Thursday, February 23, 2017

U.S. to increase oil production, drilling rig counts

For the first time since early 2015 U.S. oil production increased for the second consecutive month in November 2016. U.S. Energy Information Administration reports today that increased drilling activity in Texas and New Mexico, as well as the start of a number of new projects in the Federal Offshore Gulf of Mexico (GOM), more than offset declining production from other regions in October and November 2016.

Increased drilling in the Permian region responded relatively quickly to a rise in the WTI oil price, which increased from an average of near $30/bbl. in the first quarter of 2016 to $45/bbl. or higher beginning in the second quarter of 2016. In the GOM, the new projects that came online in the last quarter of 2016 were planned and approved during the 2012–14 period.

U.S. oil production averaged an estimated 8.9 million barrels per day in 2016, and monthly oil production increased by 232,000 b/d in October and by 105,000 b/d in November, report says. Current crude oil prices above $50/b, combined with increasing drilling rig counts in several onshore basins, suggest U.S. crude oil production will likely continue to increase, Energy Information Administration reports.

Oil supply and price spreads

Earlier in February EIA in its regular short-term energy outlook said U.S oil production is forecast to average 9.0 million b/d in 2017 and 9.5 million b/d in 2018. Total OPEC supply is expected by EIA to increase by 0.2 million b/d in 2017 and by 0.5 million b/d in 2018. EIA forecasts Brent crude oil prices to average $55/b in 2017 and $57/b in 2018. WTI prices are forecast to average about $1/b less than Brent prices in 2017.

The U.S. oil-directed rig count increased by 41 rigs in January, the eighth consecutive monthly increase and the first year-over-year increase since December 2014, according to Baker Hughes.

Prices for WTI Midland strengthened compared with similar light sweet crude oils at different delivery hubs, as represented by a decline in the WTI Cushing. Recent movements in U.S. crude oil price differentials could be reflecting infrastructure developments and changes in oil market trade flows.

Vagif Sharifov, oil and gas markets research analyst. To contact the author of the story, please write to

Wednesday, February 22, 2017

US shale oil production to jump 80,000 barrels a day


The recovery of U.S shale oil is expected to quicken next month as more crude-producing regions return to growth, says the U.S Energy Information Administration’s latest drilling productivity report.

The EIA predicts U.S shale oil production in seven major regions will increase by a total of 80,000 barrels a day to 4.87 million barrels a day in March. This marks the third month the agency has projected output to rise.

The latest prediction is nearly double the 41,000-barrels-a-day climb the agency expected for February in its previous report. On Monday the EIA slightly raised its predictions for February’s output to 4.79 million barrels per day.

The Permian Basin in Texas and New Mexico is still leading the recovery. The EIA predicts drillers there will increase output by 70,000 barrels a day in March. Due to the geology of the basin, drillers are able to produce a barrel of oil at a relatively low cost.

The Eagle Ford in south Texas is expected to return to growth next month with an addition of 14,000 barrels a day. The Niobrara in the Mountain region is expected to grow as well, with a projected raise of output by 15,000 barrels a day.

On the contrary, those gains were partially offset by a projected decline of 18,000 barrels a day in North Dakota’s Bakken shale.

American shale producers use hydraulic fracturing, a rather expensive method of drilling. By injecting a mixture of water, minerals, and chemicals into wells at high pressure, they are able to break up shale rock and release oil and natural gas.

A downturn that has lasted over two years has made it difficult for many frackers to break even on production.

Oil prices have stabilized above $50 a barrel since OPEC and other crude-producing nations agreed last year to cut production by about 1.8 million barrels a day. The higher prices have made more U.S. shale drilling profitable.

Article written by HEI contributor Lydia Ezeakor.

Friday, February 17, 2017

OSVs to become LNG fuel tankers


Bergen-based CRYO Shipping has developed a new type of tanker design that is claimed to enable shipowners to implement clean and cheap bunkers. 
By converting offshore vessels into LNG fuel tankers, the new established company aims to become the world's first and largest LNG feeder and bunker operator.

CRYO Shipping specialises in regional short sea shipping of LNG. It is a fuel that there is plentiful worldwide, but where infrastructure is lacking. Later,  the company will also look into the transport and supply of renewable cryogenic fuel, such as liquefied biogas (LBG) and liquid hydrogen (LH2).

