I think we were all assuming the Bumpy Plateau we are now on would be flat, i.e. that it would have a slope of zero, but that doesn`t have to be the case. In fact, it looks like it has a negative slope (ie downwards). Take a look at this graph, (ignore the faint yellow trace for the moment), just look at the red lines:
This sequence of lower highs and lower lows indicates that for the moment we are in a "snake" or "band" of values, and it gives us something new to look out for, not just the next monthly number from the EIA.
But what about the yellow trace? I`m glad you asked. The yellow trace is a best fit 3rd order polynomial to the data. Ever since the EIA revised the figures and put May 2005 above Dec 2005, it looked like Deffeyes was mistaken, even though these two numbers are very close. But if you look at the top of the smoothed curve - its Dec 2005. As Leanan says: Deffeyes ain`t wrong yet!
Oh yes, I nearly forgot, what is the next thing to look out for?
The thing to look for is the next mini low, followed by the next mini high. This will give an indication of breaking out above or below this pattern. Any guesses?
TB, thanks for the great post. I also chart using Excel and have gazed at the above chart many times. However I also look at groups of countries like OPEC, non-OPEC, and each individual country.
The upsurge in production was due to two factors, OPEC opening up their chokes in 2003 after having cut back in 2001 and 2002. They produced flat out until they choked back down this past November. And it is also due to Russia and the Caspian nations recovering from the collapse of the Soviet Union. Angola and Brazil added to that upsurge also.
OPEC has peaked but the Caspian, Angola and Brazil have not. Russia will likely peak in 2007 or 2008 at the latest. (Angola is now part of OPEC but that is another story.)
I think the plateau will continue through 2007 and part of the way through 2008. We will, I believe, be down slightly in 2007 but not near as drastic as your yellow line indicates. My guess is that we will end 2007 with production around 72.5 mb/d. But that is just a guess of course as none of us have crystal balls. But I will put my guess up against anyone's.
Any takers. It will be around February 1st, 2008 before we can settle the bet but I will gladly put my guess up against anyone on this list, provided they give a figure as precise as I do, to .1 million barrels per day. Now don't get me wrong, I expect to be off by as much as .5 mb/d in either direction but not more than that, not much more anyway.
One caveat, my guess is dependent upon OPEC holding its current quotas. If they are lifted by the middle of the year, then 73 mb/d would be my guess. All figures are C+C of course.
One more very important point. The data is not precise enough to say whether May, December or some other month was the exact peak. All we can really say is that we are on the plateau right now, or at least a plateau! The exact month is not really all that important since we will probably really never know when that exact month really was.
The data is not precise enough to say whether May, December or some other month was the exact peak.
Agreed. The raw data is not precise, however, the smoothed data will show an exact peak. I for one, find it entertaining to see if it matches various predictions.
This graph, from our Lower 48/Texas article was basically in support of Deffeyes' prediction that 2006 was the most likely year for a crude + condensate decline, within the context of a predicted peak in the 2004 to 2008 time frame. Note that Khebab used BP's crude + condensate + NGL's, which is pretty closely matching the crude + condensate graph. (Khebab did the technical work, I am primarily responsible for the conclusions.)
The Lower 48 and the North Sea peaked and declined after crossing the 50% of Qt mark. In other words, based on Deffeyes' plot, the world in 2006, was at the same stage of depletion at which the Lower 48 and the North Sea started declining (all three are crude + condensate plots).
Assuming that Ghawar is declining 100% of the oil fields in the world which are, or were, producing one mbpd or more are now in decline or crashing. This is happening just we hit record levels of crude oil production. In the past, when super giant fields declined, there were always other super giant fields showing stable or rising production. So, the only question right now is whether 93% or 100% of current and former super giants are in decline. This is supposed to lead to higher crude oil production? (According the Oil & Gas Journal, Kashagan, which is not even producing yet, is the only new one mbpd and larger field on the horizon, and at best, it won't cross the one mbpd line until the 2020 time frame.)
What is particularly odd about the Super Giant debate is that the key characteristic of a peak is when all or almost all of a region's giant fields start declining.
After reflecting on yesterday's Chapter 150 of the "Yes we have peaked; no we haven't debate," I can only conclude that Peak Oil Denial and Cognitive Dissonance are almost insurmountable obstacles, even on a Peak Oil website, of all places.
If only Bushie Baby could stand up like John F. Kennedy tomorrow night and proclaim in a deep Bostonian accent:
"Before this decade is out, we will land renewable energy, and the need for it, onto the mindscape of every red blooded American. Yeahh-ess. I am declaring a new Apollo Project to put man on a sustainable energy trajectory. Ask not what Big Oil can do for you, Ask what you can do for Planet Gaia."
I am posting the entire text of this article. Again, David Shields is predicting that the Pemex decline will be much worse than what Pemex is admitting to. (Shields is predicting an 800,000 bpd drop from 2007 to 2008). Mexico may cease to be a net oil exporter as soon as 2010. Recall that the UK went from exporting one mbpd in 1999 to being a net importer in 2005.
BTW, Mexico, like the North Sea in 1999, just crossed the 50% of Qt mark (Khebab's HL plot for Mexico). But this is just another "coincidence." Continue with your plans to buy the SUV.
What is fascinating is all of the similarities between Pemex & Cantarell and Saudi Aramco & Ghawar. In both cases: Large carbonate fields--which account, or accounted for more than half of their production--where the remaining oil is between rapidly thinning oil columns between rising water legs and expanding gas caps.
Other than their production rate, the key difference between Pemex and Aramco is that Pemex has grudgingly admitted to the Cantarell decline. Note the references to Pemex cutting deliveries to refineries. Let's see where have we heard that before? I remember. Saudi Aramco unilaterally cutting deliveries to Asian refiners (below what the refiners wanted to buy).
