Setting Us Up For $200 Oil -- Again -- June 1, 2015

30-second soundbite: considering where "we" are with regard to global oil and the strength of the US dollar, all-in-all, this was a pretty good day for oil bulls. And, no, this is not an investment site.

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With today's Wall Street Journal article on the slump in oil prices, I was reminded of the list I posted back in January.

Countries on the watch list with plummeting oil prices:

• Venezuela
• Russia
• Jordan
• Lebanon
• Nigeria
• Brazil 

One can add Columbia to the list.
 
From today's Wall Street Journal article:

Oil bulls ought to be cheered by news from Colombia last week.

Ecopetrol, the country’s national oil champion, cut its projection for oil and natural-gas output in 2020 by more than 400,000 barrels of oil equivalent a day. Assuming 82% of that is oil—in line with output last year—that is roughly 350,000 barrels of incremental supply off the table.

That is a lot. The International Energy Agency’s medium-term projection has production from outside the Organization of the Petroleum Exporting Countries rising by 3.4 million barrels a day by 2020 compared with 2014. Ecopetrol’s retrenchment equates to roughly 10% of that.

Except that it doesn’t really. The IEA, anticipating Ecopetrol’s struggles, wasn’t banking on a Colombian gusher. Indeed, it expects the country’s oil output to fall by 150,000 barrels a day by 2020. Certainly, at less than $68, 2020 oil futures don’t indicate panic.

That isn’t to say the risk of expected barrels evaporating isn’t real. Take Brazil. The IEA sees its production rising almost 900,000 barrels a day by 2020, roughly a quarter of the projected non-OPEC increase. But Petróleo Brasileiro, accounting for about 90% of Brazil’s oil output, has become a byword for corruption and missed targets.

And Petrobras, as the company is known, is due to announce new, likely reduced, guidance soon.

Scandal aside, what ails Petrobras, as well as Ecopetrol, is the need to curb spending as lower oil prices constrain cash flow and access to capital, undermining growth plans. In the IEA’s outlook, emerging markets, including such oil powerhouses as Russia, account for virtually all the cuts in forecast supply relative to last year’s outlook.

There are a lot of story lines here. I would love to opine on some of them but folks would think I'm nuts (if not certifiably "nuts," then at least inappropriately exuberant when it comes to oil). So, we'll let it go at that. For now. 

Maybe I'm just wearing rose-colored glasses:

Rose-Colored Glasses, Jon Conlee