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Peak Oil Review – 30 July 2018

Oil prices climbed steadily through Thursday last week, supported by easing US-EU trade tensions and a temporary shutdown by the Saudis of a critical crude oil shipping lane. On Friday prices fell in sympathy with the US equities market to end the week at $74.29 in London and $68.69 in New York. Crude prices were unfazed last week by the unexpectedly robust US GDP figure, or the threatening rhetoric exchanged between Tehran and Washington.

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US District Judge in dismissing a lawsuit by New York City against major oil companies

“Climate change is a fact of life, as is not contested by Defendants. But the serious problems caused thereby are not for the judiciary to ameliorate. Global warming and solutions thereto must be addressed by the two other branches of government.”

US District Judge John Keenan in Manhattan, in dismissing a lawsuit by New York City against major oil companies

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Peak Oil Review – 23 July 2018

The $3 drop in US oil prices last Monday was a signal that the forces moving the oil market are changing. Last year, the main forces pushing the oil markets higher were the agreement by OPEC and its partners to lower production and the growth of global demand. This year, an array of factors are pressuring the oil markets: the US sanctions that threaten to cut Iranian oil exports; US-China trade tensions; OPEC’s decision to raise crude output; and dwindling oil production from Venezuela. Moreover, there are supply disruptions in Libya, the Canadian tar sands, Norway, and Nigeria that add to the uncertainties as does erratic policymaking in Washington, complete with threats to sell off part of the US strategic reserve and a weaker dollar.

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Peak Oil Review – 16 July 2018

Oil prices dropped suddenly last Wednesday on the news that yet another dispute in Libya had been settled so that the traditional Libyan National Oil company was back in business exporting oil from its major terminals. New York futures fell by $3.50 a barrel on the news, and the London price decreased by $6.50, with New York closing out the week at $71 and London at $75.33.

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CEO of Royal Dutch Shell on climate related class action lawsuits against Big Oil

[About climate-related class action lawsuits against Big Oil:] “It’s sort of bizarre that the users of our [petroleum] products say: ‘Well actually we didn’t want your product. So why did you force it on us?’ I don’t think also that in the end it will solve anything other than maybe redistributing wealth to a certain class of the economy.”

Ben van Beurden, CEO of Royal Dutch Shell [Environmentalists counter that this resembles the reaction of Big Tobacco to class action lawsuits decades ago.]

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Peak Oil Review – 9 July 2018

Oil prices traded in a narrow range last week, between $73-$74 a barrel in New York, and $77-78 in London. A surprise increase in the US crude stocks balanced off the uncertainties of the US-China trade war that began on Friday. The announcement that the Saudis had increased production by 500,000 b/d in June helped keep the lid on prices despite the worsening prospects for global trade.

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Energy economist, from Forbes magazine article—“Whatever Happened to Peak Oil?”

“So, the peak oil theorists got lucky in that the industry experienced a large number of supply disruptions that raised prices, which seemed to confirm their arguments—just as the Iranian Oil Crisis of 1979 incorrectly convinced many that ever-higher crude prices were unavoidable and resource optimists naive. But by understanding that supply disruptions in Iraq, Libya, Venezuela and so on were responsible for higher prices, it is possible to recognize that political trends in oil exporting countries will determine prices, not resource scarcity. Recognizing the former means coping with cyclical prices, believing in the latter means getting blindsided by every major price decline.”

Michael Lynch, energy economist, from Forbes magazine article—“Whatever Happened to Peak Oil?”

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Peak Oil Review – 5 July 2018

In the two weeks since the OPEC+ coalition decided to increase oil production by an undefined amount, oil prices have risen steadily on fears that there will be oil shortages and higher prices in the coming months. New York oil futures closed above $74 a barrel last week and London closed above $79 on Friday. Driving the markets higher are disruptions to oil production in Venezuela, Libya, Canada, Nigeria, and the US efforts to force Iran to zero exports this fall. The situation is not helped by the slowdown in the increase in US shale oil production due largely to bottlenecks in moving Permian shale oil to markets. There is no sign of a letup in the global demand for oil which is expected to increase by 1.5 million b/d this year.

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Consequences of rising demand for personal vehicles in developing countries

“To the extent that developing countries aspire to reach motorization levels comparable to those in developed countries, the number of vehicles will likely continue to climb rapidly. We in the developed countries cannot successfully argue that the mobility afforded to us by personal vehicles is something to be curtailed in the developing countries for the benefit of us all. As a consequence, the required raw materials and energy will challenge our resources, and the resulting vehicle emissions will strain our ecological systems.”

Michael Sivak, former director of Sustainable Worldwide Transportation at the University of Michigan (6/12)

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Peak Oil Review – 18 June 2018

Oil prices, which have been falling since mid-May, fell more than $2 on Friday to settle at $65.06 in the US and $73.44 in London. For now, the chief concern is that the OPEC + coalition will raise or lift the production cap this coming Friday and allow as much as another 1.5 million b/d of crude to enter the market. Additional pressure on oil prices is coming from the looming Sino-American trade war which could damage the global economy and lower the demand for oil. The announcement that Beijing might impose a hefty tariff on the 360,000 b/d of crude that the US has been sending to China in recent months did not help the situation nor did the continual increase in US shale oil production despite the bottleneck on getting crude out of the Permian Basin. While the renewed US sanctions on Iran may eventually reduce its ability to export oil, these sanctions do not start up until later this year so that it will be well into 2019 before we have some idea of their effectiveness.

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Pope Francis on Climate Change

“Climate change is a global problem with grave implications: environmental, social, economic, political and for the distribution of goods.”

