Europe is planning on recolonizing Libya, and so it will send in armed forces in the coming months to restore order and stem the flow of migrants coming from Africa. If this expedition army succeeds in securing parts of the country and restoring law and order, Italian and German engineers from ENI and Wintershall will follow suit to help resume the country’s oil production, which will add 1.3 million barrels per day (Libya produced 1.7 million barrels per day before Muammar Gaddafi was toppled in 2011) to the world oil glut . Continue reading
Oil and Gas
Last month we saw the iPath S&P GSCI Crude Oil ETN (USA) making an unusual dive, doing completely the opposite of what it was designed to do. Exchange Traded Funds (ETF) and Exchange Traded Notes (ETN) are mainly designed to follow an index. To explain the basic principles of an ETF real quick, we take the AEX index as an example. The AEX is formed out of 25 funds each with their own weighing. The ETF issuer buys the shares of the companies according to their weighing in the AEX index. One is able to track the index pretty accurately this way. The ETF issuer buys it on a big scale and sells shares of their basket of AEX shares. The share that they are selling are called ETFs. The difference between an ETF and an ETN is the fact that the ETN is a note. The problem is the third party risk, with an ETN you’re facing the risk of the issuing party going bankrupt. If they do, the chances are that you will lose your money. Continue reading
World oil consumption is more than 90 million barrels a day. Between 2009 and 2014 oil was traded for about 110 dollars a barrel; now oil is changing hands for 32 dollars a barrel. Roughly a 7-billion-dollar cash flow a day is vanishing from the global market. Norway’s sovereign wealth fund that has accumulated a stake of 4.5 billion dollars in Apple over the past years1, will turn from an Apple buyer into an Apple seller.
The China Development Bank (a Chinese policy bank) has poured nearly 50 billion dollars into Venezuela in return for oil, with the country now collapsing under the Chinese debt, having no other choice but to drill for more oil. These are just some of the challenges the world is facing in 2016 as oil prices are heading towards 20 dollars a barrel.
Speculators and manipulators were able to manipulate the oil price to more than 120 dollars a barrel, with the production cost being roughly between 20 and 80 dollars. With a huge profit margin the world was digging for more and more liquid gold. Continue reading
Oil price has collapsed and is not going to rebound quickly. But not all the oil-consumer countries benefit from low prices in the same way. And not all oil-producer countries suffer equally.
Oil prices change as the values of currencies do. Purchase or sale contracts for oil are usually long term ones, the price of oil in such contracts does not change very frequently. Fluctuating exchange rates of currencies are still enormously important for the economies. Oil for $40 per barrel does not mean that this barrel is also as cheap in all countries as consumers have to buy dollars in order to purchase a barrel. Or producers sell their barrels for dollars and then exchange these dollars for their own currency. The domestic price based on the exchange rate is not always stable. Continue reading
Ukraine does not plan any additional purchases of gas from Russia by the end of this year. The reversed flow from the EU and the falling consumption have allowed gas storage tanks to be filled up to 53 percent, from about 46 percent last year, according to Gas Infrastructure Europe data. Russia is losing its blackmailing-tool on Ukraine.
Source: Ukrtransgaz statictics
After many years of prosperity, the tough time has come for the US shale industry. Dramatic US oil production decline is inevitable and many shale companies face bankruptcy. Their assets can end up to larger producers, reinforcing market concentration. US energy independence can only be saved by government intervention. US government will remove exports limitation and FED September rate hike suspension is related to the unsustainable debt levels US oil industry is keeping afloat. But that is simply not enough to prevent a collapse of the US oil industry. From our research we learn that cost per barrel declined slightly but decreasing production cost is not enough to compensate for lower oil price. US oil production already declined 400K barrels per day from its April peak. We estimate an other 2 to 3 Million barrels can be wiped out the coming year.
