Oil Prices

(28-05-2015, 11:01 AM)Behappyalways Wrote: The Tanker Market Is Sending a Big Warning to Oil Bulls
http://www.bloomberg.com/news/articles/2...s-ia7cvht4

Unfortunately, the data points do not appear to support your conclusion, i.e. Tanker Market is sending a big warning to oil bulls. Tighter tanker rates (must be) = higher demand. This demand could arise from either (a) general increase in oil demand or (b) increase demand for oil storage to exploit the contango. There is nothing in the article to really explain the rationale for the higher demand from oil storage, e.g. a sudden rise in the contango premium, etc.

One possible explanation could instead be this:
Higher Chinese Demand Being Turned Down

Note to Cityfarmer: One would have thought that if OPEC is really interested in maintaining market share, they would give the Chinese whatever they request for.....

Interestingly i have yet to hear any investment house/funds collapse so far despite of the oil price collapse. We would expect if the commodity is speculated there will be some bubble bursts. Same with Japanese Yen knives movement weakening. Anyone heard about any news.

Maybe it requires FED tightening to break.

http://www.cnbc.com/id/102713492

Oil price: Why further falls may be on the way
Catherine Boyle | @cboylecnbc
2 Hours Ago
CNBC.com
1
COMMENTJoin the Discussion
Gas prices
Daniel Acker | Bloomberg | Getty Images
Those hoping for a bit of oil price stability after the past few months' volatility may be disappointed.

Next week's Organisation of Petroleum Exporting Countries (OPEC) meeting is widely expected to be another case of the cartel sitting on its hands, and maintaining levels of oil production despite historically low oil prices.

This shouldn't be any surprise to markets – yet there are other warning signs ahead. After the last meeting in January, crude prices (WTI crude) fell to a six-year low of less than $45 a barrel, then recovered to around $65 a barrel, as the growth in U.S. supply – the main reason why OPEC has been so stubborn about cutting output -- slowed in response to lower prices.

Oil falls below $45 as OPEC plays hardball
And it looks as though OPEC may be getting the result it wished for. The growth in supply from oil producers outside OPEC is forecast to slow from 2.1 million barrels a day b/d) in 2014, to 1.3 million b/d in 2015 and 0.1 million b/d in 2016, according to analysts at UBS.

There have also been huge cuts in capital expenditure at the oil giants, with reductions of between 15-30 percent commonplace as the industry gets to grips with lower prices.

However, the decline in rig count has slowed down recently, indicating that the recent price recovery has led to more optimism among producers, and the decline in production may be levelling off.


For Saudi Arabia's plans to undercut producers with higher costs, continued rises in the price will be unwelcome. At last week's level of $65 per barrel, U.S. shale starts looking economical to produce again.

There are other factors suggesting that another fall may be close.

Net long positions – or the most speculative positions - in oil have risen to all-time highs, as analysts at Credit Suisse point out. The last time that speculative positions peaked and started falling, back in June 2014, a 60 percent oil price plummet resulted (although oil prices were much higher then).

Bulls are backing oil price breakthrough
Much of the recent oil price gains can be attributed to the fall of the U.S. dollar, which Keith Parker, head of global asset allocation research for the Americas at Barclays, thinks has boosted the oil price by 6 percent. If the currency in which oil is bought and sold strengthens further, oil should fall again.

However, despite being drowned out by the market's pessimists, there are still some oil price bulls out there - notably analysts at Bernstein, who argue that the shale supply will continue to decline, driving prices up to $85 a barrel next year.



Catherine Boyle
Senior Correspondent, CNBC

(28-05-2015, 03:43 PM)corydorus Wrote: Interestingly i have yet to hear any investment house/funds collapse so far despite of the oil price collapse. We would expect if the commodity is speculated there will be some bubble bursts. Same with Japanese Yen knives movement weakening. Anyone heard about any news.

Maybe it requires FED tightening to break.

OW Bunker was one of the largest bunker oil traders, but went belly up last year.

http://shipandbunker.com/news/world/1027...-to-police

EIA's Model...

As cautioned to valuebuddies before, EIA has a model with many fudged (or estimated if you like) numbers.

May 25 2015 at 5:14 PM Updated May 25 2015 at 5:15 PM SAVE ARTICLE PRINT Long slide in oil price has new impacts

Oil explorers are feeling new stresses from low returns. Glenn Campbell
by Christopher Adams
The oil price plunge has triggered bankruptcies and debt defaults with almost two dozen oil and gas groups now under stress as rescue measures are put in place to try to save companies nearing collapse.

A 40 per cent slide in Brent crude prices from a peak of $115 a barrel last June has put smaller, cash-strapped producers in financial trouble, according to City analysts, with up to a quarter of a million barrels a day of oil supply at risk.

Even after a rebound in prices from January's lows to about $66 a barrel, there have been "numerous small corporate casualties" across the globe, and especially in the US and Canada, says a report by Bernstein Research.

The firm has identified 22 companies "under duress" from lower oil prices, with $33bn of assets, including eight that have filed for bankruptcy protection and others warning of ­insolvency or deferred bond interest payments.

