Energy Week

Ryan Ray
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Energy Week

Ellen Wald and Ryan Ray discuss the week's events in energy, and what it all means to you. energyweek.substack.com

  1. 07/25/2023

    231 - Is global demand set to increase?

    Goldman Sachs expects ‘all time high’ oil demand to spur large deficits, boosting prices https://www.cnbc.com/2023/07/24/goldman-sachs-expects-all-time-high-oil-demand-will-boost-prices.html - expect demand to rise by 2 million bpd from India and China - Is this coming from OPEC via China? - IEA says global demand will increase by 2.4 million bpd - Will Saudi Arabia increase production as a result? Oil markets are still volatile, U.S. energy chief says, calling for further supplies https://www.cnbc.com/2023/07/22/-we-want-oil-prices-to-come-down-says-us-energy-secretary-general-.html - Prices area actually surprising stable right now - Granholm says Biden wants prices to come down because people "can't afford the premium." Anticipation of Rate Cuts Could Lead Oil Prices Higher https://etfdb.com/leveraged-inverse-channel/rate-cut-anticipation-could-lead-oil-prices-higher/ - If interest rates fall, companies will borrow more and expand causing demand to rise - If interest rates fall, oil companies might be able to borrow money and expand drilling IF banks are willing to lend to them - Can't depend on the Fed to start cutting interest rates while inflation is above 2% Oil prices rise as tight supply counters expected rate hikes https://www.reuters.com/markets/commodities/oil-rally-takes-breather-ahead-fed-ecb-rate-hikes-2023-07-24/ Russia Defies Sanctions by Selling Oil Above Price Cap https://www.wsj.com/articles/russia-defies-sanctions-by-selling-oil-above-price-cap-bae1c271 - Brent is at $82/barrel. Spread gets too large for people to ignore going to Russia. - Does this mean that the system for selling and transporting Russia oil without touching western entities is well developed enough that the price cap can be totally evaded and it is meaningless? Or does it mean that the penalties for violating the price cap aren't being enforced or aren't strong enough? - Sanctions enforcement isn't immediate - it can take 3+ years to get evidence and apply fines - “The West has true pricing power,” he said, adding that the cap could be lowered to between $20 and $30 a barrel. - But if price cap is set too low, Russia will call the bluff and price oil at what the market is pricing its oil at, and buyers can take it or leave it. Global Hunt for Crude Sends Offshore Oil Stocks Soaring https://www.wsj.com/articles/global-hunt-for-crude-sends-offshore-oil-stocks-soaring-8e4f77a9 - Exxon, Chevron stocks not doing well, but stocks of offshore exploration and service companies are booming. Noble, Transocean, etc. are booming with lots of offshore exploration.  - Can take awhile to find what you need, but good for future, 2026, 2027, 2028 Oil and Gas Companies to Face Stricter Regulations and Higher Royalty Rates for Drilling on Public Lands https://www.energyportal.eu/news/new-rules-for-oil-and-gas-leasing-raise-rates-energy-companies-pay-to-drill-on-public-lands-8/84743/ - The increased royalty rate is expected to remain in place until August 2032, with an estimated cost increase of $1.8 billion for oil and gas companies during that period.- The proposed rule, which raises royalty rates to 16.67% from the previous rate of 12.5% Link to Energy Infrastructure Webinar: https://zoom.us/webinar/register/WN_oyqmDS1aRRaqoUG0-gfVag#/registration This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit energyweek.substack.com

