Oil prices erased early gains on Tuesday, amid uncertainty over the trade deal between the US and China after Washington blacklisted twenty-eight more Chinese companies and organisations. Oil found support early this session as unrest in Iraq and Ecuador increased supply concerns.
I will open our Dallas luncheon on Thursday with a presentation on why the global oil market is going to be VERY TIGHT in early 2020.
Keep in mind that oil demand is seasonal and October is the lowest demand month of the year. Why?
> There is no holiday in October that causes people to travel.
> Demand for heating oil doesn't pick up until November.
> Refiners do maintenance in October.
Oil Price - Oct 8
Oil Price - Oct 8
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil Price - Oct 8
<<I will open our Dallas luncheon on Thursday with a presentation on why the global oil market is going to be VERY TIGHT in early 2020.>>
How long do you expect the "VERY TIGHT" conditions to last?
How long do you expect the "VERY TIGHT" conditions to last?
Re: Oil Price - Oct 8
It will be tight because U.S. oil production growth has STOPPED. Even if WTI spiked to $75/bbl tomorrow, the upstream companies are not going to run out and increase their drilling programs. That means that U.S. oil production will roll over because at the current active drilling rig count it has too. We are not completing enough wells to hold U.S. production flat.
Global demand for oil will continue to grow unless there is a MAJOR GLOBAL RECESSION.
So, without U.S. oil production growth, which has accounted for 90% of supply growth the last three years, how will supply keep up with demand? It won't.
OPEC production peaked in Q4 2018 at 32.2 million BOPD and may NEVER reach that level again. Why?
> Venezuela's production is down 500,000 BOPD since Q4 and it is not coming back anytime soon. It is going to continue to decline.
> The sanctions against Iran are not going to be lifted.
> OPEC total production in Q3 was 30.1 million BOPD.
> Saudi Arabia, UAE and Kuwait might be able to increase production by 1,000,000 BOPD, but that is not enough to offset all the problems within the cartel.
> What if Iran escalates the attacks on Saudi Arabia, UAE or Kuwait?
Saudi Arabia oil inventories are falling, OECD inventories are falling, demand for oil keeps going up. So, to answer your question: The global oil market is going to be tight for several year. The longer oil stays in the $50s the larger and longer the supply problem will get.
Global demand for oil will continue to grow unless there is a MAJOR GLOBAL RECESSION.
So, without U.S. oil production growth, which has accounted for 90% of supply growth the last three years, how will supply keep up with demand? It won't.
OPEC production peaked in Q4 2018 at 32.2 million BOPD and may NEVER reach that level again. Why?
> Venezuela's production is down 500,000 BOPD since Q4 and it is not coming back anytime soon. It is going to continue to decline.
> The sanctions against Iran are not going to be lifted.
> OPEC total production in Q3 was 30.1 million BOPD.
> Saudi Arabia, UAE and Kuwait might be able to increase production by 1,000,000 BOPD, but that is not enough to offset all the problems within the cartel.
> What if Iran escalates the attacks on Saudi Arabia, UAE or Kuwait?
Saudi Arabia oil inventories are falling, OECD inventories are falling, demand for oil keeps going up. So, to answer your question: The global oil market is going to be tight for several year. The longer oil stays in the $50s the larger and longer the supply problem will get.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil Price - Oct 8
WTI prompt month (NOV 19) was down $0.12 on the day, to settle at $52.63/Bbl.
NG prompt month (NOV 19) was down $0.015 on the day, to settle at $2.288/MMBtu.
After the markets closed:
The American Petroleum Institute (API) reported late Tuesday that U.S. crude supplies rose by 4.1 million barrels for the week ended Oct. 4, according to sources. < This looks like a correction of last week's error.
The API report also showed stockpile declines of 5.9 million barrels for gasoline and 4 million barrels for distillates. < This is significant if confirmed by EIA tomorrow.
Keep in mind: We need crude oil inventories to build in October (they always do) because refiners are doing maintenance and will need to ramp up production of winter blend gasoline, diesel and home heating oil in November because inventories are low on Days of Supply.
NG prompt month (NOV 19) was down $0.015 on the day, to settle at $2.288/MMBtu.
After the markets closed:
The American Petroleum Institute (API) reported late Tuesday that U.S. crude supplies rose by 4.1 million barrels for the week ended Oct. 4, according to sources. < This looks like a correction of last week's error.
The API report also showed stockpile declines of 5.9 million barrels for gasoline and 4 million barrels for distillates. < This is significant if confirmed by EIA tomorrow.
Keep in mind: We need crude oil inventories to build in October (they always do) because refiners are doing maintenance and will need to ramp up production of winter blend gasoline, diesel and home heating oil in November because inventories are low on Days of Supply.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil Price - Oct 8
From OilPrice.com after the markets closed:
"Tighter oil market in 2020s? While oil futures over the next few years remain subdued, a new report says that the market could tighten up significantly in the 2020s, cutting against a narrative of peak demand and oversupply. “We are increasingly confident that failure of demand growth to crater, much less peak, constitutes the next big 'surprise' in the oil market,” Rapidan Energy said in a note. Spare capacity is “too low to cap prices, much less mitigate geopolitical risk.” The consultancy is skeptical of the mass adoption of EVs and says demand for oil will continue to rise."
I told you so: Also on Oilprice.com: "Tesla (NASDAQ: TSLA) could lose 80 percent of its value or disappear entirely according to an NYU professor of business. “Tesla doesn’t have the scale to compete in a well-run, low-margin business — auto,” he said. < As I posted here earlier this year. The auto business is a low-margin business and Tesla will never be able to compete with larger automakers. Owning a Tesla was a "fad" and the fad is almost over. EV sales will grow, but Tesla's share of the market will shrink.
"Tighter oil market in 2020s? While oil futures over the next few years remain subdued, a new report says that the market could tighten up significantly in the 2020s, cutting against a narrative of peak demand and oversupply. “We are increasingly confident that failure of demand growth to crater, much less peak, constitutes the next big 'surprise' in the oil market,” Rapidan Energy said in a note. Spare capacity is “too low to cap prices, much less mitigate geopolitical risk.” The consultancy is skeptical of the mass adoption of EVs and says demand for oil will continue to rise."
I told you so: Also on Oilprice.com: "Tesla (NASDAQ: TSLA) could lose 80 percent of its value or disappear entirely according to an NYU professor of business. “Tesla doesn’t have the scale to compete in a well-run, low-margin business — auto,” he said. < As I posted here earlier this year. The auto business is a low-margin business and Tesla will never be able to compete with larger automakers. Owning a Tesla was a "fad" and the fad is almost over. EV sales will grow, but Tesla's share of the market will shrink.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group