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)
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
Global oil prices will witness “much more volatility” in 2017 even though markets may rebalance in the first half of the year if output cuts pledged by producers are implemented, the head of the IEA said on Sunday. His main concern now is lack of investment in new oil supplies. Source: Reuters
The architect of the output-cut plan, OPEC Secretary-General Mohammad Barkindo, has said inventories are the primary target–not the U.S. shale producers who are often described as the cartel’s chief adversary. OPEC has begun pushing countries to disclose more information. Source: Global Finance
But the rig count is only part of the picture. In 2016, the estimated ultimate recovery (EUR) of the average US horizontal shale oil well was 736,000 barrels of oil equivalent, more than double the volumes of four years ago, according to Rystad. Source: FT
Saudi Arabia has reduced oil production to less than 10 million barrels a day, below its targeted level, and will consider renewing its pledge to cut crude output in six months. Total SA Chief Executive Officer said he expects that the decline in oil inventories will take two years. Source: Bloomberg
Saudi Arabia plans to follow its record-breaking debut on global debt markets with an Islamic bond issue in a sale that could come as early as February. Gulf states including Qatar, UAE, Oman and Bahrain have all turned to capital markets in the wake of falling oil prices. Source: FT
Global capital spending by leading exploration and production companies will total $450bn in 2017, up 3% compared to 2016 and ending two years of steep declines. “The industry has moved out of survival mode, through a phase of adaptation to lower prices and now it is beginning to think about renewed growth.” Source:FT
Seven of the world’s largest energy companies will together boost oil and natural gas output by 398,000 barrels a day, the most since since 2010, according to Rystad Energy AS. Should crude remain above $50 a barrel, 2017 could be a break-out year, eliminating the need to borrow to pay dividends. Source: Bloomberg
Output has more than tripled in the past three months and hit a three-year high this week as militias make deals to reopen facilities. The country was exempted from cuts agreed to by major oil producers. Source: WSJ
Saudi Arabia has said it will cut oil output by at least 486,000 barrels per day (bpd) as it implements OPEC’s agreement to reduce output. According to a source, the Saudi Aramco has started talks with customers around the world on possible cuts of 3% to 7% from next month. Source Energy Voice
Gazprom Neft set a Russian record in the summer by completing 30 hydraulic fractures along the length of one well at cluster 933. Russia’s enormous Bazhenov formation in Siberia is estimated by the US Department of Energy to be the single largest deposit of shale oil in the world. Source: FT
UK-based oil and gas sector insolvencies hit a new high. Sixteen UK oil and gas firms became insolvent last year, up from a total of two the year before, following a continued low oil price environment. The accountancy firm revealed that a total of nine UK oil and gas companies went insolvent in the preceding four years. Source Rigzone
Russian oil production in December stood unchanged at 11.21 million barrels per day (bpd), flat month on month and at its highest in almost 30 years, energy ministry data showed on Monday. In 2016 in total, output reached 10.96 million bpd, up from 10.72 million in 2015. Source: Reuters
Nigeria’s peace drive in the oil-rich delta region suffered a major setback on Sunday night when a key militant group slammed President Muhammadu Buhari for allegedly stalling the peace process. The movement has been blamed for bombing key oil infrastructure in the region between 2005 and early 2007. Source: Anadolu
In 2016, the U.S. oil and gas industry defaulted on $39 billion in high-yield energy debt, more than twice as much as the $15 billion in defaulted debt in 2015, according to Fitch. While 2016 was a horrific year for the high-yield sector, Fitch says that 2017 will be much better. Source: OilPrice
North American oil and gas companies could ratchet up spending by as much as 30 percent, according to Raymond James. That will be possible because banks are finally showing signs of loosening credit once again, after two years of slashing lending. Source: OilPrice
After years of running flat out, U.S. Gulf Coast refiners are lining up repairs to plants in 2017 – but facing a severe labor shortage that could delay work, drive up costs and raise accident risks. Source: Reuters
U.S. crude oil exports averaged 501,000 bpd in the first five months of 2016, 43,000 bpd (9%) more than the full-year 2015 daily average. U.S. exports of crude oil had already increased significantly before the lifting of crude oil export restrictions. These exports were mostly to Canada, which was excluded from the previous restrictions. Source: WorldOil/EIA
The U.S. Department of Energy could begin to sell off some of its strategic petroleum reserve as soon as January, the beginning of a multi-year process to shrink the nation’s stockpile of oil. Congress has authorized DOE to sell off $375.4 million worth of oil in its recent budget resolution. Source: OilPrice
State oil giant Saudi Aramco plans to sell 49 per cent of its shares over the next 10 years, Saudi newspaper al-Eqtisadiah reported on Saturday, quoting an unnamed senior source. The company is targeting 2018 for what is expected to be the world’s biggest initial public offering. Source: Gulf Business News
Iraq said most international oil companies working in the country, along with the semi-autonomous region of Kurdistan, have agreed to cut crude output to fulfill an OPEC accord. “Kurdistan is within Iraq and we are in agreement,” said al-Luaibi. Source: Bloomberg
The IEA says that in the third quarter of 2016, the U.S. shale industry became cash flow neutral for the first time ever. That isn’t a typo. For years, the drilling boom was done with a lot of debt. Source: OilPrice
The cost of living in Saudi Arabia rose over the past year as the kingdom contends with lower oil prices and slashes to subsidies. Now Saudis are girding themselves for additional cuts that risk provoking public ire. Saudi Arabia’s fiscal deficit ballooned to a record deficit of 16% of GDP. Source: WSJ