Millions of Barrels of Oil Are About to Vanish

Millions of barrels of untapped oil that U.S. shale drillers discovered during the boom years are about to disappear from their inventories.

Six years ago, the industry pushed the Securities and Exchange Commission to make it easier for companies to claim proved reserves for wells that wouldn’t be drilled for years. Some prospects considered sure-things when crude was $95 a barrel are money losers at today’s $60. When crude crashed in 2008, 44 U.S. companies wiped 630 million barrels from their books.

Half of U.S. Fracking Companies Will Be Dead or Sold This Year

Half of the 41 fracking companies operating in the U.S. will be dead or sold by year-end because of slashed spending by oil companies, an executive with Weatherford International Plc said.

There could be about 20 companies left that provide hydraulic fracturing services, Rob Fulks, pressure pumping marketing director at Weatherford, said in an interview Wednesday at the IHS CERAWeek conference in Houston. Demand for fracking, a production method that along with horizontal drilling spurred a boom in U.S. oil and natural gas output, has declined as customers leave wells uncompleted because of low prices.

Brent Crude Hits 2015 High as US Output Slows

Oil rose more than 3 percent on Thursday, pushing Brent crude to a 2015 high above $63 per barrel on increasing evidence that U.S. production is peaking, balancing a market that has been in heavy oversupply for more than a year.

Oil prices collapsed in the six months to January, pushing Brent down more than 60 percent to almost $45 a barrel.

But the market has gradually recovered this year as much lower prices have discouraged oil exploration and production, especially in the United States.

Shale Output Is Falling Faster Than Expected

Shale drillers will see production drop sooner than expected under a U.S. government forecast, a momentum change that hints at an eventual price rally.

Just five months after Saudi Arabia put the market into a tailspin by refusing to cut supply despite a global glut, the shale oil industry will record its first monthly dip since U.S. officials began weighing output in 2013.

The projected production drop is small, just 1 percent. Yet investors took note, pushing oilfield stocks to the top five spots in the Standard & Poor’s 500 Index on Tuesday, led by rig operators Ensco Plc and Diamond Offshore Drilling Inc. The decline lags the idling of rigs because of a backlog of already-drilled wells that have gradually been coming online.

OPEC Might Just be the Largest Growing Output Hub in the Next 4 Years

OPEC production climbed by the most in almost four years as Saudi Arabia, Iraq and Libya boosted output amid a stronger outlook for global oil demand, according to the International Energy Agency.

The Organization of Petroleum Exporting Countries raised output by 890,000 barrels a day to 31.02 million a day in March, the biggest monthly gain since June 2011, the IEA estimated. Preliminary data suggest output may rise further this month, it said. The agency cut its prediction for U.S. and Canadian oil supply growth in the second half of the year.

More Balanced Oil Market Expected in 2nd Half

Professional commodity traders watch spreads (differences between the prices for adjacent futures contracts) rather than spot prices as the best indicator of the balance between supply and demand.

In crude, the narrowing spreads for both Brent and West Texas Intermediate (WTI) indicate a closer balance between supply and demand in the second half of the year than in the first.

Can the Shale Oil Boom meet it's End in May?

The shale oil boom that pushed U.S. crude production to the highest level in four decades is grinding to a halt.

Output from the prolific tight-rock formations such as North Dakota’s Bakken shale will decline 57,000 barrels a day in May, the Energy Information Administration said Monday. It’s the first time the agency has forecast a drop in output since it began issuing a monthly drilling productivity report in 2013.

Deutsche Bank AG, Goldman Sachs Group Inc. and IHS Inc. have projected that U.S. oil production growth will end, at least temporarily, with futures near a six-year low. The plunge in prices has already forced half the country’s drilling rigs offline and wiped out thousands of jobs. The retreat in America’s oil boom is necessary to correct a supply glut and rebalance global oil markets, according to Goldman.

Oil Rises a Third Day as Iran Export Recovery Remains in Doubt

Oil advanced a third day as skepticism among U.S. lawmakers over a nuclear deal with Iran undermined prospects that the OPEC producer will bolster crude exports.

