Anas Alhajji Profile picture
May 23, 2018 8 tweets 4 min read Twitter logo Read on Twitter
What is the size of the global #oil spare production #capacity?
1- Spare capacity doesn't matter, what matters is the "effective spare capacity", which is what you can bring on line within 90 days of crude quality that buyers are willing to buy.

2- therefore, there are three conditions:
a- Supply: has to be produced within 90 days
b- Demand: Buyers are willing to buy it: crude quality and price wise
c- Delivery: Ability to deliver to byers. Stranded #oil production with no pipeline to transport should not be counted,
3- Effective spare capacity can be maintained for a long period if needed. Here we have to distinguish between "effective spare capacity" and "surge capacity." If those countries have to increase production only for few days, they can use surge capacity, which is way higher
4- People who say we do not have enough spare capacity in case of interruption of supply forget that the first "spare capacity" to be used in case of emergency is SPR in the #IEA member countries. They can add 1.5 mb/d of supplies for at least 6 months months! Repeat, 6 months!
5- Now, I am not going to give you a number of the existing effective spare capacity, but pick a number and add it to the SPR number above. By the way, the 1.5 mb/d number above is CONSERVATIVE. Now what do you think? #OIL #OPEC
6- And do not forget that we still have about 50 mb overhang in OECD commercial stocks, so we can draw 1 mb/d for 50 days and yet storage remains within boundaries. Here we are not counting storage in China and India, which will play a role in case of emergency. #oil #OPEC
7- And Yes, we will have higher prices... but remember, some banks predicted $250/b at certain period, and we ended up with $25! Markets are more dynamic than what even free market believers believe. SPR + Inventories + increase in production + decline in demand ≠ $300/b
8- Re,member 2011-2012.... with all the massive unplanned production losses, oil prices remained below $150/b. Spare capacity then was lower than now. Commercial inventories were lower than now! So why $300/b now?

I rest my case, ladies and gentlemen💐!

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More from @anasalhajji

Sep 4, 2018
Comments by Paal Kibsgaard, Schlumberger Chairman & CEO
1- "Still, the well-established market consensus that the #Permian can continue to provide 1.5 million barrels per day of annual production growth for the foreseeable future is now starting to be called into question"
2- "In fact, so far in the third quarter, the hydraulic fracturing market has already softened significantly more than we expected in spite of the overall rig count holding up relatively well."
3- "Still, what is already clear is that unit well performance, normalized for lateral length and pounds of proppant pumped, is dropping in the Eagle Ford as the percentage of child wells continues to increase."

#Oil #Permian #EagleFord #shale
Read 13 tweets

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