Oil Supply

Is The Oil Glut Set To Return?

15 Dec 2017   Oil Supply

For the second month in a row, the IEA has poured cold water onto the oil market, publishing an analysis that suggests 2018 could hold some bearish surprises for crude. The IEA’s December Oil Market Report dramatically revises up the expected growth of U.S. shale, which goes a long way to torpedoing the excitement around the OPEC extension. Late last month, when OPEC agreed to extend its production cuts through the end of 2018, the U.S. EIA came out with data – on the same day as the OPEC announcement – that showed an explosive increase in shale output for the month of September, up 290,000 bpd from the month before. Although there is a time lag on publishing production data, the huge jump in output in September, plus the spike in rig count activity over the past few weeks, points to strength in the U.S. shale sector. Against […]

US shale groups step up bond sales to finance drilling

15 Dec 2017   Shale Oil

US exploration and production companies have raised more from bond sales in 2017 than in any year since the slump in oil prices began in 2014, shoring up their finances to support drilling and production growth. Equity financing for the US E&P industry, which boomed in 2016, has slumped this year, but the debt market has been robust, accounting for the largest share of oil and gas E&P company fundraisings since 2009.

Companies in the sector have raised just under $60bn in bond sales so far this year, already a 28 per cent jump from 2016, according to Dealogic. Over the past three weeks, Whiting Petroleum, Continental Resources and Endeavor Energy Resources have each raised $1bn in debt. The bond sales have helped finance increased activity in US shale reserves. The number of rigs drilling the horizontal wells used for shale oil production has more than doubled from its low of 248 in May last year to 652 last week, according to Baker Hughes, the oilfield services group controlled by General Electric. “It is the resurgence in the commodity, that’s the bottom line,” said Tom Stolberg, a portfolio manager with Loomis Sayles.

“The commodity trending better has brought out a slew of new issuance. The fringier [companies], lower rated, more stressed balance sheets, it benefits them a whole lot more because it gets them over the hump of not making it at $50 or $45 oil.”

Syria Aims To Begin Offshore Gas Exploration In 2019

15 Dec 2017   Offshore, Syria

Syria plans to start gas exploration in its offshore areas in early 2019, and has signed contracts for five offshore blocks with “friendly countries”, local media quoted Syrian Oil and Mineral Resources Minister Ali Ghanem as saying this week. It was not clear which countries and companies were involved in the contracts. Syrian waters are part of the Levant Basin and Cyprus, Lebanon, and Israel also share territorial waters in the Levant Basin. Back in 2010, the U.S. Geological Survey estimated a mean of 1.7 billion barrels of recoverable oil and a mean of 122 trillion cubic feet of recoverable gas in the Levant Basin Province using a geology-based assessment methodology. Oil Minister Ghanem told the Syrian Parliament that Syria targeted to produce 19 million cubic meters of gas per day by the end of next year, and 24.5 million cubic meters of gas a day by the end […]

EIA STEO: Global liquids supply to rise 2.1 million b/d in 2018

15 Dec 2017   Oil Supply

Production of crude oil from the Organization of Petroleum Exporting Countries averaged 32.5 million b/d in 2017, a 200,000-b/d decrease from 2016 levels, and OPEC oil production will average 32.7 million b/d in 2018, according to the US Energy Information Administration’s latest Short-Term Energy Outlook.  Despite the extension of the production-cut agreement to yearend 2018 by OPEC and non-OPEC producers, EIA forecasts higher output from non-OPEC countries to contribute to growth in total liquid fuels supply in 2018. The non-OPEC outlook is 100,000 b/d higher than EIA’s November STEO, averaging 60.3 million b/d in 2018, which would be 1.7 million b/d higher than 2017 levels.

EIA expects that crude oil price increases in late 2017 will contribute to US crude oil production rising to more than 10 million b/d by mid-2018. Overall, US crude oil production is forecast to increase by an average of 800,000 b/d in 2018.  Canada, Brazil, Norway, the UK, and Kazakhstan are forecast to add a combined 700,000 b/d of liquids production in 2018.  This growth, together with the forecast 200,000 b/d growth in OPEC crude oil production and another 100,000 b/d increase in OPEC non-crude liquids production, results in forecast total global liquids production growth of 2.1 million b/d in 2018.

Liquids fuels demand

Despite higher oil prices, EIA expects global liquid fuels demand to increase by more than 1.6 million b/d in 2018, up from growth of 1.4 million b/d in 2017. Demand growth is not forecast to keep pace with supply growth, however, resulting in global liquids inventories increasing modestly in 2018.  With global inventories expected to increase in 2018, EIA forecasts Brent crude oil prices will decline from current levels to an average of $57/bbl in 2018, which is $2/bbl higher than forecast in the November STEO. EIA forecasts Brent spot prices to average $54/bbl in 2017.