    36 min

  2. 07/19/2023

    Chinese oil demand can't support prices

    Oil slides more than 1% as Chinese GDP dents demand hopes https://www.reuters.com/business/energy/oil-slips-after-libya-resumes-output-china-data-eyed-2023-07-17 - GDP grew 6.3% year-on-year in the 2nd quarter, compared with analyst forecasts of 7.3% - what analysts were forecasting such high growth? - slow correction where expectations come back down to reality China's June industrial output rises 4.4%, retail sales up 3.1% https://finance.yahoo.com/news/chinas-june-industrial-output-rises-020809002.html - China's industrial output grew 4.4% in June from a year earlier, unexpectedly accelerating from 3.5% seen in May - Retail sales grew 3.1% in June, slowing from a 12.7% jump in May. Analysts had expected growth of 3.2%. - Are the kind of okay numbers from China signals that the Chinese economy is actually much worse? Chinese Oil Demand Doesn’t Make Sense https://www.wsj.com/articles/chinese-oil-demand-doesnt-make-sense-cbc02a44 - "Either China’s economy will accelerate rapidly in the second half—a prospect that currently looks unlikely—or oil demand will revert to more regular patterns, dragging global consumption and, potentially, prices down with it." *** Really???*** - Could there be a mismatch between petroleum imports quotas and what they actually need. - "China doesn’t regularly publish petroleum inventory data as the U.S. does, so it is difficult to say for sure how much diesel might be sitting in storage somewhere." Oil Bulls are Getting it All Wrong, Wall Street Veteran Warns https://finance.yahoo.com/news/oil-bulls-getting-wrong-wall-101242402.html - “The bulls got it all wrong,” said Ed Morse, the bank’s veteran head of commodities research. “The world is still waiting for a real Chinese recovery, Europe is in recession and we still don’t know if the US will have a hard landing.” - Citi's call for oil's summer average was $83/barrel. More realistic that the $97/barrel calls. But it's still off from $78... Japan to Propose Global Natural Gas Reserve to Avoid Shortages https://finance.yahoo.com/news/japan-propose-global-natural-gas-040004888.html - Can see why indiv countries would want to do this, but will global natural gas supplies be helpful the same way global oil reserves are when natural gas isn't traded like oil is? - Also, higher nat gas prices make Permian wells more valuable - Regional natural gas storage frameworks make much more sense Dirty and Sludgy Oil Runs Hot in Asia as Saudis Cut Supply Back https://finance.yahoo.com/news/dirty-sludgy-oil-runs-hot-051227587.html - Less light oil on the market from Saudi Arabia and UAE has made buyers look for heavy, sour crudes - Urals price is now up close to price cap price - Was this intentional by Saudis? This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit energyweek.substack.com

    38 min

  3. 07/13/2023

    230 - Biofuel displacing diesel | Kunal Patel from the Dallas Fed

    Biofuels are displacing petroleum-based distillate fuel oil consumption on the West Coasthttps://www.eia.gov/todayinenergy/detail.php?id=57040 - renewable diesel = diesel made from  - biodiesel used as well - petroleum distillate consumption down on west coast in 2022 but biodiesel consumption up - unique to west coast NATIONAL AVERAGE SEES LITTLE CHANGE, GASOLINE DEMAND PLUMMETS AFTER SURGING FOR JULY 4 - Gasoline demand soared on July 4 but declined since then - Gasoline prices went down going into July 4 but have basically remained stable since then - "Implied gasoline demand, a proxy for retail demand, unsurprisingly jumped to 9.6 million barrels as motorists hit the road for July 4." - "gasoline inventories fell 2.5 million barrels"  Oil dips on Chinese and U.S. data, but OPEC+ cuts limit fall https://www.reuters.com/markets/commodities/oil-eases-ahead-china-us-data-opec-cuts-support-market-2023-07-10/ - Lots of Chinese data coming out later this week - Will the market tighten in H2 2023? China's economy will turn around at some point, but will it be this year?  - China's trade with US and Europe is down but is Russia really a replacement? Depends who you ask. Iran Seizes Commercial Tanker in Persian Gulf https://www.voanews.com/a/iran-seizes-commercial-tanker-in-persian-gulf-/7170938.html - Military incident in Persian Gulf including US Navy firing on Iranian vessels did not cause oil market to jump at all - Do people not care about tanker security in the Persian Gulf anymore? Special Guest Kunal Patel from the Dallas Fed Q2 Energy Survey https://www.dallasfed.org/research/surveys/des/2023/2302 - price forecasts of producers are different from other industries. Think price will be in $80s by end of year - credit conditions: 24% of small E&Ps said credit conditions are having a major impact. Large E&Ps have more sources of credit. - costs in the oilfield: the larger the firm you are, the more pricing power you have, both with services and materials - larger firms can take advantage to get lower costs but smaller E&Ps are still facing higher costs - potential decreases in cost in H2 - Contracts with rigs and suppliers are the issue - if firms locked in contracts in 2022 then prices are higher even if prices are going down now. When the contracts were signed is driving the costs - Oil producers in the US think that global oil consumption has slightly underperformed this year what they expected at the start of the year. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit energyweek.substack.com

    49 min
  4. 229 - Oil falls amid China growth uncertainties | Dr. Dean Foreman returns

