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Everything You Wanted To Know About Global Oil Fundamentals (But Were Afraid To Ask)

Tyler Durden's picture




 

There's more than one oil price around the world and as the following comprehensive (but brief) overview from Morgan Stanley's Global Energy Teach In shows, crude oil pricing across the world is dynamic and multi-factorial - from fundamental factors (such as simple supply and demand and seasonality) to macro factors (such as USD strength, macro sentiment, and "burden") and risk premia (e.g. geopolitics), the following provides everything you wanted to know about global crude oil fundamentals, but were afraid to ask...

 

 

Source: Morgan Stanley

 

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Sat, 05/10/2014 - 16:23 | 4746696 OC Sure
OC Sure's picture

What will the price of wti be at the end of next week?

Sat, 05/10/2014 - 16:56 | 4746753 Chris Jusset
Chris Jusset's picture

I'm too afraid to ask!

Sat, 05/10/2014 - 17:20 | 4746789 OC Sure
OC Sure's picture

Lol! ...If dxy is going to get much stronger as long rates go much lower, then lets say it approaches 90 instead of 110? ...just trying to extract the simple from the complex.

Sat, 05/10/2014 - 17:47 | 4746822 Zirpedge
Zirpedge's picture

Option A: The west will manipulate prices lower to hurt Russia in cold war redux.

Option B: Russia and the US are posturing (colluding behind the scenes to hurt the EU) prices will go higher.

"B" makes the most sense to me. The MSM will blame the Summer season for the high prices, even though net demand I'm sure is way down.

Sun, 05/11/2014 - 00:36 | 4747543 rocker
rocker's picture

This thesis makes more sense than you realize. The bankster don't want the price drop. The FED doesn't. 

And as you say, "We have "Summer Driving Season".   Got to (Hate Them), Love it.  Drive on, pay up, Sheeple. 

Sat, 05/10/2014 - 19:51 | 4746970 Stuck on Zero
Stuck on Zero's picture

Gads. Premium is running $4.99 in some California cities.

 

Sun, 05/11/2014 - 03:53 | 4747651 Curiously_Crazy
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Not bad at all, I paid AU$1.50 a litre today - around $5.67 a gallon. Though I'm sure the European readers will say even that's cheap :)

Sun, 05/11/2014 - 07:09 | 4747730 saveandsound
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1.85 CHF/litre (in Zurich) equals 7.00 CHF/gallon equals 7.92 USD/gallon

Sat, 05/10/2014 - 16:27 | 4746702 deflator
deflator's picture

 The definition of "fiat" comes to mind whenever someone starts talking, "fundamentals."

Sat, 05/10/2014 - 16:28 | 4746708 DaddyO
DaddyO's picture

We'll know at the end of next week!

Look, as usual, there is some really nice pictures that depict all manner of things related to oil.

But the reality is it doesn't really matter when moar woar is on tap.

This will drive the price of oil up, especially since the main users will be those who are driving the price in the first place.

Can you say visicous circle(jerk) of various factions of the NWO?

DaddyO

Sat, 05/10/2014 - 16:33 | 4746718 debtor of last ...
debtor of last resort's picture

How much energy to get that one loaf of bread to your kitchen table.

Gardening bitchez....

Or Share cropping, 'tick tock motherfuckers' say

Sat, 05/10/2014 - 16:44 | 4746734 Winston of Oceania
Winston of Oceania's picture

I buy flour in bulk along with wheat berries to mix it with, and we don't eat too much since it will make you fat.

Sat, 05/10/2014 - 16:52 | 4746744 debtor of last ...
debtor of last resort's picture

Fat, that's ok, just suck up your cheeks while talking to your neighbours.

Sat, 05/10/2014 - 19:54 | 4746981 Stuck on Zero
Stuck on Zero's picture

Is that my wife?

 

Sun, 05/11/2014 - 08:40 | 4747804 DutchR
DutchR's picture

WoW she looks like a banker.....

Sat, 05/10/2014 - 16:34 | 4746719 0b1knob
0b1knob's picture

US law fordbids the export of crude oil from the US.  So US refiners run full out and export refined products overseas.  This distorts the market making crude cheaper in the US since its a closed market.

This is NOT a negative trend for the US.

Sat, 05/10/2014 - 17:47 | 4746808 CrashisOptimistic
CrashisOptimistic's picture

Not quite.

The article and graphs are generally good and meaningful, but there is a level of depth Morgan Stanley didn't touch that is somewhat important.