A dozen of the groups identified by Bernstein had their production assets in North America, with the rest spread across South America, Europe and the Asia-Pacific region. Their total output was put at 383,000 barrels of oil equivalent a day, of which 239,000 b/d was oil and the rest gas.

The fallout from the price slide has yet to match that which followed the 2008-09 collapse, when 61 companies filed for bankruptcy. However, those groups were much smaller than the energy producers that are now struggling to meet obligations to lenders as revenues dwindle.

Bernstein's Oswald Clint said that similarities with the 1980s supply-driven slump, and uncertainty over the scale of any price recovery, made companies more vulnerable than in 2008-09.

"There are a lot of differences between this downturn and the last one. The most important is that the last recovery was rapid, much quicker than the industry could react. There is greater perceived uncertainty of where we are in the cycle today," he said.

Five years ago the consequences of the price plunge were limited by the rise in US production that heralded the shale boom. This time, those higher cost shale resources make up a much bigger proportion of US output. Most of the casualties this time are in the US and Canada, where the tumble in crude has hit oil sands producers hard.

They include little-known companies such as shale gas producer Quicksilver Resources, WBH Energy and Southern Pacific Resources, which have filed for bankruptcy protection.

Larger companies such as Samson Resources, another shale producer, have warned investors of possible default. UK-based Afren has delayed payment of interest to bondholders, while Gulf Keystone, the Kurdistan producer, is in talks over a possible sale of assets or the company.

John Gerstenlauer, chief executive of Gulf Keystone, said the group, which was owed more than $330m by the Kurdistan authorities for its share of oil sales, said it was burning through cash at the rate of $8m to $10m a month.

"For us, it's a matter of keeping our heads above water until the Kurdistan situation improves. We're trying to live within our means and generate enough income to cover that," he said. The company had slashed capital and operating expenditure.

Financial Times

Financial Times

(30-05-2015, 05:40 AM)HitandRun Wrote: EIA's Model...

As cautioned to valuebuddies before, EIA has a model with many fudged (or estimated if you like) numbers.

Estimates with a 1% deviation I think is pretty acceptable. But 3% jump seemed unreasonable and weird. I would be keen to see their monthly report adjustments that indeed April marked the peak of US oil production.

Barclays: oil will be lower for longer

Angela Macdonald-Smith
677 words
21 May 2015
The Australian Financial Review
AFNR
English
Copyright 2015. Fairfax Media Management Pty Limited.

Crude oil prices are likely to stay "lower for longer" with US prices potentially languishing around $US65 a barrel through 2016 and beyond because of a huge volume of stored oil both above and below the ground, according to Barclays' global head of natural resources.

Grant Porter, chairman of natural resources at the bank, pointed to the mounting tally of half-drilled wells in shale regions in the US, which created a large bank of up to 2 million barrels a day of output that could flood on to the market as soon as prices increased.

The number of drilled but uncompleted (DUC) wells - liquids wells in US shale regions that have been drilled but not brought into production - is set to reach 3000-4000 by the end of this quarter, he said. The half-finished wells have been drilled by operators often to retain acreage, but who want to wait for higher prices and lower services costs before making the investment required to start them up.

Mr Porter referred to comments by independent producers in the US, who are waiting for prices for US crude to rise just a few dollars more to about $US65 a barrel before completing the wells.

Assuming an initial production rate of 500 barrels a day, the DUC wells represent 1.5 million-2 million barrels a day of supply just waiting in the wings.

Above the ground, meanwhile, oil stockpiles in the US have reached a record 490 million barrels, adding further to the overhang.

"A lot of people think the price will recover in the next two, three, four years - exactly when and at what rate is anyone's guess - but the concern now is that with this drilled but uncompleted inventory that that forestalls the recovery for another 12 to18 months further than would otherwise be the case," Mr Porter said. "We do not see prices of oil coming back to $US90 or $US100 a barrel any time soon. It's the lower-for-longer category."

WTI was at about $US58.60 a barrel on Wednesday.

He said that while Barclays is not as bearish as Goldman Sachs, which this week forecast oil prices at just $US55 a barrel in 2020, other forecasts looked too bullish.

Oil giant Shell, for example, revealed in documents for its $US70 billion takeover offer for BG Group that it is assuming prices will recover to $US67 a barrel next year, rising to $US75 on average in 2017, then $US90 in 2018.

Supporting the bearish view of US prices is the decline in service costs which has reduced break-even costs for producers.

The US shale boom has turned the US into the world's biggest supply growth source, rising by 1 million barrels a day every year for the past three years.

Despite cutbacks in capital expenditure by onshore shale producers which has about halved the number of drill-rigs in operation, US production is still on the rise, increasing from 9.2 million barrels a day at the start of 2015 to towards 9.4 million, he said.

Barclays expects US output finally to start to decline either this quarter or in the September quarter, but the volume of oil stored underground in well bores waiting to come into production would prevent any rapid decline.

Barclays assumes oil demand growth will pick up modestly, by 1 million-1.4 million barrels a day, up from last year's growth rate.

