Analysts Suggest Price Of Oil Could Surge Before End Of Year -- OPEC Struggling; Oil Inventories Globally At Lowest Level Since 2008 (Posted Prior To The Iraqi Insurgency)

Updates

June 9, 2014: price of WTI up over a $1/bbl; now solidly over $103/bbl again; up over 1%. Last evening (Sunday, June 8), Bloomberg was reporting the price of oil was increasing overseas:

“The economic data we’ve been getting have been a positive factor for the oil market,” Will Yun, a commodities analyst at Hyundai Futures Co. in Seoul, said by phone today. “There are positive developments on both the demand and supply sides, which gives support to crude prices at the moment.” 

China’s exports increased by more than the median 6.7 percent gain forecast in a Bloomberg News survey of economists, helping to cushion a slowdown as an unexpected drop in imports signaled risks to growth. 

Meanwhile John McCain, and others, talked an eastern European country to halt construction of a Gazprom pipeline which would have eased the pressure on Europe if the Ukraine is embargoed. You just gotta love how we Americans love to get into other people's business. LOL.

Original Post

A couple of dots to connect.

Long-time readers know my feelings about Saudi Arabia's ability to increase oil production, and sustain it, for a significant period of time.

Hold that thought.

Not long ago we were told that Libya and Iraq would soon be back on track to increase their oil imports.

Hold that thought.

Just the other day it was reported that oil stocks in the US declined more than expected.

So?

Bloomberg is reporting that Saudi Arabia is going to have put the "pedal to the metal" to meet global oil demands:

OPEC ministers say they will almost certainly leave their oil-production ceiling unchanged when the group meets this week. What really matters for global markets is whether Saudi Arabia will respond to global supply shortfalls by pumping a record amount of crude.

Just six months ago, energy analysts predicted output from the Organization of Petroleum Exporting Countries would climb too high and Saudi Arabia needed to cut to make room for other suppliers. They changed their minds after production from Libya, Iran and Iraq failed to rebound as anticipated, and industrialized nations’ stockpiles fell to the lowest for the time of year since 2008. Saudi Arabia may need to pump a record 11 million barrels a day by December (2014) to cover the other member nations, says Energy Aspects Ltd., a consulting firm. 

We'll see.

This should be interesting to watch play out.

I knew that US inventories were low, but I did not know global inventories were SOOOO low. At the linked article:

The International Energy Agency, the Paris-based adviser to 29 nations, recommended on May 15 a “significant rise in OPEC production” to meet demand of 30.7 million barrels a day in the second half of the year. Oil inventories in advanced nations were at 2.62 billion barrels in April, the lowest for that month since 2008, the year Brent reached a record $147.50 a barrel, IEA data show.

Boosting output that high would be “a Herculean task for the group to surmount given that production has been below 30 million barrels a day for the last five months,” London-based Energy Aspects said in a May 27 research note.

The situation has reversed since OPEC last met in December. At that time, the IEA indicated the group would need to reduce output by about 3 percent in the first half of 2014 to make way for North America’s booming shale oil supplies.

The Keystone XL North would have mitigated the coming trainwreck, but that's "water under the bridge," as they say. 

Note the significant increase in oil price expectations in the linked article. This is very, very bullish for "speculators."

Imagine what could happen if the global economy were to actually improve?

Wells Coming Off The Confidential List Monday -- The Williston Basin, North Dakota, USA

Monday, June 9, 2014

• 24757, drl, Statoil, Melissa 31-30 5TFH, East Fork, no production data,
• 25354, 1,179, Whiting, Mork Trsut 21-17-5H, Pleasant Hill, t12/13; cum 129K 9/19;
• 25355, 2,061, Whiting, Mork Trust 21-17-4H, Pleasant Hill, t11/13; cum 126K 9/19;
• 25356, 2,065, Whiting, Mork Trust 21-17-3H, Pleasant Hill, t11/13; cum 154K 9/19;
• 25357, 2,069, Whiting, Mork Trust 21-17-2H, Pleasant Hill, t11/13; cum 159K 9/19;
• 25389, 887, Whiting, Kessel 41-26PH, Zenith, t12/13; t12/13; cum 149K 9/19;
• 25390, 1,117, Whiting, Kessel 21-26PH, Zenith, t12/13; cum 137K 91/9;
• 25391, 1,263, Whiting, Kessel 11-26PH,  Zenith, t12/13; cum 146K 9/19;
• 25692, 726, Hess, BW-Erler 149-99-1522H-3, Cherry Creek, t6/14; cum 155K 9/19;
• 26728, 1,276, MRO, Walter 11-2TFH, Killdeer, t4/14; cum 156K 9/19;
• 26745, 717, Petro-Hunt/SM Energy, Tomlinson 3-1HN, West Ambrose, no IP yet; cum 167K 9/19;

Sunday, June 8, 2014

• None.

