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Trump Asked Saudi Arabia To Boost Oil Production By 1 Million Barrels Per Day

It all started on April 20, when having tweeted at and about virtually everything else, President Trump realized that surging oil and gasoline prices are wreaking havoc on his economic agenda and eating away at the benefits from his tax cuts, and so he made it clear when he lashed out on twitter against OPEC which he said was “at it again. With record amounts of Oil all over the place, including the fully loaded ships at sea, Oil prices are artificially Very High! No good and will not be accepted!”


Looks like OPEC is at it again. With record amounts of Oil all over the place, including the fully loaded ships at sea, Oil prices are artificially Very High! No good and will not be accepted!


The result was instant, sending the price of oil sharply lower….

… and effectively capping the price oil, which is now at the level when Trump made his warning.

Since then Trump’s stance has only hardened, and because the US president has become an especially good friend with the ruling Saudi regime, there has been a dramatic reversal within OPEC, whose next meeting is now expected to see the cartel and Russia modestly boost oil production to comply with Trump’s demand.

But by how much?

This morning Bloomberg reported the answer, when it said that the Trump administration has quietly asked Saudi Arabia and other OPEC producers to increase oil production by about 1 million barrels a day, or – not surprisingly – just enough to offset expected Iran oil export declines as a result of Trump’s renewed embargo on Tehran.

…click on the above link to read the rest of the article…

Shale Bottlenecks Could Send Oil Prices Higher

Shale Bottlenecks Could Send Oil Prices Higher

Permian

Amid reports that OPEC will likely decide to start easing production quotas after June 22 and an IEA forecast that electric vehicles will displace 2.5 million bpd in crude oil demand by 2030, some analysts remain upbeat about the future of oil prices, citing transport constraints in the U.S. shale patch as well as companies’ prioritization of returning cash to shareholders over investing in new production.

CNBC recently quoted one such analyst, Tamar Essner from Nasdaq Corporate Solutions, as saying I think it’s temporary. I think the fundamental picture is still really strong. The market’s getting a bit dislocated right now based on a risk-off sentiment. Essner went on to note the 500,000-bpd fall in production in Venezuela and speculated that it could fall by another half a million barrels daily by end-2018. If this happens, he said, U.S. shale drillers would not be able to ramp up production quickly enough to meet growing demand.

Indeed, Venezuelan production has been sliding inexorably, and chances are that it will continue to fall until the year’s end, at least. However, U.S. drillers have increased their daily production since the start of the year by 1.28 million bpd already, if we are to believe EIA’s weekly production estimates and monthly reports, which have historically proven to be quite accurate.

So, that’s 1.28 million bpd more over five months. Even if the EIA is erring on the positive side, the increase in U.S. production could be around 1 million barrels daily, which would be enough to offset a Venezuelan production decline of the same proportions.

…click on the above link to read the rest of the article…

The Unbelievable Amount Of Frac Sand Consumed By U.S. Shale Oil Industry

The Unbelievable Amount Of Frac Sand Consumed By U.S. Shale Oil Industry

The U.S. Shale Oil Industry utilizes a stunning amount of equipment and consumes a massive amount of materials to produce more than half of the country’s oil production.  One of the vital materials used in the production of shale oil is frac sand.  The amount of frac sand used in the shale oil business has skyrocketed by more than 10 times since the industry took off in 2007.

According to the data by Rockproducts.com and IHS Markit, frac sand consumption by the U.S. shale oil and gas industry increased from 10 billion pounds a year in 2007 to over 120 billion pounds in 2017.  This year, frac sand consumption is forecasted to climb to over 135 billion pounds, with the country’s largest shale field, the Permian, accounting for 37% of the total at 50 billion pounds.

Now, 50 billion pounds of frac sand in the Permian is an enormous amount when we compare it to the total 10 billion pounds consumed by the entire shale oil and gas industry in 2007.

To get an idea of the U.S. top shale oil fields, here is a chart from my recent video, The U.S. Shale Oil Ponzi Scheme Explained:

(charts courtesy of the EIA – U.S. Energy Information Agency)

As we can see in the graph above, the Permian Region is the largest shale oil field in the United States with over 3 million barrels per day (mbd) of production compared to 1.7 mbd in the Eagle Ford, 1.2 mbd at the Bakken and nearly 600,000 barrels per day in the Niobrara.  However, only about 2 mbd of the Permian’s total production is from horizontal shale oil fracking.  The remainder is from conventional oil production.

