OPEC, for some quiet moments..

[admin]

The FT Alphaville article (already featured earlier here) is pretty useful as a primer on the changing structure of the oil market:

Because lenders did not like this kind of volatility and unpredictability attached to spot oil prices, they wouldn’t invest unless prices were ridiculously high, to cover the fear of losses. This, he believed, led to under investment in oil infrastructure, leading to an effective self-squeezing effect, that ironically would lead to even more volatility. To get around the spot price volatility and overshoot problem, Simmons recommended the industry move to long-term pricing contracts instead. But now, shale’s faster “time to build” factor changes the risk paradigm completely. In short, because the industry can bring new supply to market relatively quickly, we go from a spare capacity model, to a just-in-time model instead.

A capital contango, and why oil storage economics may be dead | FT Alphaville

[admin]

Saudi Arabia’s decision not to cut oil production, despite crashing prices, marks the beginning of an incredibly important change. There are near-term and obvious implications for oil markets and global economies. More important is the acknowledgement, demonstrated by the action of world’s most important oil producer, of the beginning of the end of the most prosperous period in human history – the age of oil.

Oil Prices Saudi Arabia and the End of OPEC | The Energy Collective

Crude-oil futures are telling a far different story than the spot price is. Yet, curiously, it’s the spot price that gets all the headlines. While oil has been plunging, futures contracts expiring a couple of years from now have fallen by less than half as much. The Brent futures contract for December 2016 delivery, for example, currently trades for more than $65 per barrel. A contract with a December 2018 delivery goes for around $72 a barrel.

Investors are looking at the wrong oil prices - MarketWatch

On today's podcast, Chris Martenson talks with oil analyst David Hughes, who has analyzed the major shale plays utilizing a massive database of well production results from America's shale basins. The data show that declines tend to be hyperbolic in all shale fields. The average first-year decline is 70%; down to 85% by year three. And we're drilling the best parts of these plays first: meaning that future wells will yield less even under the best results.

The Surprising Data Behind Shale Oil

The International Energy Agency on January 16 gave the beleaguered oil industry something to feel happy about, suggesting that an oil price recovery could be around the corner. However, producers suffering from sub-$50/b oil will still have some time to wait yet before they can expect any real improvement in prices. Describing the oil market as having undergone an “historic shift” with OPEC’s reluctance to balance the market alone and the US enjoying a true production boom, the IEA said there would be no return to previous market conditions. But the slump in oil prices is now expected to – finally – have some impact on non-OPEC production, according to the IEA, which could lead to a rise in prices.

Is the tide about to turn for oil prices? « The Barrel Blog

[Kaliboo]

Saudi Arabia’s decision not to cut oil production, despite crashing prices, marks the beginning of an incredibly important change. There are near-term and obvious implications for oil markets and global economies. More important is the acknowledgement, demonstrated by the action of world’s most important oil producer, of the beginning of the end of the most prosperous period in human history – the age of oil.

Oil Prices Saudi Arabia and the End of OPEC | The Energy Collective

Crude-oil futures are telling a far different story than the spot price is. Yet, curiously, it’s the spot price that gets all the headlines. While oil has been plunging, futures contracts expiring a couple of years from now have fallen by less than half as much. The Brent futures contract for December 2016 delivery, for example, currently trades for more than $65 per barrel. A contract with a December 2018 delivery goes for around $72 a barrel.

Investors are looking at the wrong oil prices - MarketWatch

On today's podcast, Chris Martenson talks with oil analyst David Hughes, who has analyzed the major shale plays utilizing a massive database of well production results from America's shale basins. The data show that declines tend to be hyperbolic in all shale fields. The average first-year decline is 70%; down to 85% by year three. And we're drilling the best parts of these plays first: meaning that future wells will yield less even under the best results.

The Surprising Data Behind Shale Oil

The International Energy Agency on January 16 gave the beleaguered oil industry something to feel happy about, suggesting that an oil price recovery could be around the corner. However, producers suffering from sub-$50/b oil will still have some time to wait yet before they can expect any real improvement in prices. Describing the oil market as having undergone an “historic shift” with OPEC’s reluctance to balance the market alone and the US enjoying a true production boom, the IEA said there would be no return to previous market conditions. But the slump in oil prices is now expected to – finally – have some impact on non-OPEC production, according to the IEA, which could lead to a rise in prices.

