MARKET WATCH: US oil markets closed for holiday

Oil markets were quiet Jan. 21 with the New York Mercantile Exchange and cash markets closed for the US holiday honoring Dr. Martin Luther King Jr.

In London, the March IPE contract for North Sea Brent lost 18¢ to $111.71/bbl, while the average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes gained 40¢ to $109.32/bbl.

“Overnight, the market was awakened from its slumber by the announcement that Japan’s Central Bank would be engaging in more stimulus,” said Marc Ground at Standard New York Securities Inc., the Standard Bank Group, on Jan. 22. “Not only has this lent the market some encouragement from the perspective of increasing Japanese oil demand (the country is the world’s third-largest consumer of oil) but also the secondary consequences for the region should the stimulus measure translate into improved economic growth in Japan.” He also noted that “the potential positive effects for the Chinese and South Korean economies (the fourth and tenth largest global oil consumers respectively).”

However, Ground said, “The rally proved fleeting, with oil markets correcting in rather dramatic fashion this morning as the euro took a dive. Clearly, participants are still concerned that prices (especially for West Texas Intermediate) have run too hard in recently. We would concur and look for a correction, particularly in the US benchmark, to take place in the coming weeks.”

In other news, both industry and political analysts noticed the paragraph President Barack Obama devoted to climate change in his second inaugural address Jan. 20, with many assuming that issue will play a more prominent role in his second administration (OGJ Online, Jan. 21, 2013). He continued to dismiss those who disagree on causes and solutions of climate change, however, saying “some may still deny the overwhelming judgment of science.”

Obama said, “The path towards sustainable energy sources will be long and sometimes difficult. But America cannot resist this transition…. That is how we will preserve our planet, commanded to our care by God.” Some analysts interpreted Obama’s reference to God in that context as an attempt to transcend partisanship on the issue and appeal to those who embrace religion over science.

However, Frank Maisano, a Washington, DC-based energy and political analyst, more realistically noted: “It will take a lot more than a throw-away mention in a speech to get a significant number of his squeamish Democratic colleagues and certainly a very antagonistic Republican House to go along.”

Meanwhile, analysts in the Houston office of Raymond James & Associates Inc. reported, “The risk-on trade continued” on Jan. 18 because of a brief debt ceiling extension scheduled for a vote in the House of Representatives this week. “Crude prices also climbed last week on positive Chinese and US economic data, along with a widened risk premium amid the Algerian hostage crisis. Natural gas benefited from colder weather forecasts,” they said.

Raymond James analysts said, “This time last year our US oil and gas production model told us that surging US gas supply was probably going to force natural gas prices lower though 2012. In hindsight, this surging gas supply coupled with a ‘non-winter’ helped send pre-winter natural gas prices from more than $4/Mcf to a low of $1.91/Mcf by mid-April. Now that the dry gas rig count has dropped precipitously (down 60% year-over-year), many energy analysts are eagerly anticipating an imminent rollover in US gas supply.”

However, they said gas producers apparently “didn't get the memo” because gas supply continues to climb steadily. “In fact, our updated gas production model now says that US gas supply is not likely to rollover anytime soon and could even continue growing through the rest of this decade (especially if oil prices stay anywhere near current prices).”

Raymond James analysts said this “surprising, non-consensus” US gas supply growth outlook is primarily driven by three main factors:

• Marcellus supply growth has been unprecedented and is even proving to be more impressive than the Haynesville growth from 2007-11.

• Mass infrastructure build out will facilitate the flow of more gas volumes over the next few years.

• Lofty crude prices continue to drive high levels of liquids drilling, producing large amounts of associated gas.

As a result, they are updating their 2013 and 2014 natural gas supply numbers and will examine the drivers supporting their 2013 gas supply growth forecast growth of 1.3 bcfd and their 2014 growth forecast of 600 MMcfd.

Contact Sam Fletcher at samf@ogjonline.com.

Related Articles

Shell cuts $15 billion in spending for 2015-17

01/30/2015 Royal Dutch Shell PLC has curtailed more than $15 billion in potential spending over the next 3 years, but is not “not overreacting to current low ...

