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Saudi Aramco CEO says to sign $50 billion of deals with U.S. companies


Vessels pass an oil refinery in the waters off the southern coast of Singapore.

National oil giant Saudi Aramco expects to sign $50 billion of deals with U.S. companies on Saturday, part of a drive to diversify the kingdom’s economy beyond oil exports, Aramco’s chief executive Amin Nasser said.

Nasser was speaking to reporters at a conference of scores of senior U.S. and Saudi business executives, coinciding with the visit of U.S. President Donald Trump to Riyadh.

He said 16 agreements with 11 companies would be signed, including memorandums of understanding for joint ventures. Officials said earlier that many of the agreements would flesh out previously announced plans.

“We expect the deals signed today to provide a boost to bilateral trade between both countries,” Nasser said, adding that Aramco currently spent $6.5 billion a year on goods and services from U.S. suppliers.

Among the deals, executives said, were a plan by Jacobs Engineering Group Inc. for a joint venture with Aramco to manage business projects in the kingdom, and a plan by McDermott International to transfer some of its ship fabrication facilities from Dubai to a new shipbuilding complex which Aramco will build within Saudi Arabia.

Top Saudi economic policy makers, including the finance minister and head of the kingdom’s main sovereign wealth fund, described ways in which they planned to attract U.S. capital and technology. Officials said they aimed to prepare new rules covering direct investment by foreign firms within 12 months.

“We want foreign companies to look at Saudi Arabia as a platform for exports to other markets,” Energy Minister Khalid al-Falih told the conference.

This oil rebound is just another fake-out. Here’s where prices are really headed


  • Crude oil prices have dropped sharply in recent weeks.
  • Despite rebounding the past two days, the price spike can’t last.
  • Here are three reasons why we could see prices fall significantly in the next six months.
Robert McNally, founder and president of The Rapidan Group
Russia oil
Sergei Karpukhin | Reuters

Since the crude oil bust began in late 2014, prices have rocketed through three major price rallies. Each rally was fueled by widespread hope and expectations – often stoked by announcements from Organization of the Petroleum Exporting Countries and other producers – that a market “rebalancing” was imminent due to shale output declines, surging demand, or OPEC intervention. But prices crashed anew after data emerged showing no decline in the glut.

The latest rally began last September amid discussions between some OPEC and non-OPEC producers to cut production. The rally gathered steam in December after 22 producers pledged to reduce their combined output by 1.8 million barrels per day from October levels. U.S. West Texas Intermediate soared to $57 per barrel from $45 average in September.

Yet despite heady expectations, slowly emerging oil market data once again dashed hopes that producer pledges would cause the towering oil glut to recede as soon as hoped. While Vienna Group producers report high compliance with production pledges, data on stocks, imports, and tanker shipments indicate the glut has not meaningfully diminished.

In recent weeks, oil prices have dropped more than 10 percent as dismayed bulls closed out their long futures positions. Burned for the third time since 2014, bulls may now be less willing to buy crude futures on producers’ words alone and may instead wait for more tangible evidence of large, sustained stock draws. Alarmed OPEC officials are responding by hinting at a deeper and longer supply cut extension when they meet in Vienna on May 25.

Looking ahead, a May 25 Vienna Deal extension and visible (albeit seasonal) U.S. crude stock draws should trigger a summer price bump into the $50s. Indeed crude prices rose over three percent on Wednesday on news of a large crude inventory draw. But the next big question will be whether glutted crude and product inventories will drop significantly through the rest of the year as leading oil forecasters expect. I am skeptical, for three reasons.

  • The first concerns a reasonable debate among analysts over how many of the barrels that have disappeared into the Asian data fog since 2014 were consumed or just stockpiled. I see more storage and less consumption, which translates into a bigger supply overhang.
  • Second, even if producers extend cuts, we have likely seen peak “compliance,” as members will be tempted to exceed agreed output limits to protect market share amid rising summer demand. Meanwhile, exempted Libyan output should increase by another 200,000 barrels per day toward 1.0 million barrels per day by fall. When combined with expected Nigerian increases, supply growth from exempted OPEC producers will almost entirely offset cuts from the Vienna Group’s OPEC participants by the fourth quarter.
  • Third, U.S. shale oil is roaring back. Lower 48 supply should rise over 600,000 barrels per day from June to December, with shale production exiting the year over 1 million barrels per day above December 2016 levels.

