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U.S. shale crude cash markets offer ray of hope amid global gloom

In shale strongholds of North Dakota and Texas, physical crude grades are trading at the highest premiums to futures prices in years, offering a glimmer of hope that a pickup in global oil markets might follow. While crude futures hover around 6-1/2-year lows, the cash markets, where producers and refiners buy and sell physical barrels of oil, are sending a more optimistic, if short-term, signal. West Texas Intermediate crude delivered to Midland, Texas, at the heart of the Permian Basin, is trading at a record $2.75 premium to benchmark U.S. futures. North Dakota’s Bakken crude fetches more than 50 cents more, the highest in two years. The two areas produce more than 60 percent of U.S. shale oil. Many cash crude traders say the relative strength of these markets most likely reflects local, short-term factors: newly built pipelines in Texas are increasing demand for local crude, while Midwest refiners […]

Posted On : Published By : Tom Whipple
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Write-Downs Abound for Oil Producers

U.S. oil-and-gas producers have written down the value of their drilling fields by more in 2015 than any full year in history, as the rout in commodity prices makes properties across the country not worth drilling. A group of 66 oil and gas producers have taken impairment charges totaling $59.8 billion through June, according to a tally by energy consultancy IHS Herold Inc. That tops the previous full-year record of $48.5 billion set in 2008, IHS says. In 2008, oil prices plummeted from above $140 a barrel at midyear to below $37 by year-end as the financial system’s near collapse sent the global economy into recession. The drop was steep but relatively short-lived as growing demand from China and other emerging economies was expected to suck up global supplies. Now, with China’s economy sputtering and U.S. production at its highest level in decades, prices aren’t expected to return to […]

Posted On : Published By : Tom Whipple
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Peak Oil Ass-Backwards: Crashing Oil Prices Aren’t Due to an Oil Glut But to Demand Destruction and Peaking Credit

Read Part 1 of the series. Confusion dawns upon the smartest men in the room (photo by Rafael Matsunaga) As I began to mention at the end of the first part of this three-parter, I’ve only just recently come to the conclusion that oil prices aren’t going to have a tendency to rise due to the tightening of supply imposed by peak oil , but to depreciate. This of course flies in the face of the common logic of supply and demand, but when factoring in the method by which the majority of our money is created, a deflationary effect can be seen to come into play. This has taken me an absurdly long time to clue into, for although I’d steadfastly amassed a bunch of pieces (various information), I hadn’t realized they were actually all part of the same puzzle. With peak oil and fractional-reserve banking being the […]

Posted On : Published By : Tom Whipple
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Goldman, Commerzbank cut oil forecasts on oversupply

Goldman Sachs and Germany’s Commerzbank slashed their forecasts for oil prices on Friday, citing global oversupply and worries about top energy consumer China. U.S. investment bank Goldman, closely followed by many investors including commodities funds, said it expects oil prices to tumble further this year on rising OPEC production and resilient non-OPEC supply, which is seen outstripping demand. "The oil market is even more oversupplied than we had expected and we forecast this surplus to persist in 2016," Goldman said in a note titled "Lower for even longer". It said crude oil prices could fall as low as $20 a barrel, although this was not its "base case". Joining a long list of banks cutting price projections, Goldman Sachs lowered its 2016 forecast for U.S. crude to $45 a barrel from $57, and said it saw 2016 Brent prices at $49.50 a barrel, down from its earlier $62 forecast. […]

Posted On : Published By : Tom Whipple
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Oil-Price Slump Could Force U.S., Non-OPEC Suppliers to Make Deep Cuts

American oil producers will be forced to make drastic cuts in 2016 because of stubbornly low crude prices, an influential energy monitor said Friday, giving Saudi Arabia a chance to regain some of its lost clout in global markets. Oil prices that last month reached their lowest levels since the financial crisis have “dimmed the prospects for a recovery in U.S. drilling activity,” the International Energy Agency said in its closely watched monthly oil market report. The agency said tight oil—a type of expensive-to-pump crude that has driven American production in recent years—would decline by 400,000 barrels a day in 2016, a fall that already began in July. Along with expected drops in Russian and North Sea output in 2016, production outside of the Organization of the Petroleum Exporting Countries could see the steepest cuts since the fall of the Soviet Union, the IEA said. The agency’s predictions are […]

