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Are The Saudis Winning? US Crude Production Slows To Lowest In 3 Months
US crude production declined 0.74% last week to its lowest level since May 15th. US crude inventories dropped for the 4th week of the last 5, but considerably less than expected.
And inventories dropped again...
Charts: Bloomberg
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It is Obama's oil war against Russia and Putin. Saudi Arabia is a red herring.
Stakes are high as US plays the oil card against Iran and RussiaJohn Kerry, the US secretary of state, allegedly struck a deal with King Abdullah in September under which the Saudis would sell crude at below the prevailing market price. That would help explain why the price has been falling at a time when, given the turmoil in Iraq and Syria caused by Islamic State, it would normally have been rising.
The Saudis did something similar in the mid-1980s. Then, the geopolitical motivation for a move that sent the oil price to below $10 a barrel was to destabilise Saddam Hussein’s regime. This time, according to Middle East specialists, the Saudis want to put pressure on Iran and to force Moscow to weaken its support for the Assad regime in Syria.
http://www.theguardian.com/business/economics-blog/2014/nov/09/us-iran-r...
Shouldn't gas be like $1.50-2.00 a gallon considering the market price?
Just guessing, has anyone done the math?
About $1.80 is the number we came up with in our area. We are currently at $2.40 and we haven't had any gas tax hikes since the fall from $4.00.
A good root cause analysis tells you all you need to know about the oil market.
That's not a root cause analysis! It's a stack of opinions that come to a hypothetical conclusion. It's barely analytical at all.
Seemed to hit the nail on the head to me.
The people are winning due to cheap oil.
So you're saying that you don't think that low-interest rates had an effect on overinvestment into the shale oil sector, heck deepwater as well. And these low interest rates were a result of a failing monetary system that requires them to incentivize more borrowing?
I agree with you on low interest rates/overinvestment portion, but think you are leaving out international gamesmanship with Russia. I believe economics and global politics are always interrelated.
Agreed, but also believe the Saudis wouldn't have had to defend market share if not for the increase in shale production. I agree it is interrelated though.
$2.25 in some states. Tax structures vary.
Will the banks be willing to accept all of the shale/fracking defaults is a question?
Production is secondary to credit. The old way off accessing money was to produce, one no longer needs to produce to access money.
All secondary financial objections will be discarded in favor of direct access to credit/money.
Finance is like a ballon that lost its teather. The market is slow but will respond by priceing direct access as the more favorable access to credit/money.
Production just becomes a cost, cut your costs and expand your credit in recessions/depressions.
ISIS is the red herring, and yea Saudi Arabia is winning for the moment, but given they recently jumped into the bond market, they are blowing their own brains out.
The new supply in Iran more than offsets any turmoil in iraq. The US is notably active when it comes to protecting kurdish oil in iraq, and syria isn't a big oil player.
Given Saudi production is at a record, and they have a record number of rigs there, it's fair to say they are overtly trying to sink everyone else, and doing a good job at it.
Ask the Sauds why they sit in the "kiss n cry" corner with Russia's Putin...And why Iran now wants moar of the Opec cake; all at the expense of "leveraged to sky" shale.
And the Dems do have a separate agenda to the GOP neo-cons who have been sold on OIL for 50 years. He doesn't want the ME Oil to be the nexus of USA's future geostrategy.
His eyes are set on the great game with China.
A two year correction to Oil may allow a lot of things to get purged from the system, including Gazprom n Putin.
Obama now plays long on renewables in the energy patch. For Obama the cutting edge of US hegemony is hi-tech not fossil anymore. Alphabet not fracking.
Call me carzy, but I'm pretty sure the only people winning in this whole mess are the global 1%. The rest of the world is pretty much fucked.
If you make $35k/year, you are the one percent.
http://www.globalrichlist.com/
Hi, how are you carzy?? How is Mrs. Carzy?
Chip Foose is carzy, I know Chip Foose, He's a friend of mine, and you Sir, are no Chip Foose...
We are all retards and we are all fucked..good thing we are all retards so the fucking is considered more of a wecolmed activity than a punishment...
Delete. Double post. Yep, I'm a retard.
The House of Saud is about to have their oil production platue and even taper off so of course they are bleeding the compitition dry. They want the oil market for themselves.
Oil is as cut throat a business can get. The tactic is to have shale companies close their wells. Once a well is closed it won't be reopened because the cost to open it is too high. First no one really knows how much gas is in a well because they can't measure it. There could be air pockets below it and then the estamation will be too high if that air is included into the total amount. Opening an old well is as expensive as drilling a new one. Why would anyone want to open a well that was already producing? That's like me wanting to eat some of your already eaten ice cream.
mmmmmmmm! Ice Cream!
