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A document published by the Public Relations Society of America, discovered by DeSmog, reveals that from the onset of its public relations campaign, the oil industry courted mainstream media reporters to help it sell the idea of lifting the ban on crude oil exports to the American public and policymakers.

Calling its campaign the “Miracle of American Oil,” the successful PR effort to push for Congress and the White House to lift the oil exports ban was spearheaded by Continental Resources, a company known as the “King of the Bakken” shale oil basin and founded by Harold Hamm. Hamm served as energy advisor to 2012 Republican Party presidential candidate Mitt Romney.

Image Credit: Public Relations Society of America

The campaign launched on December 16, 2013, the 40th anniversary of the Organization of the Petroleum Exporting Countries (OPEC) oil embargo, and won the prestigious PRSA Silver Anvil Award.

According to the document, submitted to PRSA to detail the logistics and reach of the PR effort, it was “designed to influence public policy and/or affect legislation, regulations, political activities or candidacies — at the local, state or federal government levels.”

And it all began with a kick-off dinner in Washington, D.C., hosted by Continental Resources and attended by some of the most influential mainstream media energy reporters in the United States.

Regular readers of the Washington oil and gas industry beat will find the names of the dinner attendees, disclosed in the document, familiar.

Image Credit: Public Relations Society of America

“The campaign not only served as a catalyst to correct public misconceptions, but it also propelled crude oil exports to the top of the U.S. Senate’s agenda,” Continental boasted on the PRSA document.

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

The Crude Oil Export Ban–What, Me Worry About Peak Oil?

December 28, 2015

The Crude Oil Export Ban–What, Me Worry About Peak Oil?

Congress ended the U.S. crude oil export ban last week. There is apparently no longer a strategic reason to conserve oil because shale production has made American great again. At least, that’s narrative that reality-averse politicians and their bases prefer.

The 1975 Energy Policy and Conservation Act (EPCA) that banned crude oil export was the closest thing to an energy policy that the United States has ever had. The law was passed after the price of oil increased in one month (January 1974) from $21 to $51 per barrel (2015 dollars) because of the Arab Oil Embargo.

The EPCA not only banned the export of crude oil but also established the Strategic Petroleum Reserve. Both measures were intended to keep more oil at home in order to make the U.S. less dependent on imported oil. A 55 mile-per-hour national speed limit was established to force conservation, and the International Energy Agency (IEA) was founded to better monitor and predict global oil supply and demand trends.

Above all, the export ban acknowledged that declining domestic supply and increased imports had made the country vulnerable to economic disruption. Its repeal last week suggests that there is no longer any risk associated with dependence on foreign oil.

What, Me Worry?

The tight oil revolution has returned U.S. crude oil production almost to its 1970 peak of 10 million barrels per day (mmbpd) and imports have been falling for the last decade (Figure 1).

Figure 1. U.S. crude oil production, net imports and consumption. Source: EIA and Labyrinth Consulting Services, Inc.
(Click image to enlarge)

But today, the U.S. imports twice as much oil (97%) as in 1974! In 2015, the U.S. imported 6.8 mmbpd of crude oil (net) compared to only 3.5 mmbpd at the time of the Arab Oil Embargo (Table 1).

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

Bank of Montreal Asks If “Oil Prices Could Collapse To $20”; Answers: “Yes”

December 27, 2015

Bank of Montreal Asks If “Oil Prices Could Collapse To $20”; Answers: “Yes”

When looking at the price of oil in 2015, Canada’s Bank of Montreal admits it was wrong. Very, very wrong.

In our “2015 Year Ahead” report we laid out three plausible scenarios: (1) our base case, which forecast Brent crude oil prices of $50-60/bbl over the first half of 2015 and $60-80/bbl over the second half of the year; (2) a bull case, which forecast a Brent trading range of $85-95; and a bear case, which suggested a Brent trading range of $50-60/bbl. The actual trading range in 2015 proved to be even more ‘bearish’ than our bear case, with Brent generally trading between $36 and $60/bbl. So what did we get wrong?

