I’ve decided to stop posting to the Energy Investment Strategies web site and to take the site down eventually.  There are two reasons.   One is that I need to concentrate my efforts on fighting my cancer.  The other is that I think to a large extent my original aims for this site have been accomplished.  The site was started to educate investors about “peak oil”, its implications for potential future energy shortages, related increases in the importance and value of energy-related equities, and ways investors can best participate .  …

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Are stocks and oil bottoming?

Was last Tuesday’s 350-point rally the beginning of the end of the bear market or just a false “bear trap?”  And a related question: “Did oil bottom at $33 and will it get re-tested?”  Let’s see what we know.

Some things we know

Sometimes the objective observable facts can yield fairly clear conclusions.  Usually that’s not the case.  Usually you can use the available facts to make a decent argument in either direction.  But sometimes the facts seem fairly clear.

For example, there should have been clarity about being …

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Six month ago - when the world economy looked significantly rosier - I posted an analysis of projected supply and demand for oil going forward to 2015.  The analysis was based on the assumption of continued demand growth, continuing decline of old oil fields and expected new production from announced oil megaprojects.  I adjusted the magaprojects estimates for delays and  I concluded that: “if these estimates are at all closely correlated with reality we should expect oil markets to be tighter than at present through 2012 …

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Recent reports highlight the enormous reserves of oil in Iraq and the potential for them to be exploited in the relatively near term, potentially impacting the onset of Peak Oil.  From an investment viewpoint, I focus on the period ending in 2015, largely discounting whatever might come thereafter.  In that time frame, Iraqi production increases are more limited and political risks are still hard to assess.  That said, one must tentatively conclude from recent events that foreign contracts are likely to be let and production is likely to increase …

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Iraqi oil production was about 2.5 mb/d before the U.S. invaded.  It dropped to about 1.4 mb/d and is now back up to just under the starting point.  Iraq’s claimed reserves of some 115 billion barrels (second only to those of Saudi Arabia) are sufficient for it to achieve their new goal of producing 6 mb/d (2.2 billion barrels per year), even if actual reserves are a good deal less than what they claim.  It’s not clear that Iraq can achieve this new production objective in 4 - 5 …

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A comment at the bottom of this note indicates that the average megaproject declines at 14% after peak production is reached.   That probably reflects the fact that so many megaprojects are now  of the deep offshore kind which do have rapid decline characteristics.   This may also be reflected in the recent IEA study indicating decline rates more in the 8% range than 4.5%.  James R. Halloran 216-222-2249 December 9, 2008 james.halloran [Email address: james.halloran #AT# nationalcity.com - replace #AT# with @ ] …

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Two well respected oil analysts, Charles Maxwell and Peter Wells, provide recent updates to their peak oil thoughts.  Wells in particular is interesting because he employs a bottom-up analysis similar to the Megaprojects works that is done on Wikopedia and by Chris Skrebowski.  Wells is also a consultant to Toyota, an impressive credential. Maxwell repeated his prediction of $300 oil in 2015.  Wells thinks non-OPEC production has already peaked, that global production may peak in 2015, and like Maxwell he expects tight oil conditions and thus higher prices …

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The following article published in The Guardian and based on the work of Chris Skrebowski (Peak Oil Consulting) - indicates a crunch in oil supply vs. demand coming in 2012.   It seems clear that the assumption of demand growing at 1.6% per year is now invalidated by the current global recession.  Moreover, supply growth in 2008 and 2009 will be reduced by demand restrictions and will therefore be moved into later years.  But if global growth does resume in 2010 and if geological constraints act more or less …

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Khebab on December 10, 2007 - 11:25am I’ve just created this chart showing the repartition of project sizes: We have more small project entries for 2008 and 2009 but also more projects in the 250-500 kbpd range. There are also some uncertainties about the exact timing of some large projects …

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The discovery of enormous oil supplies in the Santos basin offshore Brazil that lie deep under a salt layer is the most optimistic development for future oil supplies perhaps in decades, eclipsing the GOM Thunderhorse or Jack discoveries or the African offshore discoveries.  But since the price of oil has slipped below $70 these Brazilian prospects, and the outlook for Petrobras (PBR), the state-controlled oil company slated to benefit from them, is much more questionable as discussed in the essay below published at Seeking Alpha.   Brazil has published …

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A Financial Post article, below, reports that tightening credit conditions will force some Canadian companies to defer expansion plans, particularly in the oil sands.  There has been an expectation that the oil sands will add some 2 mb/d of capacity by 2015.   It appears such growth will be scaled back.  If oil prices go lower and stay low for a while the combined effect of that with credit restrictions may well result in the deferral of a number of megaprojects around the world.  The impact of such deferrals would …

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According to various reports including the one posted below from the Oil and Gas Journal, Mexican oil production at Cantarell and KMZ fields declined in August by 29.2%  and an astonishing 39% respectively, although bad weather may have played a role.  The statistic that may sum it up best is the fact that total Mexican production for the first eight months of 2008 was down 2.83 mb/d or 9.7%.   KMZ is a smaller field that produces heavy oil.  The Chicontepec field is probably continuing to increase production so total …

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A report posted below states that the Kashagan field will begin producing at a rate of 150 kb/d, growing to 370 kb/d in 2014.  This is more optimistic than recent reports saying the field will not start producing until 2014.  Eni to Produce First Oil From Kashagan Field in 2012 (Update1) By Eduard Gismatullin Sept. 18 (Bloomberg) — Eni SpA, Italy’s largest oil company, plans to produce the first oil from the Kashagan field in Kazakhstan in 2012. The company is making “over 50 percent progress …

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An under-appreciated part of today’s oil supply dynamics is increased incentives for investments in Enhanced Oil Recovery techniques, as I discussed as part of a recent post predicting that oil prices may trade in a range of $80 - $100 for some time.  Posted below is a report detailing how new technologies are being applied to U.S. “stripper” wells, of which an estimated 400,000 produce nearly 1 mb/d.   Small improvements in effectiveness and cost reduction are being implemented in this business because of new high oil prices and …

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I think oil will trade in a range of $80 - $100 a barrel in the foreseeable future, probably another year.  Why?  First supply and demand:  Vectors for a lower price include roughly 3 mb/d  of reduced demand from the U.S. (about 1 mb/d) and more Saudi supply (about 2 mb/d) vs. a year ago.  The rest of the world is about flat with higher demand from China, some other Asian economies and oil exporting economies more than offsetting reduced OECD demand.  On the non-Saudi supply side, more supply from …

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