Mission & Name
US Foreign Policy (Dr. El-Najjar's Articles)
Has The US Reached "Peak Oil" At Current Price
By Leonard Brecken
Al-Jazeerah, CCUN, April 20 2015
Last night the EIA
once again capitulated on the myth that rig counts don't matter and the
productivity of wells would largely offset, leaving the industry on a
continuous path to higher output. The current consensus of 500,000 B/D
additional growth in 2015 US production now appears very much at risk.
Look how far we have come, folks, from all that media hysteria this past
year. Yesterday, Reuters even wrote an
article stating that the EIA prediction of a sequential decline in oil
production in May vs. April would be the first, if proven, true prediction.
Meanwhile, fact checking would indicate that this, in fact, occurred last
week as reported
here. In any event the EIA
that production will decline 57,000 B/D in May counter to earlier
expectations that the Permian would largely offset declines in the Eagle
Ford and the Bakken. This is despite higher productivity of existing wells
proving that rig count does matter and the market has underestimated the
effects of high decline rates.
Further, the hysteria about Cushing
overflowing with oil also appears unlikely to occur, as a result. Yet
another in a string of attempts by the media to misconstrue the facts.
Now as a topper, we hear from the North Dakota Resource Management that
amazingly February oil output fell 1% sequentially in the month despite
producing wells increasing! Thus even the theory that well productivity
would increase is dispelled. To reiterate, look for EIA to revise its oil
production estimates for 1Q after the crisis wanes later in 2015. The
warning in an article
here sounded that producers reaching deep into the lower cost, most
productive regions (which is clearly occurring in Bakken), would come at a
That price is depletion of those regions at a faster rate,
leading to cost pressures down the road. If prices don't rise to offset
those higher drilling costs then production will start declining. A further
point, the talk of all these uncompleted wells potentially coming on line
during 2015 can now be looked upon as not increasing output, but as an
effort to maintain it which was the theory here all along (another media
theory dispelled makes what, 4?).
One has to wonder if "Peak Oil" at
the current price deck in the US is very real indeed. Look for draws and not
inventory additions to start in earnest in May. The next media spin will now
focus on future risks to oil supply in 2016 to keep the oil curve flat,
whether it be the rise in the US dollar or Iran. The short term risks appear
to be clearing so the attention will be turning on preventing prices from
rising too high. Just this morning, Dow Jones ran an article quoting the
Citibank oil analyst that days of triple digit prices are in past.
Thump…that's the sound once again of someone falling off their chair in
utter amazement as to what is occurring to distort reality.
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