Is Oil Drilling Technology Outpacing the Glut?

[william the wie]

If pipeline and refining technology go high tech as well and that is the way to bet drilling technology is set to cause a very long downward trend in the cost of fuel.

Currently the reduction in US output is less than half of what was expected by KSA when KSA started the price war.

Given that many wildcatters overborrowed and will not be able to roll over their debt later this year a huge amount of oil still in the ground will be sold for less than market prices to the survivors and that will drop the price even further.

When the price of oil drops SWFs (Sovereign Wealth Funds) of formerly oil rich countries sell shares to make up the short fall. This is one reason the stock market will mostly decline. Another reason is that the bond market is @ 100 times the size of the stock market and when companies cannot borrow to rollover their debts they go into bankruptcy and their stock certificates become wallpaper. That will lead to much lower debt rations and slower growth

That drilling driven deflation cycle should continue until at least 2030.

 

[irosie91]

I have never understood economics---------oil is going down------so I heard-----but
it is finite ---so I heard. It will be depleted. --------we gotta make more
by regrowing dinosaurs and -----banging an asteroid into the planet------and waiting
around ------for about 100,000 years

 

[Mac1958]

There's expected to be quite a few bankruptcies in the oil space (including distribution) over the next few months because revenues have plummeted and they can't get loans.

No doubt, therefore, some takeovers are on the way, too.

On the other side, drillers have become much more nimble than they used to be, able to to shut down and then re-open operations much more quickly than before. So once prices move above maybe $40 and stabilize somewhat (whenever the hell that is) they'll be able to get back online pretty quickly and easily.

It would be surprising, therefore, to see oil above $45 or $50 in the foreseeable future. Exceptions would be outside forces such as Obama's $10/barrel tax or a Middle East war.
.

 

[william the wie]

I have never understood economics---------oil is going down------so I heard-----but
it is finite ---so I heard. It will be depleted. --------we gotta make more
by regrowing dinosaurs and -----banging an asteroid into the planet------and waiting
around ------for about 100,000 years

Actually that is a set of feel good assumptions. Oil is or was produced in highly saline water by some highly strange micro-organisms. Beyond that we know nothing about how it was or is produced except that it tends to be locked in shale and gradually seeps out to form reservoirs.

 

[irosie91]

I have never understood economics---------oil is going down------so I heard-----but
it is finite ---so I heard. It will be depleted. --------we gotta make more
by regrowing dinosaurs and -----banging an asteroid into the planet------and waiting
around ------for about 100,000 years

Actually that is a set of feel good assumptions. Oil is or was produced in highly saline water by some highly strange micro-organisms. Beyond that we know nothing about how it was or is produced except that it tends to be locked in shale and gradually seeps out to form reservoirs.

oh------somehow I find your explanation questionable One needs "strange
micro organisms" for OIL to be made from big amounts of organic material???

I did not know------and to think-----I got A's in organic

 

[william the wie]

I have never understood economics---------oil is going down------so I heard-----but
it is finite ---so I heard. It will be depleted. --------we gotta make more
by regrowing dinosaurs and -----banging an asteroid into the planet------and waiting
around ------for about 100,000 years

Actually that is a set of feel good assumptions. Oil is or was produced in highly saline water by some highly strange micro-organisms. Beyond that we know nothing about how it was or is produced except that it tends to be locked in shale and gradually seeps out to form reservoirs.

oh------somehow I find your explanation questionable One needs "strange
micro organisms" for OIL to be made from big amounts of organic material???

I did not know------and to think-----I got A's in organic

In saline levels well above where the cell wall/membrane would normally rupture and excreting chemicals with massive potential energy? Yeah I call that strange.

 

[waltky]

Oil glut slowing crude rise...

Oil prices rise on lower U.S. rig count, but glut weighs
Sun Feb 21, 2016 - Oil prices recovered on Monday following steep losses in the previous session, supported by a fall in the number of U.S. rigs in use, but analysts said general oversupply was keeping the market weak.

U.S. West Texas Intermediate (WTI) crude futures CLc1 rose nearly half a dollar from their last settlement to above $30 per barrel, trading at $30.11 at 0413 GMT. International benchmark Brent LCOc1 was up 45 cents at $33.46 per barrel. Both contracts fell almost 4 percent on Friday. A falling rig count in the United States which is expected to lead to a decline in 2016 production helped support prices, analysts said. "The U.S. oil rig count continued to decline..., with a total of 26 rigs idled," Goldman Sachs said. "The current rig count implies... annual average U.S. production would decrease by 445,000 barrels per day yoy (year-on-year) on average in 2016," it added. "We expect drops in U.S. production to be the source of bullishness," Singapore-based brokerage Phillip Futures said.