Investment in shale should rise approximately 50 percent in 2017; the rig count for oil-focused rigs has already increased by 34 percent this year (703 oil-focused rigs currently, up from 525 at the end of 2016), with half of the additions in the Permian (the locus of shale activity). Despite cost inflation, operators continue to realize efficiency gains and increase drilling and production.

If inventories remain stubbornly high, expect a disappointing OPEC meeting in December. Cohesion will crack and Saudi Arabia, likely the only producer substantially complying with limits at that point, may opt to open the spigots. If faced with cutting alone to sustain competitors’ drilling, Riyadh may instead accept another price collapse (and a possible IPO delay) to slow shale investment and instill Vienna Group discipline.

If the last six months have shown it is too soon to bet on a boom, the next six may indicate we have not yet escaped the bust. I see a rally after May 25. But by the middle of next year we expect crude to revisit the low $30s.

Commentary by Robert McNally, founder and president of The Rapidan Group, a global energy market, policy, and geopolitical consultancy and is the author of Crude Volatility: The History and the Future of Boom-Bust Oil Prices (Columbia University Press, 2017). From 2001 to 2003, Mr. McNally served as the top international and domestic energy adviser on the White House staff, holding the posts of Special Assistant to the President on the National Economic Council and, in 2003, Senior Director for International Energy on the National Security Council. Follow him on Twitter @andourposterity.

Oil settles at $48.04



Oil settles at $48.04, down 20 cents, as US crude stockpiles swell


Lucy Nicholson | Reuters

Oil prices recouped much of their losses after sliding to almost four-month lows on Wednesday after data showed U.S. crude inventories rising faster than expected, piling pressure on OPEC to extend output cuts beyond June.

The U.S. Energy Information Administration (EIA) said U.S. inventories climbed by almost 5 million barrels to 533.1 million last week, far outpacing forecasts for an increase of 2.8 million.

“A persistent increase in U.S. oil production, together with a rise in imports from Canada, contributed towards a large build in crude oil inventories,” said Abhishek Kumar, senior energy analyst at Interfax Energy in London.

“The market remains nervous about rising U.S. production, which is also reducing the effectiveness of output cuts by the OPEC and some non-OPEC countries,” Kumar added.

A close look at close oil sentiment

A close look at close oil sentiment   

Global benchmark Brent crude futures for May delivery were down 31 cents at $50.65 a barrel by 2:33 p.m. EDT (1833 GMT). The contract fell as low as $49.71.

On its first day as the front-month, U.S. West Texas Intermediate (WTI) crude futures for May settled 20 cents lower at $48.04 per barrel. The session low was $47.01.

Both benchmarks hit their lowest since Nov. 30 when OPEC countries agreed to cut output, and both remained in technically oversold territory. WTI was oversold for the third day in a row, Brent for the second.

A deal between the Organization of the Petroleum Exporting Countries and some non-OPEC producers to reduce output by 1.8 million barrels per day (bpd) in the first half of 2017 has done little to reduce bulging global oil stockpiles.

OPEC, which sources say is leaning toward extending cuts, has broadly delivered on pledged reductions, but non-OPEC states have yet to cut fully in line with commitments.

Trader sees oil reversing course for a rally

Trader sees oil reversing course for a rally   

“OPEC has used up most of its arsenal of verbal weapons to support the market. One hundred percent compliance by all is the only tool they have left and on that account they are struggling,” said Ole Hansen, head of commodity strategy at Saxo Bank.

U.S. shale oil producers have been adding rigs, boosting the country’s weekly oil production to about 9.1 million bpd for the week ended March 10 from an average 8.9 million bpd for 2016, according to U.S. data.

