No Recession ... Yet -- April 27, 2016; The Fed: We've Hit A Soft Patch

Updates

Later, 7:59 p.m. Central Time: one has to laugh -- the mainstream media says "we've" hit a "soft patch" economically. In fact, the economy has never looked so good under the past six or seven years of the Obama administration. Just when I thought it was looking better, mainstream media says we've hit a "soft patch." Why is that topical? If we've hit a "soft patch," the Fed is unlikely to raise rates. And that's what is being telegraphed. And that's why the market will continue to hold its own, and possibly even continue its "upward" trend.  One wonders if the Fed should not be nominated for the 2016 Geico Award?
 

Original Post

 

Due to electrical storm last night we lost our wi-fi internet at home; blogging was delayed a bit, but we will get up and running soon.

After hitting an all-time post-boom low of 24 active rigs the other day, "we're" back to 28 today. [By mid-day, it dropped back to 27, and I've updated the graphic below to reflect that "27."]

Wow! Talk about missing a forecast, from Zacks:

Baker Hughes posted wider loss than the consensus. Loss per share from continuing operations (excluding special items) came in at $1.58, higher than the Zacks Consensus Estimate of 33 cents loss per share. This also came wider than the year-ago quarterly loss of seven cents per share.

Just a few of the other companies reporting today that are of interest; results will be posted at "earnings page" when I get around to it:

• Facebook, after market close, 62 cents/share forecast.
• First Solar, after market close, 93 cents/share forecast. 
• QEP, after market close, a 60-cent loss/share forecast. 
• Whiting, after market close, a 72-cent loss/share forecast. 
• Xilinx, after market close, 52 cents/share forecast.

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Back to the Bakken

Active rigs:

	4/27/2016	04/27/2015	04/27/2014	04/27/2013	04/27/2012
Active Rigs	27	85	182	187	209

RBN Energy: US E&P Upstream Capital Spending Plunging Again.

In connection with year-end 2015 earnings announcements, North American exploration and production companies (E&Ps) continued to announce large reductions in 2016 capital budgets.

But the most dramatic news is that RBN’s analysis of a study group of 30 E&Ps indicates that these companies are finally expecting oil and gas production to fall in 2016 after a 7% gain in 2015.

In today’s blog we update our continuing analysis of E&P capital spending and oil and gas production guidance. As U.S. benchmark West Texas Intermediate (WTI) crude oil prices continue to hover around $40/Bbl, RBN’s analysis of 2016 capital expenditure guidance indicates that our study group of 30 E&Ps are cutting CAPEX in half, from $60.3 billion in 2015 to $30.6 billion in 2016.

In just two years, upstream investment has plummeted by two-thirds from $94.9 billion in 2014. Importantly, the precipitous falloff in drilling is finally leading to lower expected US hydrocarbon output, driven by a decline in oil. As we examine below, the Large Oil-Weighted E&Ps and Small/Mid-Size Oil-Weighted E&Ps are guiding to 10% and 7% production declines, respectively, after a collective 6% increase between 2014 and 2015.

This forecasted output decline has already contributed to modest gains for oil prices in recent weeks. Guidance for the Diversified US Gas-Weighted E&Ps indicates their output will fall 8%. But an expected 15% increase by the Appalachian Gas-Weighted E&Ps will leave the overall gas volumes delivered by our “universe” of 30 E&Ps about flat at 1.18 billion barrels of oil equivalent (boe).

GDP forecast:

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2016 is 0.4 percent on April 26, up from 0.3 percent on April 19. After last Wednesday's existing-home sales release from the National Association of Realtors, the forecast for first-quarter real residential investment growth increased from 8.5 percent to 10.8 percent. After this morning's advance report on durable manufacturing from the U.S. Census Bureau, the forecast for real equipment investment growth declined slightly while the forecast for real inventory investment increased slightly.

"Dramatic shift" in Saudi strategy? Bloomberg/Rigzone is reporting:

Saudi Arabia made its first sale of oil to a small, independent Chinese refiner.

What’s more significant to markets is that the world’s biggest crude exporter broke from its usual practice of selling via long-term contracts.

The world’s biggest crude exporter sold a spot cargo to teapot refiner Shandong Chambroad.

The 730,000-barrel shipment is expected to load in June from state-owned Saudi Arabian Oil Co.’s leased storage tank in Japan.

“News that Saudi Arabia is selling a cargo on the spot market to Asia may mark the turning of a dramatic new chapter in the Saudi playbook. What is unusual is that the sale is spot rather than the initiation of a new term contract. Spot sales are about the only way the Kingdom can gain new market share in a world in which chunky buyers are interested in securing incremental purchases via spot rather than term arrangements.”

Brent crude is almost 40 percent lower than in November 2014, when Saudi Arabia led a decision by the Organization of Petroleum Exporting Countries to keep pumping to defend market share in the face of swelling global inventories.

Aramco will complete the expansion of its Shaybah oilfield by the end of May to maintain the level of its total production capacity.

This summer, the Kingdom may be targeting an additional 500,000 barrels a day of sales, boosting daily production to 11 million barrels as power-generation demand peaks, Citigroup estimated.

Saudi Arabia’s output reached a record 10.57 million barrels a day last July, helping to send Brent lower for a third year. Prices rallied from a 12-year low in January amid the potential for agreement between major oil producers to cap output.

These are "interesting" numbers for Saudi Arabia.

• record output: 10.57 million bopd
• will expand an oil field to maintain production
• target: 11 million bopd this summer 

These numbers are significantly different that what has been reported in the past.

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Environmental Concerns In The Mideast? LOL

Meanwhile, over in Khafji, Reuters/Rigzone is reporting:

Kuwait and Saudi Arabia appear no closer to restarting their jointly operated Khafji oilfield despite Kuwait saying the sides had agreed to ramp up output after an 18-month shutdown.

Any delay in the restart of the Neutral Zone field that produced 280,000 to 300,000 barrels per day before environmental problems forced its closure in October 2014 will be seen as a boost to global oil markets struggling to shake off a glut that has sent prices diving over the past two years.

Kuwait's acting oil minister said on March 29, 2016, that Kuwait had agreed with neighbouring Saudi Arabia to resume production at the field. Riyadh has yet to confirm that announcement, and Saudi-based industry sources say there has been no breakthrough in talks to resolve what has become a political sticking point between the two Gulf OPEC allies.

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Over The Top -- The Politics Page

Mr Trump will probably come up short in the "official" number of delegates he needs to win on the first vote at the convention. At least that's the conventional convention thinking.

In fact, there are uncommitted delegates that can be "bought."

Some contenders with a few committed delegates could release their delegates on the first vote if given some incentive by Mr Trump.

Trump won every county in every one of the five states last night. EVERY COUNTY IN EVERY ONE OF THE FIVE STATES. Not trivial. 

Bottom line: the Republican Party -- the GOP -- has been usurped by a third party candidate.  

Keep this woman in mind: Susana Martinez is an American attorney and politician. She is the 31st and current Governor of New Mexico and current chairwoman of the Republican Governors Association.

Best line of the day: Ted Cruz called a basketball hoop a "basketball ring" while creating a scen from Hoosiers. Local broadcasters suggested he may not know a lot about sports. Well, duh. Can you imagine if George Bush had said this?

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No Will?

If, in fact, Prince left no will, it speaks volumes about his priorities. Many, many story lines. Most of them very, very sad. Maybe pathetic.

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The Literature Page

A Note for the Granddaughters

Current books. I'm re-reading Keld Zeruneith's The Wooden Horse: The Liberation of the Western Mind, From Odysseus to Socrates. That's my "main book" right now. Off and on during the day I read Richard Feynman's lectures (a commemorative edition released many decades ago). I'm pretty much done with my "Wars of the Roses" and Shakespeare phase for the moment. And before going to bed, Dorothy Parker's reviews of Broadway shows back around 1920. It's hard to believe her formal education ended in 8th grade or thereabouts, so she could stay home, and take care of her ailing father, or something to that effect; I've forgotten the specifics.