Home » Posts tagged 'us shale' (Page 3)

Tag Archives: us shale

There is new data out today. The EIA published their International Petroleum Statisticsyesterday. The EIA also published their Drilling Productivity Report which gave their expected shale oil and gas production through September. Then this morning OPEC published their Monthly Oil Marketing Report with OPEC crude only production numbers through July.

First the Drilling Productivity Report. Of course most of the Drilling Productivity Report is projection, not history. And that projection goes through September 2015.

The EIA has the Bakken peaking in December and declining 107 thousand barrels per day since that point. A secondary peak was reached in April and declining steadily since then.

The EIA has Eagle Ford peaking in March and declining 226 thousand barrels per day since that point.

The EIA has Niobrara peaking in March, almost flat for one month then declining sharply after that for a total decline of 75 thousand barrels per day after that.

The Permian was the only major shale area with no decline so far. The EIA has the Permian up 29 thousand barrels per day since the rest of the field, combined, peaked in April.

The EIA has total shale peaking in April at 5,434000 bpd and declining by 360 thousand barrels per day by September to 5,074000 bpd. 360,000 barrels per day is quite a decline by September.

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

Why A U.S Shale Slowdown Will Hardly Effect Oil Prices

June 22, 2015

Why A U.S Shale Slowdown Will Hardly Effect Oil Prices

Just last week I wrote on the possibility of a renewed downturn in oil prices, owing to the fact that huge volumes of supplies could potentially come online in places like Iraq, Libya, and Iran. That is still the case.

But let’s look at the other side of the coin. Despite the surprising resilience of U.S. shale, production could be now entering an extended period of decline. The EIApredicts that output in the major shale regions could decline by 91,000 barrels per day in July.

An ongoing and deeper contraction is likely. The EIA also reports a dramatic decline in well completions since October of last year. When prices starting falling, especially after the November 2014 OPEC meeting, rig counts started vanishing from the field and drilling companies began completing fewer wells.

(Click to enlarge)

That is important because shale wells suffer from rapid decline rates in their production profiles. After about the first year, the initial burst of oil largely peters out, and the decline rate is precipitous. As a result, a large number of fresh wells need to constantly be completed just to keep output flat.

With the number of well completions down, falling production from wells that were drilled in the past start to become more obvious. This “legacy decline” is now overtaking new production, most likely forcing overall net production to have dipped into negative territory in May.

(Click to enlarge)

The volume of legacy declines will only increase as it will increasingly reflect the huge volume of production that came online in 2013 and 2014. All of that recent production won’t be replaced as drillers sit on the sidelines. That means the decline in total production will only accelerate in the months ahead.

…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…

OPEC is frying bigger fish than just Canada’s oilsands

June 7, 2015

OPEC is frying bigger fish than just Canada’s oilsands

OPEC keeping the taps wide open, letting Saudi Arabia pick off many birds with one stone

OPEC’s masterminding of the world oil market is leaving Canada to wonder where exactly our reeling energy industry fits within the scheme of the cartel’s strategic thinking.

By leaving its production targets unchanged at its semi-annual meeting in Vienna this week, the Organization of the Petroleum Exporting Countries is sticking with a measure that will continue to bleed competitors around the world.

In Canada, the fallout of the oil shock is already something of a national preoccupation. The idea, then, that our oil industry, at least in the mind of OPEC kingpin Saudi Arabia, is just some happy collateral damage likely won’t do much for any lingering traces of our bygone global inferiority complex.

‘Here is a situation in which the Saudis, with one single chess move, are able to achieve multiple objectives’— OPEC watcher Atif Kubursi

“Obviously, we weren’t the main target, but anything that slows overall growth of non-OPEC production is good in the eyes of the Saudis,” said Vincent Lauerman, the director of energy and the environment at the Conference Board of Canada. “Taking us down a couple notches certainly supports their end goal.”

The rationale that OPEC’s move away from production quotas last November, which cratered global oil prices, was a cannon shot in the battle for market share is certainly valid.

Many birds with one stone

That said, squeezing the competition by keeping the oil market oversupplied is only one of the kingdom’s many objectives. For the Saudis — whose wants can be taken as synonymous with those of OPEC despite the fractious nature of its various factions — the real elegance of this latest oil price war is how it serves so many of its purposes with a single stroke.

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

Drilling Efficiency To Keep Oil Prices Low

May 24, 2015

Drilling Efficiency To Keep Oil Prices Low

Economics 101 tells us that prices in a free market are set by the interaction of supply and demand. The world oil markets have gotten a graphic lesson in that truth over the last year, as the dramatic surge in US oil production has met stagnant demand. This, in turn, has pushed down spot prices by nearly half.

