Oil and Gas Issues

[Buddy]

A sucker's play.

ABSOLUTELY.  Likely the largest sucker play IN HISTORY.   And Goldman Sachs will be the "lead cheerleader."

[Laurent]

Oil price needed to balance budget Iran: $138 Venezuela: $120 Iraq: $114 Russia: $100 Saudi: $92 Current: $33.5
https://twitter.com/intlspectator/status/686185733749510145

Don't know if it is valid or not, just impressive. They do not count the price to put them back in earth... !?

[SATire]

Oil price needed to balance budget Iran: $138 Venezuela: $120 Iraq: $114 Russia: $100 Saudi: $92 Current: $33.5
https://twitter.com/intlspectator/status/686185733749510145

Don't know if it is valid or not, just impressive. They do not count the price to put them back in earth... !?

As the oil price drops countries like Russia and USA are just pumping more to trying to cancel that effect a bit. Strange economic behaviour but such it is. At which oil price the budget would ballanced in USA or importing countries like France or EU? Maybe the effect of oil-price is overrated if compared to the budget alone.
Let us just hope for high prices because it maybe could lower consumption. On the other hand, if all countries do what they promised in Paris some weeks ago and reduce consumption regardless of the price of oil, then oil price must go down forever... 
So I would conclude the price of oil does not matter at all in respect to AGW or GDP or such in general. The profits/losses of the producers are just cancelled by the inverted effect of the others.

[Theta]

Oil price needed to balance budget Iran: $138 Venezuela: $120 Iraq: $114 Russia: $100 Saudi: $92 Current: $33.5
https://twitter.com/intlspectator/status/686185733749510145

Don't know if it is valid or not, just impressive. They do not count the price to put them back in earth... !?

As the oil price drops countries like Russia and USA are just pumping more to trying to cancel that effect a bit. Strange economic behaviour but such it is. At which oil price the budget would ballanced in USA or importing countries like France or EU? Maybe the effect of oil-price is overrated if compared to the budget alone.
Let us just hope for high prices because it maybe could lower consumption. On the other hand, if all countries do what they promised in Paris some weeks ago and reduce consumption regardless of the price of oil, then oil price must go down forever... 
So I would conclude the price of oil does not matter at all in respect to AGW or GDP or such in general. The profits/losses of the producers are just cancelled by the inverted effect of the others.

Isn't lack of oil consumption from demand destruction the reason we are experiencing these price drops in the first place?

[SATire]

Isn't lack of oil consumption from demand destruction the reason we are experiencing these price drops in the first place?

No, there is no sign of a long term decline in demand. Demand was rising the last decade and is about constant these days. So it is increasing supply especially from USA and Russia, which was not compensated by reduced supply from OPEC, which results in todays reduction of prices. I was talking about future possibilities - if (and that is a big if) nations take their promises from Paris a few weeks ago seriously, then we would see decrising oil prices for a long time. If we will only burn 50% of the oil we know of today, than prices must drop to close to the costs to pump those easiest 50% of oil. All more expensive producers just pump oil for cash flow but not for sustainable profits... Stupid thing both for AGW and for the investors, I think.

[Sigmetnow]

Earthquakes at Wastewater Injection Site Give Oklahomans Jolt into New Year

Oklahomans rang in the New Year with a reminder of a growing consequence of the drilling boom underway beneath the surface of their state.

Less than six hours after the stroke of midnight on Jan. 1, a magnitude 4.2 earthquake struck directly under the city of Edmond, jolting residents from sleep across the state and triggering an hour-long local power outage for nearly a half-million people.

The event came exactly 72 hours after a slightly larger magnitude 4.3 earthquake rocked the same town, representing the latest in hundreds of seismic events felt by Oklahomans since 2009, when oil and gas production increased in the state. State energy regulators and scientists say these quakes are likely caused by drillers' injection of wastewater deep into wells nearby.
...
Oklahoma experienced around 907 earthquakes at or above magnitude 3.0 in 2015, a more than 50 percent increase since 2014, according to Jeremy Boak, a scientist at the Oklahoma Geological Survey. About 480 such earthquakes were observed in the first half of 2015, and 427 events in the second half, Boak told InsideClimate News.

http://insideclimatenews.org/news/06012016/oklahoma-earthquakes-fracking-oil-gas-drilling-production-wastewater-wells

[sidd]

To me it is absolutely clear that all major oil producers have calculated that future carbon taxes degrades net present value of reserves, so they need to pump and sell as fast as they can. Of course, all of them have made that same calculation. So what they are doing is dragging down the price of oil faster, so the bet is screwing them in decreasing NPV faster than the threat of legislation.

So sad that their credit lines are tied to NPV ...

Heheheheh. Sucks to be caught on the wrong end of the prisoners dilemma.

sidd

[Sigmetnow]

More-detailed technical and regulatory examination of the SoCal gas leak.

California Declares State of Emergency as Leak Becomes Methane Equivalent of Deepwater Horizon
The unfolding disaster comes six years after a study warned of lax oversight at America's underground natural gas storage facilities.
http://insideclimatenews.org/news/07012016/emergency-declared-california-massive-methane-leak-aliso-canyon-so-cal-evacuations-health-benzene-climate-change

[Sigmetnow]

Oil Seen Heading to $20 by Morgan Stanley on Dollar Strength
- Dollar, non-fundamental factors are driving prices, bank says
- Brent fell 10% last week, closing Friday at lowest since 2004

A rapid appreciation of the U.S. dollar may send Brent oil to as low as $20 a barrel, according to Morgan Stanley.