    06/22/2023

    229 - Oil falls amid China growth uncertainties | Dr. Dean Foreman returns

    Oil falls amid China growth uncertainties https://www.reuters.com/business/energy/oil-prices-come-off-earlier-gains-banks-cut-china-growth-forecasts-2023-06-19/ - the issue is headwinds, but is China's economy really that bad - the real issue is that expectations for China's great economic reopening haven't materialized.  - China's demand growth was baked in and now that it's coming in below expectations - at the same time...China's refineries processed second most oil in May on record Column: China stored massive volume of crude oil in May, giving it options https://www.reuters.com/markets/commodities/china-stored-massive-volume-crude-oil-may-giving-it-options-russell-2023-06-19/ - China added to crude oil stockpiles at the fastest rate in nearly three years in May, as robust imports outweighed near-record refinery processing. Toyota unveils sweeping plans for new battery tech, EV innovation https://www.reuters.com/business/autos-transportation/toyota-market-next-gen-battery-evs-2026-built-by-new-ev-unit-2023-06-13/ - Solid-state batteries can hold more energy than current liquid electrolyte batteries - Toyota said it aims to launch next-generation lithium-ion batteries from 2026 offering longer ranges and quicker charging. - This could be much better for the modern model of driving. - While the range would be longer and the charging time faster and more palatable, but the weight might still be an issue New Land Grab by Oil Giants Is Deep Underground https://www.wsj.com/articles/new-land-grab-by-oil-giants-is-deep-underground-34cd5e97 Welcome Back Dr. Dean Foreman, Chief Economist for Texas Oil and Gas Association! www.txoga.org - Are we heading towards 13 million barrels per day of oil production from the US? It's not getting there. - Many states don't have the same activity levels as they did pre-pandemic - Texas is more important than ever for oil production - natural decline rates in Texas are less than in other places - Market is structurally tight, esp when you look at inventory levels - Why is OPEC cutting? Each time, Fed Reserve contemplates a rate hike, economic uncertainty results. -  Going back to the OPEC cuts last year was to offset monetary policy from Fed. - The China factor? China's economy is coming back but slowly over the course of the year. - Natural gas production is at all time highs - How much is flowing into global markets? Storage levels of natural gas are high in Europe and the U.S. - Seasonal and regional markets for natural gas remain. - Permian Basin most of the natural gas is associated - How to incentivize natural gas drilling when prices are so low - Appalachian region is constrained by pipelines - Record level of natural gas exports, but really strong production and really strong consumption. Productivity levels have held this up.  - US is sitting at under $3 per mbtu, Europe is $9/$10 per mbtu - Hot summer could pressure the LNG situation. But also a comeback in China's economy could pressure the LNG situation. China gave up many cargoes of LNG that it had contracted for to Europe because they were willing to pay super high prices This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit energyweek.substack.com

    46 min

  5. 06/07/2023

    228 - OPEC cuts | China drills second deepest well

    Commodities Slide as Investors Bet on Economic Slowdown https://www.wsj.com/articles/commodities-slide-as-investors-bet-on-economic-slowdown-233a6d3 - if prices trend down to the $60s or $50s by October then Shale producers might curb production plans Saudi Arabia Springs 1 Million b/d Cut in Opec Megadeal https://www.energyintel.com/00000188-857f-d6e7-a9ba-efffca560000 - will Aramco take oil from storage if customers want more oil than they have available from production? Saudi Arabia Cuts Oil Output After OPEC Members Clash Over Quotas https://www.wsj.com/articles/saudi-arabia-some-opec-members-clash-over-oil-production-quotas-87f43f0c - Angola vs. Saudi Arabia over a reduction in baseline quotas - 2024 new baseline quotas that more accurately reflect capacity What oil production cuts were agreed at OPEC+ meeting? https://www.reuters.com/business/energy/how-opec-deal-cuts-oil-supply-until-end-2024-2023-06-05/#:~:text=The%20OPEC%2B%20alliance%20on%20Sunday,a%20combined%2040.46%20million%20bpd - Does OPEC know something about China's demand that the rest of the market doesn't? China is drilling a 10,000-meter-deep hole into the Earth https://www.mining.com/web/china-is-drilling-a-10000-meter-deep-hole-into-the-earth/ - "The project will provide data on the Earth’s internal structure, while also testing deep underground drilling technologies, according to China National Petroleum Corp., which is spearheading the project." - Is this REALLY just a scientific and technical venture? Or is it cover for something military? - How much oil and gas would they have to get out of 457 days of drilling? - could it be for rare earths like lithium? An Inflexible EPA Rule Will Hamper Goals to Reduce Methane Emissions https://themessenger.com/opinion/an-inflexible-epa-rule-will-hamper-goals-to-reduce-methane-emissions This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit energyweek.substack.com