Now, to produce shale oil or gas, the shale drillers pump down the horizontal oil well a mixture of water, frac sand, and chemicals to release the oil and gas.  You can see this process in the video below (example used for shale gas extraction):

…click on the above link to read the rest of the article…

Reuters: OPEC Production Falls To 13-Month Low

Reuters: OPEC Production Falls To 13-Month Low

PDVSA crude refinery

OPEC’s oil production dropped in May by 70,000 bpd to 32.00 million bpd on the back of outages in Nigeria and a continuous decline in Venezuela that dragged the cartel’s total production to the lowest level since April 2017, according to the monthly Reuters survey.

The largest fall in production was registered in Nigeria, according to the survey based on shipping data from external sources, Thomson Reuters flows data, and information provided by sources at OPEC and oil and consulting firms.

Nigeria’s production dropped to 1.85 million bpd in May from 1.94 million bpd in April, the Reuters survey found. Nigeria has been struggling with unplanned shutdowns of pipeline flows this month, and loading of the Forcados grade is being delayed.

The second-largest fall in May came from Venezuela, whose production declined to 1.45 million bpd from 1.50 million bpd, compared to the implied target of 1.972 million bpd, which means that Venezuela’s involuntary “cut” in May was 617,000 bpd—more than the cut pledged and achieved by OPEC’s biggest producer Saudi Arabia.

Saudi Arabia, for its part, as well as the second-largest producer in the cartel, Iraq, slightly raised their production in May over April. Saudi Arabia stayed within its quota and its production inched up to 10.00 million bpd because more crude oil was consumed domestically by power plants, according to sources in the Reuters survey.

Iraq produced more because it increased exports from its southern ports, following a drop last month.

According to the latest available figures by OPEC’s secondary sources—the ones that OPEC uses to measure quotas and compliance with the deal, OPEC’s production in April increased by 12,000 bpd over March, to average 31.93 million bpd, as Saudi Arabia boosted its production by 46,500 bpd.

…click on the above link to read the rest of the article…

Extreme Weather Causes Production Outages In Libya

Extreme Weather Causes Production Outages In Libya

Rig

A Libyan oil company has had to significantly reduce oil production at its fields because the hot weather has caused several turbines to stop working. The company is Agoco, a unit of the national Oil Corporation, and the decline in production amounted to some 120,000 bpd, sources wishing to remain unnamed told Bloomberg.

This is only the latest production outage in the troubled North African country that has made exemplary efforts to revive its oil production after the NOC regained control over the export terminals and the fields, and settled its disputes with the Petroleum Facilities Guard. It is also the least significant one, as according to the sources, production in Agoco’s fields will return to normal in a few days.

The outage does, however, highlight the uncertainty of Libyan supply, which has been hovering around 1 million barrels daily for over a year, but has failed to move above this level—and not because Libyan is an OPEC member and as such is constrained by a production quota. It is because the political situation in the country is still so unstable that virtually any group with a grudge against the government—or another group—can block a pipeline or attack any piece of infrastructure and cause a production outage.

A few days ago, for example, protesters blocked the entrance to the Ragouba field, which produces around 5,000 bpd, so tanker trucks could not load crude. These particular protesters demanded social and health care benefits and lifted the blockade when the operator of the field promised to grant these.

Last month, a militant group attacked the pipeline feeding crude from the Waha oil field to the Es Sider export terminal, costing the field operators around 80,000 bpd in lost production. This was the second attack on this pipeline in five months. Waha produces 300,000 bpd, on par with Libya’s largest field, El Sharara, which has also been the target of several attacks.

…click on the above link to read the rest of the article…

The Double-Edged Sword Of High Oil Prices

The Double-Edged Sword Of High Oil Prices

barrel

Rising oil prices were seen last year as a positive result of growing global growth and recovery, but a combination of factors is turning this benign view into a more sinister scenario.

On the supply side, the combined efforts of OPEC and Russia, leaky as the agreement has been, have managed to reduce the global oil surplus in just 18 months to bring the market largely into balance. As a result, oil prices have gradually risen during the period. It’s a trend most observers have been sanguine about, believing the U.S.’s tight oil producers, encouraged by rising prices, will increase output to ensure ample supply and keep a lid on oil prices getting ahead of themselves.

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But that benign view had not taken account of President Trump’s decision to rip up the Iran nuclear deal and, as a result, to reinstate sanctions, a move that will take place in two phases to give firms time to adjust.

According to The Telegraph, this will be done in two stages, on Aug. 6 and Nov. 4, allowing 90- and 180-day wind-down periods. In addition, the Treasury is to re-list Iranian individuals and entities in the Specially Designated Nationals (SDN) list, thus revoking special licenses and exceptions previously granted to individuals and companies to deal with Iran, making it all but impossible for firms with a U.S. presence or needing dollar clearing to deal with them.