Oil is particularly leveraged to the dollar and may fall between 10 to 25 percent if the currency gains 5 percent, Morgan Stanley analysts including Adam Longson said in a research note dated Jan. 11. A global glut may have pushed oil prices under $60 a barrel, but the difference between $35 and $55 is primarily the U.S. dollar, according to the report.

Morgan Stanley is not the first to forecast a drop to $20 oil, but its reasons differ from other banks. Goldman Sachs Group Inc. has said there’s a possibility storage tanks will reach their limit, pushing crude [prices] down to levels necessary to force an immediate halt to some production.

Stockpiles at Cushing, Oklahoma, the delivery point for U.S. benchmark crude and the nation’s biggest oil-storage hub, expanded for a ninth week to 63.9 million barrels through Jan. 1, according to Energy Information Administration data. The hub has a working capacity of 73 million barrels.

“Oil in the $20s is possible, but not for the reasons often cited,” Morgan Stanley said. “It’s not about deteriorating fundamentals.”

http://www.bloomberg.com/news/articles/2016-01-11/morgan-stanley-sees-20-a-barrel-oil-on-u-s-dollar-appreciation

[AbruptSLR]

US Crude oil prices dropped 5% today to its lowest level since Dec 5, 2003 (see attached plot)

http://www.usatoday.com/story/money/markets/2016/01/11/lower-longer-oil-prices-crater-2003-levels/78639920/

Extract: "The price of crude oil Monday plummeted another 5% to $31.41 a barrel Monday based on WTI Crude Oil. That's the commodity's lowest closing price since hitting $30.73 a barrel on Dec. 5, 2003, according to Bloomberg data."

[wili]

Sooo, lower than after the '08 stock market crash!

Does this portend a general global deflationary spiral?

In some other coverage of this: "We think prices could fall as low as $10/bbl..."
http://www.reuters.com/article/us-global-oil-idUSKCN0UQ02220160112

http://www.nytimes.com/2016/01/12/business/energy-environment/oil-prices-slide-again-and-the-bottom-is-not-visible.html

Oil Prices Slide Again, and the Bottom Is Not Yet in Sight

“Recent price declines for major commodities are now greater than in any crisis of the past 30 years and speculative positioning much more negative than it was even in the depths of the financial crisis”...

[Buddy]

http://www.wsj.com/articles/oil-plunge-sparks-bankruptcy-concerns-1452560335

Really good article....with many interesting "tidbits".....like:

1)  $353 billion dollars of debt as of 2015 in the 134 publicly held oil and gas companies the article looked at.

2)  That is a SIGNIFICANT increase over prior years....when oil prices were MUCH HIGHER

3)  Companies including Sandridge Energy Inc.,  Energy XXI Ltd.  and  Halcón Resources Corp.  all paid more than 40% of third-quarter revenue toward interest payments on their loans, according to S&P Capital IQ.

If someone is paying 40% of their REVENUE as interest payments....they are in BIG TROUBLE.

4)  Scott Sheffield, chief executive at  Pioneer,  said pulling more oil and gas out of the ground makes sense even though prices are low because the company’s most efficient wells still make good returns. Plus investors keep rewarding growth at energy companies considered to be solid.

“The ones that announced production declines into 2016, their stocks are getting hammered,” Mr. Sheffield said in an interview. Pioneer’s shares have lost about 16% in the past year, but the company successfully sold $1.4 billion worth of new stock last week in an oversubscribed equity offering.

MY NOTE:  What Scott DIDN'T SAY in the article...is that Pioneer's stock was $230 in June of 2014....and it is now $113 (and from its chart....looks like it COULD visit $75 in its near future:).

5)   Since financial distress hasn’t been a good mechanism for slowing down U.S. oil production, many analysts fear that any pullback may come too late. U.S. government estimates pegged output at 9.2 million barrels a day at the start of 2016—1% higher than the start of last year when oil was trading for 40% more.

That last one....#5....is pretty amazing..... 

[Sigmetnow]

Sooo, lower than after the '08 stock market crash!

Does this portend a general global deflationary spiral?
...

Not necessarily.  Oil is big, but it's not the sole global economic driver.  We need a big change in the fossil fuel industry, and we're seeing it.  Smaller and more efficient, tightly-run oil companies, focusing less on exploration and fewer new oil projects would be welcome as we make the transition.  Coal companies are going bankrupt left and right, but our lights are still on. 

BP Plans to Cut Around 4,000 Jobs Amid Oil Price Plunge
http://www.nbcnews.com/business/business-news/bp-plans-cut-around-4-000-jobs-amid-oil-price-n494581

Mon Jan 11, 2016:
Arch Coal files for bankruptcy, hit by mining downturn
http://mobile.reuters.com/article/idUSKCN0UP0MR20160111

Gas prices could drop toward $1 a gallon
http://www.usatoday.com/story/money/cars/2016/01/10/oil-gas-prices-one-dollar-gallon/78080908/

[Sigmetnow]

Company Behind Souther California Methane Leak Is Ordered to Offset the Climate Damage

California Gov. Jerry Brown ordered Southern California Gas Co. to pay for a mitigation program to offset damage to the world's climate from a massive methane leak at an underground natural gas storage facility in Los Angeles.

