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In The News – Tuesday, December 2nd, 2014 Edition
Posted Dec 02 2014 7:00AM

More on the Energy picture

  • I’ve mentioned the possibility that the Saudis might have miscalculated. This article in the UK Telegraph makes the same point. They suggest that it may well heighten “geostrategic turmoil” across the Middle East and hurt the petro-sheikdoms long before it deals a knockout blow to US producers. One miscalculation may be at what price and for how long it will take lower crude prices to have a material effect on U.S. producers in light of the fact that most apparently locked in higher prices using futures contracts. With next year’s drilling budgets pretty much already in place, U.S. producers may be in better shape than the Saudis think and be able to last longer than many OPEC members can remain solvent. From Pioneer Natural Resources: “We can produce down to $50 a barrel,” said Harold Hamm, from Continental Resources. The International Energy Agency said most of North Dakota’s vast Bakken field “remains profitable at or below $42 per barrel. The break-even price in McKenzie County, the most productive county in the state, is only $28 per barrel.”

Efficiency is improving and drillers are switching to lower-cost spots, confronting OPEC with a moving target. “The (price) floor is falling and may not be nearly as firm as the Saudi view assumes,” said Citigroup.

Mr. Morse says the “full cycle” cost for shale production is $70 to $80, but this includes the original land grab and infrastructure. “The remaining capex required to bring on an additional well is far lower, and could be as low as the high-$30s range,” he said.

 

  • Here’s some interesting information on the fiscal break-even levels for various sovereign entities:

    Venezuela                  $161

    Yemen            $160

    Algeria                        $132

    Iran                             $131

    Nigeria                        $126

    Bahrain                       $125

    Iraq                             $111

    Russia                         $105

    Saudi Arabia              $  98

    As I said yesterday. They could wind up being hoist by their own petard.

     

  • And lastly, here are some comments from the Oil & Gas Financial Journal from Bjornar Tonhaugen of Rystad Energy.

    “OPEC is currently producing 0.6 MMbbld above their collective output target of 30 MMbbld. If there is no change in the output target, it could indicate a paradigm shift. Market forces would work to restore oil market balance for the first time in decades. Prices will likely continue to slide next year as the market realizes that the price level where US shale production growth stops is lower than USD 60/bbl West Texas Intermediate.

    “If OPEC reduces the output target to 29.5 MMbbld or less, the market will likely stabilize but only if it is followed by immediate signs of actual output cuts. An implied cut of 1.1 MMbbld from current production levels would be seen as a compromise. Helped by non-OPEC producers, market balance should be restored but not create much upward pressure on prices. A cut to 29.0 MMbbld would be needed to send prices higher next year.”

    Again, not sure the Saudis are going to get the result they hoped for.

     

  • You can now get add ons for your iPhone that give it night vision and infrared vision.

  • The Sonic Decanter. I’m not sure this will make that bottle of MD 20/20 taste like Cheval Blanc, but it might improve that tannic Cabernet Sauvignon that’s only two years old. This is another Kickstarter project. Using ultrasound on liquids had been around for a while, but this use shows real promise. 

  • This is hilarious! Apparently some Greenpeace nimrods picked the wrong place to stage a protest and paid a painful price for it. They were appalled that no one was amenable to hearing their point of view. ROTFLOL! The moral here is don’t try to preach malarkey to a Cockney oil trader after he’s had a few pints with lunch. Bad timing. Here’s another account. This is laugh out loud funny! One of the protesters said, “I took on a Texan Swat team at Esso last year and they were angels compared with this lot.” Behind him, on the balcony of the pub opposite the IPE, a bleary-eyed trader, pint in hand, yelled: Sod off, Swampy”

  • Police indicated that the victim’s being Bosnian wasn’t apparently a reason for the attack. There’s a news flash! The man was beaten to death with hammers in a St. Louis neighborhood, and it’s very likely that is was because of his race, not his nationality. This situation doesn’t require a White House task force. It requires a harsh police response and less sensationalism and false reporting by the media. At some point, civilized citizens will lose patience and begin taking responsibility for their own safety. Charles Barkley had some comments on the Ferguson debacle.

  • I would have guessed Clive or Nigel, but Muhammad is now the most popular name in…England.