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US crude settles at $52.63, down 1%, as more US drilling revives concern about oil glut

CNBC

A worker on a Nabors crude oil drill near New Town, North Dakota.
A worker on a Nabors crude oil drill near New Town, North Dakota.

Oil prices fell on Monday as news of another increase in U.S. drilling activity spread concern over rising output just as many of the world’s oil producers are trying to comply with a deal to pump less in an attempt to prop up prices.

The number of active U.S. oil rigs rose to the highest since November 2015 last week, according to Baker Hughes data, showing drillers are taking advantage of oil prices above $50 a barrel.

U.S. crude futures settled down 54 cents, or 1 percent, at $52.63. Global benchmark Brent crude oil prices were down 32 cents at $55.20 a barrel at 2:33 p.m. ET (1933 GMT).

Frank Klumpp, oil analyst at Stuttgart-based Landesbank Baden-Wuerttemberg, said “three factors that have been weighing on prices: the stronger U.S. dollar, the steady increase in U.S. rig counts and the (latest OPEC compliance data).”

When it comes to oil, don't forget about demand: Expert

When it comes to oil, don’t forget about demand: Expert   

The Organization of the Petroleum Exporting Countries and other producers including Russia agreed to cut output by almost 1.8 million barrels per day (bpd) in the first half of 2017 to relieve a two-year supply overhang.

First indications of compliance to that deal show members have cut production by 900,000 barrels per day (bpd) in January, according to Petro-Logistics, a company that tracks OPEC supply.

That suggests only 75 percent of the targeted cuts would be met, said Tony Headrick, energy analyst at CHS in Minnesota.

“There’s an apprehension about how big that cutback is going to be versus the strength in U.S. crude production,” Headrick said. “That gap is a little narrower than folks had anticipated more recently.”

Tamas Varga, analyst at PVM Oil Associates in London, said the news was “not very encouraging” because it implied that only 75 percent of the OPEC production cut target was being met.

What's next for big oil?

What’s next for big oil?   

Oil prices have remained above $50 a barrel since producers agreed the deal in December, incentivising drillers in low-cost U.S. shale producing regions to ramp up activity.

“In our view the strong rise in U.S. shale oil rigs is a good thing because it will be needed over the next three years as non-OPEC, non-U.S. crude production continues to be hurt by the deep capex cuts both past and present in that segment,” said Bjarne Schieldrop, chief commodities analyst at SEB Markets in Oslo.

He estimated the U.S. rig count will continue rising at a rate of seven rigs per week over the first half of the year.

Analysts at J.P. Morgan said they saw a rise in oil prices beyond $60 a barrel in 2018 as unlikely.

“For prices to be supported above $60/bbl in 2018 would likely require continued OPEC output reductions that continue to tighten the market beyond Q3’17 – something that looks unlikely at this juncture,” they said in a report to clients.

Iran’s oil minister Bijan Zanganeh said on Monday he expected oil prices to remain at around $55 a barrel this yes, according to Mehr news agency.

US crude settles at $50.82, striking one-month low on strong dollar, OPEC cut doubts

CNBC

Oil prices fell about 2 percent on Tuesday, extending the previous session’s sharp sell-off, as the U.S. dollar strengthened and doubts over implementation of a global deal to cut output loomed.

Members of the Organization of the Petroleum Exporting Countries (OPEC), such as Saudi Arabia, appear to be reducing production under a global deal to rein in oversupply but it is unclear whether other big producers like Iraq will follow suit.

Iraq, OPEC’s second-largest producer, said it would raise crude exports from its main Basra port to an all-time high in February. The country’s southern oil exports in the first nine days of January held steady near a record high, despite the agreed start of OPEC cuts on Jan. 1, according to a source and loading data.

“The petroleum markets are consolidating at the lower levels reached in Monday trade after doubts emerged over the degree of compliance with OPEC production cuts as Iraqi exports remain high, as well as the more general pace of market rebalancing,” Tim Evans, energy futures specialist at Citigroup said in a note.

“Fresh reports that non-OPEC producers Russia and Kazakhstan have reduced output have produced little price reaction, with the failure to rally on bullish news suggesting that the market is overbought and vulnerable to a further downward correction.”

