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Putin Is Ready To Cut Oil Supply, But Demand Destruction Still Grows

Russian President Vladimir Putin said on Friday that, after sending the oil markets into a massive crash a month ago by blowing up the OPEC+ exports limitation agreement, his country is now ready to work with OPEC and other countries to implement far deeper cuts to crude production than OPEC+ had ever envisioned.

Speaking in a televised video conference, Putin proposed an arrangement that would result in removing 10 million barrels of crude oil per day from global supply. As reported by the Khaleej Times, “Putin’s dramatic change of tack from his unyielding stance of non-cooperation with the Opec in further output cuts came in the wake of a truce brokered by US President Donald Trump ahead of the upcoming Opec plus meeting scheduled for April 6.” The price for West Texas Intermediate closed at $28.34 per barrel on Friday, up by 40% since Wednesday, when news of Trump’s engagement with Putin and Saudi leader Mohammed bin Salman became public.

Has President Trump, the famous deal-maker, worked a deal that will save the U.S. domestic oil and gas industry? Let’s don’t get ahead of ourselves. While a global deal that would remove 10 millions barrel from daily oil supply would certainly help firm up oil prices, we have to remember that the effort by Russia and Saudi Arabia to flood the market only impacted the supply side of a two-sided equation. Crude prices had already dropped by more than 30% into the low-$40 range in early March before OPEC+ blew up, thanks to massive global demand destruction caused by the COVID-19 pandemic.

With the U.S. intentionally shutting down its own economy during March in a strategy to slow the spread of the virus, that demand destruction has only intensified over the past 30 days, with some projecting as much as 25% of world-wide demand for crude oil having been lost, or about 25 million barrels per day. We should also realize that, with so much anticipation now focused on it, if the upcoming emergency meeting of the OPEC+ countries should somehow fail to bear fruit along the lines proposed by Putin, then the price will come crashing back down.

And even if a new deal does get done, it will only address one side of the equation. There will still be much work to be done to return the domestic oil and gas industry to some level of health.

Read the Rest at Forbes.com

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What You Need to Know About the Attacks on Saudi Arabia

Today’s Energy Update
(Because Energy Fuels Our Lives)

Crude oil prices closed today up about 15%. They escalated throughout the day as it became increasingly obvious that the production outages in Saudi Arabia will likely continue for weeks, and as rhetoric between the U.S., Iran and Saudi continued to become more heated. How many weeks the Saudi outages will last is anyone’s guess.

You should expect prices to continue to rise until – and if – the situation calms down and we have hard information indicating Saudi production is being restored.

In case you missed my story at Forbes.com linked and excerpted below, this is the largest sudden outage of crude production in world history, even larger than the Arab Oil embargoes of the 1970s.

It’s a big deal.

Excerpt:

Here are a dozen things everyone should know about the past weekend’s strikes on a major Saudi oil refinery, and the likely fallout from them:

  • The Houthis, a rebel army fighting against Saudi-led interests in Yemen, claimed credit for launching the attacks on Saturday. However, the U.S. government now says it believes the assault was launched from Iran, and that it may have involved cruise missiles rather than drones.
  • The strikes centered on Saudi Arabia’s Abqaiq refinery. Abqaiq is the world’s largest oil refinery, processing about two-thirds of the total Saudi supply each day. Saudi Arabia is the world’s second-largest producer of crude oil behind the United States.
  • Several large Saudi oil fields were also attacked. Those attacks, along with the disruption of the Abqaiq refinery required the Saudi government to shut-in about half of its current production, or about 5.7 million barrels of oil per day.
  • According to the U.S. Energy Information Administration (EIA), that amounts to the single biggest sudden disruption on record, more than the loss of Kuwaiti and Iraqi supply during the Gulf War in August 1990, and the 1979 decrease in Iranian output following the Islamic Revolution.

Read the Rest Here

 

That is all.

Today’s news moves at a faster pace than ever. Whatfinger.com is my go-to source for keeping up with all the latest events in real time.

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The Oil and Gas Situation: Reviewing 6 Predictions

Today’s Energy Update
(Because Energy Fuels Our Lives)

As Q1 2019 comes to a close, it is time to review the status of some predictions I made here the day after Christmas for what we would see during the first half of 2019. Accurately gauging where the industry will be several months into the future is always a crap shoot, and as usual, I find myself feeling glad I didn’t go out and bet the farm on any of these.

