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New IEA Data May Indicate A Slowdown In Rig Count Drop
New IEA Data May Indicate A Slowdown In Rig Count Drop
The IEA OMR is out early this month hence April’s edition of vital statistics comes early. The March 2015 Vital Statistics is here. EIA oil price and Baker Hughes rig count charts are updated to the end of March 2015, the remaining oil production charts are updated to February 2015 using the IEA OMR data. The main oil production changes from January to February are:
• World total liquids up 80,000 bpd
• OPEC down 90,000 bpd
• N America up 220,000 bpd
• Russia and FSU up 10,000 bpd
• UK and Norway up 100,000 bpd (compared with February 2014)
• Asia up 30,000 bpd
1. Global oil production is declining slowly but remains just above its long-term trend. Just over 94.04 Mbpd was produced in February.
2. The recovery in the oil price in February reversed in March and WTI has tested its January lows. Spreading conflict in the Middle East adds further complexity to the price dynamic.
3. The plunge in US oil rig count has slowed significantly although it continues falling slowly. This may signal a new phase of the oil price war that is discussed at the end of this post.
4. I anticipate that the price bottom may be in, but that price will bounce sideways along bottom for several months until we see significant falls in OECD production. Whilst there are signs that global production is falling slowly there is as yet little sign of a significant drop in US production.
…click on the above link to read the rest of the article…
5 Charts Which Show That The Next Economic Crash Is Dead Ahead
5 Charts Which Show That The Next Economic Crash Is Dead Ahead
When an economic crisis is coming, there are usually certain indicators that appear in advance. For example, commodity prices usually start to plunge before a recession begins. And as you can see from the Bloomberg Commodity Indexwhich you can find right here, this has already been happening. In addition, I have previously written about how the U.S. dollar went on a great run just before the financial collapse of 2008. This is something that has also been happening over the past few months. Some people would have you believe that nobody can anticipate the next great economic downturn and that to try to do so is just an exercise in “guesswork”. But that is not the case at all. We can look back over history and see patterns that keep repeating. And a lot of the exact same patterns that happened just before previous stock market crashes are happening again right now.
For example, let’s talk about the price of oil. There are only two times in history when the price of oil has fallen by more than 50 dollars in a six month time period. One was just before the financial crisis in 2008, and the other has just happened…
As a result of crashing oil prices, we are witnessing oil rigs shut down in the United States at a blistering pace. In fact, almost half of all oil rigs in the U.S. have already shut down. The following commentary and chart come from Wolf Richter…
…click on the above link to read the rest of the article…
The US Oil Bust Just Got Worse
The US Oil Bust Just Got Worse
The price of Oil did today what it has been doing for a while: it waits for a trigger and plunges. As I’m writing this, West Texas Intermediate is down 4.4%, trading at $44.99 a barrel, less than a measly buck away from this oil bust’s January low. It’s down over 20% from the peak of the most recent sucker rally.
US oil drillers have been responding by slashing capital expenditures, including drilling, in a deceptively brutal manner. In the latest week, drillers idled 56 rigs that were classified as drilling for oil, according to Baker Hughes. Only 866 rigs were still active, down 46.2% from October, when they’d peaked at 1,609. In the 22 weeks since, drillers have taken out 743 rigs, the most dizzying cliff dive in the data series, and probably in history:
You’d think this sort of plunge in drilling activity would curtail production. Eventually it might. But for now, the industry has focused on efficiencies, improved drilling technologies, and the most productive plays. Drillers are trying to raise production but with less money so that they can meet their debt payments. Thousands of wells have been drilled recently but haven’t been completed and aren’t yet producing. This is the “fracklog,” a phenomenon that has been dogging natural gas for years.
…click on the above link to read the rest of the article…
This Chart Shows the True Collapse of Fracking in the US
This Chart Shows the True Collapse of Fracking in the US
“People need to kinda settle in for a while.” That’s what Exxon Mobil CEO Rex Tillersonsaid about the low price of oil at the company’s investor conference. “I see a lot of supply out there.”
So Exxon is going to do its darnedest to add to this supply: 16 new production projects will start pumping oil and gas through 2017. Production will rise from 4 million barrels per day to 4.3 million. But it will spend less money to get there, largely because suppliers have had to cut their prices.
That’s the global oil story. In the US, a similar scenario is playing out. Drillers are laying some people off, not massive numbers yet. Like Exxon, they’re shoving big price cuts down the throats of their suppliers. They’re cutting back on drilling by idling the least efficient rigs in the least productive plays – and they’re not kidding about that.
