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Oil and Gas Prices are Climbing Again as Supply Risks Multiply

Global energy prices are finishing the week the way they started. It is shooting higher as a cocktail of risks to supply has put investors on edge. Yes! The oil and gas prices are climbing again.

The price of Brent crude, the global oil benchmark, rose more than 4% Friday to trade at nearly $90 a barrel. West Texas Intermediate crude oil futures, the US benchmark, jumped 4.2% to $86 a barrel.

The main driver, according to Edward Moya, a senior market analyst at Oanda, is the unfolding conflict in Israel. Also, the fears that it could spill over into the wider oil-rich Middle East region.

“The oil market is very sensitive to developments with the Israel-Hamas war. This is what  he told CNN. “There are fears that, even as we see US production hit record levels, we could see a major shock to supplies in the near future.”

Analysts told CNN earlier this week that the war — sparked by a deadly assault by Hamas militants over the weekend — had made investors wary of a potential escalation that could embroil Iran.

Israel has long accused Iran of engaging in a form of proxy war by backing groups — including Hamas — that have launched attacks against it. Tehran has denied involvement in the weekend’s attacks.

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Source: CNN

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Royalty-free lease terms Offered by Alaska to try to stimulate new Cook Inlet natural gas development

To try to entice investment in new natural gas development in Southcentral Alaska’s Cook Inlet basin, state officials are trying something new: a waiver of royalties in the upcoming annual lease sale. Have you heard about Royalty-free lease terms before?

The Alaska Division of Oil and Gas last week announced five upcoming lease sales that include the unusual terms in the Cook Inlet area.

The impetus is the concern that the state’s most populous region may soon be running low of the natural gas that is its main source of power for heat and electricity, a division official said.

“We’re kind of in a bind in terms of having a gas shortage, potentially, in the next few years,” said Sean Clifton, a policy and program specialist with the division. “We’re trying to be innovative and try new things within the bounds of the laws we already have on the books.”

Instead of requiring new leaseholders to pay royalties once production starts, the state is offering a net profit-sharing arrangement aimed at reducing companies’ economic risks. And instead of expecting bidders to compete for exploration rights, the division is setting a fixed price of $40 an acre for the 3.3 million acres that are being offered in the sale.

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Source: Alaska Beacon

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U.S. crude oil inventories increase by 10.2 million barrels

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 10.2 million barrels. It is from the previous week.  At 424.2 million barrels, U.S. crude oil inventories are about 3% below the five-year average for this time of year. This is according to the EIA crude oil and petroleum weekly storage data, reporting inventories as of October 6, 2023.

U.S. crude oil refinery inputs averaged 15.2 million barrels per day during the week ending October 6, 2023, which was 399 thousand barrels per day less than the previous week’s average. Refineries operated at 85.7% of their operable capacity last week.

  • Gasoline production increased last week, averaging 9.7 million barrels per day.
  • Distillate fuel production increased last week, averaging 4.7 million barrels per day.

Imports

U.S. crude oil imports averaged 6.3 million barrels per day last week, increased by 115 thousand barrels per day from the previous week. Over the past four weeks, crude oil imports averaged about 6.6 million barrels per day, 3.5% more than the same four-week period last year.

Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 589 thousand barrels per day, and distillate fuel imports averaged 120 thousand barrels per day.

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Source: Oil & Gas 360

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Oil and gas investment to top $818 billion in 2023 as energy crisis powers record spending

Following the energy crisis that affected most global energy markets last year, and the commodity-related fallout from Russia’s invasion of Ukraine, oil and gas industry players are eyeing a new bullish outlook for energy prices, with sector investment following suit.

In BloombergNEF’s “base-case” scenario, which considers the current state of play, money flowing into oil and gas will grow in 2023 against previous years, topping $880 billion.

Sector spending will reach a new high this year and decline slowly through 2050, although it will remain elevated overall, said BloombergNEF oil analyst Claudio Lubis.

Of total investment last year, including upstream, midstream, and downstream, $501 billion was in oil supply and $260 billion in gas supply, BloombergNEF calculated.

The sector saw rapid growth in investment in the early part of the 2010s, reaching a peak in 2014 following the oil price rally.

Investments fell swiftly in line with the weak commodity cycle, reaching a new low around 2020 when the benchmark WTI crude oil indicator went into negative territory for the first time at the height of the Covid-19 pandemic.