First, let’s look at what I had to say about the domestic rig count as calculated by the folks at DrillingInfo:

…my first prediction is that we will see a gradual fall in the domestic U.S. rig count throughout the first half of 2019. Indeed, the DrillingInfo Daily Rig Count already fell by about 3% during December, from 1160 to 1120 on December 25. I’m betting that, by June 30, that measure will be below 1050…

This particular count finished the quarter at 1049, after falling slowly but steadily throughout the first three months of the year. This represents a 9% drop since Christmas day, and there is no real reason to expect this trend to change during the second quarter, with so many upstream companies prioritizing stock buybacks and other programs designed to return capital to investors and lenders over the mad rush to increase production we saw throughout 2017 and the first 8 months of 2018.

A reasonable updated guess would be that we will see the DrillingInfo count fall to right around 1000 by the time June 30 rolls around.

What about crude prices? Here’s what I predicted they would do in Q1:

…my second prediction is that the price for WTI will rise again, but will not exceed $60 during the first half of 2019.

As things turned out, I had the general direction of crude prices right, but underestimated how rapidly they would rise, as WTI closed at $60.14 in Friday’s trading. The basic market dynamics that advocated in December for what has been a 20% recovery in the WTI benchmark remain in place today. Global demand continues to rise more rapidly than all the experts thought it would at the first of the year, and the OPEC-plus nations still maintain pretty strong compliance with their export quotas.

 

Read the Rest Here

 

 

Follow me on Twitter at @GDBlackmon

Today’s news moves at a faster pace than ever. Whatfinger.com is my go-to source for keeping up with all the latest events in real time.

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Is an Oil Price Train Wreck Hiding Around the Bend?

Today’s Energy Update
(Because Energy Fuels Our Lives)

The energy media has recently featured headlines that seem at odds with one another and that, when taken together, portend the possibility of a coming train wreck somewhere down the road where crude oil supply and prices are concerned. Let’s look at some of the more recent headlines as examples:

“The U.S. Shale Boom is About to Get a Major Upgrade” – Investors Business Daily, Feb. 19

“Wall Street Calls for Better Returns; Shale Gets Thrifty” – Gulf Times, Feb. 17

“OPEC Cuts Send Crude Exports to Lowest Since 2015” – Financial Times, Feb. 19

“U.S. shale oil output to hit record 8.4 million bpd in March: EIA” – Reuters, Feb. 19

That Investor’s Business Daily story begins by stating “The U.S. shale oil boom is about to get a whole lot bigger. The reason: Giant oil companies like Exxon Mobil (XOM) are leveraging their massive scale to unleash more production from the top-producing shale oil formation.”

The EIA projects that the domestic industry will push U.S. oil production past the 12 million barrels of oil per day (bopd) level for the first time in the nation’s history in March, with 70% of that coming from shale plays. Fully 1/3rd of all oil produced in the U.S. in March will come from the Permian Basin alone.

Follow me on Twitter at @GDBlackmon

Today’s news moves at a faster pace than ever. Whatfinger.com is my go-to source for keeping up with all the latest events in real time.

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Some Stunning New Facts About Texas and its Oil Industry

Today’s Energy Update
(Because Energy Fuels Our Lives)

#GodBlessTexas. – Last week at Shale Magazine, I put up a piece detailing some “Fun Facts” about the state of the oil and gas industry in Texas. That piece began with the following statement:

“Here’s a fun fact: If Texas were an independent country, it would now stand as the 5th-largest oil-producing nation on Planet Earth, behind only the rest of the U.S., Russia, Saudi Arabia and Iraq. According to projections by the U.S. Energy Information Administration (EIA), Texas will pass Iraq in this measure of economic might later this year.”

Boy, things sure do escalate quickly in the oil industry. Here we are, barely a week later, and the truth about that little factoid has already changed again, at least if the U.S. Energy Information Administration (EIA) has its numbers right.  EIA now says that the U.S. averaged 12 million barrels of oil per day (bopd) in January, the first time it has ever reached level. The agency further projects that the Permian Basin alone will produce 4 million bopd in March, roughly 1/3rd of total U.S. production.

So, before we get to some new amazing facts about all of this, let’s do a little math.  First, roughly 85% of total Permian Basin production comes from Texas, which in March would come to about 3.4 million bopd. Next, add in EIA’s estimate that the other behemoth Texas shale play, the Eagle Ford, will produce about 1.3 million bopd, and you are at a stunning 4.7 million. Oh, and there’s also all that oil coming out of deep south Texas, east Texas and the Texas panhandle, and all of a sudden you find Texas producing in excess of 5 million bopd.

All of which means that as of today, the great State of Texas, all by itself, would now rank 4th globally in crude oil production if it were an independent country, having now blown past Iraq.  Oh, and if the EIA’s projected trend for Permian production growth holds true, Texas will in all likelihood surpass the rest of the United States in total production at some point in either late 2021 or early 2022, and become the third-largest producer in the world.

But that’s not all.

