“Cushing Oil Inventories Are Soaring Again” By Tsvetana Paraskova

[Tomasz + 1,608]

"We believe 400 rigs long-term is reasonable at the current strip and therefore U.S. supply declines into perpetuity." --Raymond James

 

[Tom Nolan + 2,443]

Oil Surprisingly Steady Since 2020 Negative Price Disaster

By Tsvetana Paraskova - Jan 05, 2021, 9:00 AM CST

https://oilprice.com/Energy/Energy-General/Oil-Surprisingly-Steady-Since-2020-Negative-Price-Disaster.html

U.S. oil prices have stayed relatively stable at around $40 a barrel since the start of the summer, having rebounded from the negative price of -$37 per barrel on April 20, EIA data shows.

The collapse of oil demand due to the lockdowns in the spring and the building of inventories at the key U.S. hub at Cushing, Oklahoma, contributed to the plunge of the West Texas Intermediate prices in April.

On April 20, the price of WTI Crude crashed below zero to close at -$37 a barrel—the first time the WTI Crude futures contract had fallen below zero since trading began in 1983. On April 21, the international benchmark, Brent Crude, crashed to below $10 a barrel—at $9.12 per barrel, its lowest daily price in decades.

Curtailed refinery operations and inventory builds in the spring of 2020 were some of the reasons for the oil price meltdown in April. According to a recent report by the U.S. Commodity Futures Trading Commission, unusually high open interest in WTI Crude futures was another cause for the benchmark plunging into negative territory. The high open interest, the report said, coincided with a shortage in storage space and the unprecedented destruction of demand resulting from the coronavirus pandemic. The report added that open interest in WTI reached 634,727 contracts on April 2. This compared to a 12-month average peaking at 430,000 contracts.

Since the crash in April, U.S. oil prices began to recover by June and reached the $40 a barrel mark on July 1. WTI Crude prices have largely remained around that price level for most of 2020.

Prices began to rise from the low $40s in November when encouraging news about vaccines gave market participants hope that economic and oil demand recovery would speed up in 2021 with the rollout of vaccines.

At 10:06 a.m. ET on Tuesday, WTI Crude traded at $49.51 a barrel, up by 3.97 percent on the day, as the market was expecting the OPEC+ decision on production for February after talks stalled on Monday and were adjourned until Tuesday.  

By Tsvetana Paraskova for Oilprice.com

 

[Tom Nolan + 2,443]

OPEC+ Meeting Ends With Major Surprise Cut From Saudi Arabia

By Julianne Geiger - Jan 05, 2021, 12:45 PM CST

https://oilprice.com/Energy/Oil-Prices/OPEC-Meeting-Ends-With-Major-Surprise-Cut-From-Saudi-Arabia.html

After another round of drama and a stalling of the talks on Monday, the Tuesday extension of the OPEC+ meeting concluded at long last with a solution upon which all OPEC+ members agreed.

But it didn’t end the way anyone thought it would.

Tuesday’s meeting saw the groups agree to lift oil production by 75,000 barrels per day over January levels, according to OPEC’s post-meeting press release.

But Saudi Arabia’s late announcement after the meeting sent oil prices soaring—that Saudi Arabia would voluntarily cut an additional 1 million barrels per day in February and March above its current quota—all while OPEC’s allies get to ramp up production.

The OPEC+ agreed not only for the production levels for February but for March as well. March’s production level will see an additional increase of 120,000 barrels per day over February levels, or 195,000 bpd over January levels.

With March’s production quotas already set, the February meeting, therefore, will set production quotas for April.

The previous meeting held in December adjusted the total production cuts to 7.2 million bpd for January, from 7.7 million bpd before.

But with Saudi Arabia’s additional voluntary cuts, February’s total production cuts will be 8.125 million bpd, and March’s will total 8.05 million bpd.

For Saudi Arabia, there are no changes to its official output quota for either February or March. Neither are there changes to the UAE’s quotas or Iraq’s. In fact, for OPEC, there are no changes for February to the individual quotas. All the production increases, therefore, go to the non-OPEC members, not surprisingly to Kazakhstan and Russia.

Russia’s February production quota increase from 9.119 million bpd in January to 9.184 million bpd. For March, Russia’s production quota again increases to 9.249 million bpd.

That the non-OPEC group was the only group afforded increases in production over the next two months, with OPEC, therefore, shouldering more of the burden for the market’s production cuts highlights OPEC’s waning influence in the market as a lone player, and Russia’s growing influence over the oil markets.

Regardless of how the deal shook out between the members, the oil market cheered. Oil prices rallied in the afternoon, with WTI rallying more than 5% and Brent rallying just under 5%.

By Julianne Geiger for Oilprice.com

[Tom Nolan + 2,443]

WTI Extends Gains After Saudis Unexpectedly Slash Production By 1MM B/D

https://www.zerohedge.com/energy/wti-hits-50-opec-agrees-modest-output-increase-russia-kazakhstan

Update (1310ET): In a quite shocking update, the Saudi minister just confirmed the size of their unilateral cuts... and it's a huge surprise.

Saudi Arabia to make voluntary cut of 1 million barrels a day, for February and March, taking its output to 8.1 million barrels a day.

Prince Abdulaziz said of the cut:

“First and foremost, it’s a pre-emptive measure,”

“We do that willingly.”

“We will support the market, we will support the industry,”

As Bloomberg's Julian Lee notes, aside from the one month of June last year, when The Kingdom made a similar voluntary cut of 1 million barrels a day, this will take Saudi Arabia’s production to its lowest level since 2009.

That lifted WTI back above $50...

Russia's Novak called the Saudi decision a "New Year Present."

Amid winks, nods, and rumors, WTI Crude futures have just surged back above $50 for the first time since February after OPEC+ appears to have agreed on a small crude output hike in February.

As Reza Zandi reports, OPEC+ will increase the current level of production by only 75 thousand bpd instead of 500 thousand bpd.

