A small company just announced that it has made a “world-class” oil discovery in Alaska, which could be the largest find in the state in years.
Caelus Energy LLC, a small company backed by private equity, says that it has discovered oil on Alaska’s northern coast. The field could hold as much as 6 billion barrels of oil, with about 1.8 to 2.4 billion barrels considered to be recoverable. If that is the case, the discovery would instantly raise Alaska’s statewide recoverable oil reserve base by about 80 percent.
But producing the oil will not be easy. Drilling must take place in the winter. To drill the field, the tentative plan would be to build manmade islands to drill through. Oil produced in the shallow water of Smith Bay will need to be moved somehow. Caelus will have to build an $800 million pipeline that travels 125 miles, connecting to an existing pipeline system in Prudhoe Bay. Continue reading »
There is a new drama on the oil front: those who have it in excess can’t get it to those who want it—at least not quickly enough for everyone to be happy.
A recent Reuters story reveals that tankers carrying around 200 million barrels of crude are waiting to leave or dock at ports around the world, creating “the world’s biggest traffic jam.”
One would think that producers and consumers of the world’s most abundant commodity would have had time enough to adjust their port capacities, but apparently this is not the case. Middle East ports are choking on the oil waiting to be loaded onto tankers and shipped to Asia, and Asian ports are forcing tankers to wait for weeks before unloading because their infrastructure can’t cope with these amounts of oil.
The main catalyst that pushed the price of oil from a 13 year low in early February, when crude briefly traded in the mid-$20 to well over 50% higher less than one month later in one of the world’s most furious short squeezes, was the recurring infatuation with the fabricated narrative that OPEC would if not cut production then, then at least freeze it.
Just four days ago, on Monday afternoon, “legendary” oilman T Boone Pickens said that crude has hit bottom at $26 per barrel, and predicting that prices should double within 12 months.
Pickens then doubled-down on his wrong call from last year, telling CNBC’s “Squawk Box” that oil prices will rise to at least $52 per barrel by the end of the year. That said, he was at least honest enough to admit that his virtually identical call from last year, when he thought prices would strongly rebound, was wrong. Continue reading »
Oil prices around USD 30/bbl mean that an increasingly significant volume of future oil projects no longer make sense. Although Deutsche Bank does not expect US crude inventories to reach capacity, rising US inventories and high US crude imports may heighten downside pressures to push prices closer to marginal cash costs of USD 7-17/bbl for US tight oil, with few plausible scenarios for a strong price recovery in the short term,
The main reason for oil’s torried surge over the past 2 days is that following yesterday’s Russia-Opec “oil production cut” headline fiasco, crude traders – who as we previously reported already had a record net short position – scrambled to cover their exposure on the assumption that where there is oily smoke, there will be fire. We can now put to rest any speculation that OPEC will proceed with any supply cuts, whether Russia requests it or not, because as the WSJ reported moments ago, not only will OPEC not support a supply cut but it will also not support an emergency OPEC meeting.
From a glut in the U.S. supply to fears concerning what will happen now that sanctions on Iran have been lifted, the market for oil is tanking considerably — so much so that one supplier of crude in North Dakota finds itself in the odd position of paying people to take its product.
North Dakota Sour, a high-sulfur crude that’s more expensive to refine than other varieties, has now been listed at -$0.50 per barrel — down from $13.50 per barrel a year ago and $47.60 per barrel in 2014, Bloomberg reported. Continue reading »
But the bigger point is that not only is $20 oil not a shocker any more, it is largely expected and could be indeed welcomed, as first Goldman, then practically everyone else has now admitted it is just a matter of time before oil trades to levels not seen since the 20th century. Continue reading »
“Just another hint that the process to dump the dollar is definitely in play…
Saudi is bleeding with this low oil price, but if it cuts the umbilical to the dollar the bleeding should stop. As usual we’ll have to wait and see what the Rothschilds & Rockefellers tell them to do, but from the article above, it’s on the cards anyway.”
The longer oil languishes, the more pressure builds on Saudi Arabia to abandon its currency peg.
Contracts used to speculate on the riyal’s exchange rate in the next 12 months jumped to a 13-year high on Monday. That reflects growing bets for the currency to weaken for the first time in almost three decades, even after Saudi Arabia said it’s ready to cooperate with other oil producers to stabilize prices.
While the crude oil tanker backlog in Houston reaches an almost unprecedented 39 (with combined capacity of 28.4 million barrels), as The FT reports that from China to the Gulf of Mexico, the growing flotilla of stationary supertankers is evidence that the oil price crash may still have further to run, as more than 100m barrels of crude oil and heavy fuels are being held on ships at sea (as the year-long supply glut fills up available storage on land). The storage problems are so severe in fact, that traders asking ships to go slow, and that is where we see something very strange occurring off the coast near Galveston, TX.
FT reports that “the amount of oil at sea is at least double the levels of earlier this year and is equivalent to more than a day of global oil supply. The numbers of vessels has been compiled by the Financial Times from satellite tracking data and industry sources.”
