It Takes Awhile For The Red Queen To Fall Off That Treadmill -- November 11, 2015

Quick! How much less oil do you think the US produced in October, 2015, than the previous month, September, 2015? One million bbls, two million bbls, three million bbls?

Remember, North Dakota alone set a new post-boom record low for rigs this past week; Williston is talking about closing man-camps; refiners on the East Coast are refusing Bakken crude oil; and, Elon Musk announced in August that he had discovered how to burn water in conventional internal combustion engines made by Volkswagen.

Okay, I made that last one up.

But, how much less oil do you think the US produced last month compared to the previous month? One million bbls, one and a half million bbls, two million bbls, more?

The EIA's estimate (dynamic link): 40,000 bopd.

EIA estimates that total U.S. crude oil production declined by 40,000 barrels per day (b/d) in October compared with September. Crude oil production is forecast to decrease through the third quarter of 2016 before growth resumes late in 2016. Projected U.S. crude oil production averages 9.3 million b/d in 2015 and 8.8 million b/d in 2016. 

That's for the entire US: 40,000 bopd. North Dakota alone produces 1 million bopd. In the big scheme of things, 40,000 bopd is a rounding error. Not quite, but close. And remember, the Saudi surge began last October, a year ago.

And I don't know who, but it seems someone is boxed into a corner. The Bakken alone has 1,000 wells drilled to total depth, shut in and just waiting to be fracked -- and NDIC relaxed rules on fracking deadlines.

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OPEC Boxed In

How boxed in is OPEC? It's becoming existential. The [London] Telegraph is reporting:

The rumblings of revolt against Saudi Arabia and the Opec Gulf states are growing louder as half a trillion dollars goes up in smoke, and each month that goes by fails to bring about the long-awaited killer blow against the US shale industry. 

Algeria's former energy minister, Nordine Aït-Laoussine, says the time has come to consider suspending his country's Opec membership if the cartel is unwilling to defend oil prices and merely serves as the tool of a Saudi regime pursuing its own self-interest.

"Why remain in an organisation that no longer serves any purpose?" he asked.

Saudi Arabia can, of course, do whatever it wants at the Opec summit in Vienna on December 4. As the cartel hegemon, it can continue to flood the global the market with crude oil and hold prices below $50.

It can ignore desperate pleas from Venezuela, Ecuador and Algeria, among others, for concerted cuts in output in order to soak the world glut of 2m barrels a day, and lift prices to around $75. But to do so is to violate the Opec charter safeguarding the welfare of all member states.

This is more than a bit disingenuous. For decades, no OPEC member actually stayed below their quotas if they were able to over-produce; all these decades it was Saudi Arabia that opened and closed the spigot to control prices.

Hey, by the way, if nothing else, we now know the production costs for Mideast crude oil by each country. 

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Speaking of being boxed in, walls ...

Walls, Faron Young
I prefer Willie Nelson's version. This song introduced Willie Nelson to a national audience.