U.S. Oil Could Begin Competing With Middle East Crudes In Asia

[James Regan + 1,776]

Royal Dutch Shell offered on the Asian market on Monday a West Texas Intermediate (WTI) Midland cargo priced off the Dubai benchmark typically used for the Middle Eastern grades going to Asia—a move that could bring U.S. oil in direct pricing competition with Middle Eastern producers on the world’s fastest-growing oil demand market.

U.S. oil cargoes to Asia are typically priced off the WTI benchmark, while pricing the WTI Midland cargo off the Dubai benchmark could help Asian buyers to compare the prices of U.S. cargoes to crudes of similar quality coming from Saudi Arabia, Qatar, or the United Arab Emirates (UAE), Bloomberg reports.

Looks like things will be hotting up over the next few weeks, looking forward to the regional response.

Edited August 20, 2019 by James Regan
I can't spell

[Douglas Buckland + 6,308]

So it will all come down to price in an over-fed market. It doesn't take a rocket scientist to know which direction the price will go.

[wrs + 893]

US oil production numbers are about to turn down big time.  Look at this chart I produced.  The rigs pre bottom of production and rig count drop were single well rigs.  Now most rigs are skiddable and can drill more wells per rig.  It's usually about 4 wells per rig for the skiddable kind but it takes longer to get the wells drilled than with multiple rigs.

A lot of the drop in rig count from 2014 was also culling out the drill locations that couldn't produce enough oil to support the lower prices.  So in the last three years they have been exploiting the better locations with fewer rigs.  That has resulted in an impressive increase of 3.5mb/d in production(I messed up on the chart). However, the rig count peaked back in Oct 18 at 890 and now stands at 750.  That is a drop of 140 rigs but in the old count that is more like 560.  

The falloff in production is going to be much steeper and more significant because the loss of production from those poor production locations that could only be profitable with $100 oil was not as significant as the loss of production from wells that were producing 850bbl/day down to 550bbl/day after a year.  The wells completed by Jan and Feb 2019 from the peak of drilling rigs in Oct 18 were producing at those levels by April 2019 which represented the peak of production in this cycle.  Oil prices are too low to keep rigs out there and hence, production will no longer increase. 

I expect that DUC completions are supporting the outright collapse in production for the time being and keeping it level but I believe it's going to drop significantly by the end of the year unless these rigs accounted for a lot more DUC inventory.  That is the kicker and the DUC number is much harder to track because the operators are not timely changing the status of the wells after they are in production, at least with my XTO wells that has been the case. 

I think the oversupplied meme has run it's course and Wile E Coyote (US shale production) is about to fall off a cliff. 

 

 

Edited August 24, 2019 by wrs

[ceo_energemsier + 1,818]

The headline should be, US crude is competing with Mid East crude in Asia, a known fact!!!!!!!