The answer: pretty much everything but mostly the fact that in the race to the production bottom (“we’ll make up for plunging prices with soaring volumes”) only dramatic outcomes, which shock the status quo, have any impact, to wit:

“we assumed that Iraq production would average 2.9 million bpd; actual production was roughly 1 million bpd higher. We also assumed that Saudi Arabia would be content to hold production at 9.2 million bpd whereas actual production was roughly 800,000 bpd higher. In our view, this incremental 1.8 million bpd of production was the principal reason that global oil inventories swelled by more than 340 million barrels to a record high of approximately 3.1 billion barrels and why crude oil prices have collapsed.”

Well, that, and the fact that the financial BTFD community finally threw in the towel on the most financialized commodity, and following two failed attempts at dead cat bounces, may have thrown in the towel. That said, just looking at speculative positions, oil may have a long way to drop still.

Which may also explain why, as noted last week, someone has made material directional (and/or hedge) bets via puts that oil will slide to $25, $20, even as low as $15.

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

Oil Bankruptcies Hit Highest Level Since Crisis And There’s “More To Come”, Fed Warns

December 25, 2015

Oil Bankruptcies Hit Highest Level Since Crisis And There’s “More To Come”, Fed Warns

“Two things become clear in an analysis of the financial health of US hydrocarbon production: 1) the sector is not at all homogenous, exhibiting a range of financial health; 2) some of the sector indeed looks exposed to distress [and] lifelines for distressed producers could include public equity markets, asset sales, private equity, or consolidation. If all else fails, Chapter 11 may be necessary.” That’s Citi’s assessment of America’s “shale revolution”, which the Saudis have been desperately trying to crush for more than a year now.

As Citi and others have noted – a year or so after we discussed the issue at length – uneconomic producers in the US are almost entirely dependent on capital markets for their continued survival. “The shale sector is now being financially stress-tested, exposing shale’s dirty secret: many shale producers depend on capital market injections to fund ongoing activity because they have thus far greatly outspent cash flow,” Citi wrote in September. Here’s a look at what the bank means:

Of course this all worked out fine in an environment characterized by relatively high crude prices and ultra accommodative monetary policy. The cost of capital was low and yield-starved investors were forgiving, allowing the US oil patch to keeping drilling and pumping long after it should have been bankrupt. Now, the proverbial chickens have come home to roost. In the wake of the Fed hike, HY is rolling over and as UBS noted over the summer, “the commodity related industries total 22.8% of the overall HY market index on a par-weighted basis; sectors most at-risk for defaults (defined as failure to pay, bankruptcy and distressed restructurings) total 18.2% of the index and include the oil/gas producer (10.6%), metals/mining (4.7%), and oil service/equipment (2.9%) industries.”

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

“Canadians Should Be Concerned” As Energy Sector Job Losses Spike To 100,000 This Year

December 22, 2015

“Canadians Should Be Concerned” As Energy Sector Job Losses Spike To 100,000 This Year

It’s grim up north… and getting grimmer. Amid soaring suicide rates, Canada’s once-booming oil patch is rapidly accelerating its downward trajectory. “Canadians should be concerned in times like these,” warned Tim McMillan, president and chief executive of the Canadian Association of Petroleum Producers, noting that the oil and gas sector will see 100,000 job losses by the end of this year. Even if oil prices rise early and fast next year, Financial Post reports, it may take a while for Canadian oilsands to rebound as the industry has mothballed a number of long-term projects.

Over the past year, we have extensively chronicled the tragic story of Alberta – Canada’s once booming oilpatch – disintegrate slowly at first, then very fast, into an economic and financial wasteland:

And, in one of the latest articles of this sad series describing the Alberta “bloodbath”, we said that the worst casualty of Canada’s recession has been the local commercial real estate market, where office vacancies are about to surpass the aftermath of the (first) great financial crisis.

But, it turns out the biggest casualty of Canada’s recession, which unless oil rebounds strongly soon will follow Brazil into an all out depression, are people themselves. As CBC reports the suicide rate in Alberta has increased dramatically in the wake of mounting job losses across the province.

