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These Titans of Oil Are Experts at Making Bold Predictions*

Photographer: Daniel Acker Nobody saw it coming. Oil prices had been sliding, but on Oct. 1, the future still looked bright. For the next three months, oil would average $97 a barrel, according to a Bloomberg survey of 36 analysts. The first quarter of 2015 would be even better. The most pessimistic among them called for $91 a barrel.  Ha.  We all know what happened next. The free-fall in oil prices was just getting started. WTI crude, the U.S. benchmark, would tumble from $107 a barrel in June to below $45 in January. Humbling, perhaps, but it hasn’t quieted the bold predictions coming from CEOs, analysts, and energy ministers.  Here’s a look at some of the big calls made during the crash and how they’ve panned out.  Don’t Panic "Let’s not panic over the first little decline in oil prices,” Whiting Petroleum CEO Jim Volker said on Sept. 22. He made more bold predictions:  "Saudi Arabia […]

Posted On : Published By : Tom Whipple
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U.S. crude stocks build less than expected as Cushing draws: EIA

NEW YORK (Reuters) – U.S. crude inventories rose last week to hit a record high for the 16th straight week but the build was smaller than expected as supplies at the Cushing, Oklahoma, oil hub declined for the first time since November, data from the Energy Information Administration (EIA) showed on Wednesday. Crude stockpiles rose 1.9 million barrels to 490.91 million in the week to April 24, compared with analysts’ expectations for an increase of 2.3 million barrels. Crude stocks at Cushing, the delivery point for U.S. crude futures, fell 514,000 barrels, the EIA said. The decline at Cushing was the first since Nov. 28, according to EIA data. U.S. crude for June delivery extended gains after the EIA report and was up $1.40 at $58.46 a barrel at 11:05 a.m. EDT (1505 GMT), after posting a fresh 2015 peak at $58.55. Brent June crude was up $1.06 at […]

Posted On : Published By : Tom Whipple
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« The U.S. Production Decline Has Begun

The U.S. oil production decline has begun.  It is not because of decreased rig count. It is because cash flow at current oil prices is too low to complete most wells being drilled. The implications are profound. Production will decline by several hundred thousand of barrels per day before the effect of reduced rig count is fully seen. Unless oil prices rebound above $75 or $85 per barrel, the rig count won’t matter because there will not be enough money to complete more wells than are being completed today. Tight oil production in the Eagle Ford, Bakken and Permian basin plays declined approximately 111,000 barrels of oil per day in January . These declines are part of a systematic decrease in the number of new producing wells added since oil prices fell below $90 per barrel in October 2014 (Figure 1).  Figure 1. Eagle Ford, Bakken and Permian basin new producing wells by month and WTI oil […]

Posted On : Published By : Tom Whipple
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Hess reports 1Q net loss of $389 million, trims budget

HOUSTON, Apr. 29 Hess Corp. reported a net loss of $389 million during the first quarter compared with net income of $386 million in first-quarter 2014. An adjusted net loss of $279 million was down from an adjusted net income of $446 million in first-quarter 2014. The company says lower realized selling prices reduced adjusted net income by $700 million after-tax year-over-year. First-quarter results benefitted from higher crude oil and natural gas liquids production, but were offset primarily by higher depreciation, depletion, and amortization expense. Net cash provided by operating activities was $362 million in the first quarter, compared with $1.16 billion in first-quarter 2014. Hess is further reducing its full-year guidance for capital and exploratory expenditures by $300 million to $4.4 billion. The company also forecasts its full-year cash costs will be lower by $250 million. The company says it will continue to pursue additional savings in 2015 […]

Posted On : Published By : Tom Whipple
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U.S. energy demand slows except for industrial, commercial sectors

Source: U.S. Energy Information Administration, Annual Energy Outlook 2015 (interactive table viewer) U.S. energy consumption has slowed recently and is not anticipated to return to growth levels seen in the second half of the 20th century. EIA’s Reference case projections in the Annual Energy Outlook 2015 (AEO2015) show that domestic consumption is expected to grow at a modest 0.3% per year through 2040, less than half the rate of population growth. Energy used in homes is essentially flat, and transportation consumption will decline slightly, meaning that energy consumption growth will be concentrated in U.S. businesses and industries. Near-zero growth in energy consumption is a recent phenomenon, and there is substantial uncertainty about the main drivers of consumption as the United States continues to recover from the latest economic recession and resumes more normal economic growth. EIA’s analysis in the AEO2015 includes several cases with various assumptions about macroeconomic growth, […]

