Quaker

Recent Oil Rally: Another Crowded Trade

I was a petroleum engineer who worked on South Ghawar field for 6 years in the 80's.

You really should stick to posting things you have a capacity to understand. Ghawar's water cut is irrelevant to the concept of peak oil.

The only thing more oversimplified than the concept of peak oil is the moronics involved in debunking it. You could fit all the knowledge of oil on financial blogs in a thimble.

Oil Trading Volume Surge: Desperation Of The Roaches

Also, an increasing amount of world oil is light sweet."

This is a typo, it should read NOT light sweet.

Oil Trading Volume Surge: Desperation Of The Roaches

Phil, Again, I'm at a loss as to what you're getting at here. I was a production engineer in Ghawar in the 80's. All of Shedgum had about 200 wells and produced 4mmbpd. The kingdom now has 54 land rigs! (Officially, the actual number is closer to 65) Offshore they have 6 (Officially but if you look at drillers rig reports there are 14) 65 Land rigs will drill you a new Shedgum field about every 6 months. If you knew anything about Saudi production, you'd know that these fields weren't supposed to ever have to be redrilled.

When I monitored Ghawar, the wells produced 20,000 bpd. Now, again, Saudi Arabia is producing 6,000 barrels per well.

As to their production, what they produce, what they can produce at peak and what they should produce are entirely different things. Over the last 20 years, they really only produced at peak production for about 16 months. Obviously, with a flood front the amount of oil they can produce is more dependent on the amount of water they can produce than what the wells have.

As to WTI, as I said, who cares. US oil production fell from 10mm to about 4. The average US well produces less than 100 barrels per day. 99% of the worlds oil is not light sweet that goes through west Texas. 80% of US oil and gas is priced on benchmarks other than WTI. You seem to have a basic misunderstanding of what a benchmark is. Also, an increasing amount of world oil is light sweet. When oil was $79 a barrel the Saudi blend was $57. The price of oil didn't so much drop as the grade spreads narrowed.

One of the most interesting thing about Hubbert, is that nobody seemed to really understand what he was saying. The point was never that the world is going to run out of stuff underground called hydrocarbons. The problem is, you reach a tipping point where the cost of recovery and energy effeciency gets so challenging, that it's no longer worth it. Furthermore, his biggest venom was for the market mechanism for pricing didn't work. You have to be blind as a bat not to see that this is happening



.

Oil Trading Volume Surge: Desperation Of The Roaches

I wish I had some idea what you were talking about. Light sweet crude is $64 in WTI, $68 USD in Brent and $74 USD in Australia. Personally, I don't understand why anybody even pays attention to WTI. Volumes are tiny, it has 15 speculators for every actual buyer and it's sitting 20 miles from almost a billion bbls of inventory.


Haliburton moved to Dubai for a reason. America has no oil industry. We have a rig glut, the rest of the world has a massive shortage. The oil industry is leaving America faster than you'd leave a burning hey loft. In the last three years, we drilled 50,000 wells, the equivilent of half the wells drilled in Texas in the last 100 years, and didn't raise natural gas or oil production one iota. The average american oilwell produces less than 100 barrels per day.

The Saudi's cut HEAVY oil production. They did this to reduce the difference between heavy and light, which was approaching $15 a barrel.

Maybe we can all post on how Ford sales are a benchmark for the worlds auto industry of how GE makes the worlds best light bulbs.

Oil Set To Fall While Gas Continues To Hang On With The Cold

I don't disagree but keep in mind, price is a powerful motivator. I try to stay focused on the ball. I never was a big believer in peak oil. Actually, I'm at a loss as to what's actually peaking. Oil is a catch all term for sludge of varying viscosities. For every barrel of light sweet there are three barrels of crap waiting for a price rise.

When I worked in SA, I personally shut in hundreds og thousands of bpd of heavy crude. It was heavy, but it flowed. I ran flowmeters on it. But at $24 nobody wanted it.

Oil supply is, and always will be, an engineering problem. Unfortunately most US petroleum engineers are either working for greenpeace, dead or in retirement communities.

Oil Set To Fall While Gas Continues To Hang On With The Cold

I'm not quite sure what point you're trying to make here. US oil inventories were very low when oil was plentiful and cheap. This is the way inventories work. Do shoe stores buy 3X more shoes than they can sell and then watch as their profitability collapses? Even shoe salesman aren't that dumb.

US oil production has fallen almost 50mm barrels per month since 2000. Refined products imports have exploded. OBVIOUSLY inventory is going up. The stuff comes in on tankers, it doesn't flow in from West Texas in pipes. At 668mm barrels, the US strategic reserve amounts to about 37 days of what comes through the strait of Hormuz. Whippy dinkle.

Since 1/1/06, Saudi Oil production has fallen almost 1mm barrels. At the same time they've doubled the number of rigs drilling Safaniyah field. Since Safaniyah was COMPLETED in 1985, having 15 rigs drilling and one in work over is a curious happenstance. Since, at it's "mecca" Shedgum had 270 wells and now there are plans to drill 420 this year, all while SA orders new rigs from Rowan and Ensco and cuts production 1mm bpd, we're stuck with another bizarre canundrum.

Meanwhile, Pemex has 42 jackups!!!!!! drilling Canterell and production dropped 500,000 bpd in one year!!! All this as jackups scoot out of the GOM faster than you'd leave an Ashley Simpson concert because they can make 3X the moolah in the persian Gulf.

Hmmmm. What's an investor to do.

OPEC's Dilemma: When and How to Cut Production

"WSJ bottom line: "Saudi Arabia has let its output fall this year in line with demand for its oil."

As usual, WSJ shows a stunning lack of understanding of Saudi Arabia and the oil markets in general.