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Source: upstream

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Oil prices jump more than 4% in the wake of Hamas attack on Israel

Oil prices jump with more than 4% on Monday as the Israel-Hamas conflict extended into its third day following a surprise attack on Israel by Palestinian militants Hamas.

Global benchmark Brent settled 4.2% higher at $88.15 a barrel, while the U.S. West Texas Intermediate gained 4.3% to $86.38 per barrel.

At dawn on Saturday during a major Jewish holiday, Palestinian militant group Hamas launched a multi-pronged infiltration into Israel — by land, sea and air using paragliders. The attack came hours after thousands of rockets were sent from Gaza into Israel.

At the time of publication, at least 700 Israelis have reportedly been killed, according to NBC News. The Palestinian Health Ministry, meanwhile, has recorded 313 deaths so far.

While there is a surge in crude prices, analysts believe it will be a knee-jerk reaction, and likely temporary.

“For this conflict to have a lasting and meaningful impact on oil markets, there must be a sustained reduction in oil supply or transport,” said Vivek Dhar, Commonwealth Bank’s director of mining and energy commodities research.

“Otherwise, and as history has shown, the positive oil price reaction tends to be temporary and easily trumped by other market forces,” he wrote in a daily note. The conflict does not directly put any major source of oil supplies in danger, he added.

Neither side is a major oil player. Israel boasts two oil refineries with a combined capacity of almost 300,000 barrels per day. According to the U.S. Energy Information Administration, the country boasts “virtually no crude oil and condensate production.” By a similar strand, the Palestinian territories produce no oil, data from EIA shows.

However, the conflict sits at the doorstep of a key oil producing and export region for global consumers.

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Source: CNBC

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Middle East Gas Giants Look To Capitalize On Booming Demand

Global gas, specifically the Middle East gast giants, demand is projected to rise in the next decade. This is influencing a 12.5% surge in production between 2023 and 2030.

However, Rystad Energy forecasts that even in scenarios of 1.9 and 2.5 degrees Celsius warming. This is with the rapid growth in renewable energy sources. The current set of existing gas fields will not meet global demand, requiring rapid growth in unconventional gas supply. Gas-rich geographies such as the Middle East, with basins such as Rub al Khali, will play an essential role in bridging that gap, providing an estimated 20 million tons per annum (tpa) of LNG by 2040.

The production of unconventional gas, such as shale, has experienced rapid growth in recent years due to technological advancements and reduced lead times. This rapid growth has driven the global share of unconventional gas supply in global gas production at a pace that has previously required significantly more time to achieve, escalating from 4% in 2000 to 12% in 2022 and 35% in 2023.

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Source: Oil Price

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OPEC Optimistic on Demand, Calls for More Oil and Gas Investment

OPEC is optimistic on demand and sees under-investment as a risk to energy security. This is what Secretary-General Haitham Al-Ghais said on Monday at an energy industry event in Abu Dhabi.

He stressed the importance of continued investment in the oil and gas industry. He said he sees a call to stop investing in oil as counterproductive.

“We still see oil demand as quite resilient this year, as it was last year,” Al-Ghais said.

It is worth noting the group’s forecast was for year-on-year demand growth. IT is more than 2.3 million barrels per day (bpd).

He added that investment in the oil and gas sector was important for energy security.

“We are…running quite low on spare capacity; we have said this repeatedly and this requires a concerted effort by all of the stakeholders to see the importance of investing in this industry,” he said.

The UAE’s Energy Minister Suhail Al-Mazrouei echoed the call and said investment by both international and national oil companies was needed.

“And these investments need the financial world to be willing to finance oil and gas,” Al-Mazrouei said.

He later told reporters that his country is on track to expand its oil production capacity to 5 million bpd by 2027 from 4.2 million bpd currently.

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Source: ARAB NEWS

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US Oil And Gas Production Growth Accelerates Despite Higher Costs

US Oil And Gas Production expanded at a faster pace during the third quarter of the year despite still rising costs, the latest Dallas Fed Energy Survey has shown.

Costs have now been on the rise for 11 quarters in a row, the Dallas Fed said, with the situation particularly difficult for oilfield service providers.

