Recovery For Texas Energy

740_energy_oil_and_gas_image_7914 West Texas Oil Boom

In the midst of the shale boom in 2013, Texas added more than 19,000 new jobs in the oil and gas production sector, leading the U.S. job increase in the industry by a wide margin. But back then, global oil prices were stable all year around at US$100 and slightly more.

Crude prices have crashed since 2014—now barely clinging on to above US$50—effectively stagnating drilling activity and oil jobs growth.

Texas, for its part, has shed over 91,000 jobs in oil and gas industry since the end of 2014, with the Houston area economy on the cusp of a recession, according to an article in The Wall Street Journal.

The Dallas Fed has said that signs of recovery have emerged in the U.S. oil market, most notably in the Permian. The Dallas Fed also noted that Texas’s oil and gas employment increased in August—a first since 2014—suggesting that the worst of the energy crisis may be over.

“Increased activity in the Permian Basin and elsewhere has affected employment in the Texas mining sector, which rose slightly in August—its first increase since late 2014,” the Fed statement said.

The Dallas Fed issued probably the most bullish comment on the Texas oil economy so far this year, when Fed economist Pia Orrenius said that encouraging employment growth in Texas suggests that “the worst of the energy crisis may be over”.

In summary...So the latest numbers show that Texas has been overcoming this energy downturn – as it has done with many other lows – to continue to be the mainstay for America’s superpower status.

Reference:  Tsvetama Paraskova, October 14, 2016, Texas Is Making An Energy Recover, OilPrice,

Gasoline Price Hike Expected After Pipeline Shutdown

gasolinepipeline Panic Grips Eastern U.S.

Gasoline prices in the U.S. Southeast spiked in September after a major gasoline pipeline suffered a leak and was forced to temporarily shut down. The Southeast may see gasoline prices rise again because the problems with the pipeline are not over.

The Colonial Pipeline is a 2.5 million barrel per day system that carries refined products such as gasoline, diesel, jet fuel and heating oil. It consists of a massive 5,500 miles of pipeline, traveling from the Gulf Coast up to the mid-Atlantic. Fuels refined along the Gulf Coast can reach as far as New York Harbor.

On September 9, the Colonial Pipeline system was hit with a “system integrity issue” in Alabama, the company said, and was forced to shut down Line 1. That was a euphemism for a gasoline leak in the pipeline – about 8,000 barrels leaked in Alabama – which interrupted the flow of 1.4 million barrels per day of gasoline.

That was a problem for the U.S. Southeast because “there are no refineries between Alabama and Pennsylvania that produce substantial quantities of transportation fuels,” the U.S. Energy Information Administration said in September, adding that “the U.S. Southeast is supplied primarily by pipeline flows from refineries along the U.S. Gulf Coast and supplemented by marine shipments from the U.S. Gulf Coast and imports.”

The outage of the Colonial Pipeline led to a higher gasoline prices at the pump because there are few alternatives. Some cities with ports such as Savannah, Georgia, and Charleston, South Carolina, can receive shipments from the global market, but otherwise the region is isolated. When Colonial shutdown, some retail outlets ran out of fuel. A Virginia petroleum association member told Argus Media that it was “the worst outage he had seen in 17 years.” The outage led to an 8-cent per gallon increase in PADD 1C, which covers the southeast.

In Conclusion...This gasoline spike shows our energy delivery system is fragile and supplies can be interupted.

Reference: Nick Cunningham (2016, October 5, Pipeline Outage Could Lead To Another Gasoline Spike,

New Shale Boom On Horizon?

w-texas-oil-boom Oil Shale Boom?

OPEC surprised the markets when for the first time in eight years’ oil production limits will be put in place at its November meeting. The September 29th announcement from OPEC sent markets up by almost $3 per barrel.   The rally continued with the WTI week closing at $48.24.

Hundreds of oil and gas bankruptcies are an ugly background for recent predictions for continued records inventory levels.

The projected changes would be caused by an unprecedented agreement between arch-rivals Saudi Arabia and Iran.

