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151 comments on DrumBeat: January 21, 2007

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Nate Hagens on January 21, 2007 - 1:45pm Permalink | Subthread | Parent | Comments top

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?

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airdale on January 21, 2007 - 2:13pm Permalink | Subthread | Parent | Comments top

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

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Nate Hagens on January 21, 2007 - 2:35pm Permalink | Subthread | Parent | Comments top

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.

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Darwinian on January 21, 2007 - 2:43pm Permalink | Subthread | Parent | Comments top

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.

Ron Patteson

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austex on January 21, 2007 - 5:53pm Permalink | Subthread | Parent | Comments top

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.

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Freddy Hutter on January 21, 2007 - 6:43pm Permalink | Subthread | Parent | Comments top

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...

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Nate Hagens on January 21, 2007 - 7:06pm Permalink | Subthread | Parent | Comments top

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?

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