Saturday , June 12 2021

And like everyone else, everyone stopped talking about oil worth 100 USD




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The crane secures a wire line, a cable for lowering and lifting tools and other equipment in the well shaft above the Chevron Corp. oil well, being prepared for hydraulic fracturing in the Permian Basin on Thursday, 1 March 2018. & Nbsp; Photographer: Daniel Acker / Bloomberg& Copy; 2018 Bloomberg Finance LP

If there is something we know about where the oil price is heading in the global market, nobody really knows where the price of oil is heading in the global market. Just six weeks ago, press reports about oil largely focused on "how high it could be" because the Brent price exceeded 86 USD / bbl on October 3, while the price for West Texas Intermediate (WTI) was 76 USD / bbl.

At that time, various banks, investment houses and analysts lined up to see who could be closest to predicting the exact date when the Brent price would be close to USD 100, returning the goods to the glory days of 2014. Officials from Saudi Arabia and Russia were involved in discussions about how much additional production will be introduced to the market, when US sanctions against Iran will soon be extended.

It was then, it is now. From October 3 to 3:00 PM on November 13 (when I compile this song), both Brent and WTI fell by about 21 USD / bbl, 24% loss for Brent and 28% for WTI. On November 13, a record eleventh day in a row was recorded, in which the WTI price fell, as the price dropped by over USD 4 / bbl.

Since the crazy day passed six weeks ago, many factors affect prices, including a sharp increase in shale production in the US. In fact, perhaps the only factor that caused a sharp decline this week was estimates published last week by the US Energy Information Agency (EIA) that the daily production of a raw product from the US has increased week by week from 11.2 mmbopd to 11.6 mmbopd. Such a huge jump in one week seems very unlikely, and these weekly estimates are often verified later, but this large number, combined with the simultaneous large jump in the number of active machines, seemed to scare the market.

On the other hand, the market was already a bit scared, as well as speculations about the slowdown of the huge Chinese economy, and the fourth – a simple monthly downward adjustment of the forecasted increase in OPEC demand for 2019 (which is still a healthy estimated increase of 1.29 mmbopd) undoubtedly exerted impact on the market's psyche. & Nbsp; As I pointed out last week, all these market turbulences come at a time when US oil and gas producers are trying to finalize their capital budgets and drilling programs for 2019. Raising uncertainty at a very inopportune time.

Here's what we know for sure: in the last 12 months, if you believe the latest EIA numbers, overall oil production in the US has increased by slightly surprising 2 million barrels a day because progressive technologies and increased efficiency allow manufacturers to produce more volumes from every subsequent well, which I will drill. & nbsp; A reasonable person a year ago could have predicted that the US industry would be able to achieve half of this overall growth.

The result of all this additional US production entering the market was the rapidly growing pressure on OPEC and other exporting countries to adjust their volumes accordingly to keep the price of goods at the desired levels. Since Iran's ability to export is becoming more and more limited since July due to the reintroduction of sanctions on the part of the United States, both Saudi Arabia and Russia have responded, raising their own production levels to fulfill the "annul" they believed to arise in global supply. & nbsp; In retrospect, we know that it turned out that it was a mistaken assessment of the actual conditions on the oil market, which suddenly seems to be unbalanced by an excess of supply.

All this helps to illustrate the original point: if Saudi Arabia and Russia do not know where the price of oil is going, who really? This explains why no one today talks about returning to $ 100 of oil.

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The crane secures a wire line, a cable for lowering and lifting tools and other equipment in the well shaft above the Chevron Corp. oil well, being prepared for hydraulic fracturing in the Permian Basin on Thursday, March 1, 2018. Photographer: Daniel Acker / Bloomberg© 2018 Bloomberg Finance LP

If there is something we know about where the oil price is heading in the global market, nobody really knows where the price of oil is heading in the global market. Just six weeks ago, press reports about oil largely focused on "how high it could be" because the Brent price exceeded 86 USD / bbl on October 3, while the price for West Texas Intermediate (WTI) was 76 USD / bbl.

At that time, various banks, investment houses and analysts lined up to see who could be closest to predicting the exact date when the Brent price would be close to USD 100, returning the goods to the glory days of 2014. Officials from Saudi Arabia and Russia were involved in discussions about how much additional production will be introduced to the market, when US sanctions against Iran will soon be extended.

It was then, it is now. From October 3 to 3:00 PM on November 13 (when I compile this song), both Brent and WTI fell by about 21 USD / bbl, 24% loss for Brent and 28% for WTI. On November 13, a record eleventh day in a row was recorded, in which the WTI price fell, as the price dropped by over USD 4 / bbl.

Since the crazy day passed six weeks ago, many factors affect prices, including a sharp increase in shale production in the US. In fact, probably the only factor that caused a sharp decline this week were the estimates published last week by the US Energy Information Agency (EIA) that the daily production of raw US product increased weekly from 11.2 mmbop to 11.6 mmbopd. Such a huge jump in one week seems very unlikely, and these weekly estimates are often verified later, but this large number, combined with the simultaneous large jump in the number of active machines, seemed to scare the market.

On the other hand, the market was already a bit scared, as well as speculations about the slowdown of the huge Chinese economy, and the fourth – a simple monthly downward adjustment of the forecasted increase in OPEC demand for 2019 (which is still a healthy estimated increase of 1.29 mmbopd) undoubtedly exerted impact on the market's psyche. As I pointed out last week, all these market turbulences come at a time when US oil and gas producers are trying to finalize their capital budgets and drilling programs for 2019. Raising uncertainty at a very inopportune time.

Here's what we know for sure: in the last 12 months, if you believe the latest EIA numbers, overall oil production in the US has increased by slightly surprising 2 million barrels per day, because advancing technologies and increased efficiency allow manufacturers to produce more volume from each subsequent well, which he drills. A reasonable person a year ago could have predicted that the US industry would be able to achieve half of this overall growth.

The result of all this additional US production entering the market was the rapidly growing pressure on OPEC and other exporting countries to adjust their volumes accordingly to keep the price of goods at the desired levels. Since Iran's ability to export is becoming more and more limited since July due to the reintroduction of sanctions from the United States, both Saudi Arabia and Russia have responded by raising their own production levels to fill the "void" they thought global supply was creating. In retrospect, we know that it turned out that it was a mistaken assessment of the actual conditions on the oil market, which suddenly seems to be unbalanced by an excess of supply.

All this helps to illustrate the original point: if Saudi Arabia and Russia do not know where the price of oil is going, who really? This explains why no one today talks about returning to $ 100 of oil.


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