Oil markets to continue tightening: Expert

Oil markets to continue tightening: Expert   

U.S. light crude oil settled down $1.14, or 2.2 percent, at $50.82. That was its weakest daily closing level since Dec. 7.

Brent crude was last down $1.26 a barrel, or 2.3 percent, to $53.68.

Both crude contracts fell more than $2 a barrel, or around 4 percent, on Monday on doubts that the Organization of the Petroleum Exporting Countries (OPEC) and other key oil producers would cut output as promised to try to reduce a global oversupply.

The dollar rose on Tuesday, retracing early losses against a basket of currencies, and pressuring greenback-denominated oil as a stronger dollar tends to discourages buying by consumers holding other currencies.

Higher oil future prices through December encouraged investors to buy large volumes of crude contracts and many of these “long” positions are likely to be unwound unless the market stays strong, analysts and brokers said.

Supplies are also increasing in North America.

The U.S. Energy Information Administration revised its forecast for 2017 U.S. crude output, expecting growth of 110,000 barrels per day compared with last month’s forecast of a 80,000 bpd year-over-year decline.

 

JP Morgan: Remain constructive on EU oil

JPMorgan: Remain constructive on EU oil   

In the United States, energy companies last week added rigs for a 10th week in a row, extending the drilling recovery into an eighth month as crude prices remained at levels at which many U.S. drillers can operate profitably.

The average Canadian rig count for December 2016 was 209, up 36 from the 173 counted in November 2016, and up 49 from the 160 counted in December 2015, said Matt Stanley, a fuel broker at Freight Services International in Dubai.

“A 30 percent increase in Canadian rigs in a year … The bear in me is well and truly back,” Stanley said.

Weekly inventory data from industry group the American Petroleum Institute (API) is scheduled at 4:30 p.m. EST, with analysts forecasting a 1.2 million-barrel build in U.S. crude stocks in the week to Jan. 6.

Adding one-off supplies, the U.S. Department of Energy on Monday announced a sale for crude from its Strategic Petroleum Reserve (SPR), with bids for 8 million barrels of light, sweet oil due by Jan. 17.

— CNBC’s Tom DiChristopher contributed to this report.

Crude Oil Prices Brace for OPEC News

DAILY FX

Crude Oil Prices Brace for OPEC News, Gold Prices May Bounce

Monday, Jan 9, 2017 6:36 am +02:00

Fundamental analysis, economic and market themes


Talking Points:

  • Crude oil prices mark time, bracing for OPEC commentary
  • Gold prices snap 3-day win streak on US wage growth data
  • Cautious Fed-speak may cool bets on steep rate hike cycle

Crude oil prices are marking time in familiar territory as the spotlight turns back to OPEC and the implementation of its output reduction scheme. Cartel members will gather in Abu Dhabi for a variety of conferences throughout the week. Meanwhile, the group’s Secretary General Mohammad Barkindo is embarking on a three-day trip to Kuwait, which chairs the OPEC’s committee monitoring production cuts. This makes for significant headline risk and investors may be leery of taking big directional bets in the interim.

Gold prices snapped a three-day winning streak as after the December’s US employment data showed that on- wage growth jumped to a cyclical high of 2.9 percent. This suggested that the economy is running hotter than expected even before a would-be inflation boost form fiscal policies advocated by President-elect Trump. Not surprisingly, this reenergized bets on a steeper Fed rate cycle, sending US yields upward alongside the US Dollar and undermining the appeal of anti-fiat and non-interest-bearing assets.

 

FOMC policy speculation remains in focus from here as the markets parse scheduled comments from Eric Rosengren and Dennis Lockhart, Presidents of the Fed’s Boston and Atlanta branches respectively. A repeat of the cautious tone on offer in minutes from December’s meeting of the rate-setting committee may pour a bit of cold water on tightening bets, offering the yellow metal a bit of a lifeline.

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GOLD TECHNICAL ANALYSISGold prices paused to consolidate gains but maintained their foothold above 1166.51, the 23.6% Fibonacci retracement. From here, a daily close above resistance in the 1193.55-99.80 area (38.2% level, May 30 low) exposes the 50% Fib at 1215.40. Alternatively, a break back below 1166.51 targets the 14.6% Fib at 1149.85.

