“Cushing Oil Inventories Are Soaring Again” By Tsvetana Paraskova

[Tom Nolan + 2,443]

The Pandemic Could Lead To A Major Oil Supply Crunch

By Tsvetana Paraskova - Jan 13, 2021, 6:30 PM CST

https://oilprice.com/Energy/Crude-Oil/The-Pandemic-Could-Lead-To-A-Major-Oil-Supply-Crunch.html

It may be counterintuitive to say that the oil demand crash and the resulting glut in 2020 could lead to an oil supply crunch in just a few years.

Yet, a growing number of experts and international agencies warn that the world could be headed for an oil shortage when oil demand finally recovers from the COVID-inflicted crisis in late 2022 or 2023.   

Last year, the pandemic slashed global oil demand, which is not expected to return to pre-crisis levels for at least another year and a half. But the coronavirus also accelerated a structural decline in upstream oil investments as all E&P firms. Oil supermajors, U.S. shale producers, and national oil companies alike slashed capital expenditures in the wake of the price crash.

Investments in new oil supply have now slumped to a more-than-a-decade low. If the industry doesn’t raise upstream investments in coming years, the oil market could be headed to a supply crunch after oil global demand recovers, analysts and forecasters warn.

Upstream Investment At Multi-Year Lows

Investments in new oil supply have never been able to achieve the highs seen in 2014, just before the previous oil crisis of 2015-2016 pushed the oil industry to reassess the way it spends on big projects.

But 2020 investments hit a new low.

The International Energy Agency (IEA) expected that global investment in upstream oil and gas to crash 32 percent year over year to US$328 billion in 2020, after three consecutive years of investment growth. The expected rate of decline in 2020 investment was larger than the 25-26 percent decline in the 2015-2016 period, while the value of 2020 investments was down by around 60 percent from the peak of US$779 billion in 2014. The decline in investment in 2020 already takes an estimated 2.1 million barrels per day (bpd) away from anticipated oil supply in 2025, the IEA said. The IEA also warned that if investments were to stay at the 2020 levels over the next five years, it would reduce the previously expected level of oil supply in 2025 by nearly 9 million bpd.

This year, global upstream investment will stay low, just like they were in 2020, Wood Mackenzie said last month, expecting upstream oil and gas investment at a 15-year low of just US$300 billion, down by 30 percent from the pre-crisis level of investment in 2019. “The world may be sleepwalking into a supply crunch, albeit beyond 2021. A recovery in oil demand back to over 100 million b/d by late 2022 increases risk of a material supply gap later this decade, triggering an upward spike in price,” says Simon Flowers, Chairman and Chief Analyst at WoodMac.

Oil Deficit In 2021

This year, especially in H2, could see monthly oil supply deficits at their highest level in years, according to a December analysis of Rystad Energy. According to the consultancy, the current lockdowns were set to create a surplus of 500,000 bpd in February, 1.4 million bpd in March, and a minor surplus in April, after which the market is expected to recover.

This forecast was published before Saudi Arabia surprised the market last week by saying it would cut another 1 million bpd beyond its OPEC+ quota in the next two months, when demand is expected to be at its weakest this year with lockdowns across Europe and a slow start to the vaccine rollout.

More acute deficits later this year could keep oil prices high enough to warrant more U.S. oil production than the currently expected level of around 11 million bpd. 

“As we have warned our clients before, shale is a monster that can slowdown, but cannot kill,” Bjornar Tonhaugen, Head of Oil Markets at Rystad Energy, said last month.

Oil Supply Amid Peak Demand

U.S. shale is a fast-return investment. But if the world wants to avoid a supply crunch, more investments will be necessary in conventional oil projects which, unlike shale, can pump oil for decades to come.

Analysts say that a lasting change of oil consumption after the pandemic and the energy transition will accelerate the peak oil demand timeline—the day after which global oil demand will stop growing.

Even if we have already hit peak oil demand—which most analysts now peg at around 2030 or a bit sooner—the world will continue to need oil.

“Peaking of oil demand does not mean the end of oil. Oil will be around for a very, very long time,” BP’s chief executive Bernard Looney said last October, even as the company he leads has pledged to reduce its oil production within a decade.

With many maturing oilfields around the world, new supply will be needed just to keep the current rate of production. Part of that supply could come from U.S. shale, oil prices permitting, but another part is set to come from conventional oil developments.  

If the upstream capex crunch of 2020 persists for a few more years, the oil market could be sleepwalking into a supply crunch and a price spike in the mid-2020s.  

By Tsvetana Paraskova for Oilprice.com

 

[Rob Kramer + 696]

Not sleepwalking into it "EV daydreaming it doesn't exist "

[Tom Nolan + 2,443]

6 minutes ago, Rob Kramer said:

Not sleepwalking into it "EV daydreaming it doesn't exist "

I'm wondering if shale will get a shot in the arm when things pick up during coming future supply crunch.

[Tom Nolan + 2,443]

Shale Giant Chesapeake Emerges From Bankruptcy

By Irina Slav - Jan 14, 2021, 9:00 AM CST - 

https://oilprice.com/Energy/Energy-General/Shale-Giant-Chesapeake-Emerges-From-Bankruptcy.html

Irina writes about oil, gas, and all things energy. Her stories have appeared in Oilprice.com, Seeking Alpha, Business Insider, and Fortune.

Chesapeake Energy has emerged from bankruptcy proceedings after a judge approved its Chapter 11 restructuring plan, Reuters has reported, noting the company will be worth $5.13 billion now, thanks to the rebound in oil prices.

Chesapeake filed for bankruptcy protection last June, with a debt load of $9 billion amid a slump in oil prices and oil demand. It said at the time it had already secured close to $1 billion in debtor-in-possession financing that a court first had to approve before the company can use it. Chesapeake also said some of its creditors have agreed to a $2.5-billion exit financing package, made up of a revolving credit facility and a term loan.

This was not the first time Chesapeake has had dramatic troubles. During the last crisis, between 2014 and 2016, Chesapeake risked bankruptcy but managed to avoid court proceedings through a series of out-of-court debt exchanges. 

Now, following the proceedings, the company's debt has been reduced by $7 billion as part of the restructuring plan, and the company has secured new financing of $3 billion.

