Oil prices were up Tuesday morning because:
Saudi Arabia pledged to cut crude exports starting in August
Saudi Energy Minister Khalid al-Falid announced that OPEC is already discussing an extension of the agreement to curb output by 1.8 million barrels per day beyond 3/31/2018
Al-Falid also urged all OPEC members to boost compliance with the agreed cuts
Nigeria, which has been exempt from the accord, says it will eventually join the agreement to curb production levels
Halliburton made remarks during their conference call that the U.S. rig count is showing signs of plateauing, which is something that I have been telling you in my weekly podcasts.
API will release their weekly crude oil storage report this afternoon. If it shows another large draw from storage, there is a good chance the shorts will be running to cover.
The supply/demand fundamental are clearly showing that current demand exceeds current supply. Demand always spikes in Q3, especially when the price of gasoline & diesel is this low. Go here https://www.iea.org/oilmarketreport/omrpublic/
and look at the chart for demand. Notice how demand spikes by over a million barrels per day from Q2 to Q3 year-after-year.
Oil Price - July 25
Oil Price - July 25
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil Price - July 25
"For global demand, after lacklustre 1.0 mb/d growth in 1Q17, there was a dramatic acceleration in 2Q17 to 1.5 mb/d. For 2017 as a whole, demand is forecast to reach 98.0 mb/d, with growth revised up by 0.1 mb/d compared to last month's Report to 1.4 mb/d. Further growth of 1.4 mb/d is foreseen for 2018, with global demand reaching 99.4 mb/d." - IEA
Demand for hydrocarbon based liquids, most of which are refined from crude oil, will top 100 million bbls per day by Q3 2018. - My SWAG
Demand for hydrocarbon based liquids, most of which are refined from crude oil, will top 100 million bbls per day by Q3 2018. - My SWAG
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil Price - July 25
From EnerCom:
Libya and Nigeria, which were exempt from cuts, have been producing more and more. Each country was plagued by unrest in late 2016 that kept oil production low. They have since been able to reestablish a significant amount of production, and have added a combined 458 MOBPD relative to Q4 2016 levels.
Nigerian production may be capped at 1.8 MMBOPD
OPEC appears to be taking aim at these problems, based on statements from the Joint OPEC-Non-OPEC Ministerial Monitoring Committee’s (JMMC) St. Petersburg meeting. Nigeria has agreed to join the deal once its production stabilizes at 1.8 MMBOPD, up from the 1.7 MMBOPD the country is producing now. While this could mean a cut to production, it is more likely that this would cap Nigeria’s production at 1.8 MMBOPD. The JMMC did not recommend that Libya join the cuts however, as its’ current production is well below the 1.4-1.6 MMBOPD that the country produced before unrest began in 2011.
According to Reuters, Saudi Arabia will put pressure on less compliant countries. “Some countries continue to lag which is a concern we must address head on,” the Kingdom’s Energy Minister said. So far, Saudi Arabia has produced less than it has pledged to, in an effort to make up for other, less committed countries.
Saudi Arabia exporting 1 MMBOPD less than last August
Saudi Arabia will continue its current strategy of reducing exports to target global inventories. According to the country’s Energy Minister, Saudi Arabia will limit exports to 6.6 MMBOPD in August. This is 1 MMBOPD lower than at this point in 2016, meaning it may have a significant effect. Lower exports from the Kingdom should drive countries to draw on their inventories during the peak summer driving season. < This is the main reason oil prices are up this morning.
Extending cuts an option
The JMMC stated that extending the cuts beyond Q1 2018 should be an option for OPEC, as markets may not have rebalanced by then. Saudi Arabia’s Energy Minister remarked that oil producers should arrange a smooth landing from the deal if cuts are not extended, as suddenly adding more than 1 MMBOPD to the market will likely shock the markets. < As I have said from the beginning, OPEC will not blow this by not extending their production quotas.
Libya and Nigeria, which were exempt from cuts, have been producing more and more. Each country was plagued by unrest in late 2016 that kept oil production low. They have since been able to reestablish a significant amount of production, and have added a combined 458 MOBPD relative to Q4 2016 levels.
Nigerian production may be capped at 1.8 MMBOPD
OPEC appears to be taking aim at these problems, based on statements from the Joint OPEC-Non-OPEC Ministerial Monitoring Committee’s (JMMC) St. Petersburg meeting. Nigeria has agreed to join the deal once its production stabilizes at 1.8 MMBOPD, up from the 1.7 MMBOPD the country is producing now. While this could mean a cut to production, it is more likely that this would cap Nigeria’s production at 1.8 MMBOPD. The JMMC did not recommend that Libya join the cuts however, as its’ current production is well below the 1.4-1.6 MMBOPD that the country produced before unrest began in 2011.