Recall rumors of 50% plus water cuts at Ghawar and Heinberg's report, from an industry source, that Ghawar is crashing? Published reports put Saudi production in 2/07 at 8.5 mbpd, down 1.1 mbpd from their 2005 peak.
But of course, the Saudi decline is "voluntary." Dream on while you still can. Reality will be knocking on your door in the very near future, in my opinion.
The progressive decline in Mexico´s capacity to produce oil is rapidly becoming more worrisome than the slump in global crude prices.
According to estimates by the state oil company, Pemex, petroleum exports will decline dramatically during the Calderón administration.
Pemex is anticipating a 13 percent drop in its crude exports over the next six years as Mexico´s proven reserves continue shrinking.
Analysts contacted by EL UNIVERSAL agree that Pemex´s inability to increase production is due to waning reserves - particularly the Cantarell field in Campeche Bay which is the source of roughly 60 percent of the nation´s proven reserves - and incapacity to access potential deep-water wells.
The first symptoms of a genuine oil crisis are becoming more and more evident.
Documents acquired by EL UNIVERSAL indicate Pemex will be forced to cut back on exports to the United States. The reduction could reach 150,000 barrels per day in the next four years. In the final two years of the Calderón administration, the reduction could reach 500,000 barrels per day.
Currently, around 1.5 million barrels of oil go to the United States daily.
The potential for long-term damage lies in the fact that such a reduction could allow other suppliers - among them, Brazil, Venezuela and Canada - to permanently steal some of Mexico´s market share.
Furthermore, Pemex has already canceled shipments of crude to the Deer Park (Texas) refinery it owns along with Shell for the next 12 months. That means prices of imported gasoline and diesel may rise.
According to Raúl Muñoz Leos, a former Pemex director, the primary problem lies in the rapid decline of Cantarell reserves and the failure to develop other fields.
Muñoz said production levels rose steadily from 2002 to 2004, encouraging company directors to predict a continuation of this trend.
"We established a production goal of 4 million barrels a day by 2006, but by mid-2005 production levels began to decline," he said.
Although Pemex´s exploration budget was boosted to US$4 billion last year, the investment has yet to bear fruit.
"Since this sizeable investment has brought little in return, it might be time for us to learn from the experience of other international producers and redouble our exploration efforts," he said. "It is impossible to ignore the fact that our reserves are rapidly shrinking."
The latest official projection shows Pemex will be able to produce only 3.3 million barrels per day over the next 10 years.
George Baker, an oil industry consultant, told EL UNIVERSAL the situation is further complicated by the fact that the price for Mexico´s basket of crude - which is heavy and therefore less attractive - is so low.
"It is very dangerous to lose market share," Baker said. "Especially if your share is taken by someone who can supply lighter crude."
PMI Comercio Internacional, Pemex´s export management company, has already begun to notify some clients in the United States that it will have to cancel some contracts because production levels are declining.
Rosendo Zambrano, the director of PMI, explained that the contracts affected at present are short-term, renewable contracts that will be sacrificed due to the 150,000 barrel-a-day cutback planned for 2007-2010.
However, Pemex is also notifying clients with long-term contracts that production levels may force adjustments in contracts beginning in 2010.
"We are facing a very complicated situation that could result in the loss of more and more clients," said a Pemex official who asked to remain anonymous.
I noticed that yearly world production data for '79 through '84 will also produce a downwards but temporary trend (BP stats). Whether or not this is the real thing is yet to be determined. As for the the US, Mexico's future production is obviously extremely important. Now excuse me for being stupid, but in a previous discussion there was talk about the rapid decline of Cantarell and whether or not a couple of new Pemex projects coming online would be enough to counter this decline. Was there any consensus on this issue? Even with flat or declining demand in the US, we are still stuck with the prospect of increasing imports and Mexican petro imports are going to be hard to replace.
I haven't read anything that indicates Mexico will be able to make up for the massive decline of Cantarell. Partial mitigation may be possible with some new fields, but it won't be enough.
Thanks for the graph. I hadnt thought about this before but does oil PRODUCTION follow technical analysis rules? Im not certain but its possible.
It is also possible that its a random walk and what we are seeing is our propensity to see and predict patterns. One of my favorite books of the last year is Fooled by Randomness. In other words, what would be fundamental reasons that oil production (rather than prices) follow behavioral rules of market analysis?
If it does follow technical rules, is this the 'pause that refreshes', or are we approaching Black Monday?
Jeez I didn't think technical analysis had any rules. What I always observed was that no matter what the market did a tech could always explain it away via some aspect , one he failed to mention before.
I thought also that technical analysis was merely trying to predict herd behaviour.
IMO the rules ALWAYS explain it 'after the move'.
Sorta like judging wine. Has a nice nose,a leather backtaste, whatever. You like the wine, you drink the wine, end of story. The rest is just dog squeeze.
I just to run with Wordens Reports. Thats how I became jaded on the whole subject. If they were so smart why were they touting and selling their analysis. Smart money would shutup and walk with the profits not try to thin it out.
My brother lost a half a million in day trading in a very short time. Died badly and poorly. He listened to much to the market.
without datamining or curve-fitting, is there any 'algorithm' that would take a sample of historical oil production numbers and predict with some accuracy what subsequent production numbers would be? Some sort of moving average or what? And, would this 'function' then work out of sample? My instinct is that its totally random.
But again, its cool to think about - that future oil production could be predicted not through Hubbert Linearization, or new fields minus old fields, or bottoms up analysis, but just by looking at a chart of oil production to date and drawing trendlines. HL is in effect 'technical analysis' as opposed to CERA and the like which use 'fundamental analysis'. But market technical analysis IS based on her mentality - oil production is made by people, but not by the 'herd' - prices represent the herd.