Drillers Flock to Rockies as Sleepiest Shale Corner Awakens

15 Dec 2017   Shale Oil

It’s not exactly the Pike’s Peak gold rush of 160 years but with crude prices on the rise, explorers are returning to the oil-rich rock of Colorado. (Bloomberg) — It’s not exactly the Pike’s Peak gold rush of 160 years but with crude prices on the rise, explorers are returning to the oil-rich rock of Colorado as a way to expand beyond the shale plays of Texas and New Mexico. During the three-year crude-market collapse, as prices fell below $27 a barrel, the Denver-Julesburg Basin northeast of Denver was largely abandoned as explorers tightened down drilling budgets. Now, with prices headed toward $60 on the heels of OPEC-led production cuts, the region is spurring renewed interest. More than $2 billion of drilling deals have been announced in the last four months in the DJ Basin. In addition, Colorado has seen more than $1.8 billion in pipeline deals and extensions […]

Subsea Sector Still Supports Around 45,000 Jobs in UK

The subsea sector still supports around 45,000 jobs in the UK, despite the recent downturn in oil and gas, according to Subsea UK’s latest business activity review. The subsea sector still supports around 45,000 jobs in the UK, despite the recent downturn in oil and gas, according to Subsea UK’s latest business activity review. The oil price crash, and subsequent downturn, led to the deferral or cancellation of major subsea projects, particularly in deepwater, and cost around 8,000 jobs, Subsea UK Chief Executive Neil Gordon said in an organization statement. “However, the subsea sector appears to have weathered the storm by increasing exports and diversifying, particularly into offshore wind, where the skills and technology are eminently transferable,” Gordon said. Subsea UK’s latest review revealed that the industry is generating annual revenues of $10 billion (GBP 7.5 billion), compared to $11.9 billion (GBP 8.9billion) in 2014. Exports account for over […]

North Sea pipeline operator invokes force majeure

The operator of a damaged North Sea crude pipeline has invoked a clause that exempts it from fulfilling contracts, underlining the scale of the damage that has sent oil and gas prices surging. Ineos, the operator of the Forties network of pipelines that shifts almost 40 percent of the North Sea oil and gas production, on Thursday declared force majeure which exempts an entity from obligations if there are causes beyond its control. “Although North Sea cargoes are often delayed from one month to the next, it is very rare for force majeure to be declared, highlighting the severity of the issue,” said analysts at consultancy FGE. The Forties network has been closed since Monday, as Ineos assesses how to fix the hairline crack in a section onshore, close to Aberdeen in Scotland. The company, which bought the pipelines from energy company BP in October, expects it to be “a matter of weeks” before the crack is repaired. The pipeline system carries about 450,000 barrels a day of Forties crude from more than 80 fields to the Kinneil processing terminal in Scotland. From there the oil is loaded on to tankers, stored or piped to the 200,000 b/d Grangemouth refinery, which is also owned by Ineos. The company said that although the plant remains in operation it has reduced crude processing rates.

Oil slips as U.S. gasoline stock build overshadows crude draw

14 Dec 2017   Oil Supply, Prices

Oil prices slipped for a second straight day on Wednesday, as a slump in U.S. crude stockpiles was offset by a larger-than-forecast rise in gasoline inventories and as U.S. crude output continued to grow to record highs. A driver looks at the price as he fills the tank of his car at a gas station in Shanghai, China November 17, 2017. REUTERS/Aly Song U.S. crude inventories last week dropped 5.1 million barrels, more than anticipated, and production hit another record high at 9.78 million barrels per day (bpd), government data showed. The U.S. peak, when records were only kept on a monthly basis, is 10.04 million bpd, set in November 1970. Gasoline stocks jumped 5.7 million barrels, more than double analysts’ expectations for a 2.5 million-barrel gain. “It’s kind of a mixed bag across the board – a little bigger than expected draw on crude […]

World Oil Supply Hits Year High, Boosted by U.S. Shale Surge

14 Dec 2017   Oil Supply

The Loma Campaña Vaca Muerta shale oil drilling site in Neuquén, Argentina. Shale producers are roaring back to life, pushing the global oil supply to its highest level in a year and undermining OPEC’s efforts to rebalance the market through production cuts, the International Energy Agency said Thursday. In its closely watched monthly oil market report, the IEA said the amount of crude oil on the global market rose by 170,000 barrels a day in November to 97.8 million barrels a day. The agency cited a surge in U.S. shale production and increased drilling and completion activity. The report comes just two weeks after the Organization of the Petroleum Exporting Countries and 10 producers outside the cartel, including Russia, agreed to extend curbs on production through the end of 2018 . The group first agreed a year ago to cut almost 2% of global oil production in an effort […]

OPEC Wakes Up to the Threat of U.S. Shale 2.0

14 Dec 2017   OPEC, Shale Oil

Stronger U.S. output is blunting OPEC’s effort to clear glut Once expected in third quarter ’18, rebalancing now seen later OPEC predicted that global oil markets won’t rebalance until late next year after boosting forecasts for supplies from the U.S. and other rivals. The Organization of Petroleum Exporting Countries’ monthly report raised its outlook for non-OPEC supply in 2018 by 300,000 barrels a day, as its projections for American output caught up with those of the U.S. government. As a result, an initiative by OPEC and Russia to clear a global oil glut by cutting production — previously seen succeeding in the third quarter of 2018 — will take effect more slowly. Oil prices climbed to a two-year high above $65 a barrel in London this week, supported by a temporary pipeline halt in the U.K. and the Nov. 30 decision by OPEC and Russia to press on with […]

