OPEC and non-OPEC crude oil exporters have agreed to an additional 562,000 barrels per day of non-OPEC production cut in addition to the 1.2 million b/d cut that OPEC agreed on last week. At the meeting, Mexico pledged to cut 100,000 b/d, Azerbaijan 35,000 b/d, Oman 40,000 b/d, and Kazakhstan 20,000 b/d. Some analysts expressed doubt as to whether the cuts pledged by Mexico and Azerbaijan are valid reductions as their production was on course to decline by that much anyway next year due to natural depletion. The Kazakhstan cut, however, was seen as important as the country was due to increase production in 2017 by 160,000 b/d as its giant new oil field came in production. Russian oil companies are supposed to cut production by 300,000 b/d in the next six months but have had a very spotty record in making production cuts in the past.

OPEC members believe that a world oil price of $60 per barrel is high enough to help balance the national budgets of many oil exporters, but not so high as to trigger a major increase in US shale oil production. However, some crude oil analysts are skeptical that the countries pledging to make production cuts will actually carry through. It is also possible increased production from Libya, Nigeria, Iran and US shale oil producers will offset much of the agreed upon cuts; moreover, a simple rebalancing of the oil markets in the face of “astronomic” excess inventory many not be enough to substantially increase world prices.

The US Energy Information Administration (EIA) is forecasting that world crude oil prices will remain around $50 a barrel and that inventories will continue to climb by 0.8 million barrels per day during the first half of next year. The EIA does not expect any surge in US oil production for the first nine months of 2017.

Crude oil and natural gas exploration is expected to fall to a 12-year low in 2017 as the petroleum industry abandons high-risk, high-cost areas such as the Arctic and looks for less costly opportunities. Efficiencies and the lower costs of oil service contractors that have fallen on hard times mean that wells can be drilled for far less money than at the height of the oil boom. Some say the cost of drilling an exploration well can now be as low as $40 million as compared to $86 million in 2014. BP says its new Gulf of Mexico Mad Dog Phase 2 project will only cost $9 billion as compared to initial estimates of $20 billion.  This means that the costs of new deepwater projects may be as low as $50 a barrel as compared to twice that a few years back. The downside of these “efficiencies” is that a lot less money will be spent by the oil industry.

Bloomberg now projects that while China’s oil consumption will continue to grow next year, it will grow much more slowly than in 2016. Some believe that China no longer has the room to store additional petroleum and that production of much of its very-expensive-to-produce oil has already to closed down. This suggests that China’s demand for oil in the coming year may be as important a factor in determining world prices as the OPEC cut.

Oil traders are selling increasing supplies of cheap US shale oil to Asia,  the region of the world that consumes the most crude oil.

Next month, Japan will receive its first liquefied natural gas (LNG) shipment derived from US shale gas.

Canadian oil sands producers are finally ready to grow again as they are moving ahead with expansion projects two years into the worst crude oil slump in decades.

Native American reservations cover just 2% of the United States, but they may contain about 20% of the nation’s crude oil and natural gas, along with vast coal reserves.

The International Energy Agency said the share of coal as an electric power source should drop from 41% globally in 2014 to 36% by 2021. Coal demand is moving to Asia where emerging economies with growing populations are seeking affordable and secure energy sources to power their economies. China accounts for about half of the global demand for coal and, because of the size of its economy, that translates to about half of the world’s total coal production.

Germany’s Constitutional Court has ruled that the country’s largest electric power companies, Eon, RWE and Vattenfall, are entitled to “appropriate compensation” for the German government’s decision to rush the shutdown of their nuclear reactors after the 2011 Fukushima disaster in Japan. As a result of the government’s edict, Eon said it had lost 8 billion euros. RWE was claiming losses of 6 billion euros. Vattenfall claimed 4.7 billion euros. The companies argued before the court that the government’s decision was as a form of expropriation. The Court rejected the companies’ expropriation claim but did agree that the regulation amounted to a restriction of their property rights.

Market analyst IHS finds that, with specific government policies in place, electric vehicles could account for at least 15% of total new vehicle sales by 2040. IHS finds the current world EV market share is about 1%.

The US state of Colorado is planning a test of battery-charging technology capable of powering electric trucks while they drive  along the state’s roads. In the pilot project, believed to be the first of its kind in that country, vehicles equipped with “receiving coils” will draw power from another coil buried in the road.

 

 

 

 

 

 

 

 

 

with h/t Tom Whipple

Tags: , , , , , , , , , , , , , , , , , , , , , ,