Category Archives: OPEC

16-Story Super-Spec Rigs Bring Second Shale Boom

Drillers Mastered Feat Of Pumping For Less

Introduction...On a drilling rig towering above quiet cattle farms in Southeast Texas, Eric Williams perched inside the cabin of the 16-story machine, twisting a pair of joysticks to guide a gigantic wrench roaring into action, drowning out every sound as it reached for a 1,500-pound pipe emerging from the earth – pipe that soon will feed oil into a second shale boom.

Years ago, a worker doing Williams’ job would have stood outside on the rig floor, working a brake handle and knobs as men, drenched in sweat and syrupy fluid, worked the pipe by hand – a dangerous job. Now he sits behind six computer screens and a complex array of controls, piloting a 10-ton wrench on a so-called super-spec rig, one of a new breed of advanced drilling machines that are bigger and stronger than the ones that sparked the first U.S. shale oil bonanza a few years ago.

New technologies…They’re part of the fleet of new technologies paving the way for a historic surge of oil that could break the nation’s 1970 production record next year and further erode the decades-long grip the Saudi-led Organization of the Petroleum Exporting Countries has had on global oil markets. The cartel’s gathering in Vienna last week to extend oil production cuts put into place earlier this year showed how quickly the oil world’s center of gravity has shifted.

This particular $25 million machine, churning about 100 miles northwest of Houston, in the Bryan-College Station metropolitan area, has drilling systems more powerful than two semi-trucks screaming down the highway, and it can force fluid down a well with more than 100 times the pressure of a fire hose.

All told, it’s capable of supporting a fully-loaded Boeing 747, and it walks the dozen feet between well sites on four 10-ton feet. It can drill an oil well in less than 10 days, shaving more than a week from the average drilling time in 2010, and allowing oil companies to drill a greater number of wells each year.

Just a few years ago, even talking about production cuts would have sent crude prices skyrocketing. This time, when OPEC and other major producers agreed to reduce output by 1.8 million barrels a day into next year, prices fell nearly 5 percent as traders remained unconvinced the move would do much to shrink supplies in the face of rising U.S. production.

“OPEC’s market influence is highly questionable,” said Antoine Halff, director of global oil markets at Columbia University’s Center on Global Energy Policy. “We spent seven years revising shale forecasts upward because it went up much faster than anyone expected.”

In summary…The market’s cold response underscored just how much clout the cartel has ceded to U.S. oil companies, which found ways to wring a lot more oil from the earth at a profit – even at low prices.

Source: Collin Eaton, “Big rigs pave way for second shale oil boom,” Houston Chronicle, 27 May 2017

Saudi Arabia Oil Riches Decline Force Social Change

Saudi Arabia Amid Change- 95th Issue

Introduction…This blog has been documenting the shift in economic power from OPEC and its partners, to the frackers in the United States.  Even at a $50 per barrel price, plus or minus, U.S. producers have cut production cost nearly in half and billions of dollars are pouring into new production.

But, in Saudi Arabia, the low energy prices have forced painful change even in what may be the world’s most conservative.  Woman are joining the workforce and music can be found in the streets.  Even in what may be the world’s most conservative country. The government has stripped the notorious religious police of their power and the more than 3,000 guardians of morality, who terrorized women for wearing makeup and arrested unmarried couples for walking next to each other on the street, are a rare sight these days.

But what does it mean that Saudi King, the guardian of the holy cities of Mecca and Medina, has reined in the feared moral police?  And why have the fundamentalists gone silent rather than lament the loss of values?

Is the fairy tale ending?…The primary reason is the disappearance of Saudi Arabia’s fairy-tale riches. The kingdom is experiencing the deepest crisis since oil first produced in 1938.  The current low prices have led to a 50% drop in revenue.  In 2015, the government budget deficit ballooned to 90 million euros, and the country’s borrowing began.