According to Reuters, Saudi Arabia will put pressure on less compliant countries. “Some countries continue to lag which is a concern we must address head on,” the Kingdom’s Energy Minister said. So far, Saudi Arabia has produced less than it has pledged to, in an effort to make up for other, less committed countries.
Saudi Arabia exporting 1 MMBOPD less than last August
Saudi Arabia will continue its current strategy of reducing exports to target global inventories. According to the country’s Energy Minister, Saudi Arabia will limit exports to 6.6 MMBOPD in August. This is 1 MMBOPD lower than at this point in 2016, meaning it may have a significant effect. Lower exports from the Kingdom should drive countries to draw on their inventories during the peak summer driving season. < This is the main reason oil prices are up this morning.
Extending cuts an option
The JMMC stated that extending the cuts beyond Q1 2018 should be an option for OPEC, as markets may not have rebalanced by then. Saudi Arabia’s Energy Minister remarked that oil producers should arrange a smooth landing from the deal if cuts are not extended, as suddenly adding more than 1 MMBOPD to the market will likely shock the markets. < As I have said from the beginning, OPEC will not blow this by not extending their production quotas.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil Price - July 25
Last week it was reported that the Trump Administration is considering significant sanctions on Venezuela. The threat of sanctions is in response to Venezuelan President Nicolas Maduro's pledge to rewrite his country's constitution on July 30. President Trump promised that if he followed through, the U.S. "will take strong and swift economic actions," which could impact Venezuela's oil exports to the U.S. A decision is expected as early as this week.
According to the most recent data from the Energy Information Administration (EIA), Venezuela presently exports 800,000 barrels per day (BPD) of oil to the U.S. Venezuelan imports rank third behind Canada and Saudi Arabia, but Venezuela is the top source of foreign oil for U.S. Gulf Coast refineries.
According to the most recent data from the Energy Information Administration (EIA), Venezuela presently exports 800,000 barrels per day (BPD) of oil to the U.S. Venezuelan imports rank third behind Canada and Saudi Arabia, but Venezuela is the top source of foreign oil for U.S. Gulf Coast refineries.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil Price - July 25
"Oil drawdowns are going to start to matter. We should see another 3-million-barrel drawdown in crude supply this week. We should also see equivalent drawdowns in the oil products. At some point the market is going to realize we are draining the oil inventories at a record pace and that will wipe away the surplus faster than people think." - Phil Flynn at 8.52 AM ET
Phil's morning report: https://www.investing.com/analysis/the- ... -200203242
Anadarko Petroleum (APC) announced yesterday that they are going to reduce capital expenditures by $300 million in response to lower oil prices. I am expecting many other upstream companies to cut back on their drilling programs.
Sub $50 oil is clearly unsustainable. The longer WTI stays below $50 the higher the chance that U.S. oil production will flatline. During the "rebound phase" of this cycle, we saw a big increase in U.S. oil production in the 1st quarter. As I told you in my weekly podcasts, the rate of increase in Q1 is unsustainable. One Wall Street firm reported that U.S. oil production would rise steadily to over 12,000,000 barrels per day. They lack the wisdom that comes with age. There is no way that the oilfield service firms and the midstream companies can keep up with that rate of growth. NO WAY.
IEA has increased their demand forecast once and I expect them to do it again. Low fuel prices do have an impact on demand.
"With our revised oil forecast, we still expect oil prices to rise about $20/bbl by the end of this year and we remain convinced that 2018 oil prices will need to average $65/bbl to avoid abnormally large global oil inventory reductions next year." - Raymond James July 17, 2017 < If RJ is half right, the Sweet 16 share prices will be a lot higher six months from now.
Send me an e-mail if you'd like to read the full Raymond James report.
Phil's morning report: https://www.investing.com/analysis/the- ... -200203242
Anadarko Petroleum (APC) announced yesterday that they are going to reduce capital expenditures by $300 million in response to lower oil prices. I am expecting many other upstream companies to cut back on their drilling programs.
Sub $50 oil is clearly unsustainable. The longer WTI stays below $50 the higher the chance that U.S. oil production will flatline. During the "rebound phase" of this cycle, we saw a big increase in U.S. oil production in the 1st quarter. As I told you in my weekly podcasts, the rate of increase in Q1 is unsustainable. One Wall Street firm reported that U.S. oil production would rise steadily to over 12,000,000 barrels per day. They lack the wisdom that comes with age. There is no way that the oilfield service firms and the midstream companies can keep up with that rate of growth. NO WAY.
IEA has increased their demand forecast once and I expect them to do it again. Low fuel prices do have an impact on demand.
"With our revised oil forecast, we still expect oil prices to rise about $20/bbl by the end of this year and we remain convinced that 2018 oil prices will need to average $65/bbl to avoid abnormally large global oil inventory reductions next year." - Raymond James July 17, 2017 < If RJ is half right, the Sweet 16 share prices will be a lot higher six months from now.
Send me an e-mail if you'd like to read the full Raymond James report.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group