haha
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
I was stuck in traffic on northbound I5 yesterday- hint to possible migrants to Puget Sound-don't come.
Anyway, Bob Brinker who is not usually my cup of tea had Charlie Maxell, the oil analyst for Weeden &Co. as his guest. Brinker did an excellent interview, asked helpful questions and shut up for the answers. I think it was over an hour long. Maxwell said a lot of things, but relevant to the recent downward pressure in crude and especially US NG prices, he felt that the most likely scenario would be a crude trading range between $55 and $75/bbl, basis WTI, lasting for perhaps a couple of years. After that he sees a resumption of shortages and prices rising.
He admitted that once commodity markets get moving, it is hard to put safe limits on how far they might move up or down.
On the same topic but from a different source, I read a Nabors Ind. presentation to the Sept 6 Lehman Energy Conference. They discussed ""rig intensity", which is the #rigs running to get a certain production outcome. In the Middle East, rig intensity doubled between 1995 and 2005. In 1995 128 rigs were running; at year end 2005, 262 were. Although production has increased somewhat, excess capacity has diminished over this period.
The same thing is even more true in US natural gas drilling. Over the past decade, US gas drilling intensity has increased 3x over, yet production is flat to down. The wells completed have had smaller reserves, and faster decline rates. Gas wells drilled in the past couple years have had 30% decline rates contrasted to 16% in the early 90s. 27,000 wells needed to be drilled last year, just to stay even with prior years.
People make a big deal about the current gas oversupply. Unless variability of weather has been repealed, it is meaningless. There is not enough storage capacity to form a true buffer for the demand variability. Hence, shortages and oversupply of a temporary nature present speculative opportunities to traders and hedge funs, but the resulting prices distort the longer term commodity picture.
Ha
Anyway, Bob Brinker who is not usually my cup of tea had Charlie Maxell, the oil analyst for Weeden &Co. as his guest. Brinker did an excellent interview, asked helpful questions and shut up for the answers. I think it was over an hour long. Maxwell said a lot of things, but relevant to the recent downward pressure in crude and especially US NG prices, he felt that the most likely scenario would be a crude trading range between $55 and $75/bbl, basis WTI, lasting for perhaps a couple of years. After that he sees a resumption of shortages and prices rising.
He admitted that once commodity markets get moving, it is hard to put safe limits on how far they might move up or down.
On the same topic but from a different source, I read a Nabors Ind. presentation to the Sept 6 Lehman Energy Conference. They discussed ""rig intensity", which is the #rigs running to get a certain production outcome. In the Middle East, rig intensity doubled between 1995 and 2005. In 1995 128 rigs were running; at year end 2005, 262 were. Although production has increased somewhat, excess capacity has diminished over this period.
The same thing is even more true in US natural gas drilling. Over the past decade, US gas drilling intensity has increased 3x over, yet production is flat to down. The wells completed have had smaller reserves, and faster decline rates. Gas wells drilled in the past couple years have had 30% decline rates contrasted to 16% in the early 90s. 27,000 wells needed to be drilled last year, just to stay even with prior years.
People make a big deal about the current gas oversupply. Unless variability of weather has been repealed, it is meaningless. There is not enough storage capacity to form a true buffer for the demand variability. Hence, shortages and oversupply of a temporary nature present speculative opportunities to traders and hedge funs, but the resulting prices distort the longer term commodity picture.
Ha