The recent uptick in oil prices, however, has buoyed hopes among market watchers that a strong oil price rally is in order. Unfortunately economics is working against these investors.

Gasoline demand is starting to rise as prices have reached multiyear lows. As it continues to rise, motorists around the world will begin to suck up extra all of that extra supply. That would normally lead to a strong rebound in prices.

But unlike the 2008 fall in oil prices, which was driven by a collapse in demand across the industry, the current price quandary is supply based. And the massive expansion in supply is overwhelming the newfound demand. That may make it more difficult for prices to bounce back.

Over the past few years exploration companies have unlocked extraordinary new unconventional resources like the Alberta oil sands and US shale, leading to a historic increase in supply. More impressive is the fact that even at today’s low prices, there is likely to be some small production increase in 2015.

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

Will US Shale Boom Continue Or Have A Hiatus?

February 25, 2015

Will US Shale Boom Continue Or Have A Hiatus?

The conventional wisdom recently has been that North America will keep producing shale oil for some time despite the higher costs associated with hydraulic fracturing and the 50 percent drop in oil prices over the past eight months.

The thing about conventional wisdom is that it tends to be challenged, sometimes successfully. And shale’s biggest producer in the United States, EOG Resources Inc., is saying the recent rapid growth in its own shale production will end this year. And this idea is supported by people with experience in oil.

Certainly, though, the logic behind the theory of continued shale production is solid: Oil prices will bottom out, then begin to rise to the point where crude from shale becomes profitable again despite the cost of fracking. The only question is whether OPEC would then accept US shale as a competitor and cut its own production to shore up prices.

A forecast issued Feb. 17 by BP was more specific. The BP Energy Outlook 2035expects US production will grow rapidly for the immediate future, then “flatten out.” Or, as BP’s chief economist, Spencer Dale, told The Wall Street Journal, “U.S. [shale] oil can’t continue to grow rapidly forever.” And OPEC will be ready to fill that vacuum.

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

The Saudi Succession: Its Impact On Oil, Markets And Politics

January 23, 2015

The Saudi Succession: Its Impact On Oil, Markets And Politics

As reported earlier, several hours ago Saudi Arabia announced that its 91-year-old King Abdullah had passed away, in the process setting off what may be a fascinating, and problematic, Saudi succession fight which impacts everything from oil, to markets to geopolitics, especially in the aftermath of the dramatic political coup in neighboring Yemen. As a reminder, it is Saudi Arabia whose insistence on not cutting oil production with the intent of hobbling the US shale industry has led to the splinter of OPEC, and to a Brent price south of $50. Which is why today’s event and its implications will be analyzed under a microscope by everyone: from politicians to energy traders.

Here, courtesy of Ecstrat’s Emad Mostaque, is an initial take at succession, the likely impact on oil, then the Saudi market & currency and finally regional politics.

Succession

The process of succession appears to have run smoothly with Prince Salman (79), Abdullah’s half-brother, being announced king and another half-brother and the youngest of his generation (at 69) Prince Muqrin being anointed the new Crown Prince as expected. King Salman has significant financial and power backing as one of 7 sons of Hassa al Sudairi (known as the “Sudairi Seven”) and King Abdulaziz and as such is unlikely to be challenged. Salman is commonly known for his charitable giving and conservative nature, please contact us for other details.

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

Oil heads for seventh weekly loss as supply glut drags

January 9, 2015

Oil heads for seventh weekly loss as supply glut drags

(Reuters) – Oil prices headed for a seventh straight weekly loss on Friday, with key producers showing no sign of cutting output in the face of a global supply glut.

Global oil benchmarks hit their lowest since 2009 this week and are down more than 50 percent from June levels, with Brentcrude futures LCOc1 extending declines on Friday, dropping 50 cents a barrel to $50.46 by 0427 ET.

U.S. crude futures for February delivery CLc1 were down 12 cents at $48.67 a barrel despite robust U.S. economic data that brightened the outlook for demand.

Brent’s premium to U.S. crude CL-LCO1=R fell near $1.80 a barrel, the narrowest since October as international seaborne oil markets appear to be under even more pressure than the U.S. domestic market.

“It is another negative week and a reflection of the focus on negative arguments,” said Hans Van Cleef, senior energy economist at Dutch bank ABN Amro.

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

Oil hits new post-2009 low below $56 as supply glut prevails | Reuters

January 2, 2015

Oil hits new post-2009 low below $56 as supply glut prevails | Reuters.

(Reuters) – Brent crude LCOc1 reversed early gains on Friday to fall to a fresh post-2009 low below $56 a barrel, as a glut of oil that has halved prices since June outweighed investors positioning at the start of the year for a possible eventual recovery.

