EIA and MMS 9/15


Update [2005-9-15 14:7:57 by Prof. Goose]:Also go check out JDH's piece on this and the gasoline demand "freefall:"  http://www.econbrowser.com/archives/2005/09/gasoline_demand.html

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So, nothing to worry about?

so even tho lots of nat-gas and oil shut-in in the gulf
and 3 or 4 refineries are down...

JDH/econbrowser guy says gasoline demand is falling.

OPEC is said to cut its worldwide demand estimate
for the 5th straight time, down to 83.6 mbd
http://news.yahoo.com/news?tmpl=story&u=/afp/20050915/bs_afp/opecenergyoilproductionforecast_050 915163115

       ? ? ?


Putting aside whether IEA or OPEC or EIA are any good at forecasting demand, or not, that reduction in demand growth merely reduces the increase in demand expected this year by 100,000 bbl/day. Pretty small in the big picture, esp. when weather can knock off 840,000 bpd for an unknown period of time, just like that.
Friday's report, again next to no progress:


Today's shut-in oil production is 840,921 BOPD.  This shut-in oil production is equivalent to 56.06% of the daily oil production in the GOM, which is currently approximately 1.5 million BOPD.  Approximately 35% of the oil shut-in is as a result of onshore infrastructure problems.

Today's shut-in gas production is 3.384 BCFPD.  This shut-in gas production is equivalent to 33.84% of the daily gas production in the GOM, which is currently approximately 10 BCFPD.

The cumulative shut-in oil production for the period 8/26/05-9/16/05 is 22,215,726 bbls, which is equivalent to 4.058 % of the yearly production of oil in the GOM (approximately 547.5 million barrels).

The cumulative shut-in gas production 8/26/05-9/16/05 is 105.777 BCF, which is equivalent to 2.898% of the yearly production of gas in the GOM (approximately 3.65 TCF).

But how elastic was demand really - the whole scale on the graph at Econobrowser is not shown on the graph so it looks more dramatic than it actually is. Prices went from about $2.50 to $3.25 in a week - a 30% jump. Yet it only caused a 6% decline in demand. Add in the people in the NOLA affected areas that couldn't consume (1-2%?) and the drop in demand is really pretty unimpressive. We can do much better! If only we had some real leadership.

The people in NOLA who got away in their cars can still drive around.  Then again, many of them were 2-car families who only took 1 car.  Has anyone seen any figures as to how many cars were flooded, and would be totalled?  I would be interested in seeing what those destroyed vehicles are replaced with.
gasoline demand typically tapers off beginning in Sept thru Spring.  In the winter, Heating Oil becomes the primary focus, so gasoline demand will be discarded as a mere side-show.  the focus shall shift to Heating Oil demand very soon - especially when the Weather Forecasters predict an early arrival of colder than normal winter.  One may be reluctant to drive due to high gas prices, it is very hard to not turn up the thermostat when you're sitting in a frigid house.

The Chinese are not making the right decision here not filling up the SPR right now.  Crude oil has plunged from $70 down to as low as $63 - pre-Katrina levels.  this is a bargain, especially when crude prices are set to rise again this upcoming cold winter.  is $63/barrel expensive? certainly, but $70+ is even more expensive and it is a very unrealistic expectation, infact foolhardy, to wait for crude prices to drop down below $60 to fill up your SPR.

if you are an Nymex investor, buy crude light, heating oil, natural gas futures now before the winter kicks into high gear.  Matt Simmons has said on a video posted here at the Oil Drum, that this winter will be the first we see a significant shortfall.

True for the Northern part of the country, but we don't know what heating oil is here in Texas.  Natural Gas is how we do everything (or electric, supplied by NG peak power plants)

And we still drive like jackrabbits, too. All. winter. long.

also, OPEC is due to meet on the 19th.  Saudi Arabia has boasted that it is ready to boost production by another 500K barrels.  right.
500K barrels of heavy, filthy, sour.  Refineries have already said: "we don't want no more sour!"

check this quote from http://www.msnbc.msn.com/id/5612507/

"Only Saudi Arabia has spare production capacity and refiners have said they do not want more of the kingdom's sour crude"

Thanks for the links to the excellent stats.  Here are some more from the Platts website...

-- Apache Corp on Sep 15 said damage to production infrastructure in the Gulf of Mexico will likely keep 60,000 Mcf/d of its gross operated natural gas production and 20,000 b/d of its oil output offline for up to a year. Apache has restored 81% of its gross operated Gulf gas production, or some 459,000 Mcf/d, and 65% of its oil output, or 45,600 b/d. Another 45,000 Mcf/d and 4,000 b/d is expected to return by mid-October.

