$68/bbl seems to be a solid support line; at least for this morning.
A production shutdown at Syncrude Canada‘s oilsands mine and upgrader complex in northern Alberta is expected to free up pipeline space out of Western Canada and strengthen prices for Canadian heavy oil. The company has said production of upgraded bitumen could remain offline at its works north of Fort McMurray through July. The stoppage was caused by a power outage last week. Looks like it will take ~250,000 barrels of heavy oil per day off the world market through July.
https://globalnews.ca/news/4296088/sync ... -oilsands/
Oil Price - June 26
Oil Price - June 26
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil Price - June 26
Higher oil prices for Bakken crude:
North Dakota Bakken producers have historically seen wider price differentials to WTI (West Texas Intermediate) crude oil prices (UCO) compared with peers who have better access to refineries on the Gulf Coast. However, since the long-awaited Dakota Access Pipeline came online last June, oil price differentials in the Bakken Basin have improved.
Very good news for Continental Resources (CLR)
Calling the Dakota Access a “game changer,” Whiting Petroleum (WLL) noted that it’s currently the best destination to send its crude, which is then carried into Texas. It then goes to the LLS (Light Louisiana Sweet) crude oil markets, which trade closer to the Brent. Around 56.0% of CLR’s first-quarter production came from the Bakken region.
North Dakota Bakken producers have historically seen wider price differentials to WTI (West Texas Intermediate) crude oil prices (UCO) compared with peers who have better access to refineries on the Gulf Coast. However, since the long-awaited Dakota Access Pipeline came online last June, oil price differentials in the Bakken Basin have improved.
Very good news for Continental Resources (CLR)
Calling the Dakota Access a “game changer,” Whiting Petroleum (WLL) noted that it’s currently the best destination to send its crude, which is then carried into Texas. It then goes to the LLS (Light Louisiana Sweet) crude oil markets, which trade closer to the Brent. Around 56.0% of CLR’s first-quarter production came from the Bakken region.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil Price - June 26
Energy & Capital: Oil to $80 by Columbus Day
By Christian DeHaemer
June 26, 2018
The numbers I’ve read say the production reduction in Libya and Venezuela has resulted in an 800,000 barrel-per-day (bpd) cut this year, with an additional 500,000 bpd drop from Venezuela coming in the second half. Venezuela is in the chaotic throes of late-stage socialism. Libyan ports and production are in a war zone, and Iran sanctions are kicking in.
Goldman Sachs is bullish on oil, putting out a note last week that said, “The oil market remains in deficit with resilient demand growth and rising disruptions requiring higher core OPEC and Russia production to avoid a stock-out by year-end.”
Global demand will push oil above $80 for WTI over the second half of this year. The world is still undersupplied, which is good for oil longs.
By Christian DeHaemer
June 26, 2018
The numbers I’ve read say the production reduction in Libya and Venezuela has resulted in an 800,000 barrel-per-day (bpd) cut this year, with an additional 500,000 bpd drop from Venezuela coming in the second half. Venezuela is in the chaotic throes of late-stage socialism. Libyan ports and production are in a war zone, and Iran sanctions are kicking in.
Goldman Sachs is bullish on oil, putting out a note last week that said, “The oil market remains in deficit with resilient demand growth and rising disruptions requiring higher core OPEC and Russia production to avoid a stock-out by year-end.”
Global demand will push oil above $80 for WTI over the second half of this year. The world is still undersupplied, which is good for oil longs.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil Price - June 26
IMO this is the primary reason that WTI oil price should move into the top half of Stage 4 of this rebound phase. See my last podcast for what "Stage 4" is.
From TPH Morning Notes 6-26-2018
The Venezuela Saga: Libya 2.0?
Biggest threat to global crude supply in 2019?
Challenging times for Venezuela have continued into H1'18, with latest production in the 1.39mmbpd range a sharp drop-off from 2.05mmbpd just 12 months prior. We see little reason to expect the trend to reverse, with broad calls for production to continue to decline to <1.0mmbpd.
We expect with capital contraction occurring (onshore rigs down to 25 in recent months from an avg. of 65-70 '11-'15) that production declines could accelerate, and real risk of a material supply disruption as civil and fiscal unrest grows. We highlight Libya as an example of production evaporating as a country slid into disarray, with volumes still not having recovered from prior highs.
