Memo To Jane Nielson -- December 1, 2015

From the EIA:

New data released yesterday by the U.S. Energy Information Administration shows that for the first nine months of 2015, most (50.8%) of the crude oil produced in the Lower 48 states were light oils with an API gravity above 40 degrees. The largest share of production was in the 40.1 to 45 degree API gravity range. --- EIA

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Just Between You And Me

CNBC is reporting why OPEC's plan to "balance" the oil market failed.  OPEC's plan to shake up the world oil market may have backfired for now.

Just a year ago, the Organization of the Petroleum Exporting Countries decided to let market forces determine the price of oil, rather than its own production quotas.

Conventional thinking then was that the U.S. oil patch would be littered with bankruptcies, and production would collapse. As for Russia , the world's largest energy producer would be forced to cut back production by hundreds of thousands of barrels this year due to both the weakness in oil prices and the impact of Western financial sanctions.

But the results have turned out very different. Instead of falling off, production increased from where it was last year, and the world is still swimming in oil. The three biggest producers — Russia, the United States and Saudi Arabia — have in fact been adding more than 1 million barrels a day more to the market in the past year.

Just between you and me: I'm getting tired of all these "OPEC" stories. In fact, the events this past year in the oil sector prove beyond a shadow of a doubt OPEC is a sham. OPEC is Saudi Arabia. Saudi Arabia sets the course and everything else "OPEC" does is simply irrelevant. Ask Venezuela. OPEC is irrelevant; Saudi Arabia is not.

Update, December 1, 2015: this is kind of cool. I've been posting that for quite some time now. OPEC is a sham. There never was an OPEC. It was always Saudi Arabia. I think everyone knew that, but it wasn't put in writing. Now, Dan Yergin is saying exactly that. From CNBC: 

What kept oil prices up, even as the new U.S. shale oil production increased, was the roughly-commensurate loss of barrels owing to disruptions of one kind or another. In the failed state of Libya, oil production and exports largely stopped. At the same time, sanctions related to Iran's nuclear program took, at the peak, about 1.4 million barrels of Iranian exports off the market.

But the oil market ran out of offsets. U.S. production was continuing to surge, on track to add 1.5 million barrels per day just in 2014. At the same time, the risk of what IMF chief Christine Lagarde has called the "new mediocre" — lower growth in the global economy for a long time — meant that oil demand was growing more slowly — just 800,000 barrels per day in 2014. The "China chill" (slowing of the Chinese economy) was the single most important factor.

This was the context in which OPEC decided to hang up its jersey as market manager. Yet, to say "OPEC" is rather misleading. For this is not really a decision by OPEC, which is sharply divided. Rather it is the decision by Saudi Arabia, which holds most of the world's spare capacity, and the other Gulf countries to refrain from cutting output to keep up the price, as had previously been the practice for many years.