The US Energy Information Agency (EIA) forecasts US shale oil production will rise by some 300,000 barrels per day this year and another 500,000 b/d in 2018. Industry sources talk about increased efficiency and production gains, suggesting to many that the EIA’s forecast is conservative and that the US shale oil production increase may be higher. Increased US oil production is bad news for OPEC which is trying to maintain higher crude oil prices. For most oil market observers, a six-month OPEC production cut will not be a long enough time to have a lasting effect on crude oil prices and most believe that a six-month extension will likely be voted on at the next OPEC meeting in May. Kuwait already has called for an extension and Saudi Arabia is talking about going along with an extension. Iran’s oil minister said last week that his country would keep its crude oil production capped at 3.8 million b/d, provided other OPEC members stick to their agreed upon production quotas.

As US shale oil production can respond to market price signals more rapidly than other producers around the globe, the International Energy Agency believes that a $80 oil price could increase US production by as much as 3 million barrels per day in the next five years.

OPEC is also concerned about the emerging policies of the Trump administration which are aimed at increasing US oil production as quickly as possible. Among the numerous policy changes that the new administration has already made, or says it will make, are decreased regulations on fossil fuel emissions; opening up more federally-controlled land for oil exploration; reducing corporate income taxes which could free up as much as $10 billion for drilling; and imposing a “border tax” which would make imported oil much more expensive.

Iraq, which is not part of the OPEC led production cut, pumped 4.57 million b/d of crude oil in February and plans to increase this to 5 million by the end of this year.

Russia hinted that since increased production from the US shale oil industry may undermine the OPEC led production cut, it might pull out of the agreement and start a new price war. As nearly all of its oil production comes from conventional, low-cost wells, Russia may believe it is in a good position to weather a further price decline.

China’s strong interest in Brazilian crude oil has set off alarm bells among various producers in Oceania and the Middle East, prompting Australian and Persian Gulf crude oil suppliers to lower their selling prices in an effort to remain competitive and protect their market share in Asia.

Major oil companies are selling their holdings in the heavy oil sands of Western Canada and moving investments to shale fields. This month Royal Dutch Shell and Marathon Oil disclosed sales of operations that largely removed both firms from the heavy oil reserves. Last month, Exxon Mobil wrote down all of its heavy oil reserves from its Kearl project in northern Alberta, saying extracting the oil was no longer economic at current prices.

In the US state of Alaska, Repsol and Armstrong Energy say they made the largest US onshore oil discovery in three decades. The conventional oil was found in the Horseshoe-1 and 1A wells located in Alaska’s North Slope. According to Repsol, the reserves comprise approximately 1.2 billion barrels of recoverable light oil.

French oil company Total said it started production at a deep-water prospect with a capacity of 100,000 barrels per day. Moho Nord is the largest development to date in the Republic of the Congo.

The removal of the 40 year ban on US crude oil exports has led to record export numbers. US crude shipments surged to a record 1.21 million barrels a day in mid-February, up from 32,000 in 2010, when most of the country’s production couldn’t be sold overseas because of the ban. Exports averaged 900,000 b/d in the month of February.

A flood of natural gas swamping the US is turning into a global glut, sinking prices and dimming the hopes of American producers to export their way out of an oversupplied domestic market. Natural-gas futures prices have fallen 25% over the past 2½ months. There are indications that natural gas output from the Permian Shale region in the state of Texas will increase by about 25% over the next year, threatening to send prices below $2 per million British thermal units.

The International Renewable Energy Agency says global energy-related carbon dioxide (CO2) emissions could be reduced by 70% by 2050 and completely phased out by 2060. To help achieve this, the share of renewable energy in primary energy supply would need to increase to 65% in 2050 from 15% in 2015. An additional $29 trillion of energy investment would be needed to 2050, equivalent to 0.4% of global gross domestic product.

 

with h/t Tom Whipple

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