    30 min

  6. 05/24/2023

    227 - Who wants an EV F-150 | Chevon's $6.3 Billion Deal

    Ford to charge up EV drive with flurry of battery deals https://www.reuters.com/business/autos-transportation/ford-announce-new-battery-material-deals-investor-event-2023-05-22/ - doubts about Ford's ability to actually hit their EV production targets - But do people even WANT to buy F-150? - Ford says its electric vehicle unit is on track to lose $3 billion this year. NATIONAL AVERAGE PRICE OF GASOLINE HITS PAUSE AS MEMORIAL DAY LOOMS - gasoline price are not as high as people thought they were - is this a silver lining on the inflation talk? - Distillate stocks are 1% higher than this week last year - "Implied gasoline demand, a proxy for retail gasoline consumption, fell 395,000bpd to 8.91 million barrels." - Work from home, even just a few days a week, has permanently removed demand - will we see depressed gasoline consumption over the summer driving season despite lower gasoline prices Court rejects challenges to FERC approval of Alaska Gasline plan https://www.ogj.com/general-interest/government/article/14293993/court-rejects-challenges-to-ferc-approval-of-alaska-gasline-plan - FERC approved the plan in 2020 - 800 mile natural gas pipeline to bring gas from North Slope, liquefy it and ship it to Asian customers - The environmental groups objected, among other things, to FERC’s failure to calculate greenhouse gas emissions that would occur when customers burned the natural gas. European Gas Prices Drop as Goldman Sees Fuel-Switching Floor https://financialpost.com/pmn/business-pmn/european-gas-prices-drop-as-goldman-sees-fuel-switching-floor - "Mild weather and a steady flow of liquefied natural gas have contributed to the decline as Europe recovers from its energy crisis amid severely curtailed pipeline flows from Russia. Stockpiles on the continent are now almost 66% full, well above the seasonal average" - But Goldman could be wrong. Hydropower is still down from last year's drought.  Chevron Doubles Down on Shale With $6.3 Billion Deal https://www.wsj.com/articles/chevron-to-buy-pdc-energy-in-6-3-billion-stock-swap-d8835eee - Chevron getting acreage in Colorado but perhaps it can more effectively navigate regulations than smaller PDC This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit energyweek.substack.com

    41 min

  7. 05/10/2023

    226 - Is oil up or down? | Kunal Patel from Dallas Fed - Q1 Survey

    Big Oil Has $150 Billion in Cash and Investors Want a Share https://www.wsj.com/articles/big-oil-has-150-billion-in-cash-and-investors-want-a-share-b5cdea35 - oil companies sitting on cash now, but they may need that cash for when prices are lower - should they return all this cash to shareholders now or keep it to pay out in dividends throughout the next cycle? - what about needing cash to account for uncertainty in regulations? Oil’s sharp slide has surprised markets. But some traders now see a bottom for prices https://www.cnbc.com/2023/05/08/oils-sharp-slide-has-surprised-markets-but-some-traders-now-see-a-bottom-for-prices.html - analysts have "feelings" that oil prices have seen their bottom - what are the signs? expectation that US gasoline demand will be strong this summer? strong jet fuel demand? inventories? industry? Diesel demand? Chinese manufacturing data? Fed is done raising interest rates? - OPEC is a big uncertainty. Will OPEC take action to cut production at its June meeting or keep production stable? - Will OPEC members adhere to their voluntary cuts? - Diesel numbers aren't good for demand - Could hit summer driving season and demand goes up but then OPEC would need to hold production steady - If Russia doesn't actually cut then oil prices could go lower when evidence hits market Oil climbs almost 3% as recession fears begin to fade https://www.reuters.com/markets/commodities/oil-prices-inch-up-recession-fears-begin-fade-2023-05-08/ - The fears aren't fading, they just aren't as bad as they seemed before. - Was the price slide in oil really overdone? - OPEC to release monthly oil report on Thursday? No more gas stoves? New York is first state to ban gas in new buildings https://www.csmonitor.com/Environment/2023/0505/No-more-gas-stoves-New-York-is-first-state-to-ban-gas-in-new-buildings - "It’s part of a larger state plan to reach net-zero energy emissions by 2050" but the power plants will probably still be permitted to use natural gas - "By 2026, most new buildings under seven stories will have to use electric heat pumps for controlling air temperatures and for hot water. Larger buildings will have to comply by 2029. Some businesses that require extreme high heat to operate are exempt." - Heat pumps don't work that well. What will cities like Buffalo do? - "The state’s energy cushion could narrow beginning in 2025 as some generators are deactivated and demand grows" according to New York's grid operator. Probably will not take older generators out of commission in order to continue to provide electricity. Special Guest Kunal Patel from Dallas Fed - Q1 Survey https://www.dallasfed.org/research/surveys/des/2023/2301 - 200 firms in 11th district registered - data collected March 15-23 - Data suggest expansion in upstream over the last 2 years is stalling - supply chain delays eased - employment growth continuing but not as fast as before - executives are not optimistic - expect crude oil to end year at $80/barrel - WTI at $73/barrel but breakeven is around $62/barrel: range of averages from $56 to $66. But that includes different regions, Eagle Ford, Permian, etc.  - most firms can profitably drill at current prices but last year breakeven was lower ($56/barrel). Large firms (10,000bpd or more) need $55/ barrel while smaller firms need less). - Generally if executives think the price is currently in a good range they predict that oil will end the year at the same price. Last year they thought prices would come down. Now they think prices will go up. - Question: What West Texas Intermediate (WTI) oil price does your firm need to cover operating expenses for existing wells? AVerage across sample is up by 10% from last year. Suggests increase in cost just to manage existing wells.  - Price to complete a DUC has to be between operating expenses and price to put well into production. Completion cost is generally 2/3 of the cost of the well. - $70 oil but $2 gas -- is this an issue? Natural gas and natural gas liquids are seen mostly as an additional uplift. Cost of natural gas mostly impacts the just natural gas drillers. - Push to reduce emissions by moving to electric power is impacting the area. Using electric powered turbines in fracing, for example. More wells mean more electricity needed but often they are away from civilization and its hard to get electricity. - Anger towards BLM - especially regarding permitting rules. Even renewables are having trouble getting permits from BLM. Length of time to get permits is increasing. - Costs continued to rise, but supply chain issues easing. Why? Activity was flat, so maybe supply chain caught up? no, equipment that was ordered a long time ago was finally delivered. Could costs be in labor? Next report coming out June 22! Check out energy indicators and energy slide show! This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit energyweek.substack.com