In its announcement, OPEC stated:

“In the last two years, the global oil market has witnessed many challenges, originating mainly from the supply side. As a result, prices have more than halved, while volatility has increased. Oil-exporting countries’ and oil companies’ revenues have dramatically declined, putting strains on their fiscal position and hindering their economic growth. The oil industry faced deep cuts in investment and massive layoffs, leading to a potential risk that oil supply may not meet demand in the future, with a detrimental effect on security of supply.”

“The Conference opted for an OPEC-14 production target ranging between 32.5 and 33.0 mb/d, in order to accelerate the ongoing drawdown of the stock overhang and bring the rebalancing forward.”

“What we are looking at here at the very least is a freeze,” Paul Sankey host of the conference call said. “We were looking for more OPEC production growth but now we no longer think so.”

Why did OPEC do it?

“With weaker demand predicted through 2017 they could see a rough market coming,” the analyst theorized. “Being a cartel the economics were overpowering: a 10 percent cut could give as much as a 30 percent rise in oil prices.

In conclusion...If a 30% oil price rise is realized, then oil shale could boom again.

Reference:  September 30, 2016, Will The OPEC Deal Lead To A New Shale Boom? Oil & Gas 360,

Amazing West Texas Oil And Gas Discovery

alpine-highAlpine High Oil & Gas Discovery

Introduction…Houston’s Apache Corporation has done the unexpected.  It has made an amazing oil discovery in an area that no one expected.  While much of the West Texas Permian Basin region commands $20,000 per acre,  Apache’s Alpine High was purchased for just $1,300 an acre. This acreage is undeveloped and has no infrastructure.  This contrasts to much of the Permian Basin that is very popular with drillers because it is so well developed.

Most amazing disovery  in decades…Thanks to this major find though, Apache has a lock on what could be one of the most exciting finds in decades.  How exciting you ask?  Apache said it’s accumulated more than 307,000 acres and drilled 19 wells in Alpine High, a small part of the sweeping and energy-rich Permian Basin of Texas.

Further, Apache Corp. believes there could be 3 billion barrels of oil and 75 trillion cubic feet of natural gas in what it calls Alpine High.  The reserves could be worth from $8 billion up to $80 billion by some estimates.

The company has begun drilling in the area for two years and says the early wells, which produce more natural gas than oil, are capable of providing at least a 30% profit margin at today’s prices, including all costs associated with drilling. Some are so prolific that they can break even at a price of 10 cents per million British thermal units, according to the company. Natural gas futures closed last Tuesday at $2.72.

Why does this discovery change the landscape? Apache’s recent oil find highlights what could be a new phase in fracking. To date, fracking in the U.S. had really been all about taking explored basins and drilling new wells to get at previously untapped resources. That strategy worked well when oil prices were more than $80 a barrel. At today’s prices though, drilling the old style rigs in mostly depleted fields to get at residual layers of black gold is a money losing strategy. Apache’s find shows that money can be made by taking risks and looking for major new finds in areas that had been passed over previously.

In conclusion…Apache Corporation has struck a world-class oil and gas discovery in a region that no one expected.  This clay-ridden region of the Permian Basin was believed to have little value.  The company has increased it’s 2016 capital spending by $200 million to a full-year capital of approximately $2 billion.

Sources: Michael McDonald, September 15, 2016, Why Apache’s Latest Oil Find Is Such A Game Changer, OilPrice,; David Koenig, September 7, 2016, Apache may have struck big in West Texas, PowerSource,

Gigantic U.S. Crude Oil Inventory Plunge


Cushing, OK Inventory 

Oil inventories plunge…more than 14.5 million barrels for week ended September 2nd.  This was the greatest weekly plunge in 17 years attributed to Tropical Storm Hermine.  The U.S. Energy Information Administration said expectations were for an increase of 225,000 barrels.

The price of oil jumped $1 to $47.25 a barrel from the news.  “I think you need to see more than one week of this to get worries about oversupply out of the market,” said Gene McGillian, senior analyst at Tradition Energy of Stamford, Connecticut.

