OIL PRICES - 2018: VOLATILE
Real OPEC and Russian output will break Algiers (1.8 million barrels off the world market until September). Price range to $62.50 WTI high in the first half of the year and $38.65 at end of the second half or one year from today; 2019 would resemble most of 2015.
There is a second threat to price and production in the Southwest and Dakota. Hedge funds invested in public or listed companies want share buy-backs or dividends. In short, they want to make money now as opposed to operators sinking more cashflow into new production projects. The conflict inside Hess is the first example.
Traditional oil operators are 5-year business planners for returns on investment while the new private equity owners or investors are quarterly or payback pressure points for higher stock market share prices and distribution. OPEC/Russia is the external market threat leading to the lower price range alongside an internal investor/owner threat of less cash flow plow back for future production projects and more for short-term return on investment.
Oil price and production will also reflect Saudi Arabian domestic instability over its simultaneous offensive against Iranian influence in the Middle East and social and economic modernization against traditionalism. The plan is for less dependence on oil exports with technology and manufacturing in the national economy: social change and the status of women in the "revolution."
President Trump and oil and gas policy chief Secretary Ryan Zinke will complete the massive deregulation implementation with the so-called methane rule tabled in response to industry self-initiation of methane curtailment or elimination in air emissions.
This would be a response to state government substitution for the objectives of the Paris Agreement on Climate Change which the Trump Administration rejected. Democratic state governors of oil and gas producing states will be under party pressure to follow California's Governor Brown's state and local substitution for United States participation.
Trump-Zinke have established oil and gas "world domination" as American policy and eliminated the "dependence" since 1973 as a pervasive consensus.
American oil and much less natural gas exports have displaced OPEC and Russian foreign mainly as a deterrent to Russia and an alternative to the Middle East. If exports of oil are nearly 2 million bpd, how much of that is displacement of OPEC-Russia under the production cut-back agreement, and how much will OPEC-Russia recover when world oil balancing allows them to produce at market?
The Obama Federal Lands policy will have been rejected and BLM implementers replaced. Nuclear energy should be stabilized and coal burning power replaced by natural gas under market conditions. Changes and reforms in royalty determinations on federal land for oil and gas should reflect market reasonableness as opposed to the politics and climate change bias.
The State of New Mexico's Delaware Basin oil reserve study from the United States Geological Service (USGS) should be completed with 23-25 billion barrels of oil.
This will be larger than the Texas part of the Permian Basin and will deliver revenues to state and local governments accordingly. However, the price of WTI oil will determine the size of those revenues. With oil averaging $44 per barrel, the low cost or prolific wells are the "sweet spots" and Chevron, for example, will endure the low end of prices with its refining capacity. The Delaware will look better on the balance sheet than Venezuela or offshore in the Gulf of Mexico outside the U.S.
There will be a new Governor-elect and an energy policy review. Oil and gas energy in New Mexico benefited from the Governor Susana Martinez "all of the above" energy policy which rejected the previous Governor's alternative fuel/conservation efforts (dependency and climate change objectives). Her energy policy and its oil price recovery success should be a substantial part of the election voting mix.
The San Juan Basin natural gas in the Mancos Shale will generate an upward recovery in the Four Corners. A technological revival of coal-bed natural gas is taking place. Strike the world "declining" from a description of the San Juan Basin in 2018.
Natural gas prices are not determined by the factors discussed (above). New markets for natural gas exports from the Delaware Basin (gas associated with oil) and the San Juan Basin will emerge. Storage and weather remain a dominant variable. LNG for American export is here with geopolitical opportunity, for example, the future of world-dominant supply from Qatar caught between Saudi Arabia and Ukraine.
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PLATTS - For full-year 2017, South Korea's crude imports from its biggest supplier Saudi Arabia fell 1.7% to 319.02 million barrels, compared with 324.45 million barrels in the previous year, customs data showed. On the contrary, South Korea has imported 1.77 million mt, or around 13 million barrels, of crude from the US in 2017, about four times higher than in 2016. Shipments from Russia grew to 140,000 b/d last year from 112,000 b/d in 2016.
AOG - ADNOC’s 2030 strategy, he said, aims to capitalise on predicted global economic growth and demand for oil and petrochemical products, particularly in non-OECD countries. As its business responds to changing market dynamics, the company will continue to broaden its partnership base, strengthen its profitability, adapt to new realities and expand market access.
WNN - Under the terms of the assignment and purchase agreement it has signed with Nucleus and Brookfield, Toshiba will sell its rights to assert claims against Westinghouse related to the parent guarantees in the amount of $5.788 billion, and on account of other claims Toshiba holds against Westinghouse in the amount of $2.284 billion to Nucleus, for the sale price of $2.160 billion.
REUTERS - Brent crude futures LCOc1 were at $69.23 a barrel at 0808 GMT, up 8 cents from their last close, but down from a high of $69.37 earlier in the day. Brent on Monday rose to $70.37 a barrel, its highest since December 2014, the start of a three-year oil price slump. U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $63.84 a barrel, down from a high of $63.89 earlier, but up 11 cents from their last settlement. WTI hit $64.89 on Tuesday, also the highest since December 2014.