Crude Oil/Macro: Oil prices settled higher on Friday, 11/18/2016, closing out a strong week that saw crude buoyed by growing expectations that OPEC will find a way to cap production at the end of the month. For the week, Brent and U.S. crude both rose roughly 5%, the first weekly gains in about a month. Gains were limited by a rallying dollar, which reached its highest levels against a basket of currencies since 2003, after U.S. Federal Reserve Chair Janet Yellen said last Thursday an interest rate increase could happen "relatively soon”. E&P equities took their cue from crude, with the XOP also up by about 5% for the week.
As reported by Reuters and by Bloomberg, OPEC and Russia met in Doha on Thursday, 11/17/2016, for another round of talks without ministers from Iran and Iraq, the two countries that pose the biggest obstacle to a deal to cut production. Members of OPEC are “all hands on deck” to reach an agreement by the group’s 11/30/2016 meeting in Vienna, Secretary-General Mohammed Barkindo said in an interview in Marrakech, Morocco on Tuesday, 11/15/2016. Saudi Arabia, Iraq and Iran remain at odds over how to share output cuts, said an OPEC delegate, who asked not to be identified. Without such an accord, the IEA recently predicted a fourth consecutive year of oversupply in 2017.
According to the OPEC Monthly Oil Market Report released 11/11/2016, non-OPEC oil supply in 2016 is now expected to contract by 780,000 b/d, to average 56.20 million b/d. In 2017, non-OPEC supply growth was revised down slightly to 230,000 b/d, averaging 56.43 million b/d. OPEC crude production, according to secondary sources, increased by 240,000 b/d in October to average 33.64 million b/d. OPEC is hopeful of reaching an agreement at its 11/30/2016 meeting which would limit production to 32.5 to 33 million b/d, implying a cut of ~1 million b/d.
More on the OPEC Meeting: Libya and Nigeria: In our view, it will be critical to note how OPEC plans to accommodate increased production if either country is able to increase exports. Currently, most observers estimate Libya has ~900,000 b/d of exports that are affected by internal strife (and ~500,000 b/d that could be returned to the market relatively quickly) and Nigeria has about 200,000 b/d of impacted exports.
As reported by Reuters on 11/15/2016, the Nigerian militant group, the Niger Delta Avengers (NDA), said it had attacked the Nembe Creek Trunk Line pipeline in the southern Niger Delta in a blow to the government's efforts to quell militancy in the region. The pipeline is 100 km long and has a capacity of 600,000 barrels per day. But a spokesman for the Nigerian military said attackers who targeted the Nembe Creek pipeline on Monday had been thwarted. But then also on 11/15/2016, The Nigeria Security and Civil Defense Corps (NSDC), said it was investigating two explosions that occurred on 11/14/2016 at a pipeline in Lasukugbene, a town about 19 miles from Nembe. It was not clear whether the blasts were related to the attack claimed by the NDA.
On 11/18/2016, Reuters reported U.S. based Citgo Petroleum is sending refined products to its parent company, Venezuela's PDVSA, to compensate for problems in the South American country's domestic network. Beginning in 3Q 2016 Citgo has been exporting from the U.S. a large volume of refined products to Venezuela. The shipments do not solve the shortage of refined petroleum products in Venezuela resulting from outages and long maintenance periods at almost all its refineries. But they have helped prevent larger lines at gasoline stations in some parts of the country.
Crude Oil Global Market
Crude Oil Global Market
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Crude Oil Global Market
From Raymond James Stat of the Week dated 11-21-2016
"Since peak oil in 2014, we have seen a significant improvement in cost reductions from the well level all the way to the corporate
level across our entire E&P coverage group through cost controls and efficiency measures such as high-grading activity, optimizing
completions, and decreasing G&A overhead. As pricing has been and continues to cross breakeven thresholds across U.S. oil basins,
operators see it to be in the best interest of stakeholders to hedge production at these economic price levels through 2016 and into
2017 while the opportunity presents itself. Therefore, it should come as no surprise that we have seen the accelerated hedging
activity considering Permian operators largely realize 15% IRRs (the industry standard hurdle rate) in the $38-40/Bbl range and twothirds
of core U.S. well locations achieve this at ~$45/Bbl or lower."
"Since peak oil in 2014, we have seen a significant improvement in cost reductions from the well level all the way to the corporate
level across our entire E&P coverage group through cost controls and efficiency measures such as high-grading activity, optimizing
completions, and decreasing G&A overhead. As pricing has been and continues to cross breakeven thresholds across U.S. oil basins,
operators see it to be in the best interest of stakeholders to hedge production at these economic price levels through 2016 and into
2017 while the opportunity presents itself. Therefore, it should come as no surprise that we have seen the accelerated hedging
activity considering Permian operators largely realize 15% IRRs (the industry standard hurdle rate) in the $38-40/Bbl range and twothirds
of core U.S. well locations achieve this at ~$45/Bbl or lower."
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group