Victoria extends drilling, fracing ban

01/30/2015 The new Victorian Labor government of premier Daniel Andrews has extended the coal seam gas (CSG) exploration and hydraulic fracturing ban in the s...

Chevron’s $35 billion capital budget down 13% from last year

01/30/2015 Chevron Corp. will allocate $35 billion in its capital and exploratory investment program for 2015, including $4 billion of planned expenditures by...

US Senate passes bill approving Keystone XL pipeline project

01/30/2015 The US Senate has passed a bill approving construction of the proposed Keystone XL crude oil pipeline by a 62-36 vote after 3 weeks of debate. Nine...

Oxy cuts capital budget by a third

01/30/2015 In the midst of falling oil prices, Occidental Petroleum Corp., Houston, expects to reduce its total capital spending for 2015 to $5.8 billion from...

MARKET WATCH: NYMEX natural gas prices drop after storage report

01/30/2015 US natural gas closed at its lowest price in more than 2 years on the New York market Jan. 29 following the government’s weekly gas storage report,...

Pennsylvania governor reinstates state forest drilling moratorium

01/29/2015 Pennsylvania Gov. Tom Wolf (D) signed an executive order fully reinstating a 2010 moratorium on new oil and gas leases in state forests and parks. ...

PwC: Low oil prices might drive surge in restructuring in 2015

01/29/2015 Mergers and acquisitions (M&A) in the oil and gas industry hit 10-year highs in terms of deal value and volume in 2014, according to a report f...

DOE could meet 45-day LNG export decision deadline, Senate panel told

01/29/2015 The US Department of Energy would have no trouble meeting a 45-day deadline to reach a national interest determination for proposed LNG export faci...
White Papers

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by

The impact of aging infrastructure in process manufacturing industries

Process manufacturing companies in the oil and gas, utilities, chemicals and natural resource industri...
Sponsored by

What is System Level Thermo-Fluid Analysis?

This paper will explain some of the fundamentals of System Level Thermo-Fluid Analysis and demonstrate...
Available Webcasts


The Alternative Fuel Movement: Four Need-to-Know Excise Tax Complexities

When Thu, Jun 4, 2015

Discussion on how to approach, and ultimately embrace, the alternative fuel market by pulling back the veil on excise tax complexities. Taxes may be an aggravating part of daily operations, but their accuracy is crucial in your path towards business success.

register:WEBCAST



On Demand

Prevention, Detection and Mitigation of pipeline leaks in the modern world

Thu, Apr 30, 2015

Preventing, detecting and mitigating leaks or commodity releases from pipelines are a top priority for all pipeline companies. This presentation will look at various aspects related to preventing, detecting and mitigating pipeline commodity releases from a generic and conceptual point of view, while at the same time look at the variety of offerings available from Schneider Electric to meet some of the requirements associated with pipeline integrity management. 

register:WEBCAST


Global LNG: Adjusting to New Realities

Fri, Mar 20, 2015

Oil & Gas Journal’s March 20, 2015, webcast will look at how global LNG trade will be affected over the next 12-24 months by falling crude oil prices and changing patterns and pressures of demand. Will US LNG production play a role in balancing markets? Or will it add to a growing global oversupply of LNG for markets remote from easier natural gas supply? Will new buyers with marginal credit, smaller requirements, or great need for flexibility begin to look attractive to suppliers? How will high-cost, mega-projects in Australia respond to new construction cost trends?

register:WEBCAST


US Midstream at a Crossroads

Fri, Mar 6, 2015

Oil & Gas Journal’s Mar. 6, 2015, webcast will focus on US midstream companies at an inflection point in their development in response to more than 6 years shale oil and gas production growth. Major infrastructure—gas plants, gathering systems, and takeaway pipelines—have been built. Major fractionation hubs have expanded. Given the radically changed pricing environment since mid-2014, where do processors go from here? What is the fate of large projects caught in mid-development? How to producers and processors cooperate to ensure a sustainable and profitable future? This event will serve to set the discussion table for the annual GPA Convention in San Antonio, Apr. 13-16, 2015.

This event is sponsored by Leidos Engineering.

register:WEBCAST


Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected