New year, new worries?

This is the first Oil Big Five post for 2015, and we’re happy to still be sharing with you some of the big issues and topics our global oil editors and analysts are tracking. The start of a new year often brings the dreaded New Year’s Resolutions, and we’d like the oil industry to promise to continue always being interesting, complex, sometimes befuddling, and rife with interesting subplots, some of which we feature below.

If you get nostalgic for 2014 (ah, remember those heady early months with oil prices above $100?), check out our archives, but what we’re really hoping you’ll do is leave us a comment here or tweet us @PlattsOil with the hashtag #oilbig5 with your thoughts about what’s most important in the industry right now.

Here are some of the topics that have caught the eyes of those in Platts offices around the world:

1. How low can it go?

This is the big question on everyone’s minds, including for everyone covering oil at Platts. Brent, the hallmark of oil benchmarks, saw both its 2014 spot and Dated yearly averages drop below $100/b for the first time since 2010, as assessed by Platts. Front-month Brent hit a peak of $115/b in mid-June, and has fallen over 50%, but even with the tumble it still averaged just shy of $99/b as of December 31. On January 8, Platts assessed Dated Brent at $49.29, and on the IntercontinentalExchange, February Brent has fallen below $50/b. Now that the $50/b threshold has been breached, we have to wonder, what’s holding it back from dropping further? If you want to make a prediction as to where crude prices will be at the end of January (or at any other point in 2015—it would be gutsy to take a guess at prices for the end of the year), leave us a comment. We’re as curious as you to see where this all goes.

2. Russia’s crude oil production

Much has been said (including here) about the increasing US crude production, but another behemoth in the global landscape is Russia. For the fifth consecutive year, Russian crude production exceeded 10 million b/d in 2014, and actually grew 0.7% year-on-year to a record high of about 10.58 million b/d, according to preliminary data. Russia has been steadfast in its recent role amount the world’s top crude producers, and its December crude production also hit a monthly post-Soviet record high at roughly 10.67 million b/d, up 0.3% year-on-year. Producers are facing pressure from western sanctions over Ukraine, as we’ve noted before, and now there’s pressure from falling global oil prices. Will these forces, combined with natural decline from mature oil fields, finally slow production, or will producers like Bashneft continue to forge ahead with the stunning growth they posted in 2014?

3. The new bunker fuel landscapeAs a follow-up to last month’s OW Bunker fallout in Asia, we’re eyeing the global bunker landscape – including markets – as new emissions regulations went into effect with the beginning of the year. North Asian 380 CST bunker fuel price hit a near six-year low earlier this week, and vessel owners are buying fuel closer to arrival times on hopes that prices continue to fall. On the other side of the globe, it appears shipowners are turning to marine gasoil, and some US market sources said through the first week of January no deals of 0.1%S bunker fuel have been reported (though there could be sales that weren’t disclosed). In Northwest Europe, the effects of the Emission Control Areas rules was felt in the LSFO market, with Mediterranean utilities seen as a last outlet for LSFO cargoes. And as we noted last month, companies are shifting their footprints in order to make the most of the shifts. Is it too early to draw any conclusions about the rest of the year from what we’ve seen so far in 2015, or will these trends accelerate as the months pass?

4. Distillates along the US Gulf Coast

It could have been year-end tax selling volatility, but benchmark US Gulf Coast heating oil fell to a record low differential of 65.5 cents below the NYMEX January ULSD futures contract on December 24. On December 22, benchmark USGC jet dropped to a record low differential of 40 cents under the underlying futures, while the outright price saw its sharpest decline since the aftermath of Hurricane Ike in 2008, and sources said that even taking into account end-of-year selling, the volatility was more extreme than usual. Also on December 22, benchmark USGC ULSD dropped to a record low differential and reached its lowest outright price since mid-July 2009, and just this week, the US Energy Information Administration announced US ULSC stocks were at their highest level ever (much of it along the USGC). What will happen to stocks, prices, and production in 2015?

5. E&P in the US

Pink slips are already being handed out on rigs in the US, including for drillers Pioneer Energy Services and Helmerich & Payne. Idling rigs today may remind some of the economic recession that squeezed rigs in 2009, when the number of rigs fell 58% between late August 2008 and mid-June 2009, from nearly 2,000 to a low of 829. That peak wasn’t matched again until late 2011. American Eagle Energy said it was suspending its drilling operations until energy prices begin to rebound, ConocoPhillips said it’s reduced its capital budget for 2015 by nearly 20%, Halcon Resources announced additional reductions to its 2015 drilling and completion budget, SM Energy Company announced it was selling assets to exit the Midcontinent, Concho Resources announced an updated (and reduced) 2015 capital program, MDU Resources Group announced it would delay plans to market its Fidelity Exploration & Production business in light of declining oil prices, Linn Energy announced it will cut capex by 53% . . . you get the idea. Will the slowdowns in E&P trickle out to other parts of the industry?

Platts