When next you see me, it will be 2016 and I will be sharing my fearless forecast for the coming year.
not a rig-hand was stirring, no need to dispatch.
The frac-trucks were parked by the fence-line with care,
in hopes that some capex soon would be there.The welders were nestled all snug in their beds,
while visions of pipe-racks danced in their heads.
And Rachel in her ‘kerchief, and Trudeau in his cap,
I sprang from my desk to see what was the matter.
Away to check prices I went with a flash,
Hoping the market would not again crash.
The price of oil appeared to be sinking below,
what so recently seemed to be lowest of low.
Then, what to my wondering eyes should appear,
but a storage report, whose impact was unclear.With tight oil production, the signals are mixed
But I knew in a moment the market was nixed.
More rapid than eagles, the opinions they flew,
and the sector, it seemed was now getting its due:”Now OPEC! Obama!
Now, Climate and Notley!
On, Trudeau! On, Keystone!
On, Saudi and Fracklog!
To the end of the world!
To the end of the glut!
Give it up! Give it up!
The oil patch is shut!”
No more oilsands, refining, plastics and such.
Pipelines not needed, prosperity a crutch.
And up to their pulpits the pundits they flew,
Lower for longer! And end of times too!
And then, in a panic, I thought this can’t be,
is the world really over for people like me?
As I turned off the news and was turning around,
the thought of the end made me fall to the ground.
Fossil fuels done for – green power they say,
and coal is a goner, not too soon if you may.
The wind it blows turbines that spin all around,
and the sun warms up panels, not just worms on the ground.
The world it is changing! Adapt now we must!
The future renewable, opportunity robust!,
Who cares if my taxes go up, up, forever,
Our leaders know all, since they are so clever.
The fate of our industry held tight in their hands,
While advantage is gifted to far, far off lands.
Yet even at that, I still had some hope,
that when all’s said and done, surely we’d cope?
The prices drift down, there’s no turning ‘em up,
yet I laugh when I see them, for I know we’ll catch up.
A simple black swan, some aggressive demand,
in Saudi or China – we’ll be back in command.
For the sector is fickle, it sure is some work,
it gyrates and shakes but then turns with a jerk.
The bears will be slain, the prices will rocket,
and then I’ll have plenty of cash in my pocket .
So doomsters take heed, your view is shortsighted,
This market I expect will no doubt get uprighted.
So here I exclaim, ‘ere I drive out of sight,
“Happy Christmas to oil, and to all a good night!”
Prices as at December 18, 2015 (December 11, 2015)
- The price of oil ended the week down, after a modest amount of volatility.
- Storage posted a large surprise increase
- Production was up marginally
- Markets are selling the storage story
- The rig count decreased
- OPEC
- Natural gas lost ground during the week, hitting a 16 year low as warm weather has led to reduced consumer demand in what is tpyically draw-down season.
- WTI Crude: $34.59 ($35.58)
- Nymex Gas: $1.774 ($1.983) (Even freer than last week!)
- US/Canadian Dollar: $0.7181 ($ 0.7278) (Thank you US Fed!)
Highlights
- As at December 11, 2015, US crude oil supplies were at 490.7 million barrels, an increase of 4.8 million barrels from the previous week and 110.8 million barrels ahead of last year. Another large increase in imports contributed to the inventory build. Import6s for the week ended December 11 were the highest since September 2013.
- The number of days oil supply in storage was 29.5, ahead of last year’s 23.3.
- Production was up to 9.176 million barrels per day. Production last year at the same time was 9,104 million barrels per day. Based on the numbers, it is likely that by end of December year over year production growth in the U.S. will be negative. The marginal increase in production this week came from lower 48.
- As at December 11, 2015, US natural gas in storage was 3,846 billion cubic feet (Bcf), which is 9% above the 5-year average and about 16% higher than last year’s level, following an implied net withdrawal of 34 Bcf during the report week.
- Overall U.S. natural gas consumption decreased by 8.0% for the period led by residential consumption which fell 16.8% on warm weather
- Oil rig count at December 18 was up to 541 from 524 the week prior.
- Natural gas rigs drilling in the United States were down to 168 from 185.
- As of December 14, the Canadian rig count was at 157 (21% utilization), 101 Alberta (19%), 26 BC (32%), 28 Saskatchewan (22%), 2 Manitoba (11%)). Utilization for the same week last year was about 47%.
- US split of Oil vs Gas rigs is 74%/26%, in Canada the split is 42%/58%
Drillbits
- The U.S. Senate approved the lifting of the ban on U.S. oil exports which had been in place since the 1970s. Some notes on this
- It is debatable what advantage the U.S. hopes to gain from this given the stated importance of energy security. Any large scale expansion of exports can only hasten the eventual long term decline of the share revolution.
- That said, oil companies should be able to squeeze out an extra couple of sheckels by narrowing ther spread between WTI and Brent pricing although that differential has narrowed substantially throughout the downturn
- After this development, Canada stands proud and alone as the one major oil-producing country in the world to self-restrict its oil exports to one customer, guaranteeing discounted pricing until a pipeline to tidewater comes into existence.
- We are now in effect selling luxury items at dollars store prices
- Select capital budget updates
- Bonterra – $40 million, a decline of 30% from 2015
- Advantage Oil & Gas – $120 million, about half what was originally planned
- Encana – $1.5 to $1.7 billion, down from $2.2 billion in 2015
- TransCanada submitted a revised proposal for its Energy East Pipeline project which takes into account some of the revisions to the project including an expanded terminal in Saint John, New Brunswick and more than 700 changes emanating from extensive consutation across the country. The revisions have raised the expected cost of the project to $15.7 billion.
- The US Federal Reserve raised rates for the first time in my yougest daughter’s life. The 0.25% hike was expected and long overdue. It also provides the Fed some much needed policy room should some emergency measures be required. That said, the hike leads to a stronger demand for US dollars which is a negative for oil prices and the Canadian dollar.
- Drumpf Watch – OK, so I had some feedback on my thoughts of ditching the Drumpf Watch and the consensus seems to be that his brand of fear politics needs to be constantly highlighted for its absurdity so that people have it top of mind.
- There was a debate this week and Drumpf was challenged on a number of fronts, even though the real battle seemed to be between Rubio and Cruz
- A new poll shows Ted Cruz leading in Iowa
- Drumpf has managed to secure the endorsements of Vladimir Putin and Conrad Black. Um, good for him I guess?
- During the debate, Drumpf suggested shutting down the Internet and didn’t understand a question about the US’s nuclear arsenal
- He still wants to make America “Grate” again