The company aims to establish a fleet of flexible small-scale LNG tankers to be able to secure LNG supply to consumers regardless of their location. The ships will be able to perform both feeder and ship-to-ship (STS) bunkering operations in all types of waters and ports.

"We are working on conversion projects of platform supply vessels into LNG tankers, which should be in operation by first half 2018," said Nicholai Olsen, managing director and partner of CRYO Shipping. "We have designed the LNG system by using known technology, but combined in a new way. We have also developed a design for newbuildings with completely new and unique functionality that we aim to contract when our portfolio can meet the investment."

Thursday, February 16, 2017

Summer Is Looking Bright for Oil Prices

Seasonal demand dynamics are looking up for oil prices. But there are downside risks to U.S. natural gas: Higher oil prices are an incentive for more shale oil drilling, which increases the level of associated natural gas production when there is weakening seasonal natural gas demand. Technicals for natural gas prices have also weakened, and shale oil drilling is poised to accelerate further this spring and summer, given the upside risks to crude oil prices as the summer driving season approaches.
For oil drillers, natural gas is a critical part of an exploration-and-production company’s valuation. But natural gas prices often are not a critical part of the financial decision to drill an oil well. As long as oil prices are supported, drillers will be producing gas, even if prices remain relatively low -- or fall further. This is called associated natural gas, because it is “associated” with the oil that drillers really want to pump out of the ground. As a result, higher oil prices during the driving season could weigh on natural gas prices, because more natural gas will be produced from additional shale oil well drilling.
The partial implementation of production cuts by members of the Organization of Petroleum Exporting Countries has supported oil prices enough to give an incentive for additional U.S. shale drilling, sending oil rig counts higher by more than 87 percent since May 2016. And the short-term energy outlook report from the U.S. Energy Information Administration this month highlighted that increased oil drilling is expected to send U.S. oil production to a 48-year high. The report was understandably bearish for crude oil prices, but natural gas prices rose the day it was released. Distracted by near-term risks of winter weather, some traders may be missing the fact that more shale oil drilling will increase natural gas production even as demand is seasonally weak.
U.S. natural gas inventories are currently high at almost 2.6 trillion cubic feet. That is 1.8 percent above the five-year moving average, but 11.3 percent below the levels reached last year that engendered a collapse in natural gas prices to $1.64 on March 3. That means there is likely to be more price support for natural gas in the first and second quarters than there was last year, thanks to the lower year-over-year level of inventories. But there are still downside risks to natural gas prices -- especially if oil prices rise further and crude oil drilling activity increases further.
In addition to relatively high natural gas inventories and the prospects of more associated gas production, moving average, relative strength and volume technicals have been bearish for natural gas since the New Year. On Feb. 3, the price of natural gas closed below the 130-day moving average -- a critical technical support over the past three years. This was a very bearish signal to the market, and the price of natural gas has fallen further since Feb. 3, despite a recent blast of winter weather.
 Winter is almost over for the so-called Henry Hub natural gas prices on the NYMEX, since that contract closes on Feb. 24, 2017. And the imminent onset of the refinery buying ahead of the U.S. summer driving season presents additional bullish risks to WTI crude oil prices -- and bearish risks to natural gas prices. Focus on the U.S. summer driving season is likely to increase after the April WTI crude oil contract becomes the front month on the NYMEX after the March contract closes on Feb. 21, 2017.
Natural gas prices are poised to fall further, and the declines in natural gas prices since the close below the 130-day moving average on Feb. 3 may be just the beginning of a larger seasonal decline.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
To contact the author of this story:
Jason Schenker at
To contact the editor responsible for this story:
Max Berley at

