Comments below from a new Credit Suisse report.
"Leading edge inventory data for the US, Japan, ARA, and Singapore show a ~900 kb/d total stock draw for May The
same regions built ~500 kb/d of inventory during April in aggregate. And while the jury is still out on May inventory builds in China,
where inventories rose ~1 Mb/d ytd (data through April), a ~1.4 Mb/d swing in the weekly data for developed markets is certainly
encouraging as we look for signs of a global supply deficit. Meanwhile, the US inventory surplus to the 2011-2014 average
continues to fall, especially in crude and key refined products i.e. gasoline and distillate."
"We project ~1.8 Mb/d global inventory draws in H2 2017 with the OPEC extension."
Impact of the OPEC agreement
Impact of the OPEC agreement
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Impact of the OPEC agreement
From a new Wells Fargo Energy Sector Report.
"Continued productivity and efficiency improvements
driving lower breakeven levels, particularly in the shales in the nearterm,
are the focus of the E&P sector. We expect improvements in
drilling and completion (D&C) productivity to be the key factor in
lowering breakeven costs. As we detail in this note, history, the shales
and deepwater project redesigns will allow E&P companies to deliver
improved productivity and efficiency in coming years. In our view,
some cost inflation from the service sector must return with higher
activity levels. Those higher costs will be at least partly offset by
improved productivity, thus oil prices may struggle to exceed $60/bbl
in the near-term, absent a substantial geopolitical upset."
My Take: $60 is the new $100. Well level economics are SIGNIFICANTLY BETTER than they were in 2014. F&D costs have come way down. For example; Sanchez Energy F&D per boe in the Eagle Ford is now approximately $7.00/BOE as new horizontal well EURs are over 1,000,000 BOE (gross), These wells cost about $3.5 million to drill and complete, so F&D net to the working interest owners are around $7.
OXY is the #1 producer in the Permian Basin. Per Wells Fargo report:
"While far from the only E&P company to do so, we believe that OXY’s
Q1 2017 presentation clearly highlighted the potential for productivity
and efficiency improvements. OXY laid out its expectations for
significant and consistent reductions in the required level of spending
to deliver an incremental 1,000 barrels per day (bpd) of production.
For OXY to add an incremental 1,000bpd in 2015/16 required $54
million in annual capex. For 2017, OXY projects only $33 million in
annual capex is required to add 1,000bpd. By 2019, OXY projects just
$23 million will be required to add 1,000bpd – reflecting a 57%
improvement in productivity from 2015/16."
"Continued productivity and efficiency improvements
driving lower breakeven levels, particularly in the shales in the nearterm,
are the focus of the E&P sector. We expect improvements in
drilling and completion (D&C) productivity to be the key factor in
lowering breakeven costs. As we detail in this note, history, the shales
and deepwater project redesigns will allow E&P companies to deliver
improved productivity and efficiency in coming years. In our view,
some cost inflation from the service sector must return with higher
activity levels. Those higher costs will be at least partly offset by
improved productivity, thus oil prices may struggle to exceed $60/bbl
in the near-term, absent a substantial geopolitical upset."
My Take: $60 is the new $100. Well level economics are SIGNIFICANTLY BETTER than they were in 2014. F&D costs have come way down. For example; Sanchez Energy F&D per boe in the Eagle Ford is now approximately $7.00/BOE as new horizontal well EURs are over 1,000,000 BOE (gross), These wells cost about $3.5 million to drill and complete, so F&D net to the working interest owners are around $7.
OXY is the #1 producer in the Permian Basin. Per Wells Fargo report:
"While far from the only E&P company to do so, we believe that OXY’s
Q1 2017 presentation clearly highlighted the potential for productivity
and efficiency improvements. OXY laid out its expectations for
significant and consistent reductions in the required level of spending
to deliver an incremental 1,000 barrels per day (bpd) of production.
For OXY to add an incremental 1,000bpd in 2015/16 required $54
million in annual capex. For 2017, OXY projects only $33 million in
annual capex is required to add 1,000bpd. By 2019, OXY projects just
$23 million will be required to add 1,000bpd – reflecting a 57%
improvement in productivity from 2015/16."
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Impact of the OPEC agreement
A total of 21 countries have agreed to make oil production cuts. OPEC members 1,200,000 BOPD and Non-OPEC nations 558,000 BOPD for a total of 1,758,000
April data shows that OPEC members cut more than the agreed amount.
1,680,000 BOPD actual cuts in April
1,758,000 BOPD is the target
-------------------
95.56% in compliance
IEA thinks they will be full compliance in June.
April data shows that OPEC members cut more than the agreed amount.
1,680,000 BOPD actual cuts in April
1,758,000 BOPD is the target
-------------------
95.56% in compliance
IEA thinks they will be full compliance in June.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group