Is the tide about to turn for oil prices? « The Barrel Blog

Thanks for doing all this homework.  More to read than I have time, but it looks like in the above "Is the tide about to turn for oil price?" article that no less than the CEO of LukeOil has a lower low than I'm guessing for oil prices:

"There still could be significant wiggle room though – rail operator CSX said this week it sees no slowdown in its crude-by-rail business through 2015 and that Bakken oil shipments are expected to remain robust, even at a price of $35/b. "

"And Lukoil’s CEO Vagit Alekperov said Friday that prices could slide further to as low as $25/b."

Bakken "robust" even at $35?  Doesn't sound like any decline in production anytime soon.  And lastly this comment from the same article.

"OPEC production in December exceeded the ceiling by a whopping 480,000 b/d."

No restraint at OPEC. 

[Putncalls]

With respect to the Bakken price, RJ has a sophisticated model using lots of numbers from US companies which are much more transparent than most. OPEC can allow US production costs to limit the price or they can live with cheap (<50$) oil.

[admin]

My pleasure Kalibo. I don't think anybody really knows. Very few saw the present sell-off coming and we're in a 'price discovery' mode right now. There are so many events that can shake things up again at short or no notice, but I guess if nothing happens we'll be low for quite a while as the wheels of long-run adjustment slowly turn.

[admin]

Oil prices produced their first weekly gain as the International Energy Agency pointed to lower non-OPEC crude supplies. On Friday, the U.S. benchmark price rose 4.5% to $48.34 per barrel, while the international Brent price rose 3.2% to $49.83. Producers are cutting spending budgets with low oil prices, and that means less oil sloshing around. But  oil demand remains weak. IEA data show macroeconomic weakness will restrain global oil demand growth to 0.9 million barrels per day 2015 to to an average 93.3 million barrels per day, unchanged from December.

Global Energy Stocks Rally; Did Oil Hit Bottom This Week? - Emerging Markets Daily - Barrons.com

The International Energy Agency today lowered its 2015 forecast for non-OPEC productions and said that the “tide will turn.” HSBC also had a report out today saying “we are seeing leading indicators of weak prices starting to drive the market rebalancing that OPEC is seeking to achieve.” Fingers crossed and let’s hope the worst is over. But don’t expect a sharp rebound. HSBC analyst Gordon Gray and team cited four reasons.

Oil May Be Bottoming, But Recovery Is Slow: HSBC - Asia Stocks to Watch - Barrons.com

Liquefied natural gas prices in Asia are poised to average below $10 per million a British thermal unit in 2015 for the first time in four years amid growing supply and as oil tumbles. Spot and term cargoes will be priced lower this year from 2014, according to the Oxford Institute for Energy Studies, Bloomberg New Energy Finance and Holmwood Consulting Ltd. LNG prices will likely be “single digit” even as oil prices recover from their collapse, said Jonathan Stern, a senior research fellow from the U.K.-based Oxford Institute. Long-term LNG contracts can be priced off by up to 15 percent of oil prices, and for the supercooled gas to sell under $10 Brent needs to trade below $66 a barrel, according to a Jan. 5 report by Bloomberg New Energy Finance and data compiled by Bloomberg News. Benchmark crude slumped almost 50 percent last year as the U.S. pumped at the fastest rate in almost three decades, exacerbating a global glut.

LNG to Snap 4-Year Run as Sub-$10 Price Seen Amid Oil’s Decline - Bloomberg

Jim Chanos, head of the world's largest short-selling hedge fund, told CNBC on Friday he's been short major oil companies for a couple years because the North American shale explosion has been "uneconomic for drillers." "The fracking and shale revolution was propelling us to be the largest oil producer in a way that I thought was uneconomic and still is uneconomic for the drillers. But it was going to be enough supply to really disrupt the markets," he said.

