US production reaches its highest level in decades; advanced drilling and supercomputing light the way for even more output and sweet new finds; coal languishes at home but finds money overseas; ….plus the latest in this week’s premium newsletter.
But before we get onto the main business I thought I’d take a minute to blow our own horn a little (not something we normally do – but on this occasion I feel it’s warranted.)
Our Trader extraordinaire Dan Dicker has made some superb calls of late in Oilprice.com Premium – his latest call on the narrowing WTI-Brent crude spread was spot on and refiners have taken a beating as he predicted to subscribers. His call in today’s letter is perfectly timed and is set to make our Premium subscribers even better returns in the future. Don’t miss it. You can start a 30 day free trial by clicking here.
Onto the news:
US crude figures for Q1 2013 are out, with US oil production reaching its highest level in over two decades in April, exceeding 7 million barrels a day since February. Stockpiles have grown by about 2 million barrels—in their biggest rise since 1931. A majority of analysts predict that US oil production will continue to rise or remain unchanged this year. Imports rose 8% to 8.17 million barrels, with the biggest spike in imports from Kuwait, followed by Nigeria. Imports from Canada declined, but are likely to recover. Gas, on the other hand, has seen a slump in demand by 3.8% to 8.42 million barrels/day by the end of April, with consumption 3.2% lower than the same period last year. Refining activities were up this quarter, but not enough to offset supply.
Decades of technological advancements—from drilling improvements to supercomputing that helps companies determine where to explore and drill next—are leading to a significant ramp-up in production and a constant stream of new discoveries around the world. In this week’s premium newsletter, we take you through the latest advances in supercomputing, which has allowed Spain’s Repsol, for one, to determine that its offshore Brazil assets are analog to some sweet spots in Angola. Seismic imaging advancements that have gone from 2D imaging to 3D imaging and now even 4D—the time element—are making it easier and faster to find the next best spot to drill. At the same time, supercomputers are becoming more powerful, boosting capacity to process massive amounts of seismic data and removing the enormous risk associated with launching a major drilling campaign in unchartered territory. This is the competitive edge separating the wheat from the chaff. And it’s in a constant state of evolution. (You can read the full report for free by clicking here.)
Which brings us to peak oil—a theory that is increasingly being buried in the mounds of new data and mounting technological advances that are uncovering previously elusive deposits in the deepest waters. Just look at Brazil’s pre-salt finds, and the revival of optimism over the US Gulf of Mexico spurred by this South American success.
Against this backdrop, we have to talk about coal, which is languishing on the US domestic market, but finding a lucrative home overseas, where markets are greedy for cheap US coal. The question now is can we build the infrastructure to get more of this cheap coal to international markets? In theory—yes. In reality, there are mounting environmental-political hurdles, but key coal states like Wyoming, Montana and Illinois are hoping to clear these hurdles, fast.
Four planned export terminals on the US’ western shores aren’t off to a stellar start, and a major coal deal in Montana is experiencing a few hiccups. For Illinois, which has seen its coal exports jump over the past few years, the infrastructure issue is less pressing. It’s got access to the Gulf of Mexico by major river routes.
But when it’s all about exports, it’s natural gas that’s on everyone’s mind. Will the US become a net exporter of natural gas? The hints being dropped by the Obama crew are in the affirmative, and deal-making is underway. Analysts expect we’re looking a US net gas exporting by 2020.
This weeks analysis is taken from the intelligence section of the premium letter and looks at the following four situations:
• US: Towards Net Gas Exporting
• GHANA-COTE D’IVOIRE: New Find, Old Maritime Dispute
• KENYA: Oil Production 6-7 Years Away
• BRAZIL: Another Discovery for Karoon
See below for analysis and recommendations.
Don’t forget to check out this week’s premium newsletter: supercomputing advances, a hot stock pick for a company that’s weathering a management storm nicely, and the latest from trader Dan Dicker. This is a letter you don’t want to miss – Click here to start your 30 day free trial.
I hope you enjoy the four reports below and have a nice weekend.