Sadly, as The Financial Post reports, the situation looks set to get worse… as policy uncertainty has exacerbated the pain of low prices…

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

“I Know Of No One Who Predicted This”: Russian Oil Production Hits Record As Saudi Gambit Fails

December 21, 2015

“I Know Of No One Who Predicted This”: Russian Oil Production Hits Record As Saudi Gambit Fails

In late October, we noted that for the second time this year, Russia overtook Saudi Arabia as the biggest exporter of crude to China.

Russia also took the top spot in May, marking the first time in history that Moscow beat out Riyadh when it comes to crude exports to Beijing. “Moscow is wrestling with crippling Western economic sanctions and building closer ties with Beijing is key to mitigating the pain,” we said in October, on the way to explaining that closer ties between Russia and China as it relates to energy are part and parcel of a burgeoning relationship between the two countries who have voted together on the Security Council on matters of geopolitical significance. Here’s a look at the longer-term trend:

You may also recall that Gazprom Neft (which is the number three oil producer in Russia) began settling all sales to China in yuan starting in January. This, we said, is yet another sign of the petrodollar’s imminent demise.

On Monday, we learn that for the third time in 2015, Russia has once again bested the Saudis for the top spot on China’s crude suppliers list. “Russia overtook Saudi Arabia for the third time this year in November as China’s largest crude oil supplier,” Reuters writes, adding that “China brought in about 949,925 barrels per day (bpd) of Russian crude in November, compared with 886,950 bpd from Saudi Arabia.”

This is an annoyance for Riyadh. China was the world’s second-largest oil consumer in 2014 and closer ties between Moscow and Beijing not only represent a threat in terms of crude revenue, but also in terms of geopolitics as the last thing the Saudis need is for Xi to begin poking around militarily in the Arabian Peninsula on behalf of Moscow and Tehran.

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

Who’s right, commodities or the Fed?

December 21, 2015

Who’s right, commodities or the Fed?

As the U.S. Federal Reserve Bank raised interest rates last week for the first time in 10 years in response to what it said was strength in the U.S. economy, economically sensitive commodities such as industrial metals and crude oil continued to plumb new cycle lows.

Either these commodities are about the turn the corner as renewed strength in the United States–the biggest buyer of commodities next to China–revives industrial metal and crude oil demand–or the Federal Reserve is misreading the tea leaves and crashing commodity prices signal a world and U.S. economy in distress.

Market analysts like to say that copper is the metal with a Ph.D. in economics. Because of copper’s central role in the modern economy, it often reliably forecasts the direction of the economy. Since copper reached its peak at the beginning of 2011 above $4.50 per pound, it has swooned to near $3 in 2011 coinciding with a crisis in Europe, bounced back to near $4 once the crisis passed and then settled above $3 by the middle of 2013 where it essentially traded sideways until this year. After trending down since May copper hit $2.05 a pound last week, only three cents above the low for the year registered on November 23.

And, it wasn’t just copper. Nickel started the year above $7 a pound and finished last week at $3.90 a pound. Aluminum began the year above 90 cents a pound and settled last week at 67 cents. Zinc peaked near $1.10 a pound in May and now sells for 66 cents. Iron ore prices, which dropped almost 50 percent last year, this year dropped from $68 per ton to $47 as of last week, another 31 percent decline.

Crude oil, which dropped about 50 percent in the last half of 2014, has dropped another 35 percent so far in 2015.

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

Azerbaijan Currency Crashes 50% As Crude Contagion Spreads

December 21, 2015

Azerbaijan Currency Crashes 50% As Crude Contagion Spreads

OPEC blowback continues to ripple around the world. With Russia’s Ruble pushing back towards record lows against the USD, and Kazakhstan’s Tenge having tumbled to record lows, the writing was on the wall for Azerbaijan. As Bloomberg reports, the third-biggest oil producer in the former Soviet Union moved to a free float on Monday and the manat crashed almost 50% instantly to its weakest on record with the second devaluation this year.