Almost all growth in crude hasn't been crude.  There is a definitional thing.  Whereas the Bakken does at least partially qualify as crude, the EagleFord is notoriously putting out a lot of condensate.  The traditionial measure of C+C, crude plus condensate, has a problem when the ratio is not the traditional 80/20 in favor of crude.  The EF is outproducing the Bakken, but the definitions make it all a weak claim.

If your C+C is going up, but it's all the 2nd C with the first C falling, the joules total is falling.

The esoterica matters.  The liquid is measured by API rating.  A number less than 45 is crude.  A number from 45 up to even 70 is called condensate.

The reason this matters is condensate doesn't make middle distillates (diesel).  The NGLs are not in any way oil.  They are feedstock for plastic.  They don't push trucks around.  They aren't fully energy laden.

To add another layer of problem is that if you don't seperate out the NGLs and put it in the same truck loading crude (in NoDak), you can get that stuff in railcars too.  It lets you report bigger oil production, but with a portion of the railcar not crude . . . it has a lower ignition temperature.  Boom.

One other item from the MS charts.  The quote of 4-5% global decline rate from already producing fields.  This is somewhat the all powerful number of all things oil.  5% of 80 million bpd is 4 million bpd less flow coming from those pipes each year.  You gotta find another 4 mbpd every year just to break even, and in your effort to breakeven, global population, aka mouths to haul food to, keeps going up.  This decline rate problem is why XOM and CVX have falling production.  They aren't finding new oil.  Their old oil flow rate is declining.

The item of consequence in that is shale oil decline rates are 60% in year 1.  Humongous.  If shale is going to be leaned on to address the new flow that offsets old flow loss, then that 4-5% number is going to start climbing.  The sprint up the down escalator gets more and more frantic.

Sat, 05/10/2014 - 18:03 | 4746838 post turtle saver
post turtle saver's picture

barrels of oil vs. wet gas & condensate from Eagle Ford has increased 7 times in just four years... all they had to do was move out of the east regions and into the oil bearing regions further west...

your premise is worng and has been for years... stop posting disinformation

Sat, 05/10/2014 - 18:08 | 4746847 CrashisOptimistic
CrashisOptimistic's picture

What premise?

I gotta go burn some gasoline going to a drive in window for food.  Will see this when I return.

5% per year is the global number.  MS quoted it.  The eagleford doesn't supply the world.

 

Sat, 05/10/2014 - 21:18 | 4747153 post turtle saver
post turtle saver's picture

address the issue... we're already in strong agreement that refineries are retooling for light crude coming out of Eagle Ford in steadily and rapidly increasing amounts... not increasing gas cubic feet, not increasing wet gas & condensates, but light crude... in fact the crude production out of Eagle Ford has ramped up so much so fast that EIA has had to revise proven reserves for that play three years in a row... tells you right there what arm chair analysts know about the play, which is jack shit nothing...

as for MS, I'd have better luck using a dart board for market analysis

Sat, 05/10/2014 - 21:37 | 4747210 CrashisOptimistic
CrashisOptimistic's picture

Oh you did come back.  The *issue* is global.  The EagleFord is a marginal item thereof.  The decline rates quoted are global with even the most positive of such talking 3% and some less positive folks 6%.  4-5% is entirely legit.  Why did you think it is not? 

As best I saw most recently the decline rates on EagleFord wells are about 50% in year 1, just like all other shale wells.  So I sort of don't know what you're complaining about in the 4-5 quote?

You do know this is only 0.9ish million bpd C+C out of the planet's 80+ mbpd consumption?

Sat, 05/10/2014 - 20:57 | 4747091 post turtle saver
post turtle saver's picture

yeah, keep the downs coming morons... you know nothing of Eagle Ford operations... seriously, you all know jack shit

Sun, 05/11/2014 - 11:18 | 4748043 TheMerryPrankster
TheMerryPrankster's picture

Thank god the Turtle knows everything and is condescending enough to share it with us.

Turtle you smell like a troll. You still getting that government paycheck?

Sat, 05/10/2014 - 18:13 | 4746858 sushi
sushi's picture

Crash -

Good points. Lots of BOOM lately.

Also not mentioned is the use of biofuels such as corn based ethanol. This gets added to your gas but does not contain the same energy content per volume as gas so you are paying more for less.

Plus ethanol is eligible for state subsidy so you are paying twice. Pre-pump subsidies to the grower, post-pump more $ for less energy.

Plus, Plus (and this is a little contentious) the amount of energy required to grow the corn to produce the ethanol may result in a negative return on energy. The amount of FF required to deliver a gallon of ethanol represents more energy than is returned by the energy contained in that gallon of ethanol.

