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Energy market madness is the death spasm of the oil age – renewables now!
Energy market madness is the death spasm of the oil age – renewables now!
Current oil price volatility is a symptom of the end of cheap oil, writes Nafeez Ahmed, and it’s destablising the entire global economy. The answer is a major shift to renewables – but the the International Energy Agency, which should be leading the transition, is in the grip of nuclear and fossil fuel interests. Instead the leadership must come from us, the people!
There is, of course, a way out, and it lies in recognizing the growing efficacy and efficiency of renewable energy sources, especially solar, wind and geothermal.
The market price of oil has dipped below $50 a barrel – an event that few anticipated. So low is this price collapse, that it is endangering the profitability of the entire oil industry.
The immediate cause of the price collapse is the US-Saudistrategy of interfering in the oil market. The duo is using oil prices to wage economic warfare by sustaining unusually high levels of production.
With the global economy still limping along in the context of weak demand and slow growth, the supply glut has tumbled the market price of oil with the precise aim of undercutting the state revenues of US-Saudi mutual geopolitical rivals, especially Russia, Iran, Syria, and Venezuela.
Despite the apparent low price of oil on international markets, costs of production remain high. Since the peak of cheap, conventional oil around 2005, production has fluctuated on a plateau as the industry has turned increasingly to more expensive, dirtier and difficult-to-extract forms of unconventional oil and gas, especially shale.
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Increased U.S. Output Bolsters Oil Glut Fears Sending Prices Back Down
Increased U.S. Output Bolsters Oil Glut Fears Sending Prices Back Down
Oil resumed its decline after the biggest gain since June 2012 as U.S. crude production increased, adding to signs that the global supply glut that has pushed prices to a 5 1/2-year low will persist.
West Texas Intermediate futures dropped as much as 2.7 percent in New York. U.S. output surged to 9.19 million barrels a day last week, the fastest pace in weekly records dating back to January 1983, the Energy Information Administration reported yesterday. The Swiss National Bank gave up its minimum exchange rate against the euro, a policy that was intended to shield its economy from the region’s sovereign debt crisis.
Crude slid almost 50 percent last year, the most since the 2008 financial crisis, as the Organization of Petroleum Exporting Countries resisted cuts to output amid the U.S. shale boom, exacerbating a surplus estimated by Kuwait at 1.8 million barrels a day.
Oil is leading this week’s slide in commodities after a decade-long bull market led companies to boost production and a stronger dollar diminished their allure to investors. The Bloomberg Commodity Index of 22 energy, agriculture and metal products declined yesterday to the lowest level since 2002, extending a 17 percent loss last year. OPEC will release its monthly report later today.
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Oil prices down again as UAE defends holding production
Oil prices down again as UAE defends holding production
(Reuters) – Brent and U.S. WTI crude oil prices fell to their lowest levels in almost six years on Tuesday as a big OPEC producer stood by the group’s decision not to cut output to tackle a glut in the market.
Oil prices have fallen 60 percent from their June 2014 peaks, driven down by rising production, particularly U.S. shale oil, and weaker-than-expected demand in Europe and Asia.
Rather than cutting output to try to balance the market, producers from the Organization of the Petroleum Exporting Countries (OPEC) are offering discounts to customers in an attempt to defend market share.
At 1032 GMT, February Brent crude was down $1.06 at $46.37 a barrel, after dipping to $45.23, its lowest since March 2009.
U.S. crude for February was down $1.15 at $44.92 per barrel, off an intraday low of $44.21.
