Shorts are trying their best to break investors who are on margin. Free lunch for covering.
Big up day tomorrow. You got your DOW correction. Be happy with it. Bears have been wanting one for four years now.
Before this so called oil glut, the Saudis reported that they expect to spend at least $7B per year just to maintain 12 million barrels per day production capability. It's becoming more heavy oil production too. That $17B offshore project was heavy oil with some NG.
China filled up their tanks with cheap oil. They probably can't hold anymore. They have been stockpiling commodities for months. They'll replace as needed. Don't buy into the BS of their slowing economy. It's slowing to a rate of 6.8% for the year. They devalued their currency because of high wages that made them less competitive. Vietnam followed suit to counteract to keep its growing economy growing. Goods have been shifting away from China. Even the USA is experiencing reshoring of jobs. China will use different tactics in the near future. I suspect more infrastructure projects soon and the need for raw materials to complete them.
Just google: China is hoarding cheap oil in a fleet of supertankers
The rig count in March was up 30% YOY. Some drillng was because they want more NG but speculation at that time was to increase capacity to be able to bring more pressure onto the market. I don't think it's working that way. I believe that their wells are falling off peak production and they have to drill more to maintain their production.
It's over. Bulls pulled in their horns this week but next week it will be different. Everything back up next week.
"Saudi Arabia announced “a massive increase from 170 to 258gb in 1990. It had evidently decided to follow Kuwait’s practice of reporting original, not remaining reserves,” Campbell says.
Since that time, despite pumping around 9mbpd, Saudi Aramco says the size of its reserves have not only remained the same but increased slightly from 258gb to 259gb thanks to better extraction techniques.
However, Simmons believes Gharwar, responsible for about 5mbpd of Saudi output, may have been damaged by poor management.
Pumping large amounts of oil at the maximum rate can damage the geological structure of the field, usually referred to as “rate sensitivity”. Basically the hole falls in on itself, making large amounts of oil within it un-extractable."
"However, Campbell ( the head of the Association for the study of Peak Oil (Aspo), Colin Campbell) noted that in 1990 Saudi Arabia, along with other Opec producing countries, notably Kuwait, revised their reserve estimates overnight.
This was in order to pump more oil as part of Opec’s quota arrangement. The more reserves you claimed to have, the more money you made."
By the way, that project was fast tracked. First a leisurely project started in 2010 with planning, then to be completed in 2015 and then production to begin in 2013 with full production in 2014. Can we say onshore oil depletion rate was higher than expected going into 2013?
That same press release: "Aramco will invest more than $35 billion in exploration and development in the next five years to keep its oil production portfolio robust, Chief Executive Officer Khalid Al-Falih said in a speech posted on the company’s website in September." So they have to spend an average $7B per year to maintain 12 million barrels a day capacity.
From 2013 press release. "Crude supply from the $17-billion Manifa project will help the company to maintain its maximum production capacity of 12 million barrels day, without raising output beyond that level, Aramco said in an e-mailed statement."
It can produce 900,000 barrels per day of heavy crude and some NG. Each project to maintain production has cost them more and more. The Saudis a few years ago stated that they were going to maintain an oil production capacity of 12.5 million barrels per day for the next 30 years. In order to do this, the projects increase in cost. To increase global sales of oil, they are entering costly electricity projects such as the nuclear reactor project with a total cost of $80B. Plus import LNG terminals construction. Their population is growing and is projected to double by 2030. Energy consumption is expected to go up by 4X. Their break even government budget for double the population will have to double at today's prices before adding inflation and other costly oil production projects. So it will be north of $212 per barrel plus moderate inflation that could be closer to $400.
The Saudis are supposedly sitting on huge oil reserves on and offshore. They took on massive offshore projects shortly after these 2004 statements. They are now spending big money to free up oil from domestic use.
Saudi Arabia plans to construct 16 nuclear power reactors over the next 20 years at a cost of more than $80 billion, with the first reactor on line in 2022.
It projects 17 GWe of nuclear capacity by 2040 to provide 15% of the power then, along with over 40 GWe of solar capacity.
They also began their NG shale projects in 2013 to power mining operations. They are building LNG import terminals. Massive energy spending to free up even more oil so they can sell it cheap instead of utilizing it themselves in their own country? Something is dead wrong at their ancient oil fields.
With whose money? There is no real tax payer dollars to make a dent in the costs of alternative energy. Besides there's growing demand worldwide for NG, not just in the USA. Try making fertilizer from solar and wind. Tesla loss per car, $4,000.
And so is the Saudis proven? Oil reserves. If they were lying in 2004, they are lying now when it matters more. Some think that the fields are in a mess caused by damage from too much pumped in salt water. New technology won't help much if that's the case. Why would they spend on pricey offshore exploration if their fields are in good shape. That would flood the market even more at a higher cost to them. They are overproducing now and may shorten their oil fields life even more by doing so. They will need those offshore well's.