting their junk rebuilt with a quickness.

CAT Engine

This!

[Strychnine]

...

Saudi oil minister: 'Fossil fuels doomed, we're switching to solar'

Saudi Arabia's oil minister has said the country will switch its energy focus to solar power as the nation envisages an end to fossil fuels, possibly around 2040-2050, Reuters reports.

"In Saudi Arabia, we recognise that eventually, one of these days, we are not going to need fossil fuels, I don't know when, in 2040, 2050... so we have embarked on a program to develop solar energy," Ali Al-Naimi told a business and climate conference in Paris, the news service reports.

"Hopefully, one of these days, instead of exporting fossil fuels, we will be exporting gigawatts, electric ones. Does that sound good?"

Reuters reports that the minster added that he still expected the world's energy mix to be dominated by fossil fuels in the near future.

The Boston Globe adds that the minister said oil prices as low as $US30-$40 a barrel would not make solar power uneconomic.

US fracking expert slams 'desperate' Saudi oil policy

By Sarah Townsend
Thursday, 21 May 2015 2:40 PM

One of the United States’ biggest advocates of a controversial gas extraction technique known as fracking has hit out at Saudi Arabia’s plans to keep up bullishly high oil production levels despite a worldwide drop in prices.

Chris Faulkner, founder, president and chief executive of Texas-based Breitling Energy Corporation, warned Saudi Arabia is rapidly depleting its vast foreign currency reserves in an aggressive bid to retain its powerful share of the global oil market.

Despite crude oil falling below $54 a barrel for the first time in more than five years earlier this month, Saudi continues to produce almost 10 million barrels a day and has signalled it has no intention of changing its policy while it has upwards of $700 billion in its coffers.

In an interview with Arabian Business, Faulkner said: “Saudi Arabia’s social programs cannot be sustained at these oil prices. The kingdom needs upwards of $90 per barrel just to break even. How long will Saudi Arabians allow them to burn through all this money?”

He added: “There are a lot of dominoes falling the wrong way for Saudi. Is the country going to carry on depleting assets that took decades to amass, just to teach the world a lesson [that it will not give up its market share]?”

State-run oil company Saudi Aramco also announced plans in January to invest $7 billion on top of $3 billion earmarked last year to launch its own fracking operations, arguing the technique is crucial in helping it maintain its market share. Fracking describes the process of fracturing shale rocks in the ground, then injecting them with water, sand and chemicals at high pressure to release natural oil and gas inside.

But Faulkner told Arabian Business that
Saudi Arabia’s persistent drive to increase production actually masks deep anxiety about what the future holds for a nation that generates up to 90 percent of its earnings from hydrocarbons.
“The reason they’re talking about fracking is because many of their wells are in their last phase of life.

“They are pumping saltwater, nitrogen, CO2 into these wells because the pressure’s so low and they can’t get the gas out of the ground without pushing all this liquid down there.

“They are trying desperately to suck out every last drop but it’s a tell-tale sign they have this level of concern. The oil won’t last forever.”

Read the full interview in the next issue of Arabian Business, published on Sunday.

[slow99]

I closed my leveraged oil long position today. Things just look really uncertain right now and I decided to take the gains.

[Strychnine]

I closed my leveraged oil long position today. Things just look really uncertain right now and I decided to take the gains.

This is somewhat directed to you since you see the industry from a higher level than I do (Most days my concerns are rig counts, build schedules, etc. You're in it for the long(er) term with investments and things) but I know others will have opinions and insight also.

When does the world stop being so dependent on oil and gas and transition into renewables? Will it happen before a forcing event? Do things like the new Tesla home power-pack battery thing have the power to change the world in the next 10 years? Are we just one good power storage technology jump away from dinofuel being obsoleted?

Or do we pump this bitch dry then try to pick up the pieces?

[Denny]

I find the release of Tesla's power pack and Saudi's announcement very corresponding.

[Gasser64]

Ever seen who killed the electric car? back in 2006 some independent (but fairly large) battery company owned by some old ass man and his wife, developed some badass battery and they got asked to please sit on it. They collected a tidy sum for complying.

[Denny]

Go check out that Tesla power pack. Until that came out, I didn't see anything that could potentially cause a dramatic shift in energy consumption. There is an option now... and at an extremely reasonable rate.

[YALE]

Go check out that Tesla power pack. Until that came out, I didn't see anything that could potentially cause a dramatic shift in energy consumption. There is an option now... and at an extremely reasonable rate.

It's just a battery.

[Gasser64]

Go check out that Tesla power pack. Until that came out, I didn't see anything that could potentially cause a dramatic shift in energy consumption. There is an option now... and at an extremely reasonable rate.

http://www.teslamotors.com/powerwall

Looks like a nice unit. For $3k, you get 7.5 kwh. Only problem is, I'm not real sure how many kwh I use in the summer. They seem to leave out the central AC unit in their pictures. I'd like to know the cost of the install with enough solar panels, the inverter, everything. Then divide that price by what... 10 years? I think that page said the battery had a 10 year warranty. Then put that cost per month up against your electric bill's average for 1 year's worth of bills. The panels themselves are still about $18k for enough to do a typical house.

If we said the whole system (with that battery) installed was $25k, that leaves me with the equivalent of a $208 per month electric bill. Still not quite attractive enough to make me switch. But getting there. Then again, that's always been the problem with this type of stuff. Its always just "getting there".

I still want to know why solar panels are always very expensive, and never really seem to go down in price.