Some creditors of Chesapeake criticized the restructuring plan, with some accusing the company of being bankrupt already, even before the crisis. They also spoke against what they saw as the company favoring some creditors over others with the returns promised after the restructuring, which vary from 130 percent to just 4 percent for unsecured lenders.

Chesapeake was among the bigger victims of the latest oil prices crisis, which saw more than 40 oil producers in the United States file for bankruptcy last year. Their cumulative debt stood at $28 billion—far higher than any other industry's cumulative debt.

As a result of this wave of bankruptcies, crude oil production has fallen, Rystad Energy wrote last month, noting that the bankruptcy proceedings will cost companies involved in them a quarter of their production, or about 200,000 bpd.

By Irina Slav for Oilprice.com

Edited January 14, 2021 by Tom Nolan

[Rob Kramer + 696]

44 minutes ago, Tom Nolan said:

I'm wondering if shale will get a shot in the arm when things pick up during coming future supply crunch.

Not this year but very likley the next. They have the production per foot high enough so just need the total well count per year and that will come after lowered debt and higher sales prices. People always follow money. I'd assume 2022 they can add 1M b/d (if prices are where I hope they are) mabey the teir 1 will be used up tho who knows. 

[Gerry Maddoux + 3,627]

Boy, the story about Chesapeake brings back lots of memories, mostly good. In the early nineties, the United States was once again freaking out about the concept of running out of natural gas, which would freeze millions of people in the frigid Northeast. A savvy fellow by the name of Charif Souki convinced Blackstone to loan him a ton of money to build a liquified natural gas importation terminal on the Gulf Coast. That was Cheniere Energy. It took forever to build the terminal--the concept of LNG transport was brand-new and this would be the first. 

In the meantime, an old fellow named George Mitchell drilled a horizontal well into the Barnett Shale, performed a primitive frack job, and hit a lot of natural gas. Aubrey McClendon and Tom Ward studied this concept and were off to the races with their own new company, named Chesapeake. They began in the far west reaches of the pan of Oklahoma, in what used to be Oklahoma Territory. Geronimo was buried nearby, in Lawton. The area was part of the Granite Wash. There was a lot of natural gas in the Granite Wash but it paled beside the Haynesville Shale--that's where Aubrey met his Waterloo.

By the time Souki had his import terminal almost ready, it was 100% obsolete--the USA was once again awash in natural gas. Souki was near destitute, Cheniere had become a black hole, and Blackstone had had enough. It was apparently Aubrey who called Souki and suggested that he "turn it around," making the importation terminal an exportation facility instead. Souki, the silver-tongued devil, was able to raise enough cash to build an LNG train, Cheniere was off to the races, and poor Aubrey was on his way to personal ruin. 

Aubrey's great thirst for risk put him on a collision course with an inevitable copy-cat fracking boom. He had carved out a volumetric portion of each Haynesville well for himself, and each one was a gusher, but since he had to pay his share of expenses, as the price of NG fell, he soon found himself in a bad situation . . . made worse by the fact that he always levered everything. Soon it became obvious that when you fracked for gas you hit oil in some but not all shale basins. The Haynesville Shale was a natural gas monster, but oil, not so much. All at once, we were in one of the biggest oil and gas booms in history and Aubrey--along with Chesapeake--was on the wrong side of things. The rest is history that I'd rather not go into. 

Me? I'm pulling for Chesapeake. They drilled some early wells in Western Oklahoma that are still productive. They did that by drilling where most others wouldn't go: into the Hogshooter Formation. About 400-million years ago this was an ocean. Then as the ocean floor crust moved, the upheaval turned thick layers of red granite on their sides, creating irregular, trapezoidal oil and gas traps. Computer-driven geo-steering these days would be a piece of cake, but it was no piece of cake back then--it was hit or miss and if you hit you hit it big and if you missed it was to flush $10M into tombstone rock. 

Chesapeake should be given a second-chance. They helped make America energy-independent. Aubrey McClendon was one of those guys, a risk-taker extraordinaire, and his partner Tom Ward--the one always kicked out with a Golden Parachute--held him down. Together they were an unstoppable force. Alone, poor Aubrey had no one to steady him. If he had lived, he could have directed his gas to the Sabine Pass LNG train, and on to points around the globe. Chesapeake still has great holdings, but it will be an uphill battle with this Green New Deal coming like a freight-train. 

Despite all the trash-talk about shale oil and fracking and greenhouse gases, I can't help but wonder where we'd all be if George Mitchell hadn't been quirky enough to try horizontal drilling along with fracking. And if Aubrey and Tom hadn't studied it. It's a bit like the old story every father tells his son about the turtle atop the corner-post: "I don't know how he got there but I can guarantee he didn't do it on his own." It's pretty easy now to trash-talk Chesapeake, but were it not for this completely beleaguered company, America would still be importing most of its oil and the Cheniere importation terminal would be growing like a weed.  

[Tom Nolan + 2,443]

Chesapeake - Aubrey McClendon - A Conspiracy Theory on his death.

Tom Nolan here:  The above article by Irina Slav about Chesapeake brings up a "Theory" (and that is what it is...a hypothesis, a speculation) about Aubrey McClendon's death.  A Conspiracy Theory.   I remember the day of his death and watching the headlines as they developed, then following the notes of different people reporting about it, and different people's "conspiracy theories".  I will relay some of the notations for those interested.

THE CONSPIRACY THEORY basics  - The basic premise is that Aubrey's SUV was "hacked" electronically.  With the sudden (unexpected) indictment, he might turn state's evidence against co-conspirator's of his criminal activity and rat them out.  Any very rich fellow could hire someone to hack his car and take out Aubrey.

Hacking cars was well known during this era to anyone who stays informed.  The technology was easy to come by.  Even years prior, DARPA talked about it.  You can search videos on YouTube to see how a hacked car can "be driven".  A few examples:

Crashes of Convenience: Michael Hastings

Richard Clarke: Car Hacking Possible In Crash That Killed Michael Hastings

DARPA Talks about hacking cars

Car Hacker's Handbook - http://opengarages.org/handbook/

3 minute News Report of Aubrey's March 2016 crash

Indicted Ex-Chesapeake CEO McClendon Dies in Car Crash

Some people believe that Aubrey McClendon was the victim of a remote controlled automobile murder on March 2, 2016.   There is big money in white collar crime.   Hacking a car in order to commit a murder could be a relatively simple way to do it.  The car goes into flames.  Digital ‘fingerprints’ get fried.   And if any digital forensics did suggest a murder, it would be difficult to find proof of the culprit.

