Tag Archives: #DepartmentOfEnergy

Oil Markets Remain Oversupplied

Let’s look at  last week’s key figures for the oil & gas industry.  U.S. oil production is slightly up, whereas oil futures have been trading lower. Gasoline prices continue their trend downwards.

Friday, December 6, 2015 WTI closed at $39.97, down $1.11 for the week.

U.S. Oil Production

Friday OPEC’s meeting in Vienna did not give oil markets any relief. There was little expectation of an agreement on production cuts, despite the majority of OPEC members pleading with Saudi Arabia to reverse course and cut back the cartel’s output target level, which stood at 30 million barrels per day (mb/d) heading into the meeting.

In summary, here we are a year after Saudi Arabia decided to keep market share rather than cutting production to support pricing.  That decision combined with the U.S. shale industry keeping production levels up has precipitated in a nearly 50% drop in oil prices from a year ago.

Source: OPEC Won’t Cut, Markets Remain Oversupplied, OilPrice.com by Evan Kelly, December 4, 2015

It’s Not A Matter If Oil Prices Will Head Upwards, But When

US Shale Oil Boom…

Looking solely at US Shale Oil production since 2007, it is no wonder that OPEC was caught off-guard by the pace of Shale Oil production growth. Production grew from just over a million barrels per day in 2007 to around 5.5 mmbbls/day at its peak earlier in April this year.

U.S. Shale Oil Production

US Shale Supply To Decline…

Shale production decline is a reality. Overall decline rates in the Bakken Shale are around 50%, Eagleford Shale 55% and the Permian is around 25% and the US rig-count has now fallen by over a half. So why have we not witnessed anything yet?

Well the answer to that is a mixed and somewhat cloudy one. Delays in completing some wells are clouding the decline picture as are delays in actual hard production data. The answer to the delays in both cases is around 4 months. We have to wait around 4 months to get the actual data for what is happening now, and quite often wells are not completed until some 4 months after they have been spudded.

Some have asked why oil companies in the US have not colluded to shut-in production and wait for higher prices. The simple answer, many smaller oil companies must continue producing to keep paying-off the loans that financed the well in the first place. A fact that the banks and bond-holders that have financed some of the more risky ventures are about to find out to their cost.

Iranian Crude Supply Fears Are Misdirected…

Despite the worries of extra supply coming back onto the table from Iran, perhaps as early as November, the expectations are perhaps a little exaggerated. Indeed Iran may have millions of barrels in storage ready to supply the market. However, as for immediate production abilities, that will take a little longer. Any production that Iran has shut-in over a long-period of time will take perhaps as much as 18 months to get back to full-swing. Beyond this, it is unlikely Iran will be able to increase its oil production much higher than 3.5 mmbbls/day without the aid of Western technology and know-how.

Worldwide Demand Trend Upwards…

Oil demand has resurged anew with the oil price currently below $50/bbl for both WTI and Brent. The IEA has had to revise its demand figures upwards again for this year and next with its forecast of 1.6 mmbbls/day growth this year. In fact, the underlying rate of demand growth is at just over 1.4 mmbbls/day year on year.

More recently, evidence of what exactly the low-oil-price-scenario has done for the world economy can be seen in the latest GDP releases. US GDP was reported at 3.7% last week, much higher than analysts were expecting. World GDP is likely to be above 3% this year and is forecast above 3% next year and into 2018, according to the World Bank group.

World Oil Supply vs. Demand

In conclusion…

As the commodities expert, Jim Rogers said last week, “The cure for low prices is low prices.” The decline in supply and the rise in demand is happening right now. It’s not a matter of if the oil price will head back upwards, but when?

Sources: Opinion: Why The Crude Oil Doom-Merchants Have Got It All Wrong, Oil Pro by Andy Douglas, September 3, 2015: Oil To Drop Again Before Sanity Can Return, Oil & Energy Insider by Evan Kelly, September 4, 2015

U.S. DOE To Invest $32 Million In Solar Jobs

solarenergy  Indiana Solar Energy System

Introduction…The U.S. Department of Energy (DOE) is trying to move the market to solar, green energy.

Department of Energy’s intentions…DOE is setting aside $32 million to promote new jobs in research in the effort to accelerate the transition to cleaner energy.  Part of the money, $12 million, wil be to train other professionals in related fields such as real estate,  insurance, finance, and fire and safety.

Currently, there are more jobs in installing solar panels than jobs in the coal industry.  But, the abundance of cheap natural gas as a result of Fracking has reduced the demand for coal, not solar energy.

The Government’s solar track record…Our taxpayer $500 million support of the now bankrupt California startup Solundra embarrassed the Obama administration.  We all want clean energy.  But, the problem with solar is that the sun does not shine 24 hours a day and you can’t store electricity.  So, we always need a second energy source, greatly increasing the consumers’ cost of energy.

In conclusion…It seems to me that the DOE has not produced one barrel of oil or one kilowatt of electricty.  Maybe they should stick to regulations.

Bill Moist

BillBioPhoto

Bill Moist is President & Founder of Professional Equities, Inc., a funder of real estate; oil and gas; business projects; and trains others to take advantage of Crowdfunding. Mr. Moist is professional lecturer at , Graduate Business Schools and professional organizations. In addition, he is Texas Real Estate Broker, Certified Public Account (ret), Master of Science real estate tax expert, and Investor/Developer with 70+ successful projects. He can be reached on LinkedIn, billmoist.com, and billmoist.ws

Sources: “U.S. Energy Department To Invest $32 Million In Solar Jobs,” OilPrice by Andy Tully, May 28, 2015