Energy Prospectus

https://www.iea.org/oilmarketreport/omrpublic/

You should all be reading this report carefully each month.

"Energy independence" is out, and "energy dominance" is in. On Friday, June 9 Energy Secretary Rick Perry was the latest administration official to opine on "energy dominance." Interior Secretary Ryan Zinke has also been a major supporter of the burgeoning phrase, citing it in multiple speeches and even using it in testimony to House appropriators last week. Dan Naatz, senior vice president of government relations and political affairs with the Independent Petroleum Association of America (IPAA), agreed that fracking has changed the calculus for the United States, calling the proliferation of shale energy over the last 10 years "phenomenal… It's had huge impacts on American security, the economy, jobs, and now you're starting to see the impact it could have on the world," he said. While "dominance" is not a word Naatz said IPAA would use, he said the trade group has embraced the sentiment behind the language shift. "It's important for the U.S. to be an energy superpower," he said. "It's a good thing to have a country that is dedicated to free markets and free trade and dedicated to opening up new markets."

Saudis Cut Oil Exports to U.S. to Ease Global Glut. Wall Street Journal. Saudi Arabia is slashing its U.S. oil exports to a nearly three-decade low for this time of the year, intensifying its efforts to reduce a global supply glut that has been pummeling crude prices. State-owned Saudi Arabian Oil Co. expects sales to the U.S. will drop below 1 million barrels a day in June, then slide to about 850,000 barrels a day in July, according to people familiar with the matter. The July figure would be its lowest export total to the U.S. for that month since 1988, based on figures from the U.S. Energy Information Administration. Saudi Aramco expects its August exports to the U.S. to decline by another 100,000 barrels a day, these people said, which would be the lowest export amount for that month since 2009.

When IPAA's Naatz says shale production has <<had huge impacts on American security, the economy, jobs, and now . . . on the world,>> he's agreeing with the new "dominance" propaganda that celebrates low prices. Given the industry's long record of manic bubbles & busts, this is self-destructive gibberish. We've just been through a nightmare of needless bankruptcies, destruction of investment capital, and unemployment brought on by "free market" appetites and Saudi/US/Russian struggle over market "dominance." The industry needs pricing power and reality-testing, not more top dog twaddle.

I agree. Oil is much too important to go through these crazy oil price cycles. It is much too important to the global economy and to our standard of living. We need OPEC to do their job and it appears that they are. It just takes time. Per the IEA's new report, supply/demand fundamentals should rebalance the oil market by 3/31/2018.

That said, the "Right Price" for oil is probably around $55/Bbl today. Upstream companies do not need $100 oil to make money. Well costs and operating expenses have come way down and well results are much better because of improving completion designs.

Shale oil production is in the big rebound phase of the cycle. It cannot maintain this rate of growth because the more high decline rate wells we depend on, the more new wells that will be needed each year just to replace depletion. I also think oilfield services and infrastructure (pipelines, processing, etc) are being strained today.

"We need OPEC to do their job---"

sa needs $100 oil or close to it. reckon they might pull off another 1973 and shut it down for 90 days and when they restart announce the new price is $100?

in '73 the went from 3+ to $12.

time will tell.

jim

I doubt that we see a stunt like that from Saudi Arabia, but as you point out, they have done some weird things in the past.

IEA is telling us to be patient and I think that is good advice. Wall Street wants instant results from the OPEC production cuts, but that is not going to happen. The global oil market is HUGE and it will take time to rebalance. According to IEA the forces are working to get supply/demand back in balance within nine months. We should see steadily declining OECD inventories in Q3.

Investors seem to ignore that the natural gas and NGL markets are in much better shape than they were a year ago. As summer heat spreads across the South and LNG exports ramp up, we should see steadily declining increases in ngas storage during Q3.