Plus, Plus, Plus the use of agricultural lands as a transportation fuel feedstock means that there is less acerage to grow food therefore the cost of food increases. Since corn is an animal feedstock this jump in prices will affect pretty much everything that you eat.

Plus, Plus, Plus, Plus the combustion of ethanol results in an addition to atmospheric CO2 which will increase your costs for everything from rising insurance premia to increased disaster relief transfers, to increased costs for sea walls and similar abatement.

We are so fucked. And not in a good way.

 

Sun, 05/11/2014 - 11:20 | 4748053 TheMerryPrankster
TheMerryPrankster's picture

Plus you have to use petroleum to plant, water and harvest and the fertilizer is made from petroleum and with petroleum.

So you use a butt load of petroleum to make a petroleum substitute. Something is wrong with this idea.

Sat, 05/10/2014 - 16:47 | 4746737 deflator
deflator's picture

trading longterm fresh water security for oil and gas. Wonder how much hydraulic fracturing(or ethanol production or high fructose corn syrup based diets, classic Coke, etc.) would be taking place without the Ogallala aquifer.

Sat, 05/10/2014 - 17:37 | 4746811 CrashisOptimistic
CrashisOptimistic's picture

Roughly 1 million pounds of water is required to frack a well.  NoDak does 150ish wells per month.

Sat, 05/10/2014 - 17:53 | 4746828 nmewn
nmewn's picture

So, a 125,000 gallons per well or did I do the weight to gallon conversion wrong?

Sat, 05/10/2014 - 18:04 | 4746841 CrashisOptimistic
CrashisOptimistic's picture

8 lbs per gallon.  You are correct, but fracking is done in stages.  Stage count increases if you have longer horizontal well runs.  So as some well deserves even more pipe and distance horizontal, the 1 million pounds of water number increases.

BTW typically about 5 million pounds of sand or ceramic proppant also required to frack a well.

A lot of weight on those roads hauling it piecemeal to the well site.

Sat, 05/10/2014 - 18:17 | 4746863 nmewn
nmewn's picture

Understood, just wanted to make sure we were on the same page...about the usage of four-five households per month, per well.

As far as the roads (I'm not in the trucking business, so I'm not sure) but its my understanding they pay higher rates/taxation/fees because they use public roads and degrade them faster than passenger cars.

Maybe someone who is can chime in and confirm or deny...

Sat, 05/10/2014 - 18:19 | 4746864 sushi
sushi's picture

Plus you may use additional water if you perform a workover to attempt to revitalize a well with declining production.

And not all sand is the same. High quality proppant sand comes out of MN so a lot of energy is being burned to extract those FF. We are long past the Spindletop era.

Sun, 05/11/2014 - 11:24 | 4748063 TheMerryPrankster
TheMerryPrankster's picture

the long plateau seems to have a bit of a downward slope. At first I thought I was just drunk on propaganda but I now realize the reason my perch is slipping is the ground is moving beneath me as the last cheap oil is extracted.

So our magnificient GDP is a product of the loss of cheap oil? Negative GDP from 2015 forward?

I'm going long Ethanol in the form of vodka cases stashed in my basement.

Sun, 05/11/2014 - 12:33 | 4748188 Citxmech
Citxmech's picture

It was a very disturbing realization how much vodka we would need to store to keep me and friends sufficiently drunk to last through the apocalypse.  

How come nobody sells 55 gallon drums of Stoli?

Sat, 05/10/2014 - 16:48 | 4746740 IridiumRebel
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I SUMMON THE GREAT AND KNOWLEDGEABLE CRASHISOPTIMISTIC

Sat, 05/10/2014 - 17:38 | 4746814 CrashisOptimistic
CrashisOptimistic's picture

Summoning demons is never a good idea.

Sat, 05/10/2014 - 17:26 | 4746801 kurt
kurt's picture

The bank has done a nice job of constructing a "bower". The Bowerbird builds a structure and decorates it with sticks and brightly coloured objects. In the case of the bird it is done to attract a mate. In this case, you might say, the bank is insuring they can continue schtupping you.

The depression started in 2007 with gasoline prices in america being, monopolistically increased: they killed retail, jobs, you name it. It was the beginning of the "Great Extraction".

The above is a brightly colored lie, complex, to give an air of legitimacy. 

You need to wake up now. You're being had.