“OPEC’s market intervention has not yet resulted in significant visible inventory drawdowns, and the financial markets have lost patience,” U.S. bank Jefferies said in a note.

But the bank said the market was undersupplied and, if OPEC extended cuts into the second half, inventories would draw down and prices recover above $60 in the fourth quarter.

However, it said U.S. crude production was expected to grow by 360,000 bpd in 2017 and 1 million bpd in 2018, and a price recovery could spur more U.S. shale activity.

Crude oil – Too non-volatile to be true

Money managers boosted their bets on rising West Texas Intermediate prices to a record on speculation that OPEC and its partners would ease the global supply glut.

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Crude oil – Too non-volatile to be true

Money managers boosted their bets on rising West Texas Intermediate prices to a record on speculation that OPEC and its partners would ease the global supply glut.

Ravindra Rao

AVP- Commodity Research, AnandRathi | Capital Expertise: Commodities

Uncertainty continues as OPEC output and rising US rig-count would be the driving force for oil in 2017. Ever since the Organization of Petroleum Exporting Countries sealed an internal deal as well as one with a major non-OPEC, Russia, to cut production from 1st January to June 2017 to support falling prices, WTI prices have been steadily rising. In fact, from the date of the Vienna meet, 29th November 2016, oil has risen 23%. The bulls and bears are now fighting near $55 to get a grip on oil. The confusing thing is that, since January 2017, oil is trading within a tight range of $50 and $54. OPEC claims 86% of deal compliance has been achieved till 22nd February. There is no news of any OPEC member ditching the deal. On the other hand, the US rig-count is increasing due to rising WTI prices. This is something the market expected. Rising WTI prices render US shale-oil drilling financially viable, and every week the EIA’s report shows the rig-count rising (see chart below). The US rig-count (shown by the white line) has gone up since May 2016 to 602 on 24th February.

Because of the rising number of US oil rigs, total inventories on 17th February hit a record 518.6 million barrels according to the EIA. This puts considerable pressure on oil, though bears have been disappointed. The reason is OPEC’s commitment to bring price stability to the oil market. Last week, OPEC immediately came out in rescue of oil as the former showed readiness to extend the output-cut programme to H2 2017 and even to deepen cuts if necessary. So, once again bulls got active.
According to OPEC’s latest report, the club and its partners have reached 86% of their agreed cuts. Crude imports by OPEC’s Saudi Arabia decreased by 393,000 barrels a day last week to 1.06 million, according to preliminary EIA data for week ending 17th February. U.S. weekly imports of Saudi crude fell 27% to the lowest since December. OPEC production and the pace of U.S. drilling in 2017 would be the most significant drivers of crude oil balances and prices. The ambiguity surrounding the OPEC production accord has added volatility to oil prices. Besides, a more optimistic commentary from U.S. management teams implies more stable output, with a possible return to volume growth. Even Russian production heading into next year is high. Although global demand may have improved, the pace is unsteady.

Money managers boosted their bets on rising West Texas Intermediate prices to a record on speculation that OPEC and its partners would ease the global supply glut. Oil has been bound to the tightest price range in more than a decade, yet hedge funds have never been so confident it would eventually rally. The only thing is OPEC will have to keep production low once the accord expires in June. The market may tank once June arrives and OPEC decides not to extend the deal. However, before that, we expect the positive momentum to continue on track. Recently, the Iranian Oil Minister said that an oil rally above $60 a barrel would ultimately hurt OPEC because it would spur competitors to boost production and trigger a medium-term price drop. The US recently imposed new sanctions on Iran after the latter’s missile test recently. The US administration said that Iran’s continuing support for terrorism and development of its ballistic missile programme poses a threat to the world. The Iran government claims this is baseless and provocative. If such tension rises in coming sessions, we may see a spike in oil. Sentiment now supports oil prices. From the day OEPC started cutting output (1st January), prices have comfortably held above $50. As long as the psychological level of $50 is not breached, we are upbeat for March.