Pope Francis, who will meet with Big Oil execs the week of June 11, from a 2015 statement

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Peak Oil Review – 11 June 2018

Oil futures traded in a narrow range last week, at circa $65 a barrel in New York, and $76 in London. The standoff between higher and lower oil prices continues apace. Those saying that prices will soon be higher are looking at the rapid decline of Venezuela’s oil production; the damage to Iran’s oil exports that could come from the new US sanctions; and the mounting obstacles to further rapid increases in US shale oil production. Those seeing lower prices ahead are citing the likelihood that OPEC+ will increase production later this month and the dangers to global demand stemming from the possible trade wars.

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Energy industry commentator on an impending oil supply crunch

“Since the beginning of the shale revolution a decade ago, the world has discovered 110 billion barrels of oil. Meanwhile, consumption has totaled 360 billion barrels. This 250 billion barrel deficit between discoveries and consumption seems sure to grow in the years ahead, given recent oil discovery trends.
“It is understandable why people would be complacent about this scenario. After all, didn’t the world face similar risks a decade ago, only to have shale oil save the day? But it isn’t clear that there is another ‘shale oil miracle’ that is ready to save the day. There are indeed more high-cost oil resources out there that can be developed, but these projects take a long time to complete. That’s why we can look out two to three years and see an impending supply crunch. The longer investments in the industry remain depressed, the more unavoidable this scenario becomes.”

Robert Rapier, a chemical engineer and industry commentator (3/23/18, in Forbes magazine)

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Peak Oil Review – 4 June 2018

In a short trading week, oil prices closed mixed with London futures holding steady but New York declining on higher US oil output. US oil prices continue to fall well behind world prices, as booming shale oil production deals with pipeline constraints, leading to the biggest discount to North Sea Brent in three years. On Thursday, the discount climbed to over $11 a barrel. The weekly US stocks report showed that while oil production grew by 44,000 b/d, a drop in US imports and a surge in exports to 2.1 million b/d resulted in a decline in US commercial crude inventories of 3.6 million barrels from the week before last.

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CEO of small-cap Centennial Resource Development on Bakken & Eagle Ford Shale Plays

“”My estimate is that about 70% of the good quality drilling locations [in the Bakken and Eagle Ford shale plays] have already been drilled. So you’re left with Tier 2, and Tier 3 quality geologic locations, and there’s a really steep drop-off in the amount of oil you get per well with those locations.” Even though technology and well completion techniques have improved per-well yields, “that doesn’t offset bad rock. I expect by the August [earnings conference] calls, to see some independents temper their 2018 growth forecasts. They’ll couch it in terms of unavailability of service equipment, difficulty getting crews or logistical issues, but that will be code for ‘I’m having disappointing well results because I’m having to drill Tier 2 and 3 geologic locations’.”

Mark Papa, former CEO of shale producer EOG Resources and currently CEO of small-cap Centennial Resource Development.

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Joint Statement from two UK secretaries on UK natural gas

“Despite the welcome improvements in efficiency and innovation from companies operating in the North Sea, the ongoing decline in our offshore gas production has meant that the UK has gone from being a net exporter of gas in 2003 to importing over half (53%) of gas supplies in 2017 and estimates suggest we could be importing 72% of our gas by 2030.”

Greg Clark, Secretary of State for Business, Energy and Industrial Strategy, and James Brokenshire, the Secretary of State for Housing, Communities, and Local Government, in a joint statement

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Peak Oil Review – 21 May 2018

Brent crude traded briefly at $80.18 a barrel on Thursday before slipping back to close the week at $78.51. This was the highest that London oil futures have traded since November 2014. New York futures closed the week at $71.28 which is more than $7 a barrel lower than London giving another push to US crude exports. The price jump came amidst a burst of bullish news including a larger-than-expected drop in US petroleum stocks of 1.3 million barrels of crude and a drop of 3.8 million barrels of gasoline. The short-lived spike also came just after a new Goldman report saying the US shale oil production can’t possibly make up for the potential loss of oil from the new Iran sanctions and that prices are likely to move higher.

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Peak Oil Review – 14 May 2018

Oil prices rose more than 3 percent last Wednesday after President Trump abandoned the Iranian nuclear deal and announced the “highest level” of sanctions against Tehran. The price surge stalled on Friday, however, after it looked likely that Europe would try to maintain the deal with Iran, which could keep that country’s crude exports on global markets. Crude futures closed the week just below multi-year highs with London at $77.12 and New York at $70.70, up 2.8 percent and 1.2 percent respectively.

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Peak Oil Review – 7 May 2018

Oil prices continued to climb last week and are now up nearly $8 a barrel in the past month with NY futures at $69.72 and London $74.87. US oil futures are now at their highest in more than three years, as global supplies remain tight and the market awaits new US sanctions against Iran which seem likely to be imposed later this week. According to the EIA, US domestic oil production continues to climb — up by another 33,000 b/d the week before last — and US drillers added nine oil rigs to the count last week. Thus the struggle between increasing US shale oil production and deteriorating geopolitical situations around the world continues.

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Peak Oil Review – 30 April 2018

With only two weeks to go before President Trump decides whether the US will withdraw from the Iran nuclear treaty, the oil market’s chief concern is about what could happen if the US reimposes sanctions. Even though Washington would have few, if any, allies helping to reimpose sanctions on Iran, the US carries considerable weight in the world banking system by threatening to deny access to the US to anyone doing business with Tehran. Conventional wisdom holds that renewed sanctions would slow Iranian oil exports and drive prices higher.

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