• 25 mins Oil Production Cuts Taking A Toll On Russia’s Economy
  • 2 hours Aramco In Talks With Chinese Petrochemical Producers
  • 3 hours Federal Judge Grants Go-Ahead On Keystone XL Lawsuit
  • 5 hours Maduro Names Chavez’ Cousin As Citgo Boss
  • 11 hours Bidding Action Heats Up In UK’s Continental Shelf
  • 16 hours Keystone Pipeline Restart Still Unknown
  • 20 hours UK Offers North Sea Oil Producers Tax Relief To Boost Investment
  • 22 hours Iraq Wants To Build Gas Pipeline To Kuwait In Blow To Shell
  • 1 day Trader Trafigura Raises Share Of Oil Purchases From State Firms
  • 1 day German Energy Group Uniper Rejects $9B Finnish Takeover Bid
  • 1 day Total Could Lose Big If It Pulls Out Of South Pars Deal
  • 1 day Dakota Watchdog Warns It Could Revoke Keystone XL Approval
  • 2 days Oil Prices Rise After API Reports Major Crude Draw
  • 2 days Citgo President And 5 VPs Arrested On Embezzlement Charges
  • 2 days Gazprom Speaks Out Against OPEC Production Cut Extension
  • 2 days Statoil Looks To Lighter Oil To Boost Profitability
  • 2 days Oil Billionaire Becomes Wind Energy’s Top Influencer
  • 2 days Transneft Warns Urals Oil Quality Reaching Critical Levels
  • 2 days Whitefish Energy Suspends Work In Puerto Rico
  • 2 days U.S. Authorities Arrest Two On Major Energy Corruption Scheme
  • 3 days Thanksgiving Gas Prices At 3-Year High
  • 3 days Iraq’s Giant Majnoon Oilfield Attracts Attention Of Supermajors
  • 3 days South Iraq Oil Exports Close To Record High To Offset Kirkuk Drop
  • 3 days Iraqi Forces Find Mass Graves In Oil Wells Near Kirkuk
  • 3 days Chevron Joint Venture Signs $1.7B Oil, Gas Deal In Nigeria
  • 3 days Iraq Steps In To Offset Falling Venezuela Oil Production
  • 3 days ConocoPhillips Sets Price Ceiling For New Projects
  • 6 days Shell Oil Trading Head Steps Down After 29 Years
  • 6 days Higher Oil Prices Reduce North American Oil Bankruptcies
  • 6 days Statoil To Boost Exploration Drilling Offshore Norway In 2018
  • 6 days $1.6 Billion Canadian-US Hydropower Project Approved
  • 6 days Venezuela Officially In Default
  • 6 days Iran Prepares To Export LNG To Boost Trade Relations
  • 6 days Keystone Pipeline Leaks 5,000 Barrels Into Farmland
  • 6 days Saudi Oil Minister: Markets Will Not Rebalance By March
  • 7 days Obscure Dutch Firm Wins Venezuelan Oil Block As Debt Tensions Mount
  • 7 days Rosneft Announces Completion Of World’s Longest Well
  • 7 days Ecuador Won’t Ask Exemption From OPEC Oil Production Cuts
  • 7 days Norway’s $1 Trillion Wealth Fund Proposes To Ditch Oil Stocks
  • 7 days Ecuador Seeks To Clear Schlumberger Debt By End-November
Alt Text

EU Aims To Reform World’s Biggest Carbon Market

The European Union is divided…

Alt Text

Is U.S. Energy Independence Realistic?

The recent IEA report shocked…

Alt Text

The Wireless Power Grid: More Than A 100 Years In The Making

In fulfilling Nikola Tesla’s dreams,…

Oil Prices Fall As Hedge Funds Throw In The Towel

Oil Rig

Oil prices fell on Monday and Tuesday as hedge funds and money managers have started to cut bullish positions in oil in a reaction to quickly growing supply

(Click to enlarge)

(Click to enlarge)

Chart of the Week

(Click to enlarge)

• Throughout the three-year oil price downturn, Permian oil production continued to climb, even as other shale basins saw rigs and drilling activity disappear.

• But now oil production is actually starting to rise across all the major shale basins.

• The Eagle Ford, for example, saw production fall by a whopping 600,000 bpd over the past two years, falling to just 1.14 mb/d in February of this year. But bouncing off of that low, the Eagle Ford is rising again. Production is expected to jump by 39,000 bpd in May compared to April.

Market Movers

Pembina Pipeline (NYSE: PBA) agreed to buy Veresen (OTC: FCGYF) for C$9.7 billion, which will establish one of the largest midstream companies in Canada.

Cloud Peak Energy’s (NYSE: CLD) share price shed more than 10 percent of its value since last week on a large quarterly loss, which came on top of concerns over the prohibition of coal exports on Canada’s west coast.

• Libya’s Sharara oil field is reportedly back online, a field that can produce up to 300,000 bpd. The field is currently producing 216,000 bpd. Sharara is a joint venture between Libya’s National Oil Company and Repsol (OTCQX:REPYF, OTCQX:REPYY), Total (NYSE:TOT), Statoil (NYSE:STO) and OMV (OTC:OMVJF). Related: Uranium Prices Set To Rise In 2017

Tuesday May 2, 2017

Oil prices dropped by another 1 percent on Monday, hitting fresh one-month lows. WTI dropped below $49 per barrel and Brent sank below $52. Things looked slightly better on Tuesday, as crude benchmarks added some small gains on a softer dollar and more OPEC production cuts.

