- IEA's oil market report was released yesterday suggesting a Q4 2020 market deficit of 4.1 mb/d.
- Excess oil inventories for OECD is pegged at 209.1 million barrels. This means that the deficit in Q4 will eliminate all of the surpluses and more.
- In addition, we have US oil production materially lower than IEA's ~11 mb/d average for Q4, which means there's potentially more draws ahead.
- Now all of this is also hinged on demand returning to average ~96.1 mb/d for Q4, so this remains the largest variable to get right.
- So unless IEA can't do math or something goes awfully wrong, it does appear that the excess oil inventories should be eliminated by year-end.
Showing posts with label Oil Supply. Show all posts
Showing posts with label Oil Supply. Show all posts
Friday, October 16, 2020
HFIR - Implied IEA Oil Supply And Demand Balance Suggests No Excess Inventories By Year End
Summary
Tuesday, October 13, 2020
OilPirce.com - The Next Couple Of Months Are Crucial For U.S. Oil
The U.S. oil industry faces a bumpy road to recovery from the steepest slump in oil demand in history.
Oil demand in the United States and elsewhere is still trailing below last year’s levels, while a growing number of indebted shale producers struggle to refinance debts at these low oil prices and file for bankruptcy protection to restructure debt loads.
Oil prices may remain lower for longer with global oil demand unlikely to return to pre-crisis levels by the end of 2021, piling further pressure on the U.S. shale patch which, executives say, will need WTI Crude prices above $46 a barrel to see a substantial increase in completions of drilled but uncompleted wells (DUCs).
On top of the immediate financial concerns of many producers about profitability and debt levels, the U.S. oil industry also faces a shift in markets’ perception about the sector with increased investor calls for decarbonization.
Oil demand in the United States and elsewhere is still trailing below last year’s levels, while a growing number of indebted shale producers struggle to refinance debts at these low oil prices and file for bankruptcy protection to restructure debt loads.
Oil prices may remain lower for longer with global oil demand unlikely to return to pre-crisis levels by the end of 2021, piling further pressure on the U.S. shale patch which, executives say, will need WTI Crude prices above $46 a barrel to see a substantial increase in completions of drilled but uncompleted wells (DUCs).
On top of the immediate financial concerns of many producers about profitability and debt levels, the U.S. oil industry also faces a shift in markets’ perception about the sector with increased investor calls for decarbonization.
Wednesday, October 7, 2020
Houston Chronicle: Dallas Fed: Most oil executives say U.S. production has peaked
Most Texas oil and gas executives believe U.S. oil production has peaked, according to a survey conducted by the Federal Reserve Bank of Dallas and published last week.
In a survey on the state of the oil and gas industry, 66 percent of respondents said they believe oil production in the U.S. has reached its maximum level, while 34 percent said they do not.
The U.S. oil and gas sector has struggled amid a spring collapse in oil prices driven by the COVID-19 crisis. Since then, global demand for oil and refined products has fallen and business activity in the sector has declined.
In a survey on the state of the oil and gas industry, 66 percent of respondents said they believe oil production in the U.S. has reached its maximum level, while 34 percent said they do not.
The U.S. oil and gas sector has struggled amid a spring collapse in oil prices driven by the COVID-19 crisis. Since then, global demand for oil and refined products has fallen and business activity in the sector has declined.
Tuesday, September 15, 2020
EIA: Short-term energy outlook remains subject to high uncertainty
The US Energy Information Administration’s September Short-Term Energy Outlook (STEO) remains subject to heightened levels of uncertainty because mitigation and reopening efforts related to the 2019 novel coronavirus disease (COVID-19) continue to evolve.
Brent crude oil spot prices averaged $45/bbl in August, up $2/bbl from the average in July and up $26/bbl from the multiyear low monthly average price in April. The increase in oil prices has occurred as EIA estimates global oil markets have shifted from global liquid fuels inventories building at a rate of 7.2 million b/d in the second quarter to drawing at a rate of 3.7 million b/d in the third quarter.
Brent crude oil spot prices averaged $45/bbl in August, up $2/bbl from the average in July and up $26/bbl from the multiyear low monthly average price in April. The increase in oil prices has occurred as EIA estimates global oil markets have shifted from global liquid fuels inventories building at a rate of 7.2 million b/d in the second quarter to drawing at a rate of 3.7 million b/d in the third quarter.