    47 min

  8. 05/03/2023

    225 - Will China's demand lift oil prices? | No, the petrodollar is not going away

    China’s mixed economic data fuels concerns about recovery https://www.japantimes.co.jp/news/2023/05/01/business/china-economic-recovery-concerns/# - Is this something that China can deal with domestically? Or is it the fault of the global economy which isn't ordering as much stuff from China? - China's consumer demand is doing ok, but the industrial side of China is patchy. - Is this just pent up consumer demand and the consumer economy will drop off to match the poor industrial recovery? - "The manufacturing PMI index fell to 49.2 from 51.9 in March — the first time since December it was below the 50 mark, which signals a contraction. Sub-indexes for new orders, new export orders and manufacturing employment were all below 50."  - Will the consumer numbers decline once the post-Covid bump is over? If so...oil prices are heading lower. GasBuddy: Decline in retail gasoline prices gaining momentum https://www.upi.com/Top_News/US/2023/05/01/gasoline-dehaan-aaa-gasbuddy-oil/5411682948788/ - gasoline prices are going down and will go down even more. - result of oil prices declining and wholesale gasoline prices declining and retailers are passing on the savings to consumers. - diesel prices also declining. Is this due to slowing economy, or is it just coming back down after being so high due to Ukraine/Russia issues? Seems like the issue is the economy. First shipment of Russian oil to Pakistan brokered by China scheduled for May https://economictimes.indiatimes.com/news/international/business/first-shipment-of-russian-oil-to-pakistan-brokered-by-china-scheduled-for-may/articleshow/99879550.cms?from=mdr - "The USA may also have given tacit support to this deal as crisis-hit Pakistan remains a key arms supplier to Kiev, ET has further learnt." - Sanctions, etc. give US a way to control who gets what oil based on foreign policy goals. How trading oil in another currency besides the dollar might play out https://www.thenationalnews.com/business/comment/2023/05/01/how-trading-oil-in-another-currency-besides-the-dollar-might-play-out/ - Saudi Arabia's currency is pegged to the dollar and they can't de-peg it because there would be huge inflation. Can't sell too much oil in currency in non-dollars because yuan, etc. can be devalued. - "Any diminution of the dollar’s global role in favour of the yuan or another currency will be gradual, and will lead, not follow, the oil market." - Saudi Arabia may be willing to accept yuan for oil, but they will likely insist on a set yuan to dollar rate. Biden administration could delay electric vehicles biofuel program decision https://www.reuters.com/world/us/biden-administration-could-delay-electric-vehicles-biofuel-program-decision-2023-05-01/ - If EV manufactures use renewable "fuels" (energy?) they might get awarded RINs they can sell to gasoline refineries that can't use enough Ethanol? This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit energyweek.substack.com

    35 min
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    About

    Ellen Wald and Ryan Ray discuss the week's events in energy, and what it all means to you. energyweek.substack.com

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    • Creator
      Ryan Ray
    • Years Active
      2017 - 2023
    • Episodes
      245
    • Rating
      Clean
    • Copyright
      © Ryan Ray
    • Show Website
      Energy Week

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