(Reuters) Global oil production exceeded consumption by just over 1 billion barrels in 2014/15, according to the International Energy Agency (IEA).
Production exceeded consumption by an average of 0.9 million barrels per day in 2014 and 2.0 million bpd in 2015 ( tmsnrt.rs/1pvIEw8 ).
(oilprice.com) The North American Baker Hughes Rig Count came out Friday. The decline continues. Baker Hughes gives an oil and gas breakout for every basin and state with five years of historical data. Baker Hughes has twenty eight and one half years of historical data for total U.S. rigs but only five years for individual basins. Gas rigs peaked in August 2008 at 1,606 rigs, over six years before the peak in Oil rigs. On February, 26, gas total U.S. gas rig count stood at 102, a decline of over 93 percent. A closer look at the total U.S. total rig count.
October 10, 2014 1,609 rigs
February 26, 2016 400 rigs
Percent decline 75 percent
(Forbes) Oil prices should fall, possibly hard, in coming weeks. That is because fundamentals do not support the present price.
Prices should fall to around $30 once the empty nature of an OPEC-plus-Russia production freeze is understood. A return to the grim reality of over-supply and the weakness of the world economy could push prices well into the $20s.
About Latin America: “The 70 percent drop in prices is a major shock. Oil was contributing in some countries from 20 to 50 per cent government revenues and 50 to 96 percent of exports. No wonder we are starting to question the financial viability of some countries and some national oil companies.”
Luisa Palacios, head of Latin America at Medley Global Advisors, a risk consultancy
Oil prices rose for the third consecutive week with New York futures closing at $35.92 a barrel and London at $38.72. Prices in London are now up 3.9 percent for the year. Behind the price rise is a continuing drop in the number of drilling rigs operating in the US and the announcement by several major shale oil producers that they plan to suspend new drilling until prices recover. Exactly where profitability is these days is in dispute with some drillers contending they can make money from shale oil if prices rise into the mid- $40s as compared to $60-70 two years ago. Some of these claims are for the benefit of the banks who have become very wary of the oil industry in recent months. The downside, of course, is that if shale oil producers start increasing production if prices get into the mid-$40s, they could easily drive them back down again with unsaleable production.
(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.
(Reuters) Global oil prices appear to have bottomed out and are expected to rise through this year as investment cuts help to reduce a supply glut, a senior analyst at the International Energy Agency said on Tuesday.
Benchmark Brent crude futures LCOc1 were up 44 cents at $37.01 a barrel at 1304 GMT (06:04 EST), the highest in eight weeks. They hit a more than 12-year low of $27.10 on Jan. 20.
“Oil prices appear to have bottomed out,” Neil Atkinson, the new head of IEA’s oil industry and market division, told a seminar in Oslo.
(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.
(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.
“The problem is going to be the money. Where is the money going to come from? A lot of people who have burned their fingers on (U.S. shale) are going to be reluctant to reinvest.”
Arnaud Breuillac, president of exploration and production at French oil giant Total.
Oil had a good week for a change with New York futures rising 3.2 percent to close at $32.78 and London climbing 6.3 percent to close at $35.10. This time, there was more than just wishful thinking behind the price increase as pipeline outages shut in 600,000 b/d in Kurdistan and 250,000 b/d in Nigeria to cut global exports by 850,000 b/d. In both cases, it is unclear as to just when the pipelines will reopen. In Nigeria, the outage was due to an underwater leak while the situation in Kurdistan likely is related to one of many wars taking place in the region.
(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.
About the proposed production freeze announced last week by Russia, Saudi Arabia, Qatar and Venezuela: “The four producers involved are already producing close to their peak. The freeze is the oil-market equivalent of calling for a cease-fire when they’re running out of ammo.”
Miswin Mahesh, an analyst at Barclays Plc in London
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.
(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)