About the autopsy.

http://www.chicagotribune.com/business/ct-aubrey-mcclendon-death-investigation-20160608-story.html

EXCERPT

- A report on the crash in March showed that McClendon, made no serious attempt to slow his SUV as it veered across the road and smashed into a concrete wall at 78 miles per hour, bursting into flames and killing him. The SUV crossed the road’s center line 189 feet before hitting the wall, maintaining a speed of 88 miles per hour even as he lightly tapped the brakes several times. It slowed upon impact, possibly because it hit softer ground after leaving the roadway, the police said.

Following the indictment, there were probably others involved who wouldn’t want Aubrey to talk. And, of course, there is lots of money involved.

 For example: A second “alleged” co-conspirator, ex-partner Tom Ward.

  Listen to this video when Ward is confronted…

https://finance.yahoo.com/news/oil-prices-rise-not-us-203908039.html#

https://gomarcellusshale.com/forum/topics/aubre-mcclendon-killed?page=5

  Capt.  Paco Balderrama says police are still investigating the crash, but added that he was traveling at a “high rate of speed,” well over the posted speed limit.

  Balderrama says McClendon died instantly from the crash. After that, the 2013 Chevy Tahoe caught fire.

“He pretty much drove straight into the wall,” Balderrama said. “The information out there at the scene is that he went left of center, went through a grassy area right before colliding into the embankment. There was plenty of opportunity for him to correct and get back on the roadway and that didn’t occur.”

https://www.intellihub.com/chesapeake-founder-aubrey-mcclendon-dies-in-car-crash-one-day-after-federal-indictment/

“The charge that has been filed against me today is wrong and unprecedented. I have been singled out as the only person in the oil and gas industry in over 110 years since the Sherman Act became law to have been accused of this crime in relation to joint bidding on leasehold.  Anyone who knows me, my business record and the industry in which I have worked for 35 years, knows that I could not be guilty of violating any antitrust laws.  All my life I have worked to create jobs in Oklahoma, grow its economy, and to provide abundant and affordable energy to all Americans. I am proud of my track record in this industry, and I will fight to prove my innocence and to clear my name.” – Aubrey McClendon

Aubrey McClendon – Official Police Announcement on FACEBOOK

  https://www.facebook.com/okcpd/videos/vb.65444419168/10153987261814169/?type=2&theater

 If you read the Facebook comments, you will notice that many of his close associates do not think this was a suicide.

There are other videos out there that substantiate that he was not stressed enough to do a “suicide car crash”, despite his indictment.

– Record Stock Volume – cui bono?

  This stock analyst and trader points out the incredible movement of Chesapeake Energy Corp stock price following Aubrey’s death, and those major institutional investors who benefited.

  YouTube – https://www.youtube.com/watch?v=Y8P5gZ43zd0

https://www.duluthnewstribune.com/news/3985912-final-days-and-deals-aubrey-mcclendon

 

…Dispatchers took the first in a series of emergency calls at 9:12 a.m.

   “It looks like a Tahoe and it looks pretty rough...”

   “The cab is completely crushed...”

  “That vehicle just exploded….”

…Tom Price, who worked for McClendon for more than 20 years, described him as “the toughest guy I ever met. The notion that Aubrey in any way, shape or form (might) bring his life to an end voluntarily is insane.”…

  …Some energy executives who did business with McClendon say they are puzzled by the charge that he conspired to suppress land prices. Brandt Temple, CEO of Sunrise Exploration in New Orleans, is one of them. Temple was negotiating a deal with McClendon that was supposed to close the day of the deadly crash.

 

“What he was indicted for, which is keeping prices down, that’s typically never what he did,” Temple said. “With my experience with Aubrey…, he was doing it the other way,” paying as much as $1,000 per acre for land others valued at $300.

 

Temple’s view was echoed by others in the industry…

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

But the indictment caught McClendon off guard, according to people familiar with the matter.

His legal team had met with senior Justice Department prosecutors three times in late 2015 to try to persuade them not to indict McClendon, a person familiar with the matter said. McClendon had been expecting a response; instead, he was indicted without warning, the person said.

Reflecting the gravity of the probe, last fall McClendon hired famed trial attorney Abbe Lowell, who has represented politicians, lobbyists and entertainers in trouble. Among his past clients: former U.S. presidential candidate John Edwards and rap star Sean “Diddy” Combs. Lowell was chief counsel for the defense during President Bill Clinton’s impeachment trial in the U.S. Senate.

In December, McClendon’s lawyers gave a PowerPoint presentation to Assistant Attorney General Bill Baer at the Justice Department in Washington, two people familiar with the matter said.

Lowell told Baer that McClendon’s prosecution would be a first of its kind in the oil and gas industry, said a person familiar with the exchange. Lowell argued that cooperation in the industry through joint bidding ventures is common and perfectly legal. An indictment, he told the Justice officials, would mark an unfair application of criminal antitrust laws to the sector.

Part of the discussion focused on emails between McClendon and former SandRidge Energy chief executive Tom Ward, in which the two longtime friends discussed coordinating bids on energy acreage. The emails relate to a handful of deals the two men discussed among many innocuous transactions, two people familiar with the matter said.

Ward, who co-founded Chesapeake with McClendon and left to run SandRidge in 2006, was not named in the U.S. indictment against his old friend. But people familiar with the case said he is the person referred to in the indictment as McClendon’s unidentified alleged co-conspirator.

The indictment alleged that McClendon and the co-conspirator agreed not to bid against each other for certain parcels of land in northwest Oklahoma in order to keep prices down. In return, each party would receive a share of the property later.

Lawyers haggled over the intent of the messages between the two men, with McClendon’s side arguing that what some people might consider a conspiratorial tone could instead be read as two professionals trying to work out a legitimate agreement to efficiently develop an area through joint ventures.

A person familiar with the investigation countered that assertion, saying the emails between McClendon and Ward “are direct as they can possibly be.” Though the indictment doesn’t cite specific evidence, it alleges that the two men consummated the proposed rigging of bids.

