Oil prices retreat on Russian concerns about balance

A downbeat sentiment from a Russian oil boss on the trajectory for crude oil prices sent key benchmarks diving into negative territory early Thursday.

Outside of the first week in October, crude oil prices have been holding steady in bullish territory for the better part of the third quarter. The rally is due in part to the effort by the Organization of Petroleum Exporting Countries to balance the market through coordinated production cuts, an effort that includes a handful of non-member producers like Russia.

The International Energy Agency said in its monthly market report for October that, for 2018, three out of the four quarters will show a market more or less in balance, assuming OPEC output stays the same and there are no major unforeseen disruptions…

 

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US clout in world oil market grows as industry exports increase

For two separate weeks recently, the U.S. exported as much oil onto the world market each day as was being pumped in either Nigeria or Venezuela and by several other OPEC countries together.

Those roughly 1.9 million barrels a day are not a minor splash for the global oil market, and they are the equivalent of about one-fifth of U.S. daily oil production.

The extra barrels, about a million more a day than the U.S. exported in the first half of this year, may have been an anomaly due to Hurricane Harvey’s impact several weeks earlier. But they are also a sign of things to come — an even bigger U.S. presence on the world market and an increasing role for U.S. shale as a lever on world oil prices…

 

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Higher U.S. exports draining storage levels

An increase in crude oil exports, which reached an all-time high, helped lead to the decline in storage levels for the U.S. market, data analysis show.

Data from the U.S. Energy Information Administration, published Wednesday, show oil exports averaged 1.6 million barrels per day over the last four weeks, a span than included the all-time high of 1.9 million bpd for the week ending Sept. 29. The four-week moving average for exports last year was 467,000 bpd.

Geoffrey Craig, oil futures editor for commodity pricing group S&P Global Platts, said in an after-market commentary that U.S. oil exports were supported by the discount for West Texas Intermediate, the U.S. benchmark for the price of oil, relative to Brent, the global benchmark…

 

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Lower for longer: The implications of low oil and gas prices for China and India

China and India represent the future of oil demand growth, as demand in OECD countries declines. The low oil and gas prices of the last two years have generally been beneficial for India, but have posed more challenges for China, which focused its energy policy in recent years around the assumption that oil and gas would be expensive and scarce. Low prices have been hard on China’s domestic oil industry, which faces rising costs in its aging oil fields.

China’s national oil companies are shifting their strategy from a dash for resources, wherever they are found, to a focus on countries and projects tied to the One Belt, One Road (Belt and Road) initiative. On the other hand, India doesn’t have much of an oil industry to lose, so low prices have brought economic benefits, even easing the burden on the population of removing government transportation fuel subsidies.

China and India are in more similar situations with respect to natural gas imports, but even there India has been better positioned to take advantage of lowpriced spot liquefied natural gas (LNG)…

 

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Will Oil Rigs Cause a U-Turn in Natural Gas Prices?

Last week (ended October 13, 2017), the natural gas rig count fell by two to 185, but on a YoY (year-over-year) basis, the natural gas rig count rose 76.2%. Over this time period, natural gas futures fell 12.5%.

The rise in the natural gas rig count last week could be a major reason behind the fall in prices, while the pullback in the natural gas rig count overall during the past three weeks could benefit natural gas prices.

The natural gas rig count is now 88.4% below its record high in 2008. But natural gas supplies rose significantly over this time period. Since natural gas often has an outcome on oil (UCO) (OIIL) extraction, its dependence on crude oil rigs can also be seen in the image above and so crude oil rigs can be another major factor driving natural gas prices…

 

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State revenue, Alaska workers stand to gain by Liberty oil project

Hilcorp’s Liberty oil field is home to the largest undeveloped light oil reserve on the North Slope and presents an exciting opportunity for economic growth at a time when Alaska’s economy is struggling. With Alaska’s economic woes on our minds, Alaskans are ready for good news. And with the opportunity for boosting oil production, Hilcorp’s Liberty project is our good news, bringing jobs and increased state revenue.