First the Russian Ruble…

Then Kazakhstan’s Tenge…

While Azerbaijan’s former Soviet allies Russia and Kazakhstan have moved to floating currency regimes in the past year,the Azeri central bank has questioned whether the country was prepared for a similar shift. Governor Elman Rustamov said there was no need for another devaluation of the manat, according to a televised interview broadcast on Sept. 25.

And now Azerbaijan’s Manat crashes 50%…

As Bloomberg reports, “It looks like Azerbaijan’s authorities are following Kazakhstan’s devaluation path,” said Oleg Kouzmin, a former Russian central bank adviser who works as an economist at Renaissance Capital in Moscow. “After devaluing the currency once, some time ago, they concluded that the first move was not enough to tackle all the challenges of a weaker oil price environment.”

Azerbaijan relies on hydrocarbons for more than 90 percent of its exports and the manat has lost almost half its value against the dollar this year, the worst performance of currencies globally.

The Azeri central bank’s reserves were at $6.2 billion at the end of November, down from more than $15 billion a year earlier.

The Russian ruble’s collapse and a 70 percent plunge in the crude price since June last year have ushered in a new era of volatility for Azerbaijan, which is also beset by challenges ranging from declining oil output to a festering conflict with neighboring Armenia.

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

Egypt update: net oil importer and chokepoints

December 7, 2015

Egypt update: net oil importer and chokepoints

Oil production and consumption

Fig 1: Oil production vs consumption

After a post-peak decline production has stabilized but consumption has increased relentlessly at a long-term 1.7% pa, slightly below population growth of around 2% pa. Egypt is now a net oil importer. On these trends, the gap between consumption and production is likely to get larger. This increases imports and the need for fuel subsidies. Let’s zoom into the monthly oil production (crude and NGL separately)

Fig 2: Production of crude oil and natural gas plant liquids

Crude oil production declined again since 2009 at 2.5% pa, offset by an increase in NGLs of 4.7% pa

Fig 3: Net crude exports and refinery utilisation

The crude oil exported up to 2005 (at low oil prices!) is now missing. EIA data are presently only available up to 2012. The EIA writes:

According to data from OPEC’s Annual Statistical Bulletin, Egypt’s refined petroleum output averaged 445,000 b/d in 2013, suggesting that refinery utilization was about 63%. Egypt’s refining output declined by 28% from 2009 to 2013. Facts Global Energy attributes this decline to Egypt’s policy that permits foreign oil producers to export more crude oil as repayment of EGPC’s financial debt. As a result, Egypt’s crude oil exports [56% EU, 28% India, 13% China] have not declined over the past few years, despite declining production. In turn, there is a lower volume of domestic crude oil available for the domestic refineries, and Egypt must make up for the difference by importing petroleum products and/or crude oil. Egypt imported about 145,000 b/d of petroleum products in 2014, according to Global Trade Information Services. Egypt also exported about 60,000 b/d of petroleum products that same year.

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

Oil Forecast From a Reputable Firm

December 7, 2015

Oil Forecast From a Reputable Firm

The below charts were derived from the data published by a very reputable oil and gas analyst and forecaster in Texas. Because the firm charges for their data forecast I am at not at liberty to disclose their name.

All data through 2014 is the actual price and production data. Data from 2015 through 2025 is forecast data. This data came out over a month ago so some of 2015 is forecast data.

All production data is in million barrels per day and is Crude + Condensate except the World forecast which includes NGLs. Notice also that all U.S. data dates from 2008 while all other data begins with 2013.

Oil price drops only slightly next year then rises in 2017 and 2018. Then it levels out for about 5 years before rising sharply in 2024 and 2025. My guess, and it is just my guess, is that the world begins to realize that oil production will never rise again.

This firm clearly has world oil production peaking in 2015 then dropping for five years before leveling out to up slightly for three years. Then resuming its decline in 2024 and 2025.

They have the US declining only slightly in the next two years then starting a slow climb until we peak in 2021 at a point just 40,000 barrels per day above the previous 2015 peak.