The directive was part of Brown's Jan. 6 declaration of a state of emergency. The ongoing leak has caused more than 2,300 people to evacuate their homes and forced school closures in the Porter Ranch neighborhood of northwest Los Angeles. Brown's proclamation also directed state agencies to protect public health and safety, oversee efforts to stop the 12-week-old leak and ensure that SoCal Gas is held accountable for costs and any violations.

http://insideclimatenews.org/news/10012016/california-methane-leak-so-cal-gas-company-ordered-offset-carbon-emissions-climate-change-governor-brown

[Shared Humanity]

Sooo, lower than after the '08 stock market crash!

Does this portend a general global deflationary spiral?
...

Not necessarily.  Oil is big, but it's not the sole global economic driver.  We need a big change in the fossil fuel industry, and we're seeing it.  Smaller and more efficient, tightly-run oil companies, focusing less on exploration and fewer new oil projects would be welcome as we make the transition.  Coal companies are going bankrupt left and right, but our lights are still on. 

Our lights are still on because coal companies, the day after filing bankruptcy, mine just as much coal as they mined the day before. And they will continue to do so. You are conflating the financial effects of declining prices with the real economy of coal mining and consumption.

[Shared Humanity]

And because of this drop in prices, SUV and pick up sales in the U.S. have climbed dramatically.

http://www.autonews.com/article/20151216/OEM11/151219906/cheap-gas-spurs-suv-sales-and-puts-u.s.-climate-goals-at-risk

[JimD]

The head of the Dallas Fed thinks that oil will stay down for as long as 3 years.

Oil Plunges toward $30, Dallas Fed President Sucker-Punches any Leftover Oil Bulls

“Even lower for even longer”

You’d expect at least some artificial optimism when the president of the Dallas Fed talks about oil. You’d expect some droplets of hope for that crucial industry in Texas. But when Dallas Fed President Robert Kaplan spoke on Monday, there was none, not for 2016, and most likely not for 2017 either, and maybe not even for 2018.

The wide-ranging speech included a blunt section on oil, the dismal future of the price of oil, the global and US causes for its continued collapse, and what it might mean for the Texas oil industry: “more bankruptcies, mergers and restructurings….”

.....So how low is “even lower?”

He didn’t say. But here is what is happening right now, just hours after Kaplan got through speaking. On Monday during the day and in late trading, WTI plunged through the $32-level, through the $31-level, and hit $30.53 a barrel, as I’m writing this, down another 7.1%:....

Morgan Stanley, Goldman Sachs, Citigroup, and others have been projecting that WTI will break through the $30-line and head toward $20. .....

http://wolfstreet.com/2016/01/12/oil-plunges-to-30-handle-dallas-fed-president-sucker-punches-any-surviving-oil-bulls/

Note that RBS thinks:

RBS has advised clients to brace for a “cataclysmic year” and a global deflationary crisis, warning that major stock markets could fall by a fifth and oil may plummet to $16 a barrel.

http://www.telegraph.co.uk/finance/economics/12093807/RBS-cries-sell-everything-as-deflationary-crisis-nears.html

[Shared Humanity]

Note that RBS thinks:

RBS has advised clients to brace for a “cataclysmic year” and a global deflationary crisis, warning that major stock markets could fall by a fifth and oil may plummet to $16 a barrel.

http://www.telegraph.co.uk/finance/economics/12093807/RBS-cries-sell-everything-as-deflationary-crisis-nears.html

From above link....

"Larry Summers, the former US Treasury Secretary, said it would be a mistake to dismiss the current financial squall as froth. Markets often sense a gathering storm when policy-makers are still asleep at the wheel. He has long argued that the world economy is so far out of kilter that it takes permanent financial bubbles to keep growth going, an inherently unstable structure."

I have been arguing this point here for more than 2 years. The global economy has been facing growing structural issues for decades. It is what triggered the financial crisis in 2007. We barely escaped a complete meltdown and brutal deflation. The response was to flood the world economy with liquidity, driving interest rates to zero where they have essentially remained in a desperate attempt to increase demand for products. This strategy will ultimately fail.

Anyone and I mean anyone who is selling the specter of inflation is a fool or a charlatan. If you have invested in commodities, particularly precious metals, you are absolutely screwed.

The structural problem is identical to the problem capitalism faced in the 1920's and it triggered the Great Depression. The structural problem was a lack of demand for goods. Post WWII, this demand crisis was overcome by capitalism expanding and absorbing the remainder of the undeveloped world. This expansion provided entirely new regions with high ROI opportunities. This fueled the growth of the 2nd half of the 20th century. This time, there are simply no regions of the planet left to develop, certainly none large enough to solve the problem.

Once widespread deflation sets in, not just commodities, the demand destruction will be horrific as people, businesses and government desperately try to reduce debt.

Hang onto your hats! It's going to be a very bumpy ride. Financial crises take decades to resolve.

Any over-leveraged business, individual or government is likely headed for bankruptcy and, at least in the U.S., that's just about everybody.

[Theta]

Kind of scary, especially since Gail Tverberg thinks that the oversupply issue could cause oil to dip below $10.

There is no way oil will be profitable at $20 anyway, let alone $10

Also, I don't think this financial crisis will be resolved, once we hit the crisis, civilisation could be down overnight, which could be a good thing for nature, or a bad thing as humanity slaughters one-another for canned goods, and slaughters nature for resources.