The author is Head – Commodity Research & Advisory at Anand Rathi Commodities

Millions at risk from Oil and Gas related earthquakes

Millions Now at Risk From Oil and Gas-Related Earthquakes, Scientists Say

By Zahra Hirji

Mar 3, 2017

Damage from an earthquake is seen at an Oklahoma home, where earthquakes have been linked to the injection of fracking wastewater underground. Millions of people in central and eastern U.S. are now at risk of damage from man-made earthquakes caused by oil and gas activities. Credit: Pat Carter/Getty Images

A new earthquake hazard map for the central and eastern United States shows about 3.5 million people, primarily in Oklahoma and southern Kansas, are at high risk of experiencing a damaging man-made earthquake from oil and gas-related activities this year.

Researchers at the United States Geological Survey have produced a one-year seismic outlook that takes into account both natural and human-caused earthquakes, mainly those generated by the underground disposal of oil and gas wastewater and, to a lesser extent, by fracking itself.

In recent years, there has been a surge in quakes linked to oil and gas activity, including a massive 5.8 event last September in Pawnee, Okla. Some have caused damage to homes, buildings and roads across Oklahoma and elsewhere, sparking public concern and prompting regulators to begin restricting local energy company activities.

Despite some pockets of the country remaining on high alert for damaging shaking, the scientists did find the region’s overall risk went down compared to last year, which was the first year of the seismic report. The 2016 forecast had indicated up to 7 million people had a chance of facing damage from a moderate man-made earthquake. The 2017 forecast was lower because the total number of earthquakes were lower in the study area in 2016 compared with 2015.

The scientists said the drop in earthquakes last year suggests man-made earthquakes can be controlled by reducing the fracking and/or wastewater disposal activity.

According to Mark Petersen, one of the leading USGS scientists involved in the project, the decrease was largely due to state regulatory actions starting in 2014 to restrict waste disposal and energy extraction in known potential earthquake zones. He also said it could have stemmed from companies reducing oil production and waste generation because of last year’s low oil prices.

“These reductions in earthquake rates indicate that this type of seismicity is manageable or controllable,” Petersen said a press conference announcing the 2017 forecast.

The researchers used the record of historical earthquakes (including all the ones in 2016), as well as studies and modeling in developing their 2017 hazard map. It showed that a large section of central and northern Oklahoma, as well as southern Kansas, faces a greater than 1 percent chance of experiencing a moderate earthquake this year. Moreover, a sliver of central Oklahoma faces an at least 10 percent chance. This especially high-risk area was the origin of the state’s largest-ever earthquake, the one that struck near Pawnee.

Overall the number of earthquakes in Oklahoma declined last year. However, the state was shaken by a record number of strong events in 2016. State regulators have increasingly put in place regulations to prevent man-made earthquakes, including rules announced in December on how drillers should respond to possible fracking-linked events.

According to a joint statement from state officials at the Oklahoma Corporation Commission and the Oklahoma Geological Survey, the USGS 2017 forecast “serves to confirm the validity of the work done in Oklahoma to reduce earthquake risk, as well as the need for the effort to continue.”

The new forecast also identified high risk in two other areas where oil and gas wastewater disposal takes place: a small area in northern Kansas, as well as an area called Raton Basin along the Colorado-New Mexico border, which experienced two earthquakes above magnitude 4.0 last year.

The researchers identified a new area of risk of man-made quakes, in western Texas, compared to last year. Meanwhile, the risk of damaging events in northern Texas largely disappeared compared to 2016. The USGS scientists said at the recent press conference that they did not know why this was the case and that Texas officials are studying the issue.

The threat of man-made earthquakes tied to oil and gas activities extends to states excluded from the forecast. For example, researchers have identified likely man-made earthquakes in multiple areas of oil and gas development in California. And state officials in Pennsylvania last month announced a series of four small earthquakes observed in April 2016 that they say was linked to a nearby fracking pad.

