Oil Supply

Oil market flashes warning about stock levels in 2018: Kemp

23 Jun 2017   Oil Supply, OPEC

Oil traders have become increasingly doubtful that OPEC will manage to cut crude stocks down to the five-year average in 2018 and keep them there. Calendar spreads for Brent futures throughout the rest of 2017 and 2018 have weakened significantly since OPEC agreed to roll over its production allocations at the end of May. Calendar spreads (price differences between futures contracts for delivery in different months) are closely linked to the expected level of oil inventories. Physical traders and refiners use spreads to hedge oil stored at tank farms and refineries as well as onboard ships in transit or acting as floating storage. But spreads can also be used by traders and specialist hedge funds to speculate on the level of global oil stocks in future. High and/or rising inventories are […]

Rig Trends: Offshore Rig Market Recovery Reports Premature

23 Jun 2017   Offshore

For quite some time now, many oilfield analysts have reported the beginning of a recovery in offshore rig demand. For quite some time now, many oilfield analysts have reported the beginning of a recovery in offshore rig demand. Recent report headlines, however, have now started to use phrases like “elusive recovery” or something similar. The fact of the matter is that a recovery never really started. Yes, there have been isolated positive developments in some markets for some rig types, but reports of a recovery have most definitely been overstated. As seen in the figure below (courtesy of the June 2017 RigOutlook forecast), the competitive jackup, semisubmersible (semi) and drillship rig fleet totaled 700 rigs comprising 431 jackups, 150 semis, and 119 drillships. While this was down by 6.2 percent from 747 in September 2014 (generally recognized as when the current downturn began), the drop in rig demand during […]

High Costs Are Pushing Investors Away From The Permian

23 Jun 2017   Shale Oil

The Permian has enjoyed a rush of capital since oil prices began to recover from a low of $26.21 in February of last year. The play is home to some of the best economics in the country, making it a prime target for E&P companies looking to maximize profit in a lower price environment. But the surge in land costs is leaving little room for new investors to profit. The Delaware basin, the Permian’s hottest zone, is beginning to become a victim of its own success. EnerCom Analytics’ well economic models indicate that the internal rates of return (IRRs) in the Delaware are now lower than those seen in the Midland due to the high cost of land. At $45 WTI, EnerCom’s well economics models show IRRs in the Midland of 22.8 percent compared to 21.5 percent in the Delaware when acreage costs are included in the equation. The […]

Day Of Reckoning in 2018? US Rig Count Poised For Loss

22 Jun 2017   Oil Supply, USA

E&Ps’ continued austerity, coupled with swelling oilfield service costs, will choke off the US rig count surge and bring down as many as 100 rigs by the end of 2017, analysts at Barclays say. Unless they’re missing something – and really, that’s pretty unlikely – analysts at Barclays believe U.S. oil and gas will lose as many as 100 onshore rigs by the end of the year. As of June 16, there were 933 rigs at work in the United States – that’s up 270 rigs since January. But as rigs efficiency reverses and oilfield service costs trend upward, fewer rigs will remain active during the remainder of the year, Barclays said in a June 20 note to investors. In fact, for the rig count to linger above 900, exploration and production (E&P) companies would have to increase spending by 70 percent this year and well costs would have […]

Oil bear market separates strong, weak U.S. shale producers

22 Jun 2017   Shale Oil

A service truck drives past an oil well on the Fort Berthold Indian Reservation in North Dakota, November 1, 2014. Crude oil’s bear market is highlighting the haves and have nots among U.S. shale producers, with the stronger promising to keep pumping even as prospects dim for some of their financially strapped peers. Crude prices have dropped more than 20 percent since late February, in part because of rising U.S. shale production that is offsetting OPEC’s efforts to tame global stockpiles. On Wednesday, prices fell more than 2 percent to $42.58 after touching a 10-month low during the day. The price tumble has dragged down shares of oil and natural gas producers and raised the specter of trims to drilling budgets set when oil was trading around $50 a barrel. Oil producers’ average capital spending was previously projected to rise by 50 percent this year over depressed levels of […]

World Energy 2017-2050: Annual Report

22 Jun 2017   Oil Supply

A Guest post by: Dr. Minqi Li, Professor Department of Economics, University of Utah E-mail: minqi.li@economics.utah.edu This Annual Report evaluates the future development of world energy supply and its impact on the global economy as well as climate change. The report projects the world energy supply and gross world product (global economic output) from 2017 to 2050. It also projects carbon dioxide emissions from fossil fuels burning and the implied global average surface temperature from 2017 to 2100. Figure 18 Sources: World historical oil, natural gas, and coal consumption from 1950 to 1964 is estimated from carbon dioxide emissions (Boden, Marland, and Andres 2017); world primary energy consumption and its composition from 1965 to 2016 is from BP (2017); world primary energy consumption and its composition from 2017 to 2050 is based on this report’s projections. To project the future oil and natural gas production, this report uses Hubbert […]

Are Hedge Funds Expecting A Permian Bubble?