Crude Oil Prices Brace for OPEC News, Gold Prices May Bounce

CRUDE OIL TECHNICAL ANALYSISCrude oil prices continue to consolidate in familiar territory. A daily close above the 14% Fibonacci expansionat 54.03 targets the 44.19-21 area (23.6% level, January 3 high). Alternatively, a reversal back below resistance-turned-support at 51.64 opens the door for a test of the 38.2% Fib retracementat 50.25.

Crude Oil Prices Brace for OPEC News, Gold Prices May Bounce

— Written by Ilya Spivak, Currency Strategist for DailyFX.com

US crude settles at $53.99

US crude settles at $53.99, up slightly this week as traders parse signs OPEC is cutting output

CNBC

Oil traded higher on Friday as investors bought futures ahead of the weekend, but a strong U.S. dollar limited gains, as did lingering doubts about whether all OPEC producers would cut output in line with an agreement.

Trading was choppy, and market players cited end-of-week position-squaring and relatively low volumes during the first trading week of the year.

Brent crude futures, the benchmark for international oil prices, were up 11 cents at $57 per barrel at 2:35 p.m. ET (1935 GMT), having swung from a high of $57.47 to a low of $56.28.

In the United States, West Texas Intermediate (WTI) crude futures settled up 23 cents at $53.99 a barrel, recovering from a session low of $53.32 and off a high of $54.32.

The contract rose about 0.5 percent on the week, marking the fourth straight weekly gain.

US shale to kick in in second half of 2017: JPMorgan

US shale to kick in in second half of 2017: JPMorgan   

“There’s a lot of volatility, or at least changes in direction,” ABN Amro senior energy economist Hans van Cleef said. “People think the long-term trend is up, but after a gain of a few dollars, they take profit.”

The dollar gained broadly against major currencies after the U.S. non-farm payrolls report showed a slowing in hiring in December but an increase in wages, setting the economy up for further interest rate increases from the Federal Reserve this year.

A stronger greenback makes oil more expensive for holders of other currencies.

Top crude exporter Saudi Arabia and fellow Gulf members Abu Dhabi and Kuwait showed signs they were cutting production in line with an agreement by OPEC and other producers, yet market watchers have doubts about overall compliance.

Saudi Arabia’s state oil producer Saudi Aramco has started talks with customers globally on possible cuts of 3 percent to 7 percent in February crude loadings.

A Kuwaiti oil official said that country had also reduced production in line with the deal, and there are also reports of supply cuts from Abu Dhabi.

Energy CEO: We're in initial stages of a recovery

Energy CEO: We’re in initial stages of a recovery   

But there are still doubts about other producers’ compliance.

“There will be some countries who will cheat…we expect zero compliance from Baghdad… And we definitely do not expect the Kurds to join in, given that they are autonomous from the federal government,” Energy Aspects said in its 2017 oil market outlook, published this week.

Iraq Prime Minister Haider al-Abadi said this week the autonomous Kurdish region wasexporting more than its allocated share of oil. Iraq is the Organization of the Petroleum Exporting Countries’ second-largest producer.

Iran has sold more than 13 million barrels of oil that it had long held on tankers at sea, capitalizing on an OPEC output cut deal from which it is exempted to regain market share and court new buyers, according to industry sources and data.

In the past three months, Tehran has sold almost half the oil it had held in floating storage, which had tied up many of its tankers as it struggled to offload stocks in an oversupplied global market.

Oil markets to continue tightening: Expert

Oil markets to continue tightening: Expert   

National Iranian Oil Company (NIOC) is also negotiating with the Philippines over exporting four million barrels of crude per month to the country, Iran’s English-language Press TV quoted a statement published on Friday by the NIOC as saying.

Iran, OPEC’s third-largest oil producer, won special terms from the group’s production cuts agreed on Nov. 30 and may raise output slightly.

Overall supply from OPEC in December fell only slightly to 34.18 million barrels per day (bpd) from a revised 34.38 million bpd in November, according to a Reuters survey this week based on shipping data and information from industry sources.

U.S. energy companies this week added oil rigs for a 10th week in a row, bringing the total count up to 529, the most since December 2015, energy services firm Baker Hughes said on Friday.

US drillers pumped like crazy last week, and that’s a ‘major concern’ for OPEC

Oil outlook for 2017

Oil outlook for 2017   

Thanks, OPEC.