U.S. Shale Sends OPEC Deal Back To Square One

14 Dec 2017   OPEC, Shale Oil

True to its perpetually optimistic form, OPEC, which last month for the first time conceded to the threat posed by rising U.S. shale production…  sharply raised its demand forecast for cartel oil in 2018, ahead of the OPEC meeting at the end of November. And, according to OPEC’s latest market report for the month of December, demand is set to continue rising, with global oil demand projected to grow at around 1.53 mb/d in 2017, in line with last month’s forecast. China is projected to lead oil demand growth in the non-OECD, followed by Other Asia – which includes India – and OECD Americas. Which means that an unexpected Chinese landing, whether hard or soft, will have an adverse impact on oil in addition to all other commodities. (Click to enlarge) Separately, in 2018, world oil demand is expected to grow by 1.51 mb/d according […]

U.S. Shale Output Rises As OPEC Production Falls To 6-Month Low

14 Dec 2017   OPEC, Shale Oil

OPEC’s crude oil production dropped to a six-month low in November, while U.S. and other non-OPEC supply has grown stronger than initially expected this year, which prompted the cartel to revise up on Wednesday its estimates for non-OPEC supply growth in 2018. OPEC’s crude oil production fell by 133,500 bpd from October to stand at 32.448 million bpd in November, OPEC’s Monthly Oil Market Report showed on Wednesday. This was the lowest production the cartel has reported in six months . The largest increase among the members came from Nigeria, whose production in November jumped by 95,800 bpd from October to 1.790 million bpd, according to OPEC’s secondary sources. Angola, Saudi Arabia, Venezuela, and the UAE saw the largest declines in production. The final OPEC monthly report for this year focused on the 2017 highlights and expectations for 2018. In both overviews, the predominant theme was the U.S. shale […]

Florida senator moves ahead of White House on offshore drilling plans

14 Dec 2017   Offshore

Moving ahead of the word of a U.S. offshore drilling program for the Atlantic, a Florida Democrat called on his colleagues to pass legislation to block access. U.S. Sen. Bill Nelson, D-Fla., called on his Senate colleagues to move on a bill he tabled earlier this year that would prohibit oil and gas drilling in the U.S. waters of the Atlantic until at least 2022. His office said his call came amid reports that the White House under U.S. President Donald Trump was putting the Atlantic Ocean in a new five-year lease plan. The U.S. Interior Department under Trump would open drilling in 2019 by replacing the current five-year plan, which would expire in 2022. “The […]

Rising U.S. output threatens global oil market balance in 2018

14 Dec 2017   Shale Oil

The global oil market will likely show a surplus in the first half of 2018, as rising U.S. supply offsets OPEC’s discipline in maintaining its production cuts for the whole of next year, the International Energy Agency (IEA) said on Thursday. “Total supply growth could exceed demand growth: indeed, in the first half the surplus could be 200,000 barrels per day (bpd) before reverting to a deficit of about 200,000 bpd in the second half, leaving 2018 as a whole showing a closely balanced market,” the Paris-based IEA said in its monthly oil market report. “A lot could change in the next few months but it looks as if the producers’ hopes for a happy New Year with de-stocking continuing […]

Investors pour cash into U.S. shale despite questions on returns

14 Dec 2017   Shale Oil

Financiers keep pouring cash into the shale oil sector, providing producers with a path to keep U.S. output rising through the middle of the next decade.  The United States is on track to deliver up to 80 percent of the world’s oil production gains through 2025, the International Energy Agency estimates, increases fueled in part by easy access to capital. Rising U.S. production is undermining OPEC’s attempts to curb global supply and boost prices, forcing the oil cartel to continue restraining output through the end of 2018. Hedge funds and private equity firms have given producers a range of new and traditional financial levers they can pull as needed to keep shale rigs drilling, according to interviews with more than a dozen financiers, advisers and executives. […]

The ‘Unknown Unknowns’ That Threaten U.S. Shale

14 Dec 2017   Shale Oil

Three years after the oil price crash, the U.S. shale patch is on its second growth phase and is expected to continue to increase its production, at least through the next five years. The global oil markets have become increasingly dependent on U.S. tight oil supply—and the oil industry is still coming to grips with this new reality, Simon Flowers, Chairman and Chief Analyst at Wood Mackenzie, wrote in a recent article . Current projections put the Permian on the forefront of the United States’ ability to deliver increased tight oil supply to the global markets. However, forecasts for the shale patch are as dynamic as production and drilling rates are. And some ‘known unknowns’ have been surfacing such as higher gas-to-oil ratios in some wells, and the parent/child wells issue, Flowers says. Wood Mackenzie said last month that signs had started to show that intensified drilling in the […]

Will Oil Producers Do As They Say Or Do As They Sell?

14 Dec 2017   Shale Oil

North America’s oil producers have adopted a meek tone of late. But the numbers suggest they’re locked and loaded heading into 2018. North America’s oil producers have adopted a meek tone of late. But the numbers suggest they’re locked and loaded heading into 2018. Bloomberg New Energy Finance on Wednesday released an extensive new database (available only to Bloomberg Terminal clients), compiled by Peter Pulikkan, Bert Gilbert, Daniel McLaughlin and Jacob Fericy, detailing the hedging strategies of 53 U.S. and Canadian exploration and production companies. One thing that leaps out from all the data is just how much of next year’s oil and gas production has apparently been locked in already by E&P firms — with one important caveat. As I detailed here in April, producers […]