Rig count continues to climb. Another 9 oil rigs were deployed in America’s shale fields, a sign that the industry is undaunted by flagging oil prices. But the ability to produce profitably at $50 per barrel suggests downward pressure on prices, as more production is slated to come online later this year. “The U.S. rig count indicates that there is plenty more to come," analysts at JBC Energy said in a recent report.

Exxon, Chevron, BP post strong profits. First quarter earnings continue to show strong performances from the oil majors. ExxonMobil (NYSE: XOM) said its earnings doubled from a year earlier to $4 billion. Chevron (NYSE: CVX) saw its shares surge by 2 percent after it beat expectations by a large margin, posting earnings of $1.23 per share compared to consensus estimates of $0.86 per share. The $2.3 billion quarterly profit was up from a loss of $725 million a year earlier. BP (NYSE: BP) swung to a profit in the first quarter as well, taking in $1.4 billion compared to a loss of $485 million a year earlier. BP’s share price jumped by more than 2 percent on the news on Tuesday. Still, BP’s net debt rose sharply in the first quarter because of payments related to the 2010 Deepwater Horizon disaster.

OPEC production slips, but so does compliance. Reuters reports that production from Saudi Arabia remained low in April, and output fell in Nigeria and Libya, although the latter two countries are exempted from the OPEC deal. Meanwhile, Angola and the UAE actually added production, leading to a slight fall in the OPEC-wide compliance rate from 92 percent in March to just 90 percent in April. Russia also reported incremental progress on its pledge, reducing output to 11 million barrels per day from 11.05 mb/d in March, still a bit shy of the 300,000 bpd that it promised to cut.

Chevron warns that shale can’t do it alone. In an interview with CNBC, in which he was aggressively pressed to say that U.S. shale had “defeated” OPEC, Chevron (NYSE: CVX) CEO John Watson demurred, saying that while shale “can help,” it cannot supply the world for the long-term by itself. “[U]ltimately oil fields decline, and we're going to need all sources of supply, including the shales, but also deepwater and other sources around the world," Watson said. The comments echo the IEA and a growing number of other top voices in the industry, predicting a supply crunch towards the end of the decade.

Will OPEC extend? There seems to be a discrepancy between the murmurings from OPEC and the calls from market analysts. Nearly all OPEC officials have sent pretty clear signals that they intend to extend their production cuts for another six months, but a few projections from investment banks beg to differ. According to Sam Barden, director of commodity trader and advisor SBI Markets, there is “no chance” of an extension. At the other end of the spectrum is Fereidun Fesharaki, head of FGE, who says there is a “100 percent” chance of an extension, and that the cuts might even need to be extended through “the middle or even to the end of next year.”

Hedge funds cut bullish bets. Investors are losing confidence in oil prices – hedge funds and other money managers slashed their net-long positions once again, according to the latest data. For the week ending on April 25, the reduction was the largest weekly decline on record. Investor sentiment, according to the makeup for their long and short positions, now looks more bearish than it did at the start of the year.

Trump open to gas tax increase. Stuck at 18.4 cents per gallon for a few decades, the U.S. federal gasoline tax has been too politically difficult to increase even though funding needs for infrastructure have grown substantially. President Trump, departing from past presidents, hinted at an openness to raising the tax if it would be “earmarked money toward the highways.” Nevertheless, it faces a steep uphill climb in the U.S. Congress and probably won’t move anywhere anytime soon. Related: What Mexico’s Falling Exports Mean For Oil Prices

Oilfield services only rebounding in U.S. Oilfield services giants Halliburton (NYSE: HAL) and Schlumberger (NYSE: SLB) reported a sharp improvement in their financials in the first quarter, but the rebound for the sector is concentrated only in the U.S. shale patch. Elsewhere around the world, drilling services companies are struggling, the FT reports. As a result, services companies with exposure to the U.S. are doing well, but others are suffering. Whereas Halliburton or Schlumberger might be on the upswing, Italy’s Saipem, a major offshore service company, just posted its worst quarter in more than 15 years.

Upstream oil and gas a dangerous business. An analysis from E&E News shows that the upstream oil and gas industry experiences some of the highest rates of severe injuries out of any other industry in the U.S. The most common injury is amputation, followed by bone fractures.

Saudi Aramco targets Asian market with new refineries. Saudi Aramco is building oil refineries in Asia in order to capture a larger share of the market. “The key is that you need to own assets,” said Ibrahim Al-Buainain, chief executive officer of Saudi Aramco’s trading unit, in a Bloomberg interview. “Having information on the market by itself isn’t enough anymore.” Aramco currently has the ability to process 5.4 mb/d from assets that are located both at home and abroad. But the company wants to double that capacity over the next decade, which would make it the world’s largest refiner.

By Tom Kool for Oilprice.com 

More Top Reads From Oilprice.com:

Back to homepage

Leave a comment
  • Mark A Taylor on May 02 2017 said:
    It's called capitulation.
  • Naomi on May 05 2017 said:
    Financial paper demand for oil always exceeded the physical demand. OPEC is pushing on a string. Energy is over priced. Energy is in surplus.

Leave a comment

Oilprice - The No. 1 Source for Oil & Energy News