It appears that the increase will apply to Russia (+65k b/d) and Kazakhstan (+10k b/d). That’s half the increase they would have been allowed if the overall target had been raised by 500,000 barrels a day, as the Russians wanted. That would have given Russia an extra 131,000 barrels a day and Kazakhstan 20,000 barrels.

Additionally, delegates claim that the Saudis plan to make voluntary output cuts in February (rumored to be 400k+ b/d), which is quite a shocking signal of The Kingdom's determination to "re-balance" the oil market.

WTI extended its earlier gains on the Saudi surprise, topping $50 briefly...

Bloomberg's Javier Blas reports that Saudi Arabia has not disclosed to other OPEC+ countries the size of its voluntary output cut - and we must emphasize, this is so far an offer. Riyadh has yet to announce it formally.

Saudi Energy Minister Prince Abdulaziz bin Salman may use the OPEC+ press conference to confirm the plan, and disclose the volume.

Bloomberg's Julian Lee raises an important point in noting that this is starting to look like absolute desperation to keep Russia on board with OPEC+ supply management. The increase may be tiny and the duration short, but it sets a terrible precedent, particularly after the public humiliation handed out to the UAE when it over-produced briefly in June.

 

[Tom Nolan + 2,443]

U.S. Oil Executives Cautiously Optimistic About 2021

By Irina Slav - Jan 05, 2021, 7:00 PM CST

https://oilprice.com/Energy/Energy-General/US-Oil-Executives-Cautiously-Optimistic-About-2021.html

The worst seems like it’s over for the U.S. oil industry. Yet executives are entering the new year with cautious optimism, the latest Dallas Fed survey of the industry suggests. Despite an improved outlook for oil and gas in the final quarter of 2020, the biggest portion of respondents in the quarterly survey said they only expected a slight increase in capital spending this year after a disastrous 2020 that saw hefty budget cuts.

The cautiously optimistic executives, however, represented a bit over a third of the total, with 14 percent expecting significant further spending reductions. Interestingly, the same percentage of respondents in the Dallas Fed survey said they expected a substantial increase in spending.

These results suggest mixed sentiment in the industry that only just started getting back on its feet, with the Energy Information Administration’s latest weekly report estimating crude oil production at 11 million bpd, down by about 2 million bpd from pre-pandemic levels.

However, that was to be expected. U.S. oil production fell for three of the four quarters of 2020 in response to oil price movements and only started rebounding in the final quarter of the year. Whether the recovery will continue or slow down remains to be seen and very much depends on how prices move from now on.

The key shale oil industry also presents a mixed picture. Some are pessimistic about its future as most producers cannot break even at current prices. Others are optimistic, and there is even a suggestion among observers that the EIA and the industry itself are deliberately being gloomier than they need to be in order to get OPEC+ to continue its production cuts to keep prices higher.

While these cuts have helped prices, uncertainty remains because it’s not just production that determines where the industry goes but also demand, which is arguably a much more important factor right now. And when it comes to demand, the future remains highly uncertain, as Forbes’ David Blackmon noted in a recent article.

The pandemic is still raging in the United States, vaccinations are going much slower than planned, and this means that the eagerly awaited return to normal, if it ever happens, will happen later than many hoped, including in the oil and gas industry.

As a result, the industry will likely continue to face the same challenges this year that it had to tackle in 2020. Layoffs will continue, the Dallas Fed noted in its survey, although they will slow down if prices stabilize. There could be more bankruptcies, too, after last year saw 40 exploration and production companies fold, with a combined debt of $54 billion.

If prices continue to improve, however, the outlook will change. Yet there is no consensus on prices in the industry: forecasts by Dallas Fed survey respondents vary between $30 and $70 a barrel for West Texas Intermediate. Of course, this may reflect differences in cautiousness, but it is a fact no one really knows where oil prices would go even a month from now, let alone by the end of the year.

The situation for U.S. oil companies, especially smaller independents, remains challenging. With hundreds of thousands of new Covid-19 cases daily, the return to normal is being delayed, and so is the strong recovery of oil demand in the world’s largest consumer. Yet demand is recovering in Asia, and it is recovering strongly, boosting export opportunities.

In the end, it will again be all about costs and competitiveness, just as it was during the last oil industry crisis. U.S. shale pulled it off last time, with significant help from oilfield service providers—and it ended up leading the boom in U.S. oil production that turned the country into the world’s largest producer. This year will offer the first signs of what is to come later and whether the industry would be able to recover as strongly from this crisis.

By Irina Slav for Oilprice.com

[Tom Nolan + 2,443]

Goldman Sachs: Here's What's Behind Saudi's Shocking Production Cut Decision

January 6th

https://oilprice.com/Energy/Crude-Oil/Goldman-Sachs-Heres-Whats-Behind-Saudis-Shocking-Decision-To-Cut-1-Million-B.html

EXCERPTS

...the Saudi decision to cut production by 1 million barrels came as a shock to the market, sending oil sharply higher.

What has behind it? As Goldman's commodity strategist Damien Courvalin explains, despite this bullish supply agreement, Saudi’s decision "likely reflects signs of weakening demand as lockdowns return, with our updated 1Q21 balance actually weaker than previously."

That said, Saudi’s action and the prospect for a tight market in 2Q21, as the rebound in demand stresses the ability to restart production, will likely support prices in coming weeks, leading Goldman to reiterate its bullish oil view. As a result, the bank continues to recommend a long Dec-21 Brent trade (currently trading at $52/bbl vs. its $65/bbl forecast) and expect sustained backwardation and lower implied volatility. Courvalin also notes that "fundamentals do matter, but we see the recent recovery in refining margins and product cracks as premature and the best way to express the expected weakness in near-term oil demand."... [ARTICLE CONTINUES]

[Tom Nolan + 2,443]

Bloomberg - January 6th

Shale Will Need More Than $50 Oil and Saudi Cut to Boom Again

https://finance.yahoo.com/news/shale-more-50-oil-saudi-003953861.html

(Bloomberg) -- Don’t count on America’s shale industry to boom once again in response to $50-a-barrel oil and Saudi Arabia’s plan to throttle back its own oil production.