From a global supply perspective, if both Iranian and Venezuelan barrels were lost, OPEC+ may struggle to meet supply with spare capacity. From a heavy specific perspective, as a still sizeable contributor to Gulf Coast heavy needs, the loss of Venezuelan barrels could prove a shock, though the market has remained short heavies for a number of years. We highlight a few potential outcomes for Canadian heavies in this scenario: 1) Continued market setting by Pemex-priced Mayan barrels, driving limited improvement to current differentials; 2) Supply constraints pushing Gulf refiners to lean on breakeven levels, driving an improvement to current levels; 3) An even more bullish scenario wherein efforts to keep coking units full drive a tighter light-heavy spread, as limited variable costs factor into breakeven economics.
MY TAKE: lack of heavier crudes could push diesel price over $1.00/gallon higher than regular gasoline. Diesel inventories are heading into dangerous territory.
From TPH Morning Notes 6-26-2018
The Venezuela Saga: Libya 2.0?
Biggest threat to global crude supply in 2019?
Challenging times for Venezuela have continued into H1'18, with latest production in the 1.39mmbpd range a sharp drop-off from 2.05mmbpd just 12 months prior. We see little reason to expect the trend to reverse, with broad calls for production to continue to decline to <1.0mmbpd.
We expect with capital contraction occurring (onshore rigs down to 25 in recent months from an avg. of 65-70 '11-'15) that production declines could accelerate, and real risk of a material supply disruption as civil and fiscal unrest grows. We highlight Libya as an example of production evaporating as a country slid into disarray, with volumes still not having recovered from prior highs.
From a global supply perspective, if both Iranian and Venezuelan barrels were lost, OPEC+ may struggle to meet supply with spare capacity. From a heavy specific perspective, as a still sizeable contributor to Gulf Coast heavy needs, the loss of Venezuelan barrels could prove a shock, though the market has remained short heavies for a number of years. We highlight a few potential outcomes for Canadian heavies in this scenario: 1) Continued market setting by Pemex-priced Mayan barrels, driving limited improvement to current differentials; 2) Supply constraints pushing Gulf refiners to lean on breakeven levels, driving an improvement to current levels; 3) An even more bullish scenario wherein efforts to keep coking units full drive a tighter light-heavy spread, as limited variable costs factor into breakeven economics.
MY TAKE: lack of heavier crudes could push diesel price over $1.00/gallon higher than regular gasoline. Diesel inventories are heading into dangerous territory.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil Price - June 26
Phil Flynn: June 26, 2018
The Energy Report has been raising the warnings for some time about the impact of underinvestment in the energy sector and now those chickens are coming home to roost. Even the most diehard oil bears are now starting to realize that the math of meeting supply with demand just does not add up. U.S. Energy Secretary Rick Perry is starting to get it as he said yesterday that the OPEC production increase may be a little short of what is needed to prevent shortages.
Those shortages could become acute in the U.S. as Syncrude Canada says production at its oil sands facility in Alberta, producing as much as 360K bbl/day, is offline at least through July. That comes as U.S. refiners are buying and running crude at a record rate to keep up with demand for transportation fuels.
Some are speculating that Secretary Perry will ask the Russians to pump more oil, as despite the best efforts of U.S. producers, they can’t meet the needs of the refiners and the infrastructure issues and the lack of pipeline capacity is going to force them to slow production until the bottlenecks can be eliminated.
Energy Secretary Rick Perry also warned that he is trying to "raise some warning flags" about President Donald Trump's trade policies to make sure "we don't shoot a bullet that goes through the intended target and hits whoever is standing behind it."
Yet, a slowdown in growth may be what it takes to avoid an oil price spike. Genscape, the private Cushing Oklahoma monitor, reported that crude supply bounced back from last week’s -2,249,872 draws but only by 198,315 barrels. Those supplies will fall further as the Canadian outage and the slowdown in imports will drain Cushing dry to the bone. < I doubt this, because Canada has enough heavy oil in storage to fill the gap left by the Syncrude shutdown.
Gasoline demand is at a record and because refiners have ramped up, they have kept prices reasonable. Gas Buddy reports that for the fourth straight week, average gasoline prices have moved lower, falling 5.3 cents to $2.83 per gallon today according to GasBuddy data compiled from over 10 million price reports covering over 135,000 stations in the last week. Average gas prices decreased in all the nation's 50 states, but that may not last much longer. < I think the average U.S. gasoline price will move over $3.00/gallon very soon.
Hedgers must be hedged for more upside risk for gasoline and product. The global oil market is facing a structural short fall as Iran and Venezuela fade off into the sunset. The Trillion dollars of CapX cuts that the industry has made will leave a tight market environment for years to come.
The Energy Report has been raising the warnings for some time about the impact of underinvestment in the energy sector and now those chickens are coming home to roost. Even the most diehard oil bears are now starting to realize that the math of meeting supply with demand just does not add up. U.S. Energy Secretary Rick Perry is starting to get it as he said yesterday that the OPEC production increase may be a little short of what is needed to prevent shortages.
