General Category > Energy
The Americas Reducing The World Glut in Oil
Bigun:
--- Quote from: Smokin Joe on May 07, 2016, 03:23:13 am --- Surplus capacity is the single biggest controlling factor, followed by location of that with geopolitical considerations (Is that capacity threatened in a war zone, for instance). A good, if somewhat dated article can be found here: http://instituteforenergyresearch.org/analysis/the-significance-of-spare-oil-capacity/ "The Significance of Spare Oil Capacity"
At present, between increased production in the US in the past decade, OPEC producing at full tilt, ISIS selling oil on the sly through Turkey, and Iran coming back on line (Thanks Obama), there is enough surplus capacity to handle the load. The theoretical increase in that from the Iran deal alone went from 1 million BOPD to 5 million BOPD
The other factor is the downstream/upstream factor. For those majors with distribution networks for refined products to get the books to work out, the price of products has to increase to significantly increase the upstream (crude oil) bids. If gas is cheap, that doesn't justify paying more for their own produced oil, but if gas prices creep up, so will the price of oil at the wellhead, because it can. For the majors this means both sectors will look better at the stock market, which is the part that keeps investors around. (Increased demand for motor fuels will drive up fuel prices, which in turn will bolster the crude prices.)
Independents and mid-sized companies will benefit as well by increases in prices, at the wellhead and/or the pump.
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Thanks for the link Joe! I've been pretty much out of the loop (totally at the professional level) since 2009 when I retired.
Still I would think that all of the coal production that has been taken off line in the last 8 years would have some upward effect on oil prices. But I guess all that wind energy is making up for that! /s
thackney:
--- Quote from: Bigun on May 07, 2016, 03:16:19 am ---What I find most interesting is tha all those production cuts the article mentions have yet to affect market prices all that much. Would be very interested in hearing what others think about why that is.
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Stocks in the US and OCED are still quite high. Until the production cuts effect that significantly, prices will remain relatively low.
Smokin Joe:
--- Quote from: Bigun on May 07, 2016, 01:20:50 pm ---Thanks for the link Joe! I've been pretty much out of the loop (totally at the professional level) since 2009 when I retired.
Still I would think that all of the coal production that has been taken off line in the last 8 years would have some upward effect on oil prices. But I guess all that wind energy is making up for that! /s
--- End quote ---
I think there has been a huge conversion to natural gas fired power generation, mainly because of moving target emissions standards. It isn't so much a question of meeting the requirements, as having one set of requirements which can be economically met. When the scrubbers have to be made of unobtanium....
As for Wind? To paraphrase Shakespeare, 'Thereby hangs a tail...'
thackney:
--- Quote from: Bigun on May 07, 2016, 01:20:50 pm ---Still I would think that all of the coal production that has been taken off line in the last 8 years would have some upward effect on oil prices. But I guess all that wind energy is making up for that! /s
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Since almost no oil (almost) is used for electric power generation these days, there is little impact between the two markets.
Bigun:
--- Quote from: thackney on May 07, 2016, 10:49:34 pm ---Since almost no oil (almost) is used for electric power generation these days, there is little impact between the two markets.
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That is undoubtedly true but fuel sources for heat generation are still somewhat fungible I would think. I doubt you can remove one fuel from the marketplace without that having SOME affect on all the others in that marketplace.
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