In conclusion…Saudi Arabia was the pillar in the Middle Eastern order that no longer exists.  This order was destroyed by the Arab Spring, and the wars in Iraq, Syria, and Yemen (neighboring states.)  Now, Iran and Saudi Arabia are fighting over power in the region.  These events are threatening stability in the kingdom.

Source: Susanne Koelbl, “Tasting Freedom.  Saudi Arabia Experiments with Reform Amid Economic Downturn,” Spiegel Online International, 17 May 2017

No Longer Dependent On OPEC?

Results Of 1973 OPEC Oil Embargo

Introduction…The 1973-1974 OPEC Oil Embargo on the United States caused the price of oil to nearly double, high inflation, high unemployment, and shortage of gasoline resulting in long lines at the service station.  The pledge of nearly every U.S. President since President Richard Nixon has been U.S. energy independence.

Click here to watch the video that demonstrates this shift in economic dependence.

Let’s briefly review a few of the oilandgasinsider.com articles that demonstrates this shift in economic dependence.

  1. Texas Oil & Gas Production in Expansion Cycle
  2. Why Billions Are Pouring Into U.S. Shale
  3. Private equity funds raised $19.8 Billion for US oil ventures first quarter
  4. Even though price is still around $50 per barrel because producers have slashed up to ½ the cost of pumping oil from 2 years ago, making new production profitable
  5. OPEC On The Brink of Collapse
  6. Russia Cutting Production as U.S. Shale Escalates
  7. Dumping Billions in Canadian Assets For Permian Basin
  8. Marathon acquired 70,000 acres in Permian and 51,500 acres for $1.1 Billion
  9. Why Major Oil Company Goes Big On US Shale- ExxonMobile –major oil companies all but abandoned new US production several decades ago.
  10. Texas Fifth Straight Double Digit Jump in oil rig count on February 7, 2017
  11. Nearly $1 Trillion Worth Of Oil Found In Texas, Largest Deposit Ever Discovered In US.
  12. Permian Basin producing oil and gas since 1920 so infrastructure is well developed reducing production costs. And some are still claiming the largest deposit ever discovered in the US

Conclusion…The United States did oust Saudi Arabia as the world’s largest oil producer May 2016.  However, Saudi Arabia regained that title four months later. But, just as important, the United States holds 264 billion barrels of oil of which one-half is in shale.  This total exceeds both Russia and Saudi Arabia.

To conclude the U.S. is “No Longer Dependent on OPEC” may be true finally after 45 years of Presidents pledging to make the United States energy independent.  This is Bill Moist, MS, CPA

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Russia Cutting Oil Production As US Shale Escalates

Massive Oil Discoveries In Texas

Introduction…Russia plans to fulfill its obligations to cut oil output in line with the agreement between oil producing countries by the end of April, while more broadly assessing longer-term structural developments in the market, according to the country’s energy minister.

“Russia is reducing its oil production in stages, in accordance with the plans that we worked out voluntarily with our production companies,” Alexander Novak told CNBC during an exclusive interview in Arkhangelsk, Russia.

“The decrease in production in January and February were ahead of tempo with regards our initial plans. Currently, in March we have already reached a reduction level of 200,000 barrels a day. We anticipate complying with the figure set forth in the agreement by the end of April,” he revealed, noting this would constitute a reduction of 300,000 barrels of oil per day.

US Shale Escalates...The Russian energy minister’s comments come amid changes in U.S. policy under new President Donald Trump who has pushed forward the idea of energy independence for the country by executive order. This as recent months have seen a resurgence in activity by U.S. shale producers who have been encouraged to return to supplying the market given a rebound in the oil price.

“It’s clear that we are all assessing the situation in a sober fashion, we understand that there will be a rise in the production of shale oil” …Novak, “acknowledging that the rise in shale oil production could be up to 400,000 barrels a day this year.”

In summary…The oil producers are acknowledging that U.S. oil independence is not new.  Now President Donald Trump is pushing forward with executive order to that goal with his “America First Energy Plan.”

Source: Gemma Action, “Amid surging US shale, Russia is quietly cutting production and looking at bigger picture,” CNBC, 30 Mar 2017; “An America First Energy Plan,” WhiteHouse.gov.