Futures climbed 1.3 percent in New York. President Barack Obama is dispatching three cabinet members to brief lawmakers as a Senate committee prepares to take up a bill that will give Congress 60 days to review any final agreement with Iran. Drillers in the U.S. reduced the number of active rigs seeking oil to the fewest since December 2010, according to Baker Hughes Inc.

Fracklog Gains More Acceptance In U.S Oil Production Deferment Strategies

Companies delaying the completion of wells that have been drilled are keeping 373,000 barrels a day of oil out of the market, energy intelligence firm Genscape Inc. said.

Six companies announced plans to defer completing a total of 845 drilled wells this year, Genscape said in a report Wednesday.

Some oil producers have responded to the 50 percent drop in crude prices since June by delaying the hydraulic fracturing of wells. This backlog of unfracked wells, known as a fracklog, can then be completed and brought online when prices have rebounded.

Here's How $20 Oil Could Become a Reality If Storage Runs Out

Though I find this piece kind of shabby I decided to post it because its a well written angle.

(source: bloomberg.com)

There's the makings of a crisis swirling in America's oil-storage tanks, and the next few months will determine whether it's a minor annoyance, or a major blow, to U.S. oil.

The basic problem is that too much oil is being pumped, and not enough is being used up. America is running out of places to store all of the excess crude. That’s a problem, and it could send prices plummeting -- some say to $20 a barrel or even lower. (For context: Last summer it was more than $100, and today it's less than $50.)

U.S. Refiners Turn to Tanker Trucks to Avoid 'Dumbbell' Crudes

In a pressing quest to secure the best possible crude, U.S. refiners are increasingly going straight to the source.

Firms such as Marathon Petroleum Corp and Delek U.S. Holdings are buying up tanker trucks and extending local pipeline networks in order to get more oil directly from the wellhead, seeking to cut back on blended crude cocktails they say can leave a foul aftertaste.

While the business of hauling crude from individual oil wells to bulk storage depots or pipeline hubs has become a lucrative niche in recent years thanks to the shale oil revolution, refiners are getting into the "first mile" game for a different reason: taking control of their supply chains to secure a more predictable, consistent stream of crude.

Smallest Oil Rig Drop in Three Weeks Shows Retreat Easing

The biggest retreat from U.S. oil fields on record is showing signs of subsiding.

Oil explorers sidelined 41 drilling rigs this week, the smallest drop in three weeks and down from the average 59-rig decline in February. The count has fallen for 15 straight weeks to 825, reaching the lowest level in more than five years, Baker Hughes Inc. said on its website Friday.

The country has lost an unprecedented 750 oil rigs in the past 15 weeks as collapsing prices force drillers to let go of thousands of workers and retreat from shale formations. The slide in the rig count threatens to bring to a halt the oil production boom that turned the U.S. into the world’s largest fuel exporter.

“While we’re still going to see declines on a weekly basis, the retreat is definitely losing steam,” James Williams, president of energy consulting company WTRG Economics, said by phone on Friday from London, Arkansas. “We’re unlikely to see a 100-rig drop again. Eventually these declines will get smaller every week, if for no other reason than we have fewer rigs out there to stop drilling.”

Brent Oil Falls Towards $54 on OPEC Output, Iran

Brent crude oil fell towards $54 a barrel on Friday and was on track for its third straight weekly loss, hurt by oversupply worries after Kuwait said OPEC had no choice but to maintain output levels.

Brent for May delivery had fallen 33 cents to $54.10 by 0931 GMT. The contract is set to decline by more than 1 percent this week.

U.S. crude for April delivery slipped 21 cents to $43.75 a barrel, headed for its fifth weekly loss. The contract expires on Friday.

"Look Abroad", Kemp advises Britain's North Sea Oil and Gas Firms

The North Sea has already produced 42 billion barrels of oil and gas, but could have as much as 24 billion barrels left, according to FT columnist Nick Butler (“Don’t abandon the North Sea” Feb 22).