Brent has slumped to its lowest in more than five years, as top exporter Saudi Arabia and other large Gulf producers have declined to cut production in the face of fast-growing U.S. shale oil output, despite pleas from other members in the Organization of the Petroleum Exporting Countries (OPEC).

“With no production cuts in the offing and a significant demand response years away, oversupply looks to be with us for a while,” said RBN Energy analyst Rusty Braziel in a note. “$100 a barrelcrude oil prices are in the rear view mirror, at least for a couple of years.”

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

Oil Wars: Why OPEC Will Win

December 13, 2014

Oil Wars: Why OPEC Will Win.

In the green corner we have the US shale producers. In the red corner we have the oil exporting countries of OPEC. Assuming the fight is fought to a conclusion, who wins?

OPEC wins. The US shale producers will shut down first. The reasons are:

• The US shale producers are motivated by economics, and all other things being equal will have an incentive to cut production at or around the point where production cost exceeds sales price.

• The OPEC countries are motivated by social imperatives. They have historically used their oil wealth to finance social programs, build infrastructure and subsidize basic foodstuffs and other items such as gasoline (which costs one cent/liter in Venezuela). Cutting back on social spending courts civil unrest and cutting back on oil production cuts spending, so they have a disincentive to cut oil production. (As long as the oil price exceeds cash production costs, which it does in all OPEC countries by a substantial margin, they in fact have an incentive to increase production).

But not all OPEC countries are created equal. Some can stand the pain longer than others, and here we will look into the question of who might go to the wall first if low oil prices persist.

But first the US shale producers. The recent graphic from Business Insider reproduced in Figure 1 is not backed up by much in the way of explanation but my understanding is that it shows current production and breakeven production costs at US shale oil plays based on Citigroup estimates. If we take these results at face value we find that almost all US shale oil production is economic at crude prices of $70/bbl, but 40% of it becomes uneconomic at prices below $60/bbl and almost 90% of it at prices below $50/bbl:

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

US Shale Under Pressure From More Than Just Low Prices

December 4, 2014

US Shale Under Pressure From More Than Just Low Prices.

Hydraulic fracturing, or fracking, has come full circle in Denton, Texas after a controversial ban on the practice entered into effect on Tuesday. Denton is one of several cities located on top of the massive Barnett shale formation, regarded as the birthplace of modern fracking. The ban, while incomplete, gives strength to what is a growing anti-fracking movement in the United States.

The Barnett shale covers an area of more than 5,000 square miles with depths between 5,000 and 8,000 feet. With more than 40 trillion cubic feet (Tcf) of technically recoverable gas, the Barnett holds approximately 12% of the nation’s proved reserves. Over the past decade, activity on the shale skyrocketed and over 15,000 wells have been drilled to date. For the state, the benefits are clear – in 2011 alone, Barnett production added nearly $13.7 billion to the Texas economy. However, productionpeaked in 2012 at 2 Tcf and will plummet by more than half toward 2030 – recent ban notwithstanding.

U.S. Dry Shale Production

Source: EIA

Despite the success, fracking is not a victimless pursuit and its spread has been met with an unequal, but growing amount of public criticism; local bans and national moratoriums prove not everyone is on board. Earlier this year, Exxon CEO Rex Tillerson became party to a suit, which sought to remove fracking-related infrastructure from his Dallas suburb.

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

Saudi Arabia Declares Oil War on US Fracking, hits Railroads, Tank-Car Makers, Canada, Russia; Sinks Venezuela | Wolf Street

December 2, 2014

Saudi Arabia Declares Oil War on US Fracking, hits Railroads, Tank-Car Makers, Canada, Russia; Sinks Venezuela | Wolf Street.

When OPEC announced on Thanksgiving Day that it would maintain oil production at 30 million barrels per day, chaos broke out in the oil market, and the price of oil around the globe spiraled into a terrific plunge. The unity of OPEC, if there ever was such a thing, was in tatters with Saudi oil minister smiling victoriously, and with a steaming Venezuelan oil minister thinking of the turmoil his country is facing [OPEC Refuses to Cut Production, Oil Plunges off the Chart].

The bloodletting in the oil markets on Thursday led to some wobbly stability on Friday, and for a while it seemed oil had found a bottom, but then the US stock market closed early while crude continued trading, and suddenly all heck re-broke loose, and the US benchmark WTI plunged again and broke the $66-a-barrel mark before coming to a rest at $66.06. After a near 10% dive in two days, WTI is now down 37% since June!