Pump jacks are seen at the Lukoil company owned Imilorskoye oil field, as the sun sets, outside the West Siberian city of Kogalym, Russia​

Despite Monday's gains, analysts said that market conditions remained weak, especially as demand is slowing. "The sharp deceleration in demand growth in recent months (especially gasoline) is a key feature of our more bearish view and expectations for a longer rebalancing period," Morgan Stanley said. "China demand looks particularly challenged with several negative trends of late," it added. In the United States, record crude stocks of 504.1 million barrels were also weighing on markets, countering a proposed production freeze at January levels by Russia and the Organization of the Petroleum Exporting Countries (OPEC). "Locking in countries' production near historic production highs does not change an oversupplied market," said Amos J. Hochstein, the U.S. State Department's special envoy for international energy affairs.

Russia and OPEC were both pumping oil at near-record volumes last month, with Russia reaching another post-Soviet high of 10.88 million barrels per day (bpd). With production outpacing demand by 1 million to 2 million barrels every day, crude prices have fallen around 70 percent since mid-2014. Hochstein also said that OPEC-member Iran would be unlikely to fix production at January levels, having been relieved of intarnational sanctions. "I am highly skeptical of Iran, now off of sanctions, committing to exports at sanction era lows," he said. Iran, previously OPEC's No. 2 exporter at almost 3 million bpd in 2011, wants to quickly raise its output to regain lost market share and plans to raise production by 700,000 bpd in the near future.

Oil prices rise on lower U.S. rig count, but glut weighs

See also:

Asia shares edge ahead with oil, pound slips
Sun Feb 21, 2016 - Asian share markets edged cautiously higher on Monday as investors awaited a rush of February industry surveys to take the pulse of the global economy, while sterling suffered on concerns the UK might yet vote to leave the European Union.

A busy week for data culminates with a Group of 20 meeting that offers leaders a chance to soothe market concerns with talk of coordination, even if it produces nothing concrete. MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS edged up 0.7 percent, having rebounded more than 4 percent last week. E-Mini futures for the S&P 500 ESc1 were also up 0.3 percent. The calmer mood was aided by oil as Brent crude LCOc1 added 31 cents to $33.32 and U.S. crude CLc1 rose 26 cents to $29.90.

Japan's Nikkei .N225 recouped early losses to rise 0.7 percent, buoyed by a retreat in the yen even as an activity survey showed a drop in new export orders took a heavy toll on manufacturing. The Markit/Nikkei Flash Japan PMI fell to 50.2 in February, from 52.3 in January, a potentially bleak omen for the rest of the region. China's major stock indexes firmed as investors welcomed news over the weekend that the head securities regulator was being replaced. The blue-chip CSI300 index .CSI300 and the Shanghai Composite Index .SSEC both rose 0.9 percent.

While Wall Street ended Friday with a whimper, the major indexes still boasted their best weekly performances this year, with the Nasdaq tallying its strongest week since July. "Equity markets successfully stress-tested and bounced from key technical support last week," wrote analysts at RBC Capital Markets. "While we cannot definitively say the cycle/2016 lows are in place yet, the technical evidence continues to suggest a more durable bottom may be forming."

TO LEAVE, OR NOT

 

[william the wie]

oil prices are going up again as the glut weakens.

 

[HereWeGoAgain]

I cant wait for the annual summer drive time price hike.
What are they going to do,jack it up a penny?

 

[william the wie]

I cant wait for the annual summer drive time price hike.
What are they going to do,jack it up a penny?

That depends on the outcome of some bankruptcy cases under going litigation. Speaking for myself I didn't even understand the explanation.

 

[Moonglow]

oil prices are going up again as the glut weakens.

It's going up because of the freeze on production under negotiation and announced a deal would be made by March...

 

[Moonglow]

I cant wait for the annual summer drive time price hike.
What are they going to do,jack it up a penny?

That depends on the outcome of some bankruptcy cases under going litigation. Speaking for myself I didn't even understand the explanation.

Buffet is buying up the oil companies going out of business...

 

[HereWeGoAgain]

I cant wait for the annual summer drive time price hike.
What are they going to do,jack it up a penny?