Ward hasn’t been charged with any wrongdoing. Spokesmen for Ward’s new company, Tapstone Energy, and for Chesapeake did not return calls for comment. SandRidge and a Justice Department official declined to comment. AEP’s chief legal officer, Tom Blalock, did not respond to requests for comment.

During the Justice Department meeting, a person familiar with the discussion said, McClendon’s lawyers also argued that his contributions to the city, state and national economy should be taken into account. They expressed concern about the harm an indictment might cause to AEP, SandRidge, their employees, the Oklahoma City community and the natural gas industry. Baer asked questions, two sources said, and requested more information.

The day after McClendon died, prosecutors filed a motion to dismiss the indictment. But officials said their investigation of potential antitrust violations in the oil and gas industry is continuing.

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

Tom Nolan here again.  Anyway, I doubt we will ever know for certain how / why Aubrey crashed into that bridge pillar.

[Tom Nolan + 2,443]

24 minutes ago, Gerry Maddoux said:

Boy, the story about Chesapeake brings back lots of memories, mostly good.

That is a great write-up!  I enjoyed that.  I own over 100 mineral rights in Oklahoma.  I miss the good days.

[Gerry Maddoux + 3,627]

1 hour ago, Tom Nolan said:

I miss the good days.

Well, just hold on, Tom. 

The tightest oil traps in the Granite Wash were also some of the most complex geologic formations in the world. Back when the Hogshooter was all the talk, there was no such thing as geological steering. If I were young, I'd buy an old slant-drilling rig and go for it.  

The geology is fascinating. North of the North Fork of the Red River, there is no granite lying on top of the ground. South of the North Fork, granite boulders the size of VW campers are strewn around from a massive upheaval. When those boulders came to the surface, the traps were released and the oil seeped elsewhere, probably into the sandstone of the Permian. But where the granite plates were displaced but not brought anywhere close to the surface lie tremendous traps containing massive pools of oil . . . sort  of like those giant pre-salt traps off the coast of Brazil and Africa. 

😊

[Dan Warnick + 6,100]

2 hours ago, Gerry Maddoux said:

Boy, the story about Chesapeake brings back lots of memories, mostly good. In the early nineties, the United States was once again freaking out about the concept of running out of natural gas, which would freeze millions of people in the frigid Northeast. A savvy fellow by the name of Charif Souki convinced Blackstone to loan him a ton of money to build a liquified natural gas importation terminal on the Gulf Coast. That was Cheniere Energy. It took forever to build the terminal--the concept of LNG transport was brand-new and this would be the first. 

Great story, @Gerry Maddoux.  Thoroughly enjoyed the history lesson.  Thanks.

[Dan Warnick + 6,100]

Fantastic stories of not that long ago.  Heady times, eh boys?  Sort of makes me wish I'd been in oil & gas back then.  If nothing else, the ups and downs must have been one helluva ride!

[Rob Kramer + 696]

I've actually never heard of hijacking the electric power steering.  I would say its definitely possible. But I'm unsure of the strength of it vs arms . On a weak person ya it would win on an oil man it would be a 50/50. The larger the vehicle the bigger the motor. The thing is tho if he had time to correct and  didn't its not like he was fighting the steering . A last minute smash ok totally un suspected. Awake and off the road a while back and no swerves ? An electric power steering can only boost the input to the steering rack with a spring so when the spring is not flexed it stops assist. So if he manually bent spring right and someone else had to hit motor left . Same with getting off the road its tap motor left and then let it drift you can't "hold" left or it will turn the rack to max. Even with command 10% left if he is pulling the wheel right the spring would allow the rack vs the wheel to not be on command as the rack isn't measured only steering position. So if that makes any sense it looks like he fell asleep or something.  Eps takeover should be a last min hard veer if I were to imagine it.

[Old-Ruffneck + 1,245]

20 hours ago, Gerry Maddoux said:

. . . sort  of like those giant pre-salt traps off the coast of Brazil and Africa. 

Salt domes in West Texas Permian too, and in the Gulf. We'd be drilling along and all of a sudden we'd lose mud pressure, hit a salt dome and drill several hundred feet in an hour or so....The seismic graphs would show them to a certain extent and where salt domes at 8000 feet or so under it was oil, usually couple more thousand feet. That made for hard work as adding 30" sticks of pipe, it made for fast and furious "trip". Back then we would slow mud loss with adding massive amounts of paper to the mud, trying to plug the escaping mud in the salt. Then run casing. Yup, made for young men and brute muscle. 

[Tom Nolan + 2,443]

Why Oil Will Keep Rising In 2021

By David Messler - Jan 14, 2021, 7:00 PM CST

https://oilprice.com/Energy/Oil-Prices/Why-Oil-Will-Keep-Rising-In-2021.html

[ENDING PARAGRAPHS]...

Brevity keeps us from discussing all the factors that might impact oil prices over the short term. With the information provided in this article, we think a strong case is made for a continued moderate rise in oil prices for the rest of this year.

Longer-term we are expecting a spike in crude prices as shrinking supplies fail to meet rising demand. We view this as being inevitable, as I noted in a prior Oilprice article. Under-investment by the key international oil companies over the last six years will create a scenario where the industry simply will be unable to respond to increased demand in a timely fashion. 

By David Messler for Oilprice.com

[Tom Nolan + 2,443]

U.S. Shale Drillers Begin To Hedge Oil Price Production

By Irina Slav - Jan 15, 2021, 9:00 AM CST

U.S. shale oil companies are hedging against future price drops as West Texas Intermediate enjoys a rebound above $50 a barrel, Reuters has reported, citing unnamed sources in the know.

Crude oil prices had been recovering slowly during the final quarter of last year, and they jumped sharply earlier this month as vaccine rollout advanced, albeit slowly, in the United States and Europe. At the same time, Saudi Arabia served a pleasant surprise to oil markets by declaring it would cut an additional 1 million bpd from its production on top of cuts agreed with OPEC+.

As a result, WTI hit the highest since February last year, trading at over $52 a barrel at the time of writing. Brent crude rebounded to above $55 a barrel.

According to the Reuters report, short positions on oil contracts in the futures and options market opened by producers have been rising since last fall, hitting a five-month high in the middle of December. They may have continued to rise this month as oil benchmarks continued improving.

Optimism is growing in the industry, according to Reuters sources, who said some shale producers are waiting for prices to rise even higher before they lock in production on the market.