22 Jun 2017   Shale Oil

Last year’s OPEC deal to cut production managed to lift oil prices and stabilize them around US$50 for most of the first quarter this year. The higher price of oil led to quite the Permania, with a lot of the available capital and subsequent production focused on the most lucrative of the U.S. shale basins, but investors backing the Permian adventurers are threatening its top spot. The Permian continues to lead production gains of U.S. crude output, which is exceeding the wildest projections for recovery. However, a group of investors in Permian-focused drillers have reduced their positions in the largest U.S. oil field, in what could be a sign of concern that the unstoppable rise in production could sink oil prices and unravel the resurgence U.S. shale has been enjoying since OPEC decided to play the market-fixer again and collectively reduce output. These investors are some prominent hedge funds […]

USGC offshore producers brace for Tropical Storm Cindy

22 Jun 2017   Oil Supply

As the US Gulf Coast oil and gas industry prepares for the arrival of Tropical Storm Cindy late Wednesday, about 17.24% of current Gulf of Mexico oil production has been shut, according to the US Bureau of Safety and Environmental Enforcement’s Hurricane Response Team. That amounts to about 301,618 b/d of lost production. For natural gas, about 0.32% of production has been shut, representing lost volume of 10.089 MMcf/d, BSEE said. The shut-ins can usually be accomplished remotely, with personnel able to close subsurface safety valves from off-site. Once the storm has subsided, inspections will take place and undamaged facilities will be brought back online, the BSEE said. The loss of offshore domestic crude production had little effect on the assessed value of US Gulf Coast crude differentials Wednesday. Article continues below… Crude Oil Marketwire delivers vital intelligence to help you make critical decisions. Delivered daily direct to your […]

Gulf of Mexico Storm Cindy Disrupts Shipping, Crude Imports

21 Jun 2017   Oil Supply, USA

Cindy could delay oil imports, exports through the week Storm to approach Louisiana, Texas coastline late Wednesday Tropical Storm Cindy has halted service at a major oil terminal in the Gulf of Mexico, prompted some evacuations at rigs and platforms and put states from Texas to Florida on notice for flooding rains. Cindy was 350 miles (560 kilometers) southeast of Galveston, Texas, with top winds of 45 miles an hour late Tuesday. It’s forecast to come ashore early Thursday somewhere near the Texas-Louisiana state line, according to a U.S. National Hurricane Center advisory issued at 8 p.m. New York time. The storm has triggered watches and warnings along the Texas-Louisiana coast including Galveston Bay, the entrance to the Houston Ship Channel and Sabine Pass, the site of the only active liquefied natural gas export terminal in the lower 48 states. Storms in the Gulf can often roil energy markets […]

Frackers Collide With Traditional Oil Drillers

21 Jun 2017   Shale Oil

Supersized new oil wells are sometimes running into existing wells, a little-noticed consequence of the shale boom that has started to trigger complaints and lawsuits. The emerging problem is known as a “frack hit,” and it has flared up in Oklahoma, where a group of small oil and gas producers say more than 100 of their wells have been damaged by hydraulic-fracturing jobs done for companies like Chesapeake Energy Corp., Devon Energy…

A Newcomer’s Guide to Oil and Gas: The Upstream Zoo

20 Jun 2017   Shale Oil

Here’s a breakdown of some of the “critters” you can find on a drilling rig. Drilling rigs are sophisticated machines – so sophisticated that some of them can even “walk.” Nevertheless, some components of these advanced devices that can access hydrocarbons thousands of feet below the earth’s surface are described in a decidedly “low-tech” fashion. Consider the abundance of “animal” terms below in this installment of “A Newcomer’s Guide to Oil and Gas.” (Special thanks go out to intrepid Rigzone subscriber and retired BP drilling pro Jim Jenner, who suggested a discussion of “animal” terms and provided detailed descriptions of each.) What Is a Doghouse? In oil and gas parlance, the doghouse is not an enclosure where Spot, Fido or Rover takes a nap or where husbands spend the night when they screw up. Instead, it’s a small building located on a rig floor that serves as the driller’s […]

Shale-Related Seismic Activity Rises In Texas, Report

20 Jun 2017   Shale Oil

Oklahoma is the state that springs to mind whenever earthquakes and oil are mentioned in the same sentence, but a fresh report from the Academy of Medicine, Engineering and Science of Texas has revealed that the shale oil industry’s activity in the Lone Star State has led to changes in seismic activity. The report found that while between 1975 and 2008 the average number of quakes above a magnitude of 3 was one or two, between 2008 and 2016 it increased to 12 to 15 a year. The TAMEST task force that authored the report noted that this increase has been linked not to fracking itself, however, but to wastewater disposal wells, which is in line with findings from other studies. As to whether contaminated water from these disposal wells could seep through into subsoil aquifers that may supply drinking water, the report found that this is highly unlikely, […]