What in previous years might have triggered a knee-jerk reaction by U.S. oil explorers to raise output and grab market share is, this time around, more just an opportunity for them to pay down debt or boost dividends.

“Our primary priority right now is to reduce debt,” Occidental Petroleum Corp. Chief Executive Officer Vicki Hollub, who heads one of the largest exploration and production operations in Texas’s Permian Basin, said in an interview with Bloomberg TV on Tuesday. “We’re pretty close to the right production profile for $50 a barrel today because what we’re trying to do is just further improve our margins.”

Saudi Arabia’s surprise decision Tuesday to curb output by 1 million barrels a day in February and March caused oil prices in New York to surge above $50 a barrel for the first time since February, before the pandemic sent oil markets crashing and over 40 explorers went bankrupt. Helima Croft, chief commodities strategist at RBC Capital Markets, described the move as an especially sweet gift for U.S. shale drillers.

But even before the pandemic, Wall Street was growing weary of shale, an industry that had burned through billions of dollars in cash while delivering little in the way of returns for investors. So producers are more likely to use the tailwind from Saudi Arabia to pay back investors as opposed to raising output to capitalize on the rally.

To increase production, “shale will need a sustained price of above $50 a barrel for West Texas Intermediate crude, or probably closer to $60,” said Aaron Brady, executive director for IHS Markit.

Plus, it would take at least three months for shale producers to ramp up production, because that would involve decisions on new drilling and getting well-completion crews together, Brady added.

 

[Tom Nolan + 2,443]

How much does today's $50 oil have to do with lowest dollar since 2018 ?

I highly recommend that readers glance over the following THREAD,  It contains some great wisdom and balanced ideas as a forecast.

https://community.oilprice.com/topic/22157-how-much-does-todays-50-oil-have-to-do-with-lowest-dollar-since-2018/

 

[Tom Nolan + 2,443]

Hedge Funds Haven’t Been This Bullish On Oil Since Pandemic Started

By Tsvetana Paraskova - Jan 06, 2021, 3:00 PM CST

https://oilprice.com/Energy/Energy-General/Hedge-Funds-Havent-Been-This-Bullish-On-Oil-Since-Pandemic-Started.html

Money managers started 2021 with optimism that oil prices will benefit from a rise in economic activity as vaccines are being rolled out.  Hedge funds and other portfolio managers held at the end of December 2020 the most bullish overall position in the most traded oil futures and options contracts since the beginning of 2020. Fund managers held an overall net long position—the difference between bullish and bearish bets—of as much as 741 million barrels equivalent of oil in the six most important petroleum contracts as of December 29, according to data from exchanges compiled by Reuters columnist John Kemp.

This net long position was the highest net bullish bet on oil since January 2020, just before prices started crashing as the pandemic roiled oil and all other markets in February, March, and April. 

The bullish positioning of the hedge funds at the start of 2021 was not without reason. The market overall, as well as many analysts, believe that oil will rise this year as global oil demand recoups most (but not all) losses from 2020. Vaccine rollouts are expected to support economic activity and travel later this year, while stimulus packages are set to boost major economies to rebound from last year’s recessions. 

Hedge funds, therefore, started 2021 with a record net long position in all commodities, according to Saxo Bank. 

“Overall, the biggest bets are held in crude oil with the combined 614k lots long in WTI and Brent representing a nominal value of $30 billion,” Ole Hansen, Head of Commodity Strategy at Saxo Bank, said in an analysis of the latest commitment of traders report with data for the week to December 29. 

The net long position in crude oil—one of the two biggest commodity contracts in terms of exposure, together with gold—is still well below its peak at 1.1 million lots held in March 2018, says Hansen. 

Nevertheless, the bullish bets on oil have dramatically increased from the lows in March and April, with most of the long positioning and short-covering taking place at the back end of 2020. Pharmaceutical companies started announcing vaccine candidates in November—vaccine candidates that obtained regulatory approvals within weeks. Vaccinations of front-line workers and vulnerable people began in many countries in weeks as well. The vaccine-led rally in oil had the market and speculators hopeful that with vaccines available in 2021, economies will recover faster, and demand for oil will increase. 

The ratio of bullish to bearish bets on oil, however, has become the highest since January of last year, setting the stage for a pullback in bullish bets in the near term, from a positioning perspective. 

Short-term demand-side prospects for oil are not bullish at all. The UK went this week into its third nationwide lockdown since the pandemic started, with people under stay-at-home order until mid-February except for work that cannot be done from home, essential shopping, or an hour of outdoor exercise. Germany and Italy, two other major economies in Europe, also extended their respective lockdowns. 

However, the supply side of the oil market received on Tuesday a major shot in the arm from Saudi Arabia’s unilateral pledge to cut an additional 1 million bpd from its production in February and March, while Russia was allowed to boost its production by 65,000 bpd in each of the next two months.  

As a result, oil prices shot up early on Wednesday to their highest level since February 2020, with WTI Crude trading above $50 a barrel and Brent Crude above $54. 

The Russian insistence on lifting its production, which it got from the OPEC+ talks even in compromise lower volumes, and the major cut from Saudi Arabia to support prices show how far apart the positions of the two leaders of the OPEC+ alliance have grown. While this growing divergence on supply-fixing policies could mean deeper fractures within the group, it helped to support the oil market. 

“The surprise cut from Saudi Arabia is constructive for oil, as it should ensure that the market continues to draw down inventories over 1Q20, despite worries over demand with a number of new lockdowns or the extension of existing lockdowns announced,” ING strategists Warren Patterson and Wenyu Yao said on Wednesday.  

By Tsvetana Paraskova for Oilprice.com

 

[Tom Nolan + 2,443]

Crude Oil Flow From Saudi Arabia To U.S. Falls To Zero

By Julianne Geiger - Jan 06, 2021, 4:00 PM CST

https://oilprice.com/Energy/Energy-General/Crude-Oil-Flow-From-Saudi-Arabia-To-US-Falls-To-Zero.html

For the first time in 35 years, no oil flowed from Saudi Arabia to the United States last week, according to EIA data, in a show that the United States—at least for now—isn’t as reliant on oil from the Middle East like it used to be.

