News and Commentary From

$10 Billion in Savings
I reported a couple weeks ago about the growing "fraclog" and the trend not to complete wells is accelerating. U.S. producers may have saved as much as $10 billion in the last few months by not completing wells. Continue reading
$30 Oil is a Reality
You read every day where some analyst or talking head on TV is predicting oil at $30 because of whatever excuse they are using that day for the drop in oil prices. The next day oil rebounds a buck and analysts are forecasting $65 to $75 before the summer is over. The truth is nobody knows but the bears are closer then they realize. Continue reading
Wars and Rumors of War
Saudi's war against Yemeni rebels last week helped to boost oil prices but the lift was only temporary. As the Sunni/Shia conflicts in the Middle East play out we could see much higher prices. However, our more immediate fate is based on the war between the shale producers in the USA. Continue reading
Fracklog is Building
The "fracklog" is a new term coined to represent the backlog of wells that have already been drilled but not yet fractured and completed for production. The recent admissions by numerous E&P companies that they were only drilling and not fracking in order to cut costs has created a new problem for future production. Continue reading
Production Rising
Despite a -42% drop in active rigs the production in the U.S. continues to rise. The U.S. produced 9.366 million barrels per day in the week ended on March 6th. This came despite a drop of -806 rigs since September. Continue reading
Cushing Approaching Record Storage
Cushing Oklahoma is the delivery point for WTI futures and inventories there have risen to 49.2 million barrels and only 3 million below the record from April 2013. Continue reading
House of Cards About to Collapse
Exploration companies drill through miles of rock but it appears their foundations are on shifting sands. Companies are slashing expenses to the bone in an effort to survive and there are probably going to be a few that don't make it until oil prices rise again. Continue reading
Rigs Down -32%, Oil Production Up
The active rig count declined by -48 rigs last week to 1,310 and a -32.2% decline from the 1,931 high back in September. Oil production rose to a new post 1972 record at 9.28 mbpd. What is wrong with this picture? Continue reading
100,000 Energy Jobs Lost
Bloomberg is reporting that more than 100,000 jobs have already been lost in the energy sector. Previously bustling energy hot spots like the U.S. shale plays, Scotland, Brazil and Australia and others have lost well over 100,000 jobs with no letup in sight. Continue reading
Where Can I store My Oil?
The EIA reported crude inventories in the U.S. rose to 413 million barrels last week and the highest level since the EIA began keeping records in 1982. I have seen other reports based off older and less reliable inventory records that this is the highest level for January in 80 years. Continue reading
Friday Was a Preview
The +7% spike in oil prices on Friday was a short squeeze triggered by a news headline. While this may not be the beginning of a return to $70 oil it was a preview of how that return will begin. Oil prices will eventually stop going down and investors will become restless while shorts will continue loading the boat on every minute dip. A headline will appear and a short squeeze will result and the low prices will begin to fade. Continue reading
Energy Decline Continues
Oil prices may have held at the $45 level for the past week but that is no guarantee it will continue. Analysts continue to predict $30 oil despite the enormous damage that will cause to the U.S. economy and to the energy sector as we know it. Layoff announcements are increasing and with the energy earnings cycle just ahead there are sure to be even more dismissals. Continue reading
Beware of Unintended Consequences
While everyone is celebrating cheap gasoline the energy sector is imploding. Goldman Sachs now believes up to $2 trillion in future oil investments are now threatened by low oil prices. Goldman said "Lower commodity prices and production overcapacity are forcing a renewed focus on capital discipline, cost efficiency and productivity across the industry. We expect significant price pressure to come through the supply chain." $2 trillion is definitely a significant number. Continue reading
Spending Cuts Ahead
U.S. energy companies are announcing drastic spending cuts for 2015 because of the lower oil prices. Barclays said companies in North America could cut by 30%. Several have already announced cuts of that magnitude with others in the 30-35% range. A few have slashed spending by 50% or more because they lost their funding and access to the debt markets. Continue reading
Oil Prices Under $50
That is the headline we are likely to see early next week as the last round of portfolio restructuring hits the energy sector. I have warned for a couple weeks we could see a test of that level but I don't think it will last more than a few days. Oil at $50 is simply too low. Continue reading
Low Oil Prices Increase Pressure on Drillers
Offshore drillers are under more pressure than onshore firms because of the large number of new rigs coming out of shipyards over the next several years. The low oil prices make it uneconomical to spend billions finding and developing oil fields and until prices recover companies are going to be cutting back on offshore exploration. < Continue reading
Surprise, Surprise!
A handful of shale drillers thought they were being really smart with the hedging plans but their moves proved to be really dumb. Now they are facing huge revenue declines and probably a sharp drop in their stock prices when Q4 earnings arrive. Continue reading
Forecast Frenzy
It appears to be a contest to see who can make the most bearish forecast on oil prices and project the lowest demand growth numbers for 2015. The energy bears are coming out of hibernation to predict $40 oil and rapidly slowing demand growth. Six months from now we can look back on these forecasts and laugh. Continue reading
Drilling Already Slowing
The drop in crude prices has already prompted a decline in drilling activity. You could not tell from the weekly rig counts because they are still flat but that just means the rigs drilling last week were still drilling this week. You have to look out farther than that to see what is coming. Continue reading
Saudi Arabian Price War
I wrote a lot about the OPEC decision in the Option Investor commentary this weekend. Since I posted that newsletter we have learned that the majority of OPEC members supported a 1.5 mbpd cut as well as a 500,000 bpd cut from non-OPEC members. That was voted down by Saudi Arabia. As the largest producer they pretty much get their way. Continue reading