Sat, 05/10/2014 - 20:14 | 4747009 Matt
Matt's picture

Are you claiming that high oil prices are solely due to manipulation, and there is vast amounts of $20 oil available?

Sun, 05/11/2014 - 00:45 | 4747558 rocker
rocker's picture

 Although 20 is low balling. 50 to 75 is more like a realistic number set.

Yes, plenty of it at the value of the dollar yesterday, less more FED dollar printing. 

Mon, 05/12/2014 - 00:04 | 4749837 kurt
kurt's picture

Nice erection.

Sat, 05/10/2014 - 17:55 | 4746826 falak pema
falak pema's picture

Moving transport away from oil dependency is the greatest challenge of the coming thirty years.

Gas oil is the worst fuel from health considerations perspective. 

Coal and nuclear fission will bottleneck future factory production and oil will transport; worldwide. 

The age of cheap oil, the age of carbon intensive fuels is coming to an end. 

Its back to horse and buggy in 30 years; not kidding; unless we learn to store and flux renewable elec. 

I hate the idea that I'm talking Malthusian but the math... and if only the alt. energy innovation hadn't been killed by the likes of Reagan and Bush/Cheney. 

Sat, 05/10/2014 - 20:13 | 4747008 Matt
Matt's picture

All this doom and gloom, you guys are missing out on the highlight: Canada is #1! Most oil consumed per capita, most miles of road per capita! Double winning! Whoo Whoo!

I don't know about horse and buggy, I doubt there'll be that much land for growing oats in most places.

I think bicycles, sailboats and telecommuting are the way of the future. Cruise ships, Just-in-time delivery and single passenger SUV two hour commutes are going to fade away.

 

Sun, 05/11/2014 - 11:35 | 4748099 TheMerryPrankster
TheMerryPrankster's picture

all that isn't in existence, must be made, where will the material and energies be sourced from for this massive conversion to sailboats and bicycles and telecommuting (easy peasy to build a sailboat by telecommuting)?

because you dream it doesn't make it feasible.

The transistion from heavy use of petroleum to reduced use of petroleum occurs just when on needs more petroleum to transistion to less petroleum, there is the conundrum.

How to do you make do with less while preparing to make do with less?

There will be no articles explaining what is really happening, shortages will be blamed on weather, enemies of the state or popular boogie men, like terrorists. The status quo will pretend all is well even as millions starve and die.

The illusion must be maintained or chaos reigns.

Sat, 05/10/2014 - 20:32 | 4747032 Stuck on Zero
Stuck on Zero's picture

I'll bet we'd all be on alternative energy now if we'd spent the $3-4 trillion fighting wars on energy independence instead.

 

Sat, 05/10/2014 - 23:54 | 4747503 Fred123
Fred123's picture

I willing to bet that we would not. You are thinking like the typical progressive, just throw more money at a problem and it will be fixed.

Sat, 05/10/2014 - 21:02 | 4747046 Radical Marijuana
Radical Marijuana's picture

That article had lots of interesting details about the individual trees, but what about the overall dark and tangled forest?

http://cassandralegacy.blogspot.ca/2014/05/the-invasion-of-resource-zombies.html

The invasion of the resource zombies

By Ugo Bardi, May 6, 2014.

... there are ideas which simply refuse to die and, like zombies, continue forever haunting the human mindscape. One of these ideas is that the problem with mineral resources consists in "running out" of something. ... A classic strawman: the one that says that we should worry about "running out" of mineral resources. It is not so. Let me say it emphatically, assuredly, and unequivocally: we are NOT running out of anything. That's not the problem; the real problem with resources is diminishing economic returns. It means that we have extracted the "easy" (i.e. inexpensive) resources and that now we are forced to extract from "difficult" (i.e. more expensive) resources. ... Now, you can rhapsodize about new technologies as much as you want ... but there is a real problem here. ... Technology, just like almost everything else, suffers of the problem of diminishing returns ...

http://cassandralegacy.blogspot.it/2013/11/plundering-planet-status-report.html

So, there is a reason for the increasing prices of all mineral commodities - it is diminishing economic returns. Unfortunately, however, some minds tend to be infected by the virus of the resource zombie that tells us that there is nothing to worry about. But there is a lot to be worried about: if something costs more, then you may not be able to afford it. In such case, you might as well say that it is not there (or even that you "ran out" of it).

So, it is not a good idea to sit back and hope that the wonders of technology will free us from resource depletion: no problem can ever be solved if you refuse to admit that it exists. Then you can find solutions in the form of higher efficiency, substitution, recycling and more. It can be done, but we need money, planning, and sacrifices. More than all, we need to shoot the resource zombie in the head and recognize the problem in order to act on it.

