Dr. Daniel Fine: Oil speculation and natural gas/LNG in New England and Russia

 

Link to the article American oil production is poised to reach upward to 11 million barrels of oil per day if the price of West Texas Crude reaches $75 a barrel.

Saudi Arabia or Saudi Aramco believes it will, and commodity speculators are following. It is similar to 2008 in June when Goldman Sachs forecast $250 per barrel as the price approached $150.

What events are running through computer modelling to trigger speculative buying? First, the effort of Saudi Arabia to sell shares in Saudi Aramco to the world – at least 5 percent.

The price of oil is the key for the price per share at an initial public offering. It must be high enough to overcome doubts about the company in terms of ultimate economic value and size of its reserves as well as potential legal action based on the 9/11 Saudi Arabian operatives in the destruction of the World Trade Centers and the death of nearly 3,000 and related family injuries.

Second, chemical warfare in Syria and Western military reaction. This is a momentary reflux in trading behavior which dates back to 1973. After 2010 and the appearance of shale and tight oil, buying oil as commodity tight on supply is self-initiated by speculators with no basis in reality. America’s three oil basins now supply oil to replace Middle East shortages in world export flows. Continental North American production adds to a self-sufficient mix.

This event can no longer deprive the United States of physical barrels resulting in shortage of supply. Prices outside of trading pits or online bids and asks are now determined by West Texas Intermediate, which reflects self-sufficiency against non-North American sourced oil. The Persian Gulf against the Permian Basin?

 Demand for oil in producer estimates, such as, Saudi Aramco or total range between 1.2 percent and less than 1.0 percent growth per year. Supply of oil from American unconventional sources is increasing, with high prices at 8 percent.

The two year low of downturn prices did not create conditions for a supply crunch. Super-giant oil fields are few and far between even at higher prices. Supply shortage talk on the social and commercial media is promoted by Saudi Arabian interest in higher oil prices to support its potential IPO share price. Offshore Norway has applied shale recovery technology from New Mexico, Texas and North Dakota and can be profitable at $35 per barrel against $80 breakeven in 2013.

Third, reaction to OPEC-Russia announcements of production reductions – oil off the world market — are not likely signals for commodity traders to buy. How much oil can OPEC members and Russia take off the market? How long can they lower production in terms of fiscal requirements?

One last event in production denial would be the imposition of sanctions against Iranian oil exports, which would follow the decision to void the nuclear weapons treaty by President Trump.  The North American market for Iranian is almost non-existent.

As before, this Energy Magazine column warns of a downturn next year. How bad? If the buzz around the Permian is that its “health” no longer depends on the price of oil has been taken seriously, the downturn will be serious.

Exxon-Mobil/XTO is preparing to enter the world market of LNG (liquid natural gas) with a plant in Louisiana.  Its natural gas feedstock would be from its Delaware Basin production (New Mexico’s Permian).

The scale and size of its LNG facility will place American production and export as a world leader next to Qatar, which is reacting to Saudi Arabian hostility by expanding investment in American oil and gas.

Turning to Europe, the opportunity of geopolitical deployment of American gas to Europe to offset Russian supply promoted by the State Departments of Bush through Obama and now of Trump has been set back.

Germany has approved the Russian natural gas pipeline under the North Sea despite efforts to isolate Russia because of the Crimea annexation.

This means ongoing European natural gas dependence on Russia without transit pipelines through the Ukraine.  And indirectly it keeps demand and prices for San Juan natural gas lower.

As long as Marcellus natural gas is semi-stranded by New England’s opposition to building pipelines for its markets, based on environmentalist politics, American natural gas is unable to replace residential reliance on heating oil imported from high-risk Venezuela.

Russian LNG appeared in Boston harbor during the worst of a New England winter as an alternative to low- cost pipeline gas from Pennsylvania. This partially keeps San Juan Basin gas at low prices.

Dr. Daniel Fine is the associate director of New Mexico Tech’s Center for Energy Policy and the State of New Mexico Natural Gas Export Coordinator. The opinions expressed are his own.

Hedging threat and Venezuela Oil By Dr. Daniel Fine

The full article is here-> http://www.daily-times.com/story/money/industries/oil-gas/2017/08/27/hedging-threat-and-venezuela-oil/580510001/

“How can Saudi Arabia and OPEC behind them strike a second blow against shale oil producers in the Southwest? The first was the 2014-2017 price and market share war in which they raised production to put the higher cost Americans out of business.
This was partially abandoned at Algiers in a reversal to opt for a higher price for crude oil from $26 to the high $40 range. The marketing tool is lowering their production by 1,800,000 barrels per day.

