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UPDATED: Countdown to 100$ oil (16) - We'll know on Monday

by Jerome a Paris Tue Nov 22nd, 2005 at 03:51:16 AM EST

Bumped & updated by DoDo

The big energy news of last weekend was the start of the Joint Oil Data Initiative (Jodi), which for the first time promises real data on production levels in OPEC countries too (see Jérôme's original post below the fold).

Now the database is on-line, the presently available data (including OPEC) can be accessed here. For comparison, you can check one set of previous production estimates (these by MEES) here. The data is colour-coded: most reliable (checked) data is blue. Individual countries' cooperation is rated (rating explained).


So far, my bet on 100$ oil by the end of this year is not looking so smart, but have no fear, I'll stay the course. And this week-end, some arguments may actually be provided in my favor:


Opec set to lift secrecy about oil production

The Organisation of the Petroleum Exporting Countries, the cartel that controls 40 per cent of world oil exports, will on Saturday lift a four-decade veil of secrecy and begin regularly to reveal how much oil it is actually pumping.

China and India, the fastest growing major oil consumers, will also supply consumption and storage data for the first time.

The Joint Oil Data Initiative (Jodi), which will be launched on Saturday in Riyadh by energy and finance ministers of the biggest oil producing and consuming countries, will meet a persistent demand of the Group of seven industrialised countries for more transparent energy data.

The price rise of the past three years, which this year saw oil hit nominal highs of $70.85 a barrel, could in part have been avoided by better data, analysts said. It would provide a more accurate basis for industry investment decisions, which in turn help determine long term supplies.

But analysts also suggested that the new database was unlikely to transform the currently unscientific art of guessing world demand and supply into a simple task.

One person close to Saturday's event said that the data would reveal little difference to existing output estimates for some countries including Saudi Arabia, the world's biggest oil producer but would show a five to 10 per cent disparity in the production levels of other Opec countries.

Traders said they would have to wait until the numbers came out to know whether they would move the oil price when markets reopen on Monday.

JODI has its own website, which has not gone live (it exists, but provides no data yet), and says it will provide the following data:


  • Seven products : Crude Oil, LPG, Gasoline, Kerosene, Diesel Oil, Fuel Oil and Total Oil,
  • Four flows : Production, Demand, Closing Stock Levels and Changes.
  • Data are available in three different units : barrels, tons and litres
  • For 92 participating countries
  • Monthly data from January 2002 to one month old.

Any transparent data is a good thing, and this seems to be a genuine progress for the markets to understand what's going on. However, as this post over at the Oil Drum notes, it provides no new information about reserves and production rates for individual fields, the two most important determinants to know what's actually going on on the supply side. The Oil Drum also notes that this will not help us know more about depletion rates (i.e. how fast fields are used up and go into decline) nor the situation on the drilling rigs side

If fields require increasing numbers of rigs to produce, it is a sign that production is becoming more difficult - and costly - and it creates other tensions on the rig market, a market that has just been violently disturbed (30kb pdf) by the hurricanes in the Gulf of Mexico:

So where does that leave us? Here's a mainstream opinion (MarketWatch - use id: kos@dailykos.com psw: dialykos to register):


Are we there yet? Prospect of $100 oil - Longer-term bets based on high risk, depleting sources

"What ever happened to $100 crude? It just got postponed," said Agbeli Ameko, a managing partner at First Enercast Financial. "That is, at least until the next hurricane season or some geopolitical bombshell."

"In this 'peak-oil' and 'terror-premium' environment, the market will remain in reach of the $100 barrier," he said.

(...)

"I don't think we're going to have enough alternative energies at a good price that's globally distributed within the next two to five years before [the] next global expansion occurs," said Hassey.

There is "no really new alternative is on the horizon," said veteran commodities trader Kevin Kerr.

Given all that, "$100 oil is not that far off" -- in 2 to 30 months without a major terrorist act, and 6 to 12 months with a major terrorist attack, said Kerr, who also edits Global Resources Trader, a service of MarketWatch.

"The bottom line is, the light, sweet, easy-to-get/easy-to-refine oil is much harder to lay your hands on nowadays," he said, and that lack of light, sweet crude to refine "will most certainly drive prices higher overall."

