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Matt Smith

Matt Smith

Taking a voyage across the world of energy with ClipperData’s Director of Commodity Research. Follow on Twitter @ClipperData, @mattvsmith01

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Crude Cracks Below $50 On OPEC Silence

Oil is trudging tiredly lower into the weekend, exhausted after an onslaught of oil-specific releases and (another) week of ongoing OPEC rhetoric. Hark, here are five things to consider in oil markets today.

1) Earlier in the week, we highlighted how Indian crude imports reached a record last month. The four leading suppliers this year are Saudi, Iran, Iraq and Venezuela. combined, they account for some 60 percent of flows:

(Click to enlarge)

2) According to North Dakota's Department of Mineral Resources, oil production in the state for August dropped 4.7% on the prior month to 981,039 bpd. EIA's projection has it pegged just below this number at 968,000 bpd, while our own proprietary well-by-well production model suggests Bakken production won't drop below 1 million barrels per day until next month.

By the state department's estimate, this is the lowest level since March 2014. Completed wells in the state rose to 59 in August, up from 44 in July. Estimates suggest completions need to rise above 70 wells per month to stabilize production levels.

3) As oil production falls in North Dakota, so follows natural gas - given it is a byproduct of the oil drilling process (aka associated gas). Natural gas production is down 3.5 percent in August to 1.64 Bcf/d, according to the department of Mineral Resources.

This is in contrast to the Permian Basin. EIA's monthly data pegs Permian oil production at just under 2 million bpd, something our own proprietary model wholeheartedly endorses. Hence, as oil production is projected higher next month in the latest drilling productivity report, so follows natural gas (hark, below).

As our friends at RBN Energy have highlighted recently, as gas processing capacity increases in the shale play, and as new discoveries of gas are made (hark, 75 Tcf just discovered at two formations in the play by Apache Corp), production should be buoyed going forward.

4) While Permian may be holding up in terms of production, Eagle Ford continues to drift lower. And just as Texas production and drilling activity have dropped off in the last two years, the Texas economy has also headed south. Related: Can We Trust The Saudis To Stick To The OPEC Deal?

Texas accounts for ~9 percent of total U.S. economic output. Since the end of 2014, 91,000 jobs in the oil & gas and mining-support industries have been lost in the state. Over the same period, 85 oil and gas producers and 87 oilfield services companies have filed for bankruptcy protection in the U.S., with more than half of these in Texas. As unemployment grows and construction has idled, the Texas economy is stagnating:

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5) Finally, I was on Anthony Crudele's Futures Radio Show this week, talking about the competitive edge our ClipperData gives to oil traders. A recording can be accessed here.

By Matt Smith

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EXXON Mobil -0.35
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BUY 57.15
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