Posted On : Published By : Tom Whipple
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Oil Market Report

mb/d World Oil Demand *Please note that these Highlights are from the latest Oil Market Report, which is released in full to subscribers only – according to this schedule each month . Non subscribers get free access to the latest Highlights on this schedule, however the full Oil Market Report is released to the public two weeks after the report is released to subscribers. If you would like to receive the full report with accompanying charts and graphs on the day of publication please subscribe or contact the subscription manager . Oil prices sank to six-year lows in August as a supply overhang grew and concern deepened over the health of the global economy, especially in China. After rebounding on a slew of economic and fundamental data, prices turned volatile in September. Brent was last trading at $48.10/bbl with NYMEX WTI at $45.20/bbl. Oil’s latest tumble is expected to […]

Posted On : Published By : Tom Whipple
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What Will Drillers Do as Prices Fall? Depends Who You Ask

Goldman Sachs says the world has more oil than it had thought and expects prices to slip below $40 per barrel, and maybe lower, because the glut may linger deep into next year. On the same day, the International Energy Agency said production outside OPEC countries will drop sharply in 2016 with prices so weak. Goldman analyst Damien Courvalin says these cuts may not be enough. He lowered his forecast for 2016 to $45 per barrel from $57. He says prices could collapse to around $20 if production decreases too slowly. Oil markets been unusually volatile, with the price of crude down 26 percent in three months. Prices have risen or fallen more than 3 percent on 14 trading days during that stretch.

Posted On : Published By : Tom Whipple
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Operational constraints limit crude storage at U.S. refineries: Kemp

A general view of the Tesoro refinery in Carson, California February 2, 2015. U.S. commercial crude stocks are still close to their highest levels in over 80 years, but operational requirements prevent refineries filling on-site storage facilities to their maximum capacity. An increasing proportion of U.S. crude oil stocks is held in off-site tank farms, some owned or leased by refiners themselves, but many owned or leased by marketers and traders. According to the Energy Information Administration (EIA), which surveys storage capacity every six months, total crude in storage at the end of March was 475 million barrels, and the country had capacity to store up to 660 million. Only 182 million barrels of storage capacity, around 28 percent, was on site at oil refineries. The rest was off site at tank farms or in pipelines, railroad tank cars, barges and oilfield tanks. Most of the crude at refineries […]

Posted On : Published By : Tom Whipple
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U.S. importing less Saudi oil – for now

U.S. President Barack Obama looks on as King Salman bin Abd alAziz of Saudi Arabia speaks during a bilateral meeting in the Oval Office of the White House. U.S. imports of Saudi Arabian oil are down, federal data show. Pool Photo by Olivier Douliery/UPI WASHINGTON, Sept. 11 (UPI) — Total U.S. imports of crude oil from Saudi Arabia for the week ending Sept. 4 are down roughly 15 percent from last year, U.S. federal data show. The U.S. Energy Information Administration reports Saudi Arabian oil accounts for roughly 17 percent of all crude oil imported into the United States, putting it at the No. 2 spot behind Canada. Total imports of Saudi crude for the week ending Sept. 4 were 1.06 million barrels per day, down 15.2 percent from the same week in 2014. Saudi oil imports are down 32 percent from the first week of September 2013. "U.S. […]

Posted On : Published By : Tom Whipple
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EIA: Oil companies may cut spending further

Federal energy report finds rough road may be ahead for companies working in U.S. shale basins. Photo by photostock77/Shutterstock WASHINGTON, Sept. 11 (UPI) — Companies contributing most to U.S. onshore oil production are expected to cut capital spending as the weak oil market endures, a federal energy report said. West Texas Intermediate, the U.S. benchmark for crude oil prices, closed Thursday at $48.89 per barrel, more than 17 percent below the start of July and more than 50 percent below peak prices in June 2014. Most oil companies are cutting spending on exploration and production and shedding staff. Though some sectors are performing well, the economy in Texas , the No. 1 oil producer in the nation, is feeling pressure from the downward trajectory for crude oil prices. The U.S. Energy Information Administration analyzed financial data from 44 companies focused heavily on shale oil production in the United States. […]

Posted On : Published By : Tom Whipple