Posted on 01/06/2015 4:32:41 AM PST by thackney
Oil traders are well aware of the supply glut but oil producers seem largely oblivious.
With West Texas Intermediate crude breaching the $50 US a barrel threshold for the first time since April 2009 on Monday, the collapse in the price of oil that began last June resumed after the Christmas holiday and set the stage for continued volatility in 2015.
Despite forecasts for lower drilling activity and oilsands investment in the year ahead after a 50 per cent decline in oil prices in six months, Canada is one of a number of the world’s largest producers pumping record volumes of oil with the likes of Iraq pledging even higher output.
Crude briefly fell to $49.95 a barrel on the New York Mercantile Exchange on reports Russian oil output increased to a post-Soviet Union record of 10.67 barrels a day while Iraq — the largest producer in OPEC after Saudi Arabia — said it will soon boost exports to a record 3.3 million barrels a day.
Meanwhile, the International Energy Agency said in its December report that production in Saudi Arabia, Kuwait the United Arab Emirates, Canada and the United States are also at or near record levels after substantial growth in the industry as prices have surged in the last five years. Bloomberg New reported Monday that the 12-member Organization of Petroleum Exporting countries has exceeded its production targets for the seventh consecutive month in December.
Investment bank Morgan Stanley said production is set to increase in West Africa and Latin America as it warned oil markets are poised for “more trouble” in 2015 as the supply glut grows.
So much for all the worry about “peak oil” a few years ago.
The oil market is so well supplied at this point U.S. producer ConocoPhillips apparently added to the bearish price sentiment Monday by simply announcing it had struck oil in the North Sea.
Canada is producing close to 4 million barrels a day — a record level.
“Nobody wants to blink first in terms of cutting production,” Craig Fehr, a Canadian markets strategist at Edward Jones in St. Louis, told the Canadian Press.
Energy consultants Wood MacKenzie published a report last week that warned close to $60 billion of investment in Canadian oil and gas projects — mostly in the oilsands — could be deferred over the next three years if oil prices continue at the current levels.
The report said the delays could curtail about 650,000 barrels of forecast production increases over that time.
Decisions are also on hold for LNG projects in B.C. and offshore oil developments in Atlantic Canada as company’s assess the commodity price environment.
Despite crude briefly trading with a “forty handle” Monday there are only five per cent fewer drilling rigs working in the U.S. this week compared with a year ago. The downturn is more pronounced in Canada with 371 rigs active — almost 30 per cent lower than this week last January.
Western Canadian Select heavy oil traded at close to $33 US a barrel Monday.
In a research note titled “Oil and Trouble Ahead in 2o15″ published Monday investment bank Citigroup lowered its 2o15 forecast for WTI to $55 a barrel citing “continued surging U.S. production, Saudi resistance to cutting output and a weakening global demand.”
Citigroup predicted the oil supply/price situation would “sort itself out by the end of 2015.”
Royal Bank of Canada released a report Monday that noted a stronger U.S. economy, increased Canadian exports due to a lower dollar and cheaper gasoline are positives that may flow from a low oil price but warned reduced oil and gas investment is “more certain to occur.”
RBC predicts WTI will average $65 a barrel this year.
Even with a steady stream of doom-and-gloom headlines in recent weeks — oil stocks were battered on the Toronto Stock Exchange and the Canadian dollar was lower again Monday — scaling back production is not simply a matter of turning off the taps. Preserving reservoir integrity will be a top priority even as lower prices force companies to take currently uneconomic assets out of production.
Notwithstanding an unforeseen turnaround in global demand, don’t count on the oil glut to dissipate — or the price to recover — anytime soon.
Not to worry. These VAMPIRES in Washington is already figuring a way to tax all that cheap gas. Who wants to bet, that these people will put another “TAX” on all this cheap gas, in the coming months.
Senator John Thune (REP Penn) has already started to do just that and publicly stated as much.
But we were told for years speculation drove prices. I foresee an artificial shortage in the hear future to spike prices. It is around the corner.
whoops, South Dakota
Speculators can drive prices up and down, but only for a while. A futures market price is based upon the future expectation of supply and demand, a speculation, typically based on data from a past month.
I foresee an artificial shortage in the hear future to spike prices.
Then you should invest your "speculation" into the futures market. Most traders are not forcasting that.
http://online.wsj.com/mdc/public/page/2_3028.html?category=Energy&subcategory=Petroleum
I don't understand analysts who portray this as some kind of giant pissing contest. Companies have bills to pay, a good chunk of which is fixed, such as coupon payments on bond issues, and interest on bank debt - funds that have been spent on capital equipment or oilfield leases. As oil prices go down, profits per barrel go down, but the bills keep coming in, which means they need to pump more barrels to stay afloat. It's not a macho thing - it's a survival thing.
Let’s see - pump at $50 and make a small profit ore even a small loss, but maintain cash flow, or shut down production and have no income at all so that your competition can make a bit more money? Seems like a fairly easy business decision to me.
Stopping drilling at these prices makes sense. Stopping pumping to help third world dictators while driving yourself into a quick liquidation makes no sense at all. Of course, we don’t expect journalists to understand business.
Good one
We can’t drill our way out of this! Oh, wait...
The catch is, the new wells that have been the source of most of the US production growth are tight formation like shale that decline very rapidly in the early years. So those new wells are going to result in a decline in our total production rate, unless enough new wells are drilled.
King Abdullah: Saudi Arabia will keep ‘solid will’ as oil prices falling
http://fuelfix.com/blog/2015/01/06/king-abdullah-saudi-arabia-will-keep-solid-will-as-oil-prices-falling/
January 6, 2015
Saudi Arabia, the world’s largest oil exporter, will keep a “solid will” and maintain the nation’s stability even with falling crude prices, King Abdullah said in a speech read by his crown prince.
Saudi Arabia will enjoy “safety and stability,” according to a copy of the king’s speech read by Crown Prince Salman Bin Abdulaziz with Abdullah in the hospital for pneumonia. His medical procedure was successful, Abdullah Al al-Sheikh, the head of the Shura Council advisory body, said during the televised session in Riyadh.
“Drill baby drill”, worked. When oil goes back up after the suads try to drive folks out of business it will work again. As long as the government doesn’t crush with regs.
Sorry, (saud’s), I guess I should have looked up spelling.
I don’t understand the reluctance of ‘the frackers’ to claim responsibility for the lower prices.
Someone will, as the consumer loves the new lower prices.
If our side (the patriotic American side) doesn’t, the American hating Left will.
Saudi Arabia oil production is down from last year.
In thousand barrels per day:
Sep 13
10,037
Oct 13
9,714
Nov 13
9,626
Sep 14
9,673
Oct 14
9,650
Nov 14
9,590
It’s a race between the states and the federal gov’t to see who can capitalize on it.
Either that or simply send your investment capital, in increments of $5000 directly to me, which I will keep.
Either way, your results will be the same.
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