Analysis by the father of American Geopolitics Dr. Daniel Fine, MIT.

Posts tagged ‘OilImports’

Fine: OPEC in Houston and steel pipes from China


The article by Dr. Daniel Fine is found here-> https://www.daily-times.com/story/money/business/2018/03/25/russia-us-opec-oil-conference-houston-trump-steel-tariffs-china/421943002/

“For a week in March, Houston was the site of a world assembly of oil producers engaged in an OPEC-Russia dialogue with American shale or light tight oil producers on supply and — indirectly — price.

OPEC and Saudi Arabia pitched a market information offensive.

Put simply, American oil producers should cut-back or stabilize output in a “family” arrangement to avoid an expansion of supply that threatens the price of world oil.

But there is no U.S. Oil Company (government owned) in America, unlike all members plus Russia which are state companies. Russia is a mix. OPEC members are a price-setting cartel. So, a restaurant in Houston was selected as the site for an elite dinner of OPEC and American shale oil operators.

Platitudes and generalizations dominated the American-initiated conversation, because anything more would be in violation of U.S. anti-trust laws.

Saudi Arabia, consistent with its effort to sell shares in itself in an Initial Public Offering (forthcoming), emphasized there was enough future world demand to satisfy the Americans as well as OPEC.

This was 1.5 percent growth per year for the next decade or two.  Almost silence, however, on Saudi Aramco’s capacity expansion of another l.5 million barrels per day as “spare capacity.”

Does the future demand short term or long term offer support for an unspeakable and unenforceable supply agreement that involves enough for all? Will American shale producers in the Permian exclude themselves from capturing any growth of demand?

Devon, no longer in the San Juan Basin, but dominant in Oklahoma, is going for double-digit production increases yearly and is increasing its dividend to shareholders who might otherwise be attracted to the idea of drilling and completing less to prop up the price per barrel.

The Houston dinner failed, as a half a dozen companies did not show up in compliance with legal restrictions. It failed to persuade the America shale industry to act with OPEC’s oil supply and price management as a “family” and not as a law-breaking cartel.

Flashback to 2016: Iranian oil likely to push prices lower

Less than a week later, Iran signaled that it would not renew the production cut that has removed 1.8 million OPEC barrels of oil from the world and increased prices.
Saudi Arabia was projecting a forecast that a tight market for oil is ahead this year or next as oil projects will not replace wells while demand is strong.

Few were sold on this forecast since shale oil well completions are effectively responsive to price signals with well completions compared to conventional replacement-based on prior oil field investment.

Oil traders are largely unconvinced or agnostic listening in to the Houston contradictions. Most will watch Iran in late May as a sell signal in the making of algorithms.

The Trump Administration on steel tariffs takes the Obama Administration’s failure to do so as a starting point. It was Secretary of the Treasury Lew under Obama who made the case for tariffs during his many visits to Beijing. He would accuse China of promoting an overcapacity of steel production for export and consequent flooding of the American market and the United States with cheap steel.

The Chinese no doubt listened politely to the words but did not anticipate action. They followed a strategy of export price advantage for driving American-owned and operated steel out of business.

Action was taken last month by President Donald Trump. And yet nothing in the customary reaction against Trump recalled that President George W. Bush declared sanctions against Chinese Steel export dumping over 10 years ago, which lasted 18 months, and is credited for an American steel innovation-led comeback.

National security requires American made high-quality steel not only for defense and defense-industrial capability, but also for the complex steel in San Juan and Permian natural gas and steel pipelines.

What is needed is metallurgy for manufacturing and equipment for continuous casting, cooling, rolling and welding. There is only one plant left in the United States that has some capacity for high strength pipeline steel (API X70 and X80).

The oil and gas industry in the San Juan Basin should not depend on imports from a non-continental foreign source as a matter of national security.
China already dominates the American market (oil and gas) for steel valves. There is vulnerability if China follows its rare earth history.

First, it lowered prices via exports. Second, with this weapon, American rare earth domestic production failed and China bought the technology and transferred it to China. Third, China raises prices for American users of rare earths.

The North American Trade Agreement (NAFTA) negotiations continue with more confidence that fuels (natural gas) will be exempt from negative outcomes. The exemption for Canada and Mexico from steel and aluminum tariffs based on a no-threat-to-national-security finding and continental sources, suggests understanding that trade in fuels will not be restricted.

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.