“Some of them (producers) are pretty torn between hedging at a level they would have killed for six months ago and their perpetually optimistic nature,” Steve Sinos, VP at consultancy Mercatus Energy, told Reuters.

Production growth in the shale patch, meanwhile, is little likely in the short term, according to forecasters and the industry itself. Despite the optimism, perpetual or temporary, shale companies are wary of another price slump, despite OPEC+ cuts, and are taking a cautious stance. At the moment, they are focusing on free cash flow, the Reuters sources also said.

By Irina Slav for Oilprice.com

[Gerry Maddoux + 3,627]

^

As a (mostly ignorant) fan of geology, I have always had a hard time figuring out the strange marriage of salt and oil. 

To the best of my knowledge, oil seepage is trapped by salt, and the size of the oil trap is determined by source rock, the substrate the oil is seeping through, and how thick the salt dome is. Does that make sense to you? I know that oil can seep a very long distance.

I knew there were salt domes in Louisiana and the Galveston arc but I didn't know about the Permian. I have no earthly idea about "pre-salt" and "post-salt" pools of oil like those off Brazil. I suppose it's two layers entrapped by two layers of salt from different geologic times. Is that right?

I know about those massive salt and limestone caverns, but I have never understood the salt domes. I only worked on a drilling rig for one summer when I was a kid but I don't recall dropping down rapidly through a salt dome. I can see where that would crank up the tempo a bit. 

Thanks for educating me. I learned how to identify drill core samples by walking around my grandfather's porch at age seven, but I missed a few classes on all the strange things that exist underground. 

[Tom Nolan + 2,443]

January 15th - Friday - Stocks were taking a hit today across the boards.  Natural Gas was up, but other commodities went south.

Big Oil Watches In Fear As SEC Probes Exxon's Permian Valuation

By ZeroHedge - Jan 15, 2021, 10:00 AM CST

https://oilprice.com/Energy/Energy-General/Big-Oil-Watches-In-Fear-As-SEC-Probes-Exxons-Permian-Valuation.html

Having soared in recent days, rising 21% YTD on the back of the gamma squeeze discussed yesterday, and coupled with a barrage of analyst upgrades, most recently from Barclays and JPM, Exxon stock dropped as much as 4% this morning, after the WSJ reported that the SEC has launched a probe of the energy giant after an employee "filed a whistleblower complaint last fall alleging that the energy giant overvalued one of its most important oil and gas properties."

According to the WSJ, in the latest amusing "whistleblower complaint", several people involved in valuing a key asset in the Permian Basin, currently the highest-producing U.S. oil field, "complained during an internal assessment in 2019 that employees were being forced to use unrealistic assumptions about how quickly the company could drill wells there to arrive at a higher value."

At least one of the employees who complained was fired last year, according to a person familiar with the matter. The Journal previously reported that there had been internal disagreements over the valuation.

Which is great... the only problem is that absolutely every other US E&P and shale company, and in fact every energy company period, uses a similar "unrealistic" approach to valuing assets. In fact, one can argue that Aramco is the biggest offender of all, although there may be other "considerations"  there.

The SEC began investigating the claims after receiving the complaint, people familiar with the matter said. The current status of the investigation is unknown according the WSJ.

The news was enough to hammer the stock, which dropped as low as $48.3 before rebounding as traders realized that Exxon isn't doing anything that all of its peers aren't also doing.

The SEC began investigating the claims after receiving the complaint, people familiar with the matter said. The current status of the investigation is unknown according the WSJ.

The news was enough to hammer the stock, which dropped as low as $48.3 before rebounding as traders realized that Exxon isn't doing anything that all of its peers aren't also doing.

 

[Tom Nolan + 2,443]

Oil Prices Under Fire As Traders Cite Demand Concerns

By Tsvetana Paraskova - Jan 15, 2021, 10:45 AM CST

https://oilprice.com/Energy/Energy-General/Oil-Prices-Under-Fire-As-Traders-Cite-Demand-Concerns.html

Oil prices dropped early on Friday, as expanding lockdowns in China weighed on market sentiment about immediate global oil demand, while a stronger U.S. dollar also dragged crude futures down.

As of 9:47 a.m. ET on Friday, WTI Crude prices were down by 1.34 percent at $52.89 and Brent Crude was trading down 1.49 percent at $55.58.

Brent prices were headed for their first weekly loss in three weeks, while the U.S. benchmark was poised for a tiny weekly gain early on Friday. According to Bloomberg estimates, WTI Crude was set for a weekly gain in ten of the past eleven weeks.  

Following a rally of several days after Saudi Arabia surprised the market last week with an additional 1 million barrels per day (bpd) cut for February and March, oil prices retreated on Thursday and Friday from their highest levels since February 2020.

Expanding lockdowns in China, where as of Friday, there were 22 million people on lockdown, weighed on the market. China is grappling with its worst resurgence of the coronavirus since the summer of 2020. 

Oil prices were also subdued due to the strengthening of the U.S. dollar on Friday, as a stronger U.S. currency makes crude buying more expensive for holders of other currencies.

In addition, analysts see near-term transportation fuel demand in Europe as weak in the next two to three months due to the lockdowns across the continent. Despite the start of vaccinations in Europe, many countries continue to battle record daily new coronavirus cases and have been on lockdown, again, since before Christmas.    

In its January Monthly Oil Market Report (MOMR), OPEC said on Thursday that restrictions and lockdowns negatively affected Europe’s demand for transport fuels at the end of 2020 and would continue to weigh on consumption in the first quarter of 2021, with “a significant negative impact.”

Early on Friday, expectations of weak oil demand in the first quarter and the stronger dollar outweighed the excitement from the Saudi production cut and the $1.9-trillion stimulus package that U.S. President-elect Joe Biden unveiled on Thursday. 

By Tsvetana Paraskova for Oilprice.com

[Tom Nolan + 2,443]

Mapping The World’s Largest State-Owned Oil Companies

Thursday, Jan 14, 2021 - 23:40

https://www.zerohedge.com/commodities/mapped-worlds-largest-state-owned-oil-companies

Oil is one of the world’s most important natural resources, playing a critical role in everything from transportation fuels to cosmetics.

