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2016

The depletion of old oil wells is expected to surpass new sources of supply in 2016, as the ongoing oil price slump puts a long list of oil projects on the shelf.

Bloomberg flagged new data from the Norwegian consultancy firm Rystad Energy, which predicts that legacy production will tip the supply balance into the negative in 2016 for the first time in years.

The production from an average conventional oil field typically ramps up in the early years, plateaus and then enters a period of decline. Depletion rates vary wildly from field to field, but a rule of thumb for conventional oil fields – which make up the bulk of total global supply – is that they decline something like 6 percent per year on average. Again, those depletion rates can differ depending on location, levels of investment, etc., but one thing that is clear is that the oil industry needs to bring new oil fields online every year in order to merely keep production flat.

Rystad Energy estimates that the crash in oil prices has cut into upstream investment so severely that natural depletion rates will overwhelm the paltry new sources of supply in 2016. Existing fields will lose about 3.3 million barrels per day (mb/d) in production this year, while new fields brought online will only add 3 mb/d. This does not take into account rising oil demand, which will soak up most of the excess supply by the end of the year.

But the 3 mb/d of new supply in 2016 will mostly come from large offshore projects that were planned years ago, investments that were made before oil prices started crashing. The EIA sees four offshore projects starting up in 2016 – projects from Shell, Noble Energy, Anadarko, and Freeport McMoran – plus two more in 2017. The industry completed eight projects in the Gulf in 2015. U.S. Gulf of Mexico production will climb from 1.63 mb/d in 2016 to 1.91 mb/d by the end of 2017.

However, outside of these large-scale multiyear offshore projects, the queue of new oil fields is starting to be cleared out. By 2017, the supply/depletion balance will go deeper into negative territory. Depletion will exceed new sources of production by around 1.2 mb/d before widening even further in 2018 and 2019.

A few months ago, Wood Mackenzie estimated that around $380 billion in planned oil projects had been put on ice due to the crash in oil prices. Wood Mackenzie says that between 2007 and 2013, the oil industry greenlighted about 40 large oil projects on average each year. That figure plunged to fewer than 10 in 2015.

The coming supply crunch stands in sharp contrast to the short-term picture. The EIA reported on March 23 that crude oil storage levels once again increased, surging by 9.4 million barrels last week to break yet another record. Total inventories in the U.S. now stand at 532.5 million barrels. Record high storage levels, which continue to climb, are signs of short-term oversupply. The IEA expects supply to continue to outstrip demand by about 1.5 mb/d until later this year. Oil storage levels will have to fall to more normal levels before oil prices can rise substantially.

But the Rystad Energy figures show that the supply-demand balance could quickly swing back in the other direction as upstream investment has screeched to a halt. As soon as later this year, or perhaps in 2017, demand could catch up to supply. Inventories will begin falling quickly and prices will start to rise. However, since supply is inelastic in the short run, the industry may struggle to satisfy demand at stable prices. The oil markets have always suffered from booms and busts, and this is just more of the same. The current bust is sowing the seeds of the next boom.

Of course, U.S. shale has demonstrated its ability to ramp up quickly, and those short lead times could allow new supply to come online as prices rise. But it remains to be seen if U.S. shale, more or less on its own in the short run, can meet rising demand in 2017 and 2018 as conventional oil drilling remains on the sidelines.

OilPrice.com is a USA TODAY content partner offering oil and energy news and commentary. Its content is produced independently of USA TODAY

USA TODAY | James Stafford, Oilprice.com3:02 p.m. EDT March 27, 2016

 

Although we all have different crazy and busy lives at the end of it all, we are humbled and flawed humans with so much to learn.  My childhood was never one to reflect back on yet I find myself doing so often because of who I am today. The strength and perseverance it took to rise above poverty and abuse amazes me still to this very day.  I never considered myself a victim, rather, I see myself as a survivor.  To be honest, I am grateful for the unfortunate circumstances I grew up in because it enabled me to see things from an open perspective and adapt too many situations.  Although I was not raised in a religious home, I knew there was always something better to life than the one I was in.

 

Who knew when I was a child I would find myself in the Army where I met my husband and we would move to Texas.  It’s not something you can predict, you just follow life as it goes along.  With the military being my only background, I sought opportunities as an assistant.  I worked many temp assignments throughout Enron before landing a permanent position and that is kind of where this story begins.  We all know about the downfall of the champion of energy deregulation.  Five years of 401k savings were no longer worth a penny, we were practically homeless and penniless.  My husband was in the fire academy and paramedic school when the collapse happened so my income was the main source for living expenses. I was also taking classes at the University downtown but had to quit shortly thereafter due to our finances.  My father-in-law paid my car note and let us live in his rental without paying rent until we got back on our feet.  Without his grace, we would have been living on the streets with our two boys.