Jim Chanos: Days of drilling for cheap oil over

[admin]

Exxon Mobil Corp., as operator of the PNG LNG Project and of PRL 3, has signed a Memorandum of Understanding (MoU) with the PNG government with respect to the expansion of the PNG LNG Project. Under the MoU, the PNG LNG Project will supply electricity and gas for domestic power generation, providing a reliable and clean source of energy to support PNG’s urgent power needs. The agreement details the provisions for an LNG expansion project, including the award of a petroleum development license (PDL) and associated pipeline licenses for P’nyang gas field in PRL 3 (Oil Search, 38.51%).

Exxon to add third train to PNG LNG Project

OPEC has no immediate plan to cut its output target for crude, and Iran is strong enough to withstand a deeper slump in prices even if the country must sell at $25 a barrel, Oil Minister Bijan Namdar Zanganeh said.

Iran Sees ‘No Threat’ from Oil at $25 If Prices Keep Falling - Bloomberg

To get to the bottom of these important questions, TNI Executive Editor Harry Kazianis interviewed Ian Bremmer, a TNI contributing editor and president of the Eurasia Group on where sustained, lower oil prices could take nations like Russia, America and others.

Saudi Arabia's Oil Strategy: "Chill, Not Kill" America's Energy Revolution | The National Interest

Non-OPEC oil producers will increase output this year at a slower rate than previously forecast, aiding a recovery in crude prices, the International Energy Agency said. The adviser lowered its non-OPEC supply growth estimate by 350,000 bopd, the first cut since the 2015 forecast was introduced in July. Half the cut is from Colombian output while effects on U.S. production are so far “marginal,” it said.

IEA sees oil-price recovery; cuts 2015 non-OPEC output estimate

U.S. drillers have taken a record number of oil rigs out of service in the past six weeks as OPEC sustains its production, sending prices below $50 a barrel. The oil rig count has fallen by 209 since Dec. 5, the steepest six-week decline since Baker Hughes Inc. began tracking the data in July 1987. The count was down 55 this week to 1,366. Horizontal rigs used in U.S. shale formations that account for virtually all of the nation’s oil production growth fell by 48, the biggest single-week drop.

Steepest-ever drop in oil rigs shows shale losing fight to OPEC

[admin]

Jereh has successfully completed the construction of China’s first shale gas liquefaction plant in Sichuan, China, with a capacity of 2.47 MMcfd of LNG, the company has announced. The plant is located in Junlian County. In 2014, shale gas output in Junlian was 3.53 MMcfd, while local demand was 423,800 cfd, allowing for more gas to be liquefied for economic returns.

Jereh completes China’s first shale gas liquefaction plant

Iraq is pumping crude at a record pace and will continue to boost exports this year amid a global market glut that’s pushed prices down, Oil Minister Adel Abdul Mahdi said. “The average for Iraqi crude output is 4 MMbopd, which is a historical record,” Abdul Mahdi said at a news conference after meeting his Turkish counterpart, Taner Yildiz, in Baghdad.

Iraq pumps crude at record level amid oil-price drop on surplus

In an announcement on Tuesday night (well, Wednesday morning in Australia), Australian mining giant BHP said it would shut down 40% of its US shale oil rigs over by the end of its fiscal year.

BHP Shuts Shale Operations - Business Insider

Even as they beat analysts’ profit estimates, the second-and third-largest services providers are reducing their workforces and seeking to cut costs after oil prices fell 46% last year. Baker Hughes expects to cut 7,000 jobs in the first quarter, CFO Kimberly Ross said on a conference call. Halliburton reported a $129 million cost during the fourth quarter “to temper the impact of anticipated activity declines.”

Baker Hughes to cut 7,000 jobs this quarter, CFO says

Cheniere Energy, the developer of the first U.S. liquefied natural gas export terminal in decades, received authorization to build a second one. The Federal Energy Regulatory Commission said it will allow Cheniere to build an LNG plant and pipeline in Corpus Christi, Texas, according to a filing on Dec. 30.

