(oilprice.com) There has been a lot of pessimism among oil investors in recent months, and indeed the bear market over the last couple of years in black gold has destroyed many nest eggs. With that said, oil investors who have run for the hills could find themselves regretting that decision in the months and years to come.
(artberman.com) Rig count matters. Saying that it doesn’t is like a realtor saying that location doesn’t matter.
Rigs Don’t Produce Oil
The holiest mystery of shale plays is that so much production is possible with ever-fewer rigs.
But if we look at the number of producing wells, the mystery evaporates. That’s because rigs don’t produce oil and gas. Wells do.
Horizontal wells in a few tight oil plays tell most of the story for U.S. production. Figure 1 shows the rig count and number of producing wells for the Bakken, Eagle Ford, Permian, Niobrara, Mississippi Lime and Granite Wash plays. Figure 1. Tight oil horizontal rig count and number of producing wells. Source: Baker Hughes and Labyrinth Consulting Services, Inc. Although rig counts decreased dramatically beginning in late 2014, the number of producing wells continued to increase until very recently. This may be a technical triumph for the drilling industry but it is no cause for oil producers to celebrate.
(rigzone.com) The layoffs continue in oil and gas as two more companies announce workforce reductions in Texas. Weatherford Artificial Lift Systems and Sun Fab Industrial Contracting are reducing staff by 90 and 125 employees, respectively, according to data sent to the Texas Workforce Commission.
Weatherford Artificial Lift Systems, a subsidiary of Weatherford International, is cutting 90 jobs at its manufacturing operations facility in Katy, Texas due to “a loss of business opportunities.”
“The disturbing truth is that the real cost of oil production has doubled since the 1990s. That is very bad news for the global economy. Those who believe that technology is always the answer need to think about that…Tight oil may have bought us a few years of abundance but the resulting over-supply, debt and prolonged period of prices below the cost of production have exacted a terrible cost. Under-investment, a damaged service sector, weak oil company balance sheets and a decimated work force practically ensure cripplingly higher prices a few years in the future.”
Art Berman, consulting geologist
The vote in Britain to pull out of the EU came as a surprise as most observers were expecting the referendum would fail. Oil prices fell immediately and after some gyrations settled down about $2.50 a barrel at $47.64 in New York and $47.54 in London.
The ramifications of the British vote for the oil markets will take years to work out, and many believe it will lead to a series of international realignments with other countries pulling out of the EU and possibly even the secession of Scotland and Northern Ireland from the UK. Conventional wisdom currently holds that Britain’s withdrawal from the EU will lead to lower economic growth in the EU, UK, and possibly other countries.
(Bloomberg) The new Saudi oil minister, Khalid Al-Falih, says the oil glut is over. That means the kingdom’s war against U.S. shale producers is coming to an end, too. Who won it is a tough question to answer; on balance, it’s probably the Saudis, but they have paid a huge price, and the surviving U.S. frackers have also benefited.
(Reuters) Oil rallied on Monday, lifted by a wave of investor confidence and a weaker dollar after polls showed a diminishing chance that Britain may vote to leave the European Union later this week.
August Brent crude futures were up 90 cents at $50.07 a barrel by 0843 GMT, set for a gain of 6 percent in two trading days. NYMEX crude for July delivery, which expires on Tuesday, was up 80 cents at $48.78 a barrel.
(Reuters) Two years into the worst oil price rout in a generation, large and mid-sized U.S. independent producers are surviving and eyeing growth again as oil nears $50 a barrel, confounding OPEC and Saudi Arabia with their resiliency.
That shale giants Hess Corp ( HES.N ), Apache Corp ( APA.N ) and more than 25 other companies have beaten back OPEC’s attempt to sideline them would have been unthinkable just months ago, when oil plumbed $26 a barrel and collapses were feared.
“The embattled crude oil and natural gas industry worldwide has slashed capital spending to a point below the minimum required levels to replace reserves — replacement of proved reserves in the past constituted about 80 percent of the industry’s spending; however, the industry has slashed its capital spending by a total of about 50 percent in 2015 and 2016. According to Deloitte’s new study, “Short of Capital? Risk of underinvestment in Oil and Gas is amplified by competing cash priorities,” this underinvestment will quickly deplete the future availability of reserves and production.”
The BOE Report
Oil prices dropped for six straight trading sessions before rebounding on Friday to close at $47.98 in New York and $49.17 in London but both markets were down for the week. Trading was dominated by polls showing that Britain may vote to leave the EU this week sparking financial turmoil and slower economic growth. These fears resulted in a stronger US dollar which in turn drove oil prices lower. Running counter to these pressures were an IEA forecast that the global supply/demand would be back in balance by the end of the year; production outages in Libya, Canada, and Nigeria; and concerns that the deteriorating situation in Venezuela could soon limit oil production and exports.