That depends on the outcome of some bankruptcy cases under going litigation. Speaking for myself I didn't even understand the explanation.

From what I'm hearing it wont be back till mid 2017 and I hope to God they're right.
I'm taking a beating at this point but as someone who lives in Texas and worked in the oil industry I know it's just a matter of time.

 

[Moonglow]

I cant wait for the annual summer drive time price hike.
What are they going to do,jack it up a penny?

That depends on the outcome of some bankruptcy cases under going litigation. Speaking for myself I didn't even understand the explanation.

From what I'm hearing it wont be back till mid 2017 and I hope to God they're right.
I'm taking a beating at this point but as someone who lives in Texas and worked in the oil industry I know it's just a matter of time.

The derrick hands will be back to steak and whiskey before you know it..

 

[HereWeGoAgain]

I cant wait for the annual summer drive time price hike.
What are they going to do,jack it up a penny?

That depends on the outcome of some bankruptcy cases under going litigation. Speaking for myself I didn't even understand the explanation.

From what I'm hearing it wont be back till mid 2017 and I hope to God they're right.
I'm taking a beating at this point but as someone who lives in Texas and worked in the oil industry I know it's just a matter of time.

The derrick hands will be back to steak and whiskey before you know it..

Yeah thats some rough work but they get paid well. Hell,the guys on the offshore rigs really make some decent money.
If there's one thing I learned after the eighties was to always keep that cushion so the down turns were a vacation instead of a disaster.

 

[william the wie]

I cant wait for the annual summer drive time price hike.
What are they going to do,jack it up a penny?

That depends on the outcome of some bankruptcy cases under going litigation. Speaking for myself I didn't even understand the explanation.

From what I'm hearing it wont be back till mid 2017 and I hope to God they're right.
I'm taking a beating at this point but as someone who lives in Texas and worked in the oil industry I know it's just a matter of time.

The derrick hands will be back to steak and whiskey before you know it..

Yeah thats some rough work but they get paid well. Hell,the guys on the offshore rigs really make some decent money.
If there's one thing I learned after the eighties was to always keep that cushion so the down turns were a vacation instead of a disaster.

Reuters agrees with you but I'm getting highly annoyed that no one has figured out how many increasing returns trends are going on in this industry:

The old Soviet style battlefield pipeline system appears to be being used and getting better.
Seismic interpretation is improving rapidly.
Likewise drilling.
Likewise rig set up and removal

That much I get but there seems to be a lot more going on and that I do not get. Either of you know of something else that needs adding?

 

[HereWeGoAgain]

I cant wait for the annual summer drive time price hike.
What are they going to do,jack it up a penny?

That depends on the outcome of some bankruptcy cases under going litigation. Speaking for myself I didn't even understand the explanation.

From what I'm hearing it wont be back till mid 2017 and I hope to God they're right.
I'm taking a beating at this point but as someone who lives in Texas and worked in the oil industry I know it's just a matter of time.

The derrick hands will be back to steak and whiskey before you know it..

Yeah thats some rough work but they get paid well. Hell,the guys on the offshore rigs really make some decent money.
If there's one thing I learned after the eighties was to always keep that cushion so the down turns were a vacation instead of a disaster.

Reuters agrees with you but I'm getting highly annoyed that no one has figured out how many increasing returns trends are going on in this industry:

The old Soviet style battlefield pipeline system appears to be being used and getting better.
Seismic interpretation is improving rapidly.
Likewise drilling.
Likewise rig set up and removal

That much I get but there seems to be a lot more going on and that I do not get. Either of you know of something else that needs adding?

Not really.
But then I'm not sure I understand your question.

 

[william the wie]

Let me try it another way Reuter's is predicting more than 6MBD in 2020 US production. That would make the US a net exporter of crude. Since Brazil has more and richer Shale deposits than the US that sounds like $10-20/bbl for a price. Unless the cost of refining goes way down I don't see how that is sustainable. I was wondering if you do?

 

[sfnssie]

Let me try it another way Reuter's is predicting more than 6MBD in 2020 US production. That would make the US a net exporter of crude. Since Brazil has more and richer Shale deposits than the US that sounds like $10-20/bbl for a price. Unless the cost of refining goes way down I don't see how that is sustainable. I was wondering if you do?

 

[sfnssie]

U.S. stocks opened lower on Wednesday, as a fresh drop in oil prices weighed on the main benchmarks.