Bullish Citi analysts call for crude oil to hit $70 by year end but elsewhere skepticism grows


Citi analysts predict crude oil will hit $70 by the end of 2017   

Crude oil prices could shoot up to $70 a barrel by the end of 2017 as supply and demand levels continue to rebalance in coming months, according to analysts at Citi.

Nearer-term, the research team has raised price estimates modestly by $5 to an average $55 per barrel for the first quarter and by $2 to an average $56 per barrel for the second quarter.

Yet investors will likely have to wait a few more months for a more sustained rise, says Citi in the note published Tuesday, as Brent traded up marginally to around $56 in early European trade.

“Oil prices are not likely to stray far from their current $53-58 per barrel range in the near term as record investor net length and bearish inventory data will likely cap prices until more tangible evidence of a tighter market emerges,” write the analysts.

Citi’s research team is looking to the second quarter for positive effects from both the reported 93 percent compliance level of OPEC participants in last November’s production cut agreement as well as substantial refinery maintenance in Asia scheduled for the spring.

However, a close eye must be kept on delivery timetables, David Ernsberger, Global Head of Energy at S&P Global Platts, told CNBC’s Squawk Box on Tuesday.

“There is the shadow looming of new supply coming to market not just from Iran but also from the U.S. and what we’re looking at heading into the second quarter is when will that oil come to market and will it begin to take the edge off prices a little bit,” he noted.

Looking beyond 2017, Citi’s optimism also fades on expectations that increasing numbers of shale producers will be enticed back into the market by more favorable pricing.

However, the impact of shale is hard to accurately predict given the lack of uniformity in the product says S&P Global Platt’s Ernsberger.

“One cargo of shale oil is not like another and you don’t really know what is going to happen when you put it through your refinery until it lands at your port and that’s a little more uncertainty that even the oil refinery industry – which is used to uncertainty – is really willing to embrace right now,” Ernsberger explained.

“So there’s a stability of new supply issue that really needs to get worked out in the next few years,” he added, saying this was the “big story” regarding shale right now.

US shale oil to rise massively in months: Commerzbank

US shale oil to rise massively in months: Commerzbank   

Another prominent concern in the market is the distribution of derivative positioning with record net long positions and a current long to short positioning ratio of around 10:1, with this being a key reason why oil will soon drop to below $50 per barrel, Eugen Weinberg, Head of Commodity Research at Commerzbank, told CNBC’s Street Signs on Tuesday.

Weinberg also argued that the focus on OPEC compliance levels were like a distracting “magician’s show” while the real action is taking place in the U.S., which he claims is on the way to regaining its crown as the world’s largest oil producer.

“OPEC must at some point recognize and understand that they are no more the marginal producers and marginal production will be coming from shale oil so prices will come under massive pressure during this year once investors recognize oil supplies are not going to disappear,” he opined.

“The world is awash with oil at the moment and there continues to be endless supply so therefore I don’t see a real reason for prices to rise above $60 or $70…so I’m really seeing probably the risks of the prices falling below $50 for a considerable period of time and probably even touching the levels of $40 to $45 this year,” he concluded.

US Crude Oil Up 29 cents


US crude settles at $53.83, up 29 cents, after US Treasury imposes sanctions on Iran

Oil prices gave up much of their gains after jumping on Friday as the United States imposed sanctions on some Iranian individuals and entities, days after the White House put Tehran “on notice” over a ballistic missile test.

Front month U.S. West Texas Intermediate crude futures settled 29 cents higher at $53.83 a barrel. For the week, the contract was up about 1 percent.

Brent crude futures were up 24 cents at $56.80 a barrel by 2:34 p.m. ET (1934 GMT). Brent was on track to gain about 2 percent on the week, its first significant weekly rise this year.

Volume in U.S. crude futures was relatively low on Friday, with about 335,000 contracts changing hands by 12:15 p.m., on track to fall short of the 200-day moving average for 528,000 contracts.

This is the first move by the administration of President Donald Trump against Iran. It follows his vows during the 2016 campaign to get tough on Tehran.

Shuaiba oil refinery south of Kuwait City, Kuwait.

Iran relationship a black swan for oil?   

