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Oil investment is weakest in 30 years

(CNN) A history of oil’s booms and busts. The oil price crash has squeezed investment in the industry to the weakest levels in 30 years. Capital expenditure on global oil exploration and production is expected to fall 17% in 2016, following a 24% drop in 2015, according to the International Energy Agency’s medium term outlook.

That will be the first time since 1986 that upstream investment has fallen for two consecutive years, the agency said, warning that the collapse could be storing up problems for consumers further down the track.

“It is easy for consumers to be lulled into complacency by ample stocks and low prices today, but they should heed the writing on the wall: the historic investment cuts we are seeing raise the odds of unpleasant oil-security surprises in the not too distant future,” said IEA Executive Director Fatih Birol on Monday.

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Veterans of 1980s oil glut say this price slump, too, will last

(The Fuse) When Sheikh Ali Khalifa al-Sabah of Kuwait thinks about today’s plunging oil prices, his mind drifts back to the mid-1980s, when he was forced to sell some of his country’s crude for as little as $5 a barrel.

As Kuwait’s oil minister at the time, Sheikh Ali had to sell a cargo or two at that price just to keep up cash flow to a country that depended upon oil revenues. “It wasn’t because I wanted to; it was because it was the market price,” he recalls.

“We really had no alternative.”

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IEA Reiterates Underinvestment Risk

(The Fuse) Today at IHS CERAWeek in Houston, Texas, the International Energy Agency (IEA) released the 2016 Medium Term Oil Market Report, urging that consumer countries not be drawn into a false sense of complacency given the current low prices and the global glut in supply—even as the likelihood of a price spike in the medium-term remain slim. Last year, oil capital expenditures (capex) declined by 24 percent, and this year we expect an additional 17 percent. This is historic, because in the last 30 years we have never seen oil investment decline in two consecutive years. “It is easy for consumers to be lulled into complacency by ample stocks and low prices today, but they should heed the writing on the wall,” said IEA Executive Director Fatih Birol.

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Oil Glut Will Persist Into 2017 as IEA Sees Prices Capped

(Bloomberg) The global oil glut will persist into 2017, limiting any chance of a price rebound in the short term as the surplus takes even longer to clear than previously estimated, according to the International Energy Agency.

While U.S. shale oil production will retreat this year and next as the price slump hits drilling, its subsequent recovery will ensure America remains the biggest source of new supply to 2021.

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Peak Oil Review – 22 Feb 2016

The oil markets climbed through Thursday last week in hopes that the Saudi-Russian “pact” to freeze oil output would lead to lower production and higher prices. After it became clear on Thursday that countries adhering to the pact were already pumping oil as fast as they could and had little to no interest in lowering production unless forced to by geology, the markets began to fall. In New York, where futures had traded close to $26 a barrel the week before last, prices peaked at nearly $32 before falling back to close Friday at $29.64. London followed a similar pattern, climbing from $30 to nearly $36 before falling away to close at $32.91. This was the third mini price spike we have had in the past year based on stories that an agreement was in the offing that might cut production.

Posted On : Published By : Tom Whipple
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Natural Gas Price Increase Inevitable In 2016

(Forbes) Every week, the EIA proclaims a new record for natural gas production. But their own forecasts show that the U.S. will be short on supply by October of this year. A price increase is inevitable beginning later in 2016.

The popular myth is that gas production will continue to increase and that prices will remain low for years. In the myth, price has no effect on production. The reality is that price matters and production is down 1.2 bcfd1 since September 2015 (Figure 1)

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Texas Oil Production Still on a Plateau

(peakoilbarrel.com) The Texas RRC Oil and Gas Production Data is out. There appeared to be no decline in December production and may have even been a slight increase.

The Texas RRC data is incomplete and only gives an indication as to whether Texas production increased or decreased. The data appears to droop because each month the the Texas Railroad Commission receives a little more data and the totals increase, little by little, month by month, until after many months the data is complete.

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Is Saudi Arabia Winning The War Against Shale?

(Rigzone) Saudi officials insist the kingdom’s oil production strategy is not aimed at putting U.S. shale producers out of business, a message that has been repeated to visiting U.S. policymakers.

The United States remains the kingdom’s most important security partner, and Saudi officials do not want to be seen to be deliberately trying to halt the shale revolution.

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Peak Oil Review – 15 Feb 2016

Oil prices plunged for four days last week, settling at a recent low of $26.21 in New York, a drop of nearly 30 percent since the start of the year, and $30.06 in London a 20 percent drop this year. The inevitable rebound came on Friday with a vigorous jump for the day of $3.23 or 12.3 percent in New York to close at $29.44, and $3.30 or 11 percent to $33.36 in London. This time the rebound was started by rumors out of the UAE that OPEC, while not considering a production cut, might be willing to consider halting further increases in production. This rumor was seen by traders as a willingness on the part of OPEC to take charge of the oil supply situation for the first time since the crisis began. Another factor contributing to the decline was the long weekend in the US and the unwillingness of traders to be caught in short positions with prices so low. As one analyst said, “every time someone in OPEC comes out and says we are willing to cooperate, there is always a knee-jerk reaction on the part of oil traders.” “No one wants to be caught selling futures at the bottom of the move.”

Posted On : Published By : Tom Whipple