Woodmac: Only the ‘Very Best’ Projects Sanctioned

20 Jun 2017   Offshore

Only the very best deepwater projects have been sanctioned during the oil price downturn, which speaks volumes of the Liza field’s potential. Only the very best deepwater projects have been sanctioned during the oil price downturn, which speaks volumes of the Liza field’s potential, Pablo Medina, Wood Mackenzie’s senior analyst for Latin America upstream, said in a statement sent to Rigzone. “The short time it took ExxonMobil to go from Liza’s discovery to declaring Final Investment Decision (FID) signals the competitiveness of the project, both within the company’s portfolio and globally,” Medina stated. ExxonMobil Corp revealed June 16 that it, and its partners, would spend $4.4 billion to develop part of the Liza oilfield off the coast of Guyana. Woodmac forecasts that the full development of Liza-Payara will produce over 330,000 barrels per day of oil at peak, with reserves of over 1.5 billion barrels of oil equivalent. However, […]

Innovators toil to revive Canada oil sands as majors exit

19 Jun 2017   Canada, Tar Sands

In the boreal forests and on the remote prairies of Alberta, a handful of firms are running pilot projects they hope will end a two-decade drought in innovation and stem the exodus of top global energy firms from Canada’s oil sands. They are searching for a breakthrough that will cut the cost of pumping the tar-like oil from the country’s vast underground bitumen reservoirs and better compete with the booming shale industry in the United States. If they fail, a bigger chunk of the world’s third-largest oil reserves will stay in the ground. Canada’s oil sands sector has become one of the biggest victims of the global oil price crash that began in 2014 when top OPEC producer Saudi Arabia flooded the market with cheap crude to drive […]

Daniel Yergin on U.S. Oil’s Global Impact

19 Jun 2017   Shale Oil, USA

Daniel Yergin says the boom in shale in concentrated areas like the Permian Basin, Texas and New Mexico is changing the global energy position of the U.S. “You go to Asia. You go to Europe. You go to the Middle East. They realize the position of the U.S. in the world is different today because of this change in our energy position. Among other things, the sanctions on Iran would not have worked had it not been for shale, because you could not have replaced the Iranian oil that was taken off the market. And so now instead of just OPEC and non-OPEC, you have the big three. You have Saudi Arabia, you have Russia, and you have a country called the United States.” — Daniel Yergin, vice chairman, IHS Markit

Oil Sands Output Growth Second Only To Shale

19 Jun 2017   Canada, Tar Sands

Canada’s Mordor, as environmentalists like to call the oil sands, is notorious for how “dirty” oil extraction is there. It’s also notorious for how expensive it is to extract. The dirt argument, which concerns the energy intensity of oil sands production compared to other oil extraction methods, has been partially refuted : some oil production in California is dirtier than oil sands. The price argument is also being refuted by the producers themselves: oil sands extraction is becoming cheaper, and it is rising. Oil sands production has historically had some of the highest production prices in the industry due to the complexity of the process that turns bitumen into fluid crude oil. Like their peers in the shale patch, however, oil sands miners were motivated to increase their efficiency during the recent price crash. The results from this boost are now becoming evident. Earlier this week, the Canadian Association […]

Floating Storage For Oil Reaches 2017 High As Traders Employ Aging VLCCs

17 Jun 2017   Oil Supply

Outdated supertankers are becoming the storage units of choice for commodity traders looking to take maximum advantage of the new oil price crater, according to a new report by Reuters. Brokers who spoke to Reuters said roughly 10 very large crude carriers (VLCCs) aged between 16 to 20 years have been employed as excess crude storage since the end of last month. Each unit holds 2 million barrels of oil. Thirty other supertankers are parked in Singapore and Malaysia’s Linggi, largely due to a market condition called contango – where oil futures are more expensive than an order for immediate delivery. “I t makes a lot of sense for a trader to pay $16,000-$19,000 per day to take an older VLCC for 30-90 days to store oil,” said a Singapore-based supertanker broker, who chose to remain anonymous. Data released by Kpler, an international commodities trader, shows that total global […]

Funds pull back from Permian as U.S. shale oil firms go into overdrive

17 Jun 2017   Shale Oil

Cash, people and equipment are pouring into the prolific Permian shale basin in Texas as business booms in the largest U.S. oilfield. But one group of investors is heading the other way – concerned that shale may become a victim of its own success. The speed of the recovery in the U.S. shale industry in the past year has surprised oil investors after a global supply glut led to a two-year crude price slump and bankrupted many shale firms. Eight prominent hedge funds have reduced the size of their positions in ten of the top shale firms by over $400 million, concerned producers are pumping oil so fast they will undo the nascent recovery in the industry after OPEC and some non-OPEC producers agreed to cut supply in November. The funds, with assets of $286 billion and substantial energy holdings, cut exposure to firms that are either pure-play Permian […]