Under the sanctions, announced by the U.S. Treasury, 13 individuals and 12 entities cannot access the U.S. financial system or deal with U.S. companies.

A senior U.S. administration said Friday’s sanctions were an “initial step” in response to Iran’s “provocative behavior,” suggesting more could follow if Tehran does not curb its ballistic missile program and continues support for Houthi militia in Yemen.

The news added to volatility in what had already been a day of choppy trading. Analysts said the market is torn between promised cuts from the Organization of the Petroleum Exporting Countries and fears over rising U.S. shale oil production.

“While the market is taking these actions in stride so far as unlikely to result in a larger military conflict that would put Persian Gulf crude oil supplies at risk, the odds of that scenario are certainly higher than a week ago,” wrote Timothy Evans, energy analyst at Citi Futures in New York.

Trump had warned on Twitter that “Iran is playing with fire” after its missile test.

“The ‘trumperament’ of the new U.S. president is being tested by Iran and soon maybe also by Russia and China,” said Olivier Jakob, managing director of consultancy PetroMatrix. “And that is adding some geopolitical support to crude oil.”

Here's how to play a rally in crude

Here’s how to play a rally in crude   

Comments by Russian energy minister Alexander Novak that oil producers had cut their output as agreed under a deal with OPEC, also helped to support prices, analysts said.

Novak said that Russian companies might cut oil production more quickly than required by its deal with late last year. He said that 1.4 million barrels per day (bpd) was cut from global oil output last month as part of the deal.

Oilfield services firm Baker Hughes reported U.S. drillers added 17 oil rigs in the last week. The count has been recovering since June and now stands at 583 rigs, compared with 467 rigs last year.

Analysts said oil’s advance could run out of steam quickly. PVM Oil Associates noted the market “is sandwiched between supportive OPEC-led output cuts and the bearish impact of a resurgence in U.S. crude production.”

The prospect of more oil output from Nigeria and also from other non-OPEC producers such as Brazil also looms.

“Record speculative length threatens to trigger a sharp price fall as unease builds amid the ongoing wait for a conclusive upside breakout,” Commerzbank said in a note.

— CNBC’s Tom DiChristopher contributed to this report.

New report shows rising oil and gas industry confidence


New report shows rising oil and gas industry confidence


Offshore staff

HOUSTON – Despite the drawn-out recovery, confidence in oil and gas industry prosperity has risen over the past year among its US-based senior professionals according to new research conducted by DNV GL. Some 45% of the US respondents said they feel confident in the industry’s prospects for the year ahead, compared with only 27% at the start of 2016.

“Short-term agility, long-term resilience” is DNV GL’s seventh annual benchmark study on the outlook for the oil and gas industry. According to the international classification society, the report provides a snapshot of industry confidence, priorities, and concerns for the year ahead. The study draws on a survey of 723 senior sector players globally.

Throughout the US market, respondents reported that investments are spread across the value chain, with 42% saying they are likely to invest in upstream, 45% in midstream, and 27% in downstream for 2017. Notably, 73% believe gas will become an increasingly important component of the global energy mix over the next 10 years.

Peter Bjerager, executive vice president, director of division Americas in DNV GL Oil & Gas, commented: “We see the US oil and gas sector pushing opportunities and investments across the value chain. This shows the market’s ability to adapt and build a more robust portfolio as they position operations for the future. Our research echoes this and predicts a more positive outlook for the US market in the year ahead.”

Over the past couple of years, there has been a strong focus on the price of oil in relation to recovery. The study shows that 45% of US respondents expect the average WTI/Brent oil price to be in the range of $60-70/barrel, and 14% expect the price to be above $70/barrel, aligned with global expectations.

A more stable oil price would improve conditions for investing in oil and gas. “We are pleased to see that respondents globally consider the United States and Brazil to be the top country to invest in for 2017,” Bjerager said.

The report also indicated that US respondents will focus on both digitalization and subsea as emerging technologies in 2017.

