Crude oil prices rose this week to the $40 a barrel range. Behind the price rise is a continuing drop in the number of drilling rigs operating in the US and the announcement by several major shale oil producers that they plan to suspend new drilling until prices recover. Of course, there is the possibility that shale oil producers will start increasing production if prices get into the mid-$40 to $50 range and then they could easily drive the price back down again due to recent low levels.

The threat of insufficient storage capacity for excess crude oil production continues to grow. In the US, the Cushing, Oklahoma storage facility is now at 90% of capacity. In Europe, the large tank farm at Rotterdam in the Netherlands has a record number of ships waiting to unload when space for their cargoes becomes available. The International Energy Agency believes supply and demand are unlikely to come back into balance before the end of this year, and even then the world will have more than 1 billion barrels of excess oil in storage that will have to be worked off before significant crude price increases can occur.

48 crude oil and natural gas producers filed for bankruptcy in North America last year, and more are expected to follow suit in 2016.

The plunge in crude oil prices is squeezing the economy of Norway, Western Europe’s biggest oil producer. This, in turn, is driving up unemployment and threatening to halt that country’s economic growth. The government has already boosted spending to record levels and this year will tap into the nation’s $810 billion sovereign wealth fund for the first time.

Exxon Mobil has become the first major US oil company to ship American crude oil overseas, after a 40-year export ban was lifted. Exxon shipped the US crude to a refinery it owns in Sicily.

The Trans-Adriatic natural gas pipeline consortium, designed to bring non-Russian natural gas to southern Europe starting in 2019, announced it has awarded contracts for pipeline construction in Greece and Albania.

The African countries of Uganda and Tanzania have agreed to construct a crude oil pipeline 700 miles across their countries, connecting landlocked oilfields in Uganda to the Indian Ocean.

An agreement has been signed to build a 2,600 kilometer pipeline to carry natural gas from Mozambique’s Rovuma Basin to South Africa. The planned link will meet growing demand in South Africa for natural gas to generate electric power. The line will also provide offtake opportunities for other countries in southern Africa. The agreement includes the national oil and gas company of Mozambique, a Mozambican private sector consortium, SacOil Holdings Limited, and a leading Chinese and international pipeline construction company.

Brazil’s Petrobras will slash its five-year investment plan by about 20% next month as low crude oil prices, massive debt, and the fallout from a corruption scandal hobble its ability to fund offshore oil projects.

Norway’s largest crude oil and natural gas producer, Statoil, has launched a new $200 million venture capital fund dedicated to investing in renewable energy. The fund will focus on offshore and onshore wind, solar energy, energy storage, transportation, energy efficiency, and smart grids. Currently Statoil is developing the world’s largest floating wind farm off of Scotland. The 30 megawatt project is being developed at Buchan Deep, and upon completion in 2017, will generate enough electricity to power around 20,000 households.

 

with h/t Tom Whipple

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