How The US Sets Global Oil And Gas Prices

The US is increasingly influential in price formation for crude and global gas markets. But tight oil and shale gas, through LNG exports to Europe, are likely to be cap and collar in their respective markets for the next few years – tight oil setting the ceiling price, US gas the floor.

The big three – Saudi Arabia, Russia and the USA – have jostled for position as the world’s leading oil producer since the start of the new millennium. The astonishing growth path of tight oil propelled the USA to top dog 2015, ousting by a small margin Saudi Arabia, No.1 since the early 1990s. In the background, Russia, like the USA, built production up. Last year, all three produced 12 million b/d (including NGLs), give or take, and each is currently producing at or close to all-time-record levels.

The competitive sparring of the last few years is about to end, and in this fight there will be only one winner. Our latest Macro Oils Long Term Outlook shows the extent to which the USA outpaces the rest in the near future. We forecast that by 2025, US liquids volumes will increase by over 50% to 19 million b/d; Saudi Arabia will be broadly flat, whereas Russia faces gentle decline…

 

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Oil Heads for Longest Gain in a Month as U.S. Supply Seen Lower

Oil advanced for a fourth day in New York, its longest run of gains in a month, on estimates that U.S. crude inventories continued their decline from record levels seen earlier this year.

Futures added as much as 1.5 percent after rising 2 percent in the previous three sessions. Inventories probably dropped by 2.25 million barrels last week, a Bloomberg survey showed before an Energy Information Administration report Wednesday. Prices also climbed as the dollar weakened against the euro following a positive outlook from European Central Bank President Mario Draghi, making dollar-priced commodities like crude more attractive…

 

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US Crude Oil Rig Count: Turning Point for the Bear Market?

According to Baker Hughes (BHI), the US crude oil rig count rose by 11 to 758 on June 16–23, 2017. Rigs rose 1.5% week-over-week and 129.8% year-over-year.

US crude oil rigs have risen for 23 straight weeks. The rise in crude oil rigs could lead to a rise in production. High production would pressure oil prices. Lower crude oil prices have a negative impact on oil drillers like Baker Hughes (BHI), Atwood Oceanics (ATW), Transocean (RIG), and Halliburton (HAL).

The US crude oil rig count peaked at 1,609 in October 2014. Its low was 316 in the week ending May 27, 2016—the lowest level since the 1940s. Since then, the US crude oil rig count has risen 138%…

 

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Japan regulator to brief on probe into LNG trading

Japan’s Fair Trade Commission (JFTC) said it will brief on its probe into liquefied natural gas (LNG) trading practices at 3 p.m. (0600 GMT) on Wednesday.

The commission late last year ordered the country’s LNG buyers to provide details on contract requirements that prevent them from reselling the fuel to third parties.

Markets have been waiting to hear from the powerful anti-monopoly regulator on an investigation into whether so-called destination clauses limit competition, which could lead to billions of dollars of LNG contracts being renegotiated…

 

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WSJ: US Fracking Revolution Revives American Plastics Industry

The fracking revolution that has resurrected energy drilling in the U.S. is having broader effects on reviving American industry, according to The Wall Street Journal.

“That boom in drilling has expanded the output of oil and gas in the U.S. more than 57 percent in the past decade,” the newspaper reported. The re-birth of U.S. drilling is driving down the cost of raw materials for plastics companies like Dow Chemical, which is putting $8 billion into petrochemical facilities along the Gulf of Mexico.

“The scale of the sector’s investment is staggering: $185 billion in new U.S. petrochemical projects are in construction or planning, according to the American Chemistry Council,” the WSJ reported. “Last year, expenditures on chemical plants alone accounted for half of all capital investment in U.S. manufacturing, up from less than 20% in 2009, according to the Census Bureau”…

 

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Wall St set to open higher as oil prices recover

U.S. stocks were set to open higher on Monday as oil prices climbed from last week’s seven-month lows.

Oil edged up for the third straight session but gains were capped by the relentless rise in U.S. supply and bloated global inventories.

The recent drop in oil prices has spurred concerns about low inflation, which stubbornly remains below the Federal Reserve’s 2 percent target rate…

 

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ANALYSIS: OPEC looks bewildered by global oil market

It may be too soon to write OPEC’s obituary, but the oil producer club appears in urgent need of late-life care. It shows little understanding of where it is, how it got there or where it’s going. While it still manages to collect new members here and there, its core group looks more fragile than at any point in nearly 30 years.

The historic output agreements, put together so painstakingly last year, are failing. Nearly 12 months of shuttle diplomacy culminated in two deals that would see 22 countries cut production by nearly 1.8 million barrels a day. Implementation has been better than for any previous output cut, with compliance put at 106 percent in May. A resounding success? Hardly.

We’re now in the final month of those deals and oil prices are lower than when they were agreed. Not only have producers sacrificed volume, but they earn less for each barrel they do produce…

 

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ExxonMobil to Climate-Change Activists: Chew on This

At the company’s annual shareholder meeting this May, roughly 62% of the votes were in favor of having ExxonMobil (NYSE: XOM) more deeply analyze and disclose the risks posed to its business from climate change. That was up sharply from 38% of the vote a similar proposal garnered in 2016. Shareholders large and small clearly want to know what climate risks are on the horizon, and understandably so, but what about the opportunities climate change presents?

Well, it didn’t take long to receive an answer. ExxonMobil and its partner Synthetic Genetics Inc. (SGI) announced a breakthrough in their long-standing $600 million collaboration to develop what some consider the Holy Grail of energy: algae biofuels. After announcing a setback in 2013, this week the pair revealed that they have stumbled on a new genetic switch that allows photosynthetic algae to produce twice the oil content within their cells while maintaining the same growth rate.

The companies have hailed it as a “breakthrough” in their development efforts, with ExxonMobil quick to tie this milestone to the opportunities for its business presented by climate change. So should investors breathe a sigh of relief or remain more cautious given a long list of failures of algae biofuels to date…

 

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Oil Falls Prey to ‘Hungry’ Bears as Investors Drop Bets on Rally

Bears are dominating the oil market.

Hedge funds cut bets on rising West Texas Intermediate crude prices by 31 percent in the week ended June 20, pushing their net bullish position to the lowest in 10 months just as the U.S. benchmark slipped into a bear market. Wagers on declining prices reached a new high for the year.

“It matches up with the very negative sentiment tied to oil prices right now,” said Rob Thummel, portfolio manager at Tortoise Capital Advisors LLC in Lakewood, Kansas, which manages about $16 billion in energy-related investments. “The bears are not going into hibernation yet. They’re still hungry”…

 

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Clogged oil arteries slow U.S. shale rush to record output leftright 3/3leftright

A gallon of gasoline that allows a driver on the U.S. East Coast to travel about 25 miles has already navigated thousands of miles from an oil field to one of the world’s largest fuel markets.

If its last stop is one of the region’s struggling refineries – an increasingly unlikely prospect – the crude used to produce the gas would have probably arrived by tanker from West Africa. That’s because the region’s five plants have no pipeline access to U.S. shale fields or Canada’s oil sands.

Or the journey to an East Coast gas pump might start instead in North Dakota’s Bakken shale fields – which means it could take up to three months, including a stop at a Gulf Coast refinery. The same trip would have been even longer a month ago, before the opening of the controversial Dakota Access Pipeline…

 

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