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The First Shale Casualty: WBH Energy Files For Bankruptcy; Many More Coming
The First Shale Casualty: WBH Energy Files For Bankruptcy; Many More Coming
“There are too many ugly balance sheets,” warns one energy industry analyst, adding simply that “the group is not positioned for this downturn.” While the mainstream media continues to chant the happy-clappy side of lower oil prices, spewing various ‘statistics’ about how the down-side of low oil prices is ‘contained’ and the huge colossal massive tax cut means ‘everything is awesome’ for America, the data – and now actions – do not bear this out. Macro data has done nothing but disappoint and now, we have the first casualty of the shale oil leverage debacle as WSJ reports, on Sunday, a private company that drills in Texas, WBH Energy LP, and its partners, filed for bankruptcy protection, saying a lender refused to advance more money. There are many more to come…
In December we illustrated the problem names (in the publicly traded markets) among the most-levered energy companies in America…
And now, as The Wall Street Journal reports, the bankruptcies have begun as financing costs are not just prohibitive, there is no liquiidty available at any price for many…
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OPEC December Crude Output Slips as Global Prices Tumble – Bloomberg
OPEC December Crude Output Slips as Global Prices Tumble – Bloomberg.
Oil production by the 12 OPEC nations slipped less than 1 percent in December, the first month after the group refused to cut output as crude prices tumbled, a Bloomberg survey showed.
Output by the Organization of Petroleum Exporting Countries fell 122,000 barrels a day, or 0.4 percent, to 30.239 million last month, led by declines in Saudi Arabia,Libya and the United Arab Emirates, according to the survey of oil companies, producers and analysts.
Brent and West Texas Intermediate futures dropped to the lowest levels since May 2009 yesterday, capping the worst year since 2008. OPEC left its production quotas unchanged at a Nov. 27 meeting in Vienna, prompting speculation that the group will let crude slide low enough to slow U.S. production that’s climbed to the highest level in three decades.
U.S. Easing of Oil Exports Challenges OPEC’s Strategy – Bloomberg
U.S. Easing of Oil Exports Challenges OPEC’s Strategy – Bloomberg.
The Obama administration’s move to allow exports of ultralight crude without government approval may encourage shale drilling and thwart Saudi Arabia’s strategy to curb U.S. output, further weakening oil markets, according to Citigroup Inc.
A type of crude known as condensate can be exported if it is run through a distillation tower, which separates the hydrocarbons that make up the oil, according to U.S. government guidelines published yesterday. That may boost supplies ready to be sold overseas to as much as 1 million barrels a day by the end of 2015, Citigroup analysts led by Ed Morse in New Yorksaid in an e-mailed report.
Saudi Arabia led the Organization of Petroleum Exporting Countries to maintain its production quota at a meeting last month even as a shale boom boosted U.S. output to the highest in more than three decades. That prompted speculation OPEC was willing to let prices fall to force some companies with higher drilling costs to stop pumping.
“U.S. producers are under the gun to reduce capital expenditures given lower prices,” Citigroup said in the report. “Now an export route provides a new lease on life that can further weaken crude oil markets and throw a monkey wrench into recent Saudi plans to cripple U.S. production.”
Oil’s wild ride in 2014 signals return to volatility – Business – CBC News
Oil’s wild ride in 2014 signals return to volatility – Business – CBC News.
After five years in which oil traded in a narrow band around the $100 US a barrel mark, crude markets returned to volatility this fall.
Back in late June of this year, oil was trading at $107 US a barrel. At year end, it was headed below $55 a barrel.
The months in between tell the story of how changes in supply and demand can lead to wild and unpredictable swings in the price of a commodity.
Geopolitical tensions earlier this year had the effect of pushing oil prices to a peak. It pushed through $100 a barrel in March because of tensions in the Ukraine and then in June, ISIS moved in on oilfields in Iraq, threatening to cut off supplies. Crude hit a peak for the year of $107 a barrel for the West Texas Intermediate contract.
But this summer, markets began to see thedownturn in Europe and Japan were worse than previously realized. At the same time, emerging markets, particularly China, began to lose steam after propelling global growth for the past five years.
“We are seeing significantly slower growth in the emerging economies around the world, so the global economy isn’t growing at a very strong pace and this is the initial reason why oil prices started to fall,” says Craig Alexander, senior economist with TD Bank.
Exclusive: U.S. agency gives quiet nod to light oil exports – sources | Reuters
Exclusive: U.S. agency gives quiet nod to light oil exports – sources | Reuters.