Big Oil Firms Are Exploring a New Frontier in Shale: Profits

16 Jun 2017   Shale Oil, USA

For Bruce Niemeyer, the Chevron Corp. executive overseeing the company’s $15 billion expansion here, one question looms above all: Will we make money? Big oil companies including Chevron, Exxon Mobil Corp. and Royal Dutch Shell PLC are piling into the Permian Basin, the oil-rich region straddling Texas and New Mexico that is the epicenter of the second wave of U.S. shale drilling. Chevron and others say they…

How A $200,000 Well Could Drastically Change The Oil Industry

16 Jun 2017   Shale Oil

Technological upheavals in the oil sector will make it possible for mini-producers to market crude profitably, creating new competition for bloated fossil fuel companies accustomed to benefitting from their largesse. It takes serious cash to start an oil and gas exploration company the traditional way. A single well in the Permian Basin – recognized as the most cost-effective drilling area as barrel prices recover enough to support new rigs – currently costs between $5 million to $9.3 million to operate, depending on the well’s depth. And while logistical tricks and fracking R&D allow oil and gas companies to stretch the productive lifespan of their wells, those efforts only add to the sites’ operational costs. Average estimated costs for wells—as of 2015—in the Marcellus ($6.1 million), Bakken ($5.9 million) and Eagle Ford ($6.5 million) formations are just as pricey, because the economies of scale model has dominated the oil sector […]

Summary of Weekly Petroleum Data for the Week Ending June 9, 2017

15 Jun 2017   Oil Supply, USA

U.S. crude oil refinery inputs averaged about 17.3 million barrels per day during the week ending June 9, 2017, 29,000 barrels per day more than the previous week’s average. Refineries operated at 94.4% of their operable capacity last week. Gasoline production decreased last week, averaging over 9.8 million barrels per day. Distillate fuel production decreased last week, averaging about 5.2 million barrels per day. U.S. crude oil imports averaged over 8.0 million barrels per day last week, down by 316,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged about 8.2 million barrels per day, 7.1% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 574,000 barrels per day. Distillate fuel imports averaged 61,000 barrels per day last week. U.S. commercial crude oil inventories (excluding those in the Strategic […]

Shale Drillers Digging Themselves a Hole as Oil Breaches $45

15 Jun 2017   Shale Oil

U.S. shale is coming perilously close to puncturing its own rally.  Just months after predicting double-digit production increases, largely based on crude prices sitting between $55 and $60 a barrel, drillers are suddenly contemplating the possibility of retrenchment as a stubborn global supply glut pushes prices below $45.  It’s a reversal that could accomplish what OPEC and other global producers have failed to do this year: slow down America’s booming shale industry. Analysts and company officials say a drop to $40 a barrel could halt rig growth for smaller drillers in less active U.S. shale basins, and undercut efforts by fracking service providers such as Halliburton Co., FTS International and Patterson-UTI Energy Inc. to raise their fees.  “The growth outlooks proposed by many oily E&Ps appear tenuous at best and not resilient to prolonged weak oil prices,” Mizuho Securities USA analysts Timothy Rezvan and James Lizzul wrote in a June 11 note. They cited rising service costs and the industry’s lack of hedging protection for next year.  West Intermediate Texas crude, the U.S. benchmark, tumbled as far as $44.54 a barrel in New York trading Wednesday, its lowest level in five weeks after the U.S. government reported gasoline and other petroleum product stockpiles swelled last month. WTI has fallen 19 percent this year from its peak of $55.24 on Jan. 3.

Shale Efficiency Has Peaked… For Now

15 Jun 2017   Shale Oil

Learning takes time and effort. But a good education pays off. North America’s oil industry has been in school for the past three years, studying how to become more productive in a fragile $50-a-barrel world. Many companies in the class of 2017 have graduated and are now competing hard for a greater share of global barrels. Having said that, North America’s education on how to make oilfields more productive appears to be stalling. After a breathtaking uphill sprint, productivity data from the U.S. Energy Information Agency (EIA) shows that the last few thousand oil wells in top-class American plays may have hit a limit—at least for now. Our Figure this week shows a classic S-curve learning pattern in the mother lode of all oil plays: the Permian Basin. Slow improvements to rig productivity (2012 to 2015) were followed by a steep period of rapid learning (2015 to 2017). Eventually […]

The Fourth Industrial Revolution Is Fueled By Oil

15 Jun 2017   Oil Supply

Artificial intelligence is already here, with algorithms replacing traders on Wall Street and tanker watchers in ports. Robots are here, too, drilling wells and cleaning pipelines, assembling cars, and performing surgery. Make no mistake, the fourth industrial revolution is accelerating and it is running on oil and gas—at least for the time being. This is a fact that few of those active in the advancement of renewable energy would be willing to acknowledge or even consider, yet a fact it is: the revolution needs energy, and at the moment, renewable sources are simply incapable of supplying energy in amounts sufficient to run all the power plants and smelters that produce the electricity to power servers around the world, and the heat to produce the materials that wind turbines, cars, and solar panels are made of. And that’s without even mentioning batteries. Let’s take solar power. Silicon is the core […]