Rystad Energy - DUC well inventory sufficient to support US fracking deep into 2021, 280-300 rigs needed afterwards
The recovery of fracking operations in the US is happening largely thanks to an unusually high inventory of drilled but uncompleted wells (DUCs), which is strong enough to sustain the current level of fracking without the industry adding more rigs to expand drilling deep into 2021, a Rystad Energy analysis shows. After DUCs run out, however, rig activity in the five key oil regions needs to be in the 280-300 range to maintain flat oil output.
Actual rig activity today is almost 50% lower than that requirement, but the industry still has about two to three quarters of leverage, based on the current DUC count, to achieve a smooth transition from a DUC-driven activity phase to a regular operations mode.
Actual rig activity today is almost 50% lower than that requirement, but the industry still has about two to three quarters of leverage, based on the current DUC count, to achieve a smooth transition from a DUC-driven activity phase to a regular operations mode.
Monday, August 31, 2020
Seeking Alpha - The Death Of U.S. Shale Is Greatly Exaggerated, But It's Crippled For Life
Summary
- A discussion on US oil production often falls into two extreme camps.
- The truth is often something in between, but because of a fundamental change in how credit is going to be provided for US shale producers going forward, it's crippled for life.
- There also are enormous implications for inflation. Since 2010, US oil production has been the key growth driver in the non-OPEC group.
- With US shale oil crippled, this source of growth is gone, and as a result, will result in much higher oil prices going forward, which will boost inflation.
Monday, August 17, 2020
Seeking Alpha - WTI: The Prospects For Oil In The Second Half Of 2020
Summary
- Oil will soon make a move out of its current $40-$43 trading range higher due to a lack of drilling activity to replace bbls lost to decline.
- It's more a matter of when than if.
- We see U.S production falling to ~7-8 mm BOEPD by year's end.
Seeking Alpha - A Contrarian View On U.S. Oil Production
Summary
- Our contrarian view on US oil production is that the rebound observed in July and August so far is way higher than what the consensus is estimating.
- With all of the shut-in production returning, US oil production is expected to peak at ~11.7 mb/d in August.
- Monthly basin decline rates at today's completion activity level is ~260k b/d.
- By year-end, this will push US oil production down to ~10.7 mb/d.
- If frac spread count doesn't rebound to 175+ by Q1 2021, then US oil production will fall to low ~10 mb/d.
Rystad Energy - US shut-in oil comes back: Most curtailed output is set to return by the end of August
Most US onshore operators will restore nearly all shut-in oil volumes by the end of the third quarter, with only a handful maintaining some level of curtailment for the rest of the year, a Rystad Energy analysis of 25 public oil operators’ second-quarter earnings statements shows.
Curtailments from the 25 companies peaked in May with a net 772,500 barrels per day (gross – including royalties to the government - 965,600 bpd) taken off the market. Total cuts decreased to a net 680,300 bpd in June. In July, only about 306,500 bpd in net volumes (383,100 bpd gross) remained curtailed. This number is expected to fall to a net 74,300 bpd (92,900 bpd gross) in August, with nearly all production set to be reactivated by September and just a small amount remaining offline.
http://communications.rystadenergy.com/acton/rif/12327/s-0dd9-2008/-/l-0ac8:295/l-0ac8/showPreparedMessage?sid=TV2:59uFtis2b
Curtailments from the 25 companies peaked in May with a net 772,500 barrels per day (gross – including royalties to the government - 965,600 bpd) taken off the market. Total cuts decreased to a net 680,300 bpd in June. In July, only about 306,500 bpd in net volumes (383,100 bpd gross) remained curtailed. This number is expected to fall to a net 74,300 bpd (92,900 bpd gross) in August, with nearly all production set to be reactivated by September and just a small amount remaining offline.
http://communications.rystadenergy.com/acton/rif/12327/s-0dd9-2008/-/l-0ac8:295/l-0ac8/showPreparedMessage?sid=TV2:59uFtis2b
Wednesday, August 12, 2020
OilPrice.com - Here’s How Oil Could Skyrocket By 138%
The market is gradually beginning to give credence to something I've been discussing in past OilPrice articles for a long time now. In a June, 2020 article entitled, Underinvestment Could Send Oil Prices Soaring, I argued how the retrenchment and lack of capital investment the industry has seen the past five-years would lead to shortages of crude eventually. The huge volume of Saudi overproduction exacerbated the equal largess in American shale for the past couple of years, and led to a glut of crude globally.
https://oilprice.com/Energy/Energy-General/Heres-How-Oil-Could-Skyrocket-By-138.html
Monday, August 10, 2020
World Oil - Shale drillers plan for maintenance, not growth, as oil prices stall
HOUSTON (Bloomberg) --America’s most prolific shale drillers are accepting a fate once anathema to an industry obsessed with growth: Drilling just to ward off production drops.