The second blow is process.

The Saudi Arabian Oil Ministry and its state company, Saudi Aramco, negotiated in London with Glencore (world’s largest trading combined with mining), banks and hedge funds to see if they could reduce the liquidity necessary for American oil and gas shale producers to hedge forward to obtain a higher price.

Without access at only financial transactions costs to the “strip” or the forward price of oil at at least 10 percent higher than current prices “spot,” WPX and all the Permian-Delaware significant producers would not have survived the recent downturn in their current form.

If there is no difference between the price oil today and September 2018,  which is called the “contango,” this would be a problem of liquidity – no entity taking the other side against the oil and gas producer on a contract.  No cash would be bet against the oil and gas producer who sells forward one year. One side, for example, sells 70 percent of 2018 oil production at June 2018 prices in the present while the other side buys or covers, as the counterpart, the contract.

Saudi Arabia correctly followed data which demonstrated that despite the decline in the price of oil from $100 in 2014 to a low of $26 per barrel, oil producers hedged against the fall and largely survived.  Without hedging the producers would have negative cash flows and serious problems of debt to keep going.”

Watch Energy Expert Dr. Daniel Fine As He Discusses President Trump’s New Policy Of “Energy Dominance”

Overcapacity and the price of oil Dr. Daniel Fine, New Mexico Center for Energy Policy

The full article is here-> http://www.daily-times.com/story/money/industries/oil-gas/2017/06/25/overcapacity-and-price-oil/397050001/

“With the Saudi Arabian-American strategy of removing ISIS and terror roots in Middle East societies and governments, the global oil and gas service companies have new projects to expand oil capacity of Saudi Arabia. This moves Saudi Aramco into overcapacity production range and a Second Downturn in early 2019 as forecast in this column six months ago.

Saudi oil production capacity should increase to 13 million barrels per day with Haliburton and others working on projects to increase reserves. This is prepared to flow into export markets to deprive Occidental of its short- term export of domestic oil which the production cut-back under the 1,800,000 barrels per day OPEC and Russian “deal” provided as a temporary marketing opportunity.  The price of de-terrorism in the Middle East is more Saudi Arabian oil and lower world prices.  Saudi Arabian demand forecasts are no more than 1 percent per annum growth:  its new capacity addition could reach 4 percent per annum in the next five years following the service company projects signed weeks ago.

OPEC production and imports to the U.S are up as this column is prepared for publication. The Commodity Market, which determines the price of world oil, would have a trading range breakout if Iranian gunboats break the isolation of Qatar and engage the U.S. Persian Gulf naval capability. However, such incidents would move traders for hours only.

Natural gas prices should continue to move upward as risk hedging begins to focus on buying gas and selling crude.  This is a contract which oil price risk is hedged
A laying of the risk of crude oil price declines with a simultaneous buying of natural gas.

Natural gas storage favors San Juan natural gas producers in the winter months ahead. This stimulates a regional Texas offset with new Eagle Ford dry gas promotion.
Lithium prices have sharply declined mainly because of South Korean mining production and investments. This explains the stock market and Tesla Motors. Tesla may not need its mining investment in Nevada to lower the cost of the battery pack.
This shift to downstream concentration which will re-start statewide competition for expanded facilities to relieve its Fremont, California plant. New Mexico economic development competed with three states to capture the giga-factory in Nevada. A second chance for Santa Fe to win in a second round? “

Editorial: Governor’s energy plan is excellent future blueprint

For the complete article use this link–> http://www.abqjournal.com/646946/opinion/governors-energy-plan-is-excellent-future-blueprint.html

By Albuquerque Journal Editorial Board

Sunday, September 20th, 2015 at 12:02am

New Mexico has a wealth of energy resources. And now it has a comprehensive plan to help guide development of those riches to grow the state’s economy.

Last week at the 2015 Southeastern New Mexico Mayor’s Energy Summit in Carlsbad, Gov. Susana Martinez laid out a broad “all of the above” energy policy. “There is no reason we shouldn’t be an energy leader,” she later told attendees at the eighth annual Domenici Public Policy Conference in Las Cruces.

Her plan embraces a wide range of energy sources, ranging from oil and gas to solar, wind and up-and-coming technologies, such as “small modular reactors,” which must still be approved by the federal Nuclear Regulatory Commission.

While the oil and gas industry has been – and still is – the backbone of the state’s energy economy (accounting for more than a billion dollars in revenues to the state each year), it’s clear there is plenty of opportunity for the growing renewable energy sector given New Mexico’s abundant sunshine, miles of windswept open spaces and nuclear experience and expertise.

One of the keys is development of more infrastructure – electricity transmission lines to move power generated by wind and solar, and new refineries and improved roads, rail and pipelines to transport resources in and out of the energy-producing areas in the southeastern and northwestern parts of the state.

It also proposes deployment of new battery storage technologies and exporting coal as utilities start using less of that resource as a result of agreements with the federal government to reduce greenhouse gas emissions and improve air quality.

Gov. Martinez of New Mexico unveils ‘all-of-the-above’ energy plan; first plan in 25 years “There is no reason we should not be an energy leader”

For the complete article use this link–> http://www.abqjournal.com/643822/biz/biz-most-recent/gov-martinez-to-unveil-new-state-energy-plan.html

By Kevin Robinson-Avila / Journal Staff Writer

Published: Monday, September 14th, 2015 at 8:50am

Updated: Monday, September 14th, 2015 at 10:32pm

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ALBUQUERQUE, N.M. — Gov. Susana Martinez on Monday unveiled a broad “all-of-the-above” plan to develop New Mexico’s energy resources, the first such comprehensive policy outline for the state in 25 years.

The governor recommended a broad array of strategies and policies that includes traditional fossil fuels, such as oil, natural gas and coal, and renewables, such as wind and solar, and new technologies, such as “small modular reactors,” to harness nuclear energy.

It’s all about building and diversifying New Mexico’s economy to provide well-paying jobs, Martinez said.

“New Mexico is one of the most energy-rich and energy-diverse states in the nation, and we have an excellent opportunity to utilize this position to grow our economy and create more jobs,” Martinez said in a prepared statement.

“Improving our energy infrastructure, responsibly developing and producing energy of all types and better preparing our workforce for the needs of our energy sector are all critical components not only of a strong economic future, but of helping lead America to energy independence.”

Responses to the plan are likely to be varied, given the broad range of policies it promotes.

New Mexico Governor Martinez unveils new state energy plan; first plan in 25 years

By SUSAN MONTOYA BRYAN Associated Press

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ALBUQUERQUE, N.M.

Oil and natural gas won’t be the only game in town under a new state energy policy unveiled Monday by Republican Gov. Susana Martinez.

“New Mexico is one of the most energy-rich and energy-diverse states in the nation, and we have an excellent opportunity to utilize this position to grow our economy and create more jobs,” Martinez said in a statement before detailing elements of the plan during an annual energy summit in southeastern New Mexico.

 The plan calls for an all-of-the-above approach, not unlike the prescription being pushed at the federal level. It highlights the need for more infrastructure such as rail and transmission lines, storage options that could spur growth among solar and wind production and job training.

More than a year in the making, the plan stems from several listening sessions around the state. Some 450 people representing industry, state and local governments and other interests participated.

The plan includes dozens of recommendations and for the first time links energy production to the availability of water in arid New Mexico.

David Martin, secretary of the state Energy, Minerals and Natural Resources Department, acknowledged the continued importance of oil and gas development to the state’s bottom line but said things are much different now than when New Mexico’s last energy policy was adopted in 1991.

Martin cited the frustrations that come along with the cyclical nature of oil and gas and global pressures that are out of the nation’s control. Earlier this year, state lawmakers saw the amount of new money available for spending on schools and other government programs slashed by tens of millions of dollars due to drops in the price of oil.

Martin said the hope is that the new policy will help protect against volatility in one market or another.

 “Our thought is we’re not trying to pick winners or losers. We let the marketplace determine that,” he said. “But we try to give everyone enough flexibility that they can do what makes common sense and economic sense, whether that’s solar, whether that’s wind or natural gas or whatever.”

The plan indicates the state will be looking for new markets — from exporting coal and natural gas to other states and possibility across the Mexican border to the feasibility of small nuclear reactors.

Read more here: http://www.sacbee.com/news/business/article35169801.html#storylink=cpy

Amarillo to host PPROA event ; Leading energy expert Dr. Daniel Fine to deliver breaking news keynote

Link to story-> Amarillo to host PPROA event; Dr. Daniel Fine to deliver breaking news keynote

Amarillo to host PPROA event

Posted: September 4, 2015 – 11:19pm  |  Updated: September 7, 2015 – 10:25pm

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Kel Seliger: Texas state senator, R-Amarillo.

By KAREN SMITH WELCH

karen.welch@amarillo.com

A New Mexico energy policy expert will headline the 86th annual gathering of Panhandle Producers and Royalty Owners Association.