Cheniere second LNG terminal gets construction authorization

[admin]

The plummeting price of oil since Saudi Arabia decided last fall not to cut production to counter rising supply elsewhere has fueled intense speculation about a downfall of the infamous cartel, once feared for its power to bend oil prices to its will. Was OPEC’s biggest oil producer unwilling or just unable to stop an emerging glut? Does this mean oil will never again reach $100 a barrel — where the spendthrift governments of the Organization of the Petroleum Exporting Countries need it to be? What’s missing from the discussion is an understanding of how the oil market got to this juncture and, notably, who brought it here.

Behind Drop in Oil Prices, Washington’s Hand - NYTimes.com

U.S. shale drillers won’t scale back output quickly enough for OPEC to avoid production cuts this year, according to a quarterly poll of Bloomberg subscribers.

OPEC Will Blink First in Battle With Shale Drillers, Poll Shows - Bloomberg

The development of heavy oil in the UK goes back further than most people realize. All the way back to 1787, in fact. That was when miners struck a spring of natural bitumen while digging a tunnel for the Coalport Canal; indeed, with a little imagination the “Tar Tunnel” might be described as the UK’s first horizontal production well.

Next Wave Of North Sea Oil Could Deliver A Billion Barrels

Most readers of this piece should be aware that the price of oil has more than halved in the last 6 months rendering much of the global oil industry unprofitable which is an unprecedented disaster for all of those dependent upon oil in their daily lives. But what is the underlying cause of all this market mayhem and does it really matter? The S&P 500 is, after all, riding high and the US Dollar keeps marching towards new highs against the Euro and other currencies. This post takes a look at a number of indicators searching for answers which are elusive.

Market Mayhem Has Some Way To Go

Oil has been volatile today amid these calls for stability after Saudi Aramco comments on cutting projects (supply) sent prices higher, and was then talked back by the CEO bringing prices lower. Oman - the largest non-OPEC Middle East oil producer - blasted that "we have created volatility," noting it was having a "really difficult time," and that's "bad for business," demanding OPEC slow production. But it was The IMF that sparked the greatest concerns as it warned oil producers to treat this oil price drop as permanent noting that they expect these economies to lose $300 billion. Only to be contradicted by OPEC's al-Badri who noted "oil prices will rebound back to normal soon."

IMF Says Oil Drop Permanent, OPEC Says Rebound Soon

[admin]

Oil at $20-a-barrel? The heck you say. Well, that was the gist of an interview the Organization of Petroleum Exporting Countries Secretary-General Abdalla El-Badri told Bloomberg Television on the sidelines of the World Economic Forum in Davos. “The price will not go to $20 or $25, I think the price will stay at where we are now,” El-Badri said. “We have seen this before — prices coming down very fast and go up very slow. But prices will rebound.”

OPEC’s El-Badri: Oil will rebound, and it’s not going to $20-a-barrel - MarketWatch

OPEC isn’t the only victim of the growth in U.S. shale oil. A surge of light oil from North Dakota and Texas is cutting into the earnings of Canadians who turn heavy oil sands into a lighter crude that fetches more from refiners. Producers in Alberta, home of the country’s greatest reserves, upgraded 20% less of the region’s crude in October than four years earlier, according to the province’s energy regulator.

Shale oil growth in U.S. hurts Canadians as well as OPEC

Total SA must lower its break-even point and cut spending amid weak crude prices that could last at least until the middle of the year, CEO Patrick Pouyanne said. “We have to control costs,” Pouyanne said in an interview on France 2 television channel from Davos, Switzerland. “This won’t mean cutting jobs. Over the medium and long term, we’ll stick to our strategy.” Europe’s second-largest oil company by market value will cut investment by 10% from last year’s $26 billion and reduce its exploration budget by 30% to less than $2 billion

Total must curb costs, lower break-even point, CEO says

Chevron' s Australian subsidiaries have signed a binding sales and purchase agreement with SK LNG Trading, part of a leading industrial conglomerate in South Korea. SK will receive 4.15 MMt of LNG over a five-year period starting in 2017.

Chevron signs five-year Gorgon LNG supply agreement with South Korea

BHP Billiton Ltd., the biggest overseas investor in U.S. shale, will cut the number of its rigs there by about 40% as plunging petroleum prices add to concerns about lower iron ore earnings.

BHP cuts U.S. shale spending as oil to iron ore prices slide