NEWS FLASH: OIL PRODUCTION BREAKS HEAD AND SHOULDERS PATTERN ON THE DOWNSIDE- NEXT YEARS PRODUCTION TARGET 52.5 MBPD. WITH A FIBONACCI RETRACEMENT TO 66MBPD by 2009. BUY CANNED TUNA.
I hadnt thought about this before but does oil PRODUCTION follow technical analysis rules? Im not certain but its possible.
Nate, what TB was doing was not technical analysis of oil production, it was,if anything, much closer to fundamental analysis. But basically it was just showing the general trend of world oil production. Trends in oil production Nate, are very powerful and only reverse course if the trend is driven by politics rather than geology. When geology causes a nation, or group of nations, to go into decline, you can bet your bottom doller that that trend will not whipsaw you.
For instance one of my charts is of fifteen nations. That is all nations except OPEC nations and Russia, China, Brazil, Angola nd "Other". These fifteen nations peaked in 1997 and have declined every year since. And that decline rate is accelerating. In 2004 those 15 nations declined, combined, 622 mb/d and in 2005 they declined 680 mb/d. In 2006 they will be down about the same but we only have 10 months of data so far.
But the answer is glaringly simple, NO, oil production does not follow technical analysis rules.
Stocks, somewhat follow technical analysis rules but not entirely. Fundamentals determin the long term track of any stock, technical analysis only affects the short term swings.
Technical analysis affects the short term swings in the oil market also, but they affect only the price, not the production. The production of oil is affected only by geology and politics. Geology determins the long term direction but politics can sometimes control the short term swings in production.
Excellent points. The trend for crude is definitely flat to down. Also, the total liquids trend set in motion by higher priced crude is still rising, although slowly. Until the trend for total liquids plateaus and falls however, we aren't at peak.
Some here will remember Samsam Bakhtiari making fun of the IEA prediction of 19-mbd for non-conventional oil in their 1998 WEO. He was known as "Ali" back then and has deleted that article from his archives! Today, the conservative Colin Campbell is predicting All Liquids will incl a 29-mbd component for non-conv in 2010; and 32-mbd in 2020.
When i make the announcement in 2010 at TOD that we have just hit a 95-mbd monthly Supply record for the first time, can u see ron et al replying to my post saying "hey the real peak was in April 2005!"
freddy, if we do ever hit 95 mbpd - are you at all concerned that some % (perhaps a large one) of the additional 10+mpbd is from lower net energy sources, meaning that the 'oil' available to non-energy society could be, even at 95 mbpd, equal to or lower than today at 85mbpd?
My problem with graphs like this is the unanswerable question: is production being limited by geological and technical limitations that conceivably are predictive, as was the case with HL in the US and North Sea, for example - or is production being voluntarily limited because of reduced demand? It seems clear that the Saudis, a few other OPEC countries, and maybe the Russians are capable of self-limitation. Clearly demand has been reduced by the huge increase in price in the past few years. Furthermore there is increasing competition from alternative energy/fuel sources like ethanol. So are we looking at a graph of C+C supply, or of demand? It is obviously both, but which is the limiting factor?
or is production being voluntarily limited because of reduced demand?
Reduced demand, yeah that's the ticket. The Saudis are holding back because they cannot find buyers, the Russians cannot find buyers for their oil either so they are cutting back, so is Mexico, Norway and the UK. Even Iran and Iraq are having trouble finding buyers for their oil so everyone is cutting back.
But there is a very high demand for bridges in Arizona, wanna buy one?
We've already gone over this, Ron. When KSA announced their production cuts, inventories around the world were swelling to well above the upper range of the 5 year average. They publicly stated they had no buyers for some of their oil, despite offering an additional 5$ discount over OPEC crude. If that oil was in such need, why did no one ring them up and ask to buy some?
Only a moron would think that no one in the entire world called KSA's 'bluff' and that its all one vast global conspiracy to hide their peak.
Hothgor, we have been on this plateau for 21 months, as of October, two years as of now. And at any rate, if Saudi had kept production at that higher level, we would still be on that plateau, only slightly higher.
And where on earth did you get this stuff about them offering a $5 discount over the going price of OPEC crude? Please supply a URL for this. This is the very first time I have heard of this $5 discount. Why has Robert not posted this before?
To easy. Granted this is an article from late 2005, but I want it to be noted that prices back then were even higher then they are right now, by about 13$.
OPEC crude oil usually sells for around 5$ less then WTI or Brent crude does. KSA, having lots of very heavy 'high sulfur content' oil, discounts their oil even more. Some highlights:
SAUDI ARABIA is struggling to sell its crude oil despite record fuel prices and calls on the Kingdom to bring further supplies to the market.
Saudi Aramco, the state oil company, has been forced to offer ever-greater discounts to tempt refiners to buy its product, which is shunned for its high sulphur content.
How very interesting, especially when one puts this into context for the events of the time. Katrina and Rita had just hit and roughly 1/8th of US production was offline. Prices had shot up, then came back down to low to mid 60$ a barrel. And yet...
The official selling price for Saudi oil for October delivery is currently set at a discount of more than $13 per barrel to US light crude which was yesterday selling for just under $65 per barrel.
Weak demand for Arab Light, the main Saudi crude blend, has forced the Kingdom to increase the discount from $10.45 in August to $13.40 in October.
Oh the irony of it all. Even then, KSA couldn't sell all of their oil!! At this time, their discount was an additional 8$ under the OPEC average! Clearly something must be amiss, right?
Leo Drollas, of the Centre for Global Energy Studies, reckons that Saudi Arabia may not have cut its price far enough. Despite $60 oil, there is a lot of crude sloshing about in the market? he said.
My my my, this just keeps getting better and better. Not only was Saudi oil already deeply discounted, but apparently it wasn't enough to entice more buyers to buy it!!
