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The Week In Numbers for the Week Ending March 10, 2017

In each edition of the Standard, we strive to provide you a bare bones summary of what happened to the price of WTI, Natural Gas, and Brent Crude. In addition, we summarize the major reports from API and EIA on Inventory Data. And we also throw in the rig count for good measure.

Since we have not sent the Newsletter in about a month, I will give you the prior numbers from the last Newsletter followed by current:

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Ty's Take 3-10-2017

Well, the last few weeks in oil have been interesting to say the least!

Until recently, oil spreads traded in a very narrow range from the beginning of the year forward, indicating price stability and overall price volatility has been limited. That was true until Wednesday of this week, when EIA reports showed a tremendously larger than expected inventory build. At which point, WTI broke the key resistance point of $50.00 per barrel. And while markets had experienced some volatility, futures spread curves all indicated a market in which the vast majority of traders (or at least their money) indicated a move from contango to backwardation this year (i.e. – surplus supply to balance/deficit). The only question was when. For a long time, most seemed to be betting on second half of this year. Over time, that seemed to move out.

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Suppy Deficit 2021?

What a difference a year makes.  Or for that matter, a few months.

For the last two years, everything we have seen and read has been about how the world is awash in oil.  Too much oil.  Too much production.  And for the short-term, that may be true.

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Notes From CERAweek Conference

IHS CERAWEEK

Every year, major oil execs meet in Houston to discuss market conditions, the future, and to hob-nob with each other in rich fashion. Last year, the focus was the tension between U.S. Shale producers and OPEC. This year, we got a few key points:

OPEC Warns Shale

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Oil Production Costs Increasing?

As we have discussed numerous times, the higher cost producers in the oil industry has been making systematic and systemic changes aimed at reducing the cost to produce a barrel of oil to make themselves more competitive with cheap supply sources such as Saudi Arabia.

The start of recovery from a recent two-year industry downturn offers a "unique opportunity" for companies to transform and reset the cost base, Statoil CEO Eldar Saetre said during a panel discussion with the president of Petrobras on the first day of IHS CERAWeek. Statoil has brought down its breakeven price of what it calls its next-generation portfolio of emerging and current projects, which hold more than 3 billion barrels of oil equivalent, from around $70/b-plus to well below $30/b, Saetre told the annual gathering.

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Steel Pricing

As the oil industry has come back up so has steel pricing. Although the two have very little connection on a global scale. In fact, steel pricing has varied recently more in line with most other commodities: that is, it crashed.

And being in the energy sector, we tend to forget how little steel is consumed by our industry as compared to the world as a whole. Everything from automotive to aerospace, heavy industry to construction demand impact one side of steel pricing. And that’s just the demand side: we will talk about the supply side below.

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The OPEC Quandary

CERAWeek, the annual industry conference held here in Houston which is discussed more in detail in another article, marked a new level of friendliness and openness between OPEC and U.S. producers after bitterness caused by OPEC’s abandoning its role as market stabilizer in favor of maintaining market share which caused a bitter price war between the two.

OPEC has apparently realized that U.S. producers are here to stay while simultaneously feeling the pain associated with lower oil prices on their budgets. U.S. producers, who cannot by law coordinate production, seem to realize the necessity of OPEC as a market stabilizing force that insures more long-term stability in pricing.

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U.S Shale Production is Back

U.S. oil production forecasts for 2017 and 2018 have been significantly revised upwards due to rising prices and increased production efficiency. The EIA now expects U.S. production to reach 9.53 million barrels per day in December 2017, as opposed to prior forecasts of 8.29 million barrels per day when the Agency released its predictions in March of last year, according to the most recent Short Term Energy Outlook, which the Agency publishes monthly.

While the Agency has been continuously revising U.S. production figures upwards, this is a rather large jump. Most of the production growth is centered in the lower-48, with the Permian being a hotbed of activity.

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The Week In Numbers for the Week 02-10-2017

 

In each edition of the Standard, we strive to provide you a bare bones summary of what happened to the price of WTI, Natural Gas, and Brent Crude. In addition, we summarize the major reports from API and EIA on Inventory Data. And we also throw in the rig count for good measure.

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Ty’s Take 2-10-17

Well, the good news seems to keep coming in. And we remain cautiously optimistic, but more optimistic than we have been. For Five Star, January was still well below our average, but a significant improvement year of year and month over month. February seems to be trending even better. So while we are not where we need to be, we are certainly on an uptrend. And we hope that continues.

This week there is a lot to talk about. First and foremost, is the earnings that we reported. More than ever, I am going to encourage all of our readers, particularly those of you responsible in any capacity for planning for your business, to at least skim the earnings report we provided this week (FMC, NOV and Oceaneering to follow in our next edition). The CEOs of these big companies are much smarter than me, and I think their guidance is very telling. From reading all of the transcripts from the earnings calls, I discerned a few key patterns where all of the CEOs seem to be in agreement.

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