Wednesday, February 15, 2017

Crude Oil Prices at Risk as US Dollar Rebounds, Inventories Swell

Talking Points:
  • Crude oil prices retreat as Yellen drives US Dollar upward
  • Gold prices pressured as Fed outlook turns more hawkish
  • More Fed Chair comments, EIA inventory data due ahead
Hawkish comments from Fed Chair Janet Yellen shaped price action yesterday. The central bank chief warned against waiting too long to raise rates, sending the US Dollar higher alongside Treasury bond yields and steepening the 2017 tightening path implied in Fed Funds futures. Gold prices suffered amid ebbing demand for non-interest-bearing and anti-fiat assets while the USD-denominated WTI crude oil price benchmark succumbed to de-facto selling pressure.
From here, another day of Yellen testimony is ahead. Having discharged her duties in the Senate, the Chair will now do the same in the House of Representatives. Her prepared remarks ought to be essentially unchanged but the line of questioning thereafter may not match what has already crossed the wires. This could pave the way for follow-through on yesterday’s price action as the hawkish narrative is advanced. 
The case for steeper rate hikes may find further support on the data front. January’s CPI report is expected to put the headline on-year US inflation rate at 2.4 percent, the highest since March 2012. Price growth readings have tended to outperform relative to consensus forecasts since mid-2016, opening the door for an even steeper uptick. 
Elsewhere on the data docket, EIA inventory data is expected to show crude oil stockpiles added 3.5 million barrels last week. A private-sector estimate from API predicted a far more sizable gain of 9.9 million barrels over the same period yesterday. A print closer in line with that assessment may amplify USD-derived pressure as traders increasingly fret about swelling swing supply countering support from OPEC output cuts.
GOLD TECHNICAL ANALYSISGold prices continue to struggle to make good on a Bearish Engulfing candlestick pattern, though the setup hasn’t been invalidated. A daily close below the 38.2% Fibonacci retracementat 1219.20 targets the 23.6% level at 1182.36. Alternatively, a move back above the 50% Fib at 1248.98 exposes the 61.8% retracementat 1278.76.
Crude Oil Prices at Risk as US Dollar Rebounds, Inventories Swell
Chart created using TradingView
CRUDE OIL TECHNICAL ANALYSISCrude oil continue to tread water in familiar territory. From here, a daily close above range resistance at 53.86 targets the 55.21-65 area (January 3 high, 38.2% Fibonacci expansion). Alternatively, a push below rising trend line support – now at 51.82 – exposes the 38.2% Fib retracement at 50.25. 
Crude Oil Prices at Risk as US Dollar Rebounds, Inventories Swell
Chart created using TradingView
--- Written by Ilya Spivak, Currency Strategist for

Tuesday, February 14, 2017

Parsley Energy to spend $2.8 billion on Permian land

In a quest to continue their acquisitions in the area, Parsley Energy is buying rights to undeveloped acres in the heart of West Texas’ Permian Basin from Double Eagle Energy for $2.8 billion.

This will be the 10th largest purchase in the basin that has been announced by Parsley, an Austin-based company, it will add 71,000 net acres to the company’s Midland portfolio. This brings it’s total Permian acreage to 227,000, one of the largest holdings by an independent production company within the basin.

“It’s really been remarkable what Parsley’s been able to do,” said Jackson Sandeen, research firm Wood Mackenzie’s chief Permian Basin analyst. “The company’s been on a tear.”

Priced at the upper end when compared to recent averages, the purchase includes acres in six Permian counties for about $37,000 an acre.

This year is predicted to be hotter than last year in the basin. Last year companies cut more than $24 billion in Permian mergers and acquisitions, it was “a huge year,” said Sandeen. But, other companies have already spent half of that so far this year.

Since the beginning of last year, no company has made more Permian purchases than Parsley, Sandeen stated. Aside from Exxon Mobil, which announced last month the purchase of Bass family oil land for about $6.6 billion, Parsley spent more money than anyone in the basin.

The company said the new acres add 23 drilled but uncompleted wells, 3,300 horizontal drilling locations, as well as about 3,600 barrels of oil and gas per day.

Parsley will be paying half in cash and half in stock.

Double Eagle, based in Fort Worth, was considering going public. The news of the Parsley buy, released late Tuesday, took analysts by surprise.

The sale is scheduled to close by April 20.

Article written by HEI contributor Lydia Ezeakor.

Monday, February 13, 2017

Port of Rotterdam Throughput Falls by 1.1% After Record Year in 2015

Map of the Port of Rotterdam. Different areas and several towns in the boundary Source:

Throughput of freight in Rotterdam fell in 2016 by 1.1% to 461.2 million tonnes. The fall can largely be attributed to dry bulk such as ores and coal. Liquid bulk managed to hold on to the high level reached in 2015. At the time the sector was growing by overt 10%. Last year, 1.2% more containers (TEU) were handled.