EIA’s March projection of 4 million bopd coming out of the Permian Basin alone means that single basin, were it to secede from the union, would suddenly rank as the 5th-largest oil producing nation on earth, behind Iraq as well as the other countries mentioned above. The other amazing but little known fact about the Permian is that it ranks as one of the largest natural gas plays on earth, second in the U.S. only to the mammoth Marcellus Shale play in the northeast.

How incredible is that? Look at it this way:  Just a decade ago, the Permian Basin was considered to be a “dead” oil play. Downtown Midland was basically a ghost town, and the only real oil business going on out there was a bunch of small companies buying up old, depleted oil fields and going in to rework the wells in order to squeeze a few more barrels per day out of them.

Today, just 10 year later, it is the focal point of the global oil industry, the driver of booming economies of Texas and New Mexico, the main driver of the country’s burgeoning oil and LNG exports businesses. Because industries like chemicals, plastics, fertilizers and many, many more use petroleum products and natural gas as feedstocks, the Permian is also one of the the major facilitators of our country’s manufacturing renaissance over the last few years.

Stunning. And a real blessing.

God Bless Texas, indeed.

That is all.

Follow me on Twitter at @GDBlackmon

Today’s news moves at a faster pace than ever. Whatfinger.com is my go-to source for keeping up with all the latest events in real time.

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Everyone Chill Out, OK?

Just a little perspective on the current situation, and then I’ll shut up for the day:
 
  • The current effort by the fake media/Democrat Party ministry of disinformation to tar President Trump as a racist and run him out of office is just a repeat of the playbook they used against Ronald Reagan in 1981-84. Same tactics, same false claims, same inflammatory protests and rhetoric. We have, in other words, seen this movie before.
  • We should all remember that the ending to that movie in 1984 was the single greatest landslide re-election of any sitting president in the history of the American Republic. The average American is much more perceptive than Democrats believe they are.
  • We also need to remember this key difference between 1984 and today – The Democrat Party’s status has radically changed:

    • The Democrat Party in 1984 was a majority national party in almost every respect outside of the Oval Office.  It controlled both houses of congress, a majority of state governorships and a majority of state legislative houses.  It was the majority party in the West, the majority party in the Rust Belt, the majority party in the Midwest, and the majority party in the Northeast.  It had real leadership in congress, and a strong bench of younger, upcoming leaders.  What it didn’t have was a strong candidate to challenge Reagan, whose popularity boomed along with the national economy, which had come roaring back in response to his program of tax cuts.
    • By contrast, The Democrat Party today is in complete and utter disarray. It has no leadership that is attractive outside one fringe group or another.  It is now nothing more than a regional party comprised of an often-conflicting collection of single-issue grievance constituencies.  Its only unifying core philosophy is one of hate:  Hate Trump, hatred of white men, hatred of the police, hatred of the military, hatred of fossil fuels and pipelines.  It has no real leadership outside of the evil George Soros and the termed-out Barack Obama and the twice-failed presidential candidate Hillary Clinton.  It has no bench of young, upcoming stars to replace its current sclerotic leaders.  It is the majority party only on the West Coast and in some of the Northeast.  It controls neither house of congress, only 4 of 9 seats on the Supreme Court, only 15 of 50 governorships, and an even smaller number of state legislatures.  It is an utterly corrupt and dying entity.
    • Even better for the Republicans, the termed-out Barack Obama, whose feckless and corrupt rule from the radical left and deployment of Alinskyite tactics against his political enemies led directly to the fall of the Democrat Party, is promising to move back onto the political stage this fall.  This can only work to the GOP’s advantage.
  • So tonight, when you turn on CNN or MSNBC (for what reasons I can’t even fathom at this point other than self-abuse)  and see a panel made up of 4 squealing liberals, 2 pontificating fake Republican Trump-haters, and a token real Republican who is there for “balance”, realize that fewer than 1 out of 3000 other Americans are joining you in that inexplicable activity.  Most of them are hopelessly lost souls, but they do not a majority make.
  • Meanwhile, the U.S. economy continues to heat up; the FBI and Justice Department appear to be turning back into real, functioning law enforcement entities again; U.S. foreign policy is working again, even at the previously worthless United Nations; the swamp creatures who have infested and corrupted the State Department, the IRS, the Interior Department, the Energy Department, the EPA and the Department of (no) Education are being run off in droves; the rapidly rising production and exports of oil, coal and liquefied natural gas are turning the U.S. into an energy powerhouse on the international stage; and there have been more than 1 million new jobs created in our country during the first half of 2017.
  • As we sit here today, all of these factors and many more mean it is very likely, given good health, that Donald Trump will be a two-term president.  So do what I’m going to do this evening:  stop worrying and be happy.

That is all.

 

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