These Five Charts Show the Seismic Shifts Happening in Global Energy

14 Jun 2017   Oil Supply

BP Plc has published is Statistical Review of World Energy for 66 years. This year’s data laid open the accelerating shifts in global patterns of energy production and consumption as economies move from fossil fuels to wind, solar and other renewable technologies. These charts show five of the most striking trends: 1. Coal’s Quickening Demise Coal production fell by the most on record last year as power producers switched to natural gas as well as wind and solar power. 2. Even China’s Turning Away This map shows that most of the world’s economies are turning away from coal, the most environmentally harmful fossil fuel. This includes the two largest, the U.S. and China, where three decades of rapid industrialization had seen consumption grow exponentially. 3. China’s Also Using Less Diesel Here’s another sudden shift that shows how China’s maturing economy is changing the energy industry. Consumption of diesel, the […]

Excess oil inventories to last until 2018 – IEA

14 Jun 2017   IEA, Oil Supply

Oil demand should outpace supply in the second half of this year but excess inventories will persist well into 2018, dealing a blow to global crude producers enacting output cuts to bring down stubbornly high stockpiles. The forecast from the International Energy Agency comes as higher than expected demand growth next year is met by even stronger output from the US and other producers outside of the Opec cartel. In its monthly oil market report, which include forecasts for next year, the Paris-based energy agency said: “[The] outlook for 2018 makes sobering reading for those producers looking to restrain supply.”

Hedging Rush In U.S. Shale Could Send Prices Tanking

14 Jun 2017   Shale Oil

The U.S. shale industry could add yet another dose of new supply in July, with the EIA projecting production growth of about 127,000 barrels per day month-on-month. The fact that shale output is still growing at a rapid clip should raise some concerns about the trajectory of the “rebalancing” process. The gains expected in July will come largely from the Permian Basin (+65,000 bpd) and the Eagle Ford (+43,000 bpd). While total figures are still uncertain, the production gains could put total U.S. output close to 9.4 mb/d in the relatively near future, only a few hundred thousand barrels shy of the all-time high. (Click to enlarge) Surging output would come even as oil prices have faltered recently, a worrying sign that shale drillers are going to continue to ramp up even if the market softens. There are a few interesting trends to watch that could contribute to even […]

The Downturn Is Over, But U.S. Oil Companies Face A Huge Problem

14 Jun 2017   Oil Supply, Prices, USA

The downturn may be over, but the oil price crash has left behind potentially long-term consequences for the oil industry. In the wake of the oil price rout that started in 2014, companies slashed expenditures, most notably in their exploration and development budgets—and this lack of investment could have severe ramifications for the oil industry. In 2016, for a second consecutive year, 68 U.S.-listed oil companies indicated in their annual reports that their combined proved liquids reserves dropped, the EIA said in an analysis on Monday. The 68 U.S.-listed oil companies—obliged to report proved reserves annually to the SEC—had their global crude oil and other liquids production averaging 24 million barrels per day (bpd) last year, which accounted for around 25 percent of the world’s total. The proved reserves—the ones that companies believe they can extract from known reservoirs under existing economic and operating conditions—dropped by a net 8.2 […]

North Dakota oil output up 25,000 b/d in April, gas sets record

14 Jun 2017   Shale Oil

North Dakota oil production averaged over 1.05 million b/d in April, up nearly 25,000 b/d from March, the state Department of Mineral Resources said Tuesday. Oil production in April was still nearly 177,000 b/d below the all-time monthly record set in December 2014, according to state data. April marked the third month in a row that production remained above the 1 million b/d threshold. Since crossing over the 1 million b/d mark in April 2014, statewide monthly oil production has fallen below 1 million b/d just four times. Article continues below… US Marketscan provides you with a daily market overview of the major refined products in the United States delivered via e-mail. It carries spot prices for all key products traded in the US market. Gasoline, heating oil, jet fuel, residual fuel and naphtha prices are listed for the Atlantic Coast, Gulf Coast, Group 3, Chicago and West Coast […]

Shale Output Set To Hit All Time High Next Month

14 Jun 2017   Shale Oil

While the June oil production data is still pending, it is safe to say that the June oil output from U.S. shale producers – estimated today by the EIA at 5.348mb/d – will post the first double-digit production growth since July of 2015, when oil prices tumbled and a substantial portion of U.S. production was briefly taken offline. (Click to enlarge) Chart courtesy of Forge River Research Indicatively, while over the past year total U.S. production is up roughly 525kb/d, virtually all of it, or 98.5 percent, is the result of horizontal rig production in the Permian Basin, where output is up by 507kb/d. The Permian basin has been leading the increase in horizontal oil rig count (+178 percent) (Click to enlarge) More important, however, is that according to the latest EIA Daily Prodctivity Report forecast released today, in July total shale basin output is expected to rise by […]