U.S. crude oil production surged by about 100,000 barrels a day last week, providing further evidence that American drillers are responding quickly to the higher prices that OPEC created by agreeing to curtail their own production.

The Organization of Petroleum Exporting Countries reached an agreement to cut production by 1.2 million barrels a day last month and got commitments from some nonmembers to 558,000 barrels a day in reductions this past weekend. Hopes for output limits had boosted prices ahead of the agreements.

American drillers were not among the nonmembers who agreed to cut. In the lower 48 states, they drove production to nearly 8.8 million barrels a day in the week through Dec. 9, according to the U.S. Energy Information Administration. That is up from about 8.7 million barrels a day the week prior.

To be sure, the weekly production figures are preliminary, and big jumps are not too rare. But a steadily rising four-week average for U.S. oil output points to an overall recovery. At 8.72 million barrels a day, the average was at its highest level since June.

Analysts warn that OPEC’s bid to balance an oversupplied market by cutting production could backfire if it causes oil prices to rise too much. Those higher prices could cause U.S. drillers sidelined by low oil prices to start pumping more oil.

The weekly jump in U.S. output is a “major concern” for OPEC members, said John Kilduff, founding partner at energy hedge fund Again Capital.

“This is exactly what several of them had been worried about. This deal gave new life to the shale industry,” he told CNBC. “OPEC’s going to have its hands full with them for a time.”

Recent hedging activity has allowed drillers to lock in prices for future deliveries of oil at $55 a barrel, a price that makes more of their acreage profitable, according to Kilduff, who has been bearish on oil prices and skeptical of OPEC’s ability to enforce production cuts.

The production surge follows an increase in the U.S. oil rig count of 21 rigs — the biggest one-week jump since a recovery in drilling activity began in June. Drillers have added a net 182 rigs since the count bottomed out at 316 rigs in May, according to data provided by oilfield services firm Baker Hughes.

The total U.S. rig count stood at 498 at last count, close the year-ago count of 524 rigs.

US Crude Oil down at $47,96

US crude settles down 7 cents at $47.96 as doubts linger over OPEC output cut

CNBC

A pump jack and pipes at an oil field near Bakersfield, California.

Lucy Nicholson | Reuters
A pump jack and pipes at an oil field near Bakersfield, California.

Oil prices cut early losses after Iraq said it was willing to “shoulder responsibility” for some of OPEC’s planned production cuts and as U.S. government data showed crude inventories fell last week.

But gains were capped by investor doubts that OPEC will agree to a production cut large enough to make a significant dent in the global glut of crude.

OPEC’s deal faced potential setbacks from Iraq’s call for it to be exempt. Baghdad had said it needs oil revenues to fight Islamic State militants and questioned whether it should cut from the levels of OPEC’s estimates or its own, higher, production figures.

But Prime Minister Haider al-Abadi told reporters on Wednesday in Baghdad that Iraq is willing to cut its crude oil output as part of OPEC’s plan to reduce global supply and boost crude prices.

Abadi’s comments are the clearest indication so far that Baghdad will support an OPEC plan to cut production by 4 percent to 4.5 percent when it meets on Nov. 30 in Vienna.

Options activity heightens ahead of OPEC meeting: Pro

Options activity heightens ahead of OPEC meeting: Pro   

International Brent crude oil futures fell 18 cents to $48.94 a barrel by 2:35 p.m. (1935) after climbing to $49.42 a barrel earlier in Wednesday’s session on optimism OPEC would agree to an output cut.

U.S. West Texas Intermediate (WTI) crude oil futures settled down 7 cents at $47.96 a barrel after rising to $48.30 earlier on Wednesday.

U.S. crude stocks fell last week as refineries hiked output and imports fell, data from the Energy Information Administration showed on Wednesday.

Crude inventories fell by 1.3 million barrels in the last week, compared with analysts’ expectations for an increase of 671,000 barrels.

Offsetting the headline data, gasoline stocks rose by 2.3 million barrels, compared with analysts’ expectations in a Reuters poll for a 643,000-barrel gain. Distillate stockpiles, which include diesel and heating oil, were up by 327,000 barrels, versus expectations for a 357,000-barrel drop.