With oil exports to Europe having slipped from 13% of Saudi’s total to just 10% in the last six months, The FT reports, the de facto leader of OPEC has slashed its Official Selling Price (OSP) to Europe in an effort to regain market share. Saudi lowered its OSP for its Arab light crude grade in Europe by $1.30 a barrel for December, taking its discount to the weighted average of the North Sea Brent benchmark to $4.75 a barrel – the largest discount since February 2009… directly going after Russia’s customer base.
“We expect the Kingdom of Saudi Arabia’s general government fiscal deficit will increase to 16% of GDP in 2015, from 1.5% in 2014, primarily reflecting the sharp drop in oil prices. Hydrocarbons account for about 80% of Saudi Arabia’s fiscal revenues.”
On October 27, the Anglo-Dutch oil major announced that it was pulling the plug on its Carmon Creek oil sands project in Alberta, Canada. The project was expected to yield 80,000 barrels per day in oil sands production, which was originally greenlighted in 2013.
However, the markets have turned against Shell. In March, the company said that it would alter the design of the project to “take advantage of the market downturn to optimize design and retender certain contracts.” The logic was that low oil prices are forcing cost reductions up and down the supply chain, potentially allowing the company to lower construction costs. Continue reading »
Last month, when King Salman arrived in Washington to a fleet of Mercedes S-Classes, we asked if, considering the current circumstances, cutting back on spending might be in order. Indeed, in the wake of Saudi Arabia’s move to tap debt markets, rumors have been circulating for months that the kingdom has enlisted the help of “advisers” to help rein in the ballooning deficit. Now, Riyadh has effectively declared a spending moratorium in the face of self-inflicted crude carnage.
Brazil, which is caught in a vicious recessionary spiral which is only set to get much worse before it gets better, tried to obtain some much needed cash when earlier today it conducted an auction to sell exploration rights for of its oil and gas. It was, in short, a disaster. According to Reuters, by midday Brazil had only sold 17 of 119 blocks offered. A total of 36 companies from 17 countries – including Petrobras, ExxonMobil Corp, BP Plc and Royal Dutch Shell Plc – registered for the auction. None of the majors have bid so far. Only a handful of sold blocks were even contested.
For the 3rd day in a row, crude oil prices are spiking as the short squeeze morphs into a war premium. Heberler reports that Saudi ground troops have entered Northern Yemen and seized control of two areas in the Saada province. WTI is now above $45…
Well, we have a winner – Oil broke to a 3 handle before 10Y rates hit a 1 handle (just – 10Y at 2.04%) following the 5th weekly rise in rig count (+2 to 674). Energy credit risk is soaring to record highs as investors realize ‘there will be blood’ in all those highly-levered loans. This is the first time the front-month crude contract traded below $40 since March 3rd 2009… just before QE was unleashed in all its asset-inflating, malinvestment-driving, zombifying glory.
Earlier today we commented that while stock markets across the globe, heavily influenced by central bank intervention from the PBOC to the SNB, are doing everything in the central planners’ power to telegraph just how irrelevant Greece is, other indicators are far less sanguine. One example was copper, which plunged to a level not seen since February, and was in danger of breaching its 15 year support level. The commodity weakness today has persisted and is now crushing both WTI crude and Brent, both of which are in freefall, and WTI is now down over $3 on the session, or 6%, to a $53 handle, the biggest one day plunge since February to a level last seen in early April when there was much hope that the dramatic plunge in December and January was finally over. Turns out it wasn’t.
“The market is flooded with oil and everyone is desperate to sell quickly, so you have a price war,” a marine-fuel trader in Singapore, the largest ship refueling hub in the world, told Reuters as prices for bunker fuel oil are plunging.
OPEC, which produces about 40% of global oil supply, announced on June 5 to “maintain” output at 30 million barrels per day for the next six months. Six days later, the IEA’s Oil Market Report for June clarified that “Saudi Arabia, Iraq, and the United Arab Emirates pumped at record monthly rates” in May and boosted OPEC output to 31.3 million barrels per day, the highest since October 2012, and over 1 MMbpd above target for the third month in a row. OPEC will likely continue pumping at this rate “in coming months,” the IEA said. Continue reading »
While one could, at least superficially, make the case that for the US consumer (if nobody else) lower oil prices are indeed better than the opposite, we wonder how the same pundits will spin that according to AAA, not only are Los Angeles gas prices now back over $4.00 per gallon, erasing almost all losses from a year ago.
Back in early 2007, just as the first cracks of the bursting housing and credit bubble were becoming visible, one of the primary harbingers of impending doom was banks slowly but surely yanking availability (aka “dry powder”) under secured revolving credit facilities to companies across America. This also was the first snowflake in what would ultimately become the lack of liquidity avalanche that swept away Lehman and AIG and unleashed the biggest bailout of capitalism in history. Back then, analysts had a pet name for banks calling CFOs and telling them “so sorry, but your secured credit availability has been cut by 50%, 75% or worse” – revolver raids.
Well, the infamous revolver raids are back. And unlike 7 years ago when they initially focused on retail companies as a result of the collapse in consumption burdened by trillions in debt, it should come as no surprise this time the sector hit first and foremost is energy, whose “borrowing availability” just went poof as a result of the very much collapse in oil prices. Continue reading »