For this reason, as Visual Capitalist's Marcus Lu details below, many governments choose to nationalize their supply of oil. This gives them a greater degree of control over their oil reserves as well as access to additional revenue streams. In practice, nationalization often involves the creation of a national oil company to oversee the country’s energy operations.

What are the world’s largest and most influential state-owned oil companies?

LARGER IMAGE LINK - https://www.visualcapitalist.com/wp-content/uploads/2021/01/oil-companies-full-size.html

State-Owned Oil Companies by Revenue

National oil companies are a major force in the global energy sector, controlling approximately three-quarters of the Earth’s oil reserves.

As a result, many have found their place on the Fortune Global 500 list, a ranking of the world’s 500 largest companies by revenue.

China is home to the two largest companies from this list, Sinopec Group and China National Petroleum Corporation (CNPC). Both are involved in upstream and downstream oil operations, where upstream refers to exploration and extraction, and downstream refers to refining and distribution.

It’s worth noting that many of these companies are listed on public stock markets—Sinopec, for example, trades on exchanges located in Shanghai, Hong Kong, New York, and London. Going public can be an effective strategy for these companies as it allows them to raise capital for new projects, while also ensuring their governments maintain control. In the case of Sinopec, 68% of shares are held by the Chinese government.

Saudi Aramco was the latest national oil company to follow this strategy, putting up 1.5% of its business in a 2019 initial public offering (IPO). At roughly $8.53 per share, Aramco’s IPO raised $25.6 billion, making it one of the world’s largest IPOs in history.

Geopolitcal Tensions

Because state-owned oil companies are directly tied to their governments, they can sometimes get caught in the crosshairs of geopolitical conflicts.

The disputed presidency of Nicolás Maduro, for example, has resulted in the U.S. imposing sanctions against Venezuela’s government, central bank, and national oil company, Petróleos de Venezuela (PDVSA). The pressure of these sanctions is proving to be particularly damaging, with PDVSA’s daily production in decline since 2016.

In a country for which oil comprises 95% of exports, Venezuela’s economic outlook is becoming increasingly dire. The final straw was drawn in August 2020 when the country’s last remaining oil rig suspended its operations.

Other national oil companies at the receiving end of American sanctions include Russia’s Rosneft and Iran’s National Iranian Oil Company (NIOC). Rosneft was sanctioned by the U.S. in 2020 for facilitating Venezuelan oil exports, while NIOC was targeted for providing financial support to Iran’s Islamic Revolutionary Guard Corps, an entity designated as a foreign terrorist organization.

Climate Pressures

Like the rest of the fossil fuel industry, state-owned oil companies are highly exposed to the effects of climate change. This suggests that as time passes, many governments will need to find a balance between economic growth and environmental protection.

Brazil has already found itself in this dilemma as the country’s president, Jair Bolsonaro, has drawn criticism for his dismissive stance on climate change. In June 2020, a group of European investment firms representing $2 trillion in assets threatened to divest from Brazil if it did not do more to protect the Amazon rainforest.

These types of ultimatums may be an effective solution for driving climate action forward. In December 2020, Brazil’s national oil company, Petrobras, pledged a 25% reduction in carbon emissions by 2030. When asked about commitments further into the future, however, the company’s CEO appeared to be less enthusiastic.

That’s like a fad, to make promises for 2050. It’s like a magical year. On this side of the Atlantic we have a different view of climate change.

                                                                                    — Roberto Castello Branco, CEO, Petrobras

With its 2030 pledge, Petrobras joins a growing collection of state-owned oil companies that have made public climate commitments. Another example is Malaysia’s Petronas, which in November 2020, announced its intention to achieve net-zero carbon emissions by 2050. Petronas is wholly owned by the Malaysian government and is the country’s only entry on the Fortune Global 500.

Challenges Lie Ahead

Between geopolitical conflicts, environmental concerns, and price fluctuations, state-owned oil companies are likely to face a much tougher environment in the decades to come.

For Petronas, achieving its 2050 climate commitments will require significant investment in cleaner forms of energy. The company has been involved in numerous solar energy projects across Asia and has stated its interests in hydrogen fuels.

Elsewhere, China’s national oil companies are dealing with a more near-term threat. In compliance with an executive order issued by the Trump Administration in November 2020, the New York Stock Exchange (NYSE) announced it would delist three of China’s state-run telecom companies. Analysts believe oil companies such as Sinopec could be delisted next, due to their ties with the Chinese military.

[Tom Nolan + 2,443]

U.S. Rig Count Jumps Again As Oil Prices Stabilize

By Julianne Geiger - Jan 15, 2021, 12:12 PM CST

https://oilprice.com/Energy/Energy-General/US-Rig-Count-Jumps-Again-As-Oil-Prices-Stabilize.html

The U.S. oil rig count increased for the eighth consecutive week as drillers capitalize on higher oil prices 

Baker Hughes reported on Friday that the number of oil and gas rigs in the United States rose by 13 to 373.

The oil and gas rig count has risen for eight weeks in a row for a total gain of 63.

The oil rig count increased by 12 this week, while the number of gas rigs increased by 1. The number of miscellaneous rigs was unchanged.

Total oil and gas rigs in the United States are now down by 386 compared to this time last year, just a handful of days before the first case of the mysterious China virus was discovered to have infiltrated the United States.

The EIA’s estimate for oil production in the United States stayed the same for the ending January 8, at 11.0 million barrels of oil per day for the fifth week in a row—still 2.1 million bpd off the all-time high reached earlier this year.

Canada’s overall rig count increased this week by 44. Oil and gas rigs in Canada are now at 161 active rigs, and down 83 year on year. 

The Permian basin saw an increase in the number of rigs by 10 this week, bringing the total active rigs in the Permian to 189, or 214 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 sharply down on Friday on increased Covid-19 lockdown measures in China and the EA that will continue to stunt oil demand.  

At 1:06 p.m. EDT, WTI was trading down 2.48% on the day at $52.24, though still up $0.40 per barrel on the week, while Brent was trading down 2.45% on the day, at $55.01, down $0.50 for the week.

By Julianne Geiger for Oilprice.com

 

[Tomasz + 1,608]

I have spoken on this topic several times - generally crude oil stocks around the world have been gradually dropping somewhere from May / June, and from November / December this phenomenon has accelerated despite the second wave of the pandemic, which, however, is not associated with such restrictions on mobility around the world.

The topic may not make crude oil traders very excited but thats m just facts.

