Home » Posts tagged 'crude oil' (Page 10)

Tag Archives: crude oil

In 1956, a geoscientist named M. King Hubbert formulated a theory which suggested that U.S. oil production would eventually reach a point at which the rate of oil production would stop growing. After production hit that peak, it would enter terminal decline. The resulting production profile would resemble a bell curve and the point of maximum production would be identified as Peak Oil, a point of no return.

The original peak oil curve
Image Source: Cornell University

Hubbert first predicted that U.S. oil production would peak in 1970 and then start declining rapidly. His prediction turned out to be partly true, as U.S. crude oil production peaked that same year, not to be eclipsed again until the shale boom began.

Annual crude oil production (in thousands of barrels per year) for entire United States, with contributions from individual regions as indicated.

“The end of the oil age is in sight, if present trends continue production will peak in 1995 — the deadline for alternative forms of energy that must replace petroleum in the sharp drop-off that follows.” This is what Hubbert had to say in 1974, based on 628 billion barrels of proven oil reserves. However, his prediction didn’t turn out to be true, as global oil production continues to surge, thanks to new oilfield discoveries and improved exploration and drilling technology.

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

Don’t Believe The Hype On U.S. Shale Growth

June 15, 2015

Don’t Believe The Hype On U.S. Shale Growth

The OPEC Free Fall

There is a popular narrative going around that I want to address in today’s article. Last November, after several months of plummeting crude oil prices, the Organization of the Petroleum Exporting Countries (OPEC) met to discuss the oil production quotas for each country in the months ahead. Many expected OPEC to cut production in order to shore up crude prices that had been falling since summer. This was the strategy favored by OPEC’s poorer members, as many require oil prices at $100/barrel (bbl) in order to balance government budgets.

Instead, OPEC announced that they would continue pumping at the same rate. They chose to defend market share against the surge of supply from U.S. shale producers, and in doing so the fall in the price of crude oil accelerated. A look at the U.S. rig count shows the swift impact to U.S. shale drillers in the aftermath of that meeting:

Rig counts went into free-fall after it became clear that OPEC was not interested in propping up the price of oil for the benefit of rapidly expanding shale oil producers. While that approach hurt OPEC’s income in the short term, it also immediately impacted rig counts in the shale oil fields. But — and here is the narrative — shale oil producers continue to make gains in production even as rig counts have been slashed because they are becoming more and more efficient

Dissecting the Narrative

There is some truth to the narrative. Yes, oil production has continued to grow even though rig counts have plummeted. The week before OPEC’s meeting last November, the number of rigs drilling for oil stood at 1,574. Oil production that week was 9.1 million bpd. Today, with the rig count at 642, production is 9.6 million bpd — a gain of just over half a million bpd.

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

The PetroYuan Is Born: Gazprom Now Settling All Crude Sales To China In Renminbi

June 10, 2015

The PetroYuan Is Born: Gazprom Now Settling All Crude Sales To China In Renminbi

Two topics we’ve deemed critically important to a thorough understanding of both global finance and the shifting geopolitical landscape are the death of the petrodollar and the idea of yuan hegemony.

Last November, in “How The Petrodollar Quietly Died And No One Noticed,” we said the following about the slow motion demise of the system that has served to perpetuate decades of dollar dominance:

Two years ago, in hushed tones at first, then ever louder, the financial world began discussing that which shall never be discussed in polite company – the end of the system that according to many has framed and facilitated the US Dollar’s reserve currency status: the Petrodollar, or the world in which oil export countries would recycle the dollars they received in exchange for their oil exports, by purchasing more USD-denominated assets, boosting the financial strength of the reserve currency, leading to even higher asset prices and even more USD-denominated purchases, and so forth, in a virtuous (especially if one held US-denominated assets and printed US currency) loop.

The main thrust for this shift away from the USD, if primarily in the non-mainstream media, was that with Russia and China, as well as the rest of the BRIC nations, increasingly seeking to distance themselves from the US-led, “developed world” status quo spearheaded by the IMF, global trade would increasingly take place through bilateral arrangements which bypass the (Petro)dollar entirely. And sure enough, this has certainly been taking place, as first Russia and China, together with Iran, and ever more developing nations, have transacted among each other, bypassing the USD entirely, instead engaging in bilateral trade arrangements.

