Energy Prospectus

What's happening today is exactly what happened in 2009. I recall clearly that in early 2009 IEA forecast global demand for refined products would go up 1 million barrels per day. That was the average annual increase for decades, so they just assumed it would be the same.

They were way off. They ignored that hydrocarbon based fuels were selling for less than half of what they were the year before and they were available to people that had none before. In parts of this world, access to liquid fuels significantly improves the standard of living. We forget how blessed we are to have access to cheap fuel whenever we want it. Over 1.5 billion people on this planet still do not have electricity to the home. Another 1.5 billion only have it half the time. Many of these people cook over wood fires, or by burning dried cow poop. Even food cooked over gasoline tastes better.

Once again the IEA started this year with a rather low demand forecast. Their forecast models always start with historical trend analysis. Now they are starting to get it. Take a real hard look at the charts in the article below.

http://www.oilandgas360.com/iea-expects ... 6-26401157

"The International Energy Agency (IEA) released its monthly Oil Market Report (OMR) for the month of June today, projecting stronger than anticipated global demand growth through 2015. Global demand is expected to grow at 1.7 MMBOPD for the first quarter of 2015 and 1.4 MMBOPD for the rest of the year. Growth is expected to ease off after this quarter with the return of normal weather and the partial recovery of oil prices."

MARK MY WORDS: If fuel prices, primarily gasoline and diesel, remain this cheap the demand will continue to go up. From mid-2009 to mid-2010 global demand for refined products went up 3.3 million barrels per day. I think we will see a similar number from mid-2015 to mid-2016.

If SA ramps up production (their latest pronouncement) as world wide demand goes up don't we then likely have a cap on the price of oil?
In addition if the price goes up somewhat US production also would go up as the rigs go back on line.
I'm having trouble seeing any significant increase in the price of oil even with the increasing demand.

If the price of oil went up to $80/bbl tomorrow, we will not see a significant increase in the active rig count until 2016. The upstream companies will not ramp up drilling budgets until they are sure higher oil prices are sustainable.

Any thoughts on how long and how much SA can keep pumping their low cost oil before having to start drilling/producing the more expensive stuff???
If the existing supply is huge this could be a cap on any price increase even with a demand gap.

as i recall from the book--"twilight in the desert" Simmons said they had huge amounts of water in their oil now and the cost has gone way up to get rid of it.

not sure they can get much more drilling unless below/above those oil sands there are shale deposits waiting like in the permian.

damn--its been 10 years since i read that book. I reviewed a little tonight and did discover that horizontal drilling had not proven very successful in SA at that time.

fact remains that the saudi's are scrapping for every little increase they get. costs have to be increasing.

One of our members in Houston was the head of reservoir engineering for Aramco for two years. He's told me that SA cannot produce over 10 million bbls per day for an extended period without risking damage to their major fields.

Dan et al......any ideas on what SA daily production currently is?

very close to 10mbd

Read this article and note what they say about oil demand at the bottom.

http://www.howwemadeitinafrica.com/anal ... ket/49509/

US weekly crude oil production was at 9.369 MMbpd for the week ending May 1—compared to 9.373 MMbpd for the week ending April 24.
Saudi Arabia and Iraq produced 10.31 MMbpd and 3.66 MMbpd, respectively, in April 2015.
Russia produced 10.71 MMbpd of crude oil in April 2015.