U.S. shale firms more exposed to falling oil prices as hedges expire

14 Jun 2017   Shale Oil

Cash-strapped U.S. shale firms scaled back their hedging programs in the first quarter, leaving them more vulnerable to tumbling spot market prices just after OPEC reached a landmark deal to curb global supply. The pullback in hedging was driven by rising service costs and expectations that prices would continue to rally after the Organization of the Petroleum Exporting Countries extended those cuts in May, analysts said. However, rising U.S. production has stymied OPEC’s efforts to rebalance markets. Crude oil futures have lost 15 percent of their value since February, raising the risk that unhedged companies are more exposed to market weakness. The market peaked at $55 a barrel in January as cuts got under way, but […]

U.S. shale firms more exposed to falling oil prices as hedges expire

13 Jun 2017   Shale Oil, USA

Cash-strapped U.S. shale firms scaled back their hedging programs in the first quarter, leaving them more vulnerable to tumbling spot market prices just after OPEC reached a landmark deal to curb global supply. The pullback in hedging was driven by rising service costs and expectations that prices would continue to rally after the Organization of the Petroleum Exporting Countries extended those cuts in May, analysts said. However, rising U.S. production has stymied OPEC’s efforts to rebalance markets. Crude oil futures have lost 15 percent of their value since February, raising the risk that unhedged companies are more exposed to market weakness. The market peaked at $55 a barrel in January as cuts got under way, but […]

U.S. Rig Count Continues Its Ascent Unabated

13 Jun 2017   Shale Oil, USA

The number of active oil and gas rigs in the United States rose again this week by 11—making it 21 weeks of consecutive gains—the longest growth streak since at least 1987, which is the earliest date that Baker Hughes Excel data is available. As if the 11 rigs added to the U.S. repertoire weren’t enough, Canada added 33 rigs this week as well. The number of oil rigs in operation increased by 8, while gas rigs increased by 3. Combined, the total oil and gas rig count in the U.S. now stands at 927 rigs, which is 513 rigs over a year ago today, when oil prices were significantly higher than they were today. (Click to enlarge) It would appear that there is no end in sight to the steady stream of oil rigs being put into play in the U.S. shale patch, and according to Rystad Energy , […]

America’s Stubborn Oil-Supply Glut Catches Funds Off Guard

13 Jun 2017   Oil Supply, Prices, USA

Money managers’ net-long position at most bullish since April Longs rose, shorts declined, just before oil slumped 5 percent Crude markets are taking oil optimists by surprise yet again. Hedge funds boosted bets on a rally just before West Texas Intermediate prices tanked from a report showing surging American stockpiles. Wagers rose 7.3 percent to the highest since April in the week through June 6, U.S. Commodity Futures Trading Commission data show. The next day, futures fell the most since March and are lingering near this year’s lows. “The last thing the market needed to see was that inventories in the U.S. went up, when they are supposed to be going down seasonally,” Tamar Essner, an energy analyst at Nasdaq Inc. in New York, said by telephone. The report “shows that there are some bulls that are starting to get more interested in the market, but I imagine that […]

Democrats aim to block Atlantic energy surveys

13 Jun 2017   Offshore

Senate Democrats concerned Atlantic energy work could harm some maritime species that depend on seismic activity to communicate. File photo by Ken James/UPI. June 12 (UPI) — The process to open parts of the Atlantic Ocean up for energy exploration is ill-advised and lacks transparency, a group of Senate Democrats said. President Donald Trump ‘s administration issued a draft for public comment in the federal registry last week for seismic airgun blasting in the Atlantic Ocean, a practice used to get a better understanding of the reserve potential in a particular basin. Sen. Bill Nelson , D-Fla., led a group of Senate Democrats in calling on the administration to provide more transparency in the proposal. In a letter sent to UPI during the weekend, Nelson’s office said the call from the National Oceanic and Atmospheric Administration came with little notice and afforded no opportunity for public hearings. Nelson added […]

A Shale-Oil Boomtown Climbs Back From the Bust

13 Jun 2017   Shale Oil

Radio stations here are again running ads from oil-field companies seeking drivers and mechanics. A store is serving up an alligator-and-crawfish lunch to welcome workers from the Gulf Coast. New rigs are rising across the sprawling prairie. Drillers are inching back to action in North Dakota’s Bakken shale region, a sign the recovery of the American oil and gas sector is spreading beyond the Texas and Oklahoma…

Falling Interest Rates Have Postponed “Peak Oil”

13 Jun 2017   Peak Oil

Falling interest rates have huge power. My background is as an actuary, so I am very much aware of the great power of interest rates. But a lot of people are not aware of this power, including, I suspect, some of the people making today’s decisions to raise interest rates. Similar people want to sell securities now being held by the Federal Reserve and by other central banks. This would further ramp up interest rates. With high interest rates, practically nothing that is bought using credit is affordable. This is frightening. Another group of people who don’t understand the power of interest rates is the group of people who put together the Peak Oil story. In my opinion, the story of finite resources, including oil, is true. But the way the problem manifests itself is quite different from what Peak Oilers have imagined because the economy is far more […]

How Big Is California’s Oil And Gas Industry?

