U.S. Corporate Profits on Pace for Third Straight Decline… WSJ

by Jim Colburn • Friday, April 29, 2016

It’s all in these two charts:

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Note that the chart is a “blend of actual and estimated results”….  Exxon and Amazon’s actual earnings are not in the chart, estimated earnings are…

Here is the link:  http://www.wsj.com/articles/u-s-corporate-profits-on-pace-for-third-straight-decline-1461872242

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EIA updated country analysis: Iraq

by Jim Colburn • Friday, April 29, 2016

The EIA has updated its country analysis on Iraq…. Here are some charts:

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“Iraq’s crude oil production grew by almost 1.5 million barrels per day (b/d) over the past five years, increasing from 2.6 million b/d in 2011 to almost 4.1 million b/d in 2015. These production estimates include oil produced in the Iraqi Kurdistan Region, the semiautonomous northeast region in Iraq governed by the Kurdistan Regional Government (KRG). The country’s production grew at a slower rate than the Iraqi government had expected over the past decade because of infrastructure bottlenecks in the south, supply disruptions in the north, and delays in awarding contracts. However, Iraq’s production boomed in 2015, increasing by almost 700,000 b/d compared with the level in 2014 and representing the largest year-over-year increase since Iraq’s production recovery in 2004, following the start of the Iraq war.

Despite the near-record level production growth in 2015, the Iraqi government lowered its future oil production targets and slashed investment plans. Iraq has been struggling to keep up its share of payments to the international oil companies (IOCs) operating its oil fields. The drop in crude oil prices, coupled with the war against the Islamic State of Iraq and the Levant (ISIL) in northern Iraq that began in mid-2014, caused Iraq’s budget deficit to grow substantially in 2015.

Iraq’s economy is heavily dependent on oil revenues. In 2014, crude oil export revenue accounted for 93% of Iraq’s total government revenues, according to the International Monetary Fund (IMF).2 In 2015, Iraq (excluding KRG) earned slightly more than $49 billion dollars in crude oil export revenue, $35 billion less than in 2014, despite a substantial increase in export volumes.3

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There is much more here:  http://www.eia.gov/beta/international/analysis.cfm?iso=IRQ

 

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U.S. Natural Gas Imports/Exports… EIA

by Jim Colburn • Friday, April 29, 2016

The EIA reports that net imports of natural gas are at the lowest levels since 1986… Note that pipeline exports to Mexico have increased:

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“In recent years, increasing production from shale plays in the United States has resulted in an increase in U.S. natural gas exports. Since 2012, the natural gas pipeline industry has added 3.4 Bcf/d and 0.2 Bcf/d of export capacity to Mexico and Canada, respectively. As a result, U.S. natural gas exports to Mexico grew from 1.3 Bcf/d in 2011 to 2.9 Bcf/d in 2015. U.S. natural gas net imports from Canada have remained relatively stable since 2011.”

Here is the link: http://www.eia.gov/todayinenergy/detail.cfm?id=26032

 

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Eurozone Economy Above Pre-crisis High… NYTimes

by Jim Colburn • Friday, April 29, 2016

Here is a nice chart from the NY Times showing Eurozone GDP growth since 2008:

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“The potential growth rate in Europe is probably 1 percent,” Mr. Kirkegaard added. “We shouldn’t therefore expect growth to be much greater than it is today. This is, quite frankly, as good as it gets.”

Here is the link: http://www.nytimes.com/2016/04/30/business/international/eurozone-economy-q1.html?hp&action=click&pgtype=Homepage&clickSource=story-heading&module=first-column-region&region=top-news&WT.nav=top-news

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Declining M1….

by Jim Colburn • Thursday, April 28, 2016

Here is the BBC headline: “Islamic State: Up to $800m of funds ‘destroyed by strikes'”… http://www.bbc.com/news/world-middle-east-36145301

A natural experiment for RCT enthusiasts?

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Libya…

by Jim Colburn • Thursday, April 28, 2016

Reuters reports on Libya’s plans to restore output here:  http://www.reuters.com/article/libya-oil-production-idUSL5N17V4YB

“”A U.N.-backed unity government’s move to Tripoli last month raised hopes that Libya could restart idled fields and reopen export terminals, and the NOC in Tripoli says it could quickly double production to over 700,000 bpd, if political and security conditions stabilise.”

The key word is “if”…. The article mentions some of the security challenges Libya will need to overcome in order to increase production by only around 400,000 bpd…

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This Week in Petroleum… EIA

by Jim Colburn • Thursday, April 28, 2016

This Week in Petroleum from the EIA has a lot of good stuff in it (http://www.eia.gov/petroleum/weekly/):

Here is a chart showing how market structure in Brent and WTI has moved to one of less contango..

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From the EIA:

“The stronger crude oil demand outlook is likely the main reason for higher crude prices across the entire futures curve, whereas the near-term supply concerns are putting additional upward pressure on prices for near-term delivery.”

