Derrick Digest for Feb. 3, 2017: Keep your eye on these oil price catalysts in 2017
The Derrick Digest is a weekly collection of curated content, based on events from across the oil and gas industry, that caught our eye at Pennine Petroleum Corporation.
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Feb. 3, 2017
How do we keep our eye on the ball—no, make that the fluctuating Little Oil Drop—in 2017?
UAE newspaper The National has polled a panel of energy experts on what will drive oil prices for the rest of this year . . . beyond the planned OPEC output cuts, of course.
The answers cover off a wide array of crude-based variables—from U.S. shale productivity gains, to the Saudis’ gains in energy usage efficiency, to Venezuela’s production outlook.
Here’s a sampling of the responses:
Notes Michael Meidan, an analyst at Energy Aspects: “With Chinese domestic oil production falling, strong product demand and continuing efforts to fill up the strategic reserves, China will emerge once again as a bright spot for crude and product demand.”
Offers Robin Mills, chief executive of Qamar Energy: “A general worldwide slowdown, a hard landing in China, Middle East struggles with low oil prices . . . or a generalized Trump-led trade war all threaten this optimistic picture. It would not take an economic crisis, but just weak growth to delay market rebalancing and extend weak prices for another year.”
Anthony McAuley, an energy reporter at the National, notes that Venezuela’s output “is at its lowest in more than a decade and about one-third below the 3 million bpd day it was producing in 2009. U.S. imports of Venezuelan crude, at less than 800,000 bpd, are half of what they were five years ago. . . . A key question for the oil world is whether this will get worse before it gets better. There is no reason for optimism.”
And John Sfakianakis, of Riyadh’s Gulf Research Centre, opines: “Less consumption will leave Saudi Arabia with a lot more oil. Unless it cut output, it would have started flooding the market during the first half of this year.”
Jobs for U.S. workers in Keystone XL restart
TransCanada officially reapplied last week to restart construction of the Keystone XL pipeline, after Donald Trump’s executive order got the wheels in motion again.
And the pipeline is ready to start fueling jobs in the U.S., according to Fox Business.
That includes U.S. plants in Ohio, Pennsylvania, Illinois, Mississippi and Texas continuing to produce components for pump stations, and it includes pipe production jobs at Welspun Tubular in Little Rock, Arkansas.
“Building the Keystone XL and Dakota Access pipelines will lower energy costs and create jobs across the country, and in Arkansas at places like Welspun Tubular,” Sen. Tom Cotton (R-AR) said in a statement last week.
According to the U.S. State Department, the completion of Keystone XL will mean the equivalent of more than 42,000 full-time jobs per year during the pipeline’s two-year construction phase.
Drilling programs continue to rebound
It’s the most obvious barometer for the health of the oil and gas industry—and it’s looking better all the time.
The Petroleum Services Association of Canada has boosted its oil and gas well drilling forecast for 2017 by 23 percent—and now estimates that 5,150 wells will be drilled across Canada this year.
That’s a considerable bump from its previous forecast of 4,175 wells for 2017, made in November.
“Some of the Canadian oilfield service, supply and manufacturing sector are realizing some uptick in activity as oil prices recover and operators increase their drilling programs,” says Mark Salkeld, the association’s chief executive.
Of those new wells, 2,706 are expected to be drilled in Alberta. Saskatchewan is next at 1,985, followed by British Columbia at 367.
OPEC manages 82% of promised cuts in January
So far, so good in the world of OPEC gazing.
A survey by the Reuters news agency has found that OPEC’s oil output will have fallen by more than a million barrels a day in January.
Supply from OPEC’s 11 nation members who’d agreed to production targets under the deal has averaged just over 30 million bpd—down from 31.17 million bpd in December—according to a survey based on shipping data and other industry sources.
So far, OPEC members have slashed production by 958,000 bpd of the promised 1.164 million bpd, or a compliance rate of 82 percent.
“This is very high, a good number,” an OPEC source tells Reuters. “I hope it continues.”