Tight oil growth expectations, US… EIA

by Jim Colburn • Thursday, February 22, 2018

The EIA projects an increasing share of tight oil production in the US:

“EIA’s recently released Annual Energy Outlook 2018 (AEO2018) Reference case projects that U.S. tight oil production will generally increase through the early 2040s, when it will surpass 8.2 million barrels per day (b/d) and account for nearly 70% of total U.S. production. Tight oil production made up 54% of the U.S total in 2017. Development of tight oil resources is more sensitive than nontight oil to different assumptions of future crude oil prices, drilling technology, and resource availability, but tight oil remains the largest source of U.S. crude oil production in all of the AEO2018 sensitivity cases.”

Here is the link:  https://www.eia.gov/todayinenergy/detail.php?id=35052

 

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The Impact of Oil… Greg Ip, WSJ

by Jim Colburn • Wednesday, February 21, 2018

The excellent Greg Ip, of the Wall Street Journal, suggests that the impact of oil on the American economy has flipped:

”The effect of oil prices on the U.S. economy used to be straightforward: Higher was bad. Yet between 2014 and early 2016, as oil collapsed, growth slowed sharply. Since then oil has doubled, yet the economy has accelerated.”

Read the whole thing here:  https://www.wsj.com/articles/americas-emerging-petro-economy-flips-the-impact-of-oil-1519209000

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Peak Oil Demand… BP

by Jim Colburn • Tuesday, February 20, 2018

Here is the Wall Street Journal reporting on the BP’s current projections for demand for oil and other liquids (peak demand at 2035? what day, what time, please):

“The world’s appetite for oil and other liquid fuels could continue to grow until around 2035, hitting 110.3 million barrels a day—compared with 95 million barrels a day in 2015—before plateauing and falling off in the run up to 2040, the British oil-and-gas giant said Tuesday in the main future scenario, releasing its annual energy outlook.”

And here is BP’s report:  https://www.bp.com/en/global/corporate/energy-economics/energy-outlook.html

 

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US ethane consumption, exports to increase… EIA

by Jim Colburn • Tuesday, February 20, 2018

Here is the EIA’s “Today in Energy”:

“Over the next two years, EIA’s Short-Term Energy Outlook (STEO) projects growth in U.S. consumption of ethane in the petrochemical industry will exceed increases in consumption of all other petroleum and liquid products—such as motor gasoline, distillate, and jet fuel—combined. EIA also projects that ethane exports will continue increasing, as ethane is exported both by pipeline to Canada and by tankers to more distant destinations.
Ethane is separated from raw natural gas at natural gas processing plants along with other hydrocarbon gas liquids (HGL) such as propane, normal butane, isobutane, and natural gasoline. Ethane is mainly used as a petrochemical feedstock for the production of ethylene, which is a building block for plastics, resins, and other industrial products.”

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Hedge funds lighten up bullish positions in oil… Kemp

by Jim Colburn • Monday, February 19, 2018

John Kemp, Reuters is the go to guy for organizing data from the CFTC, here

The CFTC data is released Friday afternoons and reports on positions as of the previous Tuesday…

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Managed futures “crazy ride” so far in 2018… RCM Alternatives

by Jim Colburn • Sunday, February 18, 2018

RCM Alternatives has this to say about managed futures returns so far this year:

“The last month and a half has been one crazy ride for an asset class that prides itself more on base hits than trying to hit home runs. It started off with a bang, at one point up about 6% (per the SG CTA Index) as many in the industry headed down to Miami for the annual spate of conferences, broad smiles on their faces. It prompted us to write how it could be the best monthly performance from Managed Futures in more than a decade on January 29th – which, as often happens, put the nail in the coffin for the up move in a cruel contrarian headline sort of way. The market(s), it turned out, had other plans, with several key reversals causing the SG CTA Index (which is made up of the top 20 CTAs excluding Winton) to tumble at the end of January into the first week of February. In the course of 13 days, the index went from up 6% to down -4.5%, a 10% swing. That’s surprisingly similar to what stocks have done so far in 2018.”

Here is their chart:

 

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Cross-asset correlations…

by Jim Colburn • Saturday, February 17, 2018

The CME has a nice analytics tool, here, that shows-cross asset correlations over time… Here is the one month matrix for selected assets:

Over the past month, crude oil shows a high positive correlation with forex with the Euro, +.71, and the British Pound, +.68…. This is not the case over the past year where there is almost no correlation among forex and crude:

Sometimes they correlate and sometimes they don’t!

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Guess who was on the wrong side of the VIX?

by Jim Colburn • Saturday, February 17, 2018

Here is the Wall Street Journal:

”More recently, some of these investors also made big, unpublicized wagers seeking to benefit from what had been an unusually long period of low volatility, according to pension-fund consultants and others who deal with these institutions. The strategies, often involving the writing of complicated options contracts, were for years a source of easy money. Markets hadn’t been so calm since the 1950s.

Among those making such bets were Harvard University’s endowment, the Employees’ Retirement System of the State of Hawaii and the Illinois State Universities Retirement System.”

The option floor traders had colorful ways of describing these short vol strategies… One that can go in print is, “It’s like picking up dimes in front of a steamroller”…

 

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Oil, wheat, sand bottlenecks in Canada… Bloomberg

by Jim Colburn • Friday, February 16, 2018

Here is Bloomberg:

”The nation’s biggest railways haven’t been able to deliver enough cars after harsh winter conditions and as a sudden boom in energy production sparked a swell of demand. Some farmers have been waiting for months to deliver wheat and canola to elevators before they can get paid. The squeeze also means that crude supplies are piling up in Alberta, pushing prices to the biggest discount relative to New York futures in more than four years.”

Sand used in the fracking process is affected too:

”Earnings for Halliburton Co., the world’s biggest fracker, will be reduced this quarter due to temporary shipping delays of sand, the company said. Canadian National halted all new frack-sand shipments for a week across a wide section of Minnesota and Wisconsin amid winter weather. The region accounts for about a third of Halliburton’s total purchased sand volume, Chief Financial Officer Chris Weber told investors Thursday at the Credit Suisse Energy Summit in Colorado.”

Bloomberg provides a nice chart to illustrate widening price differentials:

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It’s not easy being green…

by Jim Colburn • Wednesday, February 14, 2018

Mark J. Perry on the lack of gas pipelines in Massachusetts:

https://www.aei.org/publication/the-boston-globe-editorial-board-unloads-on-the-pipeline-absolutism-of-environmentalists/

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