Crude imports rise as fall turnaround season ends: In the LOOP

13 Dec 2017   Oil Supply, USA

Crude imports into the Louisiana Offshore Oil Port increased by 4.628 million barrels in November, as refinery maintenance season came to a close and amid a relatively stable Dubai/WTI spread. The move higher also comes as traders seek to draw down inventories to lower year-end tax bills. In November, LOOP took in 11.256 million barrels, compared with only 6.628 million in October, according to US Customs data. Of November imported volumes, 9.331 million barrels were supplied by Middle East producers and 1.924 million barrels came from Latin American suppliers. Increasing refinery run rates contributed to the uptick in imported barrels, as regional refiners completed fall maintenance periods. Run rates increased 521,000 b/d from October 6 to end December 1 at 1.255 million barrels, according to the US Energy Information Administration. As a result, USGC crude storage levels decreased 14.34 million barrels from October 6 to end December 1 at […]

EIA Bashers Should Check Their Own Numbers

13 Dec 2017   Oil Supply, USA

Summary Empirical data does not support multiple recent allegations that the EIA’s reporting or forecasts are “wrong.” The wave of frivolous accusations against the EIA in the blogosphere preys on the least protected category of investors. A competent, independent, bias-free EIA must be safeguarded. This idea was discussed in more depth with members of my private investing community, Zeits OIL ANALYTICS . Bashing the EIA (U.S. Energy Information Administration) has become trendy of late among a certain category of bloggers. However, the allegations that the agency’s analytics are “wrong” often turn out to be without substance or even without demonstrated understanding of what the EIA does. Disappointingly, the outbreak of the “can’t trust the EIA” fever among sensation-seeking amateur writers has coincided with less-than thought-out criticisms by some respected industry insiders and weak coverage of the subject by major financial news outlets. Unmerited attacks on the agency can produce […]

Gas exports from Total’s North Sea field halted until early Jan

13 Dec 2017   Offshore

Exports of natural gas from one of the North Sea’s key fields have been halted for at least three weeks until early January, after the closure of Britain’s largest oil and gas pipeline, field operator Total said on Wednesday. Swiss-based chemicals company INEOS, which owns the Forties Pipeline System, said on Wednesday that it has not yet taken a decision on repairing a pipeline crack that materialized during a routine inspection of onshore infrastructure last week. The pipeline carries 450,000 barrels per day (bpd) of Forties crude oil, roughly equivalent to a quarter of the daily output of the entire North Sea basin, and handles a third of Britain’s total offshore gas production. “A number of repair options are being considered and progressed,” INEOS said. “At this stage, it is still too early to say how quickly the repair will take, but it is expected to […]

Fracking Our Way to Mideast Peace

12 Dec 2017   Shale Oil

Whatever you think of President Trump’s decision to recognize Jerusalem as Israel’s capital, it points to the most important strategic reality in the Middle East: Arab power has collapsed in the face of low oil prices and competition from American frackers. The devastating oil-price shocks of the 1970s, orchestrated by the Organization of the Petroleum Exporting Countries, nearly wrecked the world economy. Ever since, the U.S. has looked for ways to break OPEC’s parasitic and rent-seeking grip on the oil market—and thereby to reduce America’s geopolitical vulnerability to events in the Middle East. Victory did not come easily. Intense conservation efforts made the U.S. much more energy-efficient. New oil discoveries in Africa and elsewhere significantly broadened the available supply. Renewable energy sources added to the diversification. But the most decisive development was that decades of public and private research and investment unleashed an American oil-and-gas boom, leading to a […]

Nodding Donkeys Fail as Long Shale Wells Make Pumping Oil Harder

12 Dec 2017   Shale Oil

Imagine trying to slurp a thick chocolate shake through a J-shaped straw four miles long. That’s the kind of cheek-puckering test the American shale industry must overcome to prolong a record boom in oil output. For almost a decade, drillers have been using new techniques to tap vast petroleum reserves scattered within deep, porous rock layers in places like west Texas, Pennsylvania and southern Canada. By digging extra-long wells that went down and then sideways at different angles, engineers were able to capture a lot more crude than from a vertical hole. While those new methods unlocked a torrent of new supply and turned the U.S. into the world’s largest producer, the increased difficulty of sucking fluid from so far underground is overwhelming pump systems that have changed little in decades. The mismatch […]

Forties Pipeline Could Remain Shuttered For Weeks

The Forties oil and gas pipeline shutdown on Monday, caused energy prices in the United Kingdom to spike in the afternoon, according to a new report by Reuters . Brent Crude, which Forties carries, also spiked to a two-and-a-half-year high on news of the stoppage. Wholesale gas prices for immediate delivery dates rose by 28 percent to the highest rate since the beginning of 2013. The jump brought domestic gas prices almost to parity with Asian LNG rates. Brent crude was trading up 1.96% on the day at $64.64. A spokesman for Ineos, the pipeline’s holding company, said the pipeline would not be operational for “weeks rather than days.” “It happens to come at the highest demand point of the year, with the system already notably tight,” he added. Ineos just finished buying the pipeline and the Kinneil terminal from British Petroleum just over a month ago. The British […]

Are U.S. Shale Stocks Finally Set For A Rebound?

9 Dec 2017   Shale Oil

After years of meager returns and overspending to boost production at all costs, U.S. shale explorers and drillers are finally about to see their share prices rise next year, according to veteran energy investor Shawn Reynolds. The new wave of a more disciplined approach to spending and the focus on higher returns will benefit mostly the exploration and production companies. Drilling firms and oilfield services providers are also set to benefit, Reynolds told Bloomberg in an interview published on Friday. Shale companies have already started to realize the need to finally reward their shareholders, and firms are now planning within their means, not just spending to grow production at any cost. Shale companies now have more growth potential than conventional oil and gas producers, because shale firms face lowered risks in resources extraction, said Reynolds, fund manager at Van Eck Associates. “With shale, you have incredible visibility on growth, […]

Why Isn’t Wall St. Backing The Next Shale Boom?