Even with rising costs, optimism in the industry increased over the third quarter, likely thanks to rising oil prices, which also probably motivated the increase in production. The optimism was evident in respondents’ input despite expectations of still higher costs next year.

Speaking of prices, the respondents in the Dallas Fed survey forecast a WTI price of $87.91 per barrel on average for the final quarter of the year. This compares with an average price forecast of $77.48 in the previous quarter’s survey edition.

The Energy Transition Affecting US Oil and Gas Production

Asked about what the effects of the energy transition would be on the industry, about a third of respondents said they expected the transition to push the price of oil higher. Another third predicted the transition will push the price of oil significantly higher. Just 9% expect the transition to make oil cheaper.

These expectations suggest highly resilient oil demand in the face of EVs and other electrification efforts that are part of the transition push.

Another interesting take from the survey concerned oil consumption now and in 2050. Some 28% of respondents saw oil consumption in 2050 slightly higher than current levels while 25% saw it as substantially higher. Another 25% saw 2050 oil consumption as slightly lower than current levels and only 8% expected it to be significantly lower than current levels.

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Source: Oil Price

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Oil Moves Higher On EIA Inventory Draw

Crude oil prices moves higher today after the Energy Information Administration reported a crude oil inventory draw of 2.2 million barrels for the week to September 22.

This compared with an inventory draw of 2.1 million barrels for the previous week, which in turn followed a build of around 4 million barrels for the week before that.

In fuels, the EIA reported inventory builds.

Gasoline stocks added 1 million barrels in the week to September 22, which compared with a decline of 800,000 barrels for the previous week.

Gasoline production averaged 9.1 million barrels daily last week, which compared with 9.7 million barrels daily a week earlier.

In middle distillates, the EIA reported a modest inventory build of 400,000 barrels for the week to September 22, with production averaging 4.9 million barrels daily.

This compared with an inventory draw of 2.9 million barrels for the previous week when production of middle distillates averaged 4.8 million barrels daily.

The EIA report followed the American Petroleum Institute’s estimate, which showed a crude oil inventory draw of some 1.6 million barrels. More importantly, however, the API also estimated that stocks at Cushing, Oklahoma, had slipped to below 22 million barrels, which is on the brink of the minimum operating level for the hub.

Meanwhile, earlier today, oil prices inched up on continued concern about supply, despite the API’s estimate of an inventory build rather than the expected draw.

The news about Cushing also had a bullish effect on prices because if draws continue, it would reach a point, from which it would be useless to pump out crude due to compromised quality.

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Source: Oil Price

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12,100 New Jobs in Texas Oil and Gas This Year So Far

The Texas upstream oil and natural gas industry has added 12,100 jobs in 2023, Texas Oil and Gas Association (TXOGA) noted in a media release, citing newly-released data from the Texas Workforce Commission (TWC). In August alone, employment in the sector rose by 1,200 jobs, TXOGA highlighted.

“The oil and natural gas industry serves as a major driver of the Lone Star State’s robust economy,” said Todd Staples, president of TXOGA.

“The 1,200 jobs reported in August add to already strong job growth numbers for this year, continued evidence of the strong demand for these irreplaceable resources both at home and abroad,” he added.

In its review of the August Current Employment Statistics (CES) report from the U.S. Bureau of Labor Statistics (BLS), the Texas Independent Producers and Royalty Owners Association (TIPRO) said that Texas upstream employment for August 2023 totaled 208,500 jobs.

Texas Oil and Gas: The Industry has Added 51,500 Texas Upstream Jobs

Since the COVID-low point of September of 2020, the industry has added 51,500 Texas upstream jobs, averaging growth of 1,479 jobs a month, TXOGA pointed out. At 208,500 upstream jobs, compared to the same month in the prior year, August 2023 jobs were up by 18,200, or 9.6 percent, over August of 2022, TXOGA said.

Months with an increase in upstream oil and natural gas employment have outnumbered months with a decrease by 30 to five, according to TXOGA. Oil and natural gas jobs pay among the highest wages in Texas with employers paying an average salary of approximately $115,000 in 2022, the association said.

The upstream sector involves oil and natural gas extraction and excludes other industry sectors such as refining, petrochemicals, fuels wholesaling, oilfield equipment manufacturing, pipelines, and gas utilities, which support hundreds of thousands of additional jobs in Texas, TXOGA outlined.

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Source: Rig Zone

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