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US economic growth slows to 0.2%

Growth in consumer spending slowed to 1.9% The US economy "all but stagnated" in the first three months of the year, growing at an annual rate of just 0.2%, official figures show. The growth figure was far lower than expectations. Analysts had forecast growth would be about 1%. Harsh winter weather for a second year dampened consumer spending, while energy companies struggling with low oil prices cut investment. The strength of the dollar also hurt exports, which fell by 7.2%. A strike by dock workers at normally busy West Coast ports also hindered growth. But the US Commerce Department said there were signs that activity was picking up in the second quarter. The US growth figure much lower than the previous three months, when the economy expanded at an annualised pace of 2.2%. Analysis: Linda Yueh, BBC chief business correspondent The dollar has risen on the back of expected […]

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Fed points to softer U.S. labor market, weak economic growth

WASHINGTON (Reuters) – The Federal Reserve pointed to weakness in the U.S. labor market and economy on Wednesday in a policy statement that came just hours after data showing tepid economic growth, suggesting the central bank may have to wait until the third quarter to begin raising interest rates. The Fed’s statement leaves it dependent on fresh economic data, in a meeting-by-meeting approach, as it seeks to decide on the timing of its first rate hike since June 2006. The central bank, however, acknowledged weakness in some sectors of the economy, making it more likely that it will not be ready to raise until at least September. "The committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective […]

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California Gov. Brown Orders Major Cut in Greenhouse Gas Emissions

ENLARGE California Gov. Jerry Brown, shown in a file photo, announced a plan for major cuts in greenhouse gas emissions on Wednesday. Photo: Monica Davey/European Pressphoto Agency SAN FRANCISCO—Gov. Jerry Brown on Wednesday ordered new standards for greenhouse gas emission reductions over the next 15 years in California, building on the state’s already stringent requirements. Mr. Brown ordered a reduction in greenhouse gas emissions to 40% below 1990 levels by 2030. The targets align the nation’s largest state with the standards set by the European Union, Mr. Brown said in a news release. “With this order, California sets a very high bar for itself and other states and nations, but it’s one that must be reached—for this generation and generations to come,” Mr. Brown said. Currently, the state is set to meet a goal of reducing greenhouse gas emissions to 1990 levels by 2020, Mr. Brown said. That goal […]

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U.S. economy stumbles in first-quarter as weather, low energy prices weigh

WASHINGTON (Reuters) – U.S. economic growth nearly stalled in the first quarter as harsh weather dampened consumer spending and energy companies struggling with low prices slashed spending. Gross domestic product expanded at an only 0.2 percent annual rate, the Commerce Department said on Wednesday. That was a big step down from the fourth quarter’s 2.2 percent pace and marked the weakest reading in a year. A strong dollar and a now-resolved labor dispute at normally busy West Coast ports also slammed growth, the government said. While there are signs the economy is pulling out of the soft patch, the lack of a vigorous growth rebound has convinced investors the U.S. Federal Reserve will wait until late this year to start hiking interest rates. The recovery is the slowest on record and the economy has yet to experience annual growth in excess of 2.5 percent. "The U.S. economy has yet […]

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BP unwinding oil storage play as contango narrows

LONDON (Reuters) – Oil major BP said it will gradually sell throughout 2015 more than $1.25 billion of oil it had stored earlier this year to seize on a futures market structure to boost profit. Traders including BP bought and stored oil throughout late 2014 and early 2015 after an oil price collapse as prompt prices dropped below those for further into the future, a market structure known as contango. Traders have been profiting from the contango by storing crude in the hope of reselling it at a profit at a later date or by simply locking gains via paper trading. Chief Financial Officer Brian Gilvary said BP’s trading unit had performed much better than in an average quarter, likening the quarter to a strong trading performance in early 2009 when crude prices last crashed. "The profit we booked in one quarter for contango is relatively modest, in the […]

Posted On : Published By : Tom Whipple