News of the size of oil reserves in the Delaware Basin (New Mexico's share of the Permian) while OPEC was deciding how many barrels it will cut from the world market to lift prices caused epic confusion – and revelations of how little “authorities” and the media understand petroleum economics.
The New Mexico media, which relies mainly on interviews with petroleum industry spokespersons, got it wrong.
Government numbers came out as 46 billion barrels (Permian total) with 26 in New Mexico. This means nothing but oil in good rock along with technical recovery as an estimate. Some excited “authorities,” who should know better, exclaimed that there was more.
However, the estimate is based on the application of technical means to recover the oil. The reserves of real oil depend on ultimate economic recovery. This means technical based on geology, plus economics. A high price will recover the billions of barrels while a low price will not.
In short, the numbers reflect the rocks without economics.
The Delaware reserves plus the Texas Permian are now there to expand supply over 12 million b/d in the United States.
This writer has warned that world oil demand is sluggish and imprecise with only references to legacy guesswork that the developing world plus China demand will support prices long term or forever. Yet, world oil consumption has increased only 5 percent in the last 10 years.
OPEC, with Saudi Arabia as its leader, has expired as the world administrator of the price of crude oil. At its December meeting in Austria, Qatar quit after nearly 70 years and announced concentration in LNG production and world export as the existing market leader.
OPEC emerged with a serious factional split between OPEC original and OPEC with Russia. There would have been no agreement without Russia and its old Russian Federation members as producers. Moscow is the new world oil price-setter indirectly while OPEC Original becomes a collaborator in cartel for now. Simply put, Saudi Arabia no longer is the “residual supplier” alone.
The production roll-back of 1.2 barrels per day by both “OPEC” is not enough for “balance” supply and demand for world crude oil. It is being tested daily by commodity traders. In a briefing to New Mexico independent and small producers before the meeting in Austria, this writer warned that 1.7 million b/d was needed for balancing stabilization. Without that size of a production and export reduction, the average price of WTI oil in 2019 will average $50 per barrel.
Nearing 12 million b/d and over the Permian producers voluntarily will be required by this price to revise capital spending and place production into DUC (non-completions) and storage. There is doubt that the export of tight or shale oil would continue if the Brent price falls lower and loses its premium over WTI. A net cutback of Permian between 500,000 to 750,00 b/d should be a non-OPEC response to an oil glut even more serious than 2014.
Saudi Arabia is untouched as an American strategic ally in confronting Iran in the Middle East as a hegemonic threat.
Despite some Republicans and the Democratic Party in Congress, violation of human rights over the death of a Saudi journalist and critic of the Crown Prince will not override U.S. national interests in the Middle East.
President Trump has not deviated from post—World War Two foreign and defense policy.
Trump wants low oil prices for American consumers and forced OPEC this summer to pump more to offset export sanctions on Iran.
Still, with OPEC under a deep division which no President could achieve since 1973, Trump as a geopolitical manager of world oil has removed about 500,000 b/d between January and December of 2018. America, via Trump and without a formal cartel alignment, determines much of the price of world oil.
The United States and its Southwest tight and shale oil has changed from dependence on world oil to domination. Never again can OPEC engage the U.S. in a price and market share war as it did in 2014-2016 through supply acceleration in an oversupplied world market.
WTI emerges as the new world price. It is American barrels that set the price and OPEC is a price-taker. Since there are nearly 50 billion barrels in reserve in New Mexico, how will the Permian producers set a return on investment in a free market for petroleum?
Dr. Daniel Fine is the associate director of New Mexico Tech's Center for Energy Policy and the State of New Mexico Natural Gas Export Coordinator. The opinions expressed are his own.
Visit source site
https://daily-times.com/story/money/industries/oil...
OPECNon-OPECNOPECOPEC MEETINGSaudi Arabia OilSaudi ArabiaSaudi AramcoDonald TrumpPresident TrumpBusiness newsindustry newslatest oil and gas newsnewsOil And Gas Industry Latest Newsoil and gas industry newsoil and gas newsOil Industry Newsoil newsweekly market newsweekly newsweekly news updateweekly oil newsWorld NewsDelaware BasinWest Texas Delaware Basin USAPermian BasinPermian RegionPermianDepartment of CommerceDepartment of DefenseDepartment of EnergyDepartment of InteriorDepartment of International TradeUnited StatesCongressEuropean UnionUnited KingdomRussiaFair TradeFree TradeFreetradeOil TradersTradeglobal energy tradeQATARDubaiRyan zinkeupstreammidstreamdownstreamSan Juan BasinDr. Daniel FineBakkenBakken crudeOklahomaOklahoma CityLouisianaMarcellusColorado ShaleEagle Ford ShaleMancos ShaleMarcellus ShaleOhio ShaleOil ShaleOklahoma ShaleShaleShale BasinForeign affairsForeign policyEnergy DominanceEnergyenergy securityNew MexicoAlbuquerqueSanta FeCarlsbadRoswellArtesiaHobbsRepublicansDemocratsHouse Energy and Commerce CommitteeHouse Natural Resources CommitteeHouse of RepresentativessenateThe White HouseVladimir PutinPutinChinaAmerica FirstAmericaStock marketOil Marketoil futuresAnalysis: Trump and Saudi Collision on Oil, and Bingaman’s Return to Santa Fe
Dr. Daniel Fine: Trump and Oil in Trade Geopolitics
Analysis: What's Next for Oil and Gas Prices After Putin-Trump Summit? by Dr. Daniel Fine
Dr. Daniel Fine: Oil – Before and After the November Election
Should construction companies learn from their in-house data?
Janno Soon
Why Oil and Gas companies need to consider an Enterprise Asset Management solution
Marcus Kelly
The top Oil & Gas industry trends to watch in 2019
Matt Donnelly
Could Perennials solve the oil industry's looming skills gap?
Matt Donnelly
Senior Project Engineer
Wythenshawe Greater Manchester GB
Principal Mechanical Engineer
Barrow-In-Furness Cumbria GB
Project Administrator
Glasgow Glasgow GB
Principal Electrical Engineer (C&I)
Barrow-In-Furness Cumbria GB
Service Scheduler
Bolton Greater Manchester GB
Offshore Oil and Gas Jobs Is Difficult But Worthwhile?
NrgEdge Pte Ltd
Weld Purging Post Weld Heat Treated (PWHT) Pipework
An early diagnosis for the crane under a microscope: A deep look into the crane machinery at Germany’s Palm paper factory
INS Industrial News Service