Tropical Storm Hermine interrupted shipping routes and production last week, even though the storm eventually turned to the northeast and did not harm key facilities in the Gulf.

In conclusion…this report is a minor tremor in oil supply and pricing contrasted to the impact of oil inventory shortfall due to  the $1 trillion slash in new oil field investments from 2015 to 2026.  This was reported last week in the Oil And Gas Insider article Oil Price Spike Inescapable. Click here to read last weeks report.  

Reference: UPDATE 1: Biggest weekly U.S. Crude Inventory Drop, By David Gaffen, Reuters, September 8, 2016; Oil Price Spike Inescapable, By Bill Moist, Oil And Gas Insider, September 5, 2016

Oil Price Spike Inescapable


Bill’s note: We’ve been reporting in the since the beginning of 2016, that the massive cuts in new capital expenditiures for oil and gas exploration would lead to oil price hikes.  Now the results of those expenditiure cuts are appearing in new oil discoveries.


Oil price spike inescapable and here’s the facts…

  • 2015 new oil discoveries are 1/10th annual average dating all the way back to 1947
  • 2015 Oil industry new discoveries are only 2.7 billion barrels
  • 2015 worldwide oil consumption at 35 billion barrels

Click here to watch the 3 minute video Oil Price Spike Inescapable.

Why do we have the largest oil consumption deficit in 69 years?

  1. Oil at less than $50 a barrel makes many fields around the world uneconomical to explore
  2. The oil industry has slashed $1 trillion in new investment from 2015 to 2026
  3. EIA expects oil demand to expand to 105 million barrels per day by 2026 up from the current demand of 94 mb/d
  4. Large scale high volume drilling like deepwater projects have been scraped
  5. Large scale projects take years to be productive

In conclusion…Supply could  fall 1.5 billion barrels short per year by 2018 to 2020.  If this does play out, then…

Oil Price Spike Is Inescapable

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References; Wood Mckeszie, Energy Information Agency, , Oil Price Spike Inevitable, By Nick Cunningham,, August 30, 2016

Click here to watch the 3 minute video Oil Price Spike Inescapable.

Possible OPEC Production Freeze

OPEC Counries

Oil prices enjoyed a bump last week,…thanks in part to a weakened dollar and some geopolitical tensions in the Persian Gulf. But a large factor in the recent rally has been the return of a possible OPEC production freeze, a subject that was last tossed around before the organization’s much-publicized, and ultimately unproductive, meeting in Doha last April. The likelihood of a freeze sent markets up on Thursday, though some less-than-confident comments from the Saudi oil minister sent them dropping back on Friday.

Whether a freeze occurs or not is likely to be the trending gossip among speculators for the next month, at a time when such talk is exerting greater-than-average pull on the crude price. But a question worth asking is whether a freeze is even possible, given the state of OPEC and the increasingly divergent interests of its fourteen members.

This new attempt at a production freeze comes as Saudi Arabia, OPEC’s largest producer and de facto leader, reaches a new production record of 10.67 million barrels, more than 400,000 more than when the last freeze was discussed, while its oil revenues continue to plummet. OPEC profits have fallen 55 percent since 2014, according to the EIA. Ecuador, Kuwait and other Gulf producers want the price to recover past $50 a barrel. If a production freeze is on the cards, it will be discussed in late September during an informal meeting of the OPEC states at the International Energy Forum in Algeria.

Iraq and Iran, OPEC’s number two and three producers, respectively, have offered tacit acceptance of a production freeze, with important caveats. S

Conclusion…So, if there is a freeze, where will production be “frozen,” exactly?  What is possible, however, is that continued talk of a freeze will continue to exert influence over the market, which has see-sawed between bearish and bullish for weeks now.