In the latest week, they idled a 64 rigs drilling for oil, according to Baker Hughes, which publishes the data every Friday. Only 922 rigs were still active, down 42.7% from October, when they’d peaked. Within 21 weeks, they’ve taken out 687 rigs, the most terrific, vertigo-inducing oil-rig nose dive in the data series, and possibly in history:
As Exxon and other drillers are overeager to explain: just because we’re cutting capex, and just because the rig count plunges, doesn’t mean our production is going down. And it may not for a long time. Drillers, loaded up with debt, must have the cash flow from production to survive.
…click on the above link to read the rest of the article…
The Rig Count “Meme” (And Why The Bounce In WTI Is Likely Over)
The Rig Count “Meme” (And Why The Bounce In WTI Is Likely Over)
Recently, the Baker Hughes Rig Count has become all the rage. I did a search on Bloomberg, using only Bloomberg generated articles, with “Rig” and “Count” as matches in the headline only.
Back in October, there were barely any articles at all. The number of articles increased year end, but the articles were still concentrated on the day of the announcement. The first, and so far only, Saturday article was on January 31st. There were Sunday articles on February 18th and February 15th.
The first time I talked about Rig Count in a report was back on December 19th. By the 29th it had become part of our report and things to watch for – on the 29th I sent out the info at 1:30 pm – which, believe it or not, was the first time many saw the number that day. Contrast that to more recent reports where the headlines now come out instantaneously?
Very Little “Near Term” Info
The Rig Count data is very interesting. We used it primarily to support our Jack and Diane thesis on oil and the economy – which I think is winning more and more acceptance.
Secondarily, we thought it would support the price of oil, not because it did much for supply, but because everyone would focus on it, and too many bears had shown up. I think that is exactly what happened.
WTI Pricing
…click on the above link to read the rest of the article…
Never before has drilling for oil collapsed this far this fast.
Never before has drilling for oil collapsed this far this fast.
The word “boom” can never be thought of as a stand-alone concept that everyone loves, particularly governments because they get to rake in the big bucks. It’s always attached to its miserable twin that no one wants to see, the “bust.” They come invariably in cycles, one after the other. You can’t have one without the other. It’s just a question of time. And in the world of fracking, it’s no different.
The fracking-for-oil boom started in 2005, collapsed by 60% during the Financial Crisis when money ran out, but got going in earnest after the Fed had begun spreading its newly created money around the land. From the trough in May 2009 to its peak in October 2014, rigs drilling for oil soared from 180 to 1,609: multiplied by a factor of 9 in five years! And oil production soared, to reach 9.2 million barrels a day in January.
That’s what real booms look like. They’re fed by limitless low-cost money – exuberant investors that buy the riskiest IPOs, junk bonds, leveraged loans, and CLOs usually indirectly without knowing it via their bond funds, stock funds, leveraged-loan funds, by being part of a public pension system that invests in private equity firms that invest in the boom…. You get the idea.
That’s how much of the American shale-oil revolution was funded.
…click on the above link to read the rest of the article…
Goldman Warns “Don’t Count On Rig Declines To Balance The Oil Market Just Yet”
Goldman Warns “Don’t Count On Rig Declines To Balance The Oil Market Just Yet”
With WTI back under $50 once again (the mainstream media’s new Maginot Line for oil complex stability – just like $80, $70, and $60 was), it appears more investors are waking up to the reality of an over-supplied, under-demanded global energy market. The ‘squeeze bounce manipulation’ that we saw over the last week – very reminiscent of the bounce seen mid-collapse in 2008/9, was predicated on falling rig counts (and capex). However, Goldman pours freezing cold fracking water all over that thesis as they explain that the decline in the US rig count remains well short of the level required to achieve a sufficient slowdown in US oil production growth to balance the global market. Simply put, they conclude, lower oil prices will be required over the coming quarters to see the US production growth slowdown materialize with risk to their already low price forecast to the downside.
Via Goldman Sachs,
Further rig count declines required to balance market
The US oil rig count has dropped sharply, with the recent acceleration helping trigger a large rally in oil prices. To help quantify the impact, we decompose oil production from the three big shale plays at the county level, separating the contribution of well and rig performance. Our bottom-up analysis suggests that the decline in the US rig count likely remains well short of the level required to slow US shale oil production to levels consistent with a balanced global market, especially if productivity gains and high-grading materialize as expected. Nonetheless, we also find that the rebalancing of the US oil market is closer than would be implied by the US shale gas template of 2012-13.
The past weeks have featured (1) an improvement in oil prices, locked in to some extent by production hedges, (2) an easing in the funding constraint of E&Ps, and (3) an acceleration in both cost deflation and deleveraging through significant rig cuts.
…click on the above link to read the rest of the article…