9 Dec 2017   Shale Oil

No doubt, these four companies are solid and have a lot of running room, but so are the other 12 companies. Plus, all of the upstream oil & gas companies we follow are in much better shape today than they were a year ago. So, why is the Wall Street Gang not moving more money into these high quality upstream companies? 1. FEAR: This oil price cycle has been much worse and lasted much longer than previous cycles. Wall Street analysts are afraid to recommend upstream oil & gas companies when they fear an oil price pullback might come the next morning. I guess it is easier to recommend buying Bitcoin in your IRA even though no one on earth can explain the valuation. 2. There is not much confidence in OPEC + Russia sticking with their production quotas, despite the fact that they have actually been quite disciplined. […]

Chevron boasts of U.S. shale, but spending more elsewhere

8 Dec 2017   Shale Oil

While lauding the opportunities in the Permian shale basin in Texas, Chevron said it would spend more on projects already underway, such as in Kazakhstan. Chevron said it planned to spend $18.3 billion next year on exploration, adding it was focused on the growth potential in the Permian shale basin in Texas. “With production currently exceeding guidance in the Permian, our 2018 plan should deliver both strong production growth and solid free cash flow, at prices comparable to what we’ve seen this year,” Chairman and CEO John Watson said in a statement . In its latest drilling productivity report, the U.S. Energy Information Administration put the Permian shale basin at the top in terms of U.S. […]

Chevron Cuts Total 2018 Capex, Boosts U.S. Shale Investment

Chevron Corporation plans to cut its total capital and exploratory budget for a fourth consecutive year in 2018—to $18.3 billion, compared to the $19.8 billion that it planned for this year, but the supermajor is significantly boosting spending on U.S. shale, especially in the Permian. Chevron’s capital expenditure for 2017 envisaged a $2.5 billion allotment for shale and tight oil and gas, most of which was to be invested in the Permian Basin in Texas and New Mexico. For 2018, Chevron’s investment in U.S. shale includes $3.3 billion—just for the Permian—and another $1.0 billion for other shale and tight rock investments, for a total of $4.3 billion. “We’re fully funding our advantaged Permian Basin position and dedicating approximately three-quarters of our spend to projects that are expected to realize cash flow within two years,” Chairman and CEO John Watson said in Chevron’s press release. “With production currently exceeding guidance […]

Chevron Capital, Exploratory Spending to Total $18.3B in 2018

8 Dec 2017   Shale Oil

Chevron Corporation’s capital and exploratory budget will be $18.3 billion in 2018, down from $19.8 billion in 2017. Chevron Corporation’s capital and exploratory budget will be $18.3 billion in 2018, down from $19.8 billion in 2017. Upstream spend is expected to total $15.8 billion in the period, with approximately $8.7 billion earmarked to sustain currently producing assets, including $3.3 billion for projects in the Permian and $1 billion for other shale and tight rock investments. Around $5.5 billion of the upstream program is planned for major capital projects underway, including $3.7 billion associated with the Future Growth Project at the Tengiz field in Kazakhstan. Global exploration funding is expected to be about $1.1 billion and remaining upstream spend will be for early stage projects supporting potential future developments. Approximately $2.2 billion of planned capital spending will go towards the company’s downstream businesses that refine, market and transport fuels, and […]

Texas’ Austin Chalk Booms While Shale Plays Remain Mostly Dormant

8 Dec 2017   Oil Supply, USA

New technology applications are breaking records in the Austin Chalk. Somewhere down the line, someone coined the phrase, “Big oilfields only get bigger.” Now an adage, the observation was made when large oilfields had reached peak production, only to reveal later they had much more to give when new technology was applied. The Austin Chalk formation, which sits right on top of the Eagle Ford formation, was a hot play in the mid-1900s, mid-1970s and 1990s. However, it was all but forgotten during the shale boom when the Eagle Ford formation took front and center. With the majority of shale plays still on the shelf, the Austin Chalk is back on the radar and stronger than ever, proving a prominent contender in the ever-growing oilfield category. “Discussing the Austin Chalk again is very much a surprise to us,” said William R. Thomas, chairman and CEO of EOG Resources, Inc., […]

Why Isn’t Wall St. Backing The Next Shale Boom?