In October, according to the EIA, the United States imported 8.544 million barrels. In June, that figure was more than 36 million, although that figure was a bit of an anomaly as Saudi Arabia threatened to flood the U.S. market with crude oil. 

In much of the early 2000s, the United States imported more than 45 million barrels of Saudi crude oil on a monthly basis.

Source EIA

And the U.S. imports of crude oil are not just falling from Saudi Arabia. Through October, the United States imported significantly less crude oil from the Persian Gulf region.

In the early 2000s, the United States was importing more than 3 million barrels of crude oil per day from the Persian Gulf region. In October 2020, the United States imported less than a half a million barrels per day—and that figure isn’t an anomaly, it’s a clear trend. The United States is relying less and less on foreign oil, and particularly less and less on oil from the Persian Gulf.

Source: EIA

The data comes just as Saudi Arabia announced a voluntary million-barrel-per-day cut to its oil production as the OPEC+ group sat down to the negotiating table to hatch a plan to react to the oil market and the lack of demand.

It also comes on the same day that Saudi Arabia announced a crude oil price increase for the United States for February by $0Mor.20 per barrel.

By Julianne Geiger for Oilprice.com

[Rob Kramer + 696]

Thanks for all the news in one place. I'm bullish. If nothing else there's a 50$ floor on brent . I'm thinking eia data looking better in 2-4weeks and global data stabilizing vs the increased lockdowns. Saudi are wanting prices stable . Russia wanted shale hurt. Think thats pretty evident . Not that Saudi didn't let a disaster go to waste at covid Russia melt down .

[Tom Nolan + 2,443]

How To Play 2021’s First Oil Rally

By Alex Kimani - Jan 06, 2021, 7:00 PM CST

https://oilprice.com/Energy/Energy-General/How-To-Play-2021s-First-Oil-Rally.html

Oil-and-gas stocks are just coming off one of their most tumultuous years in history. In 2020, the oil and gas sector was hit with a triple-whammy of a senseless price war between two of the largest producers; unprecedented destruction in energy demand and the inexorable march of the clean energy and ESG megatrends. Those factors worked in tandem to condemn the sector to another annus horribilis where it, yet again, emerged as the worst-performing of the U.S.’ 11 market sectors. But the oil and gas sector is once again proving that it might be down but most definitely not out.

The energy sector has lately staged a very impressive rebound, outperforming the S&P 500 after gaining 34% in the space of three months with a large chunk of those gains, ironically, coming after Joe Biden was declared president-elect.

The rally is largely being fueled by growing hopes that we can finally vanquish Covid-19 and return to normal life thanks to the availability of multiple vaccines as well as continuing production discipline by OPEC+.

Opinion on the future of the industry remains divided. On the one hand, the bears and shorts contend that the sector is little more than a value trap that is doomed to come crashing down again as renewables gain the ascendancy. On the opposite side of the spectrum, the bulls and longs counter by pointing out that it might be decades before renewables and EVs can fully challenge the oil and gas hegemony.

The current oil rally certainly is an encouraging indicator, though not necessarily a be-all harbinger. Still, it’s the bulls and the dumpster divers that appear to have the upper hand here.

In its Short-Term Energy Outlook (STEO), the U.S. Energy Information Administration (EIA) has predicted that Brent prices will average $49/b in 2021, up from an average of $43/b in the fourth quarter of 2020. EIA has forecast Brent prices will average $47/b in the first quarter of 2021 and gradually rise to an average of $50/b by the fourth quarter as more people get vaccinated and the economy reopens.

But even EIA might be too conservative, and one Forbes analyst sees Brent averaging $55 in the current year, which would provide a 15% uptick for the entire sector.

If you belong to the bull camp, here are three key ways to play the oil and gas rebound in 2021

Source CNN Money

#1 Undervalued companies with improving fundamentals Oil and gas companies with improving fundamentals, especially those that have pared down their debts or successfully restructured appear to be returning to investors’ good books.

One such company is Antero Resources Corp (NYSE:AR). AR shares are up 134% over the past 12 months and 15% in the first two trading sessions of the new year. Colorado-based Antero Resources is the 3rd largest U.S. natural gas producer, pumping 3.2 bcf/d of natural gas from the Appalachian Basin where it owns 612,000 net acres of oil and gas properties sitting on 18,893 billion cubic feet (535 billion cubic meters) of estimated proved reserves.

The company has been plagued by worries regarding its ballooning debt, which has now reached $6.2B, giving the company a debt-to-equity ratio of 0.95. However, the shares have enjoyed a powerful run after the company managed to clinch an overriding royalty interest transaction with Sixth Street Partners that will pump an additional $402M to its coffers. The deal will allow AR to pay down debt while also retaining the long-term upside of its core acreage position.

About a month ago, JPMorgan upgraded AR to Overweight from Underweight with a $6 price target saying the company is uniquely positioned to take advantage of anticipated declines in U.S. supply for natural gas liquids and robust international demand for liquefied petroleum gases.

JPM also tapped Chevron Corp. (NYSE:CVX), ConocoPhillips (NYSE:COP), Devon Energy Corp. (NYSE:DVN), Diamond Energy Inc. (NASDAQ:FNG), Hess Corp.(NYSE:HES), Cimarex Energy Co. (NYSE:XEC), and Valero Energy Corp. (NYSE:VLO) as being well-positioned to outperform following a decade of lagging the rest of the market.

#2 iShares U.S. Oil & Gas Exploration & Production ETF (IEO)

This is an exchange-traded fund that invests in oil and gas companies specifically focused on exploration and production. ConocoPhillips (NYSE:COP), EOG Resources (NYSE:EOG), Marathon Petroleum (NYSE:MPC), Valero Energy Corporation (NYSE:VAL) and Phillips66 (NYSE:PSX) are among its 10 largest holdings. 