OUR CIVILIZATION IS DOMINATED BY RESOURCE ZOMBIES SUPPORTED BY THE GENERAL ZOMBIE SHEEPLE POPULATION.

"OIL FUNDAMENTALS" ARE ALWAYS BEING MISREPRESENTED, BECAUSE THE FINANCIAL ACCOUNTING SYSTEMS ARE FUNDAMENTALLY FRAUDULENT.

There is a deliberately made and maintained DISCONNECTION between the real world of energy versus the world of "money" made out of nothing as debts. The real connection between the laws of nature and the laws of men is the ability to back up lies with violence, which is what actually controls the way our civilization thinks and behaves, so that it is overrun by Resource Zombies, because the vast majority of people act like Zombie Sheeple.

To the degree to which our civilization is controlled by the banksters' bookkeeping, which is based on the magical mathematics of making "money" out of nothing as debts, it is IMPOSSIBLE for that civilization to have a saner attitude towards energy systems, since the ways that human civilization actually operates as an energy system itself is based on legalized lies, backed by legalized violence, in hyper-complicated and entangled ways, whereby the connections of human beliefs to relatively more objective realities enable that civilization to be dominated by Resource Zombie Sheeple.

Since we currently depend upon oil more than any other natural resource, the fundamentals there are actually more about that being dominated by the hordes of Resource Zombie Sheeple, (along with the corresponding Resource Zombie Wolves In Sheep's Clothing), than with respect to any other natural resources. However, they ALL follow the same pattern. Since society is dominated by accounting systems that flatly contradict the laws of nature at face value, since "money" is being made out of nothing, to pay for producing and consuming oil energy, which therefore is ACTUALLY FRAUD, (which frauds dominate the whole world, such as are manifested in the existence of a bank holding company like Morgan Stanley), therefore, this kind of article provides lots of detailed information about the trees, but nothing about the dark and tangled forest as a whole, where our civilization's most important manner of producing and consuming energy is classically done for Resource Zombie Sheeple, who make and spend "money" made out of nothing as debts, by private banks such as Morgan Stanley, as the Resource Zombie Wolves In Sheep's Clothing.

... Well, at least burning oil, as chemical energy, can still be understood by common sense. When it comes to things like atomic energy, which is many orders of magnitude BIGGER than chemical energy, the attitudes of the Resource Zombies are astronomically amplified in size. The basic problem that human civilization operates as an energy system, in ways which developed to be based on being controlled through deceits and frauds, makes having any more thoroughly rational attitudes towards its activities become practically impossible. As the saying goes, "penny wise, but pound foolish:" our civilization currently manages to be as scientific as it can be about finding and using oil, but remains being deliberately as unscientific as possible about the financial accounting systems that it uses to pay for doing that!

What I would most like to know about the Global Oil Fundamentals, but I am not afraid to ask, is how much longer can our civilization continue to operate itself through fundamentally fraudulent financial accounting systems, whereby all of the progress in science and technology turns into walking dead Resource Zombies as soon as that goes through the banks?

Sun, 05/11/2014 - 11:29 | 4748074 TheMerryPrankster
TheMerryPrankster's picture

Essentially running out of something or something being to expensive to produce are equivalent and not really worth dithering about the difference, for in the end the results are the same.

Sun, 05/11/2014 - 00:59 | 4747575 mcgoverntm
mcgoverntm's picture

Is a PDF of this presentation available to ZH readers?

Sun, 05/11/2014 - 09:55 | 4747913 SidKhadak
SidKhadak's picture
Rothschilds planning to Colonize India for another 400 years ?

It was revealed a couple of years back in the Malaysian Parliament that a PR company by the name of APCO Worldwide was subverting public opinion and through it leveraging access to planning government strategies and policies. The name APCO Worldwide suddenly gained fame (or notoriety) in Malaysia after Opposition Leader Anwar Ibrahim drew comparison of the firm’s image-building campaign for its Malaysian client to a similar campaign by the Israeli government. It became a serious issue as APCO Worldwide is formed of Israel’s ex-Mossad Intelligence officials and has a notorious background. It is infamous for whitewashing Mass Murderers into Messiah, running propaganda campaigns for the invasion of Iraq and later swiftly positioning itself to help American companies plunder Iraqi wealth and resources. Now the firm seems very well placed in doing the same with India, plundering it’s wealth and resources.

 

Rothschilds planning to Colonize India for another 400 years ?
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