12 Jun 2017   Oil Supply, USA

Petroleum industry’s total economic value for California—larger than 15 U.S. state economies A new economic study released today by The Los Angeles County Economic Development Corporation (LAEDC) details the oil and gas industry’s sizable economic and fiscal impacts on California’s economy and also identifies the user industries of refined products and quantifying their economic activity today. The Western States Petroleum Association (WSPA) commissioned the LAEDC to study the economic contribution of the oil and gas industry in California for the year 2015, as well as identifying user industries of refined products most vulnerable to cost increases, supply restrictions and competitive pressures from outside the state. Oil & Gas is major employer, leading economic driver The report shows the oil and gas industry as a major employer and leading economic driver in California, responsible for 368,100 jobs in 2015, or 1.6 percent of California’s employment, with almost $66 billion in […]

Record Breaking U.S. Exports Could Hurt Oil Markets

12 Jun 2017   exports, Prices, Shale Oil

U.S. exports have spiked in recent weeks, upending longstanding trade flows. But while that may be good news for some U.S. drillers, the unusually high level of crude exports are not obviously a good sign about the health of the oil market. At the same time, it is not guaranteed that U.S. producers will be able to continue to ship oil abroad at such a high rate for very long. U.S. oil producers were prohibited from exporting crude oil for decades until Congress scrapped the ban at the end of 2015. For much of last year, exports only rose slightly. But that changed in 2017 – U.S. crude oil exports topped 1 million barrels per day (mb/d) several times in recent weeks, double the rate from a year earlier. (Click to enlarge) The exports provide an outlet for shale drillers but they also put pressure on the global oil […]

New technology could recover more oil from early Bakken wells

12 Jun 2017   Shale Oil

Oil companies are applying new hydraulic fracturing techniques to early Bakken wells, a process industry leaders say has the potential to recover more oil without increasing the footprint on the land. Operators are targeting wells drilled between 2008 and 2010, the early years of Bakken development before fracking technology advanced to where it is today. Companies are refracturing the older wells using today’s technology and getting promising results, said Justin Kringstad, director of the North Dakota Pipeline Authority, who recently analyzed the wells. “On average, they’re getting better performance from the wells,” Kringstad said. Fracking — or pumping a high-pressure mixture of water, sand and chemicals deep underground — and horizontal drilling techniques allowed operators to recover oil from the Bakken. But the industry believes it’s only recovering about 5 to 15 percent of the oil available, Kringstad said. More than 140 wells in the Bakken have been refractured, […]

Shale production may soon hit a wall

12 Jun 2017   Shale Oil

A decade or so ago I was doing a TV interview and talked about a technology called horizontal fracturing and shale oil that might one day make the U.S. energy independent and I was laughed off the air. You see back then the concept of energy independence was thought to be an impossibility. Fast forward to 2017 and because of the success of hydraulic fraction the term “shale oil” is now widely known by people inside and outside of the oil and trading industry. Shale oil has changed the world and the global economy and now the U.S. can go tell OPEC to take a hike and we can just be increasing production and prices of oil will stay low forever. Not so fast. Despite the meteoric rise of shale oil and the recent surge in U.S. oil rig counts there is a coming shale oil production peak. Not […]

Nigerian crude oil exports threaten market balance

9 Jun 2017   Nigeria, Oil Supply

The resumption of operations at a crude oil export terminal in Nigeria could lead to stronger output from the OPEC member, industry analysts say. File photo by Pavel Shlykov/Shutterstock June 7 (UPI) — Oil export operations in Nigeria are back in service following repairs, a division of Royal Dutch Shell said, adding to lingering supply-side concerns. A spokesperson for the Shell Petroleum Development Company of Nigeria Ltd said the company lifted force majeure, a contractual condition related to circumstances beyond the control of the parties involved, for exports from the Forcados terminal in Nigeria following repairs to an export artery. The spokesperson told UPI in response to emailed questions there were “three sabotage leaks” on the pipeline that were repaired with the help from federal authorities and the governments from the oil-rich Niger Delta states. Nigeria is a member of the Organization of Petroleum Exporting Countries, but is exempt […]

U.S. rig count doubled from last year

9 Jun 2017   Shale Oil, USA

The number of rigs targeting oil and gas reserves in the United States in May was double the level from last year, Baker Hughes reported. Rig counts serve as a loose metric to gauge the industry’s interest in spending on exploration and production in a particular sector. A report last year from consultant group IHS Markit found new production from the heavier oil sands in Canada, for example, needed crude oil prices higher than $70 per barrel in some cases to get off the ground. U.S. shale oil basins, meanwhile, have become more efficient and therefore more resilient to a weaker market. Oilfield services company Baker Hughes reported a net gain in North American rig counts, […]

