1. A Monthly Chart of Brent Crude
2. Goldman Sachs sees WTI crude oil at close to $40 per barrel in first half
ONDON (Reuters) - Goldman Sachs said on Wednesday it expected prices for WTI crude oil to trade close to $40 (26 pounds) per barrel for most of the first half of 2015 in one of the lowest forecasts among major investment banks.
Goldman, one of the most active banks in commodities, said that after a very weak first half prices should recover to $65 per barrel for WTI and $70 for Brent.
3. U.S. oil well shut-ins start as crude rout batters small producers
As oil prices fell by more than half over the last six months from more than $100 per barrel, the U.S. oil industry responded by slowing its blistering growth and dialing back expansion plans.
Now, with U.S. crude around $46 a barrel, operators are already closing some small old wells, known as strippers, and tens of thousands of similar wells are on the verge of losing money. A further slide could, by some estimates, idle an equivalent of up to 2 percent of U.S. supply, slowing overall output growth more than expected or even leaving it flat.
There are about 400,000 stripper wells in the United States, most with operating costs of between $20 and $50 per barrel, according to analysts at Wood Mackenzie, a leading energy and commodities consultancy.
"At $40, we think you have got about 100,000 to 200,000 barrels per day at risk" from U.S. stripper wells, said RT Dukes of Wood Mackenzie.
Vast efficiency gains also mean that more oil can be squeezed from fewer new wells. For example, EOG Resources Inc said in November that output of new fracked wells in the Eagle Ford shale of Texas was up 39 percent compared with wells sunk at the start of 2014.
4. Fewer oil rigs does not mean less crude, EIA says
The sharp decline in oil prices has had a significant effect on U.S. drilling activity, the EIA said. Citing data from oil-field services company Baker Hughes Inc. BHI, the EIA said there has been a 16% decline in the number of active onshore drilling rigs in the continental U.S. from the end of October through last week.
In a January outlook, the EIA forecast Brent crude to average $58 a barrel this year and $75 a barrel in 2016, with New York-traded West Texas Intermediate forecast to be lower than Brent’s by between $3 and $4 a barrel during those years.
Discussing how fewer operating rigs don’t necessary mean less production, the EIA gave the example of North Dakota in the 2008 downturn. Permits and drilling activity fell at the time, but “production rates did not decline as substantially,” the EIA said.
5. Lower 48 oil production outlook stable despite expected near-term reduction in rig count
Should its price forecast be realized, EIA projects that the number of operating rigs will decrease by approximately 24% from January to October 2015 before beginning to rebound in November 2015. However, the outlook for Lower 48 production reflects more than just the rig count. Other key factors include the efficiency of drilling, which EIA tracks in its Drilling Productivity Report, the rate of decline in production from existing wells, and changes in the amount of time between the start of drilling (called spudding) and the completion of the well.
6. Falling crude prices will leave oilfield services companies ‘parked,’ may trigger layoffs
CALGARY – Depressed oil prices will cause many producers to drill, but not draw from, new wells, with the result that oilfield service companies will suffer from the drop in activity, the head of the Petroleum Services Association of Canada said Tuesday
PSAC is now predicting 7,650 new wells will be drilled in Canada this year, which would mark a 32% drop from the 11,226 wells drilled in 2014.
7. China to keep 200 MMbbl crude hoard even if oil rallies
BEIJING (Bloomberg) -- China is poised to maintain its commercial hoard of more than 200 MMbbl of crude within three years even if oil rallies toward $130/bbl.
In terms of capacity, China can store 307 MMbbl of commercial oil inventory as of last year, CNPC said in its annual research report also published on Jan. 28. Strategic oil storage tanks, spread over six bases nationwide, can take a further 141 MMbbl, the company said.
8. Cease Fire? The Energy Report 1/28/15
Is OPEC getting ready to declare a cease fire in the oil production wars? OPEC Secretary-General Abdullah al-Badri said that a bottom in oil may be near and high level rumors of meetings between OPEC and Non-OPEC members are creating speculation that there may be some type of agreement in the works to curtail production. Even Saudi Aramco said it would postpone some projects as it appears low oil prices are even making some Saudi expansion unprofitable. While there have been many denials the talk has been making the rounds and it offered oil some support aided by the weakened dollar. Yet with U.S. oil supply rising over 12 million barrels yesterday according to the American Petroleum Institute and rising Iraqi production it is unclear as to how they can structure a cut that will make a difference in the growing global oil glut.
Today is a key day for oil! If oil is going to have a chance to bottom it will have to surge off record U.S. supply and the Fed statement. While there is no press conference most believe the Fed will keep their thoughts behind closed doors and not change the statement. In the meantime traders will look at the Gasoline demand numbers as well as refinery runs to see if there is any changes that might signal are close to a bottom. $44 is the line in the sand for West Texas Intermediate.
9. Oil Prices: What’s Behind the Drop? Simple Economics
United States domestic production has nearly doubled over the last six years, pushing out oil imports that need to find another home. Saudi, Nigerian and Algerian oil that once found a home in the United States is suddenly competing for Asian markets, and the producers are forced to drop prices.
On the demand side, the economies of Europe and developing countries are weakening and vehicles are becoming more energy-efficient. So demand for fuel is lagging a bit.
Households will likely spend $750 less on gas this year because of the oil prices, the United States Energy Information Administration said Tuesday. Europeans and consumers around the world will enjoy similar benefits.
Finally, #10, from January 20th ...
5 Reasons This Crude Move is Unbelievable
It’s been one amazing sell off in Crude Oil; so amazing we can’t stop writing about it. We’ve covered the long term picture of Crude, The Best Tweets from Crude’s Drop, How to Play a Bounce , andeveryone else’s articles on crude. But we can’t stop staring at it… We’re the commodity focused moth to the proverbial flame.
But why is this sell off so amazing? What’s special about it?