(Reuters) – The main U.S. export authority is telling some oil companies that they should consider exporting a lightly processed form of crude oil called condensate without formal permission, according to people familiar with the discussions.
In conversations that may help clear the way for more overseas sales of U.S. shale oil, the Commerce Department’s Bureau of Industry and Security (BIS) has told companies seeking clarification on the legal status of so-called “processed condensate” that self-classification – whereby companies export their product without any formal authorization – could be a way forward, the people told Reuters.
An official familiar with the law said the agency’s discussions did not represent a change in policy since self-classification is allowed under U.S. export controls and is a routine, common practice for the majority of exports.
Yet the message, though carefully couched as an informal suggestion, marks the first sign that the administration is becoming comfortable about allowing companies to work around the nation’s four-decades-old ban on exporting untreated crude oil.
Low Oil Prices And Money Worries For 2015
Low Oil Prices And Money Worries For 2015.
In response to the Ruble’s recent fall (over 50% against the U.S. Dollar), Swiss banks have begun taking extreme and extraordinary measures in what appear to be early signs of a currency war. There is now a negative interest rate of 0.25% on deposits made in Swiss Francs. In combination with pre-existing efforts such as Zero Interest Rate policies and quantative easing, we are now entering an era of Negative Interest Rate Policies. These kinds of policy decisions will do nothing to allay fears about economic slowdown in Europe and Asia and the looming threat of another financial crisis. Worries aboutdebt-bubbles propping up the US shale scene seem to already be influencing international banking policy, with strategies now revolving around insulating any potential risks should it all turn sour in 2015 for key global currencies.
In addition to the Ruble’s near 50% decline against the dollar, the Japanese Yen is down 20% against the U.S. Dollar since the summer. This comes as welcome news for struggling Japanese industry as it improves export prices against import prices in favor of Japanese workers. As part of the Abenomics strategy unveiled over two years ago by the Japanese Prime Minister Shinzo Abe, by flooding the market with Yen he hopes to reinvigorate domestic industry. Given his re-election this December, his policy seems to be popular if somewhat unsuccessful thus far. Off the back of this election victory, the pro-nuclear Liberal Democratic party has greenlit the re-opening of two nuclear reactors in the Takahama project, bringing the current approved number to four with a final total of nine expected to come online in total in 2015. The restarting of these reactors could prove crucial as Japan struggles with expensive, dollar-linked imports of commodities such as LNG and crude oil. It will likely have a positive impact onlanguishing uranium markets should the go-ahead be given for all nine but only time will tell.
Resource Insights: How the U.S. could fight OPEC and win (and why it won’t)
Resource Insights: How the U.S. could fight OPEC and win (and why it won’t).
OPEC has declared war on American oil production with the intention of making the country more dependent on imported oil and on oil in general. By refusing to cut production in the face of weakening world demand, the cartel has allowed oil prices to fall more than 35 percent since mid-year to levels that are likely to make most new oil production in America’s large shale deposits unprofitable. That could not only halt growth in U.S. production, but may lead to an actual drop because production from already operating deep shale wells declines about 40 percent per year.
The United States could chose to fight back and possibly win this war with OPEC by employing one simple, big move. But, I can confidently predict that the country will not do it. Why? Because it involves a tax, a tariff actually.
Back in 1975 then-Secretary of State Henry Kissinger proposed that the world’s oil importers adopt a floor price for oil. The purpose was threefold: 1) encourage domestic oil production, 2) accelerate the development of alternative energy sources by making their price more competitive with oil and 3) encourage conservation of oil and oil-derived products such as gasoline and diesel fuel.
The easiest way to achieve the floor price, of course, would be to slap a sliding tariff on imported oil. The formula for such a tariff would be simple: The floor price minus the price of imported oil unless the price of imported oil equals or exceeds the floor price, in which case, the tariff would be zero. Imposing a tariff that keeps U.S. oil prices above, say, $100 per barrel would only return the domestic price of gasoline and other refined products to their level of just six months ago. Presumably, that wouldn’t be much of a shock to consumers.
