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Page added on July 11, 2016
Oil Market In Early Stages of Sustainable Recovery
The oil market is in the early stages of a “sustainable but protracted recovery,” according to oil and gas analysts at Jefferies International Limited.
“Supply/demand balances will transition to balance and then under-supply in the back half of 2016,” said Jefferies in a research note seen by Rigzone.
“Oil prices may not fully react to the fundamental under-supply until inventories draw to more normal levels in the late 2017/early 2018; at that point we believe $70 oil is fundamentally supported,” the company added.
Jefferies reported that the oil price has moved to a level that is within reach of the $61 per barrel “break-even for the sector,” which improves the “defensive qualities” of international oil companies as dividends can generally be viewed as safe in the near-term.
The global investment banking firm also revealed that major capital projects could be making a comeback in the oil and gas industry, after years of cost-cutting.
“Protecting the dividend through capex [capital expenditure] and opex [operating expenditure] reductions has been the major strategic re-positioning within the sector for the last two years, and it has been effective,” said Jefferies.
“With cost structures adapted to a lower oil price environment, the sector could be at an inflection point on sanctioning of major capital projects. In 2015, the industry sanctioned only six multi-billion dollar MCPs with an aggregate capital commitment of $49.4 billion. 2016 has already seen five upstream MCPs sanctioned with an estimated aggregated capital commitment of $59.8 billion including Chevron’s $37 billion Tengiz expansion,” Jefferies added.
Chevron’s major expansion project at the Tengiz oil field in Kazakhstan will increase crude oil production at the site by about 260,000 barrels per day. The Future Growth and Wellhead Pressure Management Project (FGP-WPMP), will see $27.1 billion spent on facilities, with $3.5 billion allocated for wells and $6.2 billion for contingency and escalation operations.
19 Comments on "Oil Market In Early Stages of Sustainable Recovery"
PracticalMaina on Mon, 11th Jul 2016 1:22 pm
Its cute they put the word sustainable in the title. Too late to re-brand fuckers.
Plantagenet on Mon, 11th Jul 2016 1:49 pm
How is the oil production in saudi going? Just about to peak, right?
Cheers!
shortonoil on Mon, 11th Jul 2016 2:06 pm
” “Supply/demand balances will transition to balance and then under-supply in the back half of 2016,” said Jefferies in a research note seen by Rigzone.”
They have been telling this story for the last two years? They are starting to sound like a broken record, and every time they play it sounds more, and more like Humpty Dumpty fell off a wall.
As we have been saying for the last three years, the oil markets will never again rebalance. The reason is simple; oil no longer powers enough economy to buy all of it. A barrel of oil now powers enough economy to buy 89% of that barrel. The remainder goes into storage, or is purchased by using debt that can never be repayed. Depletion is cutting into oil’s value to the economy, and that will continue.
Of course, you don’t want potential oil investors to find out about this! That could be bad for business! So they will keep telling the same story over and over again; until they drown in egg slime! The rest of the world will then get to clean up the mess.
http://www.thehillsgroup.org/
Bahamas Ed on Mon, 11th Jul 2016 3:02 pm
Thank you shortonoil
Your study makes since to me and it seems that the price of oil has been validating it over the last year or so.
Only the future, of course, will tell but thank you for your incite into this.
shortonoil on Mon, 11th Jul 2016 5:37 pm
“Thank you shortonoil “
You are very welcome.
To be able to work on a subject that has had almost as much impact on civilization as the discovery of fire has certainly been a privilege. We were very fortunate to be who we were, when we were. We slipped through a very tiny hole in the space time fabric.
Harquebus on Mon, 11th Jul 2016 9:17 pm
With the ability to create any amount of fiat currency at will, anything is possible until it’s not.
Shortonbrains on Mon, 11th Jul 2016 9:50 pm
It is clear to everyone that the energy contained in a barrel of oil (1700 kWh of energy) does not create enough economic activity to pay for its production. I do not have sources to back up this statement other than my Etp model, which doesn’t have any references either. I just made it up and used big words like entropy and dead state to confuse all you morons who so easily impressed. Futilitist says he has empirically proven it although he freely admits he doesn’t know what the word empirically means. In fact Futilitist regularly uses the word entropy and depletion in place of each other. But I digress, shale oil cost the industry 858 quadrillion dollars and only generated 85 cents in revenue. Don’t believe me? Then suck my dick faggots!
Truth Has A Liberal Bias on Mon, 11th Jul 2016 11:50 pm
@Bahamas
Did you actual read the Etp report? Did you pay for it by ordering it of shorts website? Perhaps you could summarize it in your own words. What do you think of the generous use of the word entropy throughout the report, and as well in many of shorts comments on this site, yet the lack of any statistical mechanics to express the relationship between the energy systems internal and external parameters? I thought it was a load of horse shit.
shortonoil on Tue, 12th Jul 2016 9:37 am
“It is clear to everyone that the energy contained in a barrel of oil (1700 kWh of energy) does not create enough economic activity to pay for its production. “
If you had taken the time to have read our report: “Depletion: A determination for the world’s petroleum reserve” you would realize that the standard that we use for crude is API 37.5°. That is the value that the EIA gave world production between the years 2000 and 2005. We use that standard to delineate convention crude because between those years there was still only a minimal amount of bitumen being produced, and almost no Shale. 37.5° degree crude has an exergy value of 5.88 million BTU, which is equivalent to 1,723 KWhrs.