IEO has significantly outperformed its bigger brethren, XOP, over the past three-year and one-year timeframes and also outperformed it during the last big oil rally of 2016-2018. The fund has surged 46% over the past 3 months and 7.3% YTD.

#3 Energy Select Sector SPDR Fund (XLE)

A rising tide lifts all boats, and no boat is bigger than the Energy Select Sector SPDR Fund (XLE).

The XLE is the U.S. energy market closest proxy, with holdings that include virtually all the sector’s heavyweights: ExxonMobil (NYSE:XOM), Chevron (NYSE:CVX), Phillips 66, Schlumberger (NYSE:SLB) etc. 

As big oil stocks go, so goes the XLE, with the fund up 36% over 90 days and 6.7% YTD.

By Alex Kimani for Oilprice.com

 

 

 

 

[Tom Nolan + 2,443]

Pioneer CEO Paints Gloomy Growth Picture For U.S. Shale

By Irina Slav - Jan 07, 2021, 9:00 AM CST

The immediate future of U.S. shale remains bleak despite Saudi Arabia’s pledge to cut an additional 1 million bpd in production to prop up prices.

“I really don’t see much increase in the Permian Basin or the U.S. shale over the next several years,” Scott Sheffield said at an investor webcast this week, as quoted by Bloomberg.

“I never anticipate growing above 5% under any conditions,” Sheffield also said. “Even if oil went to $100 a barrel and the world was short of supply.” The shale major CEO explained this was because the service costs associated with adding more drilling rigs would undermine profit margins.

The news is disheartening as West Texas Intermediate breached $50 a barrel for the first time in almost a year after the largest OPEC oil producer announced its new, unilateral, production cutting plans. At WTI prices of $50 a barrel, more U.S. shale drillers can break even, so it would make sense that the higher price would motivate more drilling, if only so the drillers could continue paying their debts.

However, the oil demand situation remains precarious as the pandemic rages on, and vaccines are being administered a lot more slowly than hoped.

In this context, Pioneer’s Sheffield said he expected total U.S. oil production to remain flat this year, at around 11 million bpd. He also expects more companies to merge.

Pioneer was one of the big—and few—dealmakers of 2020, acquiring Parsley Energy for about $7.6 billion in an all-stock deal that also included Parsley’s debt. The Permian was the hottest spot for deals, with Conoco acquiring another Permian major, Concho Resources and Diamondback buying QEP Resources and Guidon Operating.

According to Sheffield, the Permian will remain a bright spot in the U.S. shale patch despite the flat production outlook. Two others, however, the Bakken in North Dakota and the Eagle Ford in Texas may have plateaued as regards production growth, he said.

By Irina Slav for Oilprice.com

~~~~~~~~~~~~~~~~~~~~~~~~~~~

~~~~~~~~~~~~~~~ Bloomberg article via Yahoo dittos what one of our favorite OILPRICE.COM writers states....

Shale CEO Sees Slow U.S. Oil Output Recovery Despite OPEC Pact

https://finance.yahoo.com/news/shale-ceo-sees-slow-u-211825275.html

 

 

Edited January 7, 2021 by Tom Nolan

[Tom Nolan + 2,443]

The Next 5 Days Could See A Buying Spree In Oil Futures

By Tsvetana Paraskova - Jan 07, 2021, 10:00 AM CST

https://oilprice.com/Energy/Oil-Prices/The-Next-5-Days-Could-See-A-Buying-Spree-In-Oil-Futures.html

The annual five-day rebalancing of portfolios beginning on Friday could attract as much as US$9 billion buying into crude oil contracts, putting upward pressure on oil prices, investment banks and analysts tell Bloomberg.

The rebalancing of indices to adjust the weighting of assets in portfolios is being done every year so that target allocations or risk levels are restored. However, the rebalancing this year could attract more than usual buyers into crude oil contracts because of the 20-percent decline of oil prices during 2020.  

According to estimates from Citigroup, the next five days could see a buying spree in oil futures that could be as high as US$9 billion to adjust the weighting of the major commodity-linked indices.

The market will likely see long positions into another 80 to 100 million barrels equivalent of oil futures contracts, which could drive oil prices by $2-$3 a barrel, Gary Ross, chief executive at Black Gold Investors LLC, told Bloomberg.

It’s not a given that the market will see US$9 billion of new buying into oil futures because some investors and traders may have already done it ahead of the rebalancing period, according to Bloomberg.

Even if the buying spree is not so high, the rebalancing will likely to continue to support oil prices.  

“This buying pressure across the complex should serve as a tailwind and help fortify the improving oil market sentiment,” Helima Croft and Michael Tran, analysts at RBC Capital Markets, say in a note carried by Bloomberg.

The upward pressure on oil is set to build on the rally at the start of 2021 following the OPEC+ decision to hold off on another 500,000 bpd increase in production from February and the surprise announcement from Saudi Arabia, which unilaterally pledged to cut an additional 1 million bpd from its production in February and March. WTI Crude prices topped $50 a barrel on Tuesday, for the first time since the end of February 2020.   

By Tsvetana Paraskova for Oilprice.com

 

[Tomasz + 1,608]

32 million barrel draw of global onshore oil inventories this week. Massive.

 

[Rob Kramer + 696]

I love the title of this thread ! Lol please keep it alive TOM 😃 🤣 the authors have to check in I've noticed the bears vanish. 60$ oil and rising price claims abound now when 45$ oil was supposed rule 2021 . I'm actually less bullish of my 100$ oil in 2021 than I was half a year ago 😅. And my 60$ brent year end wasn't terrible. But I did revise it to tax time late in the year. 

My nat gas prediction got dominated . Although US is using average gas during a warmer than norm winter. I have no gas holdings and have grown tired of production being so resilient makes a long position less fruitful. I'd be curious after winter even with a better winter that had prices rise (vs today) . Canadian LNG play tou or bir. Oil investing outshines gas for me .

