Sunday, September 9, 2012

Did QEP Overpay for the Bakken?

Not if you think Barclays might be right.
Growing global demand for oil will push prices to $125 a barrel sometime next year and possibly to $180 by the end of the decade, according to a Barclays research report Thursday.  
While domestic oil production has increased with the discovery of new ways to extract oil from shale and other tight formations, the decline in new production from existing fields internationally will continue to drive up prices, according to Barclays.  
Production is declining each year by close to four million barrels per day, while annual global demand is rising by more than one million barrels per day, even in the weak economic environment. Political tensions in the Middle East could disrupt supplies further, worsening the shortfall in the coming years.
So, those are the data points:
  • lousy global economic environment
  • annual global oil demand rising by one million bopd 
  • annual global oil production decreasing by four million bopd
  • unrest in the Middle East is a footnote; will it become a story?
How soon might we see a tipping point? In 3Q12 -- at the link. Wow.

If either the first or the last data point changes ....

5 comments:

  1. i am in the camp of a a taxcession. a recession caused by the fiscal cliff and taxes not being resovled.. in my view wti oil will then drop to $ 75.00 approx, and will then march back upward to the $ 125 level..this $ 125 level will be in place in approx 1 year.

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  2. First two points would seem to be contradictory.

    On the third point , what is the status of horiz drilling and use of frac stimation in oil bearing regions around the world? Wouldnt seem logical that US is only place where low permeabity deposits exist. Of course, local politics regarding suitabiliy of frac technology may exist. But not in places lime Russia , china, north Africa , middle east South america etc.

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    1. 1. "First two points would seem to be contradictory": I see that all the time coming from US-centric Americans. They forget about the rest of the world. They forget the demographics of India and China. The global economy can be lousy, but pressure of 3 billion folks moving to middle class will push demand for oil even in a lousy global economy.

      2. Yes, it is completely illogical. It's even worse than that. Not only does shale oil favor the US, it favors private and state land, according to an administration spokesperson.

      http://www.milliondollarwayblog.com/2012/08/anticipation-wellsspacing-unit.html

      "So it's hard for the federal government to show big oil or gas shale-production numbers on its own lands, simply because the geology favors private and state landholdings," he said on the show.

      I can't make this stuff up.

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  3. http://www.startribune.com/business/168963646.html

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    Replies
    1. One post on MBI is here: http://www.milliondollarwayblog.com/2012/09/zoning-for-housing-and-oil-field.html

      Search "MBI" at the blog to find other posts on MBI.

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