The pandemic and subsequent plunge in crude prices has forced U.S. crude explorers to scrap plans to expand supplies amid investor skepticism toward the shale business model. For some of the biggest names in the Permian, that’s meant vowing restraint as long as oil lingers at levels too poor to justify a new boom.
The pledges also come on the heels of the worst crude crash in the 161-year history of the petroleum industry. Explorers are disclosing just how deeply their balance sheets were wounded by a quarter that included the heretofore unheard-of phenomenon of negative prices.
“These guys have all just had a near-death experience,” said Raoul LeBlanc, an analyst at IHS Markit Ltd. “It will take some time to get themselves back in a a better position.”
The pandemic and subsequent plunge in crude prices has forced U.S. crude explorers to scrap plans to expand supplies amid investor skepticism toward the shale business model. For some of the biggest names in the Permian, that’s meant vowing restraint as long as oil lingers at levels too poor to justify a new boom.
The pledges also come on the heels of the worst crude crash in the 161-year history of the petroleum industry. Explorers are disclosing just how deeply their balance sheets were wounded by a quarter that included the heretofore unheard-of phenomenon of negative prices.
“These guys have all just had a near-death experience,” said Raoul LeBlanc, an analyst at IHS Markit Ltd. “It will take some time to get themselves back in a a better position.”
Wednesday, August 5, 2020
BTU Analytics - 1.8 MMb/d Permian Production Potential from DUCs
As operators continue to grapple with a $40/bbl oil price environment, many are looking for ways to balance declining production with capital expenditures. In the Permian, a familiar, but perhaps currently under-emphasized story of DUCs and excess backlog has the potential to play a significant role. As oil prices began to rapidly deteriorate in March, operators responded quickly and both completions and drilling activity fell precipitously. However, completions fell faster and further than drilling activity. As a result, the excess backlog of wells in the Permian Basin sky-rocketed from ~350 wells in February to over 2,300 wells by May. Depending on the location of these wells and timing of completions, there is ~1.8 MMb/d of production potential.
https://btuanalytics.com/crude-oil-pricing/1-8-mmb-d-permian-production-potential-from-ducs/
https://btuanalytics.com/crude-oil-pricing/1-8-mmb-d-permian-production-potential-from-ducs/
Seeking Alpha - Oil: The Market Is In For A Bit Of A Surprise If It Didn't Price In The Incoming Draws
Summary
- WTI finally broke above $42 resistance level after 3 failed attempts.
- Technical analysts suggest this move could push prices to $49/bbl.
- On the fundamental side, while we argued that prices could have already priced in the draws, today's move suggest otherwise. If so, then, the market is in for a surprise.
- We currently have US crude storage falling below ~500 million bbls by the end of August.
- In addition, US oil production has disappointed to the downside. July average is around ~11.3 mb/d, but our leading indicator indicates that August may actually move lower despite more shut-in production return.
Wednesday, July 29, 2020
OilPrice.com - Why Oil Remains Stuck At $40
Oil prices posted gains once again on Wednesday on the back of bullish data from the EIA, but analysts are warning that plenty of downside risks remain. The EIA reported a huge drawdown in crude inventories on Wednesday, with a drop of 10.6 million barrels. That was enough to lift crude prices.
But several analysts argued this week that the bigger picture is murkier, with economic and pandemic-related risks looming. “While upwards momentum has stalled over the past month, we still think prices are overdue a downwards correction to reflect the flattening of oil demand recovery and the darkening of economic prospects,” Standard Chartered analysts wrote in a note. The investment bank added that “consensus views” on the oil market balances in the second half of the year have “weakened significantly over the past month.”
https://oilprice.com/Energy/Oil-Prices/Why-Oil-Remains-Stuck-At-40.html
But several analysts argued this week that the bigger picture is murkier, with economic and pandemic-related risks looming. “While upwards momentum has stalled over the past month, we still think prices are overdue a downwards correction to reflect the flattening of oil demand recovery and the darkening of economic prospects,” Standard Chartered analysts wrote in a note. The investment bank added that “consensus views” on the oil market balances in the second half of the year have “weakened significantly over the past month.”
https://oilprice.com/Energy/Oil-Prices/Why-Oil-Remains-Stuck-At-40.html
SPE Oil and Gas Facilities - What Are the Market Drivers for a Recovery?