Saturday, June 7, 2014

• 23013, 876, CLR, Sacramento Federal 4-10H, Brooklyn, t4/14; cum 231K 9/19;
• 26614, 36, Enduro Operating, MRPSU 29-13, Mouse River Park, a Madison well, t1/14; cum 35K 9/19;
• 26681, 1,844, BR, CCU North Coast 11-25TFH, Corral Creek, t5/14; cum 256K 9/19;
• 26871, 670, XTO, Cindy Blikre 41X-2C, Lindahl, t8/14; cum 247K 9/19;

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Poll: Which Location Will President and Michell Obama Visit In North Dakota?

This poll can now be taken down. The results (there should be no surprise):

• Fort Berthold: 51%
• Standing Rock: 31%
• Spirit Lake: 10%
• Lake Traverse: 5%
• Turtle Mountain: 3%

Hope springs eternal, I guess.

Story Of The Year If This Pans Out? Fracking-Grade Sand In Southwestern South Dakota? -- June 7, 2014

Updates

July 30, 2017: a June 30, 2015, story suggests South Dakota Proppants is still in business.

July 30, 2017: a 2014 story from The Rapid City Journal says sand in western South Dakota, mostly the Black Hills is not suitable for fracking. Thank goodness. 

July 1, 2015: from Linked In, undated, I believe. 

July 6, 2014: an update in the Rapid City Journal. I don't think there was anything new except to say that if the company started activity today, it would take about two years before the Bakken would see any sand from the Black Hills. Given the federal government and the native Americans and the South Dakota state tourism board, I'm not holding my breath.  

Original Post

One of my weaknesses is my hyperbole, and this may be another case of hyperbole, but on a quiet Saturday night, this article certainly got my attention. NaturalGasIntel.com is reporting:

Denver-based South Dakota Proppants (SDP) is proceeding with plans to develop a mine on federal lands in southwestern South Dakota to supply sand used in hydraulic fracturing (fracking) for shale oil/natural gas production in the Williston and Denver Julesburg (DJ) Basins in North Dakota and Colorado.

Earlier this year, the South Dakota Department of Environment and Natural Resources released a study by the University of South Dakota concluding that the state's grains don't meet American Petroleum Institute (API) specifications for proppant sand. SDP Managing Member Patric Galvin said he knew differently, but for proprietary reasons he kept quiet, he told NGI's Shale Daily on Thursday.

Galvin said his company plans to submit a mining plan in South Dakota to create a $66 million, 1 million ton/year fracking sand mine on 950 acres of public access U.S. Forest Service (USFS) lands that he estimates have 70 million proven recoverable tons of "high quality fracking sand." He said it will take 24 months before product will be available for commercial shipments.

The company has begun the permitting phase, which will be headed by the USFS, with help from the state, including DENR, whose earlier study did not include the lands SDP is pursuing. Subsequently, the state geologist and DENR confirmed Galvin's analysis that sand at his proposed site does meet API specifications for proppant, adding that the SDP samples appeared to be of "better quality" than the ones the state study had examined.

I told the reader who sent this to me that any time I see USFS (US Forest Service) and fracking-grade sand in the same story I get concerned but if this pans out, it's going to be quite a story.

Back-of-the-envelope:

• one million tons = 1 million x 2,000 pounds = 2,000,000,000 lbs / 4,000,000 (amount of sand to frack one Bakken well) =  500 wells

If I did the math correctly, that's not a trivial amount of sand.

The article has these data points:

The U.S. market currently uses 53 million tons of proppant annually with the market growing at about 3% per year, Galvin said. Since activity in the Williston represents one-third of the nation's largest shale developments, he estimates that about 20% of the 53 million tons are being used in the Bakken/Three Forks plays.

An average fracking job requires from 5,000 to 8,000 tons of sand for each well.

