I will believe the Saudis don't see any upcoming problems with Ghawar when they cancel one of their projects due to low oil prices. If they continue to be full steam ahead with increasing their capacity then I think they are aware that Ghawar may not be as robust in 5 years time as they would like us to believe.
Joined: Apr 06, 2006 Posts: 3613 Location: 3 miles NW of Champoeg, Republic of Cascadia
Posted: Fri Oct 24, 2008 5:41 am Post subject: OPEC Cuts Production by 1.5 Million Barrels a Day
Quote:
VIENNA -- Eager to rein in a dramatic slide in oil prices, the Organization of Petroleum Exporting Countries decided Friday to make a deep cut in oil production, taking 1.5 million barrels a day off global markets as it embarks on the task of managing prices amid a potential global recession.
Quote:
OPEC noted that "oil prices have witnessed a dramatic collapse -- unprecedented in speed and magnitude." The group said the slide puts many existing oil-development projects in jeopardy and could lead to the cancellation or delay of others resulting in medium-term challenges to oil supply.
Saudi Arabia's Mr. Naimi said the cut would take effect Nov. 1. The kingdom, by far OPEC's biggest producer, will cut its production by 466,000 barrels a day. Iran is set to slice output by 199,000 barrels a day as part of the cut.
OWall Street Journal _________________ Cogito, ergo non satis bibivi
The Dude Is Not In: Leave A Message After The Beep.
Posted: Fri Oct 24, 2008 9:13 am Post subject: Re: OPEC Cuts Production by 1.5 Million Barrels a Day
RSFB wrote:
Plantagenet wrote:
Oil prices fell anyway.
That's the scary part. How will exploration and drilling continue to happen in order to keep future supplies at a reasonable level?
I guess that's it. Future prices depend on speculative liquidity (there isn't any). Project development depends on future prices and credit availability (umm..). Where do we go from here??
Oct. 24 (Bloomberg) -- Oil options contracts to sell crude at $50 by December almost tripled today after an OPEC decision to slash production failed to allay concerns that the global economic slump is hurting demand.
The cost of the $50 December 2008 put option, which gives the holder the right to sell oil futures at $50 a barrel, rose as much as 142 percent to $1.50 on the New York Mercantile Exchange, compared with 62 cents yesterday, according to exchange data.
``It certainly seems to me that we could get down to $50 a barrel,'' Adam Sieminski, Deutsche Bank's chief energy economist, said in a Bloomberg Radio interview today. ``You could look at the OPEC cut as a sign of weakness, not strength.''
_________________ Cogito, ergo non satis bibivi
The Dude Is Not In: Leave A Message After The Beep.
Posted: Fri Oct 24, 2008 9:20 am Post subject: Re: OPEC Cuts Production by 1.5 Million Barrels a Day
RSFB wrote:
That's the scary part. How will exploration and drilling continue to happen in order to keep future supplies at a reasonable level?
The sound you will soon hear in the background is the silence of tar sands operations that have shut down.
That's after the biofuel plants go out of business, the solar plants get cancelled, the oil shale miners stop doing their thing, and the last coal bed methane worker turns off the lights.
In the meantime, it's a race to see whether oil prices or Cantarell production will hit zero first.
I used to think Cantarell was a sure bet, but nowadays you never know _________________ Live quotes - crude oil, gold and currencies
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Posted: Fri Oct 24, 2008 2:32 pm Post subject: Re: OPEC Cuts Production by 1.5 Million Barrels a Day
This global meltdown is pushing supply decline to the back burner for now. Let's see when oil really hit's it's bottom somewhere around $30 and then everyone tries to ramp back up. Talk about a wild ride. How does a $50 price swing in a couple days sound? If you think of the supply and demand curves what you should see is a supply curve that finally yanked demand down, now demand is overshooting on the down side because the house of cards we call finance is starting to fall. If oil comes up sharply from it's bottom we might see a 12 to 24 month respite where those in America who still have jobs feel really blessed by major deflation. Then we will be soo happy and demand will start to increase on ly to find out that world oil production will mysteriously be unable to get over 77mbpd. We all know the scenario. The system is going to shake itself to pieces and disintegrate with each new correction becoming more and more severe and sudden with pieces of nations flying off in every direction.