Crude oil inventories down 1.26M barrels

Crude oil inventories down 1.26M barrels   

Also on Wednesday, Baker Hughes reported the number of oil rigs operating in U.S. fields rose by 3 to a total of 474 in the latest week. At this time last year, the rig count stood at 555.

Futures had edged lower on Wednesday on investors’ doubts that OPEC would agree to a large enough output cut to significantly reduce the global surplus when it meets next week.

A strong dollar, trading near the 13½-year peak hit last week, also weighed on prices amid thin trading ahead of the U.S. Thanksgiving holiday on Thursday.

Exxon Mobil‘s giant oil refinery in Baton Rouge, Louisiana, was operating at planned rates on Wednesday after a fire Tuesday, according to a person familiar with the plant’s operations. The refinery is the fourth-largest in the United States, with capacity to refine 502,500 barrels per day in crude oil.

One oil cut is not enough: Expert

One oil cut is not enough: Expert   

Many traders anticipate some agreement at OPEC but fear the aim, proposed by Algeria, of cutting production by 4 to 4.5 percent, or over 1.2 million barrels per day according to Reuters calculations, may not be reached.

The deal’s success hinges on an agreement from Iraq and Iran, which may not give a full backing, three OPEC sources said Tuesday. Iran wants to increase supply because its output has been hit by sanctions.

In September, OPEC agreed to bring total output down to the level of 32.5 million to 33 million barrels a day.

Short-term though, analysts said that investors were currently unwilling to push crude prices to $50 a barrel or higher.

— CNBC’s Tom DiChristopher contributed to this report.

US crude oil exports hit record high in September: data

The Business Times

Canada took in the most exports at 243,000 bpd, followed by Singapore at 99,000 bpd. Exports to Europe were also high, with Italy receiving some 81,000 bpd and Spain 41,000 bpd. Other prominent destinations included South Korea and the Netherlands.

The previous record was set in May when the United States exported about 662,000 bpd, according to US government data.

US crude exports have climbed since the lifting of a decades-old ban late last year.

The discount of US crude to Brent crude had widened to as much as US$2.67 a barrel in late August, the widest since February.

The US Energy Information Administration will release its closely watched monthly crude figures, which are based on the US Census data, at the end of this month.

REUTERS

Crude oil extends its slide following a disappointing October.

Seeking Alpha

Technically, Crude Oil Is Right At The Edge

Nikhil Gupta

Growth at reasonable price, contrarian, medium-term horizon, macro

Summary

Crude oil extends its slide following a disappointing October.

Technically, a retest of the weekly support trend line is being seen.

Short-term bulls should place a strict stop loss.

At the end of September, I wrote a technical analysis-based article on crude oil (NYSEARCA: USO) titled Crude Oil Could Soar To $80 If This Happens. Fast forward one month, and it seems that the commodity wants to go in the opposite direction in the short term.

In my previous article, I had highlighted that a breakout needs to happen while the momentum lasts. At that time, crude was trading near $48 a barrel and went on to hit a one-year high of $51.93.

I had also commented that:

Getting some big players like Russia on board to a production freeze or a cut could lend serious momentum to the upsurge, and cause the price to pierce the resistance zone of $50-$52.

Instead, what we are hearing now is the news (or rumor) that some nations want to be exempt from any agreement to freeze their production levels, and as a result, the resistance zone of $50-$52 has stood firm. An expected rise in U.S. crude stockpiles is also adding to the misery of oil bulls.

Click to enlarge

The bearish developments have forced the smart money to increase their short bets on crude oil (NYSEARCA: OIL).

The rising probability that OPEC will struggle to get the member nations and Russia to come to an agreement, and abide by it is setting the stage for a longer period of lower prices.

I, for one, sometimes find myself overwhelmed with all this noise. Therefore, to see a clearer picture, I go to my technical charts. The technical charts are a representation of what the buyer is willing to pay (or a seller is willing to take) for one barrel of oil considering all the external factors. I then decide if the same level is appropriate for me or not.