Lastly, Iran’s crude oil sales will be limited under the National Defense Authorization Act of 2012, as the U.S. departments of State, Energy and Treasury will allow ongoing but reduced purchases of oil from Iran, termed “significant reduction exceptions” on a country-by-country basis if they demonstrate a commitment to substantially decrease oil purchases (usually at least a 20 percent reduction).

…click on the above link to read the rest of the article…

Introducing Empire Oil: A DeSmog UK Special Investigation

Introducing Empire Oil: A DeSmog UK Special Investigation

The UK likes to brag about its credentials as a global climate leader. But a new DeSmog UK investigation reveals that beneath the green veneer lies some dirty business.

At the centre of it all is the City of London and its junior stock exchange, the Alternative Investment Market (AIM).

DeSmog UK’s new three-part investigative series Empire Oil: London’s Dirty Secret, lifts the veil on a “boys’ club” that generates wealth for The City from environmentally damaging activities in politically unstable regions.

Through detailed analysis of company activity and market data, it exposes how AIM’s “light touch” regulation and complex offshore company structures create an opaque corporate environment in which conflicts of interest have been shown to thrive.

Part one, ‘Black Gold’: London’s African Oil Hub, maps the London oil companies operating in Africa. It identifies:

  • How the UK government provides ongoing support for international fossil fuel exploration despite its domestic and international climate change commitments;
  • 12 private and public limited oil and gas companies headquartered in London that have operations in Africa, all of which have ties to tax-havens in British overseas territories and crown dependencies;
  • The failure of international regulation to tackle issues regarding a lack of transparency for companies operating in unstable markets.

Part two, Taking AIM: London’s Wild West Stock Market, lifts the lid on London’s junior stock exchange, the Alternative Investment Market (AIM). It shows:

  • A history of scandals and company collapse on AIM, and a lack of public sanction and enforcement;
  • A “light touch” regulation system behind which companies are rarely named and shamed for abusing the system;
  • Fundamental problems with AIM’s regulators, known as nomads, that also act as company brokers and can have vested interests in the companies they oversee;
  • The potential for oil, gas, and mining companies to manipulate information about assets in politically unstable regions, and the obstacles to verification for investors.

…click on the above link to read the rest of the article…

OPEC April Production Data

OPEC April Production Data

The OPEC charts below were created with data from the OPEC Monthly Oil Market Report. The PDF File can be downloaded from here: OPEC MOMR All OPEC data is through April 2018 and is in thousand barrels per day.

There was little change in OPEC production in April.

OPEC production was  up 12,000 barrels per day in April but that was after February production had been revised down by 74,000 bpd and March production revised down by 39,000 bpd.

I am going to forgo commenting on each country unless there is something dramatic happening.

…click on the above link to read the rest of the article…

Could Oil Hit $100?

Could Oil Hit $100?

$100

Oil prices have continued their climb following a week of bullish news, and with geopolitical tensions reaching a boiling point, prices are poised to head even higher.

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Friday, May 11, 2018

Iran continues to dominate the headlines, keeping WTI above $71 per barrel and Brent at $77 per barrel as of early trading on Friday. The exchange of airstrikes between Iran and Israel is also adding to the tension. Meanwhile, aside from the huge increase in U.S. oil production, the EIA reported some bullish figures this week – a decline in both crude oil and gasoline inventories by more than expected.

OPEC sees Iranian outage as not immediate. Any loss of supply from Iran due to U.S. sanctions will take time, and OPEC won’t rush to increase output in the interim, sources told Reuters. The steep losses from Venezuela combined with the potential disruption in Iran could force OPEC to adjust production levels earlier than it had expected. But because U.S. sanctions don’t really take effect until November, OPEC is not scrambling just yet. “I think we have 180 days before any supply impact,” an OPEC source said. They will meet in Vienna in a month to evaluate the current status of the oil market and the production limits.

Short-term supply glut eases Iran fears. Although supply outages from Iran could severely tighten the oil market, Bloomberg reports that there is currently a bit of a supply glut, which should prevent a sudden price spike. Oil traders have reported unsold cargoes in north-west Europe, the Mediterranean, China and West Africa. The sudden emergence of a temporary glut is reflected in the Brent timespreads, with the July-August spread falling from 63 cents per barrel last month to just 24 cents per barrel this week, a five-month low. The narrowing of the spread is a “sure sign of an oversupplied market,” Bloomberg reports.