It's too bad we did not have the good sense to listen to every President since Nixon about the dangers of our foreign oil dependence.
Posted: Fri Oct 24, 2008 2:51 pm Post subject: Re: OPEC Cuts Production by 1.5 Million Barrels a Day
One more doom news. Seems an habit, don't you think? What surprises me the most is that everthing outside looks like business as usual. Childrens laughing, teenagers arguing about video games and soccer, good look young man with ipod and laptop, the old lady buying an apple pie, a young couple waiting for the bus.
Reality seems like a dream, all those people are gonna wake up in a perpetual nightmare.
Posted: Fri Oct 24, 2008 2:55 pm Post subject: Re: OPEC Cuts Production by 1.5 Million Barrels a Day
Voice_du_More wrote:
This global meltdown is pushing supply decline to the back burner for now.
It's pushed it from the consensus conciousness, but the global meltdown is actually now pushing the supply decline. We are now leaving the plateau because it has become uneconomical to maintain the current rate of production.
Quote:
... Let's see when oil really hit's it's bottom somewhere around $30 and then everyone tries to ramp back up. Talk about a wild ride. How does a $50 price swing in a couple days sound? If you think of the supply and demand curves what you should see is a supply curve that finally yanked demand down, now demand is overshooting on the down side because the house of cards we call finance is starting to fall. If oil comes up sharply from it's bottom we might see a 12 to 24 month respite where those in America who still have jobs feel really blessed by major deflation. Then we will be soo happy and demand will start to increase on ly to find out that world oil production will mysteriously be unable to get over 77mbpd. We all know the scenario. The system is going to shake itself to pieces and disintegrate with each new correction becoming more and more severe and sudden with pieces of nations flying off in every direction.
It's too bad we did not have the good sense to listen to every President since Nixon about the dangers of our foreign oil dependence.
Yes, this is the "worst case scenario" we've discussed on this site for years. We should have been using this time to prepare, but instead we're still trying to squeeze out whatever "growth" we can get from what little resources remain available to us as a civilisation.
Posted: Fri Oct 24, 2008 4:04 pm Post subject: Re: OPEC Cuts Production by 1.5 Million Barrels a Day
sjn wrote:
Yes, this is the "worst case scenario" we've discussed on this site for years. We should have been using this time to prepare, but instead we're still trying to squeeze out whatever "growth" we can get from what little resources remain available to us as a civilisation.
Reducing consumption is squeezing out growth? What planet are you talking about? If anything this will only result in greater resources available post peak/plateau, provided the oil megaproject wiki entry is accurate. _________________
Posted: Fri Oct 24, 2008 4:10 pm Post subject: Re: OPEC Cuts Production by 1.5 Million Barrels a Day
sjn wrote:
RSFB wrote:
Plantagenet wrote:
Oil prices fell anyway.
That's the scary part. How will exploration and drilling continue to happen in order to keep future supplies at a reasonable level?
I guess that's it. Future prices depend on speculative liquidity (there isn't any). Project development depends on future prices and credit availability (umm..). Where do we go from here??
Once demand and supply meet again, we'll see those projects start up again. They don't depend on speulative liquidity, at least not the reasonable ones, just high enough price to offset costs. If world oil demand drops to ~78mbpd w/ crude falling to ~$40-50/bbl and they need $70/bbl, they'll just cap the project until it becomes financially worthwhile again. When supply catches up to demand or demand catches up to supply, and prices rise sufficiently, those projects may become viable again. _________________
Joined: Apr 06, 2006 Posts: 3613 Location: 3 miles NW of Champoeg, Republic of Cascadia
Posted: Fri Oct 24, 2008 4:52 pm Post subject: Re: OPEC Cuts Production by 1.5 Million Barrels a Day
yesplease wrote:
Reducing consumption is squeezing out growth? What planet are you talking about? If anything this will only result in greater resources available post peak/plateau, provided the oil megaproject wiki entry is accurate.
At least in the case of the US, consumption is correlated to growth - all those VMT vs. GDP charts I've posted here, where the two figures are practically the same decades on end. At first I thought they'd become disconnected in the 90s due to the advent of online shopping, now I wonder if it's due (as well?) to GDP's debasement as an accurate figure. With contracted GDP there'll be less capital to invest in maintaining current production, much less splurging $6 million on a Bakken well that might not pay and certainly won't yield in great quantities.