“The relative tightness in Brent compared to WTI likely reflects the anticipation of a heavier-than-normal summer maintenance season for North Sea production facilities.”

“Recent supply disruptions are likely to be affecting oil markets. An oil workers’ strike in Kuwait immediately followed the Doha meeting, potentially disrupting Kuwait’s 2.6 million barrels per day (b/d) of crude production. Although the strike has been resolved with little to no remaining supply disruption, other disruptions are still influencing oil markets. In March, OPEC’s unplanned crude oil supply disruptions averaged 2.3 million b/d, with production outages increasing in places like Nigeria, Libya, and Iraq. Non-OPEC supply was also lower because of outages in Brazil and Ghana.

These disruptions come at a time when non-OPEC production is decreasing and OPEC surplus crude oil production capacity has narrowed. Surplus capacity is an indicator of tight or loose market conditions and surplus capacity below 2.5 million b/d typically indicates relative tightness. However, the high current and forecast levels of global crude oil inventories make the projected low surplus capacity level less significant. EIA currently expects OPEC surplus capacity to average 1.8 million b/d in 2016.”

Here are US crude oil stocks with yesterday’s data included:

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And here are stocks relative to demand (days supply) in OECD nations:

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To summarize:

“The recent narrowing contango in crude oil futures prices is the result of current supply disruptions and the risk of future disruptions, as well as rising prices across global markets with the expectation of a narrower future balance between supply and demand. However, the large buildout of global inventories should buffer any differences in supply and demand, potentially constraining near-term crude oil price increases.”

My view:  Prices moved a bit higher than I expected, but I think we are at the top end of a trading range… Front month vol, which is around 41%, could trade closer to its long term average of 33 as we move through the second quarter..

 

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“We don’t care about oil prices…” Prince Mohammed via Bloomberg

by Jim Colburn • Wednesday, April 27, 2016

In an interview with Bloomberg (http://www.bloomberg.com/news/features/2016-04-21/the-2-trillion-project-to-get-saudi-arabia-s-economy-off-oil) Prince Mohammed mentions oil prices:

“The likely future king of Saudi Arabia says he doesn’t care if oil prices rise or fall. If they go up, that means more money for nonoil investments, he says. If they go down, Saudi Arabia, as the world’s lowest-cost producer, can expand in the growing Asian market. The deputy crown prince is essentially disavowing decades of Saudi oil doctrine as the leader of OPEC. He scuttled a proposed freeze of oil production on April 17 at a suppliers’ meeting in Qatar because archrival Iran wouldn’t participate. Observers saw it as extremely rare interference by a member of the royal family, which has traditionally given the technocrats at the Petroleum Ministry ample room for maneuver on oil policy. “We don’t care about oil prices—$30 or $70, they are all the same to us,” he says. “This battle is not my battle.””

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Exxon Mobil Loses Top Credit Rating… Fuel Fix

by Jim Colburn • Wednesday, April 27, 2016

“Exxon Mobil Corp. was demoted from the top credit rating by Standard & Poor’s for the first time since the Great Depression as the collapse of the biggest oil-market rally in history strangled cash flows.”

“The company’s debt level has more than doubled in recent years, reflecting high capital spending on major projects in a high commodity price environment and dividends and share repurchases that substantially exceeded internally generated cash flow,” Standard & Poor’s wrote in the note.”

From Fuel Fix (http://fuelfix.com/blog/2016/04/26/exxon-mobil-loses-top-credit-rating/) which is the Houston Chronicle’s blog…

I remember reading a report in the 90’s that showed relationships of oil companies balance sheets, correlations of energy price changes to revenues and amount of hedging done… Exxon had the top rated balance sheet, the lowest correlation of prices to revenues and did zero hedging…

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It’s not working…

by Jim Colburn • Wednesday, April 27, 2016

Venezuela, that is:

“Venezuelan bureaucrats will work two days a week to save electricity in the country facing a deepening energy crisis.

Public employees, who account for more than a third of Venezuela’s formal labor force, will have Wednesday and Thursday off, adding to an earlier decree which made Fridays a holiday, President Nicolás Maduro said on state television. Primary schools will also shut Fridays to save power.”

That is from today’s WSJ (http://www.wsj.com/articles/venezuela-imposes-three-day-leave-weekly-for-public-sector-1461718411)….

Please, not another revolution:

“Fewer working hours and power rationing have coincided with the government’s drive to increase productivity to help the nation pull out of the deepest economic depression in its history. In the past four months, Mr. Maduro has created a Vice Presidency of Productive Economy, a Ministry of Strategic Industries and 15 “productive motors” ranging from fishing to mining.

“This is a productive revolution that is going to focus on producing what revolutions produce best,” Mr. Maduro said in February, after unveiling a plan to alleviate chronic food shortages with residential garden plots.”

Here is the EIA on Venezuela’s proved oil reserves:

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