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Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: Razorbak who wrote (42044)	4/11/1999 5:45:00 PM
From: Rob Shilling	Respond to of 95453

Simmons article, IEA, etc. I think Simmons is on to something for one reason. True supply was something like 15 mbpd over demand in 1990 (not pumping supply, but true capability to pump). Now we are sitting at something like 5-6 mbpd extra capacity. If the production of oil was producing above average returns on investment, I would not expect the convergence in such a dramatic fashion. 1998 in my mind has brought forward in time an eventual convergence between supply and demand thanks to low oil prices wrecking non-OPEC supply. Stock prices can go up and down, but there is one golden rule in economics, money only flows to businesses that can make an adequate return on investment. Simmons has potentially looked wrong because he is not predicting the price of oil tomorrow, he is showing where the current scenario is taking us long term. Richard Rainwater has predicted that the next decade will be the "energy decade". There will be tightness in energy supplies that the world will have to deal with. The 1990's information decade may indeed be replaced by the energy decade. The IEA has been wrong by several 100's of thousands of barrels many times recently. I still do not get their math. Back in the fall of 1998 from the top of my head they said non-OPEC supply in 1999 would be around 44 mbpd. At the time OPEC's official quota was something like 26.8 mbpd (forgive me for the looseness of numbers). Add the two together and you get 70.8 mbpd. Now somebody on this thread said to me that one has to a 3 mbpd for "liquified gas being used as an oil substitute", or something like that. Anyway, that gives us 73.8 mbpd, a full 1.2 mbpd or more below 1999 demand. This is before the current OPEC and non-OPEC cuts. If they are added in there is a 3.3 mbpd shortfall (not 450,000 as the IEA says). Anyway, between the IEA, the DOE, the EIA, the missing barrels, and the lack of accurate storage statistics, I have come to the conclusion that nobody knows supply, demand, or storage for oil. My gut and the above rough calculations tell me we have an incredible daily drawdown now, but I am firmly convinced we will not know the whole story until refineries start running dry.