Because I am a survivor, I hustled.  It took about six months to find something long term but it was only temp work with no benefits so when CMS closed its doors in Houston, I was without income for a couple months but we were in a better place with my husband now working for the city.  Still, we needed two incomes to survive and raise our family in a decent environment. I bounced around as an executive assistant for a few years before landing at National Oilwell Varco.  A challenging yet wonderful blessing in disguise. Within four months of contract work, I was offered a permanent position as a quotation associate and began learning all about the capital equipment NOV manufactured.  I was eventually promoted to quotation specialist and had nine product lines at one time.  I worked in that role for about 5 years then moved onto our pressure control facility briefly then back to rig systems as an Inside Sales Representative.  NOV was one of the best work families I have ever had. When Pete Miller was CEO, he would personally meet with the employees at the annual Christmas party and thank us for our hard work.  He always said the people are who make NOV great!

 

January 15, 2016 was very emotional when I was escorted out of the building.  I cried, my director was physically upset. All he could say going down the elevator was how sorry he was and all I could do through tears was say “it’s not your fault oil tanked”.  I received so many phone calls and texts from colleagues, friends, and previous supervisors. I was truly touched by their kind words but it wasn’t enough for me to not feel like I failed although I knew it wasn’t me, it was the state of the market.

 

The brain is an incredible force to reckon with if I must say.  All of the things I have been through in my life never prepared me for this emotional roller coaster I have been on since the day of the layoff.  I don’t think I have ever cried this much even when losing loved ones, I am able to control my emotions for the most part but this was like a piece of my heart was ripped away and stomped on.  I was good at what I did and loved it.  How will I find that again?  Why me? Why not this person?  Why keep people who plan on leaving anyway?  I wanted to retire from NOV!  How come I got laid off?  All of this and more randomly kept me awake and opened flood gates of feeling sorry for myself in-between applying for unemployment, looking for opportunities, doing phone interviews, school work, and daily life.

In all of it, that girl was still there in my head.  The girl who grew up in a volatile home and foster care who always knew there was more to life, she took over once again and helped me get back on track.  We can survive this, you have been through so much worse.  Don’t feel sorry for yourself.  Go after what may seem impossible, just do it! And she did! This girl did it! She is starting a new career in renewable energy. 

 

Katie encouraged me to write this blog as a ray of hope for all of us going through the same thing right now.  Without Katie’s kindness and small little pep talks on Facebook, email and so forth, I would have never had the courage to share my personal story.

 

Here is to strong wonderful women!  Have faith, be kind, and never give up!

Love,

Angie

Katie Mehnert

After a two month rally, U.S. Crude Futures closed $1.66 lower, at $39.79 a barrel, the largest daily loss since February 11th.  On Wednesday, the EIA (Energy Information Administration) reported U.S. crude inventory rose by 9.4 million barrels over the previous week to reach a total of 532.5 million barrels.  With these reports three times over analyst expectations, the market seems to be worried that news of the US stockpile may reverse the recent upward trend.

 

Crude prices had rallied nearly 50 percent over the past six months from a 12 year low of roughly $27 a barrel.  Though some of the recent rally was related to declining U.S. oil production and strong demand for gasoline, most attribute the majority of gains to OPEC and other major producer’s decision to freeze production at January’s levels. 

 

The EIA’s report was not all bad news.  They reported gasoline inventories dropped 4.6 million barrels compared to the 1.5 million drop forecast, and also reported demand for motor fuel has risen seven percent over the last four weeks. 

 

What’s next… It depends on who you believe.

 

Tariq Zahir, fund manager at Tyche Capital Advisors stated, “The rally, in our opinion, has run its course…”

 

John Kilduff, the founding partner of Again Capital is saying don’t get used to $40, we’re headed back to $25 soon. 

 

On the other hand Todd Gordon of Tradinganalysis.com is much more bullish on the rally saying, “We have a full-on commodity breakout here.  The central bank is paving the way to higher commodity prices and a lower dollar in unison with the rest of the global central banks.”  He believes we’ll be at $49 a barrel in the near future.

 

Regardless of which side of the fence you fall, today’s report from the EIA is keeping all eyes focused on crude oil stockpiles now that they’ve reached record highs for a sixth straight week.

Oil climbed above $40/bbl for the first time since late 2015 as the Federal Reserve continued to provide economic stimulus to support demand.  The Fed did this by scaling back expectations for the pace of interest rate gains.  Or more simply stated… They are continuing to drive the value of the USD down to bolster demand for commodities priced in USD. 

