Some US shale oil producers, who already have large amounts of capital sunk into leases, infrastructure, and drilled but uncompleted wells, are expected to resume drilling as world crude oil prices rise above $50 a barrel.

The International Energy Agency said that unplanned supply interruptions, mostly in Nigeria, have reduced the global oversupply of crude oil from 1.5 million barrels per day to about 800,000  b/d in the first half of this year and forecasts that global demand will be up about 1.3 million b/d for the rest of the year. However, the IEA also noted that OECD countries now have over 3 billion barrels in stockpiles and that this inventory grew by 222 million barrels as compared to last year.  These large inventories of crude oil will keep a downward pressure on world oil prices for some time to come.

US investment banker Goldman Sachs said world oil markets are “fragile” and that supply overproduction will continue into next year.

Energy consultant Wood Mackenzie reported the global oil and gas industry will cut $1 trillion from planned spending on exploration and development because of the drop in prices, leading to slower growth in production. Worldwide investment in the development of oil and gas resources from 2015 to 2020 will be 22%, or $740 billion, lower than anticipated before prices plunged in 2014, with the deepest cuts in the US. A further $300 billion will be eliminated from exploration spending. Spending cuts mean the loss of about 3%  of global production this year and another 4% next year, with onshore US production accounting for about 70% of the total decline.

Deloitte Center for Energy Solutions believes that there will be an oil exploration funding shortfall of $2 trillion over the next five years and that capital expenditures are now below the level required to replace existing reserves. Other industry experts agree and say it certainly appears that the rapid decline in capital expenditures will have a major impact on global crude oil supply and production.

Iran is partnering with China to build a new $550 million oil terminal on Qeshm Island in the Persian Gulf to increase Iran’s capacity to export oil. Iran expects to produce 4 million barrels a day of crude oil by the end of this year.

China’s potential crude oil reserves have increased 64% since 2007 due to increased exploration activities, according to a new report from the Chinese Land and Resource Ministry. These numbers now put China’s potential oil reserves at 126 billion tons, with 30 billion tons of recoverable reserves—up significantly since the last assessment nearly a decade ago. The report also puts the country’s estimated natural gas reserves up 158%, to 90 trillion cubic meters, with recoverable natural gas reserves up 127%, to 50 trillion cubic meters.

Russia said last week that it wants a new natural gas export pipeline to southern Europe to replace the canceled South Stream route. With the Middle East ramping up to produce more natural gas, Russia fears that its natural gas sales may suffer from inroads from liquefied natural gas (LNG) and new gas pipelines into southern Europe that are under discussion.

The return of Iran to the European crude oil markets is hurting Russia’s crude sales in the region.  The discount of Urals crude to Brent widened to $2.40 a barrel last week, the lowest in two years. Russia’s two largest buyers of gas in Europe are Germany and Italy.

In Ukraine, Halliburton, Schlumberger, and Weatherford are among nine companies that submitted bids to carry out hydraulic fracturing operations for Ukraine’s largest natural gas producer.

The world’s two largest oil importers are the US and China, with each importing about the same amount.

The International Renewable Energy Agency said the cost for solar and wind could drop by as much as 59% by the middle of the next decade. Already, the price for solar installations fell by 80% and 30% for wind since 2009.

The amount of coal produced in the US is the lowest it’s been since the early 1980s as overall demand falters. Natural gas is replacing coal the primary source of electricity in that country. One result of this major shift was bankruptcies declared earlier this year by large coal producers Peabody Energy Corp., Arch Coal, and Alpha Natural Resources, among others.

NASA is working on an all-electric plane concept as its newest, futuristic aircraft in the biggest boost yet for the idea of building airliners that don’t burn fuel. The electric aircraft is expected to be called the X-57 and could fly as early as next year.

 

with h/t Tom Whipple

 

 

 

 

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