And just think, the huge inventory surge that RR has talked about so often was just getting started right around this time. It's amazing what 20/20 hindsight can do in regards to connecting events of the past with those of the present.
Care to go at it again, Ron?
Edit: And just to head off the inevitable 'not a credible article' comments, this article was one that was originally posted here:
Yes, I will definitely go at it again Hothgor. From the URL you posted:
Saudi Aramco, the state oil company, has been forced to offer ever-greater discounts to tempt refiners to buy its product, which is shunned for its high sulphur content.
The discount for heavy sour crude has, for the last two years, been in the neighborhood of $15 a barrel Hothgor, not $5 a barrel. If the Saudis offered their sour at only a $5 discount they were $10 too high.
For example, the Maya crude oil discount dropped from around $17 per barrel at the end of March to $11 per barrel in May. What's important to keep in mind is that even with the decline in the sour crude discounts, our earnings in April were the highest ever for the company and May's earnings were the second highest ever. This shows that we don't have to have record refined product margins and record sour crude discounts at the same time to have record earnings. As the turnaround season ended and residual fuel oil prices fell, the Maya crude oil discounts have again widened and are currently about $14 per barrel. http://www.findarticles.com/p/articles/mi_m0EIN/is_2005_July_26/ai_n1481...
Although the Saudi product is light, it is still sour. Sour crude means it is high in sulfur content and must be discounted in line with the world price for high sulfur crude. If Saudi had done that they could have sold all their sour crude at the going world price.
Bottom line, Saudi did not discount their sour crude even down to the going world price of sour crude. Had they done that they would have found no shortage of buyers.
There were plenty of buyers for Saudi cour crude at the going world price. The real reason they did not sell any was that they did not have any more sour crude to sell.
Your right, its not 5$ a barrel, it was 8$ a barrel UNDER the OPEC Basket Crude price. Furthermore, the article clearly showed a $3 cut that month alone to entice buyers to buy their oil. Are you honestly trying to suggest to me that because I told you before it was 5$, and it was in fact 8$ under the basket and 3$ additional at the end that I was wrong?
Your missing the entire point: KSA, even with a 13$ discount over WTI, was having trouble back in 2005 in finding buyers for their oil, just as RR has stated on numerous occasions. That means that while WTI was at 65$, Saudi Oil was selling for below 52$. I don't care HOW sour the crude is, any refinery in the first world could maintain their refinery margins with that discount.
Stop engaging in a straw man defense and 'act like a man': admit I was right and you were wrong and the debate can go forward. Otherwise, its a waste of my time to post additional articles that I have while you continue to banter about how I'm wrong even in light of the fact that my article very clearly affirms my statement ~_~
Hothgor get real! Saudi sour is not WTI! Sour crude was selling at between an $17 and $11 discount to WTI. If Saudi was discounting their sour b $8 to WTI they were still over $5 too high.
Bottom line, Saudi never discounted their sour crude to the world price for sour crude, they only offered it at a premium to the world price of sour crude.
Try again Hothgor, you failed miserably on this try.
Saudi never discouted their sour crude to the world price of sour crude, they did not even offer it at a parity to the world price of world sour crude, only at a premium. The only reason they would only try to sell it at a premium to world sour crude is they knew there would be no takers! They had no damn oil to sell so they offered it at a premium to the world price.
Understand Hothgor, there is a tremendous difference in the grades of world oil. Sour crude is not WTI and therefore must be discounted to WTI. And that discount must equal the world price of sour crude. Saudi was not willing to do that, and the reason was very likely because they had no more sour crude to sell.
RP 2PM: "And where on earth did you get this stuff about them offering a $5 discount over the going price of OPEC crude? Please supply a URL for this. This is the very first time I have heard of this $5 discount."
See Hothgor, two hours ago he admits never knowing about these types of discount. And now he's a fricken expert.
Don't bother with him. I exposed three of his lies yesterday. It took ten minutes to find. I have 50 or 60 more that showed up. On all kinds of topics; and i think everyone can see the pattern here...
His lack of judgement illustrates the difference between intelligence and wisdom.
You are the liar Freddy. I did not predict any peak in 2003 as you said I did. I said that I expected the stock market to crash when the world realizes that the world is at peak and I still do.
Ron Patterson, 7pm: "You are the liar Freddy. I did not predict any peak in 2003 as you said I did. I said that I expected the stock market to crash when the world realizes that the world is at peak and I still do."
Ron Patterson, June 11 2003: Anyway, I agree with you that we are due for a stock market crash, perhaps as early as this month. But I would not be so bold as to predict it that soon. I would guess it would happen before next summer however, likely sooner than that.
Ron Patterson, Aug 23 2003: I firmly believe however that peak extraction can come no later than 2005 and think it likely that 2004 will be the date. All that depends on the stability of extraction in Iraq, Venezuela, Nigeria and the biggest source of all, Saudi Arabia.
Freddy, you are really a dumb ass you know that. I clearly stated that the stock market guess was a guess. But that last one really takes the cake. At any rate, the stock market is not my forte, oil production is.
I stated that my belief was that peak extraction would come no later than 2005 and I hit the nail on the head! Peak extraction came in May 2005.
Oh, thanks for pointing out to the list that I guessed that the peak would come no later than 2005. I am not one to say I told you so, but I did didn't I. (That is what my aunt Fanny used to say.) ;-)
I would also like to encourage you to some extent ignore some of the participants that are "debunking" your arguments. But of course, if one spot a honest argument, it should be addressed.
IMO most people here seek the truth and do valuable scrutiny (RR) to the arguments being made. Don't waste your time on sophists.
One of the main issues that SA has is that there is no available refining capacity for their heavy stuff, which makes up the bulk of their spare capacity. With the massive refinery projects they have started this will be changing, which is one reason why I'm more optimistic than many around here regarding their future production levels.
