The State of Oil and Gas: August 18, 2017

OPEC requested that Libya and Nigeria present data regarding their oil production at the meeting on July 24.  It’s presumed that OPEC is planning to limit their production now the they are producing more.

Wall Street is financing big oil, but it might be giving too much money to the industry.  More money equals more production equals more supply equals lower prices.

If you’d like to read about the Strategic Petroleum Reserve and its effects on the market, this is the article for you.

Venezuela owns almost 50% of Citgo, a Texas-based oil and gas company.  Venezuela owes Russia $1.5 billion dollars, collateralized by that ownership.  Venezuela is very likely to default on that loan to Russia, in which case Russia would end up owning almost 50% of Citgo.

Lots of people think that electric cars are likely to replace gas cars, and that consequently the demand for oil will go down.  That’s not the way things have happened in Norway.  It’s still early in the process, but it’s interesting to see that “what people think” isn’t necessarily what will happen.

OPEC is overproducing.  A lot of it is from Libya and Nigeria, but some of it is from Saudi Arabia itself.

Coal is expected to produce more energy in 2017 than natural gas, but natural gas will produce more in 2018.

Halliburton says that drilling will not grow much in 2018 because the service sector can’t provide enough services.

July 18, and there’s a rumor that an oil field in Saudi Arabia that produces 900,000 bpd may have some technical problems that could severely limit or entirely shut down its production in the next few weeks.  If that happened, oil prices would skyrocket.  Some investors are already getting in on the action, with oil prices jumping $.40/bbl today so far.  It’s amazing how things can change so fast in the oil patch.  Just yesterday we were thinking that oil and gas prices would probably be stable through the rest of this year.

A Bloomberg article attempts to predict the future, which is always difficult but perhaps even more so when it’s the future of oil and gas you’re attempting to predict.  Natural gas has been thought of as a bridge fuel between oil and renewables.  The article says that the transition period is going to be much shorter than previously thought.  The one thing we think the article didn’t take into account is the fact that as the demand for gas goes down because the price of renewables is going down, the price of gas will also go down.  We’ve seen the industry adapt to low prices.  We’ve seen that this year coal will produce more electricity than gas because the price of coal went down.  This may or may not be the last year that happens.  It’s a fluctuating market and gas will be around longer than environmentalists want to believe, but not as long as oil and gas industry people want to believe.

Mark Zuckerberg, the founder of Facebook, went fracking.  Lots of people think he’s prepping for a Presidential run.

There are twice as many rigs running today than there were this time last year.

Consequently, the price of drilling has gone up about 8%, after declining 34% since March of 2014.

Congress has passed legislation aimed at speeding up the permitting process for interstate and international pipelines.

U.S. News published an article that’s essentially an overview of the need and the safety record of major interstate pipelines.  That still doesn’t make me very comfortable with the idea of living about 1000 feet from a 42-inch high-pressure gas pipeline.

The House Committee on Science, Space and Technology thinks that Russia is funding environmentalist efforts that oppose fracking in the United States.  That would be a wise financial investment for Russia.

Kevin DiGregori hints that there are lots of down-stream projects in the works in West Virginia.  That would be really good for West Virginia’s economy.  Maybe we’ll finally stop shipping our raw natural resources out of the state for other states to turn into greater value products.

Fracking is changing world politics.

Gas and oil production numbers in the U.S. are both increasing.

It’s August 18, 2017 and gas prices are still below $3.00/MMBtu.  As we get close to the end of injection season it will be interesting to see how close we get to filling up our storage facilities again.  If we end up with less in storage than last year we can expect slightly higher prices than last year.  Slightly less is the trend so far this year.

Oil is at about $47/bbl.

I’ve been on vacation and catching up from being on vacation, so this edition is both late and not complete.  Here’s looking forward to the next regularly scheduled edition.