For a week in March, Houston was the site of a world assembly of oil producers engaged in an OPEC-Russia dialogue with American shale or light tight oil producers on supply and — indirectly — price.

OPEC and Saudi Arabia pitched a market information offensive.

Put simply, American oil producers should cut-back or stabilize output in a “family” arrangement to avoid an expansion of supply that threatens the price of world oil.

But there is no U.S. Oil Company (government owned) in America, unlike all members plus Russia which are state companies. Russia is a mix. OPEC members are a price-setting cartel. So, a restaurant in Houston was selected as the site for an elite dinner of OPEC and American shale oil operators.

Platitudes and generalizations dominated the American-initiated conversation, because anything more would be in violation of U.S. anti-trust laws.

Saudi Arabia, consistent with its effort to sell shares in itself in an Initial Public Offering (forthcoming), emphasized there was enough future world demand to satisfy the Americans as well as OPEC.

This was 1.5 percent growth per year for the next decade or two.  Almost silence, however, on Saudi Aramco’s capacity expansion of another l.5 million barrels per day as “spare capacity.”

Does the future demand short term or long term offer support for an unspeakable and unenforceable supply agreement that involves enough for all? Will American shale producers in the Permian exclude themselves from capturing any growth of demand?

Devon, no longer in the San Juan Basin, but dominant in Oklahoma, is going for double-digit production increases yearly and is increasing its dividend to shareholders who might otherwise be attracted to the idea of drilling and completing less to prop up the price per barrel.

The Houston dinner failed, as a half a dozen companies did not show up in compliance with legal restrictions. It failed to persuade the America shale industry to act with OPEC’s oil supply and price management as a “family” and not as a law-breaking cartel.

Flashback to 2016: Iranian oil likely to push prices lower

Less than a week later, Iran signaled that it would not renew the production cut that has removed 1.8 million OPEC barrels of oil from the world and increased prices.
Saudi Arabia was projecting a forecast that a tight market for oil is ahead this year or next as oil projects will not replace wells while demand is strong.

Few were sold on this forecast since shale oil well completions are effectively responsive to price signals with well completions compared to conventional replacement-based on prior oil field investment.

Oil traders are largely unconvinced or agnostic listening in to the Houston contradictions. Most will watch Iran in late May as a sell signal in the making of algorithms.

The Trump Administration on steel tariffs takes the Obama Administration’s failure to do so as a starting point. It was Secretary of the Treasury Lew under Obama who made the case for tariffs during his many visits to Beijing. He would accuse China of promoting an overcapacity of steel production for export and consequent flooding of the American market and the United States with cheap steel.

The Chinese no doubt listened politely to the words but did not anticipate action. They followed a strategy of export price advantage for driving American-owned and operated steel out of business.

Action was taken last month by President Donald Trump. And yet nothing in the customary reaction against Trump recalled that President George W. Bush declared sanctions against Chinese Steel export dumping over 10 years ago, which lasted 18 months, and is credited for an American steel innovation-led comeback.

National security requires American made high-quality steel not only for defense and defense-industrial capability, but also for the complex steel in San Juan and Permian natural gas and steel pipelines.

What is needed is metallurgy for manufacturing and equipment for continuous casting, cooling, rolling and welding. There is only one plant left in the United States that has some capacity for high strength pipeline steel (API X70 and X80).

The oil and gas industry in the San Juan Basin should not depend on imports from a non-continental foreign source as a matter of national security.
China already dominates the American market (oil and gas) for steel valves. There is vulnerability if China follows its rare earth history.

First, it lowered prices via exports. Second, with this weapon, American rare earth domestic production failed and China bought the technology and transferred it to China. Third, China raises prices for American users of rare earths.

The North American Trade Agreement (NAFTA) negotiations continue with more confidence that fuels (natural gas) will be exempt from negative outcomes. The exemption for Canada and Mexico from steel and aluminum tariffs based on a no-threat-to-national-security finding and continental sources, suggests understanding that trade in fuels will not be restricted.”

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.

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Energy group hopes to reduce foreign oil imports


by James Fenton

The full article is at–> http://www.daily-times.com/story/money/industries/oil-gas/2016/06/14/energy-group-hopes-reduce-foreign-oil-imports/85855044/

“FARMINGTON – A group of oil and gas executives and energy policy experts from the Texas Panhandle and New Mexico’s piece of the Permian Basin are pushing a plan to restrict seafaring imports of foreign oil from coming into the U.S. in order to stabilize the oil and gas industry and bring back lost oilfield jobs.