Edited January 7, 2021 by Rob Kramer

[Tom Nolan + 2,443]

The Real Crisis For Oil Is Yet To Come

By Felicity Bradstock - Jan 07, 2021, 2:00 PM CST

https://oilprice.com/Energy/Crude-Oil/The-Real-Crisis-For-Oil-Is-Yet-To-Come.html

Italian energy major, Eni, described 2020 as a “year of war”, regarding the energy crisis experienced in the face of a global pandemic. But it may be too soon to see the issues faced last year as a thing of the past.  Eni is committing to lower the price of oil at which the company breaks even going into 2021, as a means of tackling the uncertainty of the oil economy in the coming months. Francesco Gattei, CFO at Eni, stated that “Volatility is growing every year.”, highlighting the need to be prepared for the energy demand of the future. 

In 2020, global fuel demand decreased by 30% on average. While demand appears to be steadily increasing as Covid-19 restrictions are relaxed, the worry is that this need may not increase to pre-pandemic levels anytime soon.  

Oil giants BP Plc and Total SE published forecasts which hypothesized that oil demand was at its peak in 2019, and is therefore now in decline. This comes as the production of oil and liquid fuels at the global level peaked at 94.25 million bpd in 2020, down from 100.61 million bpd in 2019. According to the Energy Information Administration, this figure is expected to increase to just 97.42 million bpd in 2021. 

2020 therefore proved the perfect time for environmentalists to campaign for a shift towards renewables; as oil demand and prices plummeted in April last year. As dozens of countries agreed to Paris Agreement objectives in December, with such promises as net-zero emissions over the next 30 years, many governments and investors have also put pressure on energy companies to develop renewable strategies. 

The decrease in oil demand over the last year has already forced refineries in Asia and North America to close or curb output, particularly along the U.S. Gulf Coast as companies worry demand losses might never return. 

In the USA, these closures include the largest Royal Dutch Shell refinery in Convent, Louisiana, as well as Marathon Petroleum’s refineries in Martinez, California, and Gallup, New Mexico. Japan, Singapore, The Philippines, Australia and New Zealand also all experienced refinery closures during 2020. The question is whether plants across Europe can weather the storm long enough to see a demand increase.

The international oil benchmark, Brent Crude, finally reached $50 a barrel this month, following months of volatility. However, Gattei at Eni suggests the need to drive company costs down so that the price at which they break even is lower than this, as a means of defence following such a difficult year for the industry. 

As OPEC+ agree to increase production levels by 75,000 bpd in February, with Saudi Arabia voluntarily decreasing production by 1 million bpd in February and March sends prices soaring, investors must weigh up whether to continue investing in oil or move to alternatives; faced with the potential volatility in demand over the next months and uncertainty over future OPEC agreements. 

While energy companies have worked hard to remain relatively stable throughout 2020, the potential impact of a low energy demand and price volatility in 2021 could be a push too far. As governments and funders encourage greater investment in renewables and there continues to be uncertainty around the oil outlook for 2021, the question is whether oil majors can survive another turbulent year. 

By Felicity Bradstock for Oilprice.com

[Tom Nolan + 2,443]

1 hour ago, Rob Kramer said:

I love the title of this thread ! Lol please keep it alive TOM 😃 🤣 the authors have to check in I've noticed the bears vanish. 60$ oil and rising price claims abound now when 45$ oil was supposed rule 2021 . I'm actually less bullish of my 100$ oil in 2021 than I was half a year ago 😅. And my 60$ brent year end wasn't terrible. But I did revise it to tax time late in the year. 

My nat gas prediction got dominated . Although US is using average gas during a warmer than norm winter. I have no gas holdings and have grown tired of production being so resilient makes a long position less fruitful. I'd be curious after winter even with a better winter that had prices rise (vs today) . Canadian LNG play tou or bir. Oil investing outshines gas for me .

Damn!  That was a pretty good call on Brent by year end.  It sure looks like we are headed that way.

I'm watching the Natural Gas closely.  Prices have gotten beaten down hard on some long trends.  And then there seems to be some market manipulation which doesn't match fundamentals.   Anyway, I'm watching stockpiles/production to get an idea of where longterm trends will go.  Climate-wise...On a decade trend, our planet is in a solar minimum phase, so as a general trend we should expect a cooler climate pattern (although we may have some odd weather patterns).  As oil prices rise and production grows, I expect natural gas production to be on its heels.

I own a bunch of Oklahoma mineral rights.  The easy oil is pretty well played out, but gas is there.  I'm hopeful for the coming year trend.

[Tom Nolan + 2,443]

Visualizing US Oil & Gas Production (Through September 2020)

shaleprofile Yesterday at 08:29 AM in Oil (General)

https://community.oilprice.com/topic/22228-visualizing-us-oil-gas-production-through-september-2020/

 

[Tomasz + 1,608]

MacroVoices Podcast: WTI will increase to $65 in 2021

Special Guest- Art Berman

http://mp3.macrovoices.com/mvmp3player.php?mp3=https://mcdn.podbean.com/mf/download/yj39sq/MacroVoices-2021-01-07-Art-Berman.mp3

Art Berman generally says in this interview that US comperative crude oil stocks are relatively declining at a rate of 5 million barrels per week from Q2 2020 and should reach the 5-year average level for both US and OECD stocks within 6 weeks.

In his opinion, this year's trend will be a decline in oil production, especially in the US shale, which will exceed the demand projections which will be lower than expected. In a word, one should look more at the falling oil production, especially in the US, which will have a greater impact than the demand for crude oil.

You should not miss also his Slide Deck https://www.artberman.com/wp-content/uploads/2021/01/MACROVOICES-JAN-7-2021.pdf

 

I do not mean to promote this expert, but as always, a very interesting recording with his participation, so I think that it is worth getting acquainted with him, that's why I put information about the interview in this thread

Edited January 9, 2021 by Tomasz

[Tom Nolan + 2,443]

41 minutes ago, Tomasz said:

Art Berman generally says in this interview that US comperative crude oil stocks are relatively declining at a rate of 5 million barrels per week from Q2 2020 and should reach the 5-year average level for both US and OECD stocks within 6 weeks.