Abandoning projects halfway through and then firing them up later can't be cheap - or always viable. Someone in the industry like ROCK could cite some examples. And production in a region rarely reaches a previous peak - the FSU has but they essentially took a holiday after the USSR folded, instead of reaching true geological peak. _________________ Cogito, ergo non satis bibivi
The Dude Is Not In: Leave A Message After The Beep.
Posted: Fri Oct 24, 2008 6:50 pm Post subject: Re: OPEC Cuts Production by 1.5 Million Barrels a Day
TheDude wrote:
yesplease wrote:
Reducing consumption is squeezing out growth? What planet are you talking about? If anything this will only result in greater resources available post peak/plateau, provided the oil megaproject wiki entry is accurate.
At least in the case of the US, consumption is correlated to growth - all those VMT vs. GDP charts I've posted here, where the two figures are practically the same decades on end.
There's some convo over at TOD on it. Basically, the drop in VMT over the past year is mostly due to higher prices, with the recent economic downturn exacerbating it. In other words, we can see most of the difference in price elasticity of demand and income elasticity of demand wrt VMT and probably oil consumption. While it's true that oil consumption is correlated to economc growth, we don't need additional oil consumption for economic growth as much as we need economic growth for additional oil consumption based on the growth in oil consumption compared to GDP, and probably VMT compared to GDP as well. Like I said before, it doesn't look like as a whole we are going to be squeezing out growth any time soon economically or in terms of oil consumption, which is why we've seen OPEC cut production.
TheDude wrote:
At first I thought they'd become disconnected in the 90s due to the advent of online shopping, now I wonder if it's due (as well?) to GDP's debasement as an accurate figure. With contracted GDP there'll be less capital to invest in maintaining current production, much less splurging $6 million on a Bakken well that might not pay and certainly won't yield in great quantities.
I doubt online shopping would make that much of an impact since it's more of a luxury item for most in the states than a staple, although like anything else it tends to be both. GDP in and of itself isn't an accurate measure of capital depending on the field in question since it just looks at all economic activity. As times get tough people tend to cut back on luxuries and focus on what's needed. Similarly, a society can cut back capital for plastic crap production in order to maintain capital investment in another field even if the economy as a whole is percieved to be contracting. Granted, since oil's primary use in the states, gasoline, is something of a luxury item, I think we'll see people cutting back before on it and lack of capital will prevent some projects from going online, not that they'll be needed w/ some of the forcasts regarding demand I've seen, but as a requisite fuel in certain apps I imagine we'll see higher prices again sooner or later, w/ demand dropping again.
TheDude wrote:
Abandoning projects halfway through and then firing them up later can't be cheap - or always viable. Someone in the industry like ROCK could cite some examples. And production in a region rarely reaches a previous peak - the FSU has but they essentially took a holiday after the USSR folded, instead of reaching true geological peak.
Rock should know, and if that fails I could always ask my cousin. IIRC, to a certain extent companies have some level of sunk costs and will continue to produce even if it's at a loss, up to a point. Offhand I can't think of many economic hurdles, aside from losing out on the wages/rates of equipment/personnel during transit, to shuttering a well, but I suppose that depends heavily on the well in question. _________________
Joined: Apr 06, 2006 Posts: 3613 Location: 3 miles NW of Champoeg, Republic of Cascadia
Posted: Fri Oct 24, 2008 7:04 pm Post subject: Re: OPEC Cuts Production by 1.5 Million Barrels a Day
yesplease wrote:
I doubt online shopping would make that much of an impact since it's more of a luxury item for most in the states than a staple, although like anything else it tends to be both.
Wiki says in 2006 it accounted for 6% of retail product sales in the US - $146.4 billion. 10% of all clothing sales! There were a few MSM stories about a pickup in sales when the oil price had spiked.
So often we hear about Peak Optimism, where ever-scarcer and pricier energy supplies put the kibosh on investing/economic growth for ever. I really wonder how that will play out though - would a global consensus on rationing be reached instead of wars being fought? Or we could buy time by just letting the developing world go completely to hell.
I wouldn't call gasoline a luxury item in the States - far from it. It's almost universally considered about as optional as water. _________________ Cogito, ergo non satis bibivi
The Dude Is Not In: Leave A Message After The Beep.
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