Despite the optimism for 2017, cost management is still reported as a high priority among 82% of respondents (down 4% from 2016) and comparable with 85% globally. However, hard work paid off in 2016 and 79% of US respondents feel that they successfully achieved cost efficiency targets. Throughout the US, the key cost cutting priorities for 2017 include opex (34%) and organization restructuring (33%); these are aligned with the global picture.

“In the last two years, we saw intense short-term cost-cutting measures throughout the industry,” Bjerager added. “Though US respondents have a stronger belief that the worst of the downturn is over, restructuring and reorganization are still on the table to ensure growth and competitiveness for the long-run.”

Other key findings included:

* US respondents believe stronger oil prices will start to rebound in 2017 (41% versus 34% globally).

* US respondents (43%) see oversupply of oil and gas as a barrier to industry growth compared with 27% of sector professionals globally.

* The grip on cost control has loosened and dropped significantly from 65% in 2016 to 44%.

* The share of respondents expecting an increased focus on efficiency of assets and extending the lifespan of assets has increased significantly since last year. The share expecting increased focus on efficiency of assets in operations has risen from 34% to 41% while for life extension the percentage has grown from 29% to 36%. Both are slightly lower than the global response of 47% and 39% respectively for 2017.

* Expectations for increased overall headcount remain stable at 14%.

* The focus on cost management as a top priority in 2017 has seen a marked drop, from 38% to 23%. This is a larger fall than globally (from 41% to 34%).

* While opex and organizational restructuring are the top key priorities in both the US and globally in 2017, there is less of a focus on collaboration and supply chain savings in the US.

* 59% stated that cost pressures are driving companies to collaborate with industry participants.

* 68% understood that their business will seek to achieve greater standardization of tools and processes during 2017 – two percentage points higher than globally.


US Crude settles at $52.75


US crude settles at $52.75, down 43 cents, after EIA reports bearish oil, fuel stockpile data

Build in crude oil inventories

Build in crude oil inventories   

Oil prices fell on Wednesday after earlier shrugging off a report from the U.S. Energy Information Administration that showed the nation’s crude inventories rose and gasoline stocks increased sharply.

U.S. light crude settled down 43 cents at $52.75. Benchmark Brent crude fell 25 cents a barrel to $55.19 by 2:54 p.m. ET (1954 GMT).

Futures fell early in the day after builds in U.S. inventories reinforced expectations that increasing shale output this year would reduce the impact of production cuts by OPEC and other major exporters. However, they turned positive after the EIA report amid market strength.

Again Capital founding partner John Kilduff said there was little to cheer in the report, but oil futures can’t fight the strength on Wall Street on a day when the Dow crossed 20,000 for the first time ever and markets were broadly higher.

“It was a very bearish report, and it’s a cloud over this market, but it’s no asset class left behind at the moment,” Kilduff said.

Trump revives pipelines: Who wins & loses?

Trump revives pipelines: Who wins & loses?   

U.S. crude stockpiles rose by 2.8 million barrels in the week through Jan. 20, matching analysts expectations and roughly in line with an earlier report from the American Petroleum Institute.

U.S. gasoline futures fell to a session low after EIA reported gasoline stocks rose by 6.8 million barrels, compared with analysts’ expectations in a Reuters poll for a 498,000-barrel gain. It pared losses shortly after the report came out.

Distillate stockpiles, which include diesel and heating oil, increased by 76,000 barrels, versus expectations for a 1 million-barrel drop, the EIA data showed.

Oil prices have found support in recent weeks from plans by the Organization of the Petroleum Exporting Countries and other producers to reduce output.

Around 1.5 million barrels per day (bpd) has already been taken out of the market from about 1.8 million bpd agreed by oil majors starting on Jan. 1, energy ministers said on Sunday, as producers look to reduce oversupply.

Bernstein Energy said global oil inventories declined by 24 million barrels to 5.7 billion barrels in the fourth quarter of last year from the previous quarter. The amount remaining equates to about 60 days of world oil consumption.

Bearish on oil for the short term: Pro

Bearish on oil for the short term: Pro   

But as OPEC is cutting, U.S. shale output is rising.

