Tuesday, September 1, 2015

Tweeting now: Canada slumps into technical recession after 2nd consecutive quarterly contraction of GDP - @CBCAlerts (meanwhile the US reported a blistering 3.7% GDP in 2Q15). Yesterday it was reported that Alberta, Canada, is reporting a budget deficit somewhere between $6 billion and $9 billion, depending which numbers you choose to believe. And, yes, that's a record for those keeping score.

Putin must be getting inside Obama's head: I heard on the radio this morning that President Obama will be doing some kind of "survival" stunt on "reality TV" while visiting Alaska. The news came just after we saw photographs of "Putin hitting the gym."

Active rigs:

	9/1/2015	09/01/2014	09/01/2013	09/01/2012	09/01/2011
Active Rigs	76	194	184	192	200

RBN Energy: update on the Permian. Archived.

For the past several months shippers in Midland, TX – in the middle of the prolific Permian Basin - have been paying premiums up to $2/Bbl over the benchmark Cushing, OK trading hub price for West Texas Intermediate (WTI) crude. That means shipping WTI from Midland to Cushing is a money losing proposition. Historically Cushing WTI has traded at a premium to Midland – usually at least covering the ~$1/Bbl pipeline tariff.

Today we explain how traditional price dynamics have been turned upside down.
We last looked at Permian Basin crude takeaway capacity back in May (2015) when we wondered aloud how Enterprise Product Partners (EPD) secured shipper support for their proposed 540 Mb/d Midland, TX to Sealy, TX pipeline expected online in 2017. The addition of half a million barrels of new takeaway capacity out of the Permian on a new EPD pipeline just doesn’t match current expectations about crude production in the basin by 2017. Lower crude prices and independent producers reigning in their drilling budgets to only drill in those sweet spots that remain profitable have crushed production growth expectations.

Our analysis back in May – based on RBN’s Permian crude production forecast at the time – showed that a combination of existing takeaway pipelines with those expected online in 2015 would easily exceed production needing to find a route to market by the second half of 2015. That meant too few barrels chasing too much pipeline capacity. But all of that discussion was about a hypothetical future situation - when and if the EPD pipeline comes online in 2017. In the meantime, two major Permian takeaway pipelines have commenced operations since April 2015 - leaving the market with more than enough pipeline capacity and too few barrels of crude and turning traditional price dynamics in the Permian upside down.

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OPEC Tired Of Giving Away Its Oil For $50?

Probably Not

Being reported in multiple places, this from USA Today:

OPEC said in an article that it "stands ready to talk to all other producers" to achieve "fair and reasonable prices." In its monthly OPEC Bulletin, the cartel added, "But this has to be a level playing field. OPEC will protect its own interests."

Though the article, headlined "Cooperation holds the key to oil's future," does not spell out how the discussion would go, the focus would clearly be on how to moderate production levels in a way to drive up prices, which fell below $40 a barrel this month.

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Walking Rigs

How Long Have We Been Talking About Walking Rigs In The Bakken?

Bloomberg has "discovered" walking rigs:

Some of the newest rigs can travel hundreds of yards to the next well under their own power, lurching along like 150-foot- tall robots on pneumatic legs that raise the equipment five inches at a time, nudging forward at about a foot per minute. While that sounds slow, it is faster and cheaper than dismantling a rig and trucking the parts to a new site nearby.

More efficient drilling rigs that cost a third less than just a year earlier are changing the face of the U.S. shale industry, helping boost per-rig output in the four largest fields by at least 40 percent since the crude price plunge began in 2014. While helping producers pump more oil, the new rigs have a downside. Companies such as Helmerich & Payne Inc., Nabors Industries Ltd. and Patterson-UTI Energy Inc. that provide the equipment face investor concern that the improvements they’ve made might translate into fewer sales in the future.

In other news, farmers are now using tractors in North Dakota.

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Setting Us Up For $200 Oil

Reuters is reporting:

The U.S. oil industry pumped less crude than initially estimated this year, according to new government data that offered the clearest look yet at the impact of drillers' retrenchment in response to collapsing prices.

The downward supply revisions were "unambiguously" bullish for a global market awash with oil, said Credit Suisse global energy economist Jan Stuart, suggesting the oft-cited resilience of U.S. shale producers to lower crude prices might have been overstated. Oil prices surged by as much as $3 a barrel on Monday, with some traders citing the new data.

Decreased production at a time when gasoline demand is setting new records.