Oil Shortage, Price Spike Predicted

Oil Price Spike Predicted

Introduction — Rising Canadian and U.S. production will not be enough to make up for tepid global investment, leading to a supply shortage in oil markets in a few years, a International Energy Admisitration report published last Monday said.

In its annual five-year forecast released in Houston Monday, energy watchdog Paris-based International Energy Agency said “it is far from clear that enough projects will enter the pipeline in the next few years to avoid a potentially tight market by 2020 and with it, the possibility of a price spike.”

The report comes as major oil and gas producers continue to slash their exploration budgets amid lower oil prices. Years of sharply growing oil supply have put the market into a state of oversupply in recent years, depressing prices. That led to widespread retrenchment on the part of debt-laden major oil producers. Late in 2016, OPEC and its non-OPEC allies agreed to curb supplies in an attempt to put oil markets closer into balance.

In Summary…$25 trillion investment in new oil-producing capacity over the next 25 years needed to meet the growing demand as reported here in this newsletter.

Source: “IEA predicts oil supply shortage and price spike within three years,” Financial Post, Jesse Snyder, 6 Mar 2017; “$25 Trillion Investment Needed, Oil And Gas Insider, Bill Moist, 22 Jan 2017

Oil Sold Out Of Asia Tanker Storage As Market Tightens

Oil Tankers Stationed Eastern Coast Of Singapore 

Introduction…Traders are selling oil held in tankers anchored off Malaysia, Singapore and Indonesia in a sign that the production cut led by OPEC is starting to have the desired effect of drawing down bloated inventories.

The Organization of the Petroleum Exporting Countries (OPEC) and other producers outside the group, including Russia, announced late last year that they would cut output by almost 1.8 million barrels per day (bpd) during the first half of 2017, looking to drain a glut that pulled down prices from over $100 per barrel in 2014 to around $56.50 currently LCOc1.

“OPEC’s strategy is targeting inventories – given the scale of the overhang, the market won’t rebalance in six months – we expect an extension into (the second half of 2017),” said Energy Aspects analyst Virendra Chauhan.

As OPEC’s cuts start to leave some demand unmet, a hefty 6.8 million barrels of crude has been taken out of tanker storage from Linggi, off Malaysia’s west coast, in February, shipping data in Thomson Reuters Eikon shows.

An additional 4.1 million barrels and another 1.2 million barrels have been taken out of storage on tankers in Singaporean and Indonesian waters, the data shows

In the short-term, the flood of crude from floating storage will add to supplies coming into Asia from as far away as the Americas and Europe.

In the longer-term, however, clearing oil out of inventories like tankers is part of OPEC’s goal to rebalance markets.

In conclusion…”Inventories will continue to decline driven by the combination of production cuts and the strong demand growth,” U.S. bank Goldman Sachs said this week in a note to clients, adding that it expected Brent prices to rise slightly in the second quarter, to $59 per barrel.

Source: Mark Tay | Singapore, “Oil sold out of tanker storage in Asia as merkt slowly tightens,” Retuers Commodities, 23 Feb 2017

$25 Trillion Investment Needed

  West Texas Drilling Rig

Introduction...We’ve been documenting the massive cuts in new oil and gas drilling programs.  Now we are seeing the results.  The world needs to invest US$25 trillion in new oil-producing capacity over the next 25 years to meet growing demand, Saudi Aramco’s chief executive Amin Nasser said at the World Economic Forum in Davos last Tuesday.

Demand is still healthy and oil “will be with us for decades”, CNBC quoted Nasser as telling a Wall Street Journal panel at the Davos forum. The global oil and gas industry needs to expand and requires more investment, Nasser said.

In summary…Wood Mackienzie sees E&P global spend rise with about 3 percent in 2017 to around $450 billion. According to WoodMac’s Malcolm Dickson, ‘’companies will get more bang for their buck,”as internal rates of return jump from 9 to 16 percent, comparing 2014 to 2017.

