Nils Peterson
https://www.facebook.com/groups/406824673049557/permalink/1075286162870068/
This is a story I think I understand of dominoes tipping over for world oil. Thoughts welcome.
COVID-19 slowed economic activity, which reduced demand for fossil fuels.
Oil began to be in oversupply and price threatened to fall. Saudi Arabia got in a squabble with Russia over production cuts and decided to retaliate by increasing production.
World storage is filling up, soon there won't be any place to store the over production.
Oil price has fallen creating hard times for many producers.
"While key global benchmarks Brent and WTI were trading on the futures market in the $20s on 27 March, West Texas Light at Midland sold for $9.40/bbl on the physical market. And Canadian heavy crude oil sold for less than $6/bbl. IHS Markit projects Brent prices to fall to around $10/bbl in April. Some producers may experience “negative prices” where they pay a buyer to take their crude oil."
https://www.worldoil.com/news/2020/3/31/ihs-markit-sees-forced-oil-production-cuts-of-10mmbpd-ahead
When storage gets full (pretty soon) then some production will have to halt. The term is "shut-in" and oil extraction leases often have shut-in clauses that require the lessee to pay a shut-in fee in lieu of pumping oil.
"Stripper wells" are oil wells that are reaching end of life, they run on old equipment and have low production. If they are shut-in they are likely never to be restarted. It might be better to terminate the lease than pay a fee. Their physical equipment might not restart either.
11% of US oil production comes from stripper wells.
It seems possible that we could come out of COVID with a permanent reduction in US oil production capacity.
Since growth in US oil is a key factor keeping world oil production growing, could COVID be the world's peak oil event?