(Forbes) World oil prices are controlled by the amount of crude oil stored at Cushing, Oklahoma. That’s because Cushing is the pricing point for WTI (West Texas Intermediate) oil prices, the most-traded oil futures contract in the world.
Cushing Storage Rules World Oil Prices.
WTI (and Brent) oil prices have good negative correlation with the volume of crude oil stored at Cushing.
(Reuters) For leading U.S. shale oil producers, $40 is the new $70.
Less than a year ago major shale firms were saying they needed oil above $60 a barrel to produce more; now some say they will settle for far less in deciding whether to crank up output after the worst oil price crash in a generation.
Their latest comments highlight the industry’s remarkable resilience, but also serve as a warning to rivals and traders: a retreat in U.S. oil production that would help ease global oversupply and let prices recover may prove shorter than some may have expected.
(oilprice.com) What if I told you that there was a period in history where oil demand declined by 5 million barrels per day and non-OPEC supply increased by 5 million barrels per day, yet oil price rallied more than 50 percent? Would you believe me?
If your answer is yes, then you guessed right. This was the period from 1979 to 1985; it was a period during which global oil demand declined from over 61 million barrels to 56 million barrels and non-OPEC supply increased from 32 million barrels to 37 million barrels. Yet prices rallied from $17 a barrel in 1979 to $26 a barrel in 1985, while reaching as high as $35 in 1981.
(peakoilbarrel.com) The JODI Oil World Database came out a few days ago. The data is through December 2015. The JODI C+C production numbers differs somewhat from the EIA numbers. The JODI OPEC numbers are crude. Also there are a few very small producers that do not report to JODI so their numbers will be slightly less than the EIA. But otherwise they are pretty accurate.
Also, JODI, for some reason, does not count all of Canada’s oil sands production. So for Canada I use Canada’s National Energy Board numbers instead.
(Forbes) One of the questions I am most frequently asked is “What factors led to the precipitous drop in oil prices?” Some have suggested that this is all OPEC’s fault, while others have blamed either surging U.S. shale oil production or falling demand.
I addressed the demand issue back in December in The Fallacy of Peak Oil Demand . To summarize, since 1983, annual global demand for crude oil has only fallen twice; a small decline in 1985 and another decline in 2009 in response to the financial crisis. The growth rate for crude oil has been remarkably consistent, adding an average of almost exactly a million barrels per day (bpd) for more than 30 years.
(BBC) The International Energy Agency (IEA) is warning consumers not to let cheap oil lull them into a false sense of security amid forecasts of a price spike by 2021. In a report , the IEA said it expects prices to start recovering in 2017. But it forecasts that will be followed by a sharp jump in price as supply shrinks following under-investment by struggling producers.
Brent crude touched a 13-year low of $28.88 a barrel in January. It has since recovered somewhat, but is still far below a high of $115 in June 2014. On Monday the price was up around 4.9% at $34.62.
(oilprice.com) BNP Paribas, France’s largest bank, announced that it would no longer lend money to struggling oil and gas companies in the United States. “Given the current environment in the oil and gas markets and the short to medium term outlook, BNP Paribas has decided to halt the redevelopment of its reserve-based lending business,” BNP said in a statement. The bank will continue to work with its existing borrowers, but won’t lend to new ones.
The French bank was concerned that default rates among energy companies would rise, sources told Reuters. It was the second time that the bank pulled out of lending to energy companies in the U.S. – it sold a unit to Wells Fargo in 2012 before reentering the space in 2014 when oil prices shot into triple-digit territory.
(Toronto Sun via Reuters) Oil workers just aren’t drinking like they used to. Molson Coors Brewing Co. blames a sluggish economy for a big drop in beer sales in Alberta, Newfoundland and Labrador, and Saskatchewan. Customers are abandoning higher-priced premium beers for economy brands, the beer giant says.
“The consumer is under pressure,” Stewart Glendinning, chief executive of Molson Coors Canada, said Thursday during a conference call on the company’s fourth-quarter and 2015 results.
“And if you add to that the fact that consumer debt in Canada is at an all-time high, it’s made for quite a difficult recipe in some of those provinces.”
(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.
(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.”
(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.
(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.
(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)
(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.
(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.
(The Fuse) In 2015, almost 40 oilfield services companies, with more than $5 billion in debt, went bankrupt. More are expected this year.
While bankruptcies among independent shale producers have received the most attention , the oilfield services sector is in dire straits. The carnage from the low oil price in the shale patch has been widespread, with companies that provide technology, transportation, and supplies to producers getting slammed.