In his opinion, this year's trend will be a decline in oil production, especially in the US shale, which will exceed the demand projections which will be lower than expected. In a word, one should look more at the falling oil production, especially in the US, which will have a greater impact than the demand for crude oil.

Thanks Tomaz!   Art Berman has been around a long time in the industry.  I appreciate that you summarized aspects of the recording.

[Tom Nolan + 2,443]

Oil Rally Continues Despite Slow Vaccine Rollout

By Julianne Geiger - Jan 08, 2021, 11:00 AM CST

Crude oil prices continued their climb on Friday, poised for a weekly gain of more than 6% as Saudi Arabia took decisive action to voluntarily—and singlehandedly—curb production by an additional million dollars per barrel in hopes of stabilizing the oil markets.

WTI closed out last week at $48.52 per barrel. This week, WTI crude is up 1.38% on the day at $51.55 per barrel—a gain of $3 or more than 6% since last Friday.

Brent crude closed out last week at $51.80 per barrel. This week, Brent is up 1.80% on the day at $55.36 per barrel—a gain of more than $3.50 on the week or nearly 7% since last Friday.

Typically, these OPEC shockers, while meaningful, fail to bolster prices for more than a day, particularly given the striking demand destruction courtesy of the pandemic and the associated lockdowns and travel restrictions. But Saudi Arabia, desperate for Saudi Aramco’s revenues, went beyond what the market had anticipated.

In addition to Saudi Arabia’s extra production cuts, U.S. Democrats gained an advantage in the Senate this week after a hard-fought race in Georgia gave two more seats to their party. This shift of power likely means, according to analysts, that President Donald Trump’s call for $2,000 stimulus payments—as opposed to the $600 that is currently being issued—will become a reality, and soon. The hope is that this round of stimulus payments will increase activity and therefore, increase oil demand.

Meanwhile, the vaccine rollout continues to have some effect on oil prices, but the rollout is slower than many had estimated, and it is unlikely that the vaccine will have any meaningful effect on oil demand until the third or fourth quarter of this year.

By Julianne Geiger for Oilprice.com

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Tom Nolan's comment - Worth noting the PURPLE $2000 checks.

There might be the possibility that the Democratic push towards the $2,000 stimulus was bait in order to help swing the Georgia runoff and to "buy votes".   Because after the Georgia election, (article QUOTE) "Sen. Joe Manchin III (D-W.Va.) said he would “absolutely not” support a new round of checks."

Article here...

Stocks Rebound After Manchin Walks Back Refusal To Support Biden $2,000 Stimulus Plan

https://www.zerohedge.com/markets/stimulus-shock-democratic-senator-manchin-will-absolutely-not-support-biden-2000-stimulus

 

[Tom Nolan + 2,443]

Oil, Gas Rigs Increase For Seventh Straight Week

By Julianne Geiger - Jan 08, 2021, 12:17 PM CST

https://oilprice.com/Energy/Energy-General/Oil-Gas-Rigs-Increase-For-Seventh-Straight-Week.html

Baker Hughes reported on Friday that the number of oil and gas rigs in the United States rose by 9 to 360.

The oil and gas rig count has risen for seven weeks in a row for a total gain of 50.

The oil rig count increased by 8 this week, while the number of gas rigs increased by 1. The number of miscellaneous rigs was also unchanged.

Total oil and gas rigs in the United States are now down by 421 compared to this time last year.

The EIA’s estimate for oil production in the United States stayed the same during the week ending January 1, at 11.0 million barrels of oil per day for the fourth week in a row, 2.1 million bpd off the all-time high reached earlier this year.

Canada’s overall rig count increased this week, by 58. Oil and gas rigs in Canada are now at 117 active rigs, and down 86 year on year. 

The Permian basin saw an increase in the number of rigs by 4 this week, bringing the total active rigs in the Permian to 179, or 218 below this time last year.

Check back here later for an exclusive early peek at the Frac Spread by Primary Vision.

WTI and Brent were both trading up on Friday despite increased coronavirus-related lockdowns after Saudi Arabia announced earlier in the week that it would curb its own oil production by an extra 1 million barrels per day for the next two months on a voluntary basis.  

At 1:14 p.m. EDT, WTI was trading up 1.91% on the day at $51.80, up more than $3 on the week, while Brent was trading up 2.21% on the day, at $55.58, also up more than $3 for the week.

By Julianne Geiger for Oilprice.com

[Tom Nolan + 2,443]

Asian Buyers Rush To Secure North Sea Oil After Saudi Surprise Cut

By Tsvetana Paraskova - Jan 08, 2021, 1:00 PM CST

Saudi Arabia’s surprise announcement that it would cut 1 million barrels per day (bpd) beyond its share of OPEC+ cuts in February and March has refiners in Asia scrambling to secure supplies from Europe, with record purchases of North Sea cargoes in one day.   

Saudi Arabia caught the market by surprise earlier this week when it said after the end of the OPEC+ ministerial meeting that it would unilaterally cut 1 million bpd off its crude oil production for the next two months.

While the Saudi move has been supporting oil prices all week, the tightening supplies out of the world’s top oil exporter have apparently upended the plans of Asian oil buyers.

A day later, the Saudis also raised the official selling prices (OSPs) of their oil for Asia for February, lifting the price of the flagship Arab Light grade by $0.70 a barrel to a premium of $1 per barrel against the Middle East benchmark, the Oman/Dubai average.  

The major cut and the higher prices from the Kingdom have prompted Asian refiners to source oil from elsewhere, and North Sea cargoes seem to have benefited from the Saudi production cut.  

According to Reuters, seven crude oil cargoes from the North Sea were bought and sold during a trading window on Thursday alone, and this, according to an oil trading source, was a daily record for North Sea cargoes traded in one day in recent history. Typically, one or two cargoes of 600,000 barrels of crude each are being traded on a normal day in normal circumstances, according to Reuters.

Four of the seven North Sea cargoes on Thursday were acquired by China’s Unipec, the trading arm of the largest oil refiner in Asia, Sinopec, trade sources told Reuters.