Austex, Saudi crude is not all that heavy, it is just is very sulfurous. Sulfur is apparently very hard to remove from crude and must be discounted quite a bit.
Perhaps Robert, who is a refinery man, could better inform us on this point. Or perhaps some other oilman. But the URL Hothgor posted seemed to emphasize the sulfur content rather than the weight of the oil as the reason it must be discounted so heavily. http://www.relocalize.net/node/984
By the way, Valero specalizes in heavy sour crude and is prepared to handle it where other refineries are not, but at a heavy discount of course.
The only thing that proves is the House of Saud has a lot of bad shitty oil. Where's the $5 discount for the good stuff? Oh wait....
It's overly obvious that for good crude, there was not, and is not, any reason why Saud oil would sell for $13 less a barrel than WTO or Brent, other than the occasional camel dung odor or men dressed in tents.
If there were such a reason, world prices would drop, not just KSA prices.
Read your own quote:
"The official selling price for Saudi oil for October delivery is currently set at a discount of more than $13 per barrel to US light crude which was yesterday selling for just under $65 per barrel.
Weak demand for Arab Light, the main Saudi crude blend, has forced the Kingdom to increase the discount from $10.45 in August to $13.40 in October."
What that mean, if they're lucky, is the poor stuff they offered was SOOOOOO bad that it hurt clients' confidence in their good stuff, Arab light. If they wanted to sell any devil along with the divine, clients only accepted at a higher discount.
They would have taken A.L. anytime at the regular price, but the Saudi's insisted including their mud in the deals. So the client says: OK. but only if the mud comes at mud prices.
A note on the "Bumpy Plateau".
I think we were all assuming the Bumpy Plateau we are now on would be flat, i.e. that it would have a slope of zero, but that doesn`t have to be the case. In fact, it looks like it has a negative slope (ie downwards). Take a look at this graph, (ignore the faint yellow trace for the moment), just look at the red lines:
This sequence of lower highs and lower lows indicates that for the moment we are in a "snake" or "band" of values, and it gives us something new to look out for, not just the next monthly number from the EIA.
But what about the yellow trace? I`m glad you asked. The yellow trace is a best fit 3rd order polynomial to the data. Ever since the EIA revised the figures and put May 2005 above Dec 2005, it looked like Deffeyes was mistaken, even though these two numbers are very close. But if you look at the top of the smoothed curve - its Dec 2005. As Leanan says: Deffeyes ain`t wrong yet!
Oh yes, I nearly forgot, what is the next thing to look out for?
The thing to look for is the next mini low, followed by the next mini high. This will give an indication of breaking out above or below this pattern. Any guesses?
Best Regards
TB
TB, thanks for the great post. I also chart using Excel and have gazed at the above chart many times. However I also look at groups of countries like OPEC, non-OPEC, and each individual country.
The upsurge in production was due to two factors, OPEC opening up their chokes in 2003 after having cut back in 2001 and 2002. They produced flat out until they choked back down this past November. And it is also due to Russia and the Caspian nations recovering from the collapse of the Soviet Union. Angola and Brazil added to that upsurge also.
OPEC has peaked but the Caspian, Angola and Brazil have not. Russia will likely peak in 2007 or 2008 at the latest. (Angola is now part of OPEC but that is another story.)
I think the plateau will continue through 2007 and part of the way through 2008. We will, I believe, be down slightly in 2007 but not near as drastic as your yellow line indicates. My guess is that we will end 2007 with production around 72.5 mb/d. But that is just a guess of course as none of us have crystal balls. But I will put my guess up against anyone's.
Any takers. It will be around February 1st, 2008 before we can settle the bet but I will gladly put my guess up against anyone on this list, provided they give a figure as precise as I do, to .1 million barrels per day. Now don't get me wrong, I expect to be off by as much as .5 mb/d in either direction but not more than that, not much more anyway.
One caveat, my guess is dependent upon OPEC holding its current quotas. If they are lifted by the middle of the year, then 73 mb/d would be my guess. All figures are C+C of course.
Ron Patterson
One more very important point. The data is not precise enough to say whether May, December or some other month was the exact peak. All we can really say is that we are on the plateau right now, or at least a plateau! The exact month is not really all that important since we will probably really never know when that exact month really was.
Ron Patterson
Thanks for the kind words.
Agreed. The raw data is not precise, however, the smoothed data will show an exact peak. I for one, find it entertaining to see if it matches various predictions.
Regards
TB
Lower 48/World Comparison: http://static.flickr.com/45/145186317_215cd1247f_o.png
This graph, from our Lower 48/Texas article was basically in support of Deffeyes' prediction that 2006 was the most likely year for a crude + condensate decline, within the context of a predicted peak in the 2004 to 2008 time frame. Note that Khebab used BP's crude + condensate + NGL's, which is pretty closely matching the crude + condensate graph. (Khebab did the technical work, I am primarily responsible for the conclusions.)
The Lower 48 and the North Sea peaked and declined after crossing the 50% of Qt mark. In other words, based on Deffeyes' plot, the world in 2006, was at the same stage of depletion at which the Lower 48 and the North Sea started declining (all three are crude + condensate plots).
Assuming that Ghawar is declining 100% of the oil fields in the world which are, or were, producing one mbpd or more are now in decline or crashing. This is happening just we hit record levels of crude oil production. In the past, when super giant fields declined, there were always other super giant fields showing stable or rising production. So, the only question right now is whether 93% or 100% of current and former super giants are in decline. This is supposed to lead to higher crude oil production? (According the Oil & Gas Journal, Kashagan, which is not even producing yet, is the only new one mbpd and larger field on the horizon, and at best, it won't cross the one mbpd line until the 2020 time frame.)