Those shortages could become acute in the U.S. as Syncrude Canada says production at its oil sands facility in Alberta, producing as much as 360K bbl/day, is offline at least through July. That comes as U.S. refiners are buying and running crude at a record rate to keep up with demand for transportation fuels.
Some are speculating that Secretary Perry will ask the Russians to pump more oil, as despite the best efforts of U.S. producers, they can’t meet the needs of the refiners and the infrastructure issues and the lack of pipeline capacity is going to force them to slow production until the bottlenecks can be eliminated.
Energy Secretary Rick Perry also warned that he is trying to "raise some warning flags" about President Donald Trump's trade policies to make sure "we don't shoot a bullet that goes through the intended target and hits whoever is standing behind it."
Yet, a slowdown in growth may be what it takes to avoid an oil price spike. Genscape, the private Cushing Oklahoma monitor, reported that crude supply bounced back from last week’s -2,249,872 draws but only by 198,315 barrels. Those supplies will fall further as the Canadian outage and the slowdown in imports will drain Cushing dry to the bone. < I doubt this, because Canada has enough heavy oil in storage to fill the gap left by the Syncrude shutdown.
Gasoline demand is at a record and because refiners have ramped up, they have kept prices reasonable. Gas Buddy reports that for the fourth straight week, average gasoline prices have moved lower, falling 5.3 cents to $2.83 per gallon today according to GasBuddy data compiled from over 10 million price reports covering over 135,000 stations in the last week. Average gas prices decreased in all the nation's 50 states, but that may not last much longer. < I think the average U.S. gasoline price will move over $3.00/gallon very soon.
Hedgers must be hedged for more upside risk for gasoline and product. The global oil market is facing a structural short fall as Iran and Venezuela fade off into the sunset. The Trillion dollars of CapX cuts that the industry has made will leave a tight market environment for years to come.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil Price - June 26
Oil prices spiked after the U.S. State Department told buyers of Iranian oil that they must wind down those purchases by November or risk sanctions. WTI moved quickly over $70.50/bbl as short covering kicked in.
> The Trump administration has not yet held talks with China, India or Turkey about their purchases of Iranian crude, but it intends to pressure them to entirely cut their imports under threat of sanctions, says a senior State Department official.
> Buyers of Iranian crude had expected the U.S. would allow them time to reduce oil imports over a much longer period by issuing sanctions waivers if significant efforts were made to cut their purchases, based on previous comments from Trump administration officials as well as the Obama administration’s earlier decision to wean the world off Iranian oil over several years.
> Also supporting crude prices today are uncertainty over Libyan crude exports and doubts over OPEC’s ability to increase production quickly enough to prevent a shortfall in global supplies.
Tomorrow the EIA should report another decline in U.S. crude oil inventories. BTW the 4th of July holiday is next week and lots of Americans will be hitting the road and burning up gasoline in their boats.
Q2 results are going to be strong and the Sweet 16 is still trading as if WTI is $50/bbl. The "Rebound Phase" is really fun when the Wall Street Gang finally figures it out. FEAR eventually gives way to GREED when the reality of gasoline and diesel shortages sets in. As I have been pointing out in my podcasts, we never really caught up after Hurricane Harvey shut in 30% of U.S. refining capacity for several month. Refined product inventories are approaching the "Danger Zone", diesel is already there.
> The Trump administration has not yet held talks with China, India or Turkey about their purchases of Iranian crude, but it intends to pressure them to entirely cut their imports under threat of sanctions, says a senior State Department official.
> Buyers of Iranian crude had expected the U.S. would allow them time to reduce oil imports over a much longer period by issuing sanctions waivers if significant efforts were made to cut their purchases, based on previous comments from Trump administration officials as well as the Obama administration’s earlier decision to wean the world off Iranian oil over several years.
> Also supporting crude prices today are uncertainty over Libyan crude exports and doubts over OPEC’s ability to increase production quickly enough to prevent a shortfall in global supplies.
Tomorrow the EIA should report another decline in U.S. crude oil inventories. BTW the 4th of July holiday is next week and lots of Americans will be hitting the road and burning up gasoline in their boats.
Q2 results are going to be strong and the Sweet 16 is still trading as if WTI is $50/bbl. The "Rebound Phase" is really fun when the Wall Street Gang finally figures it out. FEAR eventually gives way to GREED when the reality of gasoline and diesel shortages sets in. As I have been pointing out in my podcasts, we never really caught up after Hurricane Harvey shut in 30% of U.S. refining capacity for several month. Refined product inventories are approaching the "Danger Zone", diesel is already there.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group