Friday, June 5, 2015

Idle Chatter -- June 5, 2015

Reuters at Rigzone has a nice article on Saudi and pricing. Note the 7th paragraph:
Some analysts warn that the recent price crash - which has reignited demand and slammed the brakes on much global investment - may be sowing the seeds of another supply squeeze as early as next year.
The second (internet) page of the article gets even more interesting. Folks much smarter than I have talked about this for at least a year, the implications of the following data points:
Saudi Arabia launched a $35 billion five-year exploration and production investment plan in 2012 meant to sustain its current capacity. While the number of U.S. oil rigs has fallen by more than half since last year due to low prices, those drilling in the Middle East have risen to near the highest in records going back to 1975, according to Baker Hughes data. More than 400 rigs are operating in the region, a more than 10 percent rise from 2013, with just over half of those in Saudi Arabia.
Note: the $35 billion five-year program announced in 2012 was meant to sustain its current capacity. 

So, with a $35 billion five-year exploration and production program which began in 2012, almost four years ago, and with a 10% rise in active rigs year-over-year, what has it gotten Saudi Arabia?

It looks like that $35 billion program is working: sustaining current production

It's a bit hard to read: the Saudi Arabia "line" moves up slightly, very slightly, 2008 through 2014. But note that the bar graph is boe (both crude oil and natural gas). Also, remember, Saudi Arabia's domestic crude oil requirements have also increased significantly since 2008. Saudi Arabia is now engaged in what will be a long and lengthy civil war (or war on terrorism, if you prefer). So, a $35 billion five-year exploration / production program AND with more than 400 rigs active in the region, hasn't resulted in a production line like the US "blue" line.

The tea leaves suggest "we" are being set up for $200 oil.

What if the writers at Reuters are correct, suggesting a supply squeeze as early as next year? Is anything else going on next year? Oh, that's right. A presidential campaign with one side known for a desire to kill the US oil and gas industry and the other side often accused of thinking no farther (or deeper) than "drill, baby, drill."

We live in very interesting times.

The JV Team Advances

Tweeting now:  Islamic State seizes another town in Libya - @Reuters

Huge Background Story If Anyone Is Interested

From Seeking Alpha:
  • ConocoPhillips says it is quitting shale gas exploration in Poland after failing to reach production-level flows from its gas wells located in the northern part of the country.
  • COP was the last major oil company looking for shale gas in Poland, after Chevron's withdrawal at the start of this year; it says it invested ~$220M in Poland since 2009.
  • Poland imports ~60% of its gas from Russia and had hoped domestic shale gas production would allow it to break its dependence.
Hotter Than Ever; Atmospheric CO2 > 400 PPM
More Sea Ice Than Ever
So It Goes
NOAA says "anthropogenic global warming" is back on track, warmer than ever, and the Antarctic Sea ice sets a new record for the month of May. Even in the Arctic, more ice than in the cooler years of 2004 and 2006.

April, 2015, atmospheric CO2: 403.
Before He Approves The Keystone

I can imagine the president will declassify this report before he gets around to reviewing the Keystone XL North pipeline application. In case the link breaks, the linked article is from The [London] Telegraph about the secret report that Saudi Arabia financed "9/11." The pages in question were redacted by friends of the king (FOK).

This Is Not An Investment Site

The old adage, "sell in May, go away" seems to be back in play.

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