So "for those asking 'are we there yet?' -- be patient. It probably won't happen in 2005, but 2006 or 2007 could be another story," First Enercast's Ameko said.

So, let's see if this week-end's data brings any reason to change that estimate (for instance if it appears that Saudi production is no higher than last winter). In any case, even if I lose this year-end bet, I'll continue the series. We're still going there - pretty soon.

Are you getting ready in the meantime? Any extra months we are granted before 100$ oil or more happens should be used to make it easier to live with it when it happens, because it will.

Earlier "Countdown" diaries:
Countdown to 100$ oil (15) - the impact on your electricity bill
Countdown to 100$ oil (14) - Greenspan acknoweldges peak oil
Countdown to 100$ oil (13) - Katrina strikes / refinery crisis
Countdown to 100$ oil (12) - Al-Qaeda, oil and Asian financial centers
Countdown to 100$ oil (11) - it's Greenspan's fault!
Countdown to 100$ oil (10) - Simmons says 300$ soon - and more
Countdown to 100$ oil (9) - I am taking bets
Countdown to 100$ oil (8) - just raw data
Countdown to 100$ oil (7) - a smart solution: the bike
Countdown to 100$ oil (6) - and the loser is ... Africa
Countdown to 100$ oil (5) - OPEC inexorably raises floor price
Countdown to 100$ oil (4) - WSJ wingnuts vs China
Countdown to 100$ oil (3) - industry is beginning to suffer
Countdown to 100$ oil (2) - the views of the elites on peak oil
Countdown to 100$ oil (1)

Display:
Go read asdf's alternate diary of the same number, and do go recommend my crossposted version of this diary on dKos.

And use as a tip jar.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sat Nov 19th, 2005 at 01:20:33 PM EST
One interesting (perhaps temporary) feature of energy prices in the UK is that various oil products that I have contact with (petrol/diesel/kerosene) appear to be faling from previous highs, but natural gas is rising with serious intent it seems...
by Metatone (metatone [a|t] gmail (dot) com) on Sat Nov 19th, 2005 at 05:10:16 PM EST
[ Parent ]
I found this gem: Hunt resumes for oil and gas in Switzerland.

Desesperation must really have grasped the oil industry that they'll go looking for oil in, of all places, switzerland!

by srutis on Sat Nov 19th, 2005 at 03:11:14 PM EST
How many times do I have to tell you that you are worng? :)

He he he.

Oil is not going to reach 100$, first beasue there is probably enough demand in the next five years to cover the demand at 60-70$. And seconly, if it ever gets to 80-90$ becasue the deman in developing contries increases or there is a crisis in Venezuela we will have the first real scary-moment and the first serious and easy measures to reduce consumption will be implemented (reducing around 15 % of consmption).

So oil will reach 100$ only some years ahead and, hopefully, it will increase the price at two or three times inflation so that the transition to a world without oil will be smooth.. I hope

I know what you think (not like me). You  know what I think. But I repeated my opinon ... well because you just repeated yours...snark snark snark.

Good night

A pleasure

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

by kcurie on Sat Nov 19th, 2005 at 05:34:45 PM EST
Somebody should keep an eye on Venezuela.

Chavez is a man with a plan.

Venezuela is #1 in oil reserves once you add non-traditional heavy reserves.

They are also building nuclear a reactor with Argentinian technology.  Cuba wants to complete its Chernobyl class reactor, hmmmm...

Brazil is playing cat and mouse with El Baradei's IAEA

Strange alliances form

The Southern Command scrambles.

Some people worry but the focus is elsewhere.

by Shockwave (shockwaveatinorbitdotcom) on Sun Nov 20th, 2005 at 12:12:58 AM EST
you should know better than this.  You need to look at this analytically though the economic model of a cartel/oligopoly.  Please don't bet your money, on oil futures, this way.  You can't predict what an oligopoly is going to do.  And I think you're putting to much faith in these estimates about oil reservies.
  that is what cartels do.
by wchurchill on Sun Nov 20th, 2005 at 01:49:11 AM EST
I say precisely that we know very little about reserves, so I am not sure I understand your point.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Sun Nov 20th, 2005 at 04:33:49 AM EST
[ Parent ]
more in the framework of a cartel.  Your diary is good, and provides a number of needed insights.  Certainly the transparency on data is a move in the right direction.

