Weekly Review

(The Fuse) The U.S. oil industry seemed to be defying gravity in 2015, keeping oil production elevated even as oil prices crashed to lows not seen in more than a decade. But now, over 1.5 years into the price collapse, production declines in shale oil are finally starting to appear as low oil prices have slashed company investments in new supply, and production begins to decline from existing wells.

The latest data from the EIA shows that U.S. output is steadily declining, although perhaps at a slower rate than shale’s competitors might prefer. In December, the latest month for which final data is available, total U.S. production declined to 9.26 million barrels per day (mbd), a loss of 43,000 barrels per day from the month before and down from a peak of 9.69 mbd in April 2015. But December’s small decline hides the decrease in shale production, as losses were offset by output increases from the Gulf of Mexico.

(Bloomberg) Even if Saudi Arabia wins its struggle with U.S. shale producers over market share, it will face a new billion-barrel adversary.

It won’t be regional nemesis Iran, a resurgent Iraq or long-standing competitor Russia. The answer will be more prosaic: Even when overproduction ends, a stockpile surplus of more than 1 billion barrels built up since 2014 will remain, weighing on prices. Inventories will keep accumulating until the end of 2017, the International Energy Agency forecasts, and clearing the glut could take years.

(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.”

(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.