December 16, 2015

CRUDE OIL INVENTORY/’000 bbls (Week Ended 12/11/15)

Current: 490,657

Actual Build/(Withdrawal): 4,801
Economist Average Estimate: (600)
Previous: 485,856

Click here for the chart with five year averages.

Stephens Investment Banking - Building Blocks of a Stronger Oil & Gas Industry

*OPEC Oil Production hits Three Year High – 31.695 MMBOPD – Oil & Gas 360®

In the group’s monthly release out today, OPEC reported that the group produced 31.695 MMBOPD, the most it has produced since 2009 reports The Wall Street Journal. The higher levels of production came mostly from Iraq, which added 247.5 MBOPD in November for a total of 4.3 MMBOPD. OPEC’s November Oil Market Report did not give specific reasons for the increased production in Iraq. Interestingly, if Iraq’s production is excluded from the rest of OPEC’s, the group’s production declined slightly in the month of November, led by production declines in Saudi Arabia. – Read More

*Oil Prices Fall on U.S. Inventory Data – The Wall Street Journal

The price difference between U.S. oil and the global benchmark narrowed Wednesday to the smallest level in months after Congress agreed to lift the ban on most U.S. crude exports. Both benchmarks traded lower after government data showed an unexpected increase in U.S. crude stockpiles. Traders also waited on news from the Federal Reserve, which is expected to announce it will raise interest rates for the first time in years. Oil touched seven-year lows earlier this week amid signs that the global oil glut, which has battered the market since last year, is far from abating. – Read More

*Will Full Storage Tanks Crash The Price Of Oil? – Forbes

A number of analysts have suggested that oil prices might crater to $20 a barrel if storage tanks become full, which is certainly a possibility. There is significant uncertainty, but some indicators suggest this may be approaching. Physical numbers: Storage capacity is not estimated with any accuracy and there is very little data on the amount outside the OECD. The National Petroleum Council used to do occasional studies of U.S. capacity, but hasn’t in a long while. Numbers change with a) pipeline capacity (oil has to fill it up) and b) refinery capacity. – Read More

*Fracing Has Become a Litmus Test of Principle – Oil & Gas 360®

The following are Rupert Murdoch’s remarks to the Hudson Institute, Nov. 30, 2015 – published with permission of the author: “Before I thank you Henry [Kissinger], and before delivering my modest message, I feel obliged to alert college students, progressive academics and all other deeply sensitive souls, that these words may contain phrases and ideas that challenge your prejudices – in other words, I formally declare this room an “unsafe space”….. – Read More

*‘OPEC cannot kill shale oil’ – Financial Times

The minute oil prices go up shale oil production will go up again to its previous levels, says independent oil expert Dr. Mamdouh Salameh. OPEC can only slowdown its production, but shale oil’s real shortcoming is its wells depletion rate, he adds. Gulf Cooperation Council (GCC) members including Saudi Arabia are no longer able to afford their abundant welfare and near-zero taxes because of the collapse in oil prices and expensive military campaigns. The six Gulf States have agreed to introduce VAT, to plug the gap. It’s not yet clear how high the tax is going to be, but it will be introduced over the next three years. – Read More

*Mexico’s oil auction beats expectations despite oil price plunge – Reuters

Mexico’s oil regulator awarded all 25 contracts on offer on Tuesday, beating expectations despite a dramatic plunge in crude prices, in an auction aimed at boosting new Mexican oil companies after a historic sector reform finalized last year. Peak oil production from the 25 onshore fields will reach 77,000 barrels per day and attract investment of $1.1 billion, Energy Minister Pedro Joaquin Coldwell said in a tweet following the auction. Mexican officials had said they would consider the auction a success if at least five contracts were awarded. “This is a triumph for Mexico,” Juan Carlos Zepeda, president of Mexico’s oil regulator CNH told local radio after the auction. – Read More

*Energy Market Upside: PDC Energy Shows Off Versatility in the Wattenberg Field – Oil & Gas 360®

The oil and gas market is approaching the end of 2015—which will no doubt go down as a highly tumultuous year for the industry. In spite of the dive in oil prices, some companies have positioned themselves well for capturing the upside through advantageous acquisitions, reliable takeaway capacity, attractive hedges and low-cost production. Or a combination of factors. Today’s focus is PDC Energy (ticker: PDCE), one of the fastest growing companies in the Wattenberg Field of Colorado. –Read More

*U.S. Push to End Oil-Export Ban Puts China in Slippery Situation – The Wall Street Journal

A move by the U.S. Congress to lift a 40-year ban on oil exports could bring a gush of new supply to global markets, just as leaders in China—the world’s biggest importer—say they are growing concerned that oil is too cheap. Even if the bulk of new U.S. oil exports don’t go to China or other parts of Asia in the near term, they could still weigh on global prices, complicating China’s promised switch away from fossil fuels, analysts say. Crude was trading lower Wednesday on the news of possible U.S. oil exports. Both grades are hovering around eight-year lows. – Read More

*Kick OPEC While It’s Down – Bloomberg

The Organization of Petroleum Exporting Countries is in disarray. The price of Brent crude fell to less than $38 a barrel on Friday, the lowest since 2008. If the cartel had been working, it would be cutting output to force prices back up. Its members chose to keep pumping. Why? Because just as demand from emerging markets is slowing, technology has changed the economics of oil. That’s bad news for OPEC, but good news for everybody else — especially if the U.S. government and others have the wit to kick OPEC while it’s down. The U.S. shale-oil revolution has greatly increased non-OPEC supply. – Read More

*Oil and Gas Spending Cuts Already Apparent for 2016 – Oil & Gas 360®

The year over year drops in 2015 capital expenditures were significant, but apparently not significant enough. Budgets for 2016 are trickling onto the newswires, and some of the largest companies in the business are pulling back on costs yet again. Heavyweights like Chevron (ticker: CVX) and ConocoPhillips (ticker: COP) are reducing capital but abiding to their dividends; other debt-laden E&Ps like Encana (ticker: ECA) are not blessed with such a luxury, cutting dividends while reducing expenditures by more than 40%. – Read More

*Never Mind $35, The World’s Cheapest Oil Is Already Close to $20 – Bloomberg

As oil crashed through $35 a barrel in New York, some producers were already living with the reality of much lower prices. A mix of Mexican crudes is already valued at less than $28, an 11-year low, according to data compiled by Bloomberg. Iraq is offering its heaviest variety of oil to buyers in Asia for about $25. In western Canada, some producers are selling for less than $22 a barrel. “More than one-third of the global oil production is not economical at these prices,” Ehsan Ul-Haq, senior consultant at KBC Advanced Technologies Plc, said by e-mail. “Canadian oil producers could have difficulty in covering their operational costs.” – Read More

*Energy Market Upside: Cimarex continues to push the limits in low price environment – Oil & Gas 360®

Cimarex (ticker: XEC) continues to look for the best long-cycle returns on their drilling, and the company appears to have found it in its long-length laterals. The company is increasingly looking to improve the efficiency of its two-mile laterals, reporting that its first lateral of this length in the Meramec in Oklahoma is showing a peak 30-day IP of over 16 MMcfe. Tom Jorden, president, chairman and CEO of Cimarex said during a recent conference call that the new well, called the Clayton, represented a 72% uplift versus the average one-mile lateral being drilled there. – Read More

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