Gloomy outlook for shale oile

For oil analysts and advisers Goehring & Rozencwajg the prospects for oil and especially shale oil will be murky in the forseeable future:

We believe we are on the cusp of a global energy crisis. Like most crises, the fundamental causes for this crisis have been brewing for several years but have lacked a catalyst to bring them to the attention of the public or to the average investor. The looming energy crisis is rooted in the underlying depletion of the US shales along with the chronic disappointments in non-OPEC supply in the rest of the world. The catalyst is the coronavirus.

The initial phase of the crisis that took prices negative is behind us and the next phase which, should take prices much higher, is in its infancy. Global energy markets in general, and oil markets in particular, are slipping into a structural deficit as we speak. We believe energy will be the most important investment theme of the next several years and the biggest unintended consequence of the coronavirus.

 

Investors’ focus has shifted to how quickly supply can be brought back to meet recovering demand. While most investors believe the lost production will be easily brought back online, our models tell us something vastly different. While OPEC+ production will likely rebound, non-OPEC+ supply will be extremely challenged. Instead of recovering, our models tell us that non-OPEC+ production is about to decline dramatically from today’s already low levels.

 

You can read the rest of the piece via the below link:

http://blog.gorozen.com/blog/setting-the-stage-for-an-oil-crisis

US pressurizes KSA in petrol price war

Saudi-Arabia opened the floodgates in march inundating the market with cheap petrol. It is a bold move with the aim to get rid of competitors, especially american shale oil producer, even though all stakeholders will bleed severely writes french newspaper Le Monde:

"The Trump administration is stepping up pressure on Riyadh and Prince Mohammed Ben Salman, known as "MBS", to stop increasing production. On Wednesday March 25, in a telephone conversation with the crown prince, US Secretary of State Mike Pompeo urged Riyadh "to rise to the brink of the situation and reassure" the markets.

But for the Saudis, this chaos is the perfect opportunity to get rid of American competitors. The rapid development of shale oil, in Texas in particular, has put the United States back at the center of the game and created an inextricable situation for the kingdom. Since 2014, the increase in American production is such that it always threatens to lower prices."

US shale oil companies struggle with taking out loans

Investors are reluctant to grant credits to US shale drillers and hence putting them into difficulties and sparking a wave of bankruptcies and mergers among smaller companies in the Permina Basin and other shale regions.

https://www.ft.com/content/187f8176-f4f4-11e9-b018-3ef8794b17c6 

Oil-gas-links and the outlook on US shale gas

Natural Gas World gives an interesting insight on the US oil and gas market:

"According to a Reuters report, LNG bagged a 14% share of the European gas market in the period October 2018 to August 2019, up from 5% in the same period a year earlier. Gas Infrastructure Europe reports that gas storage in Europe was 89.65% full as of August 20, with storage in Austria, Belgium, the Czech Republic, Denmark, France, Germany and the Netherlands over 90%. European gas prices reached a 10-year low in July … yet still the LNG comes.

Despite general European antipathy towards hydraulic fracturing, it is ‘fracking’ which has delivered this tsunami of cheap gas. In doing so, it addresses a fundamental long-standing driver of European energy policy – the fear that as European domestic gas production falls, Europe will become ever more dependent on the few major pipeline exporters that provide the majority of its imported gas supplies -- with Russia to the fore.

That concern now looks much less severe thanks to US LNG, largely derived from shale drilling. The EIA reported that the US last year saw one of the largest absolute increases in oil and gas production from a single country in history."

(...)

"If a recessionary outlook is assumed, oil demand forecasts will continue to fall and with them oil prices and US shale drilling activity, which will worsen the financial stress already evident in the sector. If this turmoil results in a slowdown in oil production, it is likely to have a knock-on impact on US gas production similar to the last contraction in US shale drilling.

The US will then find itself in an unfamiliar position. Steadily rising demand for gas as long-lead time infrastructure – notably LNG plants – is completed, but a slowdown in production growth. This is likely to push gas prices higher.

Just as gas prices have fallen as oil prices rose, the reverse will go into effect, which would come as an unwelcome surprise both to US users of gas, but also their European counterparts who have this year become used to very low prices for imported US LNG."

You can read the rest of the piece via the below link:

https://www.naturalgasworld.com/oil-prices-and-the-us-lng-juggernaut-lng-condensed-73111?utm_medium=email&utm_campaign=NGW%20Newsletter%20-%20NGWs%20Top%205%20of%20the%20Day%20-%20September%2018%202019&utm_content=NGW%20Newsletter%20-%20NGWs%20Top%205%20of%20the%20Day%20-%20September%2018%202019+CID_edf39098640b56ab2122f19c15e1be91&utm_source=Campaign%20Monitor&utm_term=ull%20ar 

 

 

Low oil prices get KSA in trouble

Saudi economy meets financial hardship as oil price remains at 60 USD. 
KSA curbs oil extraction to 10 m barrel per day. However US shale oil thwart attempts to increase the oil price through artificial shortage. Minister of Energy
Khalid al-Falih has been fired by MBS.
Media: stock market launch  of oil production company Aramco possibly cancelled.

https://www.bild.de/politik/ausland/politik-ausland/haushaltsloch-in-saudi-arabien-bei-den-oel-scheichs-wird-die-kohle-knapp-64476958.bild.html 

US shale oil ends OPEC hegemony

US shale oil industry disrupts OPEC strategy to reduce oil production in order to increase oil prices.
OPEC admits in World Oil Outlook 2040 that it has lost control about price mechanism on oil.

https://www.opec.org/opec_web/flipbook/WOO2017/WOO2017/assets/common/downloads/WOO%202017.pdf