Crude Oil Exports from the US: Current Issues and Future Outlook

Natalie Regoli & Brian Polley, Texas Lawyer

After 40 years in place, President Barack Obama lifted the ban on exporting crude oil from America on Dec. 18, 2015. Some of the largest oil companies in the U.S. had aggressively lobbied Congress to end the ban since at least October 2014, when the lobbying group called Producers for American Crude Oil Exports (PACE) was formed. Congressional Democrats withheld support until Republicans agreed to a package of tax credits worth about $680 billion over 10 years related to certain environmental priorities, including renewable energy tax credits. Despite the initial excitement in the oil industry due to the lifting of the ban, the uptick in oil exports has been mild.

Following the 1973 Arab oil embargo that sent domestic gasoline prices skyrocketing, in 1975 Congress banned oil exports from the U.S. under most circumstances. Since then the U.S. energy industry has undergone a dramatic transformation, and the increased use of fracking and other drilling technologies has caused U.S. oil production to shoot up nearly 90 percent since August 2008. The surge in production has had many positive effects, including reducing gasoline prices to historic lows and the creation of as many as 1.7 million jobs, according to a U.S. Chamber of Commerce study. When the price of oil started sliding in June 2014, and then continued its rapid descent through October of that year, PACE was organized to begin lobbying for the removal of the export ban.

PACE’s fight to end the ban was joined behind the scenes by many oil companies, both Texas senators, most of the Texas Congressional delegation, other members of Congress with upstream activity in their districts, and trade groups including the American Petroleum Institute. Opponents to ending the ban included many refiners and downstream companies, many companies in the petrochemicals industry that use crude oil as a feedstock, some members of Congress with refining in their districts and environmental groups such as the Sierra Club.

Historically there were certain exceptions to the crude oil export ban, including that for the export of ultralight “condensate,” some exports to Canada and some exports from Cook Inlet in Alaska. The Canada exception, in particular, was a relic of an era in which Canadian refiners at the border relied heavily on U.S. light crude. Just as the ban on crude exports had exceptions, the lifting of the ban also has certain exceptions. For example, the 2016 act lifting the ban preserves the president’s power to restrict crude exports in response to a national emergency or to enforce trade sanctions.

The mild industry response to the removal of the ban is best explained by basic economics: There is simply too much supply on the global oil market. High supply combined with weak global demand growth has meant persistently low prices, which is not particularly conducive to overseas sales. The global oil glut has also sent a number of U.S. drillers into bankruptcy, causing lower domestic production and less potentially exportable U.S. oil in recent years. This reduced production probably cannot recover significantly until prices rebound. These conditions have set the stage for what the U.S. Energy Information Administration calls “sporadic” shipments of U.S. oil to overseas buyers, and most of these shipments have been test sales meant to demonstrate the high quality of American oil rather than representing new sources of long-term demand. In the months and years leading up to the lifting of the ban and at the time it was lifted, many industry experts predicted that the United States could be a net exporter of oil by the year 2022. However, if current market conditions and certain regulatory burdens persist, it is less clear whether U.S. producers will have the capacity to produce in sufficient quantities to export large amounts of crude by then.

There are some indications that exports may now be starting to rise. Global oil trading company Trafigura recently announced it is moving 5 to 7 million barrels of crude from the U.S. gulf coast to the U.K. and the Netherlands. The same company recently opened an office in Midland, Texas, where it will focus on moving Permian Basin-produced oil “around the globe to the best market,” according to the company’s director of North America operations. Whether exports will begin increasing more rapidly depends on the economics. If U.S. production remains low, and the gap between the price of West Texas Intermediate (the U.S. benchmark) and Brent crude (the global benchmark) remains narrow by historical standards, it is difficult to see how exports really take off. However, if the price of WTI returns to something lower relative to Brent, exporting more crude may begin to make sense for more players in the market.

Some energy analysts have suggested there is an opportunity for expanded exports from the U.S. due to the June 26 expansion of the Panama Canal. This past summer the Panama Canal Authority inaugurated a new set of locks which allow for the transit of larger ships. This was the first such expansion since the canal was completed in 1914. Despite some speculation to the contrary, the expansion of the canal is unlikely to have a major impact on crude oil flows. This is because crude is typically loaded on vessels classified as Very Large Crude Carriers (VLCCs) or Ultra-Large Crude Carriers (ULCCs), both of which are still too large to transit the Panama Canal even with the new locks. Some petroleum products including propane are often loaded on smaller vessels, some of which can transit the existing and new canal depending the ship’s hull design. Therefore, although the canal expansion may increase exports of certain petroleum products, there is unlikely to be a major impact on crude exports.