Falling crude prices served to accelerate the petrodollar’s demise and in 2014, OPEC nationsdrained liquidity from financial markets for the first time in nearly two decades:

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

Mexico and American Oil Companies Want a Crude Swap to Open Loophole in the Oil Export Ban

June 9, 2015

Mexico and American Oil Companies Want a Crude Swap to Open Loophole in the Oil Export Ban

As politicians from oil-producing states work to draw up bills to end the ban on oil exports, Mexican officials are “confident” that the country will soon be importing American crude through a backdoor loophole in the law.

Back in January, Mexico applied for a crude swap that, if approved, would allow the U.S. to export 100,000 barrels of oil per day to Mexico. This would be unrefined crude — refined products such as diesel and gasoline are not subject to the ban — likely from the Eagle Ford and Permian shale fields, where fracking has produced a glut of light, sweet crude in recent years.

Though the crude oil export ban has been in place for about four decades, it allows for certain exemptions to be permitted. Exports to Canada, for instance, are allowed, so long as the oil will be processed and consumed in Canada. And last year, Commerce Department officials in the Obama administration approved the export of condensate, an extremely light and gassy form of oil that can be minimally processed in the field without any trip to a refinery.

Condensates are already flowing heavily out of Texas shale regions, and since permission was granted last November, there’s been a rush of condensate exports to Mexico.

If the crude swap is approved, it’ll open up another loophole to the export ban for crude to flow through.

Very few exceptions have been made to the ban since it was implemented as a response to the Arab oil embargo in 1973.Exports are allowed to Canada “for consumption or use therein,” and very limited exports are allowed from Alaska.

Last September, Alaska shipped off its first crude export in over a decade.

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

Steen’s Chronicle: The best of times, the worst of times

May 23, 2015

Steen’s Chronicle: The best of times, the worst of times

Significant changes to our JABA model’s long-term outlook
Inopportune rise in gold and energy prices expected
Commodities will outperform and yields will add another 100 bps
Europe will suffer downturn and the US will flirt with recession in 2016

Gold is one of those items that should outperform over the longer term. Photo: iStock

Saxo Bank’s JABA model rarely makes significant changes to its long-term outlook, but this quarter is different. Not only do we expect a steep increase in yields but higher gold and energy prices too.

The dynamics at work are plenty: The model’s predictions are always based on the lead-lag of different economic factors. Think of each economic data point, each market price as having its own Sinus curve. Once in a while this multitude of Sinus curves moves in the one direction and this time it’s upwards in the second half of 2015.

The biggest “news” is that we are very close to the secular low in interest rates globally. This will have material impact on stocks, fixed income and asset allocation over the coming one to five years, and probably an “upside-down” return profile relative to performance since the financial crisis started. Commodities will outperform and yields will move up by another 100 bps beforeEurope once again slides to downturn and the US flirts with recession in early 2016.

The headlines for the next 6-7 months say:

US, German and EU core government bonds will be 100 bps higher by and in Q4 before making its final new low in H1 2016. US 10-year yield will trade above 3.0% and Bunds above 1.25%
Energy: WTI crude will hit US $70-80/barrel, setting up excellent energy returns.
US dollar will weaken to EUR1.18/1.20 before retest of lows and then start multi-year weakness.
Gold will be the best performer in commodity-led rally. We see 1425/35 by year-end.

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

Oil Prices Will Fall: A Lesson In Gravity

May 19, 2015

Oil Prices Will Fall: A Lesson In Gravity

The oil price collapse is not over yet. It is more likely that the Brent price could fall back into the mid-$50 range than that it will continue to rise toward $70 per barrel.

That is because oil prices have risen based on sentiment alone. The fundamentals of supply and demand indicate a dismal reality: oil prices will fall and may fall hard in the near term.

Our present situation is like that of the cartoon character Wile E. Coyote. He routinely ran off of a cliff and as long as he didn’t look down, everything was fine. But as soon as he looked down and saw that there was no ground beneath him, he fell. Hope and momentum cannot overcome gravity.