They have the Gulf of Mexico peaking in 2021 at 2.13 million bpd. The Permian peaks in 2020 at 1.9 million bpd. Eagle Ford peaks in 2019 abd 2020 at 1.51 million bpd and the Bakken peaks in 2021 abd 2020 at 1.36 million bpd.

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

ISIS Oil Trade Full Frontal: “Raqqa’s Rockefellers”, Bilal Erdogan, KRG Crude, And The Israel Connection

November 29, 2015

ISIS Oil Trade Full Frontal: “Raqqa’s Rockefellers”, Bilal Erdogan, KRG Crude, And The Israel Connection

“Effectively, we have been financially discriminated against for a long time. By early 2014, when we did not receive the budget, we decided we need to start thinking about independent oil sales” — Ashti Hawrami, Kurdistan’s minister for natural resources

In June of 2014, the SCF Altai (an oil tanker) arrived at Ashkelon port. Hours later, the first shipment of Kurdish pipeline oil was being unloaded in Israel. “Securing the first sale of oil from its independent pipeline is crucial for the Kurdish Regional Government (KRG) as it seeks greater financial independence from war-torn Iraq,” Reuters noted at the time, adding that “the new export route to the Turkish port of Ceyhan, designed to bypass Baghdad’s federal pipeline system, has created a bitter dispute over oil sale rights between the central government and the Kurds.”

A week earlier, the SCF Altai received the Kurdish oil in a ship-to-ship transfer from the The United Emblem off the coast of Malta. The United Emblem loaded the crude at Ceyhan where a pipeline connects the Turkish port to Kurdistan.

The Kurds’ move to sell crude independent of Baghdad stems from a long-running budget dispute. Without delving too far into the details, Erbil is entitled to 17% of Iraqi oil revenue and in return, the KRG is supposed to transfer some 550,000 bpd to SOMO (Iraq’s state-run oil company). Almost immediately after the deal was struck late last year, Baghdad claimed the Kurds weren’t keeping up their end of the bargain and so, only a fraction of the allocated budget was sent to Erbil during the first five months of the year.

This was simply a continuation of a protracted disagreement between Erbil and Baghdad over how much of the state’s crude revenue should flow to the KRG. For its part, Iraq has threatened to sue anyone that buys independently produced Kurdish oil.

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

Oil Prices Down As Storage Keeps On Filling Up

November 26, 2015

Oil Prices Down As Storage Keeps On Filling Up

Happy Thanksgiving Eve! One hundred and forty-eight years to the day after Alfred Nobel patented dynamite, and the fuse has been lit for an explosion to the downside for the crude complex.

After geopolitical tension was stoked yesterday, attention shifts back to oversupply today with the weekly EIA inventory report. Yesterday afternoon’s API report yielded a build of 2.6 million barrels to crude stocks, as well as solid builds to the products. This has adjusted expectations ahead of the EIA report, as a lesser 1 million barrel build was being baked into the cake.

Yesterday we discussed how copper is at a six-and-a-half year low due to a combination of falling Chinese demand and a rising US dollar. The chart below illustrates that despite the downward trend in copper prices, an ongoing supply glut is set to persist, as lower-cost projects come to fruition after billions of dollars have already been invested. Accordingly, global copper production is expected to reach an all-time this year…and is projected to rise through the rest of the decade.

Given the broad-based sell-off we have seen in commodities, from copper to crude to coal, Bloomberg’s commodity index – which tracks 22 natural resources – has plunged two-thirds lower from its peak in 2008 to the lowest level since 1999:

Today is ‘double data day‘, as tomorrow’s Thanksgiving holiday means we get the EIA natural gas storage report a day early. A minor injection of +6 Bcf is expected, which will further add to the record storage level of 4.000 Tcf.

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

Oil May Plunge to $20, Signalling Economic Disaster: “The Numbers Are Dreadful And Unprecedented”

November 22, 2015

Oil May Plunge to $20, Signalling Economic Disaster: “The Numbers Are Dreadful And Unprecedented”

The price of oil has long been a key indicator of economic health and stability. And that index is tanking fast.