-- Royal Dutch/Shell said its net Gulf of Mexico production has returned to about 160,000 boe/d in the aftermath of Katrina. The company's first-half production from the region was 450,000 boe/d. Shell said it expects that about 60% of the total production will be restored to pre-hurricane levels "within fourth quarter 2005."

-- Despite the fact some 56% of the oil production in the Gulf of Mexico remains idled more than two weeks after Katrina roared through the region, the six refiners awarded loans from the US Strategic Petroleum Reserve to help ease crude supply shortages have taken delivery of just 2.405-mil bbl of the 12.6-mil bbl awarded, information from the companies and the Department of Energy showed on Sep 14.

Much more at...

Does anyone else find it hard to believe that the SPR only dropped a million barrels when apparently much more than that was officially released?

Possibly those barrels expected to be returned are counted as inventory?

Also the natural gas storage this week seems unbeliveably high.  Can someone point out why I may be wrong?

Nice weather on the East Coast last week?
I apologize if this has been discussed before:
Has anyone noticed that the shut in numbers for Katrina are relative to 1.5 MBPD and 10 BCFPD, for oil and gas, respectively, whereas the numbers for Ivan last year were versus 1.7 MBPD and 12.3 BCFPD?  Does this reflect permanent damage due to Ivan, or depletion, or a combination of both?  The final numbers for Ivan posted on 2/14/05 show 7.4% shut in for oil and 1.2% shut in for gas, which wouldn't account for the difference.
To give you a quick answer, post-Katrina the totals were re-estaimted by the MMS to take into account permanently lost platforms.

Or in other words, production losses are only from those platforms, etc., expected to recover, and not total losses.

Wrongo - go and look at the production levels on MMS for April, May, and June - NG was below 10 Bcf/d and oil below 1.5 million bbls/d.  Those changes in baseline mark production lost, either due to Ivan or depletion, BEFORE taking into account whatever was destroyed by Katrina.
Oil prices seem to be impacting on 'big boys' attitudes as well, from Oil & Gas Journal:

Survey gauges oil-price effects on multinational firms
By OGJ editors
HOUSTON, Sept. 14 -- High oil prices are taking a toll on US-based multinational companies, making senior executives less optimistic and more uncertain about the future, said analysts at PricewaterhouseCoopers LLP, New York.

"Many--particularly the 36% that see their companies as vulnerable to rising oil prices--are scaling back expectations for revenue growth, new jobs, and investments," they said in the report of a recent survey. Although 82% of the surveyed senior executives still believed that the US economy is growing, only 62% were optimistic in the second quarter about prospects over the next 12 months--"a sharp 15-point drop from the prior quarter," the report said. "One-third now counts itself uncertain, a 13-point increase."

The decline of optimism is most prevalent among 36% of executives citing rising oil prices as a potential barrier to corporate growth. Only 56% of this group remains optimistic; 42% is uncertain, according to the survey.

There was a story in the WSJ yesterday about the tar sands in Alberta.  Since natural gas is required to heat the stuff out and get the oil, they are clearly sensitive to the price of natural gas.  In the article they now say that they can break-even if oil remains below 40$/bbl, whereas before the breakeven point was 25$/bbl.

In a related though, I am wondering about this winter.  In the event of natural gas shortages for heating, would they idle this project and divert the natural gas to home heating??

Also regarding the oil recovered from the oil sands, it's heavy and sour, so it doesn't get the $65 price that oil is at now. I'm not sure what most heavier sour crudes are selling for, but remembering the links comparing sweet light to heavy sour on econ browser a while ago, I think that most are in the 30-40 range, which means that the oil sands right now are just barely break even. And as natural gas continues to become more expensive so will the oil sands. And yet they're still continuing the project.

Part of it could be continuing research hoping to find the magic method to exptract oil cheaply, but why upgrade existing non-perfected facilities to be able to extract oil for barely break even prices? Unless it's a very small change which will make things magically become profitable it would seem that they'd have to undergo a large retrofit and take a large write off on the expended capital. Their actions seem to say that they're not confident that a revolutionary cheaper method to process the oil sands is going to occur.

What's up with natural gas storage?  The US Energy Dept.'s Energy Information Agency publishes weekly information on natural gas storage, and I'm having trouble believing the most recent report (as of Sept. 9th).  It showed a net increase of 89 Bcf, which is more than twice as much as last week's result.  That should be good news, but it is hard to understand how that much gas was produced, given the extent of damage from Katrina.

The Mineral Management Service's latest Katrina status report showed a total of 102Bcf shut in since Katrina came ashore, and 80Bcf were shut in up until Sept. 9th.  I just really don't understand how storage levels can be so strong, while production is so weak.

phil flynn provides a decent answer in today's energy report
As for the drop in gasoline demand, note the cutoff date of the curve. We had a drop of similar magnitude last year, only 1 week later. Let's see how the next week or two play out before getting excited.  Murray