 

"This is a strong rally and the main catalyst is the return of easy money," said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. "The Fed announcement yesterday was the latest sign that central banks are going to continue with stimulus. This is putting downward pressure on the dollar, which favors commodities."

 

However, there is another side to consider with the recent increase in oil prices.  Faced with the new competition from American Fracking, OPEC may want to keep prices down, continuing their effort to push competition out of the market.  Even though they prefer the higher prices, they believe their ability to endure a price war is far better than their American counterparts. 

 

Just last month Ali al-Naimi, Saudi Arabia’s petroleum minister, publicly told American Frackers, “…the market will crush them – because they don’t have the cost structure to survive the on-going price war, which may end up taking oil close to $20.”

 

So as multiple forces and underlying interests tug at the price of oil, the future still remains uncertain.  Multiple members of OPEC are finalizing plans for a meeting in Doha on April 17th to discuss their strategy going forward. 

David Feldman

Has Oil Bottomed out?

Posted by David Feldman Champion Mar 12, 2016

The International Energy Agency (IEA) spoke up today and expressed their opinion on the state of oil prices.  Referring to oil’s “remarkable recovery” over the last couple weeks, they believe that the market appears to have “bottomed out” and is now headed in the right direction.  With a one percent raise Friday, U.S. crude prices jumped to a high for the year, which is great news considering the state of the industry lately.  Bombarded with lay-offs, rig shut downs, and more, this is some well received and much anticipated news for most.

 

It’s quite possible a main contributor to the recent rise in price is the monthly report on global supply/demand published by the IEA this morning.  OPEC production is down by 90,000 barrels a day compared to last month, and U.S. production is expected to drop by almost 530,000 barrels a day this year.  Yet even though they were optimistic, they also cautioned there is a long way to go before supply and demand find a real balance.  Thoughts are we’ll be well into 2017 before that happens.

 

The IEA isn’t the only one thinking we’re still at least a year out.  Goldman Sachs said on Friday that production is unlikely to increase in the U.S. until 2017, and they anticipate the price of oil to be quite unstable for the next few months.  They warned that if we get carried away too quickly and ramp production with the rise in oil prices, "we believe a self-defeating rally in oil prices/equities could result."

 

So once again we continue in our pattern of hurry up and wait.  However, it looks as though there is a light at the end of the tunnel.  And right now, I think everyone will take a silver lining whenever we can get it!

As each party’s primary contest heats up, it’s turning into quite the show.  Each candidate throwing insults and accusations not only across party lines, but within their own house.  As each of us seek to find the right choice for America’s future, it’s often hard to filter out the rhetoric and actually see where each of them stand.  And since the next president will have a significant impact on how America produces, uses, and distributes energy, here is a summary and list of resources to understand each candidate’s stance on energy.

 

For the Republicans, the four remaining candidates have slightly differing views on climate change; however, none bases his energy policies exclusively on it.  Donald Trump appears the biggest opponent of climate change, having called global warming a “hoax” and tweeting that the Chinese started the global warming ruse “in order to make US manufacturing non-competitive.”  Sen. Ted Cruz and Marco Rubio are generally opposed to the idea of global warming being man-made, and support the notion that it is natural phenomenon, and laws passed to address it will only generate adverse effects to our economy.  Governor John Kasich’s views run somewhat against the grain of the Republican Party in that he believes climate change is a problem, but he doesn’t support curbing the use of fossil fuels. 

 

All four support building the Keystone pipeline, are weary of aggressive EPA regulations, support the regulation of energy production at the state and local level, and want to spur economic growth by increasing American energy production and reducing our reliance on foreign sources. Perhaps it could be summed up as not necessarily the most environmentally friendly stance, but embracing the positive potential of America’s energy abundance which would also result in lower energy costs.

 

Here are some links to each candidate’s website, discussing their take on the future of U.S. Energy:

 

 

 

 

 

Generally speaking, the Democrats are looking for more government involvement.  They would like more government-led investment and federal regulation.  Their stance is that climate change is a man-made crisis caused by the use of fossil fuels.  Both remaining candidates would generally look to continue President Obama’s lead in regard to federal regulations and support of the EPA’s effort to encourage the use of renewable energies.  Over all, the Democrats approach can be summed up as moving away from the current fossil fuel energy model toward a more environmentally friendly renewable energy model although this would most likely result in higher costs for end consumers.

 

Here are some links to each candidate’s website, discussing their take on the future of U.S. Energy:

 

 

 

So there you have it.  All the information you need straight from the mouths of each candidate on what their energy plan is for America if they become president.  So get out there and support the candidate you feel best represents your beliefs on the future of energy and oil.

 

 

Additionally here is a summary of all candidates for your review: https://ballotpedia.org/2016_presidential_candidates_on_natural_resources