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Page added on March 31, 2017

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Rig Count Continues To Threaten Oil Price Recovery, Saudis Cut Prices To Asia

Rig Count Continues To Threaten Oil Price Recovery, Saudis Cut Prices To Asia thumbnail

For the 11th week in a row, the number of US oil rigs rose (up 10 to 662 – the highest since September 2015). US Crude production continues to track the lagged rig count, pouring more cold water on OPEC’s production cut party.

The rig count grows, tracking the lagged oil price in a self-defeating cycle…

And crude production appears to have plenty more room to run…

And don’t forget, as Nick Cunningham detailed, there are thousands of drilled shale wells are sitting idle, unfracked and uncompleted.

(Click to enlarge)

Once the DUCs are completed, new production will come online. And just as before, that backlog still weighs on the market. Wood Mackenzie estimates that if the Permian Basin’s DUC list was completed, it would add 300,000 bpd in new supply.That supply sitting on the sidelines will put downward pressure on any new oil price rally.

And worse still, as OilPrice.com’s Tsvetana Paraskova, it seems the Saudis are starting to panic at the loss of market share… Abundant supply of light oil in Asia and weaker demand amid some seasonal refinery maintenance will likely prompt Saudi Arabia to cut the official selling price for most of its crude varieties bound for Asia in May.

At the beginning of March, Saudi Arabia unexpectedly lowered the April price for the light crude it sells to Asia. According to trade sources who spoke to Reuters, Saudi Arabia’s official selling price (OSP) for Arab Light was set for April at the low end of the range expected by a Reuters survey. At that time, the price for Arab Extra Light was cut by $0.75, which was more than expected.

For the May OSP, according to a Reuters survey of four Asian refiners, Saudi Arabia would likely cut the price of its Arab Light crude by $0.10-$0.40 per barrel from the April OSP.

“I’m seeing price reductions across the board,” one of the refiners surveyed told Reuters.

The Arab Light and Arab Extra Light grades prices are expected to drop more than the medium and heavy grades, since the Asian market is oversupplied mostly with light oil varieties, according to the sources Reuters has polled.

OPEC’s output cuts have made it profitable for oil traders to send crude from as far as the U.S., the North Sea and West Africa to Asia, and this has weakened demand for spot market purchases from Middle Eastern grades.

Another respondent in the Reuters survey for May prices said:

“The spot market is weak. Almost every type of crude is sold at discount against its OSP.”

Saudi Arabia releases OSPs for its grades around the fifth of each month, and as a policy Saudi Aramco does not comment on the monthly prices that Saudi Arabia is setting. The Saudi OSPs generally establish the trend for the prices that Iran, Kuwait, and Iraq charge for Asia-bound crude.

zerohedge



11 Comments on "Rig Count Continues To Threaten Oil Price Recovery, Saudis Cut Prices To Asia"

  1. BobInget on Fri, 31st Mar 2017 1:26 pm 

    Venezuela in play: Watch for conflict, imminent.
    The site, Venezuela is currently the biggest oil prices on earth. Who controls Venezuela controls prices in the next decade.

    UPDATE 1-Venezuela court move may facilitate Russian investment, spook other oil majors
    Fri Mar 31, 2017 5:33pm GMT Print | Single Page [-] Text [+]
    (Recasts headline, adds context, link)

    By Alexandra Ulmer

    March 31 (Reuters) – The sight of Venezuela’s National Assembly president tearing up a Supreme Court ruling and warning foreign firms against making deals with the leftist government will no doubt resonate in international boardrooms.

    The ruling ripped up by Congress head Julio Borges on Thursday was designed to allow President Nicolas Maduro to create oil ventures without congressional approval, easing investment in the cash-strapped country’s floundering oil industry.

    And it may well facilitate deals with companies including Russia oil major Rosneft, which Reuters reported earlier this month had been offered a stake in an oil joint venture with Venezuelan state oil company PDVSA as part of a broader deal with Caracas’ key ally.

    But the ensuing muddy legal framework and international outcry is likely to further raise anxiety levels at foreign oil companies already nervous about buying oil field stakes in Venezuela because of the country’s shaky finances, as well as stricter regulatory scrutiny at home, according to oil executives, lawyers, and other industry sources.

    Under the Venezuelan constitution, Congress must approve contracts of “national public interest” with foreign companies. But the Supreme Court just ruled Congress does not have a say over joint ventures anymore, while lawmakers retort the top court is illegitimate, creating a legal maze.

    That bodes poorly for Venezuela’s ravaged economy, which depends on oil shipments for over 90 percent of its export revenue as millions skip meals due to food shortages and roaring inflation.

    “This complicates any investment decision,” said a Caracas-based source at a foreign oil company that partners with PDVSA, asking to remain anonymous because the person was not allowed to speak to media. Continued…

  2. BobInget on Fri, 31st Mar 2017 1:32 pm 

    correction: Venezuela, largest (known) oil reserves on planet. China, Russia, US companies, all looking for a piece of the action. Forget KSA, they’re too busy killing fellow Muslims to prove whose boss.

    Venezuela drama is better then our nightly DC soap opera.

  3. BobInget on Fri, 31st Mar 2017 1:47 pm 

    I submit, with Yemen, S. Sudan, Syria, Libya, out of action, with Iraq fighting for it’s life, with Iran being besieged by Saudi Arabia, with Nigeria and Venezuela in hunger chaos, it matters a great deal if the US and Canada’s E&P’s can support demand, no matter how many ‘rigs’ activated. I say the more the better.

