bluewill67
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- Sep 12, 2015
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The full article by Dr. Daniel Fine is here-> http://www.daily-times.com/story/op...changes-ahead-oil-and-gas-producers/95447298/
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The OPEC and non-OPEC agreement to reduce oil production officially begins this week. At mid-December when this column was submitted for publication, information surfaced that the “deal” was in trouble because OPEC barrels were under-stated. However, it appears the monitoring of output will begin with a January “surprise” that the 1.8 million barrels output is underway with moderate results.
It will be the bank newsletters from the futures markets that will catch up and swing to a “buy” at least by the end of January. Recall, “perception” pushes the button at oil trading computers. The upturn in 2017 oil prices to $ 60 per barrel of West Texas Intermediate before June has begun.
OPEC wants a price and supply agreement with shale oil producers here in the Southwest and in North Dakota. American producers are unable to collectively sign on, but notably the Hess Corporation, an independent energy company, has signaled cooperation based upon new transparency of information. Now the American rig count recovery is front and center on how OPEC in May will evaluate the agreement on producing less oil.
At least one additional rig in the San Juan Basin south should be expected and when added to an estimated 135 in the Permian-Delaware for 2017 will once more raise the question: is the OPEC production cut leading to an increase of American output? Are American Shale oil barrels replacing OPEC similar to the Saudi Arabian loss of market share in 1985? Will the Southwest's rapid increase in drilling and completion ultimately add to world oil supply and consequently lower the price oil — a "Second Downturn?"
This will make 2017 a volatile market year. Now will an OPEC-American“framework” restore demand and supply balance, the objective of the agreement in the first place? American producers are expected to demonstrate discipline and follow a 1 percent annualized demand increase which is the Saudi Arabian reference model.
But producers follow cash flow protection with hedging strategies. Much of 2017 Southwest production is sold forward (hedged) at prices between $51 and $53 per barrel. Some remains available for spot sales towards $60. OPEC should be watching our rig count and new production. New Mexico begins the year with oil output at 2015 levels or record high production which will be surpassed in 2017.
Reserve bank lending to smaller independent producers should reduce the pressure on debt repayment as the 2017 price oil rises. However, with higher cost of money as interest rates move up, producers will discover that this will not create 2013 or “boom” conditions” in debt financing of exploration and lease holding acquisitions. Overall, the San Juan Basin and the Four Corners general economy remains dependent on natural gas demand and prices.
President Trump’s choice of the retiring head of Exxon as secretary of state, if there is no withdrawal or rejection by the U.S. Senate, begins the “new world order in energy,” I spoke of in a Dec. 9 presentation at the San Juan College School of Energy."
"
The OPEC and non-OPEC agreement to reduce oil production officially begins this week. At mid-December when this column was submitted for publication, information surfaced that the “deal” was in trouble because OPEC barrels were under-stated. However, it appears the monitoring of output will begin with a January “surprise” that the 1.8 million barrels output is underway with moderate results.
It will be the bank newsletters from the futures markets that will catch up and swing to a “buy” at least by the end of January. Recall, “perception” pushes the button at oil trading computers. The upturn in 2017 oil prices to $ 60 per barrel of West Texas Intermediate before June has begun.
OPEC wants a price and supply agreement with shale oil producers here in the Southwest and in North Dakota. American producers are unable to collectively sign on, but notably the Hess Corporation, an independent energy company, has signaled cooperation based upon new transparency of information. Now the American rig count recovery is front and center on how OPEC in May will evaluate the agreement on producing less oil.
At least one additional rig in the San Juan Basin south should be expected and when added to an estimated 135 in the Permian-Delaware for 2017 will once more raise the question: is the OPEC production cut leading to an increase of American output? Are American Shale oil barrels replacing OPEC similar to the Saudi Arabian loss of market share in 1985? Will the Southwest's rapid increase in drilling and completion ultimately add to world oil supply and consequently lower the price oil — a "Second Downturn?"
This will make 2017 a volatile market year. Now will an OPEC-American“framework” restore demand and supply balance, the objective of the agreement in the first place? American producers are expected to demonstrate discipline and follow a 1 percent annualized demand increase which is the Saudi Arabian reference model.
But producers follow cash flow protection with hedging strategies. Much of 2017 Southwest production is sold forward (hedged) at prices between $51 and $53 per barrel. Some remains available for spot sales towards $60. OPEC should be watching our rig count and new production. New Mexico begins the year with oil output at 2015 levels or record high production which will be surpassed in 2017.
Reserve bank lending to smaller independent producers should reduce the pressure on debt repayment as the 2017 price oil rises. However, with higher cost of money as interest rates move up, producers will discover that this will not create 2013 or “boom” conditions” in debt financing of exploration and lease holding acquisitions. Overall, the San Juan Basin and the Four Corners general economy remains dependent on natural gas demand and prices.
President Trump’s choice of the retiring head of Exxon as secretary of state, if there is no withdrawal or rejection by the U.S. Senate, begins the “new world order in energy,” I spoke of in a Dec. 9 presentation at the San Juan College School of Energy."
