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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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Worrying Signs For North Dakota’s Oil Industry

As markets re-open after Friday’s coordinated terrorist attacks in Paris, there is a rather somber atmosphere to start the week. Economic data flow has done little to lighten the mood, with preliminary Q3 Japanese GDP showing a slip back into recessionary conditions. The world’s third largest economy shrank by 0.2 percent on the previous quarter, and by 0.8 percent year-over-year – both numbers worse than expected.

South Korean imports and exports were also below consensus, down -16.6 percent and -15.9 percent, respectively year-on-year; this highlights both weak domestic demand, as well as poor demand from its biggest trade partner, China. The Bank of Korea highlighted China’s economic slowdown, the Federal Reserve’s potential interest-rate hike, and local household debt as key risks to its financial system.

Across to Europe, and Eurozone inflation has clambered back into positive territory on a year-over-year basis, increasing by the same amount (0.1 percent) versus the prior month in October. Related: Saudis Planning For A War Of Attrition In Europe With Russia’s Oil Industry

EurozoneCPI

Eurozone CPI, YoY (source: investing.com)

Onto the oil market, and prices are very much reacting in a response to the weekend’s events in Paris. Hence, as French jets bomb an Islamic State stronghold in Syria, geopolitical concerns return to the radar to rally prices to start the week. U.S. warplanes have also attacked trucks used to smuggle crude oil in eastern Syria, in an area controlled by the Islamic State.

The North Dakota Department of Mineral Resources has reported that the state’s oil production dropped by about 25,000 barrels a day in September. As the chart below via @javierblas2 illustrates, North Dakota oil production has dropped on a year-over-year basis for the first time in over a decade. Related: Korea Leading The Way With Ambitious Fuel Cell Project

The September data also illustrate that the number of wells that are drilled but uncompleted (DUCs) have risen above 1,000 for the first time ever, as oil producers defer pulling oil out of the ground at current prices, hoping instead for better times ahead.

NorthDakotaProduction

This nifty graphic below highlights how ‘big oil’ continues to boost its dividends, despite their collective earnings dropping by more than 70 percent from a year earlier. Dividends are up 10 percent to $28 billion thus far in 2015.

BigOilDividendsRelated: OPEC’s Strategy Is Working According To Cartel’s Latest Report

Finally, there are two worrying signs of slowing from the transportation side of things. Firstly, U.S. freight rail traffic is down 5.2 percent versus the same week last year (h/t @jkempenergy), showing slowing demand. Meanwhile, imports into the key U.S. ports of New York and Los Angeles (which account for over half of all goods entering the U.S. by sea) have dropped by over 10 percent from August to October.

WeakPeak

By Matt Smith

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