    Watch for more attention payed to Natural Gas as a potential substitute for gasoline and diesel.

    None of what I’m saying here will play out overnight.
    However, we, the world, have been leading up to this crisis for two years. No one knows what President Trump will do. Least of all, himself.

  4. rockman on Fri, 31st Mar 2017 3:46 pm 

    “US Crude production continues to track the lagged rig count, pouring more cold water on OPEC’s production cut party.” Apparently they think if you repeat the same lie often enough folks will believe it. From the EIA: any US oil production for the entire year of 2016 = 270,664 bopd. Average production for Jan 2017 = 273,890 bopd. IOW in Jan we did a whopping 104 bopd more then we averaged during 2016.

    But that should be a surprise even using their logic. Remember it can take 3 to 6 months after the drill rig moves off a well before it begins producing. So wells that were drilled in 3Q 2016 aren’t going to show up in the production stats until 1Q 2017 or so. So how does the rig count during 3Q 2016 compare to 1Q 2016? About the same average. In fact, there were more rigs drilling during Jan 2016 then at any time during 3Q 2016. Any significant production increase (which has yet to materialize) from the increase in drilling activity over the last few months won’t develop until early summer. And given there’s about a 2 month lag between production and when the data becomes available we won’t see those numbers until July or August.

    Just one more example of an “expert” who doesn’t have a f*cking clue about the dynamics of drilling and production. Even when they use the term “lagged”. LOL.

    https://ycharts.com/indicators/us_oil_rotary_rigs

  5. Apneaman on Fri, 31st Mar 2017 5:44 pm 

    HOW TO AVOID EARLY EXTINCTION: MAKE AUSTRALIAN STUDENTS ‘SURVIVAL LITERATE’

    Australia should take the lead on research and teaching to avoid the collapse of civilisation and the demise of our species.

    “A wealth of hard science and a many highly respected authors are now pointing to the likelihood that without a profound change in direction, the human species is headed for extinction, conceivably before the end of this century. A number of distinguished Australians have contributed substantially to our understanding of the knife-edge on which the human species is currently poised.”

    https://australia21.org.au/event-archive/avoid-early-extinction-make-australian-students-survival-literate/#.WN7AIGTytO1

    Yabut rig counts N stuff

  6. Apneaman on Fri, 31st Mar 2017 5:53 pm 

    5 die of heat stroke in Maharashtra, record temperatures in North India

    http://www.deccanchronicle.com/nation/in-other-news/300317/5-die-of-heat-stroke-in-maharashtra-record-temperatures-in-north-india.html

    Odisha: Mercury crosses 43 degrees Celsius mark, IMD issues heatwave warning
    Bhubaneswar recorded 36.7 degrees Celsius, while it was 42.2 degrees Celsius in Sambalpur.

    http://indianexpress.com/article/india/odisha-mercury-crosses-43-degrees-celsius-mark-imd-issues-heatwave-warning-4592949/

    Heat wave to continue in Rajasthan, Barmer breaks another record

    http://timesofindia.indiatimes.com/city/jaipur/heat-wave-to-continue-in-raj-barmer-breaks-another-record/articleshow/57926898.cms

  7. Apneaman on Fri, 31st Mar 2017 6:00 pm 

    A new era dawns and it won’t be human-friendly

    A new book suggests that, as a result of our actions, we are contemplating our own extinction.

    “LONDON, 31 March, 2017 – Clive Hamilton’s book Defiant Earth – the fate of humans in the Anthropocene is not for the faint-hearted. Basically, its thesis is that the Earth – and us along with it – is going down the tubes.

    Our rampant, irrational use of the planet and its resources, including our exploitation of climate-changing fossil fuels, means we are interfering and upsetting the functioning of the Earth system that sustains us.”

    http://climatenewsnetwork.net/new-era-dawns-wont-human-friendly/

    https://www.scribd.com/document/342035565/Defiant-Earth-The-fate-of-humans-in-the-Anthropocene-by-Clive-Hamilton-Extract

  8. deadlykillerbeaz on Sat, 1st Apr 2017 6:50 am 

    The best guess is there will be about 95 million barrels of oil burned today.

    After a year, 365 times 95 million, a total of 34,675,000.000 barrels of oil will be gone for good.

    After 1000 years of oil burning, the total will probably exceed 34,675,000,000,000 (that would be 34 trillion) barrels of oil to keep civilization happy for another 1000 years.

    It’ll never happen in a million years, even if there is that much oil.

  9. deadlykillerbeaz on Sat, 1st Apr 2017 6:53 am 

    A comma, not a decimal point on the first big number.

    34,675,000,000 barrels of oil.

  10. Kenz300 on Sat, 1st Apr 2017 11:02 am 

    What happens if KSA decides to ramp up production once again and the price of oil drops? Will that put another nail in the coffin of frackers that ramp up now. Those that survived the last down turn are now spending like the good times are back. They might be in for a surprise and bankruptcy if prices drop.

  11. rockman on Sat, 1st Apr 2017 11:20 am 

    Ken – “What happens if KSA decides to ramp up production once again and the price of oil drops?” It would certainly kill a lot of drilling plans. As well as kill a lot on incentive to move away from ICE’s to EV’s. Will sell a lot more V-8 pickups when gasoline drops to $1/gallon. LOL.

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