[Buddy]

First EXPORT of liquefied natural gas from the continental US is happening this week.  I believe there are 2 or 3 export facilities in the US that will come online this year.

http://247wallst.com/energy-business/2016/01/11/first-us-lng-cargo-to-begin-loading-this-week/

[Csnavywx]

Oil down to 30.33 today. RBOB is sitting at $1.05/gal. Local stations now selling gas for around $1.60 (and falling).

[Sigmetnow]

Oklahoma Residents Sue Energy Companies Over Earthquake Damage

Oklahoma has been hit by swarms of earthquakes over the last few years, and some residents have had enough.

This week, a group of 14 homeowners in Edmond, Oklahoma filed a lawsuit against 12 energy companies, claiming that the companies’ fracking operations have contributed to this uptick in earthquakes. Specifically, the lawsuit targets the companies’ wastewater disposal wells, claiming that the injection of fracking wastewater into these wells “caused or contributed” to earthquakes and constituted an “ultrahazardous activity.”

http://thinkprogress.org/climate/2016/01/12/3738417/oklahoma-earthquake-residents-lawsuit/

[Sigmetnow]

U.S. Federal Reserve Bank of St. Louis President James Bullard suggests the latest decline in oil prices may delay the return of inflation to the central bank’s 2 percent target.

In his prepared remarks to the Economic Club of Memphis, Bullard said the “very substantial” drop in oil prices has contributed to low inflation, and further declines may delay the return of inflation to target. Under a scenario in which prices fall through June, a return to 2 percent wouldn’t occur until mid-2017, he said.
...
The U.S. economy is likely to grow 2.5 percent to 3 percent this year, and recent market volatility is no reason to revise that forecast, he told reporters.

http://www.bloomberg.com/news/articles/2016-01-14/fed-s-bullard-says-oil-s-fall-may-delay-inflation-return-to-2-

[Laurent]

The LA Gas Leak Is Scarier Than We Thought
http://gizmodo.com/the-la-gas-leak-is-scarier-than-we-thought-1752935526?utm_campaign=socialflow_io9_facebook&utm_source=io9_facebook&utm_medium=socialflow

Since a gas leak erupted outside LA on October 23rd, over 83,000 metric tons of methane have escaped to the atmosphere, prompting public officials to evacuate the neighboring community of Porter Ranch. But as a disturbing new analysis shows, a much broader swath of LA is now drowning in methane.

The Home Energy Efficiency Team (HEET) is a Cambridge-based nonprofit that’s been shedding light on leaky natural gas infrastructure for years. Last week, HEET sent Boston University Professor Nathan Phillips and Bob Ackley of Gas Safety out to LA to measure pollution in the air surrounding Porter Ranch.

Armed with a laser gas analyzer that can sniff out airborne methane with parts-per-billion precision, Phillips and Ackley drove around the LA area measuring methane concentrations for a period of five days. Every time their analyzer detected elevated gas levels, it plotted the numbers to Google Earth. The red bars on their maps indicate where they drove, with higher bars corresponding to higher methane concentrations.

[Laurent]

Oil tumbles below $ 30 per barrel
https://www.washingtonpost.com/news/energy-environment/wp/2016/01/15/oil-breaks-below-30-per-barrel/

Oil plunged sharply below $ 30 per barrel Friday after flirting with that level all week, as the market anticipated a flood of new Iranian oil due to the lifting of sanctions.

Brent crude on the Intercontinental Exchange in London dropped as low as $ 28.82, and was down over 6 percent Friday early afternoon. West Texas Intermediate crude, on the New York Mercantile Exchange, fell as low as $ 29.13.

The moves accompanied a broader plunge in the U.S. markets, with the Dow Jones industrial average breaking below 16,000, and off over 300 points overall.

The oil price decline in 2016 has been remarkable. Brent closed out 2015 at $ 37.28 per barrel on Dec. 31. Its low so far Friday was nearly $ 8 cheaper, a decline of some 21 percent.

There’s a “trifecta going on here” in terms of factors that are driving down oil prices, said Tom Watters, a managing director at Standard & Poor’s specializing in the oil and gas sector. The three factors are a “stronger dollar, concerns about demand growth, and of course, supply,” he said.

A stronger dollar makes oil more pricey for purchase in other currencies, which decreases global demand. Worries about whether demand will grow more broadly, meanwhile, are closely tied to China and the sense that a major consumer of the commodity may want less oil than previously thought.

And then, of course, there’s supply, supply, supply, which has been the bottom line here since the oil price plunge began back in late 2014. OPEC’s strategy of maintaining market share, adopted last November, is not having as fast an effect as may have been originally anticipated when it comes to pushing other producers to back down as prices plunge.

Russia is at “record output,” Watters said, and U.S. shale has been surprisingly resilient. And now, next up is Iran, which could see sanctions lifted in the next few days.

As for the current price and how low it could go, that’s becoming a subject of very hot discussion, with most observers and analysts still feeling that oil won’t go below $ 20, said Michelle Michot Foss, chief energy economist at the Bureau of Economic Geology at the University of Texas at Austin. But some think it will fall farther than that.

“Everybody is searching for a floor, and we just haven’t gotten to it,” says Foss. “It’s going to be a hard landing because of everything else that’s going on out there.”
Chris Mooney reports on science and the environment.