…click on the above link to read the rest of the article…

How Much Iranian Oil Can Trump Disrupt?

How Much Iranian Oil Can Trump Disrupt?

Trump

Oil prices surged following President Trump’s withdrawal from the Iran nuclear deal. So, what happens next?

Trump did not offer any new justification for how Iran was violating the nuclear accord – the IAEA confirmed on May 9 that Iran is in compliance with its nuclear commitments – and offered no Plan B or even a coherent strategy on what comes next. For now, Washington is pursuing confrontation with Iran, and hoping that “maximum pressure” will force Iran to not only abandon any hint of a nuclear weapons program, but also agree to concessions on a range of non-nuclear issues. If history is any guide, there is little chance of this happening, so we are now on a course of escalating confrontation.

The U.S. will re-impose all nuclear related sanctions on Iran, which could begin to disrupt oil flows from the country. There will be a 90-day and 180-day wind down period before sanctions really start to bite, which puts the deadline at early November. However, there is a great deal of disagreement and uncertainty over how quickly and how severely the impact of U.S. confrontation will be.

The U.S. will not have the coalition that shut in 1 million barrels per day (mb/d) of Iranian oil exports prior to the 2015 agreement. The EU, China and Russia have said they are sticking with the deal. Still, U.S. sanctions will loom over private companies from those nations, which could keep them from doing business with Iran. The EU has vowed to protect its companies, and could even pursue trade retaliation if the U.S. Treasury moves to penalize European companies. However, U.S. sanctions will almost certainly deter large-scale investment in Iran’s oil and gas sector for years to come.

…click on the above link to read the rest of the article…

Oil Production Vital Statistics April 2018

Oil Production Vital Statistics April 2018

On the World stage, momentous events are unfolding. The USA, UK and France have bombed Syria risking confrontation with Russia. The Israelis are more than a little concerned about Iranian involvement in Syria. And on the Korean peninsula, peace between N and S is on the cards spreading prosperity and more energy consumption for all. On the second tier, oil production in Venezuela and Mexico continue to tank. No one should be surprised, therefore, that Brent has breached $74/bbl. The only thing standing in the way of another severe oil price spike is the N American frackers going back more seriously to work. They may one day be joined by frackers in Saudi Arabia, China and Russia.


The chart below from the February OMR is one of the more important produced by the IEA showing the balance between supply and demand leading to either stock draw or additions. So important in fact that I have decided to leave it there from the last report 2 months ago so that it can be compared with the equivalent chart from the April OMR that is reproduced just below it.

The difference between the two charts are quite subtle but with dramatic impact. Data revisions result in crude oil stock draws for 7 quarters backdated from 4Q 18. This has meant that the IEA now sees OECD crude oil stocks at the 5 year mean at the present day. The momentum of the trend will see OECD crude oil stocks shooting to the low side. Even higher oil prices may be on their way.

Readers should note that since January 2018 I have been employed as a consultant at ETH Zurich. ETH are a well-kept secret, but are in fact the number 10 ranked university in the world, up there with CalTech, MIT and Imperial College.

…click on the above link to read the rest of the article…

Norway Production, 2017 Summary and Projections

Norway Production, 2017 Summary and Projections

Average annual Norwegian wellhead C&C production dropped 1.5% in 2017, from 1709 kbpd (625 mmbbls total) to 1682 kbpd (614 mmbbls total). Wellhead gas (which includes fuel gas, flaring and gas injection) rose 2.6% from 2805 kboed to 2878 kboed. Exit rates were down 9% for oil andt 4% for gas, some of which was due to the Forties pipeline failure in December, but the decline appears to have continued in the first quarter of 2018.

Three small projects, Flyndre, Sindre and Birding, and two larger ones Gina Krog and Maria, came online. Sindre appears already to be exhausted. Flyndre is shared with UK and is declining fast. Gina Krog, discovered in 1974, is a tie back via a wellhead platform to Sleipner with nominal nameplate capacity of 60 kboed (split about evenly between oil and gas), and Maria is an oil tie-back to the Kristin semi-sub, but with water injection supplied from Heidrun, with 40 kbpd nameplate and is still ramping up after first production in Decemeber.

Norway C&C

The data shown in the charts is through February, but the NPD figures for this year have not been as complete or unequivocal as usual, so should be considered accordingly. A number of fields have no reported wellhead figures for January or February, though they do have sales reported (to fill the gaps I have prorated from these numbers based on previous complete monthly data). Additionally it looks for some reason that the sales figures for 2017 have all been doubled and the numbers for NGL are being switched from reporting in Te/d to m3/d, so there’s a bit of uncertainty.

chart/

Troll

Troll, started in 1990, is by far the largest gas producer but also, currently, the largest oil producer, at around 150 kbpd, which has been kept steady for several years. The oil comes from a thin oil rim, produced from long, horizontal wells that are being continually drilled.