The crude oil and natural gas markets may recover in 2020, but the speed of recovery in terms of pricing will be different. The crude oil market is rebalancing following a recent mild price recovery, but an increase in COVID-19 cases remains cause for concern. Natural gas may not recover until winter 2020/2021 as low prices, weak demand, and ample storage weigh on the industry.
“Each of (the markets) has very different dynamics going on, but they are definitely being impacted by pandemic and demand destruction trends,” said Enverus VP of Strategic Analytics Bernadette Johnson.
Speaking during the virtual 2020 Unconventional Resources Technology Conference (URTeC), Johnson outlined key drivers for the markets.
https://pubs.spe.org/en/ogf/ogf-article-detail/?art=7418
“Each of (the markets) has very different dynamics going on, but they are definitely being impacted by pandemic and demand destruction trends,” said Enverus VP of Strategic Analytics Bernadette Johnson.
Speaking during the virtual 2020 Unconventional Resources Technology Conference (URTeC), Johnson outlined key drivers for the markets.
https://pubs.spe.org/en/ogf/ogf-article-detail/?art=7418
Monday, July 27, 2020
Rystad Energy - A mild second wave of Covid-19 is now Rystad Energy’s base case scenario for oil demand
As Covid-19 infections continue to increase around the world and the implications of the pandemic’s spread are acknowledged in key markets in the Americas and Asia, Rystad Energy is now changing its base case scenario for oil demand, incorporating a mild second wave effect.
The updated base case scenario assumes a temporary pause in global demand recovery, as the reopening of Europe and other regions is offset by Covid-19 outbursts in populous and high oil-consuming countries in the Americas and Asia such as the United States, Brazil and India, among others.
There is downside risk to our base case. We have identified a category of oil demand at risk – that is, the maximum number of barrels that could be lost if a full lockdown is reinstated globally. In this worst-case scenario in which strict lockdown measures return, we expect demand to edge around 3.7 million bpd lower for the rest of 2020, compared to our updated base case scenario.
https://www.rystadenergy.com/newsevents/news/press-releases/a-mild-second-wave-of-covid-19-is-now-rystad-energys-base-case-scenario-for-oil-demand/
The updated base case scenario assumes a temporary pause in global demand recovery, as the reopening of Europe and other regions is offset by Covid-19 outbursts in populous and high oil-consuming countries in the Americas and Asia such as the United States, Brazil and India, among others.
There is downside risk to our base case. We have identified a category of oil demand at risk – that is, the maximum number of barrels that could be lost if a full lockdown is reinstated globally. In this worst-case scenario in which strict lockdown measures return, we expect demand to edge around 3.7 million bpd lower for the rest of 2020, compared to our updated base case scenario.
https://www.rystadenergy.com/newsevents/news/press-releases/a-mild-second-wave-of-covid-19-is-now-rystad-energys-base-case-scenario-for-oil-demand/
Tuesday, July 21, 2020
URTeC 2020: Opening session speakers see industry recovering, but ESG issues loom large
Representing a milestone shift in how the conference projects itself, the virtual URTeC 2020 opened on Monday morning with a fine plenary session on the future for unconventionals, with a growing list of ESG (environmental, societal, governmental) challenges to deal with. While all participants see the E&P industry recovering over the next 18 months, the growing importance of ESG issues will require attention by publicly held companies.
https://www.worldoil.com/news/2020/7/20/urtec-2020-opening-session-speakers-see-industry-recovering-but-esg-issues-loom-large
https://www.worldoil.com/news/2020/7/20/urtec-2020-opening-session-speakers-see-industry-recovering-but-esg-issues-loom-large
Friday, July 17, 2020
Seeking Alpha - U.S. Oil Production - Bakken Will Never Be The Same Again
Summary
- Since 2017, Bakken has surprised to the upside.
- But with DAPL stuck in legal court battles and uncertainty around takeaway capacity continuing, Bakken's production base will fall.
- Lower completion activity for 2021 and beyond will result in lower projections of ~250k b/d.
- With the rest of the US shale oil basins wounded, Permian will be the only basin left to carry the US. We see Q4 2019 as peak US oil production.
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