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EXCLUSIVE-October oil shale permits drop: is the slowdown here?
EXCLUSIVE-October oil shale permits drop: is the slowdown here?.
NEW YORK, Dec 1 (Reuters) – U.S. oil producers have been racing full-speed ahead to drill new shale wells in recent years, even in the face of lower oil prices. But new data suggests that the much-anticipated slowdown in shale country may have finally arrived.
Permits for new wells dropped 15 percent across 12 major shale formations last month, according to exclusive information provided to Reuters by DrillingInfo, an industry data firm, offering the first sign of a slowdown in a drilling frenzy that has seen permits double since last November.
The Organization of Petroleum Exporting Countries last week agreed to maintain its production quota of 30 million-barrels-per-day, despite a 30 percent drop in oil prices since June, triggering an additional 10 percent decline. That move, many analysts believe, was squarely aimed at U.S. oil producers driving the country’s energy resurgence: can they continue drilling at the current pace if prices don’t rise?
“Currently, the market is focused on U.S. shale as the place where spending and production must be curtailed,” Roger Read, a Wells Fargo analyst, said in a note Friday. “There is little doubt, in our view, that lower oil and gas prices will result in lower spending and lower shale production in 2015 to 2017.”
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US “Secret” Deal With Saudis Backfires After Oil Minister Says US Should Cut First | Zero Hedge
US “Secret” Deal With Saudis Backfires After Oil Minister Says US Should Cut First | Zero Hedge.
Who could have seen this coming? With oil prices holding at 4-year lows, heavily pressuring around half of US shale production economics, the “secret” US deal (see hereand here) with Saudi Arabia to crush Russia via oil over-supply in a slumping demand world appears to be backfiring rapidly for John Kerry and his strategery team. Capable of withstanding considerably lower prices for longer, Saudi Arabia’s oil minister Ali al-Naimi proclaimed “no one should cut production and the market will stabilize itself,” adding rather ominously (for the US economy and HY default rates), “Why should Saudi Arabia cut? The U.S. is a big producer too now. Should they cut?”
OPEC leader Saudi Arabia signaled on Wednesday it was unlikely to push for a major change in oil output at the producer group’s meeting this week, a day after Russia refused to cooperate in any production cut. Saudi Oil Minister Ali al-Naimi said he expected the oil market “to stabilize itself eventually.”
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Iranian Oil Minister Bijan Zangeneh said some OPEC members, although not Iran itself, were gearing up for a battle over market share and insisted that non-OPEC producers needed to participate in any OPEC-led output cut.
“The most important thing for all of us is the unity and solidarity of OPEC, and in this situation I believe we need to have the contribution of non-OPEC producers for managing the market,” Zangeneh told reporters.
“Some OPEC members believe that this is the time where we need to defend market share … All the experts in the market believe we have oversupply in the market and next year we will have more oversupply,” he added.
Which led the Saudi Minister to comment…
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Meanwhile, This Is Who Is Quietly Buying All The Cheap Oil | Zero Hedge
Meanwhile, This Is Who Is Quietly Buying All The Cheap Oil | Zero Hedge.
With the US Shale Oil industry up in arms, Venezuela screaming, and Russia awkwardly quiet (as the Ruble slides with the falling oil price stabilizing domestic inflows), the ‘secret’ Saudi-US oil dealthat pressured prices for crude down to $80 (18-month lows today) has ‘hurt’ a lot of the world’s producer nations. However, as Bloomberg reports, there is one nation that is very grateful. The number of supertankers sailing toward China’s ports surged to a nine-month high as over 80 very large crude carriers (VLCCs) – the industry’s biggest ships – sail toward the Asian country’s ports. At an average of 2 million barrels each, the 160 million barrels will help refill China’s 727 million barrel SPR which it started in 2012.
There are 89 tankers sailing for Chinese ports, 80 of which are VLCCs – the highest since January 3rd.
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