Here are more views of crude oil production in August. Previous post mentions the output hit 1.087M bopd in the month.
The 10/10/17 Director’s Cut says the DMR thinks the daily count of drilling rigs will drop if WTI goes below $45 for over 30 days. If WTI is above $55 for over 90 days, the rig count will increase.
That suggests price stability in the range of $45 to $55 will keep the rig count around the current level of 57.
The rig count has been in the high 50s for the last few months. It seems to have stabilized since spring 2017 and is up substantially from the low. Remember that the rig count today does not compare to the rig count a few years ago because drilling rigs today are far more productive than just two years ago.
Here is the view of monthly rig count:
What is the value of the crude produced at the average sweet price in the state? Check it out:
Production of crude oil in the state rose to 1,085,690 bopd in August, an increase of 36,591 bopd from the updated production of 1,048,099 bopd in July. That is a 3.49% increase.
For context, that is the highest daily production since March 2016. On the front end of the boom, production did not rise to that level until June 2014.
The Williston Herald reports comments from Mr. Helms: Rigs moving away from Bakken’s core, but gas production still hits new high. Rigs are being deployed outside the core area of Bakken, away from the best sweet spots. I’m not sure what that means, but will guess it is an indication that drillers are more confident that prices will stay roughly where they are now or better.
Here is a graph of crude produced in the state and from the Bakken formation (along with Three Forks):
Looks like we are in the midst of radical change in regional and world politics caused by the technological revolution in oil and gas production. I keep trying to wrap my little brain around what is going on. Here are a few articles that may stretch your brain too.
Brain stretcher on the shift in geopolitics due to increased US oil production
Speculation why the Saudi government’s plan to re-engineer their country’s economy isn’t going to work
Three articles on the rapidly increased US shale production undercutting the OPEC production cut
3/12/17 – PJ Media – The Problem of Success– Article raises the unsettling idea that nobody has figured out the impact of dramatically increased production in the US.
Neither the previous US administration, the current US administration, leadership in Saudi Arabia, leadership elsewhere in the Middle East, nor even pundits for that matter, have figured out how geopolitics will change as Saudi Arabia loses its role as dominant oil producer and the decentralized American drillers gain the swing producer role.
It stretches my brain even to understand there is an issue.
American frackers used the dramatic run up in oil prices to $100 as an opportunity to figure out how to frack oil where it could never have been touched before. They then used the collapse in prices as an opportunity to figure out how to frack far more efficiently, far more effectively, with far higher production output from every well. As a result, the break-even price for U.S. shale has shrunk.
The vast network of independent producers are responding to price changes far faster than OPEC could handle or the majors could ever dream of. Prices go up somewhat and in about three months US production is surging.
Outlook for energy production in the US is getting better and better. Might want to get out your sunglasses.
Low oil prices have spurred innovation amongst US drillers; file this under unintended consequences for OPEC.
Breakeven prices in US shale approaching that of OPEC producers; ponder that the breakeven price for Saudi Aramco is not the same as breakeven price for the Saudi government.
Overview of news in 2016 for oil & gas; good news for companies that survived the year.
12/2 – Tyler Morning Telegraph – Saudis awakened a sleeping giant when they declared war on fracking– Editorial says the Saudis made a serious mistake waking up the slumbering giant of fracking land. The artificially high prices allowed the frackers to get started. The artificially low prices forced them to innovate, cut costs, and start producing at breakeven points competitive to the OPEC giants. Not a good move.
Wouldn’t it be grand if that paragraph was the four-sentence history of fracking?
Production costs are half what they were two years ago.
Oh, by the way, the geology wizards just discovered another twenty billion barrels of recoverable oil where the wizards knew something existed but had no idea how much.
Twenty billion barrels. Billion, with a B.
11/15 – Star-Telegram – Permian’s Wolfcamp formation called biggest shale oil field in US – Estimate from USGS is the Wolfcamp formation in the Permian Basin holds 20 billion barrels of oil. There are four layers of shale that make up Wolfcamp. That puts this find somewhere in the range of three times the size of the entire Bakken formation in North Dakota.
Oil prices are moving up and OPEC isn’t planning to do anything to hold down production. Completions appear to be slowly increasing. What price will it take for drilling to increase? Price drop has forced improvements in shale oil and the technical knowledge will not go away when drilling increases.
A guess on what price will keep the shale revolution going in the very short-term. Background discussions of the impact from the shale revolution: cheap oil era is upon us, oil prices won’t hit $100 again, and OPEC has lost its pricing power. Interview with Daniel Yergin is a must read.
4/28 – The Million Dollar Way – Lifeline for Oil Companies – Here is a guess on the framework for oil pricing, courtesy of Rigzone:
Fascinating to watch news in February about OPEC’s strategy. First, IEA sees a drop of US shale oil in 2016 and 2017 with strong growth in output over the following four years.
I have quite a backlog of lot of articles on energy to discuss. Will try to get caught up. Here goes…
Article at the end of January indicated OPEC is publicly claiming things are going swimmingly well. Then Saudi Arabia and Russia agreed to freeze their production at the January level, which is near record level of output for both countries. Then the end of February OPEC’s secretary-general acknowledged that the intentional goal was to wage a price war against US shale. Also acknowledged the price war hasn’t worked like they planned.
I don’t think that crippling the Russian, Saudi Arabian, and Venezuelan national budgets by dropping prices about 60% with no near-term expectation of recovery is quite what they had in mind.
The Energy Information Administration says the increase in crude oil production (counting lease condensate also) during 2014 was 1.2M bopd. That is the largest increase since 1900, when record keeping started. The percentage increase is 16.2%, which is the largest percentage increase since 1940.
Is the cratering of crude oil prices going to crater oil production as OPEC wants to make happen? Not quite.
EIA expects crude oil will increase by these amounts:
Update: Some commenters on the ‘net did not agree with a graph that combines gas and oil. Fair point. I’ll redraw the graph to include only crude oil.
The new graph does not change any comment made in this post. It stands as is.
Peak oil is still a failed concept.
Here is the new graph:
Again, here is the main question: Where is the inverted V drop after the peak that mirrors the runup to the high point?
Answer: It isn’t there.
2nd Update: I appreciate folks pointing out the error of my ways. Further research produced the above graph which makes the point yet again. I also looked at natural gas production.
The fail of Dr. Hubbert’s theories is even more extremely illustrated by graphing natural gas production. Comparing actual to his predictions is staggering. Another post on Monday.
Two busted Hubbert theories from one post. Peak Gas is even more of a fail than Peak Oil.
3rd update: Further discussion of the Peak Oil graph on the following post.
Saw a graph containing production of oil and gas in the U.S. since 1950. Since that one is copyrighted, decided to make my own.
Check out this graph of the amount of crude oil, natural gas (dry), and NGPL from 1949 through 2013:
Now, please look for the permanent, inevitable decline trending to zero after the never-to-be-achieved-again peak oil point of 1970. Also look for the inverted-V shaped drop after the peak that mirrors the runup.