Thursday, 13 December, 2018

Crude Oil Snaps Out Of Brief Funk

U.S. oil prices fall after weekly supply data U.S. oil prices fall after weekly supply dataMore
Nellie Chapman | 02 February, 2018, 21:12

Top exporter Saudi Arabia boosted output by 50,000 bpd, according to sources in the survey who cited higher exports for much of January.

Almost all the recent surge has come from the lower 48 states excluding federal waters in the Gulf of Mexico.

USA production is forecast to average 10.3mn bpd this year, and 10.9mn in 2019, the EIA said in January 9 in its monthly Short-Term Energy Outlook.

Oil is becoming more expensive, despite recent data from the U.S. Energy Department on the growth of reserves and production in the country over the past week. In annual terms, the number of drilling rigs increased by 235 units, or 1.3 times.

Smaller, older rigs have been idled or replaced by newer, larger and more powerful equipment that can bore through rock faster and further. Venezuela's oil output fell by 14 percent over the past year.

West Texas Intermediate crude for March delivery advanced 72 cents to US$65.45 a barrel at 9:54 a.m. on the New York Mercantile Exchange. Last month's total was revised down by 110,000 bpd to the lowest since April 2017. Gas prices are at their highest in months and expected to rise further. The rig count has been rising since June 2016.

Iraq will begin exporting next week 60,000 bpd of oil from the fields in Kirkuk to an Iranian refinery across the border via tanker trucks, in exchange for refined oil for southern Iraq.

Understanding the lags in the system between prices, drilling and production is absolutely critical to making sense of the data. Exxon Mobil Corp is spending billions to triple output by 2025 from the Permian, where its costs are as low as $15 a barrel.

Aside from Canada, countries in Asia and Europe have been some of the largest recipients of USA crude oil since the restrictions were lifted.

The environment for investing in commodities is the best since 2004-2008, Goldman Sachs said on Thursday, saying it expects returns of 15 percent over the next six months and of 10 percent over the next year.

Certainly that seems to be the goal of energy producers: Exxon Mobil will reportedly triple its production of oil and chemical feedstocks in the Permian Basin and expand regional infrastructure by 2025; this comes on the heels of Exxon announcing it will increase its USA investments to $50 billion over the next five years, thanks to us president Donald Trump's tax reforms.