• 2 days PDVSA Booted From Caribbean Terminal Over Unpaid Bills
  • 2 days Russia Warns Ukraine Against Recovering Oil Off The Coast Of Crimea
  • 2 days Syrian Rebels Relinquish Control Of Major Gas Field
  • 2 days Schlumberger Warns Of Moderating Investment In North America
  • 2 days Oil Prices Set For Weekly Loss As Profit Taking Trumps Mideast Tensions
  • 2 days Energy Regulators Look To Guard Grid From Cyberattacks
  • 2 days Mexico Says OPEC Has Not Approached It For Deal Extension
  • 2 days New Video Game Targets Oil Infrastructure
  • 3 days Shell Restarts Bonny Light Exports
  • 3 days Russia’s Rosneft To Take Majority In Kurdish Oil Pipeline
  • 3 days Iraq Struggles To Replace Damaged Kirkuk Equipment As Output Falls
  • 3 days British Utility Companies Brace For Major Reforms
  • 3 days Montenegro A ‘Sweet Spot’ Of Untapped Oil, Gas In The Adriatic
  • 3 days Rosneft CEO: Rising U.S. Shale A Downside Risk To Oil Prices
  • 3 days Brazil Could Invite More Bids For Unsold Pre-Salt Oil Blocks
  • 3 days OPEC/Non-OPEC Seek Consensus On Deal Before Nov Summit
  • 3 days London Stock Exchange Boss Defends Push To Win Aramco IPO
  • 3 days Rosneft Signs $400M Deal With Kurdistan
  • 4 days Kinder Morgan Warns About Trans Mountain Delays
  • 4 days India, China, U.S., Complain Of Venezuelan Crude Oil Quality Issues
  • 4 days Kurdish Kirkuk-Ceyhan Crude Oil Flows Plunge To 225,000 Bpd
  • 4 days Russia, Saudis Team Up To Boost Fracking Tech
  • 4 days Conflicting News Spurs Doubt On Aramco IPO
  • 5 days Exxon Starts Production At New Refinery In Texas
  • 5 days Iraq Asks BP To Redevelop Kirkuk Oil Fields
  • 5 days Oil Prices Rise After U.S. API Reports Strong Crude Inventory Draw
  • 5 days Oil Gains Spur Growth In Canada’s Oil Cities
  • 5 days China To Take 5% Of Rosneft’s Output In New Deal
  • 5 days UAE Oil Giant Seeks Partnership For Possible IPO
  • 5 days Planting Trees Could Cut Emissions As Much As Quitting Oil
  • 5 days VW Fails To Secure Critical Commodity For EVs
  • 5 days Enbridge Pipeline Expansion Finally Approved
  • 6 days Iraqi Forces Seize Control Of North Oil Co Fields In Kirkuk
  • 6 days OPEC Oil Deal Compliance Falls To 86%
  • 6 days U.S. Oil Production To Increase in November As Rig Count Falls
  • 6 days Gazprom Neft Unhappy With OPEC-Russia Production Cut Deal
  • 6 days Disputed Venezuelan Vote Could Lead To More Sanctions, Clashes
  • 6 days EU Urges U.S. Congress To Protect Iran Nuclear Deal
  • 7 days Oil Rig Explosion In Louisiana Leaves 7 Injured, 1 Still Missing
  • 7 days Aramco Says No Plans To Shelve IPO
Alt Text

Oil Quality Issues Could Bankrupt Venezuela

Falling Venezuelan oil quality could…

Alt Text

The Next Big Digital Disruption In Energy

Blockchain technology is transforming the…

Rally Over? Oil Down 4 Percent

Oil Rig

We begin by taking a quick look at some of the critical figures and data in the energy markets this week, which show a sharp fall in oil prices following the jump in U.S. rig count at the end of last week.

(Click to enlarge)

(Click to enlarge)

Chart of the Week

• Fossil fuels only made up about 81.5 percent of the total energy consumption in the United States in 2015, the lowest total in the past century.
• But despite the rapid deployment of renewable energy and electric vehicles expected in the years ahead, the EIA still sees fossil fuels dominating the energy landscape.
• By 2040, fossil fuels will only see its market share fall to 76.6 percent.

Market Movers

Royal Dutch Shell (NYSE: RDS.A) requested $2 billion from Saudi Aramco as part of the breakup of their joint venture Motiva Enterprises. Negotiations will be difficult, Reuters reports, but the breakup is expected to be completed in October.
Petrobras has announced its decision to put nine small, shallow-water oil fields up for sale, in an effort to reduce its $12 billion pile of debt. But a source told Reuters that “the fields are junk” and will require substantial investment.
Chevron (NYSE: CVX), ExxonMobil (NYSE: XOM) and their partners have agreed to move forward on a $36.8 billion expansion of the Tengiz oil field in Kazakhstan. The expansion could add roughly 200,000 barrels per day of output beginning in 2022.

Tuesday July 5, 2016

Oil prices fell sharply on Tuesday, down more than 4 percent as the U.S. rig count shot up at the end of last week. Ongoing fears about economic turmoil in Europe are also weighing on WTI and Brent. An assessment from Genscape also predicted that oil inventories increased in Cushing, a bearish sign that excess supply remains. $50 oil remains elusive once again, after a brief period of time above that threshold in June.