Hilcorp estimates that the Liberty oil field contains around 150 million barrels of recoverable, high-quality crude oil. The oil field is located 19 feet deep in federal offshore waters. The project will require a 9-acre island, generating construction jobs for Alaskans. Once built, the Liberty project could boost oil production by 50,000-70,000 barrels per day. This will help offset the decline in oil flowing through the trans-Alaska pipeline, which is now running at three-quarters empty. The pipeline has been Alaska’s economic engine for decades, and filling the pipeline will recharge Alaska’s economy.

Not only will the Liberty project help fill the pipeline — building and operating the Liberty project means jobs for Alaskans. During the construction phase, the number of jobs is expected to peak at around 200 positions to perform ice road construction, pipeline construction and drilling unit installation. Drilling activity will take place around the clock for two years, requiring an estimated 60 to 80 full-time positions…

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Politics are putting the oil market in a risky place

It’s been a long time since geopolitical developments caused major movements in the oil price, but the escalating tension between the U.S. and Iran, combined with the sudden military clashes in Iraq, has pushed geopolitical risk back on to the agenda for the oil market.

“Geopolitical risks to the oil market have continued to intensify,” Goldman Sachs wrote in an October 17 research note. In addition to Iraq and Iran, the decline in Venezuela’s oil production “appears to be accelerating,” while the resurgence in output from Libya and Nigeria continues to be fragile. “There remains high uncertainty on the potential impact of these new tensions on the oil market.”

But it’s Iraq and Iran that have really raised fears of outages. As of October 17, preliminary reports suggest that about 350,000 bpd of oil production from the Kirkuk oil fields were disrupted, with conflicting reports about whether or not that output has come back online. Iraqi officials said that the interruptions would be temporary and short-lived, and the Kurdish government insisted that it wouldn’t block exports through its pipeline system…

 

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U.S. Is Well On Its Way To Being An ‘Energy Superpower,’ Former Senior Obama Staffer Says

U.S. liquefied natural gas (LNG) exports may surge in the next decade, establishing America as an “energy superpower,” former Obama special assistant Jason Bordoff told The New York Times Tuesday.

The American LNG market has several unique advantages that make it attractive to other countries’ needing a reliable and affordable source of gas.

“U.S. gas is linked to a hub price and has no destination restrictions,” Bordoff told TheNYT in an email. “That means more competition, liquidity and supply diversity, and that will make global gas markets more flexible, efficient and secure”…

 

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As Gas Use Surges, China Sees ‘Harsh’ Winter Without More Supply

Chinese regulators warned that the nation may face a “harsh” supply situation this winter if natural gas supplies can’t keep up with its booming demand.

Surging use of the fuel — powered by President Xi Jinping’s pro-gas policies — combined with inadequate infrastructure such as pipeline connections and storage, may create a severe supply shortfall as weather turns colder, the National Development & Reform Commission said in a statement Thursday. The nation’s top regulator called on state-run producers to ensure sufficient supply.

State owned oil and gas companies China National Petroleum Corp., China Petrochemical Corp. and China National Offshore Oil Corp. should raise production year-on-year this winter to meet the increased demand, the NDRC said. Output from unconventional sources, including coal-bed methane, shale gas and coal-to-gas projects, should also rise, it said…

 

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Oil prices rallying again on short-term drains on supply

Short-term market metrics lingering from a U.S. hurricane gave support to crude oil prices Wednesday, even though balance seemed slow to emerge.

The American Petroleum Institute reported late Tuesday that crude oil inventories in the United States moved lower last week by 7.1 million barrels. The API report was far more bullish than the 3.9 million barrel draw reported in an analyst survey earlier in the week by commodity pricing group S&P Global Platts.

Crude oil inventories matter for traders watching the supply-side pressures that pushed oil prices below $30 per barrel last year fade away. The drain on the surplus of the five-year average in global crude oil inventories is supported by a production ceiling steered by the Organization of Petroleum Exporting Countries…

 

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