Well you don't understand the business at all. No one closes their wells or they lose the lease which is the collateral upon which all the loans are based.......................
Typical ZH ignorance.
In theory, for short holes, after a period of time the production rate decreases to a point where a decision would then be made to "shut in a well" so that the pressure could rebuild and at a later date you would "reopen a well that was already, so called, producing"
Not applicable for deeper wells though, only shallow ones.
NO, you still lose the lease. The wells have to produce or the lease is lost and that is the collateral for the loans. They do rework on the old ones like a frac with acid and sand in order to open up the formation but eventually the wells water out. With prices like this, they don't have the cash flow to rework them so it's likely some leases will be lost as marginal wells quit producing.
The lease is held if there is even one producing well in a unit. At least in Texas, the production does not need to be profitable. You can choke your last well in a given lease down to a teacup and hold that lease.
Yes, there has to be at least one producing well. I have just that situation on one of my sections with a lot of Wolfcamp oil beneath it and XOM holds the deep rights because a stripper operator keeps one well going, the others have all watered out and they haven't properly shut them in or cleaned up the mess on my land. In that lease which is 60 years old, all that's required is production. However, in a modern lease you always use the term "paying quantities" which means profitable. However, paying quantities really just means positive cash flow and doesn't include capital investment so it doesn't include the cost to drill, it's just about existing production costs.
'Lavrov's dog'...
Israelis planning beach party
https://www.youtube.com/watch?v=i0X5ZyMAVuM
If any government in the world deserved to receive the full brunt of the US military industrial complex, it would be Saudi. Imagine 10,000 cruise missiles flying in the twilight toward Saudi government and military targets. That's just a beautiful picture.
That and 10,000 cruise Missiles headed for Tel Aviv.
Party time.
If any government in the world deserved to receive the full brunt of the US military industrial complex, it would be Israel.
Fixed it for ya.
Nah....send a nuclear message to the ragheads....let them find out that there are no virgins for them.
Kikes and ragheads. vapourize them all.
Saudis are ZioNazis with tea towels
Hell, I'd settle for a squadron of Piper Cubs with skilled coyote shooting ranch kids making a pass....'course, its hard to find a good ranch raised waist gunner now a days...might be able to scratch maybe a half dozen capable volunteers from Wyoming, and get the rest from montana I guess...those helicopter flying hog shooters from Texas could do some damage granted...
Sail one missle into that black stone. Save the other 9,999.
Shale was going to go down anyway. Most of the estimates I saw that weren't coming from the ShaleMiracle.com crowd put peak production in the Bakken near and slightly above where it is now, at that point the decline rates would have begun eating away at production numbers. It was very interesting timing for SA to open the spigots.
Peak non Opec:
Non-OPEC C+C production peaked in December 2014 at 47,186,000 bpd and had declined by 230,000 bpd by April. I believe this will be the final non-OPEC peak. By the end of the year US production will be down by .5 million barrels per day and the rest of non-OPEC will also be down by at least that amount. And even if higher prices turn US production around the rest of Non-OPEC will continue to decline.
http://peakoilbarrel.com/us-shale-declining-and-opec-still-climbing/
Economy=slow Demand=slow. SImple.
Not so simple since demand is up by 1.5mmbbl/day over last year. The numbers don't support the declining demand argument, miles driven are higher now than in 2007 at the last peak and gasoline inventories fell by 1.5mmbbl last week while production is up 6.6% over last year. Obviously production isn't keeping up wth demand.
Might want to take natural gas demand into consideration while we're here. The EPA is gunning for our coal-fired power plants in Texas. I'm expecting at least two of those plants to be offline within the next 5 year judging by the way things are going. If that base generation is to be replaced in this part of the state, it will need to come from natural gas.
Funny how last week when oil production increased by 52,000 bbl/day which is just noise anyway, it was blamed for no gain on a massive inventory drawdown much larger than expected. This week the inventory draw down is equal to what was expected last week and the production gain is wiped out, more noise. However, oil is comatose. No one bothered to pay attention to the fact that the Saudis reported a 200kbd decline in July production but the market paid attention to Iran increasing production by 28kbbl/day. Anyway, gold is up nicely and the GOR continues to rise which means if gold can hold it's gains, oil should soon follow, especially with the dollar in crash mode.
Wow! What a great plan! This really going to screw the Russians! Oh, wait!
Saudi Arabia winning?
The US has a bunch of oil it can pull out anytime it wants and the Saudis are pumping their oil out of the ground at increasing rates and selling at a lower price. This is after a large oil reserve has been built up to ensure that the Saudis have no leverage.
