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IEA sees renewed pressure on oil prices as glut worsens
IEA sees renewed pressure on oil prices as glut worsens
(Reuters) – Oil prices might have stabilized only temporarily because the global oil glut is worsening and U.S. production shows no sign of slowing, the International Energy Agency said on Friday.
The West’s energy watchdog said the United States may soon run out of spare capacity to store crude, which would put additional downward pressure on prices.
That process would last at least until the second half of 2015, when growth in U.S. oil production is expected to start abating.
Combined with an increase in global demand, the expected U.S. production slowdown would give some support to oil prices and respite to oil producers’ group OPEC, the IEA said.
“On the face of it, the oil price appears to be stabilizing. What a precarious balance it is, however,” the Paris-based IEA said in its monthly report.
“Behind the façade of stability, the rebalancing triggered by the price collapse has yet to run its course, and it might be overly optimistic to expect it to proceed smoothly.”
The IEA said steep drops in the U.S. rig count have been a key driver of the recent price rebound, which saw Brent crude rising to $60 per barrel after falling as low as $46 in January from last year’s peaks of $115.
…click on the above link to read the rest of the article…
Deciphering The Latest Rig Count Data
Deciphering The Latest Rig Count Data
The main take-away from this week’s rig count is that everything is on track for lower U.S. oil production by mid-year. The weekly changes vary but the overall trend since October is down and that is positive for achieving a better balance between supply and demand.
Please remember the following points and read my previous post “Oil Prices Don’t Change Because of Rig Count” if you haven’t already:
• Rig count is only one indicator of future production trends.
• Week-to-week changes are not critical but trends may become important.
• Horizontal rigs are more important than vertical rigs.
• Bakken, Eagle Ford and Permian basin are the most important plays for tight oil production in the U.S.
This week, the overall rig count was down 75 compared with 43 rigs last week. The horizontal rig count was down 51 compared with 33 rigs last week.
The Eagle Ford Shale play lost 9 horizontal rigs this week, the Permian lost 15 and the Bakken lost 3 rigs.
Rig Count Change Table. Source: Baker-Hughes, Labyrinth Consulting Services, Inc.
(Click to enlarge)
Related: Oil Price Crash A Blessing In Disguise For US Shale
The Bakken horizontal rig count is down 40% from its maximum in 2014. The Permian basin horizontal rig count is down 33% and the Eagle Ford is down 30%.
…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…
Rig Count Decline Re-Accelerates To 2nd Biggest Drop In 22 Years
Rig Count Decline Re-Accelerates To 2nd Biggest Drop In 22 Years
Following last week’s slowing in the pace of rig count, crude prices dropped and then spiked, and it makes today’s data under more scrutiny. At around $49.50, WTI prices have round-tripped back almost perfectly to the scene of the crime before today’s rig count data hit. The total oil rig count dropped almost 6%, down 75 to 1,192 meaning a re-acceleration of the rig count decline and the 2nd biggest drop since 1993.
- *U.S. TOTAL RIG COUNT -75 To 1,192 , BAKER HUGHES SAYS
- *U.S. OIL RIG COUNT -64 TO 922, BAKER HUGHES SAYS
2nd biggest rig count decline since 1993
Total rig count has now dropped 38% in the last 13 weeks – just shy of the move in 2009…
…click on the above link to read the rest of the article…
Where Have All The Rigs Gone?
Where Have All The Rigs Gone?
Baker Hughes publishes a weekly oil and gas rig count by producing basin. I have created charts of all the most productive basins in order that we can see where oil and gas rigs are increasing or decreasing. Their historic rig count, by basin, goes back 4 years.
It needs to be noted that Baker Hughes does not count rigs that are not actively drilling. Rigs that are “Moving In, Rigging Up” are not counted in the Baker Hughes count though they are counted by some others including the North Dakota Industrial Commission.
All rig counts are as of Friday, February 27, 2015.
But first, total US weekly rig count. The oil rig count stands at 986, down 623 from a high of 1,609 in October. The gas rig count stands at 280, down 656 rigs from the high of 935 in October of 2011. However this data base goes back only 4 years. The all-time high for gas rigs was 1,606 in September of 2008. The 1,609 oil rig count in October 2014 was an all-time high for oil rigs. That record is valid only back to the days when Baker Hughes began separate stats for oil and gas rigs however.