[Sigmetnow]

Oil Slides to Lowest Since '03 After Iran Sanctions Lifted

Worries about Iran's return to an already oversupplied oil market drove down Brent crude to $27.67 a barrel early on Monday, its lowest since 2003. The benchmark was at $28.59 by 4:21 a.m. ET, down 38 cents from its settlement on Friday.

http://www.nbcnews.com/business/energy/oil-slides-lowest-03-after-iran-sanctions-lifted-n498811

[Buddy]

This week we will likely find out if the oil markets have already "priced in" the Iranian oil coming onto the oil market....OR...if there is any material downside left.

Here was the Baker Hughes rig count for the week:

http://www.marketwatch.com/story/baker-hughes-reports-us-oil-rig-count-down-by-1-2016-01-15

Only "lost" 1 oil rig....although natural gas was down more.  The chart below gives you a much better LONG TERM VIEW of the oil rig count starting in January of 1973 and ending January 15, 2016:

http://www.wtrg.com/rigs_graphs/rigus.gif

You can see from the graphs...that long term, the 500 level of drilling rigs provided that last LONG TERM BOTTOM in 1999.

It's too bad that PRODUCTION isn't overlayed on that chart as well.  Obviously....technology has played a large part over the past 10 years via horizontal fracking in the oil fields.  If production WAS overlayed on that chart....you would see that PRODUCTION PER WELL is much higher now...vs the 1973 - 2000 time period.

Bottom line....is that that price of oil is "working on a bottom".  How LONG that will take is anyone's guess.....and now the oil markets are working against alternative energy sources to boot.

Interesting times.....

[Sigmetnow]

Oil at negative pricing!  "Pay me to take your oil away."

The North Dakota Crude Oil That's Worth Less Than Nothing
>  Flint Hills values North Dakota Sour crude at -$0.50 a barrel
http://www.bloomberg.com/news/articles/2016-01-18/the-north-dakota-crude-oil-that-s-worth-less-than-nothing

[AbruptSLR]

Per the following linked article Iran will begin to ship 500,000 barrels per day, starting immediately, and plans to add another half a million barrels per day within a few months time:

http://www.bloomberg.com/news/articles/2016-01-18/iran-gives-order-to-boost-crude-oil-output-amid-global-glut

[Sigmetnow]

Half of U.S. Fracking Industry Could Go Bankrupt as Oil Prices Continue to Fall

Last week, one analyst predicted that half of U.S. shale oil producers could go bankrupt before the oil price rebalances itself.

Fadel Gheit, a senior oil and gas analyst at Oppenheimer & Co believes it could be two years before oil stabilizes near $60, which is still below the break-even point for many shale producers.

“Half of the current producers have no legitimate right to be in a business where the price forecast even in a recovery is going to be between, say, $50, $60. They need $70 oil to survive,” he told CNBC.

http://ecowatch.com/2016/01/18/fracking-industry-bankrupt/

[Sigmetnow]

Norway's Shift to Life After Oil Now Speeding Up, Nordea Says

Norway is being forced to bring forward plans to end its reliance on oil as the crude price plunge saps jobs, according to the head of Nordea Bank AB’s Norwegian unit.

“This adjustment is coming a bit faster than one thought,” Snorre Storset, who started as CEO of the unit on Thursday, said in an interview in Oslo. “Long term this can be an advantage for Norway because you preempt this whole thought process of where we will be after the oil, which actually can make us create new jobs.”

Norway is struggling to adapt to a 72 percent drop in oil prices over the past 18 months as OPEC effectively abandoned output limits amid a global surplus. That has forced the government to start a transformation to cut the economy’s reliance on oil.

http://www.bloomberg.com/news/articles/2016-01-18/norway-s-shift-to-life-after-oil-now-speeding-up-nordea-says

[Sleepy]

Nordea has made "huge" efforts the last year to mitigate. But they are still stuck in fossils with 17,9 billion SEK. Picture attached.

The Nowegian Petroleum Directorate seems optimistic enough.
http://www.npd.no/en/news/News/2016/Summary/

There was a substantial drop in revenues, but the industry continues to make a strong contribution toward maintaining Norway's general welfare level.

"Even in a demanding year, it's good to see that the oil and gas industry is still the country's largest, with total export values reaching well over NOK 400 billion," says Director General Bente Nyland.

"It is also gratifying to see that the industry has invested substantial effort in increasing efficiency. This work is starting to materialise in the form of lower costs."

Eighty-two fields were in operation at the end of 2015, compared with 51 ten years ago. This illustrates the enormous development activity that has taken place in recent years. Never before have more wells been drilled than in 2015, when exploration wells are included. Fifty-six exploration wells were spudded; 11 discoveries were made in the North Sea, and six in the Norwegian Sea. However, most of these discoveries were minor.

From a record level in 2013 and 2014, investments fell by about 16 per cent from 2014, to just under NOK 150 billion. They are expected to continue their decline going forward, followed by a moderate increase from 2019. The NPD estimates that total costs will be well in excess of NOK 200 billion per year in the next few years.