The group’s plan, which would exempt crude oil imported from Mexico and Canada, is an effort to push back against the price wars the group said are being waged by OPEC, or the Organization of the Petroleum Exporting Countries, led by Saudi Arabia.

Members met at the School of Energy at San Juan College Tuesday to promote  the “Panhandle Import Reduction Initiative,” which they say could be implemented in multiple phases within 90 days of the next administration, with the ultimate goal of reducing heavy crude oil imports to about 10 percent of demand.

Launched in November, the initiative aims to cut foreign oil imports enough to activate more domestic drilling rigs and boost domestic production to meet current demand levels within four years.

Former state legislator and Four Corners Economic Development Chief Operating Officer Tom Taylor said the drop in natural gas prices eight years ago and the fall of crude oil in 2014, has delivered prolonged pain to the regional economy.

“We find ourselves … in a situation now where we’re down about 6,000 jobs, most of those in the oil and gas industry,” Taylor said of the San Juan Basin. “We have about 11,000 people who have left (San Juan County) … So while we’re down 6,000 jobs and down 11,000 people, we’ve built seven fast-food restaurants, three more under construction, and two big box stores. It’s a different world out there.

“But the fact of the matter is that the economic base of the community is in trouble. And not only is the community in trouble, but the state of New Mexico is in trouble, and not only is New Mexico in trouble but our nation and its security. It’s all tied together. It’s a very difficult situation we find ourselves in when we have one country that can control oil prices. It goes beyond free trade. It’s a problem we need a solution to. We are at the dependence of foreign oil.”

Taylor said about a third of New Mexico’s general fund comes from the oil and gas industry in the form of taxes and fees.”

World Oil and Gas expert Dr. Daniel Fine: Oil at halftime, 2016


The full story is here-> http://www.daily-times.com/story/opinion/columnists/2016/05/28/fine-oil-halftime-2016/84610710/

“The question of the oil-price reality pervaded the talks and private conversations at the Four Corners Oil and Gas Conference earlier this month. From the lowest price per barrel in nearly eight years to a recovery halfway to $100 in less than three months!  Is the “bust” in the San Juan Basin dissolving as others before?

Yet, Ken McQueen, retiring vice president of WPX in the San Juan Basin, and the most effective in technical innovation in the basin, said: “price is not everything.”

This is the view of surviving management. It is not shared by financial institutional  players and speculators.

Before Thanksgiving 2014, I presented a forecast for the oil price in a new “crash” range of $23 to $28. This was based on analytical experience and petroleum economic history. The trade associations were then spinning that it was an opportunity and would turn around in weeks.

They had no understanding of Saudi Arabia and OPEC as the price-setter. The price of oil collapsed three months ago to $26.70.

There was an abortive effort by OPEC and Russia at Doha, Qatar, to freeze production at Jan. 1 levels to “re-balance” world demand and supply. It failed because OPEC was no longer outside the Middle East political and religious war — Shia-Iran, with oil export sanctions recently lifted, did not show up.

But a one-day oil field workers stay-at-home in Kuwait took one million barrels of oil off the over-supplied world market within 24 hours and the financial market players covered their short or future sale positions.

The bet was now that every “outage” or supply disruption in the world would “re-balance” demand and supply and move West Texas Intermediate prices higher.

Saudi Arabia alone is replacing all the “outage” oil while the San Juan Basin and Southwest producers have record lay-offs, bankruptcies, community economic dislocations, and cuts in production: a million barrels less per day by Christmas is anticipated.

Without the freeze of OPEC production, $50 a barrel prices are here nevertheless. Does the rig count recover — only 15 working in New Mexico from over 100 just 18 months ago?

Yes and no. Companies should start stimulating (fracking) the heavy inventories of uncompleted wells. A boom again? Hardly. With more drilling of uncompleted wells at $50, American Southwest unconventional production rises. Saudi Arabia and the Gulf nation producers would see once more the threat to market share which started the bust in the first place.

Higher oil prices equate to more production and energy-related banks and funds might find new borrowers. Is this the constraint of lower and longer oil prices? It doesn’t matter what supply forecasts come from traders’ prattle on cable TV. The final half of 2016 will be negative on price and oil demand. The price war with Saudi Arabia/OPEC continues.

There are three counter-strategies to Saudi Arabia and OPEC from American shale oil producers and communities:”

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