For North Sea operators and their supporters, the remaining reserves provide a compelling economic reason to keep producing to avoid leaving value locked in the ground.

The reserves represent tens of billions of dollars in profits, wages and tax revenues that would be lost if the North Sea fields are abandoned prematurely.

North Sea reserves have a strong political dimension because most operators and service companies are based in Scotland, where separatist sentiment remains strong despite the rejection of independence in last year’s referendum.

The economic reality is more complicated. The notional value of the oil and gas that would remain locked in the ground is not a convincing reason why it should be developed. In a market-based economy, resources are developed only if they can be extracted profitably.

And there are many instances where resources have been left in the ground or abandoned because it was no longer possible to exploit them profitably.

The U.S. Has Too Much Oil and Nowhere to Put It

Seven months ago the giant tanks in Cushing, Okla., the largest crude oil storage hub in North America, were three-quarters empty. After spending the last few years brimming with light, sweet crude unlocked by the shale drilling revolution, the tanks held just less than 18 million barrels by late July, down from a high of 52 million in early 2013. New pipelines to refineries along the Gulf Coast had drained Cushing of more than 30 million barrels in less than a year.

As quickly as it emptied out, Cushing has filled back up again. Since October, the amount of oil stored there has almost tripled, to more than 51 million barrels. As oil prices have crashed, from more than $100 a barrel last summer to below $50 now, big trading companies are storing their crude in hopes of selling it for higher prices down the road. With U.S. production continuing to expand, that’s led to the fastest increase in U.S. oil inventories on record. For most of this year, the U.S. has added almost 1 million barrels a day to its stash of crude supplies. As of March 11, nationwide stocks were at 449 million barrels, by far the most ever.

Goldman Says $40 Oil Call May Be Too Low as Demand Surprises

Goldman Sachs Group Inc. said it didn’t expect oil demand to recover so quickly and its forecast for crude at $40 a barrel may be too low.

While the bank projects that oil will still reverse its recent advance, the failure of global inventories to increase amid weather-related disruptions and stronger-than-expected demand means there’s a risk prices will miss its target for the next two quarters, according to a report dated March 8. Morgan Stanley also said the oil market was “surprisingly healthy.”

Welcome to Fracklog, the New-Fangled Oil Storage System

Oil drillers expecting prices to rebound after the biggest drop in six years have come up with an alternative to storing their crude in tanks: They’re keeping it in the ground.

It’s a new twist on an old oil-trading technique, known as a contango storage play, in which a trader buys cheap crude in an oversupplied market and saves it to lock in profits at higher future prices. Drillers who have spent millions boring holes through petroleum-rich shale rock are just waiting for prices to go up before turning on the spigot.

Oil down on dollar, rate hike fear; little impact from rig count drop

(source: Reuters)

Crude prices fell on Friday as a rallying dollar and fears of a rate hike due to strong U.S. jobs growth suppressed the market, diverting attention from a near four-year low in the number of rigs drilling for oil in the United States.

Worries about the security of Libyan and Iraq crude supplies, which had put a floor beneath the market in the earlier hours of trade, also took a backseat.

Brent Crude Future Prices Rise Above $61

Brent crude future prices rose above $61 a barrel on Thursday, as investors brushed aside bearish U.S. inventories data to focus on tensions in Iraq and Libya.

A deteriorating security situation led Libya's state oil company to declare force majeure on 11 of its oilfields on Wednesday.

In Iraq, Islamic State militants have set fire to oil wells in the Ajil field east of the city of Tikrit to try to hinder aerial attacks aimed at driving them from the oilfield, a witness and military source said.

Saudi Ups Official Oil Prices Amid Signs of Stronger Demand

Saudi Arabia raised the official selling prices (OSPs) for its oil deliveries to Asia and the United States on Tuesday, in the latest signal OPEC's largest exporter is seeing signs of stronger demand.

The Kingdom raised all U.S.-bound crude prices by $1 a barrel and hiked extra-light crude oil to Asia by $1.40 a barrel, in a vote of confidence oil demand is growing in two of its biggest markets following the price crash since June.