8 Dec 2017   Shale Oil

No doubt, these four companies are solid and have a lot of running room, but so are the other 12 companies. Plus, all of the upstream oil & gas companies we follow are in much better shape today than they were a year ago. So, why is the Wall Street Gang not moving more money into these high quality upstream companies? 1. FEAR: This oil price cycle has been much worse and lasted much longer than previous cycles. Wall Street analysts are afraid to recommend upstream oil & gas companies when they fear an oil price pullback might come the next morning. I guess it is easier to recommend buying Bitcoin in your IRA even though no one on earth can explain the valuation. 2. There is not much confidence in OPEC + Russia sticking with their production quotas, despite the fact that they have actually been quite disciplined. […]

U.S. Shale Cautious As Oil Majors Invade Texas

8 Dec 2017   Shale Oil

Shale drillers are starting to show some caution when it comes to their pace of drilling, but some of the oil majors are still increasing their efforts in the shale patch. Chevron announced a 2018 capital spending program on Wednesday, which detailed spending cuts for the fifth consecutive year. One of the big reasons why Chevron slashed spending yet again is because of the completion of some massive, high-profile LNG export projects in Australia. But the oil major is also trying to chart a careful course amid uncertainty about oil prices. But the oil major’s caution does not extend to the shale patch, where it is ratcheting up spending and ambition. “Our 2018 budget is down for the fourth consecutive year, reflecting project completions, improved efficiencies, and investment high-grading,” Chevron Chairman and CEO John Watson said in a statement . “We’re fully funding our advantaged Permian Basin position and […]

Oil Investors Are Growing Impatient

8 Dec 2017   Shale Oil

The renewed optimism in the oil markets and the $55-plus WTI prices may have warranted frenzied production growth across the U.S. shale patch, if it wasn’t for the 2015-2016 downturn. U.S. oil and gas companies are surely happier now than they were in June this year when WTI prices dropped to below $43 a barrel, but they have been preaching spending-discipline as the sting from the oil price plunge is still fresh. However, investors are not buying the ‘discipline’ narrative, and fear that the higher the WTI price goes up, the more U.S. shale drillers will want to return to growing production. Investors have also grown increasingly wary of the fact that they have received meager returns so far for their investments in U.S. oil firms and will not be too willing to pour in new financing just to see drillers grow production and not grow returns to shareholders. […]

The Drastic Drop Off In US Oil Imports

8 Dec 2017   Oil Supply

While the dust may now have settled on last week’s OPEC meeting, the cartel’s impact on U.S. oil inventories is set to linger on. Stocks are at their lowest level since January 2016, and are down over 80 million barrels from their peak in March – in spite of a 30 million barrel injection from the SPR. As we head into the holiday season, the U.S. should expect little in the way of holiday cheer from OPEC flows. U.S. imports of OPEC crude have averaged 3.26 million barrels per day through the first eleven months of this year, a smidge higher than last year’s average. Although imports started out the year at 3.7mn bpd in January, the highest monthly level since 2013, we have seen them dropping below the 3mn bpd mark in recent months – led by a significant drop in deliveries from Saudi Arabia. (Click to enlarge) […]

More U.S. oil export capacity in the works

7 Dec 2017   exports, Shale Oil, USA

A gas pipeline running from Texas shale could be converted to send oil to the Gulf Coast by the start of the next decade, Enterprise Products Partners said. The company announced plans Wednesday to convert a pipeline in its portfolio that carries natural gas from the Permian shale basin to a crude oil pipeline. With a new gas pipeline coming into service at the end of 2019, Shin Oak, the company said it has flexibility to repurpose another line for shale oil. “We have had strong demand for crude oil transportation, storage and marine terminal services for crude oil production from the Permian Basin,” CEO Jim Teague said in a statement . In its latest drilling productivity report, the […]

The Drastic Drop Off In U.S. Oil Imports

7 Dec 2017   Oil Supply, OPEC, USA

While the dust may now have settled on last week’s OPEC meeting, the cartel’s impact on U.S. oil inventories is set to linger on. Stocks are at their lowest level since January 2016, and are down over 80 million barrels from their peak in March – in spite of a 30 million barrel injection from the SPR. As we head into the holiday season, the U.S. should expect little in the way of holiday cheer from OPEC flows. U.S. imports of OPEC crude have averaged 3.26 million barrels per day through the first eleven months of this year, a smidge higher than last year’s average. Although imports started out the year at 3.7mn bpd in January, the highest monthly level since 2013, we have seen them dropping below the 3mn bpd mark in recent months – led by a significant drop in deliveries from Saudi Arabia. (Click to enlarge) […]

Wall Street Tells Frackers to Stop Counting Barrels, Start Making Profits

7 Dec 2017   Shale Oil

Twelve major shareholders in U.S. shale-oil-and-gas producers met this September in a Midtown Manhattan high-rise with a view of Times Square to discuss a common goal, getting those frackers to make money for a change . In the months since, shareholders have put the screws to shale executives in ways that are changing the financial calculus of hydraulic fracturing and could ripple through the global oil market. In the past decade, the shale-fracking revolution has made the U.S. the world’s largest oil-and-gas producer and reshaped markets . Yet shale has been a lousy bet for most investors. Since 2007, shares in an index of U.S. producers have fallen 31%, according to data provider FactSet, while the S&P 500 rose 80%. Energy companies in that time have spent $280 billion more than they generated from operations on shale investments, according to advisory […]

Oil Prices Fall After API Reports Huge Build In Gasoline Inventories

6 Dec 2017   Oil Supply, Prices

The American Petroleum Institute (API) reported a large draw of 5.481 million barrels of United States crude oil inventories for the week ending December 1, while analysts had expected a drawdown of 3.507 million barrels . The draw may embolden oil bulls who were left wanting after the OPEC meeting failed to lift prices as many had hoped. Last week, the American Petroleum Institute (API) reported a surprise build of 1.821 million barrels of crude oil when analysts had expected a drawdown of 3.15 million barrels . A day later, however, the EIA reported a 3.4-million-barrel draw , more in line with analyst expectations. Gasoline inventories, on the other hand, saw a massive build this week of 9.196 million barrels for the week ending December 1, compared to forecasts of a much smaller 1.145-million-barrel build . This week’s unexpectedly large build in gasoline inventories is likely to put downward […]