[Sigmetnow]

Some Bankrupt Oil and Gas Drillers Can't Give Their Assets Away

The four biggest U.S. banks -- Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo & Co. -- have set aside at least $2.5 billion combined to cover souring energy loans and have said they’ll add to that if prices stay low.
...
“So much of the frenzy in shale in the past few years was a result of the money pouring out of Wall Street,” said Clark of White Marlin. “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.”

http://www.bloomberg.com/news/articles/2016-01-20/some-bankrupt-oil-and-gas-drillers-can-t-give-their-assets-away

[AbruptSLR]

I imagine that with these low oil prices, SUV sales will jump up:

http://www.reuters.com/article/us-global-oil-idUSKCN0UY04U

Extract: "U.S. oil prices crashed to below $27 dollars on Wednesday for the first time since 2003, caught in a broad slump across world financial markets with traders also fearful that the crude supply glut could last longer.
The slide of more than 25 percent in oil prices so far this year has piled more pain on oil drillers and producing nations alike, yet they continue to pump more oil into an oversupplied market."

[Buddy]

Next couple of months will likely be a "rough ride" in the oil and gas markets (AND....the stock market).

NOBOBY really "knows" what is going on in China.  One thing for sure....is that "rail car activity" in the US has slowed appreciably over the past couple of months (year over year....not just the usual seasonal slowdown).  Although...surprisingly...."intermodal activity" is actually UP slightly over last year.  Intermodal.....is the "containers" that are shipped worldwide and transition between trucks and ships.  Most consumer goods are included in "intermodal".

The BIG DROPS were in coal and petroleum products (heavy oil from the tar sands in Canada would be part of that big drop in petro products).

Here is a few paragraphs from the report (link at the bottom):
========================================================
Three of the 10 carload commodity groups posted an increase compared with the same week in 2015. They were miscellaneous carloads, up 21.4 percent to 8,437 carloads; motor vehicles and parts, up 2.8 percent to 16,751 carloads; and chemicals, up 2.2 percent to 31,687 carloads. Commodity groups that posted decreases compared with the same week in 2015 included coal, down 32.6 percent to 75,308 carloads; metallic ores and metals, down 24.2 percent to 18,690 carloads; and petroleum and petroleum products, down 18.5 percent to 12,852 carloads.

For the first 2 weeks of 2016, U.S. railroads reported cumulative volume of 481,891 carloads, down 15.1 percent from the same point last year; and 522,702 intermodal units, up 4.2 percent from last year. Total combined U.S. traffic for the first 2 weeks of 2016 was 1,004,593 carloads and intermodal units, a decrease of 6 percent compared to last year.
========================================================

Also note....in the US, jobless claims increased by 10,000.  Most economic numbers in the US point towards a continued "slowing" in the economy.  Whether that gets us to a "technical" recession in future weeks and months.....is unknown of course.  I suspect that we will be CLOSE if not actually IN a MILD recession in future months in the US.

Russia is an absolute economic mess....ditto for Brazil.....and in China nobody knows for sure (other than it is slowing down).  Not a great backdrop for commodities....as they continue to get hammered.

Frackers are going to have a rough first half to the year....

[Buddy]

Oil companies:  Deleveraging ahead

http://www.fool.com/investing/general/2016/01/20/this-is-the-only-thing-oil-companies-will-be-doing.aspx?source=eogyholnk0000001&utm_source=yahoo&utm_medium=feed&utm_campaign=article

[Buddy]

Here is an article that points to the world oil markets being AT or NEAR a turning point.  Indeed....when Goldman Sachs is pointing towards markets (in this case Oil) going lower....I want to be on the "other side" of that bet.  Not that Goldman would intentionally mislead investors or lie to investors like they did during the banking crisis or anything.....(wink..wink...).  Just saying...I want to take the other side of that bet.....

http://finance.yahoo.com/news/oil-markets-balancing-faster-iea-224652585.html

In fact....commodities in general may be turning.  Which is a good thing....because the metals markets have been beaten like a red-headed step child for the last 4 years and 10 months (but who's counting?).  I love to buy GOOD THINGS.....that NOBODY WANTS.

[Buddy]

Here is an article that almost everyone should read.  It takes a look at the "divergence" between commodities (represented by what is called the CRB) and stocks (specifically the S&P 500).

http://www.safehaven.com/article/40034/the-incredible-commodities-stock-divergence-and-what-it-portends

Oil and gas commodities make up a large portion of the CRB (although that portion has been declining with the downturn in oil, nat gas, and coal prices).

But the article takes a LONG TERM VIEW of both commodities (via the CRB) and stocks.  I will caution you....this article is one persons view (the authors).   He looks at BOTH the "technical aspects" (the charts) AND the fundamental aspects of commodities, stocks, and debt.

A famous mathematician by the name of Fibonacci (is at the heart of "chart analysis".  Fibonacci looked CLOSELY at nature (note:  he lived from about 1175 - 1250).  Here is one of thousands of links to Fibonacci information for any gearhead who wants to go on a "deep dive" into the mathematics behind Fibonacci:

http://www.maths.surrey.ac.uk/hosted-sites/R.Knott/Fibonacci/fibnat.html

Keep in mind as you read the article linked near the top of the page.....that FUNDAMENTALS cause the technical (chart).......the "technical's do NOT cause the fundamentals....

Enjoy...

[Sigmetnow]

U.S.:  Oil's Collapse Hurting States That Were Counting on $50-a-Barrel
http://www.bloomberg.com/news/articles/2016-01-22/oil-s-collapse-hurting-states-that-were-counting-on-50-a-barrel

[Sigmetnow]

North Sea Drilling at Record Low Spells End to Region's Revival

Statoil ASA, which operates more than 70 percent of Norway’s oil and gas production and dominates its offshore industry, has in the past 1 1/2 years scrapped the equivalent of four years of drilling by one rig, according to data compiled from company filings. Before long there’ll be a rig “graveyard” in the North Sea, Nordea Markets said in November. The 30 exploration wells planned off Norway this year compare with 56 in 2015, the Norwegian Petroleum Directorate said Jan. 14.

