Jan Lars Mueller – Executive Director
Thomas Whipple – Editor, Peak Oil Review and Peak Oil News
Last week there was a surge in oil prices based on rumors and statements from Iraq’s oil minister and a Russian pipeline official that Russia and the Saudis might be considering a meeting to discuss “coordination” of their oil production. The merest hint of a supply cut was enough to Read more...
Oil prices touched 12 year lows of just above $27 a barrel on Wednesday and then rebounded sharply to close above $32 on Friday. Other than the major east coast snowstorm in the US and the expectation there would be more demand for heating oil, there was no significant news Read more...
Crude futures settled below $30 a barrel on Friday with New York closing at $29.42, down 10.5 percent for the week, and London closing at $28.82, down 13.7 percent for the week. The global oil glut, a stronger dollar, and reports that the sanctions on Iran were about to be Read more...
Oil prices plunged again last week from a high above $38 a barrel on Monday to a new low of $32.10, touched by NY futures on Thursday. For the week New York futures were down $3.88 or 10.5 percent to close at $33.16. London’s Brent was down 10 percent for Read more...
There were no surprises during the last week of trading for 2015. Prices moved sideways, with an occasional flurry of short-covering briefly offsetting the steady downwards trend of the markets. At the close Thursday, New York futures were at $37.04 a barrel, down 30 percent for the year, and London Read more...
"The fact that some oil is being sold at $10 per barrel - like some Canadian and Venezuelan crude grades - shows that the strain on producers has rarely been so big. At this level, some producers are not covering capital and operating expenses. And costs are even higher to shut down production. These prices will serve as destabilizing factors in many producing countries and on many bank loans.”
Marco Dunand founder and CEO of trading house Mercuria
"The situation is worse than it was in 2007. Our macroeconomic ammunition to fight downturns is essentially all used up. Debts have continued to build up over the last eight years and they have reached such levels in every part of the world that they have become a potent cause for mischief. It will become obvious in the next recession that many of these debts will never be serviced or repaid, and this will be uncomfortable for a lot of people who think they own assets that are worth something. The only question is whether we are able to look reality in the eye and face what is coming in an orderly fashion, or whether it will be disorderly. Debt jubilees have been going on for 5,000 years, as far back as the Sumerians."
William White, chairman, OECD's review committee; former chief economist, Bank for International Settlements
“So much of the frenzy in shale in the past few years was a result of the money pouring out of Wall Street. It was as much a Wall Street play as it was an oil-and-gas play. It was putting money to work. Companies took on all that risk and now we see the result [--bankruptcies].”
Terry Clark, White Marlin Oil & Gas Co.
"At our conference, producers largely did not provide specifics on what capex/ production would look like at $35/bbl of oil. Instead, producers spoke largely of their agility to spend within cash flow and ... ramp up when needed. Commentary suggested $50 per barrel WTI is now where producers would raise activity."
Goldman Sachs, in a note to investors
Q: “Can you imagine selling shares in Saudi Aramco?
A: “This is something that is being reviewed, and we believe a decision will be made over the next few months. Personally, I’m enthusiastic about this step. I believe it is in the interest of the Saudi market, and it is in the interest of Aramco, and it is for the interest of more transparency, and to counter corruption, if any, that may be circling around Aramco.”
Interview with Saudi Arabia’s deputy crown prince Muhammad bin Salman in The Economist
“By our calculations it will require additional debt formation of $39 trillion over the next decade to keep petroleum production operating. Where that funding will originate from, when it is very unlikely to ever be repaid, will be of tantamount importance. It will take very strong-willed societies to make such sacrifices. If those sacrifices are not made, the integrated global production system will have disappeared by 2026. 2016 will be witness to the beginning of this event with dramatically increasing closures and bankruptcies throughout the world’s petroleum industry.”
The Hill’s Group — “an association of consulting petroleum engineers and professional project managers”
“Around $200 billion of investments in energy have been canceled this year, with energy companies planning to cut another 3 to 8 percent from their investments next year. This is the first time since the mid-1980s that the oil and gas industry will have cut investment in two consecutive years.”
Prince Abdulaziz bin Salman al Saud, Saudi Arabia’s vice minister of petroleum and mineral resources
If the ban on US oil exports is lifted…] “The net effect of export of American oil on the market is zero. This will have no effect on the price because the U.S. still is an importing country. They export some, but they need to import the same quantity from somewhere else.”
