Category Archives: North American Shale Producers

On Saudi Pledge Oil Climbs To 17-Month High

Bloomberg: Non-OPEC Producers Join Deal to Cut Production

Introduction:  Largest oil producers strengthen commitment to tighten supply, Non-OPEC countries agree to trim output 558,000 barrel per day next year.

Oil advanced to the highest since July 2015 after Saudi Arabia signaled it’s ready to cut output more than earlier agreed and non-OPEC countries including Russia pledged to pump less next year.  WTI closed Monday at $52.83 P/B.

Futures climbed 2.6 percent in New York and 2.5 percent in London. Saudi Energy Minister Khalid Al-Falih said Saturday the biggest crude exporter will “cut substantially to be below” the target agreed on last month with members of OPEC. His comments followed a deal by 11 non-OPEC countries to join forces with the group and trim output by 558,000 barrels a day next year, the first pact between the rivals in 15 years.

U.S. oil futures have gained almost 20 percent since the Organization of Petroleum Exporting Countries agreed on Nov. 30 to cut output for the first time in eight years. Saudi Arabia, which initiated OPEC’s decision in 2014 to pump without limits, is leading efforts to regain control of the market. The OPEC and non-OPEC plan encompasses countries that produce about 60 percent of the world’s crude.

OPEC Collaboration…”The main impact of the non-OPEC collaboration is to pull the global market into balance, if not in deficit, in the second quarter of 2017, rather than in the third quarter,” said Sarah Emerson, managing director of ESAI Energy in Wakefield, Massachusetts. “On an annual average basis, this pushed the global balance into a 200,000 to 300,000 barrel-a-day deficit for the year.”

Oil prices at $60 a barrel would be “ideal” for OPEC as higher levels risk sparking a recovery in competing supplies from the U.S., Nigerian Minister of State for Petroleum Emmanuel Kachikwu said in a Bloomberg Television interview.

Conclusion…U.S. exporters rushed back to the shale patch with the largest weekly addition of oil rigs since July 2015 according to Baker Hughes.  OPEC deal cous drain almots half of the global oil surplus.

Sources:  Mark Shenk, Oil Climbs to 17-Month High on Saudi Pledge, Non-OPEC Output Cut, Bloomberg, December 11, 2016; Gran Smith, OPEC-Russia Deal Could Drain Almost Half the Global Oil Surplus, Bloomberg December 12, 2016; Non-OPEC oil producer to cut output 558,000 barrels a day, CNBC, December 10, 2016

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, www.oilandgas360.com

Oil Price Spike Inescapable

offshorerig

Bill’s note: We’ve been reporting in the oilandgasinsider.com 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.

 CASUAL ATTIRE

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, OilPrice.com, August 30, 2016

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

West Texas Oil Production More Stable Than Saudi Arabia?

PumpingRigWTexas Pumping Rig In West Texas

Introduction…Oil production increasing in west Texas Permian Basin,  the largest U.S. shale-oil region, as the  Bakken and Eagle Ford are experiencing production declines.

West Texas two-lane county roads are congested with trucks as energy companies are searching for deals even though the oil markets are in the worst condition of decades.

On October 26, 2015 we reported (http://oilandgasinsider.com/?p=449) a Chinese investment holding company signed a letter of intent to purchase West Texas oil fields in Howard and Borden Counties for $1.3 billion.

Companies like Exxon Mobile, Corp. to Anadarko Petroleum Corp. have also searched for assets in this region the size of Syria.  Exxon purchased 48,000 acres in two deals in August and is reportedly looking for additional acquisitions.

“We’re already seeing companies targeting the Permian,” said Alen Gilmer, chief executive officer of Austin-based Drilling Info.  “If you were to look for the most stable area today to do anything, it’s going to be there.  Today you might even argue it’s more stable than Saudia Arabia.”

In summary…Oil production in the Permian is forecasted by the  EIA to rise 0.6% in December to 2.02 million barrels a day evan as drillers idled 59 percent of rigs.  The rival shale fields, the Bakken and Eagle Ford, have fallen 12 percent and 25 per cent respectively.

Source: “Oil Producers Hungary for Deals Drool Over West Texas Tiramisu,” BloombergBusiness by Dan Wethe, November 15, 2015.

Stalemate To Persist In OIl Market

The “big news” this month is that the banks granted over-leveraged, loss-making shale oil drillers a stay of execution by continuing to provide credit lines. Consequently, there was no major move in U.S. oil drilling or production, though both are trending down. Elsewhere, the story is one of production plateaus and stabilization of rig counts. The modest production rises and falls detailed below are simply noise on these production baselines.

Against this backdrop of no news, the oil price traded sideways in October. OPEC countries, Russia and International Oil Companies are all losing billions and look set to continue doing so throughout 2016 as over-supply now looks likely to remain until early 2017. The situation is one of stalemate as opposed to checkmate.

  • World total liquids production down 80,000 bpd to 96.56 Mbpd.
  • OPEC production down 90,000 bpd to 31.72 Mbpd (C+C)
  • N America production down 220,000 bpd to 19.46 Mbpd.
  • Russia and FSU up 60,000 bpd to 13.94 Mbpd
  • Europe up 140,000 bpd to 3.30 Mbpd (compared with August 2014)
  • Asia down 30,000 bpd to 7.91 Mbpd.
  • Middle East rig count is stable. The international oil rig count has stopped falling. The U.S. oil rig count has turned down again.

supply and demand data form IEA.First Q 2014 over-supply has persisted.  Since first quarter 2014 over-supply situation has persisted – IEA

Summary…OPEC, Russia and the FSU, SE Asia and Europe are all producing at plateau levels with no significant moves up or down in recent years. The only region with significant trend is N America where declines of 660,000 bpd from the April peak are modest compared with the production growth that preceded the peak and current over-supply running at 1.5 Mbpd.

Source: Oil Market Stalemate To Parsisit Until End of 2016? OILPRCE, by Euan Means, November 2, 1015.