In the last few years, dramatic overproduction of oil has become a major tool of geopolitical conflict.

As prices have plummeted from $110/barrel to $40, Americans have tapped huge sources of fracking and flooded the market; OPEC and the Saudis have continued pumping despite dropping prices; Russia, dependent upon oil for its economy, has been under siege via sanctions and bottom-level prices; ISIS and other terror organizations are undercutting everyone with illegal oil sales and China remains large in the whole affair.

Proxy wars and threats and rumors of world war have accompanied bitter economic warfare over currencies and energy. Now, oil is at a record level of glut, and nearly every storage facility in the world is filled past capacity.

The London Telegraph reports:

The world is running out of storage facilities for surging supplies of oil and may soon exhaust tanker space offshore, raising the chances of a violent plunge in crude prices over coming weeks, experts have warned.

Goldman Sachs told clients that the increasing glut of oil on the global market […] could send prices plummeting to $20 a barrel, the so-called ‘cash cost’ that forces drillers to abandon production. “Risks of a sharp leg lower remain elevated,” it said.

[…]

It is estimated that at least 100m barrels are now being stored on tankers offshore, waiting for better prices. A queue of 39 vessels carrying 28m barrels is laid up outside the Texas port of Galveston, while the Iranians have a further 30m barrels offshore ready to sell as soon as sanctions are lifted.

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

OPEC’s Bad Bet By The Numbers

November 18, 2015

OPEC’s Bad Bet By The Numbers

As the December 4, 2015 OPEC meeting in Vienna approaches, OPEC members have the tools to assess the impact of “lower for longer” crude prices on their countries. Serendipitously, the IEA in its recently published World Energy Outlook 2015 describes a low price scenario in which crude stays around $50/barrel through the current decade’s end. It is based on four assumptions: lower near-term global economic growth, a less unstable Middle East, continued OPEC emphasis on market share, and resilient non-OPEC supply. Equally serendipitously, the IMF October 2015 World Economic Outlook projections are premised on $51.62 crude in 2015 and $50.36 crude through 2020 and therefore show the impact ~$50 crude through the end of the decade would have on OPEC in general and the economies of individual OPEC members.

It’s not very pretty with crude at ~$50 per barrel—and therefore is likely to be uglier since the OPEC basket crude price in 2015 will average ~$47 and OPEC basket crude, which generally trades at a discount to Brent crude, would average below $50 in the IEA scenario.

Economic Consequences of a Wager Gone Bad

In national currencies, it appears that OPEC members will show steady, if not spectacular, growth through 2020 with “lower for longer crude,” and that the GDP of each member will exceed 2014 levels before the end of the decade.

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

OPEC’s Strategy Is Working According To Cartel’s Latest Report

November 16, 2015

OPEC’s Strategy Is Working According To Cartel’s Latest Report

The cartel’s Monthly Market Report, published Thursday, said its 12 members extracted an average of 31.38 million barrels of oil per day last month, down by 256,000 barrels per day in September because of export delays in Iraq and lower production in both Saudi Arabia and Kuwait.

As for next year, the report said low prices are prompting energy companies not affiliated with OPEC to pare back on capital expenses by nearly $200 billion. As a result, non-OPEC output in 2016 will fall by an average of around 130,000 barrels per day, “a gaping supply hole” compared with the average growth of 720,000 barrels per day in 2015.

The report on OPEC’s production decline comes less than a month before the cartel meets on Dec. 4 at its headquarters in Vienna. Some producers have been calling for the group to abandon its price war with rival producers, particularly in the United States, and bolster the price of oil, which has fallen from more than $110 per barrel in June 2014 to below $50 per barrel today.

Yet the report supports the opposing view: that the strategy, masterminded by Saudi Oil Minister Ali al-Naimi, is working precisely because OPEC is not only regaining market share it lost to rival producers, but also forcing those producers to extract less oil. Many of them rely on hydraulic fracturing, or fracking, to extract oil from shale, and can’t make a profit with the global price of oil so low.

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

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