Stories by the author
Saudi Arabia has long enjoyed the status of being the top crude oil exporter in the world. With record production of 10.564 million barrels per day in June 2015, Saudi Arabia has been one of the major driving forces behind the current oil price slump.
The Saudis have kept their production levels high since last year in order to drive other players (especially U.S. shale drillers) out of business. Equally clear is the fact that this strategy of maintaining the glut and driving out rivals has not worked so far.
In the last quarter of 2014, in the face of possible oversupply, Saudi Arabia abandoned its traditional role as the global oil market's swing producer and therefore it role as unofficial guarantor of existing ($100+ per barrel) prices.
Many oil companies had trimmed their budgets heading into 2015 to deal with lower oil prices. However, the rebound in April and May to $60 per barrel from the mid-$40s suggested that the severe drop was merely temporary.
But the collapse of prices in July – owing to the Iran nuclear deal, an ongoing production surplus, and economic and financial concerns in Greece and China – have darkened the mood. Now a prevailing sense that oil prices may stay lower for longer has hit the markets.
A flood of bearish news has pushed down oil prices to their lowest levels in months, with WTI nearing $45 per barrel and Brent flirting with sub-$50 territory.
With a bear market back, there is pessimism throughout the oil markets. Goldman Sachs is even predicting oil stays at $50 through 2020, a profoundly grim view of the state of oil supplies.
On the other hand, the contraction in U.S. shale is underway, so it is just a matter of time before the mismatch between supply and demand balances out.
Canada has given oil sands a dirty reputation, but a breakthrough, commercially viable technology has caught the eye of a former Exxon Mobil president who is putting it to use to clean up Utah's billions of barrels of oil sands.
Imagine extracting high-quality oil out of the estimated 32 billion barrels buried in Utah's oil sands, without creating the toxic wastelands that have resulted from oil sands projects in Western Canada. In addition, imagine doing it at a cost that can still turn a profit in today's oil price slump.
The age of electrification across the transportation sector, the solar panel revolution, and Tesla's battery gigafactory are igniting a battle for the cheapest battery. That will transform lithium into a boom-time mineral and the hottest commodity on the energy investor's radar. It has been easy to take lithium for granted. This wonder mineral is the backbone of our everyday lives, popping up in everything from the glass in our windows to our mountains of electronics.
The undisputed king of oil and gas is making some moves that could change the face of the global refining sector.
In June 2015, Saudi Arabia pumped a record 10.564 million barrels a day. As if being the world's biggest exporter of oil was not enough, the desert kingdom is now looking to conquer the refining sector, as it has quickly become the fourth largest refiner in the world.
With the recently concluded nuclear deal between Iran and the P5+1 countries, oil prices have already started heading downward on sentiments that Iran's crude oil supply would further contribute to the already rising global supply glut. The economic crisis in Greece, OPEC's high production levels and China's market turmoil have created more pressure on oil prices, making a price rebound look highly unlikely in the near future.
In the past, I documented the overstatements by both the IEA and EIA in 2014 & 2015 in terms of supply, inventory, and understatements of demand. Others also noticed these distortions and, whether intentional or not, they exist and they are very large in dollar terms. These distortions, which are affecting price through media hype and/or direct/indirect price manipulation, are quite possibly the largest in financial history.
What OPEC countries fear most is a follow-up technological revolution that will lead to a second oil boom in the U.S., and that fear is now being realized.
A technological revolution spurred the U.S. oil boom that resulted in the greatest increase in domestic oil production in a century. While that has stuttered in the face of a major oil price slump and an OPEC campaign to maintain a grip on market share, the American response could be another technological revolution that demonstrates that the first one was merely an impressive embryonic experiment.
Monday's 8% WTI crude decline is setting up a big opportunity for buyers. In addition, there could be more to come. However, this is driven by momentum, not by the fundamental conditions in the physical market.
To the point:
Demand is heading towards record levels both internationally and in the U.S.
The Greek issue is not new and it has not changed. It is just popular now as deadlines are pushed. It will fade and its drag on oil prices will ease.
In the latest weekly production data from the EIA, on the back of recent March revisions, the U.S. managed to post a 76,000 barrel per day increase in the lower 48. Production from Alaska fell by 61,000 barrels per day, putting overall U.S. output 15,000 barrels per day higher for the week ending June 12 compared to the previous week.