Updates
February 2, 2016: Saudi Aramco confirmed it is looking at an IPO, selling off part of its company. Bloomberg has the story.
Later, 6:49 p.m. Central Time: the "global wrap" at the bottom of this page reports on several countries who are facing existential crises. This is what the tea leaves are telling me:
The American, Russian, Chinese, North Korean, German, and French arms industries are going to do very, very well supplying guns and ammunition to all the combatants: Syria, Iran, Iraq, Saudi Arabia, Yemen, just to name a few.
It's a free-for-all in the Mideast.
The one country that might do the best: Iran.
They've been to hell and back; and now that sanctions have been lifted, their morale is rising, and their bank accounts building.
It's a free-for-all in the Mideast, a good ol' traditional "capture the flag." ISIS, of course, will do well in a free-for-all.Wildcards: Turkey, Egypt, Palestine, Kurdistan, Lebanon, Afghanistan.
Original Post
If you do only one thing today with regard to the Bakken, visit this site: visualizing US shale oil production.
This site will be linked on my "Data Links" page.
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Global Wrap
Saudi Arabia
I'm going off the net for several hours but I will be back but before I leave, Saudi import data as well as selected import data.
I believe the previous update was this post, back on January 8, 2016.
The actual spreadsheet since 2000:
Now look at that graphic/spreadsheet in light of the Argus article just sent to me by a reader:
US crudes in domestic refineries are losing out to heavier feedstocks and imports, independent refiner Valero said today, but they should regain competitiveness later this year.
Valero cut its throughputs of continental US crudes by 400,000 b/d from the previous quarter as it increased runs of medium sour crudes and light, sweet imports. Valero averaged 1.2mn b/d in light, sweet throughputs in the fourth quarter. The heavy crude diet remained the same.
Light Louisiana Sweet, a key domestic sweet crude marker for the US Gulf coast, traded at a premium to import benchmark Brent and encouraged imports of foreign crudes during the quarter.
Rising US inventories indicated that LLS was overpriced and would come down to compete with the waterborne imports.
The movement welcomes light, sweet crude imports to a region that had almost completely shut them out just a year ago. The US Gulf coast imported 1.3mn b/d of light, sweet crude in January 2007, before the boom in onshore domestic crude production. Imports of crude higher than 30°API averaged just 47,484 b/d last year and 3,677 b/d the year before, according to the Energy Information Administration. Import data for 2016 is not yet available.
Shifting away from light crude will not curb the refiner's production of gasoline or change the conditions that helped create a glut of naphtha.West African sweet barrel yields are similar to US Eagle Ford and Bakken crude, while highly complex refining units wring comparable volumes of gasoline out of medium sour barrels, the company said.
Shift could create export opportunity.
Valero's US Gulf coast dock capacity, developed with the rise of Eagle Ford production, could also see export business. The facilities were used to send up to 90,000 b/d of the south Texas crude to its 265,000 b/d St Romuald refinery in Quebec. But North Atlantic imports are once again economic at the facility, along with new deliveries of Bakken that began in December off of Enbridge's Line 9.
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Global Wrap
Venezuela: On Brink of Economic Collapse
Update, February 3, 2016: in the Financial Times (archived) -- it may be too late --
As markets brace themselves for the negative effects of the decline in oil prices, Venezuela will probably be the first big domino to fall.
Jeff Bezos is reporting:Domestically, the most likely scenario is an imminent economic collapse and a humanitarian crisis. Internationally, it will imply the largest and messiest emerging market sovereign default since the Argentine crisis of 2001. The situation is made worse by the inability of the political system, at present, to address the situation.Why Venezuela? First, because while most other oil exporters used the boom to put some money aside, former president Hugo Chávez, who died in 2013, used it to quadruple the foreign debt. This allowed him to spend as if the average price of a barrel of oil was $197 in 2012, when in fact it was only $111. He also used it to maim the private sector through nationalisations and import controls. With the end of the boom, the country was put in a hopeless situation.
The only question now is whether Venezuela's government or economy will completely collapse first.
The key word there is "completely." Both are well into their death throes. Indeed, Venezuela's ruling party just lost congressional elections that gave the opposition a veto-proof majority, and it's hard to see that getting any better for them any time soon — or ever. Incumbents, after all, don't tend to do too well when, according to the International Monetary Fund, their economy shrinks 10 percent one year, an additional 6 percent the next, and inflation explodes to 720 percent.
It's no wonder, then, that markets expect Venezuela to default on its debt in the very near future. The country is basically bankrupt.
That's not an easy thing to do when you have the largest oil reserves in the world, but Venezuela has managed it. How? Well, a combination of bad luck and worse policies. The first step was when Hugo Chávez's socialist government started spending more money on the poor, with everything from two-cent gasoline to free housing.
Now, there's nothing wrong with that — in fact, it's a good idea in general — but only as long as you actually, well, have the money to spend.
And by 2005 or so, Venezuela didn't. Why not? The answer is that Chávez turned the state-owned oil company from being professionally run to being barely run. People who knew what they were doing were replaced with people who were loyal to the regime, and profits came out but new investment didn't go in. That last part was particularly bad, because Venezuela's extra-heavy crude needs to be blended or refined — neither of which is cheap — before it can be sold.