This chart shows the Thanksgiving plunge following OPEC’s decision, the deceptive stability Friday, and the afterhours plunge:

Now more information has emerged, confirming prior “rumors” and “conspiracy theories.”

During the closed-door meetings in Vienna, Saudi oil minister Ali al-Naimi told OPEC members that OPEC had to combat the US fracking boom. If OPEC cut output to raise the price of oil, it would lose market share, he argued. The way to win would be to allow overproduction to depress prices to the point where they would destroy the profitability of North American producers. And they’d have to cut production, rather than OPEC.

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

OPEC Inaction Spurs Survival of Fittest as Oil Below $65 – Bloomberg

December 1, 2014

OPEC Inaction Spurs Survival of Fittest as Oil Below $65 – Bloomberg.

West Texas Intermediate tumbled below $65 a barrel to the lowest level since July 2009 amid speculation prices have further to drop before OPEC’s decision to maintain output slows U.S. shale supply.

Benchmark futures in New York and London slumped as much as 3.7 percent, before paring some of those losses. Both grades had their biggest monthly loss in November in almost six years after the Organization of Petroleum Exporting Countries signaled it will leave it to the market to reduce a global glut. Current prices are no guarantee of a significant decline in U.S. shale output, Iran’s Oil Minister Bijan Namdar Zanganeh said in an interview on Nov. 28.

Oil has collapsed into a bear market as the U.S. pumps crude at the fastest rate in three decades while global demand growth slows. OPEC last week resisted calls from members including Venezuela and Iran to reduce its production target of 30 million barrels a day at a meeting in Vienna.

“The market is in panicking mode,” Hans van Cleef, energy economist at ABN Amro Bank NV in Amsterdam, said by phone. “Prices in 2015 will be significantly lower than in 2014.”

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

Energy round-up: nuclear future? | New Economics Foundation

November 30, 2014

Energy round-up: nuclear future? | New Economics Foundation.

Article: Hinkley Point nuclear plant ‘threatened by Areva financial crisis – Reactor-maker Areva’s stake in new UK nuclear plant called into question amid financial difficulties.

Chart: Renewables catching nuclear:

Article: Oil price slump to trigger new US debt default crisis as Opec waits – Falling oil prices and US shale drillers drowning in a sea of debt could be the spark for a new credit crunch.

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

“It’s Different This Time?” What Happened To US Oil Drillers During The Last Price War | Zero Hedge

November 26, 2014

“It’s Different This Time?” What Happened To US Oil Drillers During The Last Price War | Zero Hedge.

History may not repeat but it rhymes so loud sometimes that Einstein would be rolling in his repetitively insane grave. As Bloomberg notes, the last time that U.S. oil drillers got caught up in a price war orchestrated by Saudi Arabia, it ended badly for the Americans. “1986 was the big price collapse and the industry did not see it coming,” said Michael Lynch, president of Strategic Energy and Economic Research who has covered the oil sector for 37 years, “it put a lot of them out of business. You just don’t forget it. It’s part of the cultural memory.” Think it can’t happen again? Think again… consider how levered US Shale drillers are and just what Saudi has to gain from keeping their foot on the US neck… In 1986, the U.S. industry collapsed, triggering almost a quarter-century of production declines, and the Saudis regained their leading role in the world’s oil market.

As Bloomberg reports,

In 1986, the Saudis opened the spigot and sparked a four-month, 67 percent plunge that left oil just above $10 a barrel. The U.S. industry collapsed, triggering almost a quarter-century of production declines, and the Saudis regained their leading role in the world’s oil market.

So while no one expects the Saudis to ramp up output now like they did then and U.S. shale oil companies are pledging to keep drilling regardless, the memory of that bust looms large for American industry executives on the eve of OPEC’s meeting tomorrow. As the Saudis gather with officials from the 11 other OPEC nations in Vienna, analysts are split on whether the group will cut output to lift prices or leave production unchanged to fight for market share with shale drillers.

“1986 was the big price collapse and the industry did not see it coming,”said Michael Lynch, president of Strategic Energy and Economic Research in Wakefield, Massachusetts, who has covered the oil sector for 37 years. “It put a lot of them out of business. You just don’t forget it. It’s part of the cultural memory.”

…

“Someone has to blink,” said Sarah Emerson, managing principal of ESAI Energy Inc., a consulting company in Wakefield, Massachusetts. “OPEC is saying ‘Does it really have to be us?’”

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

Tag Archives: us shale

Content

Post categories

Economic Links

Energy/Resource Links

Environmental Links

Geopolitical Links

Liberty Links

News Links

Other Links

Survival Skills

Post Archives by Category

Many birds with one stone

Post navigation

Latest Posts