OEF REVIEW:Nimble U.S. shale oil producers continue to show an uncanny ability to squeeze more and more crude from new wells, allowing them to do more with less as they try to weather another dip in oil prices to $40 a barrel, so they are still seeing output gains from improved well designs and fracking techniques. The pace of innovation is increasing. Pioneer Natural Resources said it was introducing its third generation of well completion techniques, called version 3.0, using even more sand and water than the super-sized volumes introduced as version 2.0 earlier in the price crash to pull more oil out of rock. For its part, Devon Energy Corp has cut costs to drill and complete new wells by 40 percent and plans to cut $1 billion in costs this year.
OEF REVIEW:Oil analysts are looking to next year for a rebound. Crude has plunged as refineries created a glut of gasoline while failing to eliminate excess supply of crude. That wrecked refining margins. Yet, global oil prices will average $57 a barrel in 2017, according to the median of at least 20 analyst estimates compiled by Bloomberg. “We’re looking at a market that’s still in a very slow process of rebalancing and we don’t think that you’ll get a sustainable deficit until the second quarter of 2017,” said Michael Hsueh. Oil companies’ capital expenditure reductions are set to reach $1 trillion by 2020 and this lack of investment “will have a big impact on global supply,” said Hans Van Cleef who forecast Brent will reach $70 next year.
OEF REVIEW:After a long period of dwindling demand, China’s oil consumption showed first signs of stabilizing in June. Total apparent oil demand in the world’s second-largest oil consumer averaged 11.32 million barrels a day that month, up 4% from May. Beijing does not release official data on oil demand and stocks, but Platts, by adding refining output as reported by the National Bureau of Statistics, and net imports as reported by the customs department, apparent demand for gasoil of 3.39 million barrels a day in June was down 6.4% year-on-year but up from the 70-month low of 3.14 million barrels a day in May. Fuel oil demand in June dropped 31.6% year on year to 765,000 b/d, and was 10.9% lower from May levels, and apparent demand for gasoline in June recovered from May, with a 4.6% month-on-month rise to 2.81 million barrels a day, which was also 2.6% higher than the same month last year.
OEF REVIEW:Russian President Vladimir Putin, Eastern Economic Forum, 2018 elections, US General Election, Syria, OPEC, Rosneft sale, Japan, oil, Russian oil and gas companies, investment in energy, natural gas exports, 50 percent ownership, oil and gas revenue, structural changes, industrial production growth
OEF REVIEW:Crude could return to $100 a barrel because the two-year market downturn has curbed investment. Except during the financial crisis in 2008, average Brent prices increased every year from 2002 to 2012, and topped $100 a barrel from 2011 to 2014 and leading companies into higher-costs projects and capacity building that outstripped demand leading eventually to a collapse in prices.
OEF REVIEW:One of the structural flaws driving China’s instability is the existance of a investment situation where profits of state-owned enterprises, known as SOEs, are largely privatised to SOE personnel and losses of SOEs are socialised on to the state budget. This is the cause of the large amount of excess capacity in China’s heavy industries today, and also of the serious non-performing loan problem in state-owned banks. The growing presence of “zombie” firms coincides with the downward trend in the growth of productivity. The social pain resulting from necessary economic adjustments will have to be addressed.
OEF REVIEW:Civilian planes landed on Subi reef and Mischief reef for the first time on July 12th giving China three operational runways in the disputed Spratly Islands in the South China Sea. A military transport plane visited Fiery Cross Reef earlier this year but there is no evidence that Beijing has deployed military aircraft to these outposts. The reefs can easily accommodate any fighter-jet in the People’s Liberation Army Air Force or Naval Aviation.
OEF REVIEW: Mid-August saw the longest period of rig expansion since the final days of the drilling boom in early 2014, according to World Oil, marking the longest period of oilfield expansion since April of that year when drillers added oil rigs nine weeks in a row, reported Baker Hughes Inc. Prompted by an oil price recovery from a 12-year low in February, producers have begun returning parked rigs to service after idling more than 1,000 rigs since the start of last year. The long-term decline in drilling expansion has led to a slowdown in production. Crude output fell by 15,000 barrels per day to 8.45 million barrels per day during the week ended August 5th. “I think it’s just a matter of time before we come into balance,” Paul Crovo, a Philadelphia-based oil and equity analyst at PNC Capital Advisors said. “We think the fundamentals will take care of themselves as we come into the third quarter and later into the fourth quarter and early 2017.”
OEF REVIEW:According to the U.S. Energy Information Administration (EIA) world tight oil production is expected to more than double between 2015 and 2040, increasing from 4.98 million barrels per day in 2015 to 10.36 million barrels per day in 2040. Most of the projected increase will come from the United States, with much of the rest coming from countries such as Russia, Canada, and Argentina. U.S. tight oil production is expected to reach 7.1 million barrels per day in 2040. Tight oil production in Canada will continue to decline until 2020, and then increase over the rest of the projection period, reaching 0.76 million barrels per day in 2040. Argentina is still in the early stages of commercial tight oil production, but projections are that production will double from 2015 to 2020 and will reach 0.69 million b/d in 2040. Russia, Mexico, Colombia, Australia, and other countries that hold large technically recoverable tight oil resources are expected to contribute 18% of the projected total world tight oil production by 2040.