…click on the above link to read the rest of the article…
If Oil Prices Are Surprising, Then That Can Only Mean Demand
If Oil Prices Are Surprising, Then That Can Only Mean Demand
Crude oil futures have been quite volatile of late, particularly in the front months where even the slightest changes in expectations of whatever factor (rig counts, CEO comments, etc.) send WTI surging or tumbling by turn. Despite that, however, the outer years on the curve have seen not just more stability but a steady downward pressure of late. I think a lot of that has to do with futures investors reconciling actual contango options with the idea that demand is far more of not just a problem, but a longer-term problem.
At the front end, rig counts have gained most attention but only as they relate to the surge in inventory. The US is overflowing with oil and production remains at a record high, but the two of those factors together don’t actually count as much in terms of price as is made out by most commentary. It is far too difficult for many to discount the entire economics professions’ complete dedication to the US “booming” economy in order to see a huge demand problem in oil prices; far easier to simply repeat the words “record supply” and leave it at that.
If you actually view the futures curve of late, the curves of recent days has crossed in the outer years. In other words, where prices have moved around at the shorter end, out at the long end the curve has shifted significantly downward regardless of short term pricing. That relates to both contango, as noted above, but also I believe growing recognition that supply is overwrought and demand is what may be impaired – perhaps more permanently than anyone thought possible only a few months ago.
…click on the above link to read the rest of the article…
OPEC Production Cut May Not Be Needed After All
OPEC Production Cut May Not Be Needed After All
U.S. tight oil production may fall 600,000 barrels per day by June 2015 based on reasonable projections of current rig counts.
I compared the decrease in rig counts that began in late 2014 to the rig count decrease in 2008 and 2009 following the Financial Crisis. I projected current total rig counts according to three scenarios out to June 5, 2015 shown in the chart below. I then applied those decline rates to rig counts and production in the 4 major tight oil plays: the Bakken, D-J Niobrara, Eagle Ford and Permian basin.
Comparison of rig count decrease in 2008-2009 and 2014-2015. Source: Baker Hughes
In 2008-2009, the U.S. rig count dropped from 2,031 to 876 over a period of 283 days. As of February 13, 2015, the rig count has fallen from 1,931 to 1,358 over a period of 151 days. The current rate of decrease is greater than in 2008-2009. I used the 2008-2009 rig count trend as a general guide for rate of change and duration recognizing that there are differences between the two events. Other than the rate of decrease, the most notable difference is that in 2008-2009, there was more vertical drilling than in 2014-2015 and that rig efficiency was lower in 2008-2009 as a result.
…click on the above link to read the rest of the article…
Oil Plunges, Inventories Soar to Record, Glut Gets Worse
Oil Plunges, Inventories Soar to Record, Glut Gets Worse
Crude oil had rallied 20% in three days, with West Texas Intermediate jumping $9 a barrel since Friday morning, from $44.51 a barrel to $53.56 at its peak on Tuesday. “Bull market” was what we read Tuesday night. The trigger had been the Baker Hughes report of active rigs drilling for oil in the US, which had plummeted by the most ever during the latest week. It caused a bout of short covering that accelerated the gains. It was a truly phenomenal rally!
But the weekly rig count hasn’t dropped nearly enough to make a dent into production. It’s down 24% from its peak in October. During the last oil bust, it had dropped 60%. It’s way too soon to tell what impact it will have because for now, production of oil is still rising [my post from Friday… Oil Price Soars, Rig Count Plunges Worst Ever, But Bloodletting Just Beginning].
And that phenomenal three-day 20% rally imploded today when it came in contact with another reality: rising production, slack demand, and soaring crude oil inventories in the US.
The Energy Information Administration reported that these inventories (excluding the Strategic Petroleum Reserve) rose by another 6.3 million barrels last week to 413.1 million barrels – the highest level in the weekly data going back to 1982. Note the increasingly scary upward trajectory that is making a mockery of the 5-year range and seasonal fluctuations:
…click on the above link to read the rest of the article…
US Rig Count Crashes At Fastest Pace Since 2009 To 14-Month Lows
US Rig Count Crashes At Fastest Pace Since 2009 To 14-Month Lows
Just as T.Boone Pickens warned, US Rig Counts are plunging. Down by 61 this week alone – the biggest weekly drop in over 5 years – at 1,750, this is now the lowest since November 2013 (and very close the lowest since 2010). The 10% or so plunge in the last 7 weeks is following the same trajectory as the 2008 collapse – which led to – just as Pickens suggested – a 50% crash in rig counts…
Pickens… “demand is down” – “lower demand is the main driver” – “rig count is gonna fall – drop 500 rigs in next 6-9 months”
This the first rig count drop year-over-year in a year…
Charts: Bloomberg