What is particularly odd about the Super Giant debate is that the key characteristic of a peak is when all or almost all of a region's giant fields start declining.
After reflecting on yesterday's Chapter 150 of the "Yes we have peaked; no we haven't debate," I can only conclude that Peak Oil Denial and Cognitive Dissonance are almost insurmountable obstacles, even on a Peak Oil website, of all places.
Yes, except I would leave out the "almost". That is why some of us have ceased commenting on some subjects. Closed minds cannot be changed.
"Closed minds cannot be changed."
From a Salada tea bag quote.
Some Minds Are Like Cement,
All Mixed Up and Permanently Set
I fear you are right.
But young minds are moldable.
The future belongs to the young.
"Before this decade is out, we will land renewable energy, and the need for it, onto the mindscape of every red blooded American. Yeahh-ess. I am declaring a new Apollo Project to put man on a sustainable energy trajectory. Ask not what Big Oil can do for you, Ask what you can do for Planet Gaia."
Re: Pemex predicts production drop
I am posting the entire text of this article. Again, David Shields is predicting that the Pemex decline will be much worse than what Pemex is admitting to. (Shields is predicting an 800,000 bpd drop from 2007 to 2008). Mexico may cease to be a net oil exporter as soon as 2010. Recall that the UK went from exporting one mbpd in 1999 to being a net importer in 2005.
BTW, Mexico, like the North Sea in 1999, just crossed the 50% of Qt mark (Khebab's HL plot for Mexico). But this is just another "coincidence." Continue with your plans to buy the SUV.
What is fascinating is all of the similarities between Pemex & Cantarell and Saudi Aramco & Ghawar. In both cases: Large carbonate fields--which account, or accounted for more than half of their production--where the remaining oil is between rapidly thinning oil columns between rising water legs and expanding gas caps.
Other than their production rate, the key difference between Pemex and Aramco is that Pemex has grudgingly admitted to the Cantarell decline. Note the references to Pemex cutting deliveries to refineries. Let's see where have we heard that before? I remember. Saudi Aramco unilaterally cutting deliveries to Asian refiners (below what the refiners wanted to buy).
Recall rumors of 50% plus water cuts at Ghawar and Heinberg's report, from an industry source, that Ghawar is crashing? Published reports put Saudi production in 2/07 at 8.5 mbpd, down 1.1 mbpd from their 2005 peak.
But of course, the Saudi decline is "voluntary." Dream on while you still can. Reality will be knocking on your door in the very near future, in my opinion.
http://www.eluniversal.com.mx/miami/23061.html
Pemex predicts production drop
El Universal
Viernes 19 de enero de 2007
Down Under...really would like your 2 cents again on the state of Ghawar...you seem to know more about it than most here.
Nice work.
I noticed that yearly world production data for '79 through '84 will also produce a downwards but temporary trend (BP stats). Whether or not this is the real thing is yet to be determined. As for the the US, Mexico's future production is obviously extremely important. Now excuse me for being stupid, but in a previous discussion there was talk about the rapid decline of Cantarell and whether or not a couple of new Pemex projects coming online would be enough to counter this decline. Was there any consensus on this issue? Even with flat or declining demand in the US, we are still stuck with the prospect of increasing imports and Mexican petro imports are going to be hard to replace.
B.W.
I haven't read anything that indicates Mexico will be able to make up for the massive decline of Cantarell. Partial mitigation may be possible with some new fields, but it won't be enough.
Thanks for the graph. I hadnt thought about this before but does oil PRODUCTION follow technical analysis rules? Im not certain but its possible.
It is also possible that its a random walk and what we are seeing is our propensity to see and predict patterns. One of my favorite books of the last year is Fooled by Randomness. In other words, what would be fundamental reasons that oil production (rather than prices) follow behavioral rules of market analysis?
If it does follow technical rules, is this the 'pause that refreshes', or are we approaching Black Monday?
Jeez I didn't think technical analysis had any rules. What I always observed was that no matter what the market did a tech could always explain it away via some aspect , one he failed to mention before.
I thought also that technical analysis was merely trying to predict herd behaviour.
IMO the rules ALWAYS explain it 'after the move'.
Sorta like judging wine. Has a nice nose,a leather backtaste, whatever. You like the wine, you drink the wine, end of story. The rest is just dog squeeze.
I just to run with Wordens Reports. Thats how I became jaded on the whole subject. If they were so smart why were they touting and selling their analysis. Smart money would shutup and walk with the profits not try to thin it out.
My brother lost a half a million in day trading in a very short time. Died badly and poorly. He listened to much to the market.
airdale
without datamining or curve-fitting, is there any 'algorithm' that would take a sample of historical oil production numbers and predict with some accuracy what subsequent production numbers would be? Some sort of moving average or what? And, would this 'function' then work out of sample? My instinct is that its totally random.
But again, its cool to think about - that future oil production could be predicted not through Hubbert Linearization, or new fields minus old fields, or bottoms up analysis, but just by looking at a chart of oil production to date and drawing trendlines. HL is in effect 'technical analysis' as opposed to CERA and the like which use 'fundamental analysis'. But market technical analysis IS based on her mentality - oil production is made by people, but not by the 'herd' - prices represent the herd.
NEWS FLASH: OIL PRODUCTION BREAKS HEAD AND SHOULDERS PATTERN ON THE DOWNSIDE- NEXT YEARS PRODUCTION TARGET 52.5 MBPD. WITH A FIBONACCI RETRACEMENT TO 66MBPD by 2009. BUY CANNED TUNA.
Unlikely.
Nate, what TB was doing was not technical analysis of oil production, it was,if anything, much closer to fundamental analysis. But basically it was just showing the general trend of world oil production. Trends in oil production Nate, are very powerful and only reverse course if the trend is driven by politics rather than geology. When geology causes a nation, or group of nations, to go into decline, you can bet your bottom doller that that trend will not whipsaw you.