Statoil has lost more than 20 percent of its value in the past year. Norwegian driller Seadrill Ltd. tumbled 79 percent. Transocean Ltd., which also drills in the North Sea, declined 40 percent in New York.

http://www.bloomberg.com/news/articles/2016-01-22/north-sea-drilling-at-record-low-spells-end-to-region-s-revival-ijox9779

[Sigmetnow]

Do Hundreds of Other Gas Storage Sites Risk a Methane Leak Like California's?
More than 400 facilities holding huge storehouses of natural gas get little regulatory oversight as their infrastructure ages.
http://insideclimatenews.org/news/22012016/california-methane-leak-disaster-hundreds-other-natural-gas-storage-aliso-canyon-california-porter-ranch

[crandles]

http://www.bbc.co.uk/news/business-35398426
has an interesting quote:

"The current environment is putting this future at risk. At current price levels, it is clear that not all of the necessary future investment is viable," Mr al-Badri said.

Normally if an investment isn't viable it wouldn't be appropriate let alone 'necessary'. So this seems a bit odd. It seems to signal a belief that current investments are insufficient to keep oil flowing at a rate that is necessary because renewables cannot possibly get sufficient investment to make up for the fall in oil production that will occur if oil investments do not pick up.

Does this signal denial - a refusal to believe the market signal that the oil industry should shrink so much, or
is it a sensible position that current glut of oil is a short term issue, oil prices will rise again and oil investments will resume as is going to be necessary to be able to meet future demand for energy?

Is he denying the potential of renewables to be better than oil? And/or denying the potential for a deflationary spiral to cause significant contraction of economies?

[Sigmetnow]

Is Oil's Drag on U.S. Growth Finally Over?

Households and businesses have better weathered the storm on this occasion in part due to the state's more diversified economy, Goldman Sachs suggests, observing that oil and gas extraction as a share of gross domestic product has fallen to 12 percent in 2013 from 19 percent in 1981.

http://www.bloomberg.com/news/articles/2016-01-25/is-oil-s-drag-on-u-s-growth-finally-over-

[Richard Rathbone]

http://www.bbc.co.uk/news/business-35398426
has an interesting quote:

"The current environment is putting this future at risk. At current price levels, it is clear that not all of the necessary future investment is viable," Mr al-Badri said.

Normally if an investment isn't viable it wouldn't be appropriate let alone 'necessary'. So this seems a bit odd. It seems to signal a belief that current investments are insufficient to keep oil flowing at a rate that is necessary because renewables cannot possibly get sufficient investment to make up for the fall in oil production that will occur if oil investments do not pick up.

Does this signal denial - a refusal to believe the market signal that the oil industry should shrink so much, or
is it a sensible position that current glut of oil is a short term issue, oil prices will rise again and oil investments will resume as is going to be necessary to be able to meet future demand for energy?

Is he denying the potential of renewables to be better than oil? And/or denying the potential for a deflationary spiral to cause significant contraction of economies?

He's telling people that investment in fracking (and other high cost production techniques) isn't going to pay and the sooner they stop doing it, the sooner the oil price can go back up again.

[crandles]

He's telling people that investment in fracking (and other high cost production techniques) isn't going to pay and the sooner they stop doing it, the sooner the oil price can go back up again.

When you say stop doing 'it' do you mean drilling new wells or pumping oil from existing wells? I think he is saying investment is too low so there needs to be more investment in drilling. He wants pumping to be reduced (but who wants to do that when it would hurt more than than just low prices and pumping lots with little reinvestment).

I am pointing out that he appears to have reached this conclusion despite market information suggesting it isn't worth investing more.

This might be inappropriate arrogance that he wrongly thinks he knows better than the market what size the market should be. Alternatively he might be right it is just a temporary problem of the price being too low due to a glut of oil because everyone is concentrating on pumping lots and investing very little. If this continues too long then production eventually will decline sharply due to too little investment and the price rises sharply. This might promote high cost fracking investments because these have shorter time before crude is produced rather than lower cost oil investments.

The more alarm about 'necessary investment isn't viable' the more I would tend to think we are on this latter path.

[JimD]

crandles

Normally if an investment isn't viable it wouldn't be appropriate let alone 'necessary'. So this seems a bit odd. It seems to signal a belief that current investments are insufficient to keep oil flowing at a rate that is necessary because renewables cannot possibly get sufficient investment to make up for the fall in oil production that will occur if oil investments do not pick up.

Does this signal denial - a refusal to believe the market signal that the oil industry should shrink so much, or is it a sensible position that current glut of oil is a short term issue, oil prices will rise again and oil investments will resume as is going to be necessary to be able to meet future demand for energy?

No one believes in a free market solution here.  Not the OPEC guys, the analyst in the article, the USG nor any of the oil producers.  They all seek some advantage which will make them richer in some way.  The oil & gas industry has never been a free market (not that any free markets really exist anywhere) as it is intertwined fully into the national security of all countries and its wealth buys significant influence in all democratic countries and control of it frequently determines government survival in a host of other countries. 

What we are seeing in the oil markets has nothing to do with their following any kind of ideal free market pattern.  In a true free market fracking or tar sands production would never have happened.  They are outrageously expensive. 