But the point on reserves was that the oil reserve data will still be mainly provided by members of the cartel.  They will continue to have an agenda in terms of how they are trying to manage expectations of other competitors iin the energy market, as well as the overall market price.  Therefore, IMHO, they will continue to post reserve estimates more based upon their agenda, than any reality based numbers on reserves.

So guessing the price of oil is a lot about guessing what competitive strategies will be among key oil producers in the future.  Kind of like playing the lottery IMHO, where the number between $20 and $100 will win 99.5% of the time, with $45 or something like that probably being the highest probability number by, say March '05.  Just my opinion.

I should have said more in my post about how good your diary is--seriously.  My comments were totally around the $100/'barrel predictions, which i imagine in reality is less important to you now, than giving us more insights into the market.

by wchurchill on Sun Nov 20th, 2005 at 12:12:56 PM EST
[ Parent ]
I agree with your point about how this oligopoly works, and that they can manipulate things.

It's even worse than you think, as they are only providing input on production and stocks, not about individual fields, and they provide nothing about reserves. So i's a beginning in terms of information made avialable, but it's far from the end. And they will have to prove that they don't manipulate whatever little they provide.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sun Nov 20th, 2005 at 03:09:50 PM EST
[ Parent ]
What is up with this (MSNBC, no link):

An experimental project in Canada to inject carbon dioxide into oil fields has proven successful, removing 5 million tons of the heat-trapping ³greenhouse² gas, while enhancing oil recovery, the Energy Department said Tuesday.

If the methodology could be applied worldwide, from one-third to one-half of the carbon dioxide emissions that go into the atmosphere could be eliminated over the next century and billions of barrels of additional oil could be recovered, the department said.

The Project's homepage says:

The PTRC [Petroleum Technical Research Centre], meanwhile, is the first to apply a rigorous scientific approach to injecting and storing industrial sources of CO2 to improve oil recovery. EnCana uses CO2 that would otherwise be vented to the atmosphere; the liquefied gas is transported through a specially built 320-km pipeline from the Dakota Gasification Company's Great Plains Synfuels Plant in North Dakota.

The homepage for the PTRC is here

Skepticism is the first step on the road to truth. -- Denis Diderot

by ATinNM on Sun Nov 20th, 2005 at 11:58:51 AM EST
CO2 is soluble in crude oil.  It cuts the viscosity allowing more to flow out of the pores of the source rock.  

It's not exactly new technology.  IIRC, CO2 injection in West Texas fields started in the 70's.

by HiD on Tue Nov 22nd, 2005 at 04:33:54 AM EST
[ Parent ]
by corncam on Mon Nov 21st, 2005 at 12:53:22 PM EST
I have a half-finished diary about Venezuela (may be finished this week), so I looked at its figures with most interest - what is apparent is that in 2004, production was significantly above estimates and closer to Chávez's claims, but at the beginning of 2005 something happened.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Tue Nov 22nd, 2005 at 03:55:42 AM EST
According the the Oil Drum, the highest month of production on record was April 2005 (I need to dig the comment in a thread).

According to MEES, the highest month on record for OPEC was May 2005.

The JODI database is still incomplete for now, so hard to use (and using a very unpractical software).

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Tue Nov 22nd, 2005 at 04:14:17 AM EST
not surprising.  Typically cold weather production systems like those in the North Sea do their maintenance in June/July.  Therefore a lull in production then.

Then we had the hurricanes that knocked 1-2% off the total.  

What is interesting is that even with the 1.5 MM off the market in the USGC, OPEC didn't produce as much as in May and the price still fell.   Demand destruction is real.

by HiD on Tue Nov 22nd, 2005 at 04:45:26 AM EST
[ Parent ]
  1. Very amateurish question. Could the demand destruction have happened at the same place as the supply destruction? I.e., could the destruction of New Orleans and environs have meant as big a reduction in US car traffic etc. as the shut-in production?