When Boom is Bust: the Shale Oil Bonanza as a Symptom of Economic Crisis

6 Dec 2017   Shale Oil

The gradual climb in oil prices in recent weeks has revived hopes that US shale oil producers will return to profitability, while also renewing fevered dreams of the US becoming a fossil fuel superpower once again. Thus a few days ago my daily newspaper ran a Bloomberg article by Grant Smith which lead with this sweeping claim: “The U.S. shale revolution is on course to be the greatest oil and gas boom in history , turning a nation once at the mercy of foreign imports into a global player. That seismic shift shattered the dominance of Saudi Arabia and the OPEC cartel, forcing them into an alliance with long-time rival Russia to keep a grip on world markets.” I might have simply chuckled and turned the page, had I not just finished reading Oil and the Western Economic Crisis , by Cambridge University economist Helen Thompson. (Palgrave Macmillan, 2017) […]

Don’t Expect Aggressive U.S. Shale Drilling

6 Dec 2017   Shale Oil

Many analysts expect U.S. shale to put the pedal to the metal after OPEC extended the production cuts through the end of next year, but some shale executives are unmoved from their pivot towards a more cautious approach to drilling. For years, shale companies burned through cash to grow production, a strategy that promised future returns even at the cost of a sharp increase in debt. The problem was that, by and large, the vast majority of shale companies have come up short, failing to turn a profit even as production soared. They added barrels to the market at an amazing clip, but shareholders have been left disappointed. The dramatic cost cutting and lowering of breakeven prices over the past year or two offered yet another promise to investors. The days of reckless drilling were gone and the leaner and meaner shale operators would finally become profitable. Countless news […]

The ‘Mega’ Oil Field That Will Never Boom

6 Dec 2017   Oil Supply

2017 will most likely witness a continuation in the decline of conventional oil discoveries. This year has seen no major onshore discovery, pretty much all significant finds were confined to offshore areas of the Americas, where Mexico’s continental shelf unearthed two highly promising formations, the Ixachi (1.5 BBbl) and Zama (1.4 BBbl), whilst Alaska’s Horseshoe discovery gave rise to hopes that this once-prolific region might be back in the game again. Europe’s headway has been incomparably paler – it seems that the biggest find will be Statoil’s Verbier field which is estimated to contain up to 0.13 BBbl. In stark contrast with the above, China’s CNPC announced last week that its latest discovery, the Mahu field located within the Junggar Basin of Xinjiang province, is estimated to hold between 0.52 and 1.24 billion tons of crude (4-9 BBbl), by far the largest find of recent years – provided that […]

GoM Production: August and September Update

6 Dec 2017   Offshore, USA

This briefly covers the production side as the hurricane outages are dominating the trends at the moment, but there’s a section at the end on discoveries and reserves that may give some pointers to future expectations. The tables below show the production numbers for September, and their relation with previous months from BOEM and EIA, which are pretty close, but for some reason never the same and have actually diverged quite significantly at the moment. Both sets of data get revised, possibly up to a year later, usually those from EIA more than those from BOEM, and they end up with much closer, with EIA usually slightly lower BOEM C&C Production (kbpd) m-o-m (%) y-o-y (%) Average Annual (kbpd) July 1756 August 1722 -2.0% September 1706 -1.0% 12.2% 1707 EIA C&C Production (kbpd) m-o-m (%) y-o-y (%) Average Annual (kbpd) July 1732 August […]

Is The EIA Overestimating The U.S. Shale Boom?

6 Dec 2017   Shale Oil, USA

The American shale boom may be overstated by the U.S. Energy Department, according to a new MIT study that suggests the agency may be over-attributing a rise in shale drilling to technological advances. “The EIA is assuming that productivity of individual wells will continue to rise as a result of improvements in technology,” MIT researcher Justin B. Montgomery told World Oil . “This compounds year after year, like interest, so the further out in the future the wells are drilled, the more that they are being overestimated.” Instead, lukewarm oil prices have forced oil majors to drill only in easy-to-access areas, located mostly in the Eagle Ford and Permian basins in Texas, and the Bakken formation in North Dakota. This has led to an exaggerated increase in the number of active wells, and a hyperbolized narrative of growth in the shale industry, the study says. “The same forecasting methods […]

Big Shale Turns OPEC Ally From Foe With Focus on Oil Returns

5 Dec 2017   OPEC, Shale Oil

Don’t expect Big Shale to rush and fill the hole left by OPEC in the oil market. (Bloomberg) — Don’t expect Big Shale to rush and fill the hole left by OPEC in the oil market. Executives from three of the biggest independent U.S. drillers say they won’t increase activity just because prices rise after the Organization of Petroleum Exporting Countries and its allies agreed to extend output curbs. The emphasis, instead, will be on maintaining spending discipline and generating profits to return to investors, according to Pioneer Natural Resources Co., Parsley Energy Inc. and Newfield Exploration Co. While crude is trading near the highest level in more than two years as OPEC and its partners limit supplies in a bid to drain a global glut, investors have been concerned stronger prices would encourage U.S. drilling and undermine those efforts. The biggest oil crash in a generation began in […]