U.S. oil production has increased by more than 6 percent since mid-2016, although it remains 7 percent below its 2015 peak. Output is back to levels reached in late 2014, when strong U.S. crude output contributed to a crash in oil prices.

President Donald Trump‘s promise to support the U.S. oil industry has encouraged analysts to revise up their forecasts of growth in U.S. oil production, which is already benefiting from higher prices.

A push by Republicans in the U.S. House of Representatives for a shift to border-adjusted corporate tax could help push U.S. crude prices higher than global benchmark Brent, triggering large-scale domestic production, according to Goldman Sachs.

— CNBC’s Tom DiChristopher contributed to this report.

US Crude up 29 cents


US crude settles at $51.37, up 29 cents as IEA sees oil market tightening

Jonathan Alcorn | Reuters
Oil jack pumps are pictured in the Kern River oil field in Bakersfield, Calif.

Oil prices edged higher on Thursday, but swelling U.S. crude stockpiles limited the rebound from a one-week low after the International Energy Agency said oil markets had been tightening even before cuts agreed by OPEC and other producers took effect.

The IEA said that while it was “far too soon” to gauge OPEC members’ compliance with promised cuts, commercial oil inventories in the developed world fell for a fourth consecutive month in November, with another decline projected for December.

U.S. West Texas Intermediate crude oil settled up 29 cents at $51.37 per barrel, having dropped to a one-week low on Wednesday at $50.91 a barrel.

International benchmark Brent crude was up 34 cents at $54.26 a barrel by 2:33 p.m. ET (1933 GMT), after closing down 2.8 percent in the previous session.

A strong U.S. dollar limited oil’s advance.

RBC strategist: Oil will grind higher

RBC strategist: Oil will grind higher   

Prices tumbled to session lows after U.S. Energy Information Administration (EIA) data showed crude inventories rose unexpectedly last week as refineries sharply cut production.

U.S. commercial crude inventories rose by 2.3 million barrels in the week through Jan. 13 to 485.5 million barrels, well above the expectations of a 342,000-barrel decline.

The data also showed much larger-than-expected increases in stocks of gasoline and a surprise drop distillates inventories. Stockpiles of gasoline in the U.S. East Coast swelled to the highest weekly levels on record for this time of year, when refiners typically begin storing barrels ahead of summer driving season.

“At the end of the day, the focus is on the bigger picture and the bigger picture still looks positive which is why we are still up,” said Scott Shelton, energy specialist at ICAP in Durham, North Carolina.

“The bigger picture includes the OPEC/non-OPEC supply cuts and the IEA report, which was pretty supportive.”

Oil prices have gyrated this year as the market’s focus has swung from hopes that oversupply may be curbed by output cuts announced by the Organization of the Petroleum Exporting Countries and other producers to fears that a rebound in U.S. shale production could swamp any such reductions.

The head of the IEA, Fatih Birol, said in Davos, Switzerland, that he expected U.S. shale oil output to rebound by as much as 500,000 barrels per day over the course of 2017, which would be a new record.Oil and Gas

Futures Now: Oil slips on supply concerns

Futures Now: Oil slips on supply concerns   

It raised its 2016 demand growth estimate, and said the data indicated that rising demand was slowly tightening global oil markets.

Still, analysts warned that keeping the cuts was crucial, particularly as a resilient U.S. shale industry threatened to add more barrels to the market.

“Discipline and strict adherence to the new quotas will be needed probably throughout 2017 and beyond to see the long-awaited and sustainable rebalancing finally arrive,” PVM Oil Associates analyst Tamas Varga said in a note.

OPEC, which is cutting oil output alongside independent producer Russia for the first time in years, wants a lasting partnership with Moscow, Saudi Energy Minister Khalid al Falih told Reuters. He also said extending the deal for a full year if the market rebalances was not needed.

OPEC itself said its cuts would help balance the market, and said its output had already fallen in December. But it also pointed to the possibility of a rebound in U.S. output amid higher oil prices.