U.S. has more oil reserves than Saudi Arabia. A new assessment from Oslo-based Rystad Energy finds that the United States has the world’s largest oil reserves, not Saudi Arabia or Venezuela. The U.S. is sitting on an estimated 264 billion barrels of reserves, compared to Russia’s 256 billion barrels, and Saudi Arabia’s 212 billion barrels. More than half of the U.S. reserves are located in shale. Venezuela is commonly thought to have the world’s largest reserves, but Rystad says that much of that is not discovered.

Venezuela pays bond holders as country falls apart. Venezuela’s economy is melting down, but the government has prioritized meeting bond payments even as food riots spread across the country and medical supplies and other basic items run dangerously low. Bloomberg notes that in the recent past, other countries have defaulted on bond payments long before the crisis has blown up to the extent it has in Venezuela. The situation is curious, especially for a socialist government. But a much bigger test looms later this year when larger debt payments fall due. Between the sovereign and the state-owned PDVSA, a combined $5.8 billion in debt payments will fall due in the second half of 2016. As Barclays noted in a recent research note, there are very large downside risks to Venezuela’s oil production – with several hundred thousand barrels per day of output at stake. Related: Tensions Between India And Pakistan May Rise Over Nuclear Deal

U.S. shale drillers increase hedging. Oil prices are rising, and shale drillers are increasingly choosing to lock in production. According to a Reuters survey, 17 out of 30 companies increased their hedging in the first quarter, the most since early 2015. EOG Resources (NYSE: EOG) and Devon Energy (NYSE: DVN), for example, obtained hedges for the first time in six months. An uptick in hedging activity typically suggests that more drilling is sure to follow. But as Reuters notes, one interesting aspect of the hedging is that some producers even locked in hedges at lower prices than what currently prevails in the market, and even at prices lower than breakeven levels. That highlights the fear that prices could crash again, but also the desire for certainty.

Vitol sees oil prices remaining flat through 2017. The CEO of Vitol Group, the world’s largest independent oil-trading house, does not see oil prices rising much more than today’s levels for the next year and a half. “I cannot see the market really roaring ahead,” Vitol Group CEO Ian Taylor told Bloomberg TV. Taylor sees Brent only rising to about $60 per barrel by the end of next year. He sees weak demand, particularly from China, plus elevated storage levels of both crude oil and refined products. Meanwhile, the supply disruptions in places like Nigeria and Canada are likely temporary.

Niger Delta attacks return. After nearly a three-week hiatus, the Niger Delta Avengers have resumed attacks on the oil industry in Nigeria. Oil prices rose in recent months, in part because of huge supply outages in Nigeria. Estimates vary, but Nigeria lost somewhere around 700,000 to 900,000 barrels per day because of supply outages in recent months. However, after a ceasefire, pipelines and oil wells saw repairs, and Nigeria managed to bring back nearly 500,000 barrels per day, with hopes of a return to full capacity of 2.2 million barrels per day in July. But the Avengers struck two oil sells owned by Chevron (NYSE: CVX) over the weekend, and also pulled off three attacks against pipelines owned by the Nigerian National Petroleum Corporation. Oil prices recently sank as Nigeria brought supply back, but the new round of attacks will put upward pressure on prices. Related: Texan Oil Production May Not Be Falling As Fast As Analysts Believe

Rival Libyan oil companies merge. The rival oil companies in eastern and western Libya have decided to merge, a major political breakthrough that could see Libyan oil return to the market. Libya’s oil production was below 400,000 barrels per day in May, and has hovered around that level for more than a year. Before the civil war began in 2011, Libya was producing 1.6 million barrels per day. Political reconciliation could bring some output back, and Libyan officials have said that output could double in a short period of time.

Unsubsidized solar competitive with natural gas. A new report from Greentech Media found that solar power, even without subsidies, can be cost-competitive with natural gas-fired power plants in the United States. Unsubsidized utility-scale solar projects cost $50 to $70 per megawatt-hour compared with the $52 to $78 for the most efficient natural gas power plant. And for the first time on record, solar is expected to account for the most electricity added to the U.S. power grid, more than any other energy source.

By Evan Kelly of Oilprice.com

More Top Reads From Oilprice.com:

Back to homepage

Leave a comment
  • Jim Decker on July 05 2016 said:
    I want to audit the books on their claims. Do you think they added any costs for:
    1. land needed for the solar panels or is this government land that they consider to be free.
    2. either battery storage for when the sun isn't shining or capital to build a back up plant probably running on natural gas.
    3. depreciation- this industry has wildly exaggerated claims of the life time of solar panels.

    I checked the link and there were no numbers presented there either. When you make cost claims and make no effort to back the claims, I smell a rat.
  • Mark Kuppe on July 05 2016 said:
    At these relatively low prices of natural gas, I don't believe these claims. Maybe when gas is trading at $10 / GJ, but not at $2.75. I'm sure if we looked at the numbers, this claim would fall apart. "The moon is made of cheese.... trust me".

Leave a comment

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