How is that winning? Right, the US has slowed production and the banks are holding the price-cut blade over the heads of the Saudis. The Saudis are pumping and maybe getting enough money to cover their needs (maybe). But they have high costs, no control of price and no control over the financial system. They have become dependent on the USD and the financial system that has turned on them. Maybe this IS payback for Bandar Bush and the neocon crony attack on the US (thinking not) ... or maybe just part of the bigger plan (more likely). The question is whether the Saudis realize that they are in the crosshairs.
Which path to Persia?
ZH'ers don't like the thought of the US winning anything.
I think that is not an accurate assessment. I think what ZHers try to do is separate the bad actors who are running the US government, media and financial system from what is perceived as "the country". No one wants to see bad actors win. That would be un-American.
The bad actors are not the US. The bad actors want to be portrayed as THE US, and therefore want it believed that anything not supportive of bad actors is then a betrayal of America. But that is not the case. It is possible to not support the bad actors, who are driving the country into the ground and who have betrayed their responsibility and the people, but still to support the US.
So why are shale producers considered bad actors here? I think it's mainly because shale has worked out the kinks and isn't what the peak oil people originally thought it was and most ZHrs are sour grapes peak oilers who will never admit to being wrong. Otherwise shale is a US resource that is adding to the reduction in trade deficit and was providing good high paying jobs until the price of oil was intentionally crashed last year.
I don't think that shale producers are bad actors. I think they have been used as a tool to accomplish other things ... but not bad actors.
The bad actors comment was directed at the above comment that ZHers are anti-American, which I do not agree with.
"Zh'ers aren't anti American." heh
Member = 5 days three hours.
How much longer until China buys Venezuela?
They already did and they are clueless on how to produce oil. This according to a friend who is Venezuelan that visited us last weekend. He lives and works here in the US but his family is back in Venezuela and he says the Chinese and Russians took over the oil fields after the US majors were kicked out and that the Chinese and Russians have made a mess of it. Look at the production declines.
Saudi Arabia is up S' creek without a paddle. the NWO wants its oil without the bearded drag queens.
c'mon tyler we all know the saudis dont fight their puppetmasters.
Have ze feds or ze goldman kraken taken over this zerohedge ship?
Shale is a fraud in the current economic climate. It needs well over $160 a barrel to be a viable business plan and that's with easy to reach deposits. Max Keiser has been claiming Shale and Fracking were a scam for nearly 3 years and he has been proven to be 100% correct again. There is an oil war and America can never win it alone, as she doesn't have enough locally. What you are seeing is the rest of the world slowly breaking away from U.S hegemony, domination the death of the Petrol-Dollar and the death of its status as the world’s reserve currency.
You don't know what you are talking about and Max Kaiser is a circus clown. Last year I had one shale well producing 15kbbl/mo and now I have three producing 50kbbl/mo. The decline rates on the shale aren't 90%, they are more like 40% which is exactly what it is for conventional.
Furthermore, if the dollar really does go into a freefall mode, oil will be back over $80 so fast it will make your head spin and all the oil shorters on this board will be squealing like pigs.
OK, well good luck with that...you might want to look farther downstream to consumption/transportation to gird your loins for a major financial disappointment, unless you are selling your shit by the gallon like a maple syrup tapper a roadside stand of some sort...
Black gold. 'Nuff said.
I don't know where this conventional well decline rate of 40% is coming from. Granted as time goes on it grows but it has usually been estimated at between 4-15%.
"A commonly quoted global decline rate is from CERA: 4.5%. This figure was calculated from an analysis of 811 large to giant size fields, covering ~66% of global production"
"The IEA 2008 World Oil Report concentrated on defining future decline rates. They published a production-weighted average decline rate worldwide of 6.7% as of 2007."
Large to giant size conventional fields don't exist in the US. Conventional ( read vertical ) wells here decline at a 40% rate and no large to giant fields have been discovered for years. Funny how your data source is 8-9 years old now which makes the production data even older. I own a fair amount of land with said conventional wells and those that were drilled in the 80s declined at a 40% rate and have either dried up or are now at about 5% of their original production.
160?
how did you get there, or what do you drink?
Time to release the 28 censored pages of the 911 report.
Dream on son, dream on. Fracking companies are dropping like flies, leaving the state to pick up the tab. How many local oil jobs is the U.S shedding When it all comes out in the wash, you will be exposed as an uneducated liar and a fool. Time will reveal all. Read and weep...... http://www.bloomberg.com/news/articles/2015-04-22/half-of-u-s-fracking-c...
This Bloomberg article is too polite to call them out and tell the truth in plain old English, The industry is a fraud and worse than the Dot.Com bubble. I talk to City analysts who claim most Fracking companies can’t even make their interest payments.