Wednesday, June 14, 2017

"Whatever It Takes" Isn't Working -- CNN -- June 14, 207

Active rigs:

Active Rigs552875187184

RBN Energy: an update of the gas supply-demand balance and storage.

Cuts not cutting it! -- Rigzone, June 19, 2017
The sustained fall in oil prices over the past week is indicative of the consensus view that the 1.8 million barrel per day coordinated output cut among the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC is not deep enough to rebalance global oil markets in 2017, or even in 2018.
Also contributing to this bearish outlook are serious concerns around U.S. gasoline demand. In its Weekly Petroleum Status Report on Wednesday, the U.S. Energy Information Agency (EIA) showed a surprise build to gasoline stocks for the week ending June 9.
NY Times: OPEC took aim at US oil producers but hurt themselves, also.
This week oil traders were shaken by a report by the International Energy Agency that global supplies rose by 585,000 barrels a day in May as both OPEC countries and non-OPEC countries increased production. Oil stocks for the 35 industrialized economies, the agency noted, are not only well above the historical average but higher than when OPEC decided late last year to cut output.
United States oil production, which averaged 8.9 million barrels a day in 2016, will rise to 9.3 million barrels a day this year. The [government] is projecting production of 10 million barrels a day in 2018, exceeding the record set in 1970. Last week domestic crude inventories eased a bit, but gasoline stockpiles rose by 2.1 million barrels.
OPEC set the latest market cycle in motion in late 2014, when the Saudis and their allies decided to swing cartel policy in an unexpected direction. Instead of cutting production to support prices, as it had done so often in the past, OPEC decided to let market forces loose and then even raised production.
Snarky: IEA to Saudi. From Bloomberg. Only one "new" data point that interested me:
By the end of 2018, demand for crude oil should top 100 million barrels a day for the first time ever.
OPEC stumbles: from WSJ -- production cuts aren’t drawing oil out of storage and are helping U.S. shale producers.
Oil stockpiles in the Organization for Economic Cooperation and Development—a club of 35 countries with industrialized economies—rose by 18.6 million barrels in April and were higher than they were when OPEC agreed to its cut late last year, said the International Energy Agency, a Paris-based group that advises governments on energy trends.
Saudi to target US shale? Saudi Arabia and other producers are frustrated that growing U.S. production is hurting the oil market. Saudi Arabia is said to be considering holding back exports into the U.S. Link at CNBC. Reduced exports would show up in weekly US government data and send a bullish signal to the market. Wow -- Saudi should have done that from the beginning instead of flooding the US with crude oil from their "storage tanks." By the way, this may be more smoke and mirrors: during the summer, Saudi exports less oil because domestic demand is greater during the hot summer months. 

Bad news for OPEC: that was the teaser from CNN Money this morning. Unfortunately nothing new:
OPEC has been trying for months to eliminate a glut of excess supply that has kept prices from rising. The cartel has pledged to do "whatever it takes."
But its efforts have been blunted by a massive boom in production by U.S. shale operators. The IEA said Wednesday that the trend is likely to continue into next year, with production by non-OPEC nations growing more quickly than global demand.
Graphic: the source.  IEA forecasts non-OPEC oil supply will rise by 1.5 million bopd in 2018, faster than expected increase in demand. The entire report is bad news for OPEC. I love this observation with regard to the OPEC cut (wink, wink):
Global oil supply rose by 585 kb/d in May to 96.69 mb/d as both OPEC and non-OPEC countries produced more. Output stood 1.25 mb/d above a year ago, the highest annual increase since February 2016. Gains were dominated by non-OPEC, particularly the US.
Dire analysis: from John Kemp over at Reuters -- some data points:
  • the speed and scale at which U.S. shale production has bounced back from the slump in 2015/16 has confounded OPEC and all the other major forecasters
  • the increase in U.S. production is now threatening to overwhelm the market, in a re-run of the situation in 2014 that led to the price collapse
  • the U.S. Energy Information Administration projects U.S. production will rise by a further 680,000 bpd in 2018. The International Energy Agency is predicting an even larger increase
  • many U.S. shale producers insist they can drill wells profitably at prices well below $50 per barrel and in some cases below $40.Many U.S. shale producers insist they can drill wells profitably at prices well below $50 per barrel and in some cases below $40
  • the International Energy Agency (IEA) projects non-OPEC output will increase by 1.5 million barrels per day (bpd) in 2018
  • if that proves correct, non-OPEC suppliers will capture all the increase in demand next year, because the IEA predicts consumption will increase by only 1.4 million bpd
  • in effect, OPEC will be restricting its own output only to see rival producers step in to meet growing demand from refiners
Iraq eating Saudi's lunch: from Bloomberg --  Iraq is driving up crude oil exports to the U.S., the world’s second-biggest import market, just as there are signs Saudi Arabia is honoring a pledge to restrict such deliveries, according to tanker-tracking data. See EIA data here.

Deep doo-doo: unless there is some geo-political event in Saudis' favor, the kingdom is in great trouble. Canada, too, with regard to strength of its dollar, and, Mexico with regard to strength of its peso. At least that's what I think. Disclaimer: this is not an investment site.

Oil flirts with $40. Bloomberg.

More: from PennEnergy -- US oil production seen thwarting OPEC effort to boost prices. My hunch: every Arab for himself by the end of the year.

Even more: from Bloomberg. America can spin the oil world on its axis. The government can provide incentives, as oil and natural gas production is not just a matter of economics, but of national security as well. Say what? What incentives? This is such an incredible (ridiculous) article, it may be re-posted as a stand-along post. Really? The US oil industry needs government's help? From the linked article:
For OPEC, Russia and others that have lived off oil (and little else) for decades, the worst-case scenario is about to become the present-tense scenario. America has discovered the magic beanstalk, and it is named “shale oil production.” The U.S. now has the ability to not only be energy self-dependent but to become a major exporter of oil and natural gas and spin the world on its axis. America now owns the magic beans, and all it needs to do is plant them and water them with care.
OPEC can’t quite believe it, and the cartel is in denial. The markets can’t quite believe it, either, as OPEC spews the nonsense that we have listened to, and believed in, for far too long -- that it can control supply and, therefore, prices.
Iraq: taking on Saudi Arabia. From Bloomberg via Rigzone:
Iraq is gaining the edge over Saudi Arabia in the world’s fastest-growing oil consumer amid an intensifying race among producers to retain their most-prized markets.
Iraq was the top crude supplier to India for a third month in May, shipping 1 million barrels a day. Iraqi supplies accounted for 23 percent of India’s purchases last month, up from an average 19 percent in the previous four months, while Saudi Arabia’s share fell by 1 percentage point to 17 percent, the data showed.
Oil producers are facing increasing competition in major markets like China and India as OPEC and its partners continue efforts to curb output to clear a global glut. India’s $2-trillion economy imports more than 80 percent of its crude requirement and the International Energy Agency expects it to be the fastest-growing consumer through 2040.
“Saudis used to be the king when it comes to crude supply, but now it’s becoming a prince,” said R. Ramachandran, the head of refineries at Bharat Petroleum Corp., India’s second-biggest state-run refiner. “Preference for Iraqi crude will continue as Indian refiners continue with refinery upgrades.”

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