  2. I'm not familiar with US usage pattens, but I recall buzzwords like "summer driving season" and "winter heating season". Could this have played a role too? Won't real problems start now if winter turns colder? (Tough long-term predictions I read somewhere, possibly Wunderground, say this winter will be mild globally.)


*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Tue Nov 22nd, 2005 at 05:22:11 AM EST
[ Parent ]
 Sept-Nov is a low demand period as we are between gas and heat seasons.  A refining system well stretched in summer/winter catches it's breath and stockpiles for winter.  That's probably the main effect as to why margins are dropping like a stone, esp. on mogas.  There is enough slack in the system in this period to cover for the 4 downed refineries. (the biggest is back)

NO + the surrounding areas are only about 2 million people.  That's less than 1% of US population.  We've already seen many of them were too poor to have cars and use much fuel.  Also just because people were displaced doesn't mean less driving a priori.  Where ever they went, they'll still be driving once they find work.

As for real problems in winter, I doubt it unless we have a terrible winter (which always causes price spikes).  We had 131 million bbls of heat in storage when Katrina hit.  That was what we had in Dec the year before.  Mogas season had been good and margins stayed up on heat as well so refiners made lots both as a byproduct of mogas production and just because they could hedge in a nice margin.  Nat Gas is more worrisome although stocks there are reaching reasonable levels again.

by HiD on Tue Nov 22nd, 2005 at 02:39:41 PM EST
[ Parent ]
I am not sure you can conclude that there was demand destruction. There was oil demand destruction becuase the refineries were offline, and gasoline supply was provided by the European emergency storage. That took care of the last weeks of the driving season.

Now what will happen this winter is still an open question.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Tue Nov 22nd, 2005 at 05:56:20 AM EST
[ Parent ]
I would hope that, if for any reason the EU finds itself with a shortage of crude oil, the US will open its oil reserves for us like the EU-mandated gasoline reserves were tapped to help the US.

Idle hopes, I know.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Tue Nov 22nd, 2005 at 06:02:26 AM EST
[ Parent ]
using a very unpractical software

Yeah...

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Tue Nov 22nd, 2005 at 05:23:36 AM EST
[ Parent ]
One thing I couldn't figure out was this (from the explanation of color codes and ratings):

yellow background indicates that the Metadata should be consulted

Where can I access the Metadata? Can I even do so, or does this refer to stuff restricted to paying users? If the latter, are you such a user, and would you be allowed to tell us about what you found there in public? (I would obviously be interested in the February and April 2005 data on Venezuela.)

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Tue Nov 22nd, 2005 at 05:30:07 AM EST
[ Parent ]
Might the "metadata" be buried in the HTML source?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Tue Nov 22nd, 2005 at 05:39:58 AM EST
[ Parent ]
?

If you meant that the explanation page would have a link, no. If you meant that the squares in the table would have a link or something, also no - only the same text (consult the metadata) appears if I click on them.

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Tue Nov 22nd, 2005 at 06:10:09 AM EST
[ Parent ]
No, I meant truly buried. That would be really ass-backwards, but it's a technical possibility.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Tue Nov 22nd, 2005 at 06:20:22 AM EST
[ Parent ]
I think I found something rather curious.

I downloaded the Excel version, so that I could create a more viewable table and check for myself - and indeed it appears that the world total figures are significantly below current estimates of 80 million barrels per day even for months where data for big producers is complete (e.g. summer  and November 2004) - it appears production never topped 68 million barrels per day, by extrapolation it is barely above 70 million barrels a day now. (And I can't think of any significant producers not on this list.)

Could you two energy experts here comment this?

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Tue Nov 22nd, 2005 at 05:59:17 AM EST
Yes, this is only oil. It usually does not include condensates (liquids from gas fields) and other LPGs.

I am not sure that unconventional oils are counted in the above tables.

Then you also have refinery surplus (whihc HiD can probably explain better than I) which is not negligible.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Tue Nov 22nd, 2005 at 07:02:36 AM EST
[ Parent ]
>>spark goes up<<

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Tue Nov 22nd, 2005 at 07:28:31 AM EST
[ Parent ]
I also forgot to check Iraq in the table - data missing there, so another 2 million.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Tue Nov 22nd, 2005 at 07:50:50 AM EST
[ Parent ]


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