Figure 1. Wile E. Coyote cartoons. Sources: The Braiser, Dubsisms and Forbes.

Neither can ignoring the data.

When I look down from $60 WTI and almost $68 Brent, I see no support except sentiment. Like Wile E. Coyote, we need a gravity lesson about oil prices. What goes up for no reason, will come down sooner than later and it may fall hard.

Let’s examine the facts.

The principal reason for the oil-price collapse is a production surplus–more supply than demand for oil. The latest data from EIA (Figure 2) indicates that the surplus is the greatest since the current oil-price collapse began. In other words, the cause of the price collapse is getting worse, not better!

Figure 2. World liquids production surplus or deficit (production minus consumption), January 2011-April 2015. Source: EIA and Labyrinth Consulting Services, Inc.

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

Oil Price Recovery May Be Too Much Too Soon

May 8, 2015

Oil Price Recovery May Be Too Much Too Soon

Oil prices have hit their highest levels in 2015, with WTI surging above $60 per barrel. Crude oil inventories in the U.S. declined for the first time since December 2014, perhaps indicating that the glut could be easing.

The EIA reported that oil stockpiles fell by 3.9 million barrels for the week ending on May 1, a larger drop than expected. With rig counts falling by more than half since last year, this could be the beginning of a longer contraction. Both weekly production figures and the stock build appeared to have peaked, suggesting that supplies are adjusting lower and demand is rising.

That has oil prices surging from their March lows, with WTI jumping over $15 per barrel, and Brent about $20 per barrel.

But have the markets overreacted? The rise in oil prices over the last few weeks has been so rapid that few predicted it. Speculators have raised their bullish betsto the highest level in years. The optimism may not be justified. In the past, bets to such a degree have often been followed by a fallback in prices, the head of commodity strategy at Saxo Bank told Reuters in an interview. Similarly, the top commodities official at Commerzbank told CNBC that the price rise was “premature,” and oil prices could dip back below $50 per barrel once the markets come to their senses.

In other words, the markets may have overshot, rising beyond levels warranted by the underlying fundamentals. Oil inventories are still at 80 year highs. The 487 million barrels of oil sitting in storage will take quite a while to drawdown. Crucially, oil production is still exceeding demand, leaving oil markets well-supplied.

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

New Oil-By-Rail Regulations Are Big Win for Oil and Rail Industries, Won’t Stop “Bomb Trains”

May 4, 2015

New Oil-By-Rail Regulations Are Big Win for Oil and Rail Industries, Won’t Stop “Bomb Trains”

The long-awaited oil-by-rail regulations released today are basically a guidebook for the oil and rail industries to continue doing business as usual when it comes to moving explosive Bakken crude oil by rail.

DeSmog recently reported on how the Obama administration has worked behind the scenes to help achieve the oil industry’s top goal when it came to these new regulations — allowing the oil producers to continue to put the highly volatile Bakken crude oil into rail tank cars without removing the natural gas liquids that make it such an explosive mixture.

As we’ve reported, there is a relatively simple fix to end, or significantly reduce, the “bomb train” disasters, via a process known as stabilization.

But the new regulations not only give the industry a pass on doing this, they add to the “we need more research before we do anything” approach that is the preferred tactic the industry and regulators are using to delay addressing the issue.

On page 232 of the new regulations, they state the following:

Any specific regulatory changes related to treatment of crude oil would consider further research and be handled in a separate action.

If you are a Bakken oil producer, that one sentence out of the close to 400 pages of new regulations is all you need to know. Time to start writing thank you notes to your lobbyists.

As Al Jazeera recently reported, quoting a professor of petroleum engineering at the University of Houston who was commenting on the science of Bakken crude:

“The notion that this requires significant research and development is a bunch of BS.”

A similar sentiment was expressed in an editorial published by RailwayAge earlier this week responding to the Department of Energy announcement that it will study the issue of Bakken oil volatility

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

Rig Count Data Shows Gulf States Cranking Up Pressure On The U.S.

April 15, 2015

Rig Count Data Shows Gulf States Cranking Up Pressure On The U.S.

