PEAK OIL - EPOCHAL EVENT OF OUR LIVES

[sumisu]

Peak Oil Review: A Midweek Update - 6th Oct 2016

by Tom Whipple, originally published by ASPO-USA | Oct 6, 2016

http://www.resilience.org/stories/2016-10-06/peak-oil-review-a-midweek-update-6th-oct-2016

Oil prices have climbed some 13 percent during the six trading sessions since OPEC announced it was considering freezing its production at 32.5 – 33 million b/d. OPEC’s final decision will not be made until another meeting is held in November. In the meantime, a steady decline in US crude stocks has brought their total size to under 500 million barrels for the first time since last January. The normal US crude inventory for this time of year, however, is about 330 million barrels, indicating that stocks are still way above normal.

This week’s stocks report registered a decline of 3 million barrels vs. an analyst-expected increase of 2.6 million. The decline came as a surprise considering the drop in refining and the end of the US driving season. US gasoline consumption is still running about 3 percent higher than at this time last year due to the relatively low price of gasoline. This continuing drop in US stocks was the major impetus for another price increase on Wednesday which left NY closing at $49.83 and London closing at $51.86.

While a few trading firms are saying that the oversupply situation will be ending soon, Goldman Sachs is not so sure that oil will be going much above $55 a barrel anytime soon. Goldman’s says that the oil markets will be oversupplied in 2017 due to the return of disrupted output in Libya and Nigeria; some increase in US shale oil production; and the beginning of production from several major deep-water projects that were started years ago when prices were higher. While investment in new production has dropped dramatically in recent years, the impact of this decline is still some years away. In the immediate future most analysts do not see a major increase in production and most do not see the possible OPEC production freeze as having much of an impact on prices. OPEC “freezes” simply have too many loopholes and are usually ignored by members who see an advantage in pumping and selling as much as they can.

Libya’s oil production has now reached about 500,000 b/d and is expected to climb to 600,000 by the end of the month. In Nigeria, the Forcados terminal, which is capable of exporting 400,000 b/d and which has been closed since February due to a bombing, is back in operation. The increase in Libyan and Nigerian exports alone could be enough to offset the possible OPEC cut, leaving much of the burden of reduced exports to fall on the Gulf Arabs.

The US oil-rig count grew by seven last week to 425 rigs as the number of operating rigs continues to grow. This is still down dramatically from the October 2014 peak of 1,609 rigs.

The EU voted to ratify the 2015 Paris climate agreement this week. This action now covers 56.75 percent of total global emissions and is now above the 55 percent threshold needed for implementation. The treaty will formally go into effect on November 4th just before the US presidential election. The Obama administration and Hillary Clinton strongly support the treaty while Donald Trump opposes it. Seventy-two out of 195 countries have now ratified the treaty.