West Texas Oil Production
“Since the Saudis and Russia reached an agreement to freeze output, volatility in the market has eased and oil prices have stabilized with the focus shifting back to fundamentals,” said Hong Shug Ki, a senior analyst at Samsung Futures, Inc. “More stable oil prices are expected in the coming months, possibly up to the $40 level…”
West Texas Intermediate crude climbed more than 30 percent since dropping to lowest level in 12 years. The pricing on Monday was just short of $36 per barrel.
A contributing factor may be that U.S. production slid for the sixth straight week ended February 26 to 9.08 million barrels a day, the lowest level since November 2014, according to the Energy Information Administration.
Key members of OPEC intend to meet with other producers in Russia this month to renew talks on the freeze deal according to Emmanuel Kachikwu, Nigerian Minister For Petroleum Resources.
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.
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.
Midland County Drilling
New EIA data shows deeper contraction in U.S. oil production than previously expected.
The EIA reported that the United States produced much less oil than expected in the first half of 2015. On the whole, the country produced 40,000 to 100,000 fewer barrels than previously reported between January and May. The August report also showed that U.S. oil production peaked in April at 9.6 million barrels per day (mb/d), before falling to just 9.3 mb/d in June.
The declines suggested that the contraction in the U.S. shale industry was deeper than the world had initially thought. And one can only assume that the decline either kept up at a similar rate, or even accelerated in the intervening months since June.
Global supplies could actually increase between now and the end of next year, despite a significant pullback in U.S. oil production. Put in this context, it appears that OPEC’s strategy of pursuing market share by forcing higher cost producers to cutback could bear some fruit. Even if it takes longer and the adjustment is not as sharp as expected, Saudi Arabia will maintain its grip on the market, pushing U.S. shale to contract.
Who is Bill Moist?
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 Accountant, Master of Science real estate tax expert, and Investor/Developer with 70+ successful projects. He can be reached on LinkedIn and ModernFundRaising.info
Sources: “Decline In U.S. Oil Production Accelerates,” OilPrice, by Nick Cunningham, September 10, 2015: “Short-Term Energy Outlook,” U.S. Energy Administration, September 9, 2015