“The shortcoming of oil replacement by the drill bit has been quite drastic … Discoveries are not keeping up with production.”
Per Magnus Nysveen, head of analysis, Rystad Energy. Last year, 10 billion barrels of oil were discovered, around one third of global consumption, including well-appraisal activity, said Nysveen. He added that supply could fall short by up to 2 million barrels per day within seven to eight years.
After climbing steadily since March 27th, oil prices stabilized at the $53-55 level late last week. As usual, prices got a boost from various oil minister’s comments about how well they were doing in meeting their production cut goals and how they are considering extending the cuts until the end of the year. The monthly OPEC report shows that the cartel’s production jumped by about 1.2 million b/d after production cuts were first seriously discussed last fall, and then fell about the same amount after cuts started in January. The net result was to leave OPEC’s production about where it was through most of 2016.
“It’s clear that wind energy’s time has come. My message is a very simple one: our government is committed to addressing climate change, and we know that wind power will play a critical role in those efforts.”
Canadian Natural Resources Minister Jim Carr.
After falling on Monday on the news that Libya was resuming production from its largest oilfield that was shut down the previous week, oil prices moved higher for the next three days on hopes that the OPEC production cut was having the desired effect. Some believe that oil traders have been too busy watching the well-publicized build in US crude stocks, while excess inventories in other parts of the world are shrinking away unnoticed. Futures prices, which were about $48 a barrel the US the week before last, climbed to over $51 a barrel by Thursday.
“My administration is putting an end to the war on coal…The miners are coming back.”
US President Donald Trump, as he signed the “energy independence” executive order
“I suggested that (Trump) temper his expectations. He can’t bring them back.”
Robert Murray, founder and CEO of Murray Energy, the biggest US coal company
Crude prices rebounded sharply last week erasing nearly half the $7-8 selloff that began in early March. The March price drop came on the consensus that increasing crude inventories and ever higher rig counts would offset the 1.8 million production cut that OPEC was trying to orchestrate. At the close Friday, New York futures were at $50.85, and London was at $53.83.
“Overall the idea that we have to go into the Arctic to find new resources I think has been dispelled by the enormous cheap, easier to produce and quicker time-to-market resources in the Permian onshore US. We think there is almost no rationale for Arctic exploration. Immensely complex, expensive projects like the Arctic we think can move too high on the cost curve to be economically doable.”
Michele Della Vigna, commodity equity business unit leader in EMEA at Goldman Sachs
Last week oil prices fell for the third time in a month, closing in New York at just below $48 a barrel. Increasing US crude inventories remain the chief motivation for the price drop as many traders now see higher US production as largely offsetting the OPEC/NOPEC production cuts. OPEC and its allies met in Kuwait last week to consider the situation and to talk about extending the cuts until the end of the year. In the meantime, the US rig count continues to grow amid some doubts as to whether all the new drilling will result in a concomitant amount of production.
–David Houseknecht, a senior research geologist at the U.S. Geological Survey, says the Smith Bay discovery in Alaska seems to have incredible potential. Then he adds: “But it’s the last one you’d want to bet your retirement money on.” (3/15)
After a quick drop of $3-4 a barrel the week before last, oil prices steadied last week as the markets contemplated just how effective the OPEC/NOPEC production freeze will be in the short term. Speculators had enthusiastically embraced the production freeze when it was announced late last year and drove open interest in futures to record highs. The cuts, however, did not come fast enough or be deep enough to offset increasing oil production from other countries and lower demand. As one important trader put it, “The OPEC cuts were good enough to prevent a repeat of the glut of last year, but it’s a different story if you want to have oil at $60 or $70.” For now, the physical oil market continues to indicate an oversupply situation.
