Commodity price, Energy crisis, Market research, Oil market

2/5 Oil production and the evolution of drilling technologies

Technology is another element comprising the happy talk about the world’s inehxhaustibly abundant oil supplies. As with Saudi Arabia (and other nations’) reserves, the reality is quite different from what is commonly presented. The argument is that oil reserves calculus changed in the last decades as drilling technologies iproved. That, in part, is how the mushrooming oil reserves numbers are justified even in absence of large new oil field discoveries. Unfortunately, experience hasn’t borne out this optimism and the idea that drilling technologies may have turned Saudi Arabia’s 110 billion barrels of proven reserves into 790 billion barrels is unrealistic, to put it politely. Continue reading

Commodity price, Economics, Energy crisis, Hedging, Market research, Oil market

1/5: Making sense of Saudi Arabia’s oil reserves and production capacity

UPDATE: This article is part of a 5-part series posted in 2016. Latest oil market related article is here: “The coming oil price shock

So, the question is, why did oil prices suddenly collapse in 2014 and continued slumping into 2016? Neither U.S. fracking boom nor the slow demand growth can explain the event’s timing. We’ve known about fracking since at least 2009 and the “boom” part became quite apparent by 2011. The weakness in global demand wasn’t news either, so what did happen in June 2014 when oil prices collapsed? Supposedly, this had something to do with Saudi Arabia’s refusal to curb excess production for whatever reason – there has been no shortage of explanations. Saudi Arabia is the world’s biggest oil producing powerhouse endowed with virtually inexhaustible reserves of the black gold and the capability to switch the taps on or off and move global oil supply and prices at will. That, at any rate is what the mainstream media narrative would have us believe. However, if we scratch the gloss off that narrative, the situation appears starkly different: Continue reading

Commodity price, Energy crisis, Hedging, Market trends, Oil market

$500 per barrel: could oil price rise tenfold?

In 2012 a report produced by the UK Ministry of Defence  predicted that oil prices would rise significantly out to 2040, and by “significantly,” they meant to $500 per barrel. Today, after nearly two years of low oil prices and much talk about an oil glut this may seem farfetched. But we shouldn’t dismiss UKMOD’s warning. This could turn out to be the most important development facing humanity for decades to come. Continue reading

Commodity price, Economics, Market research, Oil market

Market facts vs. market narratives

So the economy is in the doldrums globally and demand for oil languishes. At the same time, oil producing countries are pumping the stuff out as hard as they can with no let-up in sight. So how does it make sense that oil price surged nearly 60% from its January lows? Today’s news and rumors may explain today’s advance, but what about previous three months’ rally? The answer is that over time, it is the price that leads the narrative, not the other way around. I’ll try to elaborate.

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