The bank is also bearish in US gas prices, with a forecast of an average price of $US2.75 per thousand cubic feet this year, rising to $US3.60 per mcf in 2016. But Mr Porter said US LNG exports would still be competitive in Asia, assuming a Henry Hub US benchmark price of $US4. At that price, US LNG could be delivered to Tokyo Bay in Japan at about $US10 per mcf, lower than the $US12-$US14 per mcf that some projects in Australia need to be competitive.


Fairfax Media Management Pty Limited

Document AFNR000020150520eb5l0000j

Oil slips after OPEC keeps output high, China slowdown

By Christopher Johnson

LONDON (Reuters) - Oil prices slipped on Monday on news of a slide in China's fuel imports and as markets digested OPEC's decision to maintain its production target, which analysts said could prolong a supply glut for the rest of the year.

China, the world's biggest net oil importer, bought nearly a quarter less crude in May than it did in the previous month, official data showed. China's imports of oil products also fell by more than 6 percent while oil product exports fell 10 percent.

The Chinese data came after the Organization of the Petroleum Exporting Countries (OPEC) agreed on Friday to maintain oil output at levels well above current demand, exacerbating a glut where millions of barrels of crude are stored without a buyer.

"The OPEC decision is bearish for oil," said Tamas Varga, oil analyst at London brokerage PVM Oil Associates. "It means we will have an oversupplied market for the rest of the year."

Brent for July dropped to a low of $62.70 a barrel on Monday before recovering to around $62.95 a barrel by 1040 GMT, down 36 cents. U.S. crude was at $58.70 a barrel, down 43 cents.

Several analysts said they expected oil prices to fall in the wake of the OPEC meeting as supply gradually overwhelmed demand in many markets.

"The oil market still looks like it is heading for trouble," Barclays commodities analysts said in a report, adding that a global oil market surplus would last for the rest of 2015, although it would probably shrink in the second half of the year.

"This means that global oil stocks, already at record highs, will continue to climb, resulting in further downward pressure on prices," they said.

Goldman Sachs oil analysts agreed: "We forecast that Saudi and other low-cost producers will continue to increase output as this is the next logical step to maximizing revenues in the face of shale oil's scalability."

Morgan Stanley analysts led by Adam Longson said the future oil market focus was likely to be on rising supplies, particularly if Iran agreed a nuclear deal leading to the end of economic sanctions on the Islamic Republic.

"We believe the market will increasingly turn its attention to the risk that Iran could add new supply to the market," they said in a note.

Analysts expect U.S. drilling to start increasing again in the second half of this year following 26 weeks of decline.

http://www.bloomberg.com/news/articles/2...rket-share

The World Is Facing Its Longest Oil Glut in at Least Three Decades
by Grant Smith
June 16, 2015 — 7:00 AM SGT Updated on June 16, 2015 — 5:35 PM SGT
Recommended
Chinese Workers
Five Million Reasons Why China Could Go to War
Honda HR-V
This Tiny SUV Just Made the Biggest Splash in the U.S.

Greek Deadlock Has Leader Hoping for Miracle to Avoid Default

Calling All Engineers! Musk Looks for Hyperloop Pod Ideas
The world is on the brink of the longest-lasting oil glut in at least three decades and OPEC’s quest for market share makes it almost unavoidable.
Record-Breaking Glut
Oil supply has exceeded demand globally for the past five quarters, already the most enduring glut since the 1997 Asian economic crisis, International Energy Agency data show. If the Organization of Petroleum Exporting Countries were to keep pumping at current rates it would become the longest surplus since at least 1985 by the third quarter, the data show.
There are few signs the 12-nation group will cut back. Saudi Arabia, OPEC’s biggest member, will probably increase production to intensify pressure on U.S. shale drillers, Goldman Sachs Group Inc. predicts. OPEC’s supplies may be swollen further this year if Iran reaches a deal with world powers to ease sanctions on its exports, Commerzbank AG says.
“It seems to be taking longer for the oil surplus to clear, and, even without the return of Iran, IEA data indicates it could last for the rest of the year,” said Eugen Weinberg, head of commodities research at Commerzbank in Frankfurt. “Any expectations the oversupply will be gone by 2016 don’t look justified at this stage.”
Brent crude for August settlement dropped 18 cents to $63.77 a barrel on the London-based ICE Futures Europe exchange at 10:17 a.m. London time. The benchmark has risen about 40 percent since reaching a six-year low of $45.19 on Jan. 13.
OPEC pumped 31.3 million barrels a day in May and will probably continue to pump around that level “in coming months,” the IEA said in a report on June 11. The agency doesn’t forecast OPEC production.
Global Oversupply
Producing at that level would imply a global oversupply of 1 million barrels a day in the third quarter and 600,000 barrels in the following three months, according to IEA projections for global demand and non-OPEC supply compiled by Bloomberg. That would be the eighth consecutive quarterly surplus, exceeding the current record of six quarters from 1997 to 1998.
The glut could swell further if Iran and world powers reach an accord on the Islamic Republic’s nuclear program by their June 30 deadline, Commerzbank predicts. The country could boost exports by 1 million barrels a day within seven months of sanctions being removed, Oil Minister Bijan Namdar Zanganeh said in Vienna on June 3.