For instance one of my charts is of fifteen nations. That is all nations except OPEC nations and Russia, China, Brazil, Angola nd "Other". These fifteen nations peaked in 1997 and have declined every year since. And that decline rate is accelerating. In 2004 those 15 nations declined, combined, 622 mb/d and in 2005 they declined 680 mb/d. In 2006 they will be down about the same but we only have 10 months of data so far.
But the answer is glaringly simple, NO, oil production does not follow technical analysis rules.
Stocks, somewhat follow technical analysis rules but not entirely. Fundamentals determin the long term track of any stock, technical analysis only affects the short term swings.
Technical analysis affects the short term swings in the oil market also, but they affect only the price, not the production. The production of oil is affected only by geology and politics. Geology determins the long term direction but politics can sometimes control the short term swings in production.
Ron Patteson
Excellent points. The trend for crude is definitely flat to down. Also, the total liquids trend set in motion by higher priced crude is still rising, although slowly. Until the trend for total liquids plateaus and falls however, we aren't at peak.
Some here will remember Samsam Bakhtiari making fun of the IEA prediction of 19-mbd for non-conventional oil in their 1998 WEO. He was known as "Ali" back then and has deleted that article from his archives! Today, the conservative Colin Campbell is predicting All Liquids will incl a 29-mbd component for non-conv in 2010; and 32-mbd in 2020.
When i make the announcement in 2010 at TOD that we have just hit a 95-mbd monthly Supply record for the first time, can u see ron et al replying to my post saying "hey the real peak was in April 2005!"
i can hardly contain my anticipation...
freddy, if we do ever hit 95 mbpd - are you at all concerned that some % (perhaps a large one) of the additional 10+mpbd is from lower net energy sources, meaning that the 'oil' available to non-energy society could be, even at 95 mbpd, equal to or lower than today at 85mbpd?
My problem with graphs like this is the unanswerable question: is production being limited by geological and technical limitations that conceivably are predictive, as was the case with HL in the US and North Sea, for example - or is production being voluntarily limited because of reduced demand? It seems clear that the Saudis, a few other OPEC countries, and maybe the Russians are capable of self-limitation. Clearly demand has been reduced by the huge increase in price in the past few years. Furthermore there is increasing competition from alternative energy/fuel sources like ethanol. So are we looking at a graph of C+C supply, or of demand? It is obviously both, but which is the limiting factor?
Reduced demand, yeah that's the ticket. The Saudis are holding back because they cannot find buyers, the Russians cannot find buyers for their oil either so they are cutting back, so is Mexico, Norway and the UK. Even Iran and Iraq are having trouble finding buyers for their oil so everyone is cutting back.
But there is a very high demand for bridges in Arizona, wanna buy one?
Ron Patterson
We've already gone over this, Ron. When KSA announced their production cuts, inventories around the world were swelling to well above the upper range of the 5 year average. They publicly stated they had no buyers for some of their oil, despite offering an additional 5$ discount over OPEC crude. If that oil was in such need, why did no one ring them up and ask to buy some?
Only a moron would think that no one in the entire world called KSA's 'bluff' and that its all one vast global conspiracy to hide their peak.
Hothgor, we have been on this plateau for 21 months, as of October, two years as of now. And at any rate, if Saudi had kept production at that higher level, we would still be on that plateau, only slightly higher.
And where on earth did you get this stuff about them offering a $5 discount over the going price of OPEC crude? Please supply a URL for this. This is the very first time I have heard of this $5 discount. Why has Robert not posted this before?
As I said, a URL please!
Ron Patterson
http://www.relocalize.net/node/984
To easy. Granted this is an article from late 2005, but I want it to be noted that prices back then were even higher then they are right now, by about 13$.
OPEC crude oil usually sells for around 5$ less then WTI or Brent crude does. KSA, having lots of very heavy 'high sulfur content' oil, discounts their oil even more. Some highlights:
How very interesting, especially when one puts this into context for the events of the time. Katrina and Rita had just hit and roughly 1/8th of US production was offline. Prices had shot up, then came back down to low to mid 60$ a barrel. And yet...
Oh the irony of it all. Even then, KSA couldn't sell all of their oil!! At this time, their discount was an additional 8$ under the OPEC average! Clearly something must be amiss, right?
My my my, this just keeps getting better and better. Not only was Saudi oil already deeply discounted, but apparently it wasn't enough to entice more buyers to buy it!!
And just think, the huge inventory surge that RR has talked about so often was just getting started right around this time. It's amazing what 20/20 hindsight can do in regards to connecting events of the past with those of the present.
Care to go at it again, Ron?
Edit: And just to head off the inevitable 'not a credible article' comments, this article was one that was originally posted here:
http://business.timesonline.co.uk/article/0,,9072-1782657,00.html
Yes, I will definitely go at it again Hothgor. From the URL you posted:
The discount for heavy sour crude has, for the last two years, been in the neighborhood of $15 a barrel Hothgor, not $5 a barrel. If the Saudis offered their sour at only a $5 discount they were $10 too high.
Although the Saudi product is light, it is still sour. Sour crude means it is high in sulfur content and must be discounted in line with the world price for high sulfur crude. If Saudi had done that they could have sold all their sour crude at the going world price.
Bottom line, Saudi did not discount their sour crude even down to the going world price of sour crude. Had they done that they would have found no shortage of buyers.
There were plenty of buyers for Saudi cour crude at the going world price. The real reason they did not sell any was that they did not have any more sour crude to sell.
Care to try another tactic Hothgor?
Ron Patterson
Your right, its not 5$ a barrel, it was 8$ a barrel UNDER the OPEC Basket Crude price. Furthermore, the article clearly showed a $3 cut that month alone to entice buyers to buy their oil. Are you honestly trying to suggest to me that because I told you before it was 5$, and it was in fact 8$ under the basket and 3$ additional at the end that I was wrong?