The entire article floats on a mistaken BAU argument as well.  It presumes that the demand for oil and gas will continue as long as there is a supply.  That this artificial situation we are in that has resulted in very low prices which will likely be down for several years is going to kill necessary investment by the low cost producers to be able to maintain their production.  While it is very likely true that killing off a large percentage of the high cost producers is not a bad thing they are also correct that it will dramatically slow investment by everyone.  Since even the large low cost fields have production declines over time there is a requirement to invest in new capacity to keep production level or even to increase it.

But the big kicker here is that we don't really care what is good for their bottom line nor do we give a damn what some free market nonsense might come up with regarding oil and gas (and coal) exploration and production. What we care about is survival and since we already know where far more oil/gas/coal is than we ever dare burn we really could care less what these folks trying to figure out how to make more profits think is the thing to do.  There should be a global ban on exploration for new sources and development/production of low EROEI sources.  Just use the best sources we have for the absolute minimum we can get away with...and then stop using them.  We need to deliberately and efficiently kill the fossil fuel industries.  Save all that capital that the 'free market' is going to inefficiently waste and use it on trying to keep civilization afloat.

[Buddy]

Exxon and Chevron....along with almost all oil stocks had another bad day.

I see about 20% downside (SHORT TERM) in both Exxon and Chevron in coming weeks/months.  THAT...is going to be painful for some folks....and Mr. Market won't like it either.

Humans are SOOOOOOO short sighted.  I still can't believe that people REBUILT on the New Jersey shore!  Why did they do that?  Just to get a better look at the NEXT STORM that is going to swamp their house?

And the same short sightedness goes for oil and gas.  Does anyone with their eyes open REALLY think there is much future for oil and gas products?  A product that is NOT RENEWABLE....and is getting more expensive to find?

Incredible.  I see Exxon and Chevron at $60ish in coming weeks before we likely get a HUGE COUNTER-TREND RALLY.  If Exxon dips below $56......it will act like a "bungy cord" and likely bounce HIGHER once it bounces.  But long term......Exxon and Chevron and most other oil stocks are DEAD MEAT.  The fundamentals are HORRIBLE.....and the "technical chart picture" points to FUTURE DEATH (large head and shoulders....or....it might "morph" into broadening top....both ending in a very bad future).

Exxon has a market cap of $308 billion US dollars....and Chevron has about $150 billion US dollars.

It is going to be....as Paul McCartney once sang....."a long and winding road"......down.

[Neven]

crandles

Normally if an investment isn't viable it wouldn't be appropriate let alone 'necessary'. So this seems a bit odd. It seems to signal a belief that current investments are insufficient to keep oil flowing at a rate that is necessary because renewables cannot possibly get sufficient investment to make up for the fall in oil production that will occur if oil investments do not pick up.

Does this signal denial - a refusal to believe the market signal that the oil industry should shrink so much, or is it a sensible position that current glut of oil is a short term issue, oil prices will rise again and oil investments will resume as is going to be necessary to be able to meet future demand for energy?

No one believes in a free market solution here.  Not the OPEC guys, the analyst in the article, the USG nor any of the oil producers.  They all seek some advantage which will make them richer in some way.  The oil & gas industry has never been a free market (not that any free markets really exist anywhere) as it is intertwined fully into the national security of all countries and its wealth buys significant influence in all democratic countries and control of it frequently determines government survival in a host of other countries. 

What we are seeing in the oil markets has nothing to do with their following any kind of ideal free market pattern.  In a true free market fracking or tar sands production would never have happened.  They are outrageously expensive. 

The entire article floats on a mistaken BAU argument as well.  It presumes that the demand for oil and gas will continue as long as there is a supply.  That this artificial situation we are in that has resulted in very low prices which will likely be down for several years is going to kill necessary investment by the low cost producers to be able to maintain their production.  While it is very likely true that killing off a large percentage of the high cost producers is not a bad thing they are also correct that it will dramatically slow investment by everyone.  Since even the large low cost fields have production declines over time there is a requirement to invest in new capacity to keep production level or even to increase it.

But the big kicker here is that we don't really care what is good for their bottom line nor do we give a damn what some free market nonsense might come up with regarding oil and gas (and coal) exploration and production. What we care about is survival and since we already know where far more oil/gas/coal is than we ever dare burn we really could care less what these folks trying to figure out how to make more profits think is the thing to do.  There should be a global ban on exploration for new sources and development/production of low EROEI sources.  Just use the best sources we have for the absolute minimum we can get away with...and then stop using them.  We need to deliberately and efficiently kill the fossil fuel industries.  Save all that capital that the 'free market' is going to inefficiently waste and use it on trying to keep civilization afloat.

Very well put, Jim.

[Buddy]

If anyone likes LOW GASOLINE PRICES....they will like this article.  If you want higher oil and gas prices......not so much.

http://finance.yahoo.com/news/wall-street-got-china-oil-162720861.html

[Richard Rathbone]

..  There should be a global ban on exploration for new sources and development/production of low EROEI sources.  Just use the best sources we have for the absolute minimum we can get away with...and then stop using them.  We need to deliberately and efficiently kill the fossil fuel industries. 

The Saudis agree with you. They think that their oil is the oil that should be burnt and other people's oil is the oil that should stay in the ground. And they will keep the price low enough, for long enough, to prove their point.