The global rig count statistics published by Baker Hughes provide a crucial industry activity indicator and some of the most up to date industry statistics available. This is a short report updating international statistics to March 2015 and US statistics to 10 April 2015.

MiddleEastRigCount

Figure 1 The Middle East OPEC gulf states continue to confound expectations by increasing their rig count and drilling, evidently intent on keeping the oil market over-supplied and the oil price suppressed. Oil rig count for these 4 countries increased 6 to 161 for the month of March. Saudi oil production hit a new record of 10.3 Mbpd in March. Oil Minister Ali Al-Naimi wants price stability and order to return to the market but on OPEC’s terms.

WorldRIgCOunt

Figure 2 The international oil rig count peaked at 1080 in July 2014 and has since fallen 104 (10%) to 976 units in March 2015. This is as yet a very muted response to what is a full blown industry crisis. It does take longer for offshore drilling to wind down and it is possible that companies with rigs on contract have simply parked them for the time being.

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

Top 12 Media Myths On Oil Prices

April 9, 2015

Top 12 Media Myths On Oil Prices

The upstream oil and gas industry is not a black hole. There’s no mystery wrapped in an enigma here.

There are a lot of meetings with engineers, chemists and geologists. There’s a constantly evolving learning curve. And then there’s all the regulations and compliance. But all-in-all it’s pretty straight forward, that is, until the media gets a hold of it. That’s when it becomes complicated. It’s as though we are getting reports from the mysteries of the deep ocean or life in the great galaxies beyond. There is so much hyperbole and unsupported guesswork that investors don’t have a chance. So, in a small effort to set the record straight, let’s see if we can’t dispel some of the misinformation.

Misperception #1: Goldman Sachs knows what is going on. This is incorrect. Goldman Sachs should not be quoted extensively. They are notoriously wrong when forecasting tops and bottoms. What they are good at is jumping on the band wagon and stoking fires. Their forecasting always seems to be done through a rear view mirror and their calls for peaks and troughs are always overdone. Back in July 2014 when WTI was peaking, they were calling for more, even as the dollar was showing signs of strength (and we know what happened there) and as oil inventories were beginning to wash up over our ankles. And then when we are forming a bottom in January and retesting it in March, they were calling for a deeper bottom. And then there was 2008. Remember the calls for $150 and $200 oil from Goldman and Morgan Stanley? That was right before we went to $40 and then some. (To be fair, Ed Morse from Citi called the top but he overshot the bottom. We’re not going into the 20s).

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

Oil Plunges To Lowest Since March 2009 ($43 WTI) As EURUSD 1.05 Battle Continues

March 15, 2015

Oil Plunges To Lowest Since March 2009 ($43 WTI) As EURUSD 1.05 Battle Continues

Update: *WTI CRUDE TRADES AT LOWEST INTRADAY PRICE SINCE MARCH 2009 – $43.57

Despite ‘trouble’ in Saudi Arabia, and chatter of SPR buying, it appears the re-opening of all Houston shipping channels, comments from Greenspan, yet another refinery shut (Exxon’s Joliet lost power), and the rapidly filling storage capacity has awakened the realization that the month-long dead-cat-bounce is over in crude. Brent broke below $53.50 and WTI back to a $43 handle (close to the lowest levels in 6 years) at the open. One can only imagine the pressure on USO (Oil ETF) holders as the contango continues to gap wider. EURUSD is teasing the crucial 1.05 level again…

Tumble to a $43 handle briefly…

The lowest in the cycle (based on the April contract)…

as the contango blows sky high…

Looks a little different this time…

And EURUSD is teasing 1.05 once again…

Charts: Bloomberg

The Truth About U.S. Crude Storage

March 14, 2015

The Truth About U.S. Crude Storage

Despite the popular narrative that we keep hearing, the U.S is not running out of crude oil storage. Yet there are those who are predicting that oil prices are going to fall to $20 or $30 a barrel, pointing to the crude oil storage numbers and suggesting that we are near maximum capacity and therefore a price collapse is imminent. (Although Goldman Sachs did some backpedaling on their forecast this week).

The argument goes something like this: US running out of room to store oil; price collapse next?

