Current EIA estimates show DUC counts as of the end of August totaling 4,117 in the four oil-dominant regions (Bakken, Eagle Ford, Niobrara, and Permian) and 914 in the three natural gas-dominant regions (Haynesville, Marcellus, and Utica) that together account for nearly all U.S. tight oil and shale gas production. In the oil regions, the estimated DUC count increased during 2014 and 2015, but the count declined by about 400 over the past five months. The DUC count in the gas regions has generally declined since December 2013.
Earnings per barrel of crude oil and other inputs processed by refiners that operate mainly in North America were lower in the second quarter of 2016 compared with the same time last year and are now close to per-barrel earnings by refiners operating elsewhere. North American refiners, which for years were consistently more profitable than other refiners, were less profitable than European refiners and the global average, based on the four-quarter moving average of profits. Changes in the difference between North American and European crude oil prices are likely contributing to the converging profits.
U.S. retail gasoline prices are expected to continue falling through the end of 2016, even though gasoline demand this year is expected to be the highest ever.
The average pump price for December is on track to be the lowest for the month in eight years.
Gasoline retail prices are down this year because of a combination of modest crude oil prices and abundant supplies of gasoline from high levels of refinery production.
The decline in U.S. oil production this year and in 2017 is not expected to be as steep as in previous forecasts, because of improved drilling rig efficiencies and more rigs drilling.
Builds are expected in global oil inventories during the second half of 2016. However, the pace of builds will be slower than in 2015 and early 2016, but this should still limit upward pressure on oil prices in the months ahead.
Drawdowns in global oil inventories are expected to start in mid-2017, which will contribute to higher oil prices in the second quarter of next year.
After a brief slowdown in early 2016, U.S. natural gas production is expected to increase during the second half of this year and continue rising through 2017.
The United States is on track to become a natural gas net exporter in the second quarter of next year.
Hurricane Hermine led to the evacuation of several offshore oil and natural gas production platforms and caused some shut-in production. The hurricane-related shut-ins contributed to an estimated 5 percent dip in Gulf of Mexico natural gas production from August to July, but overall U.S. production was still up slightly.
This summer’s higher electricity sales because of warmer weather are more than offset by lower power use during the recent milder winter, resulting in an overall decline in electricity demand by the residential sector for 2016.
While coal use for electricity generation will be lower this year, the amount of electricity from coal is expected to increase in 2017 in response to higher natural gas prices.
Improved water conditions on the West Coast have increased electricity generation from hydropower in California this summer, and the state has also increased its generation from other renewable energy sources such as wind and solar.
Total U.S. solar power generating capacity by the end of 2017 is expected to be almost double the generating capacity from two years earlier.
U.S. rig count up, but mostly from smaller basins: Baker Hughes
The U.S. oil rig count was up two to 418 on Friday, with the gains coming from unexpected areas during a week marked by a small recovery in oil prices as all eyes focused on an upcoming key OPEC meeting.
Rig changes were all one-off—something analysts characterize as “noise”—as the Williston Basin of North Dakota/Montana gained an oil rig, as did both the Cana-Woodford of Oklahoma and the Mississippian play in Oklahoma/Kansas.
Two other basins lost a rig, including the prolific Permian—the most active area in the U.S., which generally has been the big rig winner from oil prices that bounced off lows in the $20-$30/b range earlier in the year.
Also declining by a single rig, were the Eagle Ford Shale in South Texas, which now stands at 33. But that is down from 74 in the same week in 2015.
The two U.S. oil rig adds this week “matched last week’s pace” despite the slight dips in Permian and Eagle Ford activity, a Robert W. Baird investor note said shortly after Baker Hughes’ weekly data release.
“Traders now watch to see if this week’s OPEC speculation-related gains in oil [prices] stick,” the investment bank said.
This week, 201 rigs are working in the Permian where producers say returns are high. Pioneer Natural Resources CEO Scott Sheffield told the Deloitte conference last week that his company’s breakeven Permian crude price is $29/b.
Overall, the Permian is up by 69 rigs since late April, although down 19 percent from this same week a year ago.
The Williston now has 28 oil rigs working, the Cana Woodford has 33 and the Mississippian, three rigs.
At the Deloitte conference, industry generally expressed optimism for 2017 despite a stagnant oil price that appears to have nested in a several-dollar range below what some previously called the “magic” $50/b mark.
On Friday, NYMEX crude futures for November settled down $1.84 to $44.48/b.
Through Thursday, domestic oil prices had risen nearly 8 percent over the week.
But while oil companies “can survive at $50… ultimately $60 is more of a level we think we need to sustain a recovery,” John England, vice chairman of Deloitte and its U.S. and Americas oil and gas leader, told reporters at the start of the consultancy’s annual oil and gas conference.
At the same time, at Johnson Rice’s conference in New Orleans, the CEO of Patterson-UTI, a top North American land driller, said it has put nine rigs and more than 200 employees back to work.
Nearly all the rigs were high-spec, with “all the bells and whistles—the ones customers want when they talk about adding rigs,” Andy Hendricks said.
Russia Making Moves Within Former Soviet Union
A total of 24 key crude and natural gas projects are expected to start operations in the Former Soviet Union (FSU) region by 2025, with Russia and Kazakhstan driving production in the region, according to research and consulting firm GlobalData.
The company’s report states that Rosneft Oil Company is expected to lead the FSU in terms of operatorship of planned projects, as it is responsible for nine, of which eight will be conventional crude projects. According to the latest forecast, key planned projects in the region are expected to contribute 2.1 million barrels of oil per day (mmbd) to global crude production in 2025, and 10.4 billion cubic feet per day (bcfd) to global gas production.
Russia accounts for most of the planned oil and gas production in the FSU, with Gazprom contributing the highest production levels in the region by 2025. According to the GlobalData’s latest estimates, the company’s key planned assets are expected to contribute 1.7 million barrels of oil equivalent per day (mmboed) of production in 2025, followed by Rosneft Oil Company and Lukoil Oil Company with 693.5 thousand barrels of oil equivalent per day (mboed) and 224.2 mboed respectively.
Anna Belova, GlobalData’s senior analyst covering oil and gas, explains, “Over the past two years of low crude prices, Russian production continued growing to new records aided by ruble devaluation, which reduced dollar-denominated costs, the progressive taxation system, and fiscal incentives available to select new fields. These production drivers will remain relevant in the near term, contributing to stable production until 2020.”
In terms of capital expenditure related to planned projects, GlobalData estimates Russia will lead the region with $31.7 billion (USD) during the 2016–2025 period, of which $6 billion will be spent on the Kovyktinskoye project.
Belova concludes, “Conventional onshore production will remain the main source of Russian crude and natural gas over the forecast period, with smaller contributions made by shelf projects in the Caspian, Pechora, and Okhotsk seas.”
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