Tea Leaves Sugggest Worse May Not Be Over For The Bakken -- July 11, 2016

Active rigs:

	7/11/2016	07/11/2015	07/11/2014	07/11/2013	07/11/2012
Active Rigs	29	73	190	185	210

From Emergent Group this morning: 2.9% increase in active rigs across the US; now up to 409

• Permian Basin: up 2.7% to 158
• Eagle Ford: flat at 33 rigs
• Cana Woodford: up 7.7% at 28 rigs
• Williston: up 7.7% at 28 rigs
• Marcellus: flat at 23 rigs
• DJ-Niobrara: up 7.1% at 15 rigs
• Utica: flat at 12 rigs
• Mississippian: up 25% to 5 rigs
• Haynesville: flat at 17 rigs
• Granite Wash: flat at 8 rigs

RBN Energy: power generation projects and natural gas demand in the US southeast.

We talk a lot here in the RBN blogosphere about the bearish market effects of the Shale Revolution, and frequently highlight the U.S. Northeast natural gas region — rapidly growing gas production from the Marcellus/Utica; oversupplied, trapped-gas conditions; and resulting regional price discounts.

These dynamics are driving massive investments in pipeline reversals, expansions and new capacity to move the gas to market. Northeast producers are counting on that increase in takeaway capacity to relieve price pressure and balance the market.  But all this gas moving out of the region needs a home. 

Fortunately, new demand is emerging, from exports (to Mexico and overseas LNG) and into the U.S. power sector. 

One of the big growth regions is the U.S. Southeast, where power utilities are investing heavily in building out their fleet of gas-fired generation plants and are banking on this new, unfettered access to cheap Marcellus/Utica gas supply.

Today’s blog provides an update on power generation projects coming up in the southern half of the Eastern Seaboard, based on a recent report by our good friends at Natural Gas Intelligence — “Southern Exposure: Gas-Fired Generators Rising in the Southeast; But Will Northeast Gas Show Up?”

In five short years (between 2010 and 2015), production from the Marcellus/Utica grew by more than 16 Bcf/d, while demand in the Northeast grew by only 3 Bcf/d. As a result of the rapid production growth, the historically supply-short region became increasingly supply-saturated. Initially the production growth occurred at the expense of other supply coming into the region, i.e. by displacing gas flows from other U.S. regions (especially the Gulf Coast) and imports from Canada. But as production started exceeding demand in many months of the year — primarily in the warmer months when Northeast demand is lowest — the region has become a net supplier of natural gas to the rest of the U.S. and to Canada.

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Tea Leaves Suggest The Worst May Not Be Over For The Bakken

Updates

July 18, 2016: the industry now forecasts $45 through the end of 2016. Bad for the Bakken, devastating for the Kingdom.

July 15, 2016: faltering oil recovery prompts warnings of a relapse to $40.

While there’s still a consensus that the worst of the oil glut that sent prices to a 12-year low is over, the International Energy Agency cautioned this week that “the road ahead is far from smooth.”

Inventories are brimming after two years of surplus production and U.S. demand for gasoline - the key driver of prices in summer - is proving to be disappointing. As unwanted barrels pile up, traders have been forced to hoard the most crude at sea on tankers since 2009, according to the Paris-based agency.

The supply disruptions that helped lift crude above $50 in recent months are fading. Oil-sands producers in Canada have restored most of the output halted when wildfires menaced facilities in May and curbed more than 1 million barrels a day, or about 40 percent of supplies.

OPEC member Nigeria revived some output in June after militant attacks cut production to a three-decade low, the IEA said. There’s a chance Libya could increase exports this month after the two rival branches of the state-run oil company agreed to start working together again, although previous efforts to unify the divided country have failed.

Original Post

• oil prices remain stubbornly low, trending down again
• rig count -- an indicator of activity, interest -- not production -- again, no traction
• Canadian oil sands story posted earlier; bad omen
• Brexit affecting global economy