OPEC Threatens To Kill U.S. Shale

 

The Organization of Petroleum Exporting Countries will once again become a nemesis for U.S. shale if the U.S. Congress passes a bill dubbed NOPEC, or No Oil Producing and Exporting Cartels Act, Bloomberg reported this week, citing sources present at a meeting between a senior OPEC official and U.S. bankers.

The oil minister of the UAE, Suhail al-Mazrouei, reportedly told lenders at the meeting that if the bill was made into law that made OPEC members liable to U.S. anti-cartel legislation, the group, which is to all intents and purposes indeed a cartel, would break up and every member would boost production to its maximum.

Saudi Strikes Back Against U.S. Shale

 

The price of oil is plunging.

For the first quarter of 2017 West Texas Intermediate (WTI) held a pretty stable range between $54–58 per barrel. Now it is back to the roller coaster that we have been on since mid-2014.

As I write this, WTI is struggling to hold $43 per barrel and is sinking like a rock.

U.S. Shale Is Immune To An Oil Price Crash In 2017

A brilliant move by U.S. shale oil producers has given them a great hedge. How long it can hold is anyone’s guess as OPEC is sure to try and counter it. The good news is that the U.S. remains one step ahead.

 

 

Since OPEC announced the production cut deal at the end of November, industry analysts have been warning that rising production from producers outside the deal—U.S. shale in particular—is effectively capping the oil price gains from that agreement.

Four months after the OPEC/NOPEC deal took effect, oil prices dropped to the levels preceding the agreement, amid concerns over still stubbornly high inventories and rising U.S. output.

Shale production has been gaining ‘significant momentum’, and there is a limited downside risk in the short run, Norway-based consultancy Rystad Energy said in a report last week.

Russia Regains Status As China’s No.1 Crude Supplier

 

China imported daily average of 4.69 million tons, or 34.38 million bpd, of crude oil from Russia last month. That’s 9.3 percent more than the February average, putting Russia back at the top spot of China’s foreign oil suppliers, above Angola, which sits at number 2. Saudi Arabia fell to number 3 in March, as it cuts output deeper than it was expected to under the OPEC agreement from November.

The shuffle comes amid talks in OPEC about extending the six-month production output cut to further strengthen prices, which turned out to be less responsive to the international effort than expected.

Shale Drilling Set To Take Off In Argentina

The economy in Argentina is best described as a “pendulum”, going from loose economic policies in the ‘80s to Washington-consensus liberalisation in the ‘90s and back again under the Kirchner regime. Since the current president Macri took office in December 2015, he has been reversing the policies of his predecessor and has focused on boosting the economy with free-market measures through eliminating currency controls and lowering utility subsidies. In March, the government also announced a US$7.50 per barrel subsidy on exported oil while Brent remained below US$47.50 per barrel to attract foreign investment.

China intends to oust dollar from oil trade

China is planning to launch its own oil benchmark in October, similar to Brent and WTI, striving for a more important role in establishing crude prices. Unlike the Western benchmarks, the Chinese contracts will be nominated in the yuan, not the US dollar.

Shanghai International Energy Exchange sent a draft futures contract to market players in August, Reuters reported quoting sources.

Saudi Arabia Continues To Turn Screws On U.S. Shale

Saudi Arabia continues to ratchet up production, taking market share away from U.S. shale producers.

According to OPEC’s latest monthly oil report, Saudi Arabia boosted its oil output to 10.31 million barrels per day in April, a slight increase over the previous month’s total of 10.29 million barrels. That was enough for the de facto OPEC leader to claim its highest oil production level in more than three decades.

Saudi Arabia has increased production by 700,000 barrels per day since the fourth quarter of 2014 in an effort maintain market share. The resulting crash in oil prices is forcing some production out of the market, and Saudi Arabia intends for the brunt of that to be borne by others.

OPEC Boasts About Pain In U.S. Shale

Oil prices continue to fluctuate in a relatively narrow band around $50 for WTI and $60 for Brent. On March 6, Baker Hughes reported another round of declining rig counts. Only this week the pace of cutbacks accelerated. An estimated 75 rigs were removed from the oil patch for the week ending on March 6, a big jump from a week earlier. It is important to remember that week-to-week numbers are largely statistical noise; the long-term trend line is more important. Still, after several weeks in which the rig count collapse appeared to be slowing, last week’s figures are a reminder that the rout is not over yet. After all, production has not dropped off – U.S. production surpassed 9.3 million barrels of oil per day in February, the highest level in decades.

Russia Abandons PetroDollar By Opening Reserve Fund

2015 has not been good to Russia; the spread between Brent and WTI is gone in anticipation of US exports and both benchmarks have flirted with sub $45 prices. A hostage to such prices, the ruble has yet to begin its turnaround and the state’s finances are in extreme disarray. President Vladimir Putin’s approval ratings remain sky-high, but his country has not faced such difficult times since he took office more than 15 years ago.

Since the turn of the new year the ruble has fallen over 13 percent and Russia’s central bank and finance department are running out of options – to date, policy makers have hiked interest rates to their highest level since the 1998 Russian financial crisis and embarked on a 1 trillion-ruble ($15 billion) bank recapitalization plan to little effect. Their latest, and most dramatic, plan is to abandon the dollar – at least somewhat.

US Sees Huge Energy Opportunity In Europe

If 2015 is anything like 2014 we can expect a wild ride. Oil price volatility – including its downward trend – will linger well into the first and second quarters as global production persists and key conflicts in Eastern Europe and the Middle East show no end. For its part, the United States is better positioned than most – the US is poised to carry the global economy in 2015 with projected GDP growth of 3.1 percent. However, converting this potential into meaningful energy trade and/or soft power is another matter altogether and 2015 offers limited opportunities.

Oil price will fall to $70 US a barrel in 2015, Goldman Sachs says

World is producing more than it needs, thanks to boom in shale oil, bank says

One of the world’s leading investment banks says the benchmark price of North American oil is going to fall even further, to $70 US a barrel by next spring.

Investment bank Goldman Sachs slashed its forecast late Sunday night for both West Texas Intermediate (known as WTI) and Brent crude — the two most common types of oil used and sold in North America and Europe.

Goldman Sachs says WTI will go for $75 a barrel in the first three months of 2015. Brent, meanwhile, will change hands at $85 a barrel. Both forecasts are down $15 from what the bank was last expecting. And both are forecast to slip even lower in the second quarter — historically a seasonally low time for oil prices — before rebounding a little in the summer of 2015.