According to Bloomberg, crude outside the North Sea is also in demand in Asia, such as the CPC blend of Kazakhstan.

By Tsvetana Paraskova for Oilprice.com

 

[Tom Nolan + 2,443]

Oil Bulls Are Back

By Tom Kool - Jan 08, 2021, 2:00 PM CST  - Friday

https://oilprice.com/Energy/Energy-General/Oil-Bulls-Are-Back.html

The surprise cuts by Saudi Arabia following the OPEC+ meeting have provided oil bulls with a major boost, sending Brent above $55.

For Global Energy Alert members there are now two new free reports available in your dashboard. The first of these reports is on how to interpret stock charts and the second outlines the three biggest mistakes made by traders today. Make sure you become a member to read these reports and many more.

Friday, January 8th, 2021

Brent topped $55 per barrel at the end of the week, as the pledge from Saudi Arabia to cut deeper has built a solid rally. Other forces are at play as well, including monetary stimulus, the prospects of deeper fiscal stimulus in the U.S., and vaccine optimism. “The past 10 weeks of trading have seen only one weekly decline, which was comparatively small,” said Carsten Fritsch, an analyst at Commerzbank AG. “This is testimony to the strength of the oil market in the last 2 1/2 months.”

Cold winter rallies coal and gas. Thermal coal prices in China are shooting up, and JKM prices for LNG are skyrocketing. Spot prices for liquefied natural gas (LNG) delivery in Asia jumped to a six-year high. A cold winter across the northern hemisphere is contributing to price gains. Javier Blas of Bloomberg notes that at least one LNG spot cargo was sold for $33-$36/MMBtu, which would be a historically high price.

3 reasons to go all-in on lithium. Shares of major lithium producers and explorers, including Sociedad Quimica y Minera de Chile (NYSE:SQM), Albemarle Corp. (NYSE:ALB), and Orocobre Ltd (ASX:ORE) received a major hammering after Morgan Stanley forecast that Chilean low-cost brine producers could add as much as 200kt per year by 2025, while the expansion of China's and Australia's hard-rock mines could pump in another half a million metric tonnes over the timeframe. But there are three main reasons to go all-in on lithium.

U.S. LNG exports hit record high in December. U.S. LNG exports set a new record in December after a record-breaking November 2020, averaging 9.8 billion cubic feet per day (Bcf/d).

Pioneer paints gloomy outlook for shale. The immediate future of U.S. shale remains bleak despite Saudi Arabia’s pledge to cut an additional 1 million bpd in production to prop up prices. “I really don’t see much increase in the Permian Basin or the U.S. shale over the next several years,” Scott Sheffield of Pioneer Natural Resources (NYSE: PXD) said this week. I never anticipate growing above 5% under any conditions…Even if oil went to $100 a barrel and the world was short of supply.”

Shale pledges restraint. Devon Energy (NYSE: DVN) said that it won’t start drilling aggressively even with higher oil prices. “I have a hard time seeing the need for U.S. producers over the next several years to get back to double-digit growth,” new CEO Rick Muncrief told Bloomberg. “For this management team, if we really think about 2021, let’s keep it flat.”

2020 tied for warmest year on record, disaster costs double. 2020 was tied with 2016 for the warmest year on record, according to new data. The costs from natural disasters in the U.S. topped $95 billion last year, double the costs from the year before. 

Musk becomes world’s richest person. Elon Musk overtook Jeff Bezos to become the richest person in the world, driven by the wild surge in the stock price of Tesla (NASDAQ: TSLA). Musk’s net worth is estimated at $195 billion. 

Saudi Arabia looks to build bridges with Biden. Saudi Crown Prince Mohammed bin Salman called off a multi-year blockade of Qatar this week, and it also said it would voluntarily cut 1 mb/d of oil production. The new tone, some analysts say, is at least in part aimed at currying goodwill with the incoming Biden administration. 

Exxon releases GHG data for first time. ExxonMobil (NYSE: XOM) has disclosed emissions data for its Scope 3 emissions – those burned by end-users – for the first time. Exxon’s sales in 2019 were equivalent to 730 million metric tons of carbon dioxide, roughly the same amount as the entire country of Canada. It is also the highest of all the western oil majors. 

ANWR sale an “epic failure.” The highly-anticipated first lease sale in the Arctic National Wildlife Refuge (ANWR) was a major bust. Only 50% of the acreage on offer received bids, and the sale only generated $14 million in sales, a fraction forecasted in recent years. To make matters worse, the state of Alaska was the main player in the successful bids, and only two small private companies – Knik Arm Services LLC and Regenerate Alaska Inc. – obtained tracts. Environmental groups called the sale an “epic failure.”

Banks criticize rule forcing lending. Wall Street banks blasted a proposed rule by the Trump administration that would force them to lend to energy and firearms firms.

Rivian near $25 billion valuation. Rivian Automotive Inc., the electric-truck startup backed by Amazon.com Inc. and Ford Motor Co., is close to raising a new round of funding valuing it at about $25 billion.

Biden aims to build an international coalition to counter China. In a departure from the Trump administration’s go-it-alone approach, the Biden administration will aim to build an international coalition to confront China on multiple fronts, including trade, according to the WSJ.

Canada’s oil sands grows. Canada’s oil sands production hit a record high in November at 3.16 mb/d.

Norway’s EVs reach 54%. EV sales in Norway achieved a 54% market share in 2020, overtaking gasoline and diesel vehicles for the first time. 

Georgia Senate races open up more aggressive Biden plans. The twin wins in Georgia by two Democrats flipped control of the Senate. That opens up a lot more possibilities for the Biden administration on a range of energy and climate initiatives. S&P Global Platts gives a rundown.

Army Corps finalizes pipeline permitting program. The Army Corps of Engineers finalized its Nationwide Permit Program (NWP), a technically complex program that allows for quick permitting for pipelines. However, the Biden administration could suspend the program.

By Tom Kool for Oilprice.com