…click on the above link to read the rest of the article…

What Is A ‘Fair’ Price For Oil?

What Is A ‘Fair’ Price For Oil?

Oil Pump

Last week, oil prices hit their highest level since late 2014 on the back of continued global and U.S. stockpile drawdowns and expectations that oil demand growth will stay strong this year.

Analysts and officials are once again trying to predict what a ‘fair’ price for oil is – a prediction that must take into account the summer driving season, the possibility of new sanctions on Iran, elections in Venezuela and Iraq, continuous OPEC chatter about “mission accomplished or not”, and reports of OPEC kingpin Saudi Arabia aiming for oil prices of $80 to $100 a barrel.

Some analysts and officials believe that oil prices could hit $80 this year, although such a price would probably be due to the geopolitical risk premium rather than market fundamentals.

Even if oil prices were to rise to $80, such an increase would be short-lived, and would be mostly fueled by fears of a supply disruption, especially in the Middle East with possible new sanctions on Iranian oil and with tenser situations in and around Syria and Yemen. Then there’s Venezuela, with its oil production plummeting and elections expected to be held in May—and if the U.S. were to slap further sanctions on Venezuela, such as on its oil industry, it would be yet another wild card for oil prices later this year.

Yet, around $75 oil is as good as it’s going to get in the short term, according to some investment banks and oil officials. No one is predicting oil at $100 yet.

“I think $65 to $75 is more realistic numbers for the rest of the year, but there are so many factors that can change that,” Mohammed bin Hamad Al Rumhi, the oil minister of non-OPEC participant in the production cut deal, Oman, told CNBC.

“In my opinion, where we are is not too bad and we can live with it. That’s $65 to $75, give or take, for the foreseeable future,” said the minister.

…click on the above link to read the rest of the article…

Venezuelan Oil Enters The Disaster Zone

Venezuelan Oil Enters The Disaster Zone

Rig

The decline of Venezuela’s oil production for the foreseeable future has been assumed, and to a large extent, already priced into the market. However, an acceleration in the rate of decline is possible, and a few recent developments raise the odds that such a disaster will become a reality.

Reuters reported that state-owned PDVSA is completely falling apart, with workers walking off the job at a frightening pace. The conditions for oil workers has deteriorated for years, with shortages of food, unsafe working conditions, and hyperinflation utterly hollowing out the value of paychecks.

Since last year, however, things have grown worse. Venezuela President Nicolas Maduro sacked the head of PDVSA and handed over control to the military in order to keep the armed forces on his side. But Major General Manuel Quevedo has only accelerated the decline of PDVSA, which once held a reputation as one of the better managed state-owned oil companies in the world.

Reuters reports that about 25,000 workers have quit PDVSA between January 2017 and January 2018, a staggering sum. PDVSA employs roughly 146,000 people. Thousands of workers are walking off of job sites, fed up with going to work hungry, putting their lives at risk at rickety refineries, all for a paycheck that fails to cover even the most basic expenses.

The worker exodus has grown so bad that the company has in some cases refused to process resignations. Those higher up are no less unhappy. Reuters says that General Quevedo “quickly alienated the firm’s embattled upper echelon and its rank-and-file.”

The loss of both top level engineers and managers as well as workers on the ground ensure the oil production losses will continue. Reuters reports that some rigs in the Orinoco Belt, where PDVSA produces heavy oil, are only operating “intermittently for lack of crews.”

…click on the above link to read the rest of the article…

OPEC March Crude Oil Production Data

OPEC March Crude Oil Production Data

All OPEC data below was taken from the April issue of The OPEC Monthly Oil Market Report. The data is through March 2018 and is thousands of barrels per day.

OPEC crude oil production dropped just over 200,000 barrels per day in March. They are now just over one million barrels per day below their fourth-quarter 2016 average.

Only the UAE showed any significant gain among OPEC members.

Algeria took a hit in March, down almost 50,000 barrels per day. They reached a new low of under 1,000,000 barrels per day.

Angola took the biggest his of all OPEC nations in March. They dropped 82,000 barrels per day to reach their lowest level in almost 7 years.

Ecuador has slowed their decline during the last two months.

…click on the above link to read the rest of the article…

Olduvai II: Exodus
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