(artberman.com) Fundamentals point toward market balance but pessimism is dragging oil prices down. IEA has apparently succumbed to this negativity but their data suggests that things are getting better, not worse.
In a business-as-usual world in which nothing unusual happens, the world will be close to market balance some time in 2016. If anything unusual happens, all bets are off and oil prices could rebound much faster than anyone imagines.
(Reuters) The world will store unwanted oil for most of 2016 as declines in U.S. output take time and OPEC is unlikely to cut a deal with other producers to reduce ballooning output, the International Energy Agency said.
The agency, which coordinates energy policies of industrialised countries, said that while it did not believe oil prices could follow some of the most extreme forecasts and fall to as low as $10 per barrel, it was equally hard to see how they could rise significantly from current levels.
(The Fuse) Two years ago some oil market prognosticators were worried (or happy) that oil could go to $150 a barrel or more. The unexpected collapse in oil prices appears driven by the desire of some OPEC members to reduce competition by opening the spigots. The fall from $115 a barrel to as little as $30 a barrel has discouraged investment in drilling. Oil rig count in the United States is down by two-thirds from its peak. Middle East rig count has not fallen. In this paper we review the rise of U.S. oil production driven by the fracking revolution. Oil price volatility impacts many business sectors and affects federal macroeconomic policy as the Federal Reserve tries to encourage low unemployment and price stability. The history of 40 plus years of oil volatility continues to damage U.S. economic performance.
(International Business Times) At the outset of the global economic meltdown in 2008, the world was already bracing for another crisis: peak oil. Predictions that oil production would soon top out flooded the airwaves, stoking fears of a global oil shortfall and fueling speculation of prices at hundreds of dollars a barrel.
“People have been trying very hard and they can’t increase oil production from here,” Robert Hirsch, an energy analyst, said in a June 2008 segment on CNBC. He projected oil production would peak, and then decline sharply within three to five years. “For somebody to suggest that all of a sudden something magic is going to happen, and there’s going to all of a sudden be an enormous amount of new oil — they don’t understand the problem,” he added.
(peakoilbarrel.com) Rystad Energy , an independent oil and gas consulting services and business intelligence data firm in Oslo, Norway, has online, a wealth of information concerning upstream oil production projects and costs. Some of it is a bit dated but some of their charts date from late 2015.
The two below Rystad charts were published by CNN Money on November 23, 2015. Costs, Overall This is overall or average cost, not marginal cost. It cost Canada $41 to produce a barrel of oil but only cost Russia $17.20. I guess that is why Canada is cutting back but Russia is not. Costs, Breakdown Here is the breakdown between capital expenditures and operational expenditures. Why would the United Kingdom’s operational expenditures be two and one half times those of Norway? After all, they are both drilling basically the same oil field.
(Reuters) Less than two months into the year, the top U.S. shale oil companies have already cut their budget for 2016 a second time as the relentless drop in oil prices continues to erode their cash flow.
With oil prices firmly wedged in the low $30-per-barrel range, oil producers are deferring spending on new wells and projects.
(Bloomberg) After a year of low oil prices, only 0.1 percent of global production has been curtailed because it’s unprofitable, according to a report from consultants Wood Mackenzie Ltd. that highlights the industry’s resilience.
The analysis, published ahead of an annual oil-industry gathering in London next week, suggests that oil prices will need to drop even more — or stay low for a lot longer — to meaningfully reduce global production. OPEC and major oil companies like BP Plc and Occidental Petroleum Corp. are betting that low oil prices will drive production down, eventually lifting prices. That’s taking longer than expected, in part due to the resilience of the U.S. shale industry and slumping currencies in oil-rich countries, which have lowered production costs in nations from Russia to Brazil.
(The Fuse) It seems fitting that oil prices fell back under $30 on the day that two major oil companies reported disastrous earnings results showing the damage of the past year and a half. The decline in prices that began in mid-2014 has wreaked havoc across all different types of companies—NOCs, IOCs, independents, oil majors, oilfield services—and there seems to be no respite in the short run. Companies are continuing to lay off staff, cut back on projects, and report eye-opening losses.
(Bloomberg) Texas has a message for $30 crude doomsayers: Bring it on.
A handful of shale patches in the state, which would be the world’s sixth-largest oil producer if it were a country, are profitable with crude below $30 a barrel, according to an analysis by Bloomberg Intelligence. In DeWitt County, which produced more than 100,000 barrels a day in November from the Eagle Ford formation, the average well can be profitable with U.S. benchmark crude at $22.52 a barrel, $4 below the lowest level this year. Drive 200 miles southwest to Dimmit County, and drillers need $58 oil.