Your missing the entire point: KSA, even with a 13$ discount over WTI, was having trouble back in 2005 in finding buyers for their oil, just as RR has stated on numerous occasions. That means that while WTI was at 65$, Saudi Oil was selling for below 52$. I don't care HOW sour the crude is, any refinery in the first world could maintain their refinery margins with that discount.
Stop engaging in a straw man defense and 'act like a man': admit I was right and you were wrong and the debate can go forward. Otherwise, its a waste of my time to post additional articles that I have while you continue to banter about how I'm wrong even in light of the fact that my article very clearly affirms my statement ~_~
I'm eagerly anticipating your apology, Ron!
Hothgor get real! Saudi sour is not WTI! Sour crude was selling at between an $17 and $11 discount to WTI. If Saudi was discounting their sour b $8 to WTI they were still over $5 too high.
Bottom line, Saudi never discounted their sour crude to the world price for sour crude, they only offered it at a premium to the world price of sour crude.
Try again Hothgor, you failed miserably on this try.
Saudi never discouted their sour crude to the world price of sour crude, they did not even offer it at a parity to the world price of world sour crude, only at a premium. The only reason they would only try to sell it at a premium to world sour crude is they knew there would be no takers! They had no damn oil to sell so they offered it at a premium to the world price.
Understand Hothgor, there is a tremendous difference in the grades of world oil. Sour crude is not WTI and therefore must be discounted to WTI. And that discount must equal the world price of sour crude. Saudi was not willing to do that, and the reason was very likely because they had no more sour crude to sell.
Ron Patterson
RP 2PM: "And where on earth did you get this stuff about them offering a $5 discount over the going price of OPEC crude? Please supply a URL for this. This is the very first time I have heard of this $5 discount."
See Hothgor, two hours ago he admits never knowing about these types of discount. And now he's a fricken expert.
Don't bother with him. I exposed three of his lies yesterday. It took ten minutes to find. I have 50 or 60 more that showed up. On all kinds of topics; and i think everyone can see the pattern here...
His lack of judgement illustrates the difference between intelligence and wisdom.
.
You are the liar Freddy. I did not predict any peak in 2003 as you said I did. I said that I expected the stock market to crash when the world realizes that the world is at peak and I still do.
Why don't you get a life.
Ron Patterson
Ron Patterson, 7pm: "You are the liar Freddy. I did not predict any peak in 2003 as you said I did. I said that I expected the stock market to crash when the world realizes that the world is at peak and I still do."
Ron Patterson, June 11 2003: Anyway, I agree with you that we are due for a stock market crash, perhaps as early as this month. But I would not be so bold as to predict it that soon. I would guess it would happen before next summer however, likely sooner than that.
Ron Patterson, Aug 23 2003: I firmly believe however that peak extraction can come no later than 2005 and think it likely that 2004 will be the date. All that depends on the stability of extraction in Iraq, Venezuela, Nigeria and the biggest source of all, Saudi Arabia.
Freddy, you are really a dumb ass you know that. I clearly stated that the stock market guess was a guess. But that last one really takes the cake. At any rate, the stock market is not my forte, oil production is.
I stated that my belief was that peak extraction would come no later than 2005 and I hit the nail on the head! Peak extraction came in May 2005.
Oh, thanks for pointing out to the list that I guessed that the peak would come no later than 2005. I am not one to say I told you so, but I did didn't I. (That is what my aunt Fanny used to say.) ;-)
Ron Patterson
Ron, never argue with fools - people might mistake you for one and it only encourages them.
I would also like to encourage you to some extent ignore some of the participants that are "debunking" your arguments. But of course, if one spot a honest argument, it should be addressed.
IMO most people here seek the truth and do valuable scrutiny (RR) to the arguments being made. Don't waste your time on sophists.
Thanks for your great contributions.
One of the main issues that SA has is that there is no available refining capacity for their heavy stuff, which makes up the bulk of their spare capacity. With the massive refinery projects they have started this will be changing, which is one reason why I'm more optimistic than many around here regarding their future production levels.
Austex, Saudi crude is not all that heavy, it is just is very sulfurous. Sulfur is apparently very hard to remove from crude and must be discounted quite a bit.
Perhaps Robert, who is a refinery man, could better inform us on this point. Or perhaps some other oilman. But the URL Hothgor posted seemed to emphasize the sulfur content rather than the weight of the oil as the reason it must be discounted so heavily.
http://www.relocalize.net/node/984
By the way, Valero specalizes in heavy sour crude and is prepared to handle it where other refineries are not, but at a heavy discount of course.
Ron Patterson
The only thing that proves is the House of Saud has a lot of bad shitty oil. Where's the $5 discount for the good stuff? Oh wait....
It's overly obvious that for good crude, there was not, and is not, any reason why Saud oil would sell for $13 less a barrel than WTO or Brent, other than the occasional camel dung odor or men dressed in tents.
If there were such a reason, world prices would drop, not just KSA prices.
Read your own quote:
"The official selling price for Saudi oil for October delivery is currently set at a discount of more than $13 per barrel to US light crude which was yesterday selling for just under $65 per barrel.
Weak demand for Arab Light, the main Saudi crude blend, has forced the Kingdom to increase the discount from $10.45 in August to $13.40 in October."
What that mean, if they're lucky, is the poor stuff they offered was SOOOOOO bad that it hurt clients' confidence in their good stuff, Arab light. If they wanted to sell any devil along with the divine, clients only accepted at a higher discount.
They would have taken A.L. anytime at the regular price, but the Saudi's insisted including their mud in the deals. So the client says: OK. but only if the mud comes at mud prices.
Es todo.