Canada’s Oil Sands Open Up To Chinese Investment

9 Jun 2017   China, Tar Sands

Canada is inviting Chinese companies to invest in its oil sands, Canada’s Natural Resources Minister Jim Carr said on Thursday, after an exodus in the past few months saw international oil majors selling a total of US$23 billion worth of assets to domestic producers. Speaking at a conference call to reporters during his trip to China, Carr said “We think there are opportunities and we laid out, along with experts from industry, what we believe to be opportunities for them,” as quoted by Reuters. “We would welcome investment from any nation that’s interested in the oil sands,” the minister noted, without giving details of what kind of Chinese investment Canada would see as welcome. The government is interested in discussing proposals case by case, he said. Chinese firms, including PetroChina, CNOOC, and Sinopec had invested in Canada’s oil sands industry between 2005 and 2012. But now, with the price […]

Summary of Weekly Petroleum Data for the Week Ending June 2, 2017

9 Jun 2017   Oil Supply, USA

U.S. crude oil refinery inputs averaged over 17.2 million barrels per day during the week ending June 2, 2017, 283,000 barrels per day less than the previous week’s average. Refineries operated at 94.1% of their operable capacity last week. Gasoline production decreased last week, averaging over 9.9 million barrels per day. Distillate fuel production increased last week, averaging about 5.3 million barrels per day. U.S. crude oil imports averaged over 8.3 million barrels per day last week, up by 356,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged 8.3 million barrels per day, 8.8% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 787,000 barrels per day. Distillate fuel imports averaged 152,000 barrels per day last week. U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum […]

The Next Big U.S. Shale Play

9 Jun 2017   Shale Oil

Media coverage of the U.S. shale oil and gas industry makes it sound like the Permian is the only place where things are happening. Everybody is buying acreage in the Permian, selling acreage in other shale plays, and production costs are falling the fastest in that same Permian. True as this may be, this shale play is by no means the only one where production is growing. In fact, oil and gas output across the shale patch has been growing, as the Energy Information Administration’s latest drilling productivity report shows. And that’s not all because there is a new actor on stage: Powder River Basin in Wyoming. Now, in its May drilling productivity report the EIA confirmed what media have been saying: the Permian is the hottest spot in the shale patch, with a 71,000-bpd increase in output in April. This hottest spot was followed by the Eagle Ford, […]

More offshore oil openings from Trump draw criticism

7 Jun 2017   Offshore, USA

The White House took another step to opening up offshore oil and gas reserves using a method that an industry critic said poses a real ecological threat. The office of President Donald Trump issued a draft for public comment in the federal registry for seismic airgun blasting in the Atlantic Ocean. The practice is used to get a better understanding of the reserve potential in a particular basin, though advocacy group Oceana said the method endangers marine mammals that use sound to function as species. Nancy Pyne, a campaign director for Oceana, said the risk is elevated because of the steady stream of Trump initiatives aimed at unraveling the environmental legacy of […]

Oil production in the Gulf of Mexico shows resilience

With crude oil prices in May holding above the $50 mark, analysis finds the U.S. Gulf of Mexico saw gains in exploration and production activity. Platts RigData, a forecasting unit within pricing group S&P Global Platts, revealed a total U.S. rig count for May at 1,026, up 6 percent from the previous month and more than double the level from one year ago. The U.S. waters of the Gulf of Mexico were the only production centers in the United States to show a decline in rig activity from last year, with the May level of 36 down 16 percent from last year, but a slow recovery is apparent. Eight new fields in the U.S. waters of […]

Trump Moves To Allow Drilling On Atlantic Coast

6 Jun 2017   Offshore

A new proposal by the Trump administration will allow oil companies to use seismic air guns to search for fossil fuel deposits in the Atlantic Ocean, according to reports emerging from Washington. Former President Barack Obama had blocked this form of testing due to dangers posed to marine wildlife in the area. The current White House needs Marine Mammal Protection Act permits from a specialized branch of the Commerce Department to allow five companies to use the technique. ” An authorization for incidental takings shall be granted if [the National Marine Fisheries Service] finds that the taking will have a negligible impact on the species,” a Federal Register notice, scheduled for publication on Tuesday, read. The agency will accept public comments through July 7th before deciding whether to grant the required permits. An approval would allow the seismic gun shots to fire in the Fall. Trump’s April executive order, […]

Are Super Rigs The Driver Behind The New Shale Boom?

5 Jun 2017   Shale Oil

Cost cuts and efficiency—the two key ingredients of the U.S. shale’s recipe for surviving the worst of the downturn—have led to drillers now employing a growing number of rigs capable of reducing the time needed for drilling a well and for moving from one area to another. The U.S. shale patch has been increasingly using the so-called super-spec rigs, a more advanced type of drilling machine, since the shale resurgence began at the end of last year, helped—inadvertently—by OPEC’s production cut deal that pushed oil to a more stable, around-US$50, price. The market was particularly unimpressed with OPEC extending the output cuts into March next year, while U.S. shale continues to increase production by the week, having found ways to get more bang for the buck and be profitable at a US$50 oil price. “OPEC’s market influence is highly questionable,” Antoine Halff, director of global oil markets at Columbia […]