After 2.5 Billion Barrels, Eagle Ford Has More Oil Coming

5 Dec 2017   Shale Oil

Mark Twain would appreciate irony in the Eagle Ford Shale, where rumors of the play’s impending exhaustion are greatly exaggerated. The Eagle Ford has produced 2.5 billion barrels (Bbbl) of oil and will generate another 2.1 Bbbl, according to Allen Gilmer, CEO of DrillingInfo, the Austin-based Big Data repository of all things oil and gas. The play has also produced 10 Tcf of natural gas and is on track to produce another 5 Tcf to 6 Tcf. DrillingInfo compiles datapoints on rock quality, drilling parameters and completion techniques. Internally, the company correlates well metric variables to rock quality in an attempt to determine which aspects of rock quality drive are producible. The company has classified 10 grades of rock across the play, which stretches from the Mexican border east and north to the area around Bryan/College Station, Texas. “The reason we did this—and it’s not perfect; there is no […]

Don’t Count On A Utah Shale Boom

5 Dec 2017   Shale Oil

On Monday, President Trump announced his plan to shrink Bears Ears National Monument by 85 percent, while also cutting Grand Staircase-Escalante National Monument by half, a move that could open up Utah to more oil and gas drilling. In the waning hours of Barack Obama’s tenure as President, he signed an order using the Antiquities Act to protect millions of acres in Bears Ears. President Trump is now trying to undo that move, which will be the first time a president has reduced such a large portion of national monument territory since the 1960s. Presidents tend to add land into protection to burnish their legacy – George W. Bush created a massive reserve in the Pacific Ocean around Hawaii in his second term, a Marine National Monument that was expanded under the Obama administration. There are not a ton of examples in which Presidents shrink national monuments, and even […]

The Biggest Oil Producers Flying Under The Radar

4 Dec 2017   Oil Supply

This post covers recent C&C production and future prospects, with a bit on gas, for several mid-size non-OPEC producers. A few have been omitted (e.g. Canada, Kazakhstan, Egypt, UK) for no particular reasons other than lack of time or anything much to say, but may be covered in the future. Many of the countries here have held a bumpy plateau over the last twelve to eighteen months. For most this has come after a period of decline, and some are showing signs that decline might be starting again. Brazil has been on a plateau after a period of increase, and may be about to renew that growth. There is a general theme that oil discoveries and developments are drying up and most of the countries are looking more to gas, but with the current gas glut looking like it might end up worse than the 2014/15 oil glut that […]

Oil demand: Beware the gap

Forget a peak – falling production from existing fields should be the market’s immediate focus Peak oil demand has swiftly moved from concept to potential to symbolic talisman— and it means different things to different people. Most often, the debate centres on the year when this peak may occur. Is it 2025? 2035? And these days the discussion never fails to mention electric vehicles, which—runs the argument—will eat away at oil’s market presence. But there are other significant things to worry about in the much shorter term. And for companies, this attempt to identify the year of the peak—and what will happen to the 20% or so share of the market that would be affected by transport electrification—is simply not granular enough to be of use. It also ignores what’s been going on in the market. Global oil-demand growth in 2017 is likely to come in at around 1.6m […]

US tight oil: Too light, too sweet

4 Dec 2017   Shale Oil, USA

International buyers’ appetite may start to wane in 2018 US light tight oil output is transforming world oil markets. After falling during the 2015 oil price crash, total American production – of which shale is now a major source – surged back onto markets, and the Energy Information Administration (EIA) expects output to rise another 0.5m barrels a day in 2018, to a record 9.9m b/d. Much of this new production is finding its way onto global markets, and exports now regularly run over 1m b/d. But can there be too much of a good thing? Specifically, with Opec ‘s light sweet crude exporters Libya and Nigeria staggering back from extended production outages, and big Persian Gulf producers tightening availabilities of middle-gravity sour crudes, is there a “demand limit” to the volumes of very light sweet crude now produced in the US? Several factors suggest that there is, and […]

OPEC extension a win-win, even for U.S. shale oil producers

2 Dec 2017   OPEC, Shale Oil

A move by parties to an OPEC-led agreement to extend a production cut deal to the end of 2018 is a win-win, including for U.S. shale oil players, analysts said. Ministers from the Organization of Petroleum Exporting Countries and a handful of non-member states, notably Russia, agreed Thursday to extend an agreement that sidelines the equivalent of about 2 percent of total global demand for crude oil through the end of next year. The agreement, implemented in January and meant expire in March, is designed to drain the surplus on the five-year average for global crude oil inventories and Saudi Oil Minister Khalid al-Falih said parties are about halfway to their goal […]

U.S. Vastly Overstates Oil Output Forecasts, MIT Study Suggests

2 Dec 2017   Shale Oil, USA

Estimates from EIA exaggerate impact of fracking technology New well output could undershoot EIA forecasts by 10% in 2020 Turns out, America’s decade-long shale boom might just end up being a little too good to be true. There’s no denying that fracking has turned the U.S. into a force in the global oil and gas markets, which has more than a few people abuzz about the prospect of energy independence. But now, researchers at MIT have uncovered one potentially game-changing detail: a flaw in the Energy Department’s official forecast, which may vastly overstate oil and gas production in the years to come. The culprit, they say, lies in the Energy Information Administration’s premise that better technology has been behind nearly all the recent output gains, and will continue to boost production for the foreseeable future. That’s not quite right. Instead, the research suggests increases have been largely due to […]