Oil prices are not likely to be triple-digit, but the market is gradually balancing and oil stocks are normalizing all over the world.

The rise in oil prices is, of course, partly speculation, but this rise since November is based on the hard facts of declining oil stocks both in the US and around the world.

[Tom Nolan + 2,443]

OPEC Oil Revenues Could Slump To 18-Year Low

By Irina Slav - Jan 15, 2021, 1:00 PM CST

https://oilprice.com/Energy/Energy-General/OPEC-Oil-Revenues-Could-Slump-To-18-Year-Low.html

OPEC’s crude oil export revenues for 2020 could decline to $323 billion, the U.S. Energy Information Administration said in a new report, noting that this would be the lowest revenue level in 18 years.

This would compare to $595 billion in oil revenues for 2019, the authority added.

Unsurprisingly, the biggest chunk of OPEC’s collective oil revenues for 2020 will be for Saudi Arabia as the biggest exporter in the cartel. For 2019, Saudi Arabia’s oil revenues totaled $202 billion—more than a third of the total—but last year’s revenues will be hit by the pandemic like those of its fellow OPEC exporters.

Like other forecasters, the EIA warned the lower oil revenues will have a strong negative impact on OPEC economies.

“The decrease in revenues could be detrimental to member countries’ fiscal budgets, which rely heavily on oil sales to import goods, fund social programs, and support public services,” the authority said.

OPEC itself is guardedly optimistic about the immediate future, however. Despite substantial deficits and a surge in loans to prop up budgets, the cartel expects oil demand to begin recovering this year.

In its latest Monthly Oil Market Report, the cartel forecast oil demand this year to rise by 5.9 million bpd, to reach 25.9 million bpd. The biggest drivers, again, would be Asian economies, where demand is seen jumping by 3.3 million bpd from 2020 when OPEC estimated it had fallen by as much as 9.8 million bpd.

The group was rather upbeat on demand trends in North America, despite the raging pandemic, noting that “The recovery in transportation fuels, including gasoline, is additionally linked to developments in the labour market and gasoline retail prices. The current outlook assumes a respectable recovery in both variables.”

Its outlook for European oil demand was less upbeat, as it noted the continent’s struggle to contain the spread of infection and the lockdowns that have sapped oil demand.

By Irina Slav for Oilprice.com

[Tom Nolan + 2,443]

OPEC Predicts A Rebound In U.S. Shale

By Tom Kool - Jan 15, 2021, 2:00 PM CST

https://oilprice.com/Energy/Energy-General/OPEC-Predicts-A-Rebound-In-US-Shale.html

Oil prices fell back on Friday morning as demand fears grow, but OPEC has predicted an increase in U.S. shale production at current price levels.

With 2021 shaping up to be one of the most important years for the energy sector in modern history, there is no better time to become an Oilprice.com premium member. Sign up today to get breaking news, expert analysis, and trading tips.

Friday, January 15th, 2021

Oil prices fell back on Friday over demand concerns. News that China has reported its highest Covid-19 case count in months weighed on market sentiment. 

OPEC sees shale rebounding. OPEC admitted that an improved outlook for crude oil prices could result in higher U.S. shale production. OPEC upgraded its forecast for U.S. oil production, expecting an increase of 370,000 bpd, up from a previous forecast of 71,000 bpd.

LNG spike causing havoc worldwide. Bitter cold and skyrocketing prices for LNG are now being felt in more places than just Asia. The ripple effects are affecting gas markets everywhere, straining supplies and forcing consumers to cut back. Another potential side effect could be the undermining of the spot market, potentially leading to more emphasis on oil-linked contracts, which would provide more stability. 

Total quits API. Total (NYSE: TOT) announced its decision to withdraw from the American Petroleum Institute, the industry’s most powerful lobby. The French oil giant cited API’s opposition to methane regulations, EV subsidies, and carbon pricing. Total also disagreed with API’s political contributions to U.S. politicians that oppose the Paris Climate Agreement. 

Gas projects in Mozambique at risk. A chronic insurgency puts Total’s (NYSE: TOT)$23 billion gas production and LNG export project at risk. The same is true of ExxonMobil’s (NYSE: XOM) planned $33 billion facility. Total has halted work at its site due to nearby attacks.

JPMorgan touts commodities, pro-risk posture. JPMorgan told investors to boost commodity positions, go underweight on bonds and take a pro-risk exposure to equities. “We increase our overweight in commodities, in particular energy, both as an inflation hedge and to position for a continued cyclical recovery,” analysts wrote.

Exxon target of new SEC probe. ExxonMobil (NYSE: XOM) is under investigation by the Securities and Exchange Commission (SEC) after an employee filed a whistleblower complaint last fall, alleging that the company has overvalued its Permian assets.

Shale boosts hedging. U.S. shale drillers increased hedging with WTI surging above $50 per barrel.

Is the rally in renewables sustainable? Solar and wind power companies have soared in value. The New York Times explores the potential bubble in clean tech stocks.

Biden’s $1.9 trillion stimulus could preview energy package. President-elect Biden proposed a $1.9 trillion covid rescue package, which included vaccination efforts, $1,400 checks to Americans, and other stimulus measures. He has indicated that a sequel package in the spring, which could be even larger, would target major investments in clean energy. 

Halliburton turns to grid instead of diesel. Halliburton (NYSE: HAL) is swapping out diesel engines for the electric grid for its Permian basin operations. 

Shell declares force majeure on Forcados. Royal Dutch Shell (RDS.A, RDS.B) says loadings of Nigeria's key export grade Forcados are on force majeure due to the shutdown of the Trans Forcados pipeline.

Summit Midstream Partners soars on greenlight. Summit Midstream Partners, LP (NYSE: SMLP) saw its share price shoot up after its Double E Pipeline received agreenlight from FERC.

ExxonMobil upgraded by JPMorgan. JPMorgan upgraded ExxonMobil (NYSE: XOM) to Overweight for the first time in seven years. 

Siemens to produce hydrogen from wind. Siemens Gamesa (BME: SGRE) and Siemens Energy (ETR: ENR) are developing a commercial offshore wind turbine that produces hydrogen via electrolysis, the companies said.

EIA: Oil production to rise to 11.49 mb/d in 2022. The EIA unveiled its first forecast for 2022, projecting that U.S. oil production rises to 11.49 mb/d, a 3% increase over this year’s levels. 