A few months ago, when the oil price rise again before the June crush, the US oil industry seemed to be able to go through the difficult times. „It is too late for OPEC to stop the shale revolution”1, „OPEC can’t stop the shale industry”2 – roared the headlines. However, after last publications of Energy Information Administration (EIA) the OPEC and Saudi Arabia are the only one to triumph. Continue reading
CRUDE OIL (WTI)
CRUDE OIL (BRENT)
With India’s booming population, which the United Nations predicts will be larger than China’s by around 2030, energy demand and oil consumption are expected to reach record levels. The IEA estimates the country will account for a quarter of global energy demand growth by 2040. Source: OilPrice
Russia pumped 10.49 million barrels a day in December, down 29,000 barrels a day from November, while Saudi Arabia’s output declined to 10.46 million barrels a day from 10.72 million barrels a day in November, according to data published Monday on the website of the Joint Organisations Data Initiative in Riyadh. Source: Bloomberg
Oil prices are up. E&P companies are going back to work. OFS operators are raising the capital they need to supply goods and services. Canadian publicly traded oilfield service (OFS) companies are busily raising equity from the sale of treasury sales for working capital, balance sheet repair. Source: OilPrice
There were only 174 oil and gas discoveries worldwide last year, compared to an average of 400-500 per year up until 2013, according to IHS Markit, the research group. The slowdown in exploration success shows that the world is likely to become increasingly reliant on “unconventional” resources. Source: FT
India’s monthly oil demand fell the most since May 2003 as the government’s crackdown on high-value currency notes continued to reverberate through the country’s $2 trillion economy. Growth in gross domestic product may slow to 6.5 percent in the year through March from 7.9 percent the previous year. Source: Bloomberg
Venezuela’s state-run oil company, PDVSA, has fallen months behind on shipments of crude and fuel under oil-for-loan deals with China and Russia, according to internal company documents reviewed by Reuters. Source Reuters
Domestic output will average 9.53 million barrels a day in 2018, the Energy Information Administration said in its monthly Short-Term Energy Outlook released Tuesday. The U.S. will pump the most crude next year since 1970 as domestic producers benefit from OPEC supply cuts. Source: Bloomberg
BP PLC said it needed oil prices to rise to $60 a barrel in order to break even, as the British oil giant ramped up debt levels last year to fund spending, maintain its dividend and cope with costs associated with the 2010 Deepwater Horizon disaster. Source: WSJ/Morningstar
Russian bond funds counted record inflows in the week to February 1 as higher crude prices and improving relations with the US prompted an investor rotation back into the country. Source Financial Times
Vanguard Natural Resources LLC filed for chapter 11 bankruptcy after reaching the terms of a debt-for-equity swap with its bondholders designed to eliminate $708 million in debt from the company’s books. Source The Wall Street Journal
Saudi Oil Minister Khalid al-Falih has told the BBC’s Chief International Correspondent Lyse Doucet he is pleased that US President Donald Trump plans to pursue a more fossil fuel-oriented energy policy. Source BBC
President Donald Trump is willing to consider removing U.S. sanctions against Russia when he has his first official discussion with Kremlin leader Vladimir Putin on Saturday, according to senior adviser Kellyanne Conway. Source Bloomberg
China’s oil majors are expected to pump up spending in 2017 for the first time in years, scrambling to squeeze more barrels of crude out of ageing domestic wells in the hope that higher prices are here to stay. Source RigZone
Since prices began to sink in 2014, the five “supermajors” more than doubled their combined net debt to $220 billion. At $50 a barrel, they can balance their books and pay dividends without borrowing for the first time in five years, according to analysts at Jefferies International Ltd. Source: Bloomberg
US liquefied natural gas (LNG) exporters have shifted their focus to Southern Europe from Asia as cold weather and problems with Algerian gas supply have driven Europe’s gas prices higher. Gas prices in Europe are at their highest premiums to US gas prices for three years. Source: Ekathimerini
Global production and consumption are both projected to increase through 2018, but consumption is expected to increase at a faster rate than production. With annual inventory builds, along with a lack of a significant draw on existing inventories, prices remain below $60/b through the end of 2018. Source: EIA
Energy companies, which rely on large, complex equipment for drilling and maintaining oil wells, are particularly well-positioned to benefit. Automation means wells need only five workers, down from 20. Source: Bloomberg
Russian shipments surged nearly a quarter over 2015 to about 1.05 million barrels per day (bpd), the data showed, with Saudi Arabia coming in a close second with 1.02 million bpd, up 0.9 percent in 2016 versus the previous year. China is the world’s second-largest oil buyer and the fastest-growing major importer. Source Reuters
U.S. oil producers, optimistic that higher crude prices are here to stay, have issued 2017 budgets that call for dramatically greater spending to tap new wells. Source: WSJ
The world’s top oil companies are back in acquisition mode, targeting smaller exploration and development firms to boost oil and gas reserves rather than the mega-mergers that followed previous slumps in crude prices. Total acquisitions of oil and gas fields tripled to $31 billion in December from a month earlier. Source: Reuters
Oil-price gains will trigger a “significant” increase in U.S. shale output as OPEC and other producers rein in supply, according to the head of the International Energy Agency. Last month, the agency said it expected U.S. tight oil — as shale is also known — to rise only “marginally” in 2017. Source: Bloomberg
Exxon Mobil Corp said on Tuesday it will pay up to $6.6 billion to double its holdings in the Permian Basin of west Texas and New Mexico, the largest oil field in the United States. Source: Reuters
China’s production is forecast to fall by as much as 7 percent this year, extending a record decline in 2016, according to analysts. Crude production fell 6.9 percent in the first 11 months of 2016 to about 4 million barrels a day. Lower domestic production will help support the nation’s imports. Source: Bloomberg
Demand for oil and gas will continue to grow for the next few decades and any fall in capital investment for the industry will cause “spikes” in prices and affect the global economy, according to the president and CEO of Saudi Arabian Oil Company (Saudi Aramco). Source: CNBC