Thursday, May 11, 2017

Consider The Source -- May 11, 2017

Rystad via Twitter:

Meanwhile, elsewhere, and consider the source --

Goldman Sachs now bullish on oil -- at least for the next 6 to 12 months --
He pointed to the futures market, where the curve could be headed into backwardation – a situation in which near-term oil futures trade at a premium to contracts further out. That structure points to concerns about a deficit in the short run, which is why front month contracts would trade at a higher price than deliveries six or twelve months away.
A deficit in the short term? What universe is he living in?
Putting some of the jargon aside, Goldman is simply arguing that the oil market will be much tighter this year than most people seem to think. The investment bank forecasts returns on commodity prices on the order of 13.3 percent over the next three months and 12.2 percent over the next 12 months.
It's been my impression that trying to decipher Goldman Sachs reasoning is akin to sorting out a vision from the Delphi oracle.

Meanwhile, the forecast for non-cartel production growth quadrupled in size since November, 2016. Read that again:
the forecast for non-cartel production growth quadrupled in size since November, 2016
From Financial Times.
Higher than expected production from the US and other countries outside the cartel is offsetting curbs from some of the world’s biggest producers, Opec said, keeping global oil inventories stubbornly high and pressuring prices. 
Opec’s latest monthly forecasts revised up production growth from outside the group by 58 per cent to almost 1m barrels in 2017, and said the world will require only 31.9m barrels a day of its crude on average this year.
Again, by OPEC's reckoning: non-OPEC production (e.g., Bakken, Eagle Ford, Permian) will / has increased production by almost 60 percent -- increased production by another 1 million bopd -- pretty much off-setting any OPEC production cuts.

And more:
That means demand for Opec’s oil is only 200,000 b/d higher than current levels of output, according to the data from consultants and energy analysts submitted to the group, despite making output cuts that are at least six times as large. 
Although Opec’s figures suggest stockpiles will still drop in the second half of this year, it is dependent on output not rising further. The total production figure includes Libya and Nigeria, however, who are exempt from output cuts and whose production is set to recover in coming months after disruptions. 
Pricing Mineral Acres In The Eagle Ford

One can get Bakken acreage for as little as $1/acre. What's the Eagle Ford doing? From Oil & Gas Journal:
  • 111,000 net acres for $265 million 
  • $2,400 / acre
  • buyer: WildHorse Resource Development Corp
  • seller: Anadarko Petroleum Company
And, oh, by the way, the Bakken is 93% oily; the Eagle Ford is not.

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