Now that the ban has been (mostly) lifted, other regulatory hurdles and deteriorating domestic hydrocarbon infrastructure have come into focus. Removing the ban has theoretically removed artificial trade impediments which caused international energy market distortions, but without the removal of certain barriers to domestic production including drilling on federal lands and offshore and the expansion of pipelines and other infrastructure, the full potential of lifting the export ban will be difficult to realize.

The crucial element in the months and years ahead is for Congress and the next president to allow industry to improve America’s energy infrastructure, which can be done at very little cost to the taxpayer. Various regulatory hurdles to production remain, and the industry must now focus on having permits for new pipelines and LNG terminals approved, as well as gaining new approvals for oil and gas drilling on public lands. The stakes are high, since pro-energy policies could result in as much as $150 billion more in GDP a year according to some economists, increasing growth from 2 percent to about 3 percent. For the U.S. to enjoy the full potential benefits of lifting the export ban, though, lawmakers must roll back some of the more burdensome regulations on domestic exploration, production and transportation of oil and gas.

There is no doubt that the lifting of the crude oil ban late last year was a major development from a regulatory and foreign policy perspective. However, the impact has been much more limited from an economic perspective—we simply have not seen the increase in the volume of exports that some predicted. There is some evidence that this may be changing and more producers may be expanding their export operations and facilities, and this expansion may increase if the gap between WTI and Brent prices returns to historical norms rather than the current, narrow gap. Two things are certain: The underlying market conditions are driving the development of U.S. crude oil exports, and those market conditions are constantly changing in this industry.

 

Oil price rally sparked by U.S. rate decision enters second day

cropped-Energy-Oil-drilling-untitled.png

– UPI.com

By Daniel J. Graeber

Crude oil riding the Yellen train

At least one analyst not buying the rhetoric as Russia shoots down talks of a production cut.

NEW YORK, Sept. 22 (UPI) — Crude oil prices moved higher in early Thursday trading after strong labor data from the United States lent support to a possible rate hike later this year.

U.S. Federal Reserve Chair Janet Yellen said economic growth in the United States was subdued during the first half of the year, but gains in household spending stimulated growth since then.

“Business investment, however, remains soft, both in the energy sector and more broadly,” she said in opening remarks Wednesday afternoon. “The energy industry has been hard hit by the drop in oil prices since mid-2014, and investment in that sector continued to contract through the first half of the year. However, drilling is now showing signs of stabilizing.”

Nevertheless, with steady gains in exploration and production activity offering an indication that the market may have hit bottom, Yellen said that, while rates would be left alone, the economy is expected to expand. Economic data over the past few weeks show pressures on the U.S. economy remain, though recent trends in employment add support to the possibility of a rate increase later this year.

The U.S. Labor Department reported first-time claims for unemployment declined by 8,000 last week to a seasonally adjusted 252,000, the lowest level since July. The less-volatile four-week average declined 2,250 to 258,500.

Crude oil prices extended a rally sparked by Yellen’s comments into early Thursday trading. The price for Brent crude oil moved higher by 1.9 percent to start the day at $47.73 per barrel. The U.S. benchmark price, West Texas Intermediate, gained 2.4 percent to open the day in New York at $46.41 per barrel.

The price movement is in contrast to trends in production. Russia’s deputy energy minister sparked a news media frenzy early Thursday when he said a cut in output was technically possible, though Energy Minister Alexander Novak corrected him later to say there were no proposals to curb production.

In a statement on strategy, French energy company Total said its production was on pace for an average increase of 5 percent through 2019, with more than a dozen new start-ups on the schedule. Libya and Nigeria, two members of the Organization of Petroleum Exporting Countries, are both on the cusp of recovery.

Ministers from OPEC and non-member states could review proposals to keep production rates steady at meetings next week in Algeria. In no uncertain terms, Olivier Jakob, the managing director at Swiss oil-market research group Petromatrix, said in an emailed statement that he was calling the bluff of both the U.S. Federal Reserve and OPEC ministers.

“The U.S. Fed is all about talk and no action and the crude oil market can now speculate for the next two days if the same will characterize the upcoming meeting of OPEC members in Algeria,” he said.