"Some companies are increasing the size of the wellbore to lower the pressure at the end of the pipe and provide more flow as the horizontal runs are getting to be very long," Galvin said. "This increase will require more sand as well, so the need for increased volumes-per-well is also on the horizon."

The bulk of the proppant used in the Bakken comes from Ottawa, Canada and Wisconsin, requiring rail transportation that costs about $35-40/ton more than shorter, truck shipments, Galvin said. Truck transportation of sand to the Bakken from South Dakota would cut the cost of the product an average of $8-20/ton, "making [our] sand the low-cost provider for the surrounding oil basins," he said.

The South Dakota mine site would be located about 300 miles to either the Bakken or Niobrara oil/gas drilling sites.

Somewhere my math must be off. The article says "an average fracking job requires 5,000 to 8,000 tons of sand for each well. A ton is 2,000 lbs. 5,000 tons is 10 million pounds which is seldom the amount seen in the Bakken except for the new completions used by EOG. Unless they're using a different size ton in South Dakota.

Go to the linked article for the data points. I might have made a mistake somewhere along the line.

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Note to the Granddaughters

It is an incredibly beautiful night for biking in the Dallas-Ft Worth Area. There's a debate in Dallas this past month on the bicycle helmet law. Dallas is the only city in the area that requires a helmet regardless of age. None of the cities I bike in require a helmet for adults. I don't wear a helmet, but if required, I would follow the law. Dallas plans to start up a "rent-a-bike" program similar to the one Boston has; it won't work if helmets are required. People generally don't walk around carrying bike helmets "just in case." I expect Dallas to repeal the helmet requirement for adults but to save face will issue a very, very strongly worded statement that the city highly, highly, highly encourages everyone to wear a helmet while riding. I wonder if adults are required to wear bike helmets in NYC where they frown upon adults drinking "Big Gulps."

But I digress. It's an absolutely beautiful night to ride, so I took a long ride up the highway to Grapevine, and found a wi-fi / computer friendly McDonalds on south Main, Grapevine. I've been here before. Very nice.

It's hard for me to blog without music. Wow, I haven't heard Mazzy Starr in in years. I enjoyed them many years ago, but over time lost track of them. Then this, out of the blue. I had not seen it and certainly have not played it -- although not that I'm listening to it, I seem to have a vague recollection that I've come across it before -- be that as it may, here it is (again?):

Seasons of Your Day, Mazzy Starr
Whoever posted it at YouTube, also posted this:

If psychedelic music had a voice in '90s post-punk, Mazzy Star may have been its strongest reincarnation. That doesn't necessarily mean that fans of the Jefferson Airplane and the Grateful Dead will find the band to their liking, however. Mazzy Star much preferred the dark side of psychedelia, as exemplified by the most distended tracks of the Doors and the Velvet Underground. Their fuzzy guitar workouts and plaintive folky compositions are often suffused in a dissociative ennui that is very much of the '90s, however much their textures may recall the drug-induced states of vintage psychedelia.

'Seasons Of Your Day' is full of solid songwriting, the six piece haven't bothered to conform to an audience, instead they've grown with them. Hope Sandoval's vocal chords are as dreamy as ever. Coupled with a country feel, this record is certainly not "alternative rock" as they're occasionally labelled. Given that it's been more than fifteen years since the group's last full length, it's amazing how cohesive this album is. After all, it was recorded over an extended period (and self produced) across locations in Norway, London and California.

The reviewer certainly name-dropped a lot of bands. He/she should have included Lana Del Rey. 

Random Update On A Couple Of Wells In The Williston Basin; It's Snowing Near Sheridan, WY -- The Winter That Never Ends

Under my page, "Things To Follow Up On:"

1. This item can now be removed. This well was reported as dry.

• 26761, DRY, Flatirons Resources, Sundsbak 31-11, Torning oil field, a Madison well, completed 12/13;

2. I am leaving this one on the page, but maybe some knows whether this well was re-fracked or simply a workover or some other reason for the improvement in January 2014; the increase in production suggests a work-over, not a refracking, but Marathon had targeted a number of older wells for re-fracking some time ago:

• 17310, 459/IA, Marathon, Eckelberg 41-26H, 49,138 bbls in 15 months; t8/08; cum 117K 11/13; taken off-line 7/13; went back on line 1/14; significant increase in oil production; no explanation in well file; production profile:

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	4-2014	30	1398	1383	260	956	81	695
BAKKEN	3-2014	31	1398	1411	226	960	36	738
BAKKEN	2-2014	28	1334	1412	173	907	0	739
BAKKEN	1-2014	25	1181	942	237	796	0	654
BAKKEN	12-2013	0	0	0	0	0	0	0
BAKKEN	11-2013	0	0	0	0	0	0	0
BAKKEN	10-2013	0	0	0	0	0	0	0
BAKKEN	9-2013	0	0	0	0	0	0	0
BAKKEN	8-2013	0	0	0	0	0	0	0
BAKKEN	7-2013	16	158	235	29	104	3	9
BAKKEN	6-2013	30	565	461	130	193	5	8
BAKKEN	5-2013	31	715	827	146	235	33	16
BAKKEN	4-2013	30	899	918	215	364	161	32
BAKKEN	3-2013	31	1037	928	268	397	136	75

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Global Warming

Regular readers know the fun I have with Patrick Kennedy (or whichever Kennedy it was) who said that due to global warming, the Kennedy children (and your children) would never see snow again. I can't make that up. He didn't say your great-great-great-great grandchildren, but your children. My children and grandchildren have seen a lot of snow since that comment was made. If the Kennedys have missed that snow (unlikely since Boston had an incredibly snowy winter, 2013 - 2014) they will get another chance. It's currently snowing near Sheridan, Wyoming, in the high country, which will continue into tonight and tomorrow. The Beartooth Highway south of Livingston, MT, could be closed tonight due to snow. Plan accordingly.

Richard Zeits On Halcon

Over at Seeking Alpha, Richard Zeits' summary on Halcon:

• Halcón's downdip wells in the East Texas Eagle Ford are performing admirably, which suggests that the best wells are still ahead.
• The Reveille #1H produced over 40,000 barrels of oil in 42 days, setting a new productivity record in the play.
• The Keystone #1H is another notable test which confirms the excellent quality of Halcón's acreage in Burleson County. 

The narrative:

Among the most recent results, I should note the Keystone #1H well located in the center of Burleson County, which produced ~20,000 barrels of oil in less than a month. This very impressive well is "on strike" with two other strong producers: Halcón's Reveille #1H well and Clayton Williams' Pivonka E Unit #1 well.The Keystone well, therefore, de-risks a large portion of Halcón's acreage in Burleson County, where the company has just started its drilling activity.

The following graph shows renewed growth momentum in Halcón's monthly production volumes in El Halcón. My well-by-well contribution analysis indicates that gross production rate in El Halcón in April increased by over 28% from the average production rate in Q1. The growth rate may, in fact, be even greater, given that not all wells may have been reported.

Much more at the link. The page is there on a limited time only.

Disclaimer: this is not an investment site. Do not make any investment decisions based on anything you read here or think you may have read here. 

Also, the Fly On The Wall noted that at least one analyst has raised the target price for Halcon:

Wunderlich raised its price target for Halcon Resources shares to $9 citing potential catalysts from the company's upcoming Tuscaloosa Marine Shale well results. The firm keeps a Buy rating on the stock.  

Older articles on asset sales by HK: first, the asset sale last fall, and second, the asset sale this spring:

• O&GJ, three separate conventional assets, $302 million
• Seeking Alpha, Woodbine, $450 million
• same link, are the Utica assets next?

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Man-Made CO2 66 Million Years Ago?

or, Unexplained Global Warming?

Daily Digest.com is reporting:

During an expedition in southern Saskatchewan, Canada, a joint research team from McGill University and the Royal Saskatchewan Museum discovered the first fossil-record evidence of forest fire and subsequent regrowth and recovery of flora, revealing a snapshot of the ecology and climate on earth just before the mass extinction of the dinosaurs.

The researchers’ discovery revealed that at the forest fire site, the plants are dominated by flora quite similar to the kind that begin forest recovery after a fire today. Ancient forests recovered much like current ones, with plants like alder, birch, and sassafras present in early stages, and sequoia and ginkgo present in mature forests.

“We were looking at the direct result of a 66-million-year old forest fire, preserved in stone,” said Emily Bamforth, of the Royal Saskatchewan Museum and the study’s lead author. “Moreover, we now have evidence that the mean annual temperature in southern Saskatchewan was 10-12 degrees Celsius warmer than today, with almost six times as much precipitation.”

 McGill is one of the world's premiere universities.