Abdalla El-Badri, Secretary-General of OPEC
“The long-term price of oil is literally unforecastable. The only thing that can be said with absolute certainty is that oil prices will continue to defy the expectations of experts.”
John Kemp, Reuters
"Nothing is economic at today's prices… We're drilling the best of the best rock right now. At some point we'll have to move to lesser-quality rock, which will increase the break-even costs."
James West, analyst at Evercore ISI
“Credit rating agency Fitch says defaults for oil and gas companies are already at the highest since 1999. Since the start of the third quarter, at least 12 oil and gas companies have defaulted on their debt. The ‘zombies’ bet that by shifting into survival mode they can hang on until oil prices recover, but the outlook is grim.”
Anna Driver and Tracy Rucinski, Reuters, “Zombies Appear in U.S. Oil Fields”
Last week there was a surge in oil prices based on rumors and statements from Iraq’s oil minister and a Russian pipeline official that Russia and the Saudis might be considering a meeting to discuss “coordination” of their oil production. The merest hint of a supply cut was enough to send traders into a frenzy. Short positions were covered and prices rose from below $30 a barrel to nearly $36 in London. The story was quickly denied by numerous OPEC officials and even by Russia’s deputy prime minister, but oil prices stayed firm closing at $33.62 in New York and $34.74 in London.
Oil prices touched 12 year lows of just above $27 a barrel on Wednesday and then rebounded sharply to close above $32 on Friday. Other than the major east coast snowstorm in the US and the expectation there would be more demand for heating oil, there was no significant news to touch off the rebound other than traders feeling there was not much downside for oil prices left and that it was time to take profits. The rapid rebound was helped by the record size of the short positions held by hedge funds. As these were liquidated, the rebound accelerated to gain some 21 percent from the Wednesday lows. Hints by the European Central Bank last week that there could be a further stimulus coming also supported the move.
Crude futures settled below $30 a barrel on Friday with New York closing at $29.42, down 10.5 percent for the week, and London closing at $28.82, down 13.7 percent for the week. The global oil glut, a stronger dollar, and reports that the sanctions on Iran were about to be lifted contributed to the move. The now familiar factors of a circa 1.5 million b/d surplus in global oil production; a strong US dollar, up 20 percent since mid-2014; the Chinese economy continuing to slacken; and problems on the horizon for US growth were the main reasons behind the price slump. A couple of new concerns have arisen lately. Analysts are worried about the optimism being expressed by US shale oil producers over the likelihood of higher oil prices just ahead. Many US drillers are not trying to cut back on production but simply tying to hold things together until later this year. Another factor is reduction in demand for diesel used to drill and frack oil wells which is down by nearly 50 percent in the last 18 months. The drop in demand for diesel along with warm weather is leading to large surpluses of distillates.
Oil prices plunged again last week from a high above $38 a barrel on Monday to a new low of $32.10, touched by NY futures on Thursday. For the week New York futures were down $3.88 or 10.5 percent to close at $33.16. London’s Brent was down 10 percent for the week closing at $33.55, the lowest closing since June of 2004. The usual factors of too much oil and too little demand as the US and Chinese economies continue to weaken were behind the move. A number of the factors that usually move oil markets are beginning to change. For example, another large drop of 20 units in the US rig count failed to drive the market higher for more than a few minutes as traders have come to recognize that changes in the rig count do not translate into short-term supply changes. Likewise the increase in enmity between Iran and the Saudis is having very little impact on prices as the markets believe the harsh rhetoric is unlikely to lead to hostilities – at least in the short term. Even a US jobs report which showed the creation of 292,000 new jobs, 39 percent more than expected, did little to move prices higher. Usually traders see more people working as a sign that there will soon be more demand for gasoline, but not this time. Fundamentals are ruling the markets.
There were no surprises during the last week of trading for 2015. Prices moved sideways, with an occasional flurry of short-covering briefly offsetting the steady downwards trend of the markets. At the close Thursday, New York futures were at $37.04 a barrel, down 30 percent for the year, and London was at $37.28 down 35 percent during 2015. On Thursday, the EIA released US crude production data for the first nine months of 2015 showing production falling from a 44-year peak of 9.7 million b/d in April to 9.3 million in October. This drop in production was less than many had anticipated given the severe cutbacks that have taken place in drilling rigs and capital expenditures.