Reference: Is An Oil Production Freeze Even Remotely Possible, Oil Price, by Gregory Brew, August 29, 2016

Saudi Arabia – A Kingdom In Retreat

SaudiKingdomKingdom Tower

The Kingdom is struggling with weak GDP growth, higher fees and taxes, and an economy that is unable to pay the dues to its workers, leaving thousands of workers from South Asia with an uncertain future.

When a nation is unable to provide food to its migrant workers, it says a lot about their financial condition.

The oil price crash has forced the oil-rich Kingdom to introduce austerity measures, and delay payments to already cash-strapped contractors.

“It looks like austerity has hit hard and more than we had anticipated, halting construction projects and stopping hiring,” said Jason Tuvey, Middle East economist at Capital Economics, reports the Financial Times.

Who is the Hardest Hit?…Construction laborers from India and Pakistan are most affected by the Kingdom’s hardships. This group of workers are left without a job, and without basic amenities such as insurance coverage, food, shelter and medical facilities—a situation that has improved after respective consulates stepped in to offer their own citizens aid.

Saudi’s Empty Pockets…Setting aside the Kingdom’s positive outlook, until the Saudi economy reduces its reliance on oil, the situation is likely to get worse before it gets any better. With oil prices reeling close to $42 a barrel, the Saudi economy is likely to run out of cash, according to the International Monetary Fund.

“All oil exporters will need to adjust to the new low oil price,” the IMF warned, reports the Independent. “All” in this case, includes, probably most importantly, Saudi Arabia.

Meanwhile, Saudi Arabia continues its record oil production, reaching 10.67 million barrels per day, up about 120,000 bpd on the prior month—with no signs of slowing. Although this will allow Saudi Arabia to hold onto its marketshare, which they can hardly be blamed for trying to cling to, it will no doubt add to the supply glut, and certainly will not bode well for oil prices in the short term.

In conclusion…And if oil prices continue to languish near today’s lows, it will be years before Saudi Arabia can regain its erstwhile glory.

 Source: Oil, Is Saudi Arabia About To Cry Uncle In the Oil Price War, By Rakesh Upadhyay – Aug 11, 2016

Crude Prices Rise On OPEC Statement

Barrels of Oiloil-workers

OPEC Commnets...While the Organization of the Petroleum Exporting Countries (OPEC) no longer wields the same power over global oil markets it had 40 years ago, it can still make some noise when it wants to. And Monday, OPEC wanted to.

The cartel’s new president, Mohammed Bin Saleh Al-Sada, who is also Qatar’s oil minister, said in a statement that he expects higher oil demand in the second half of 2016. These words tacked a gain of around 3% onto crude prices.

Al-Sada added that prices have experienced “steady improvement” since February following “a decline in crude oil production, supply outages and a decrease in oil inventories, while global demand for oil improved.” He also added that the recent (current?) decline in prices and higher volatility is “only temporary,” according to the press release:

These are more of an outcome resulting from weaker refinery margins, inventory overhang – particularly of product stocks, timing of Brexit and its impact on the financial futures markets, including that of crude oil.

Since June 1, the price for an OPEC reference basket barrel has dropped from $44.68 to $40.08, more than 10%. The reference basket price rose by nearly $1 as of July 1, but it’s been steadily downhill since then.

In Conclusion...Is OPEC just talking its book, hoping to push up the price? While it wouldn’t be the first time that has happened, it is more probable that the cartel, like the International Energy Agency (IEA) and the U.S. Energy Information Administration (EIA), really believes that global demand will rise, global inventories of oil and refined products will fall and production will continue to slow down, especially in North America.

Jump In U.S. Oil & Gas Rig Count Impact

oilwelldrillbigLast week the  U.S. oil and gas rig count increased by 15 to a total of 462.  Canada rig count up seven to new total of 102 according to Baker Hughes report.

The biggest gains were in Texas where 15 new rigs were brought online with the Permian Basin adding eight.

At the time the rig count was released, West Texas Intermediate was trading at $43.94, but slumped by $.83 midday Friday.

In conclusion…The decline in price is attributed to a ramp-up in drilling fields that are profitable with oil below $50 per barrel, adding to supply surplus.