Friday -- May 1, 2015; Pressure On Saudi Arabia; Greek Default Slides To May 12 (Or Not); But First Payment Due Today

OPEC output near 2 1/2 year high; no let-up in production. Bloomberg is reporting: 

 OPEC oil production was little changed in April near the highest level since November 2012 as Saudi Arabia pumped 10 million barrels a day. Production by the Organization of Petroleum Exporting Countries slipped 1,000 barrels to 31.295 million a day this month.

Last month’s total was revised 267,000 barrels higher to 31.296 million a day, mostly because of a change to the Saudi estimate. Prices tumbled the first quarter of this year as U.S. output surged to the highest level in more than four decades and OPEC members pumped more barrels. The 12-member group left its production quota unchanged at a November meeting, prompting speculation that it would let crude slide low enough to curb shale development in the U.S.

“The high Saudi number is what sticks out,” Julius Walker, senior consultant at JBC Energy GmbH in Vienna said by phone. “The consensus view is that the Saudis are going to continue with their present policy. The market continues to be substantially oversupplied.”

Reminder: Saudi is fighting a war in the Mideast.

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Active rigs:

	5/1/2015	05/01/2014	05/01/2013	05/01/2012	05/01/2011
Active Rigs	86	187	189	209	173

RBN Energy: Asian LNG Demand and US Production.

The pace of liquefied natural gas (LNG) demand growth in Asia will be a critical factor in determining how much natural gas North American producers export over the next 10 to 20 years, and gas/LNG export levels are sure to affect U.S. and Canadian gas production levels and prices. Last year's pause in Asian LNG demand growth--combined with a collapse in LNG prices--led many to wonder, where is all this heading, and what does it mean for gas producers and LNG exporters? Today, we continue our review of the fast-changing international LNG market with a look at Asia's burgeoning gas needs and how they will likely be met.

Of the 4,023 worldwide LNG shipments made in 2014, 2,886 (or 72%) were to Asian ports—and more than half (1,524) were to Japan, which is by far the largest consumer of LNG. Asian markets also represent the future of the LNG trade; the vast majority of the growth in worldwide LNG demand is expected to occur there, most of it in China and India and as a bunker fuel for ships plying the region’s waters. As we’ll get to, LNG demand growth in China is the biggest wild card.

Chinese demand is expected to grow rapidly but the forecast shows two scenarios – a low case and a high case. Which of these scenarios proves more likely depends on several factors, chief among them how much natural gas China gets delivered by pipeline from nearby regions of mainland Asia.

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Disclaimer: this is not an investment site. Do not make any investment or financial decisions based on what you read here or what you think you may have read here.

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Conoco Transcript

Mentions the Bakken.

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Other Companies In The News

CVX: earnings.  Huge beat; forecast 79 cents; reports $1.37.

TransCanada:  met expectations, 66 Canadian cents.

Genesee and Wyoming: beats by a penny.

Whiting would add rigs if oil hit $70. A lot of companies would add rigs if WTI / Bakken gets back to $70.  From Reuters:

WILLISTON, N.D., April 30 (Reuters) - Whiting Petroleum Corp., the top oil producer in North Dakota, plans to keep 11 drilling rigs operating through 2016, though it would add "a couple of rigs" if crude prices rise to $70 a barrel.

The comments from CEO Jim Volker were among the most definitive yet from a leader of a big crude producer on what threshold is needed to start fresh drilling and curb recent pullbacks that have rocked the oil sector since prices started to drop last summer.

Thus far this quarter, executives at industry peers have sent mixed messages on adding new rigs. Hess Corp, for example, does not plan to add any rigs this year, while Pioneer Natural Resources Co told Reuters last week that it was considering adding rigs in the near future.

Shell still waiting for US permit to drill in the Arctic.

Royal Dutch Shell is pushing ahead with plans to explore for oil in the Arctic Ocean near Alaska this summer despite opposition from environmental groups. The Anglo-Dutch oil major is preparing "an armada of 25 vessels" to begin a two-year program to explore two to three wells in the Chukchi Sea off the coast of Alaska.

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Saudi Burning Through Foreign Cash Reserves

From The Financial Times:

Saudi Arabia is burning through its foreign reserves at a record rate as the kingdom seeks to maintain spending plans despite lower oil prices. The central bank’s foreign reserves have dropped by $36bn, or 5 per cent, over the past two months, as newly crowned King Salman bin Abdulaziz al-Saud dips into Riyadh’s rainy-day fund and increases domestic borrowing to fund public sector salaries and large development projects.

The latest data show Saudi’s foreign reserves dropped by $16bn to $708bn in March, driven by public sector bonuses paid by King Salman after he assumed power in January. This follows a fall of $20bn in February. Saudi Arabia has spent $47bn of foreign reserves since October. The king this week reshuffled his royal court, replacing Crown Prince Muqrin, one-time heir to the throne, as he seeks to shore up his power base and promote a younger generation of princes, including his son and nephew.

Significantly, the appointments of two well respected technocrats, labour minister Adel al-Faqih to the economy and planning brief and oil executive Khalid al-Falih to the health ministry, are meant to signal King Salman’s intent to tackle the country’s economic difficulties. Unveiling his reshuffle, King Salman promised a bonus payment for military personnel engaged in the kingdom’s month-long bombardment of Houthi rebels in Yemen, a campaign that itself added pressure to state coffers.

High quality global journalism requires investment. \The International Monetary Fund has warned Gulf states to cut spending on wages and subsidies to prevent the draining of national reserves. “The [military] bonuses are not an encouraging sign,” said Steffen Herthog of the London School of Economics. “It shows the knee-jerk reaction to political challenges is to distribute more money.”

If Saudi is feeling the pressure, imagine the pressure felt by the other OPEC nations.

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EAI Statistics For Friday

Natural gas fill rate (dynamic link): 81 (very, very slightly below 5-year average).

Weekly US gasoline demand: drops.

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The Stories Not Being Reported

Whatever happened to the Ebola epidemic?  First line from April 22, 2015 report:

The decline in confirmed cases of Ebola virus disease (EVD) has halted over the last three weeks. To accelerate the decline towards zero cases will require stronger community engagement, improved contact tracing and earlier case identification. In the week to 19 April, a total of 33 confirmed cases was reported, compared with 37 and 30 in the preceding weeks.

Whatever happened to the Greek tragedy? From the BBC April 24, 2015:

Greece initially has to come up with €200m on 1 May.

But the payment stirring jitters around Europe is a €760m (£550m; $810m) IMF bill due on 12 May.

So many crunch dates have come and gone for Greek reforms to be agreed, but the consensus is now that if any bailout money is to be released then the talking will have to stop by 30 June.

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Losing Track Of War Zones Under US "Peace Prize" President

Now, US Navy will escort "every" US-flagged ship near Iran. The president has no trouble negotiating lifting Iranian sanctions while at war with the country, but is unable to bring himself to even look at the Keystone XL during Canada's political season.