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The global oil market is broken, drowning in crude nobody needs

bloomberg.com

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Re: The global oil market is broken, drowning in crude nobody needs

#31

Post by crimsonalucard »

Synaesthesia wrote: post #22
gregorymichael wrote: post #9

What happened to "Peak Oil"? Was there some assumption in those projections that proved to be wrong?

Turns out the world has loads of oil, and is still discovering more, and even more natural gas, coal and so on. We’re not running out anytime soon, which is actually a problem.

I've read we're right at the peak with shale. If we continue normal usage/production sans the effects of covid-19, we would've hit the drop off (for shale) of the Hubbard curve some time before 2025.

source: https://www.bloomberg.com/news/articles/2019-10-14/peak-shal...

Re: The global oil market is broken, drowning in crude nobody needs

#32

Post by Synaesthesia »

jesuschroist wrote: post #19
ufo wrote: post #4

I find it odd that the article does not mention the oil price war between Saudi Arabia and Russia. https://www.reuters.com/article/us-opec-oil-policies-idUSKBN...

The 'oil price war' was 3 weeks ago. Things are changing fast these days.

It’s not like that’s suddenly over now. But on top of that, demand is even lower, because fewer people are flying and driving around.

Re: The global oil market is broken, drowning in crude nobody needs

#33

Post by stevoo »

_yhdy wrote: post #11

How to bypass free article limit?

Two ways in Bloomberg. Either search in debug mode and disable two displays that are what is disabling them or simply disable Javascript on their page. It will be limited in functionality but you can read the article.

Re: The global oil market is broken, drowning in crude nobody needs

#34

Post by api »

drewm1980 wrote: post #25
api wrote: post #14

Earlier quoted context omitted.

I think there is/was validity to the concept of EROEI: energy return on energy invested. The EROEI of oil has decreased over time. What they got wrong was the overall estimate of how much of this stuff there is to be extracted. The easy oil is indeed being used up, but as you invest more and more energy (EROEI decreases) the amount of oil available actually increases. Look at how much tar sands, oil shale, offshore,…

I also wonder if the peak oil computations included oil discoveries as the arctic melts.

They didn't, and if we go there we definitely have enough carbon to go back to the Pleistocene epoch. Antarctica is believed to contain large coal and oil fields but they have not been thoroughly mapped as they are not economic to reach at the moment.

I recall watching an old 50s documentary on Antarctica when I was bored years ago and they mentioned that there was enough fuel there to satisfy our energy needs for hundreds of years. This was before anyone was very worried about CO2.

Re: The global oil market is broken, drowning in crude nobody needs

#35

Post by delusional »

lstodd wrote: post #20
9nGQluzmnq3M wrote: post #15

Serious question: how do I invest in some of those $10 barrels of oil? It seems like a contract to deliver oil at $10 in 2021 is likely to be worth more than by next year.

Find a broker, buy some futures.

the article says the futures are still trading high, meaning you probably couldn't make a lot of money buying them right now, likely because traders know the prices are going to come up too.

Am I misunderstanding?

Re: The global oil market is broken, drowning in crude nobody needs

#36

Post by blablabla123 »

lstodd wrote: post #20
9nGQluzmnq3M wrote: post #15

Serious question: how do I invest in some of those $10 barrels of oil? It seems like a contract to deliver oil at $10 in 2021 is likely to be worth more than by next year.

Find a broker, buy some futures.

That's risky though, it's possible to get ruined by buying futures (or put options for that matter) since it's basically a contract that must be fulfilled at some point in the future. AFAIK normally they function as insurance for buyers and sellers, to create more market stability.

Re: The global oil market is broken, drowning in crude nobody needs

#37

Post by evjrob »

empath75 wrote: post #16
evjrob wrote: post #12

Earlier quoted context omitted.

Extracting oil from shale reservoirs was though to be too difficult and expensive to ever really flood the market like this. Turns out it wasn't.

It is too difficult and expensive for this. Most of them are taking a loss at this price.

True, but tight oil production that was previously though to be impossible to extract economically has more than offset losses in conventional production. Peak oil predictions of decades past presumed this could only happen when oil prices rose so high that alternative energy sources would be competitive. Therefore these reservoirs would remain uneconomic. Instead fracking got really cheap.

Re: The global oil market is broken, drowning in crude nobody needs

#38

Post by solarengineer »

9nGQluzmnq3M wrote: post #15

Serious question: how do I invest in some of those $10 barrels of oil? It seems like a contract to deliver oil at $10 in 2021 is likely to be worth more than by next year.

Options Trading would be one approach. You don’t need to actually buy the commodity itself, but instead an option contract that permits you to buy the underlying ( stock, commodity ) at a particular rate by a particular date.

If the price were to rise in the future, the value of the contract would be much higher than what you bought it at, and someone interested in further trading in the options contract or even buying the actual underlying world more pay the market value of that options contract to you.

I just checked: the current price of a single options contract of crude for 18 Sept at buying price (CALL) of USD 10, is 0.3. So buying a 100 (the minimum), would cost about USD 30. Now, ID between now and September the price of crude were to shoot up, then the market price of this option would likely rise.

Unlike stock, though, Options expire. But unlike stock, you get to buy the rights to buy or sell at a particular price and thus the capital needed is far lesser.

Re: The global oil market is broken, drowning in crude nobody needs

#39

Post by robin_reala »

biharibaboo wrote: post #21
_yhdy wrote: post #11

How to bypass free article limit?

By paying, you leech

From the FAQ:

Are paywalls ok?

It's ok to post stories from sites with paywalls that have workarounds.

In comments, it's ok to ask how to read an article and to help other users do so. But please don't post complaints about paywalls. Those are off topic.

Re: The global oil market is broken, drowning in crude nobody needs

#40

Post by wazoox »

gregorymichael wrote: post #9

What happened to "Peak Oil"? Was there some assumption in those projections that proved to be wrong?

Peak Oil (conventional) happened in 2008 (see World Energy Outlook 2018 from the IEA). Tight oil came to the rescue. Tight oil and shale oil industries are all built on a huge amount of debt and never were cash-positive in the past 12 years. That's the part that wasn't anticipated.

However shale oil requires constant drilling because production rises then falls very quickly (18 months to 2 years). With low oil prices, drilling will dry out and oil will dry out soon, too. Plus total oil production (conventional + non conventional) will probably peak anyway in the next decade (see WEO 2018, once again), and this may be quickened by the coming lack of investment due to low oil prices.

What could happen? With low demand and low price, the non conventional oil industry is deemed to go bankrupt, and the US banks will have to part with trillions of debt. That won't be pretty. Until this industry is rescued and starts pumping again, there could be a severe crunch of oil production, initiating an oil shock and a huge recession, sometimes in the coming next few years.

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