Source: Tsvetana Paraskova, $25 Trillion Invesement Needed To Meet Future Oil Demand, OilPrice.com, 17 Jan 2017

Saudi Arabia Oil Production Cuts Push Oil Up

 U.S. Oil Production Falls

Introduction…Oil prices rose on Friday as a result of a strong draw to U.S. oil inventories and early signals that OPEC is following up on their pledge to cut output

Oil prices are set to end the week slightly up from where it started, following a few rocky days of trading. After a sharp correction, earlier in the week, oil regained ground on a steep fall in crude oil inventories. Still, the gains would have been much larger if not for the fact that U.S. gasoline stocks rose sharply. Nevertheless, oil is starting off the year on a positive note, and early signs of OPEC compliance (more below) are buoying the market.

Tesla gigafactory starts up. Tesla (NYSE:TSLA) announced that its gigafactory has started commercial production of batteries at its much-hyped gigafactory in Nevada. The inauguration of mass battery production marks a new era for the energy industry. The gigafactory could lower the cost of batteries for electric vehicles as well as home energy storage systems. Tesla says that at peak production, slated for 2018, the factory will add as much battery capacity to the global market as the rest of the world currently produces.

U.S. to become net-energy exporter. The EIA released its Annual Energy Outlook 2017, with projections out through 2050. The report estimates that the U.S. will become a net-energy exporter in the years ahead under most of its possible scenarios. That is largely due to falling oil imports and rising natural gas exports. The higher energy prices go, the quicker the U.S. becomes a net-exporter.

In Conclusion…It’s too early to tell which OPEC and Non-OPEC countries will stay with the recent production cuts agreed to.  However, it appears that Saudii Arabia is meeting its lower target.  Time will tell who is cheating.

Forget New Year’s Resolutions

 Introduction…Every year Americans fail to keep their New Year’s Resolutions.

But, somehow we think if we just try harder, this year will  be different.

There are scientific and spiritual reasons why we should “Forget New Year’s Resolutions and Instead Prepare Our Minds For Success.”

Click here to watch this powerful 5 minute video.

Click to Get FREE UPDATES & Oil And Gas Reports.

Coming Oil Shortage In 2017?

Oil shortage…Global oil markets will swing from surplus to deficit in the first half of 2017 as OPEC and other producers follow through on an agreement to cut supply, according to the International Energy Agency.

Oil stockpiles will decline by about 600,000 barrels a day in the next six months as curbs by OPEC and its partners take effect, said the agency, which had previously assumed inventories wouldn’t drop until the end of 2017. Russia, the biggest producer outside OPEC to join the deal, will gradually implement the full reduction it promised, according to the IEA.

Oil has gained about 17 percent since the Organization of Petroleum Exporting Countries agreed on Nov. 30 to trim output for the first time in eight years, an accord expanded on Dec. 10 with the participation of 11 non-members including Russia and Kazakhstan.

“Before the agreement among producers, our demand and supply numbers suggested that the market would re-balance by the end of 2017,” the Paris-based agency said in its monthly market report. “If OPEC promptly and fully sticks to its production target” and other producers cut as agreed, “the market is likely to move into deficit in the first half of 2017.”

Stockpile declines…The stockpile declines will only occur if OPEC reduces supply enough to meet and maintain a target of about 32.7 million barrels a day, the agency said. The organization pumped a record 34.2 million a day in November, making the cut required to reach its target even bigger, according to the IEA, which advises 29 nations on energy policy.

In summary…There are some signs the market is already starting to tighten. While inventories of crude and refined oil in industrialized nations remain 300 million barrels above their five-year average, they dropped for a third month in October, the longest run of declines since 2011, according to the IEA.

Source: Grant Smith, OPEC Deal To Create Oil-Supply Deficit Next Half, IEA Says, Bloomberg, 13 December 2016; Jeremiah Carver, From oil glut to oil deficit in 2017, Oilpro.com, 13, December 2016