“The U.S. has so much crude that it is running out of places to put it, and that could drive oil and gasoline prices even lower in the coming months. For the past seven weeks, the United States has been producing and importing an average of 1 million more barrels of oil every day than it is consuming. That extra crude is flowing into storage tanks, especially at the country’s main trading hub in Cushing, Oklahoma, pushing U.S. supplies to their highest point in at least 80 years, the Energy Department reported last week.”

At first glance, the argument seems to be pretty straightforward. But let’s dig into the data a bit. Admittedly, if you look at the storage numbers in the nation’s most important oil storage hub (and the price settlement point for West Texas Intermediate on the New York Mercantile Exchange) in Cushing, Oklahoma, it’s easy to form the impression that storage is filling up and an oil price crash is inevitable:

WeeklingCushingStocks

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

Oil wars: Shifting balance of power?

March 11, 2015

Oil wars: Shifting balance of power?

What impact are lower global oil prices having on the world’s geopolitical landscape?

Global oil policies are becoming ever more complex as suppliers balance their needs, priorities and self-interests.

A period of low prices is redefining the geopolitical landscape, and bringing international relations into sharp focus.

The price of crude oil has tumbled since June, down by almost 50 percent from $115 a barrel to a little below $60 a barrel.

Lower energy costs are being driven by weakening demand, a reluctance by OPEC to cut production, and the rise of the US as the world’s largest oil producer.

The emerging price wars are set against a backdrop of multiple conflicts and crises in oil producing nations.

So how will these changing dynamics affect the way states deal with each other?

Does OPEC still have the upper hand? And how is surging production in the US playing into a potentially volatile mix?

…click on the above link to view video…

US May Run Out Of Oil Storage Space As Soon As June

March 10, 2015

US May Run Out Of Oil Storage Space As Soon As June

On Sunday, we noted that the economics of the floating storage play could spell further declines for crude prices. With a global stock increase that’s some 3 times larger than that which occurred during the last period of oversupply, expect cheap, on-land storage to prove inadequate necessitating the use of VLCCs. According to Soc Gen, determining how far the front end of the curve would have to fall in order for traders to arbitrage the difference between buying and storing physical oil and selling paper forward is a good indicator for where prices may find a floor:

…the bank is looking for the front end of the curve to fall until the contango is wide enough to make the floating storage play enticing.

The example Soc Gen uses shows that Brent needs to see ~$49 before the trade is sufficiently profitable.

The takeaway, we noted, is that storage availability and contango should be taken into account when considering the future direction of oil prices. With production still climbing despite the decline in rig count, it seems supply may, in short order, outstrip storage capacity for as the following two charts show, crude storage capacity in the US is now at 60% and is set to be completely exhausted by June:

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

CN Rail Train Derails In Northern Ontario, Fire At Site

March 8, 2015

CN Rail Train Derails In Northern Ontario, Fire At Site

GOGAMA, Ont. – CN Rail says a train carrying crude oil derailed early today in northern Ontario and there is a fire at the site.

It’s the third CN derailment in northern Ontario is less than a month, and the second in the same area.

Spokeswoman Emily Hamer says CN crews, including senior officers, are on the way to the scene near Gogama, Ont., about 200 kilometres north of Sudbury.

“Emergency crews are conducting a full site assessment and activating the emergency response plan with local officials,” Hamer said in an email.

Provincial police have closed Highway 144 in both directions, and set up a command centre in the area.

Hamer says the crew on an eastbound freight train reported that cars derailed about 2:45 a.m. and that there are no reports of injuries.

Photos on social media show a large fireball at the site.

A CN freight train derailed on Thursday 100 kilometres east of Hornepayne but there was no leakage from the 16 residue tank cars that contained crude oil or gasoline.

And on Feb. 14, 29 cars of a CN freight train carrying crude oil derailed in a remote, wooded area about 80 kilometres south of Timmins, Ont., with seven catching fire.

There were no injuries in those two derailments.

Tag Archives: crude oil

Content

Post categories

Economic Links

Energy/Resource Links

Environmental Links

Geopolitical Links

Liberty Links

News Links

Other Links

Survival Skills

Post Archives by Category

Post navigation

Latest Posts