Proterra to go public. Electric bus producer Proterra will launch an IPO, with preliminary estimates valuing the company at $1.8 billion.

Saudi cuts exports to Asia. Saudi Arabia has reduced sales of oil to at least 11 refiners in Asia, evidence that it is following through to some degree on its pledge to cut production by 1 mb/d.

Gasoline profit margins increase. The profit margin for refining gasoline has widened to its largest extent since July, as markets anticipate demand recovery by mid-year.

U.S. warns European companies on Nord Stream 2. The Trump administration warned European companies that they risk U.S. sanctions over their involvement in the Nord Stream 2 pipeline. 

Equinor wins offshore wind contract in New York. Equinor (NYSE: EQNR) was selected for a major offshore wind project off the coast of Long Island. The combined 3.3 GW Empire Wind and Beacon Wind projects will be the largest offshore wind installation in the U.S. to date.

Chesapeake Energy to emerge from bankruptcy. Chesapeake Energy will emerge from bankruptcy valued at over $5 billion. 

Occidental to use direct air capture for oil production. Occidental Petroleum (NYSE: OXY) plans to build a direct air capture (DAC) facility, which will remove carbon dioxide from the atmosphere, and then use the CO2 to produce more oil. The project could be the world’s first large-scale DAC facility and it could cost hundreds of millions of dollars. 

Forest Service gives go-ahead to Marcellus pipeline. The U.S. Forest Service approved the construction of the Mountain Valley Pipeline through a sensitive part of the Jefferson National Forest, a big win for a project that would carry Marcellus shale gas to the U.S. southeast.

Ireland drops another LNG terminal over methane concerns. The Port of Cork in Ireland allowed an agreement with NextDecade Corp. (NASDAQ: NEXT) for an LNG import terminal to expire. It’s the latest setback for the LNG company in Europe over concerns about methane emissions. NextDecade is planning an LNG export terminal in Texas.

By Tom Kool for Oilprice.com 

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

NOTE:  Ya gotta love those Kool Graphs and Charts and weekly wrap-up.

[Tom Nolan + 2,443]

The Mega-rich Elite of "The Great Reset" New World Order love stories like this...

Has Big Oil Turned Its Back On Alaska?

By Haley Zaremba - Jan 16, 2021, 2:00 PM CST

https://oilprice.com/Energy/Energy-General/Has-Big-Oil-Turned-Its-Back-On-Alaska.html

“Is Exploring For Oil Still Profitable?” Oilprice asked back in August. As the novel coronavirus has swept the world, stalling whole industries, tanking oil demand and prices, leaving legions of people jobless, and upending the natural order of things, everyone who has anything to do with the energy sector has found themselves asking these kinds of existential, world-altering questions. Until 2020, claims of peak oil just on the horizon were easily dismissed as naive and alarmist. Now, peak oil is suddenly upon us, an unforeseen stall in the status quo has afforded the world an unmissable opportunity to reorient the global economy toward decarbonization with not a moment to spare, and global leaders and thinkers such as the World Economic Forum are calling for a “new energy order” and a “great reset.”

For European Oil majors, at least, this has all culminated in a surprisingly simple answer: no. No, exploring for oil is no longer financially worth it. With fossil fuels fast falling out of favor and the clean energy transition fomenting and picking up speed around the globe, we are seeing more and more “stranded assets” as oil company choose to let their already purchased, yet-untapped oil reserves sit stagnant, preferring to accept the sunk cost rather than spend any more cash on drilling ventures that promise few financial returns. 

Instead, Big Oil is quickly transitioning to become Big Energy in Europe, where the oil industry’s most profitable business is no longer oil. In the United States, however, Big Oil has taken a decidedly different track, clinging steadfastly to the shale that catapulted the nation to the top of the energy production food chain instead of investing in alternative, more forward-looking ventures. Until now.

Just this month, a government auction of drilling leases in Alaska turned into an allegory for the state of the entire U.S. oil industry when nearly no one showed up. As one of Donald Trump’s last actions before leaving office, the U.S. president opened up the Arctic National Wildlife Refuge (ANWR) to would-be oil drillers. This contentious move on Trump’s part was actually mandated by Congress in order to raise funds to help make up for the ballooning deficit spurred by the president’s sizable 2017 tax cuts. “Advocates promised that wells in ANWR would generate $1 billion a year and decrease the budget deficit,” The Houston Chronicle reported. 

Related: Rising LNG Prices Welcome News For U.S. Exporters

When auction day arrived, however, not one major energy company made a bid, and only about half of the tracts on offer received any bids at all. What’s more, many of the lots that were sold will likely never be drilled upon. One of the buyers, The Alaska Industrial Development and Export Authority, bought their 400,000 acres at the minimum bid for the purpose of economic development but has never drilled a well in its history. Other buyers included small companies that almost certainly don’t have the capital to explore for oil in the refuge and will have a very hard time securing it, as nearly every conceivable major bank has pledged in writing never to fund such a venture. Last year, Morgan Stanley became the fifth of six major U.S. banks to announce that the financial institution would no longer fund any future oil drilling in environmentally delicate Arctic refuges, adding themselves to the ranks of Arctic drilling divesters that already included Morgan Stanley, Wells Fargo, Goldman Sachs, JPMorgan Chase, and Citigroup.

According to Chris Tomlinson, an analyst for the Houston Chronicle, the message broadcasted from the failed ANWR auction was loud and clear: more oil is no longer wanted or needed. And the fact that the primary bidder was a state-owned economic development organization means that Alaskans are desperate for a new way to find jobs and keep their economy afloat that no longer depends on the oil that has now failed them for so many years. 

Alaska is not alone. Down in Texas, in the Permian Basin and on the Gulf Coast, the winds of change are blowing as well. From North to South, the U.S. energy industry is finally beginning to bid oil goodbye. 

By Haley Zaremba for Oilprice.com

[Tom Nolan + 2,443]

U.S. Shale Is Gaining Influence Over Oil Markets

By Matthew Smith - Jan 17, 2021, 4:00 PM CST

https://oilprice.com/Energy/Energy-General/US-Shale-Is-Gaining-Influence-Over-Oil-Markets.html

[Matt gives his take on a brief history of the oil industry and then current international players / policies]