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)
As of March, the biggest explorers had hedged 28% of this year’s production, according to Warren Russell and Michael Cohen of Barclays Plc. There are no guarantees for 2018, however, when most of the hedges expire. “Now that it’s trading under $50, not many people are rushing to hedge.” Source: Bloomberg/WorldOil
Russian President Vladimir Putin said Thursday that he was pleasantly surprised at the pace of construction of the liquefied natural gas (LNG) plant in Russia’s Yamal Peninsula, and noted that maintaining such a pace would allow Russia to become the world’s largest LNG producer. Source: Sputnik
The oil market is risking a supply crunch as producers cut spending on major projects to focus on short-term low-cost shale output in the U.S., some of the top crude and products traders said. Hedging activity by these same producers is keeping future prices low until 2020. Source: Bloomberg
Oil prices have recently edged below $50 a barrel, but several U.S. drillers have already locked in higher prices for the barrels they sell this year, a new report says. After OPEC announced it would trim oil production in late November, nearly three dozen of the largest U.S. explorers increased oil hedging activity by a third. Source Fuelfix
Five companies default in Jan-Feb brings total bankrupt E&Ps to 119. Five oil and gas companies have gone bankrupt in the first two months of this year, according to the most recent edition of Haynes and Boone’s Oil Patch Bankruptcy Monitor. Currently 119 E&P companies have entered bankruptcy since the beginning of 2015. Source Oil & Gas 360
New production projects and a fresh shale boom could boost oil output by a million barrels per year and result in an oversupply in the next couple of years, according to Goldman Sachs Source Investing
The Asian energy companies sitting on the largest hoard of cash outside China are ready to put it to use. Thailand’s PTT Exploration & Production Pcl and its parent company have nearly $11 billion combined in cash and marketable securities, such as bonds and other short-term investments. Source RigZone
Paul Basinski, the geologist who helped discover the Eagle Ford basin in Texas, is part of a fledgling effort on Alaska’s North Slope to emulate the shale boom that reinvigorated production in the rest of the U.S. Source: Bloomberg
“We achieved this great achievement of 4 million barrels per day … middle of 2016, and now we have climbed up and we are reaching about 5 million barrels per day beginning of second half of this year,” Al-Luiebi said during an interview at CERAWeek by IHS Markit. Source: CNBC
The recent drop in oil industry investment brought on by weak prices threatens to significantly slow supply growth in the long term, and could lead to a shortage when it comes to meeting global demand, the International Energy Agency said in its five-year oil market forecast released Monday. Source MarketWatch
Albanian villagers who accuse an energy company of damaging their homes by fracking will get full compensation, the country’s deputy prime minister said on Wednesday. “Since 2010 we have suffered earthquake tremors of high intensity at various times, usually at night, even 30 quakes a day,” Source: Reuters
Exxon is diverting about one-third of its drilling budget this year to shale fields that will deliver cash flow in as little as three years. Next year, U.S. shale will absorb 50 percent of Exxon’s worldwide drilling budget. Source: Bloomberg
Storing crude oil for sale at a later date is no longer profitable, as the futures curve has flattened out in recent weeks, depriving traders of a strategy that has served them well over the past few years. The market “contango” has all but vanished. Source: OilPrice
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