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So how much oil will be produced going forward? After following the weekly production statistics avidly for some months and initially being smugly pleased by the data saying exactly what I wanted to hear, I then became completely befuddled by the data saying the opposite. I had almost reached the conclusion that the weekly production data wasn't worth paying attention to.
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Comments
wildrides
What is your forecast for world over or under supply opposite world demand for 2016 , incorporating the above work .
Paul Curtis
Steve
Another great piece of research. The weekly figures are ‘best guesses’ whereas the monthly figures are well head survey and therefore much more reliable.
Like you I am struggling to understand how best to model how production is being influenced by reducing rig count. How are the oil companies able to defy gravity ie 60-70% first year depletion.
I’m not sure we can project from any historic data since what % of new wells are verticals that are being stacked for future completion, the pace of technical and economic gains of the last 18 months are clearly not repeatable, when do some companies run out of proven up sweet spots….
This year the oil companies have much reduced hedging and will be running for short term cash flow, more so than last year. This must impact supply H2 this year?
Results season starts this week so guidance will be fascinating
Steve Brown
Wilds, good question… I think the supply will be a bit less than IEA think, I suspect that (as above) the US shale miracle isn’t quite as brilliant and resilient as everyone thinks – still pretty good mind, just not brilliant. But maybe more importantly I think Iran has been flat out for years – with oil slipping across the border into Iraq.
Let’s see if Iraqi production numbers fall as Iranian production numbers rise. So I suspect Iran’s return will make no difference (apart from the cargoes in floating storage).
So I guess tighter – demand I have no clue about – I saw a comment over the weekend from Gregor MacDonald who said that now non-OECD demand is more than 50% of the total anyone who thought they knew what demand was, was confused.
Paul, thanks.
To model the production going forward I used the DPR and applied engineering judgement to determine how I thought rig count, rig productivity and legacy production declines would go. Engineering judgement is a euphemism for a SWAG (Scientific Wild Assed Guess). Then I declined the rest ay 0.5% a month. But I feel like the recent drop in prices will have forced some stripper operators to shut up shop, they won’t re-open until the price is over $50 or $60 so I suspect there is a 200,000 bbls/day which might just fade away on top of those figures, but I wasn’t quite brave enough to include that guess in my numbers.
How do Operators defy gravity? Great, great question. See Wile E. Coyote.
Seriously though this is how it goes in the field. Production targets raised, maintenance budgets cut. Initial impact – production up, costs down, asset managers look like heroes, bonuses all round (paid from from maintenance budget cuts); subsequent impact – production down as equipment fails, costs up as equipment repair and replacement is costlier than maintaining it properly in the first place. Been there – done that.