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Does the U.S. Need a Large Strategic Petroleum Reserve?

The Strategic Petroleum Reserve is the biggest government stockpile of oil in the world. The U.S. is sitting on the biggest government stockpile of oil in the world. Should it continue to maintain it? The Strategic Petroleum Reserve was set up in the 1970s as a response to the Arab oil embargo and the shock waves it sent through the U.S. economy. The idea: to create a supply of oil that would let the nation weather those kinds of disruptions and give it more leverage with oil-producing nations. Over the decades, Washington has tapped into the reserve only a handful of times. Now Congress has authorized another big draw on that supply. The recent budget deal allows the government to sell 58 million barrels from the stockpile. Some observers say we should be cautious about dipping into the reserve—let alone thinking about abandoning it entirely. It serves a vital […]

Posted On : Published By : Tom Whipple
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Bakken Big Decline in September

The NDIC has published their monthly update for Bakken Oil Productin and all North Dakota Oil Production . Bakken & North Dakota Bakken production was down 24,424 barrels per day while all North Dakota was down 25,378 bpd. Bakken & ND Amplified Here is an amplified version of the last 15 months of North Dakota production. September 2015 production is now below September 2014 production so the 12 month average has now turned negative. ND & Bakken BPW Even though producing rigs in North Dakota declined in September, barrels per day per well declined also from 94 to 92. Bakken bpd per well declined from 112 to 109. This is a long term view of Bakken and North Dakota barrels per well. Bakken year over year percent growth has finally gone negative. August Producing Wells = 13,031 September Producing Wells = 13,025 10,228 wells or 78% are now unconventional […]

Posted On : Published By : Tom Whipple
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Unsold oil stuck on tankers threatens world market gridlock

An oil tanker passes underneath the Golden Gate Bridge during a rainfall in San Francisco, California, February 26, 2014. As land storage sites worldwide reach brimming point due to a supply glut, tens of millions of barrels of oil are sitting on tankers looking for homes – threatening logistical paralysis. The International Energy Agency on Friday said stored oil has hit 3 billion barrels. Traders say the excess of crude is leaving tankers queuing at major ports worldwide, lengthening waiting times to days, weeks and even months. [IEA/M] The lack of space to unload oil is tying up the tankers needed to keep oil moving, and wells running. The bottlenecks could force oil suppliers into quick, cut-priced sales just to free space, adding more pressure to oil prices already close to six-year lows. The cost to hire a supertanker – each capable of carrying 2 million barrels of oil […]

Posted On : Published By : Tom Whipple
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IEA Says Record 3 Billion-Barrel Oil Stocks May Weaken Prices

Oil stockpiles have swollen to a record of almost 3 billion barrels because of strong production in OPEC and elsewhere, potentially deepening the rout in prices, according to the International Energy Agency. This “massive cushion has inflated” on record supplies from Iraq, Russia and Saudi Arabia, even as world fuel demand grows at the fastest pace in five years, the agency said. Still, the IEA predicts that supplies outside the Organization of Petroleum Exporting Countries will decline next year by the most since 1992 as low crude prices take their toll on the U.S. shale oil industry. “Brimming crude oil stocks” offer “an unprecedented buffer against geopolitical shocks or unexpected supply disruptions,” the Paris-based agency said in its monthly market report. With supplies of winter fuels also plentiful, “oil-market bears may choose not to hibernate.” Oil prices have lost about 40 percent in the past year as the OPEC […]

Posted On : Published By : Tom Whipple
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Is Crude Oil Facing Peak Storage?

Crude Oil (WTI) has had a troubling week, as the commodity continues to slide lower as growing over supply concerns point to further falls ahead. In fact, as a veritable conga line of tankers navigate towards the United States, some are now asking at what point “peak storage” have been reached. A range of factors have contributed to the global oil supply glut including diminished demand, as well as the introduction of Iraqi supply to the market. Although slow to start, Iraqi oil exports are now ramping up and, as we speak, a 2-mile long line of tankers is heading towards refineries in the United States. However, a tanker backlog is already underway in Houston, where over 39 oil laden vessels stand idle waiting for a turn to unload their cargo of crude oil. The current combined supply nears a capacity of over 28 million barrels, which doesn’t include […]

Posted On : Published By : Tom Whipple
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North Dakota oil well backlog eclipses 1,000 for first time

The number of oil wells in North Dakota that have been drilled but not fracked eclipsed 1,000 for the first time in September, as producers delayed turning them on in hopes crude prices will soon recover. The milestone, which was widely expected around the second-largest oil producing state, highlights the immense cost pressure companies have come under in the past year as crude prices have dropped more than 50 percent. Fracking alone can account for nearly two-thirds of a well’s cost. Today more than 8 percent of oil wells in the state are sitting idle, storing their crude and natural gas in rock miles underground until prices rise. The delay harms the industry’s ability to grow production, a metric closely watched by investors. Daily output in the state fell 2 percent in September. "That’s sending a definite signal to the market that oil and gas operators are not willing […]

Posted On : Published By : Tom Whipple
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Chesapeake Lenders Flee Debt as Oil Rout Pummels Reserves Value

Chesapeake Energy Corp.’s bonds have plunged to half their face value as lenders fret that tumbling energy prices are hurting their chances of getting paid on borrowings that are three times the current worth of the company’s oil and gas fields. The producer’s $1.5 billion of 4.875 percent notes due in April 2022 dropped 9.625 cents this week to 50.375 cents on the dollar, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The Oklahoma City-based company estimates the discounted value of its proven oil-and-gas reserves will fall to about $4.2 billion by the end of the year down from $22 billion last December. Chesapeake shares have been the worst performer among their peers in the Standard & Poor’s 500 Index this year, plunging 73 percent. The downturn in oil markets has been especially painful for the driller because it happened just as the company […]

Posted On : Published By : Tom Whipple
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Canadian Oil Sands-Suncor spat takes new turn

Canadian Oil Sands says it’s frustrated with scare tactics used by rival Suncor in its unsolicited takeover offer. Photo courtesy of Canadian Oil Sands CALGARY, Alberta, Nov. 13 (UPI) — Canadian Oil Sands Ltd. continued to urge its shareholders to reject a bid from rival Suncor Energy, saying the offer would sell itself if it was worthwhile. Suncor last month said its unsolicited $3.2 billion takeover bid for its rival was a "financially compelling" offer. Last week, Suncor called on the Alberta Securities Commission to consider a shareholder rights plan adopted by Canadian Oil Sands, which is designed to prevent the takeover . Suncor, in a letter to rival shareholders, said a "do-nothing" stance from Canadian Oil Sands is a risky position given the continued weakness in the energy sector. In a new filing, Suncor said it updated information on the bid to reflect further evidence of the downturn […]

Posted On : Published By : Tom Whipple
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North Dakota natural gas flaring targets challenged by rapid production growth

Source: U.S. Energy Information Administration, with data from the North Dakota Industrial Commission Increases in North Dakota’s crude oil production have resulted in increased associated natural gas production from oil reservoirs, especially in the Bakken region. Because of insufficient infrastructure to collect, gather, and transport this natural gas, about one-fifth of North Dakota’s natural gas production is flared rather than marketed. North Dakota’s Industrial Commission (NDIC) has established natural gas capture targets in an effort to reduce the amount of flared gas, and they recently issued a revision to the flaring targets in response to faster-than-expected gas production growth in the Bakken region. North Dakota’s current target is to capture and sell at least 78% of total natural gas gross withdrawals, or flare just 22% of the state’s natural gas output. Based on the targets established in April 2014, the percentage of flared gas was set to fall to […]

Posted On : Published By : Tom Whipple