The event will take place Sept. 22 to 24, with sessions at Amarillo Civic Center Complex and events at the Cactus Gun Club and Ross Rogers Municipal Golf Course.

PPROA serves as an advocate for oil and gas producers, mineral royalty owners and industry support companies in the Texas Panhandle, western Oklahoma and southwestern Kansas.

Dr. Daniel I. Fine, associate director of the New Mexico Center for Energy Policy, a research arm of New Mexico Tech, and Texas Land Commissioner George P. Bush will be featured speakers on Sept. 23.

Fine is a senior policy analyst in the New Mexico State House and his resume includes stints as a policy advisor on nonconventional oil and gas in the administration of President George W. Bush and as a research associate at the Massachusetts Institute of Technology’s Mining and Minerals Resources Institute.

“I’m going to make a special announcement about a policy recommendation that could change the supply and demand for oil dramatically to benefit southwest U.S. producers,” Fine said Friday.

“Let me just say that (much), and I’m reserving that for Amarillo.”

Fine said the information he will release is set against the backdrop of the “open price war against southwest and U.S. shale (oil) production. I’m going to break it down in terms of the history of the price war, the objectives of Saudi Arabia, and the current condition of world oversupply.”

The talk also will cover policy issues involved in the current situation, as well as contain his analysis of the consequences of the proposed nonnuclear proliferation treaty between the United States and Iran and “the re-entry of Iran in the world oil market and its impact on price and U.S. production,” Fine said.

The schedule for Sept. 23 will include a keynote luncheon speech by Texas Land Commissioner George P. Bush.

A forum is also planned featuring state Sen. Kel Seliger (R-
Amarillo), state Reps. Four Price (R-Amarillo) and Ken King (R-Canadian), Texas Railroad Commissioner Ryan Sitton, Texas Alliance of Energy Producers Chief Counsel Gloria Leal, and Texas energy advocate Luke Legate, a PPROA news release said.

The convention will open on Sept. 22, with sessions about the battle for minerals and surface rights in the Texas Supreme Court by Houston lawyer John B. Thomas and a “WOTUS or Bogus” presentation from speaker John Tintera about the U.S. Environmental Protection Agency’s Waters of the United States rules.

Tinterra is former executive director of the Railroad Commission of Texas, a regulatory expert and licensed geologist.

The Sept. 24 activity is a golf tournament at the Ross Rogers course.

PPROA has about 640 members and its conventions regularly draw 200 to 300 participants, Executive Vice President Judy Stark said.

For a convention schedule and registration details, visit www
.pproa.org or call the association office at 806-352-5637.

Energy expert Daniel Fine discusses impact of falling global oil prices John Locke Foundation (video)

Published on Aug 21, 2015 Please Share!

Dr. Daniel Fine, associate director of the New Mexico Center for Energy Policy, discusses the impact of falling oil prices on the domestic energy industry. Fine offered these comments during an interview for Carolina Journal Radio (CarolinaJournalRadio.com) Program No. 640. Video courtesy of CarolinaJournal.tv.

Column: Geopolitical events demand rapid response from unconventional producers by oil and gas expert Dr. Daniel Fine -Special to the Daily-Times-

For the complete article by Dr. Daniel Fine use this link-> http://www.daily-times.com/four_corners-news/ci_28389990/column-geopolitical-events-demand-rapid-response-from-unconventional?source=most_viewed

The Saudi-OPEC price war is now nine months old. Two OPEC meetings have passed without revisions or changes in strategy. It is a war against high-cost unconventional American producers that are seen as the principal threat to market share.

The West Texas Intermediate price per barrel has recovered since the low of the mid-$40 bottom to slightly above $60. This has become a trading range with algorithms following momentum making a price range. Financial or paper traders and speculators have moved the price of oil in a “rally” up $15.

Oversupply still overshadows the market. The balance of supply and demand awaits the onset of winter or 2016. The market share for OPEC and Saudi Arabia continues to expand at the expense of non-OPEC producers, but American shale or unconventional production has not declined to the point that an acceptable world balance between supply and demand appears to be in the making.

Daniel Fine (Daily Times file photo)

The CEO of Conoco Phillips was invited to the recent preliminary OPEC meeting and he challenged the producer countries with a warning: American “high cost” production will survive the price war with cost-saving efficiency already in process and yet to come. This promises American oil supply at less cost and a prospect of little change in world supply while demand remains weak and possibly weaker with China importing less crude as well as iron ore and other commodities.

What is now at play in oil price formation is geopolitics.