Also, if you had read the report, you would have found in the left column of the PDF a category called “References”. Those pages contain over 200 references used in the development of the report. If you would apply yourself in the least you could become a much better troll than you are. As it is, you sound like an really ignorant idiot!
shortonoil on Tue, 12th Jul 2016 10:02 am
“I thought it was a load of horse shit.”
If a “load of horse shit” is the best that you can come up with, we are certainly not going to regard your opinion as very significant; and no one else should either! Try dissecting our solution to the “Entropy rate balance equation for control volumes” That would get you some consideration if you can find an error in that area.
In the meantime you can join the category expressed above:
“As it is, you sound like a really ignorant idiot!”
Here is the theory behind the Etp Model:
http://www.thehillsgroup.org/petrohg10.pdf
We will be expecting your rebuttal any century now!
Davy on Tue, 12th Jul 2016 12:12 pm
“The “Mystery” Of Who Is Pushing Stocks To All Time Highs Has Been Solved”
http://www.zerohedge.com/news/2016-07-12/mystery-who-pushing-stocks-all-time-highs-has-been-solved
Citi’s Matt King:
“While we remain deeply skeptical of the durability of such a policy-induced rally, unless there is a follow-through in terms of fundamentals, and in credit had already started to emphasize relative value over absolute, we suspect those with bearish longer-term inclinations may nevertheless feel now is not the time to position for them.”
“And some words of consolation for those who find themselves once again fighting not just the Fed but all central banks:”
“The problems investors face are those we have referred to many times: markets being driven more by momentum than by value, and most negatives being extremely long-term in nature (the need for deleveraging; political trends towards deglobalization; a steady erosion of confidence in central banks). Against these, the combination of UK political fudge (and perhaps Italian tiramisu), a lack of near-term catalysts, and overwhelming central bank liquidity risks proving overwhelming – albeit only temporarily. Why have central banks now completely turned their backs on the long-run just to provide some further near-term comfort? Simple: as Keynes said, in the long-run we are all dead.”
Bahamas Ed on Tue, 12th Jul 2016 2:34 pm
No, I have not paid for his report as it’s not something I care to read at this point in my life, I’m retired and don’t care about the nuts and bolts behind it. But I have read his web site and his other writings on the subject, here and elsewhere.
So I think I understand his theory and it explains things I’m seeing in the world around me. I see the PIE (world gdp maybe) getting smaller while at the same time we’re pumping a record amount of OIL out of the ground cheaply. So that PIE should be growing based on history from 1900 to 1990-2005, but it’s not so something has changed.
I think his theory explains it and I will continue to consider it in my planning until the Annual Average Price of crude breaks his limits if it does.
I do understand what a theory is.
Dustin Hoffman on Tue, 12th Jul 2016 8:40 pm
Fossil Fuel Industry Risks Losing $33 Trillion to Climate Change
http://www.bloomberg.com/news/articles/2016-07-11/fossil-fuel-industry-risks-losing-33-trillion-to-climate-change
The fossil fuel industry risks losing $33 trillion in revenue over the next 25 years as global warming may drive companies to leave oil, natural gas and coal in the ground, according to a Barclays Plc energy analyst.
Government regulations and other efforts to cut carbon emissions will inevitably slash demand for fossil fuels, jeopardizing traditional energy producers, Mark Lewis, Barclays’s head of European utilities equity research, said Monday during a panel discussion in New York on financial risks from climate change.
Yes Sir, can see the writing on the wall
Because of Looney crackpot leftist scientists and liberal politicians oil and coal can’t be burned.
Yep, its all blown out of proportion and
World governmentors are evil freedom haters.
Just watch…
rockman on Wed, 13th Jul 2016 10:39 am
“Government regulations and other efforts to cut carbon emissions will inevitably slash demand for fossil fuels, jeopardizing traditional energy producers…” Of course those govts will do just that by continuing to follow the same policies that have resulted in the ever increasing volume of CO2 released to the atmosphere. LOL.
Sometimes I have wonder if such stories are coming from stealthy fossil fuel lobbyists trying to convince folks that there’s really meaningful change underway.
Boat on Wed, 13th Jul 2016 4:46 pm
Hoff,
Trying to cut pollution and co2 now equals evil freedom haters. Lol Sigh, straight jacket demand is high but In your case brother Hoffman we will have to cut through the red tape and have yours made immediately.
Apneaman on Wed, 13th Jul 2016 5:50 pm
What is the oil market recovering from exactly?
Is there like a standard “oil market” diagnostic manual and set of strict criteria so we can know the difference between a sick oil market, a recovering oil market and healthy oil market?
Boat on Wed, 13th Jul 2016 6:14 pm
ape,
Yea, it’s called common sense. The market continually looks for balance. Oversupply/unhealthy, undersupply/healthy.
Apneaman on Wed, 13th Jul 2016 7:07 pm
Sure boat. The “common sense” card is another of your regular plays in lieu of a real fucking answer. Same as your all time favorite “it’s just capitalism” card.
Kenz300 on Thu, 14th Jul 2016 6:53 am
Oil market in early stages of UNSUSTAINABLE recovery………..
Libya and Iran will soon increase production causing over supply to increase and prices to fall……….