Wednesday, July 19, 2017

The Energy And Market Page, T+180; Poseidon; Crude Oil To Stay In $50-Trading Range For Next Two Years -- Analyst -- July 19, 2017

$50 oil ... like forever? This analyst was almost named a nominee for the Geico Rock Award for 2017 but if I included him/her, I would have to include a gazillion more analysts who completely missed this over the past couple of years. So many analysts suggested that US shale could not make up for all the projects delayed or cancelled due to low price of oil.

Over at CNBC: the analyst noted that global oil supply increased by 720,000 barrels a day in June as OPEC compliance with its production cuts seemed to stall. Oh, yes, the OPEC cut (wink, wink).

DUCs: US backlog hangs over oil market -- John Kemp. Well, duh. And I remember all the analysts suggesting US shale operators would not be able to "ramp up" DUCs fast enough to make a difference. In the seven major plays in the US, the number of DUCs has risen by more than 1,000 since December, 2016.
  • 2,250 DUCs in the Permian; up from 1,200 a year ago
  • 3,800 DUCs across all other plays combined
Poseidon: new entrant in the US-Mideast crude fight. From Bloomberg via Rigzone, data points:
  • Mars and Poseidon: both produced in the Gulf of Mexico
  • similar in quality to Middle East supply
  • will lure refiners away from Middle East oil: sulfurous sour crude oil pumped by Saudi Arabia, Kuwait, others
  • American oil is now cheap enough for Asian refiners to haul it all the way from the Gulf of Mexico to Asia
  • the first 500,000 bbls of each Mars and Poseidon will be delivered by Royal Dutch Shell
  • buyer: Asian refiner; Kochi refinery on India's southwest coast; processor's first purchase of US oil (this is different from the earlier story in which another Indian company -- Indian Oil -- bought its first US oil due for arrival in October
  • a trial cargo; similar to the Middle Easter crude the refiner usually uses
  • WTI is trading at $1.42/bbl below Dubai crude, after it flipped from a premium to discount in December for the first time in six months
Herding cats. More on Ecuador, previously blogged. Exactly what I said, "Every Arab for himself."
The pain of those low prices led one of the cats to call it quits on Tuesday. Ecuador, which is implementing an austerity plan and struggling to clear a $1.1 billion backlog of unpaid pensions, said it can't continue to forgo the revenue lost from cutting a nominal 26,000 barrels a day as part of the agreement. At current prices, that's worth about $465 million a year.
Now, as Ecuador's oil minister said when announcing this, “What Ecuador does or doesn’t do has no major impact on OPEC output.” That is true in strict mathematical terms.
But we're beyond strict math at this point. [It's every Arab for himself.]
Saudi Arabia's own oil minister, Khalid Al-Falih, has been relying more on the power of rhetoric, with a central banker-like promise to do "whatever it takes" to clear the glut of excess barrels weighing on prices.

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