So Venezuela just hasn't been able to churn out as much oil as it used to without upgraded or even maintained infrastructure. Specifically, oil production fell 25 percent between 1999 and 2013.Note: Venezuela's production fell 25% well before the "Saudi Surge/Slump." Well before the price of oil plummeted (October, 2014), Venezuela's production collapsed (between 1999 and 2013).
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Global Wrap
Saudi Austerity
The [London] Telegraph is reporting that the Saudis are being told to "embrace austerity" as debt defaults loom. The Kingdom faces a future of higher taxes and low fuel subsidies amid fears the world's weakest oil producers will soon begin to buckle.
The Saudis have been burning through their reserves at a record pace to protect the riyal's fixed value against a soaring dollar, and should continue to preserve the peg at all costs, said the IMF.
Mr Ahmed said it was "neither necessary nor appropriate" for Riyadh to move to a floating exchange rate, forcing it to undertake record levels of expenditure cuts instead.
"The currency peg has served Saudi Arabia well. It's appropriate for the structure of the economy".
His comments echo concern that any moves to jettison a stable currency, or embark on massive fiscal austerity, could erode the social fabric of the Gulf oil producing nations five years on from the Arab Spring.
Saudi Arabia is set to slash subsidies on water and electricity, and must begin to overhaul its generous fuel subsidies for its 30 million people, recommended the Fund.
"Energy price reform is key. It has been part of the social contract but that will now need to change".
IMF calculations suggests Saudi Arabia could be running a deficit of around $140bn , far above the government's own estimates of around $98bn, or 15 percent of GDP.
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Global Wrap
Iraq
Global Wrap
Iraq
The New York Times is reporting Iraq now faces calamity from dropping oil prices after being batted by war:
Iraqis seeking to withdraw money from banks are told there is not enough cash. Hospitals in Baghdad are falling back to the deprivation of the 1990s sanctions era, resterilizing, over and over, needles and other medical products meant for one-time use.
In the autonomous Kurdish region in the north, the economic crisis is even worse: government workers — and the pesh merga fighters who are battling the Islamic State — have not been paid in months. Already, there have been strikes and protests that have turned violent.
These scenes present a portrait of a country in the midst of an expensive war against the Islamic State that is now facing economic calamity brought on by the collapse in the price of oil, which accounts for more than 90 percent of the Iraqi government’s revenue.
Analysts and officials, though, say much tougher economic times are ahead, even as they insist the war will be largely unaffected because of help from foreign powers determined to defeat the Islamic State.
The United States, for instance, recently extended new loans to Iraq to buy weapons, and other countries are stepping up with donations of arms and ammunition.
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Global Wrap
Egypt: No Dollars
Egypt suffering from shortage of dollars. No tourists. Ability to import essential goods from drugs to wheat is threatened. Looking for aid from Saudi Arabia. Don't hold your breath. WSJ reports:
The government also is canvassing Gulf neighbors such as Saudi Arabia for more aid and investment, though plummeting oil prices may curb their capacity to help. Since October, Egypt’s new central-bank governor, Tarek Amer, has relaxed some restrictions on Egyptian banks dealing with dollars to free up more foreign exchange.
As Egypt struggles to cope with the dollar shortage and keep its economy ticking, analysts warn the country risks having to devalue its currency to boost itscompetitiveness and bring foreign investors back.
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Global Wrap
Nigeria: Borrowing
According to Bloomberg, Nigeria is in talks to borrow $3.5 billion as oil saps budget.
Nigeria’s government is in talks for concessionary loans worth $3.5 billion from the World Bank and African Development Bank to help finance a planned record budget this year.
Lawmakers in Nigeria’s parliament will begin deliberations this week on the record $30.7 billion 2016 spending plan.
Africa’s top oil producer wants to spend its way out of slowing economic growth. To plug a record budget gap of $15 billion authorities will borrow about $5 billion in external debt from multilateral agencies and the Eurobond market.
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Global Wrap
Pemex: Even Shakier Footing
From Platts:Unfortunately, the deep dive in the price of oil has put Pemex on an even shakier footing, with the company now losing money on crude production, its core business, for the first time since it emerged as a major producer in the late 1970s.
For years, the profitable upstream division of Pemex shouldered the losses of petrochemicals, refining and other businesses. No longer.
“To my surprise, during the first three quarters of 2015, the upstream division was making a loss, just like the others,” Carranza said.
Including all its divisions, Pemex had net losses of almost $10 billion in the first three quarters of last year.
But turning around a state-run enterprise with 77 years of inertia behind it, can’t happen overnight and while steps are slowly being taken to turn things around, more pain is likely.
The first barrels of oil from private-sector newcomers following Round One of the reform effort are not expected until at least 2018. This makes arresting steadily falling crude production difficult as low oil prices have deprived Pemex of investment capital of its own.
Mexico’s crude oil production fell to 2.275 million b/d in December, down nearly 12% from 2010, according to Pemex data.
Since Pemex favored the crude production side of its business over others, the downstream refining business is in sore need of repair. This is one reason the company’s refined product output has decreased over the years.
This is now changing with the Los Ramones pipeline that will allow Mexico to import natural gas from US shale plays. Not only will the pipeline bring gas to a Mexican market hungry for it, but now the US price will have an element of the Mexican market.Much, much more at the linked story.
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