Allard Castelein, CEO Port of Rotterdam Authority: “After exceptional 4.9% growth in 2015, we have to be content that most sectors have been able to equal or even slightly exceed these volumes in 2016. The Rotterdam port and industrial complex is facing huge challenges, in particular digitisation and energy transition as well as stiff competition from surrounding ports. Divergent trends provide reassurance that the complex can handle these challenges, such as the major investments in various refineries, a number of projects that should shape energy transition and the new container line sailing schedules that are favourable to Rotterdam.”

Paul Smits, CFO Port of Rotterdam Authority: “With turnover remaining virtually the same and increased profit thanks to good cost management, 2016 was, from a financial viewpoint, a healthy and stable year. Investments rose by 16% and they are at least expected to be comparable to 2016 levels over the next few years. At the same time the Port Authority is obliged to pay corporate tax from 2017 onwards. We shall not allow our clients to suffer as a consequence, so we shall be focusing strongly on our costs.

Liquid bulk

Throughput of crude oil fell by 1.2% to 101.9 million tonnes. Although refinery margins fell slightly, they remained buoyant whereby the level of crude oil input stayed at the upper end of the historical spectrum. Following a rise of 18.0% in 2015, the input and output of oil products increased by a further 0.3% to 88.8 million tonnes. There was less throughput of fuel oil but more gas oil, diesel, kerosene, petrol and naphtha was handled. Throughput of LNG dropped by 26.1% to 1.7 million tonnes following an increase of over 90% in 2015. The reason for this that in 2016 the global market saw less arbitrage relating to LNG prices. The other liquid bulk category rose by 1.5% to 31.2 million tonnes. This is a sum of different types of cargo. For instance more biodiesel was transhipped but less palm oil. In total the amount of liquid bulk fell by 0.5% to 223.5 million tonnes.

Dry bulk

Throughput of ores and scrap dropped by 7.8% to 31.2 million tonnes. The main reason for this was the dumping of Chinese steel. On the upside, there was an increase in the export of scrap to Turkey, which has announced anti-dumping measures. The amount of coal handled dropped by 7.3% to 28.4 million tonnes. The most significant causes are the closure of coal-fired plants in the Netherlands and the increased generation of wind and solar power. More agricultural products were received from Europe and fewer from overseas, which meant throughput of agricultural bulk fell by 3.6% to 10.4 million tonnes. The amount of other dry bulk goods fell by 1.4% to 12.2 million tonnes due to fewer raw materials being shipped for construction and industry. All in all, dry bulk fell 6.2% to 82.3 million tonnes.


Throughput of containers rose by 1.2% to 12.4 million TEU (twenty feel equivalent unit, the unit of measurement for containers) and a 0.6% increase in weight to 127.1 million tonnes. In the second half of the year, 4.9% more was throughput than in the same period of the previous year. More cargo was shipped to and from the Far East and North America, but less went to South America. Within Europe, both feeder traffic and short sea traffic between Rotterdam and Great Britain, Ireland, Spain and Portugal increased. At the same time, container traffic to the ScanBaltic shipping area decreased, mainly due to the weak Russian economy. In the second half of the year, the two new container terminals at Maasvlakte 2 underwent strong growth. In the first half of the year they jointly handled 0.6 million TEU, rising to 1.1 million TEU in the second half of the year. As in previous years, Rotterdam’s share of the market in de Hamburg-Le Havre range was around 30%. This year has seen a fair amount of shifts in the partnerships between the major container lines. From 1 April, these alliances will operate under new sailing schedules. These are looking favourable for Rotterdam.
Despite the announcement of Brexit, roll on roll off (RoRo) traffic increased. This not only involves shipping to and from Great Britain, but also Scandinavia, Spain and Portugal. RoRo traffic grew by 1.7% to 22.4 million tonnes. Throughput of other general cargo increased by 3.0% to 5.9 million tonnes, mainly due to the fact that more steel and non-ferrous metals were handled. RoRo and other general cargo combine to form the breakbulk category. This increased by 2.0% to 28.3 million tonnes.


There has been relatively little investment in oil and gas production due to the persistently low oil price and, consequently, the offshore industry has been hard hit. A lot of companies in what is a key industry for Rotterdam had to make employees redundant last year. At the same time, Sif launched the manufacture of monopiles for offshore wind turbines at Maasvlakte 2.


The Port Authority expects throughput volume in 2017 to remain at a comparable level to that of 2016. Container handling is expected to continue on an upward trend. It is uncertain whether the other sectors will equal the 2016 results.