Commodity Corner: Oil Declines on GDP Data

- Commodity Corner: Oil Declines on GDP Data

Tuesday, August 16, 2011
Rigzone Staff
by Matthew V. Veazey

The WTI and Brent contracts settled lower Tuesday after the release of a key European Union economic indicator supported a pessimistic outlook for global crude oil demand.

Light sweet crude oil for September delivery lost $1.23 to end the day at $86.65 a barrel while Brent slipped 44 cents to settle at $109.47 a barrel. Eurostat, the statistical arm of the EU, on Tuesday announced that gross domestic product throughout the bloc rose by only 0.2 percent in the second quarter. GDP growth during the first quarter was a more robust 0.8 percent; however, Eurostat pointed out that the latest second quarter figure beats that of the corresponding period in 2010 by 1.7 percent.

The WTI contract price fluctuated from $85.62 to $87.93 during Tuesday's session.

Front-month natural gas lost nine cents to settle at $3.93 per thousand cubic feet. Forecast models show milder temperatures from the Midwest to the Northeast through the remainder of this month, chilling cooling demand projections for the regions.

The September natural gas contract traded within a range from $3.90 to $4.04 Tuesday.

The price of a gallon of reformulated gasoline fell two cents to end the day at $2.85. September gasoline peaked at $2.87 and bottomed out at $2.83.

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Report: UK O&G Production Declines Continue

- Report: UK O&G Production Declines Continue

Monday, August 01, 2011
Rigzone Staff
by Karen Boman

UK oil and natural gas production declined in 2010, mirroring the larger trend seen over the past decade, the UK Department of Energy and Climate Change (DECC) reports.

In the Digest of United Kingdom Energy Statistics (DUKES) 2011 report, DECC reports that primary energy production in 2010 totaled 158.1 million tones of oil equivalent, down 5.3 percent from 2009. Production has fallen each year since 1999, and is down 46.9 percent on 1999 levels, an average rate of decline of 5.6 percent.

Crude oil production, which includes natural gas liquids (NGLs), in 2010 was 63 million tones, 7.7 percent lower than in 2009, and now accounts for 44 percent of primary energy production.

DECC notes that net imports of crude oil and NGLs rose to meet demand with oil exports decreasing by six percent. Net imports grew to just under 9 million tones or around 13 percent of the UK's demand.

The decrease in oil production over the past 10 years shows a sharp rate of decline between 2002 and 2006, with a shallower profile in later years. The main factor behind this flattening effect was the Buzzard field development, which compensated for the sharper falls seen in existing fields. On average, crude oil production has been decreasing by around seven percent a year.

Gross UK gas production has been decreasing since 2000, and in 2010 was down 4.3 percent from 2009. Gross gas production has fallen by 47.3 percent since its peak in 2000. Gas imports in 2010 were almost a third higher than in 2009, mainly because of lower production and higher demand.

Liquefied natural gas (LNG) is increasingly important as a source of imports to supplement existing ones. In September 2010, imports from shipped LNG surpassed the gas imported via pipeline from Norway for the first time; in 2010, LNG imports accounted for 35 percent of the UK's total commercial imports.

UK primary energy consumption in 2010 grew by 3.2 percent, largely driven by the colder weather in 2010. Total oil consumption in the UK fell marginally in 2010; the majority of final consumption of oil, around 75 percent, was consumed in the transport sector. Energy use for transport fell by one percent in 2010 compared to 2009, largely due to falls in aviation fuel resulting from disruptions due to snow and volcanoes.

Overall gas demand grew by 8.4 percent in 2010, with gas demand for electricity generation growing by 3.5 percent; gas's share of the UK's supply of electricity was 47 percent.

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Commodity Corner: Oil Declines on Lackluster Jobs News

- Commodity Corner: Oil Declines on Lackluster Jobs News

Friday, June 03, 2011
Rigzone Staff
by Matthew V. Veazey

Crude oil for July delivery lost 18 cents Friday to settle at $100.22 a barrel after the U.S. Department of Labor released data suggesting that reports of an economic recovery may be premature.

According to the federal agency, the U.S. economy added 54,000 nonfarm payroll jobs in May—well below what analysts had anticipated. By comparison, the Labor Department reported last month that the U.S. workforce added 244,000 nonfarm payroll jobs in April.

The Labor Department also reported Friday that the country's official unemployment rate edged upward 0.1 percentage point in May to 9.1 percent.

Front-month crude oil peaked at $100.87 and bottomed out at $98.12 Friday. For the week, oil is down 0.4 percent.

July natural gas also ended the day lower, falling eight cents to settle at $4.71 per thousand cubic feet. The decline stems from predictions of milder temperatures in the Midwest and Northeast, lessening demand for electricity to power air conditioners in the regions.

The July contract price for gas traded from $4.715 to $4.81 Friday. Overall, natural gas is up 4.2 percent for the week.

July gasoline gained two cents to end Friday's trading at $2.99 a gallon—the intraday high. The price floor for the session was $2.92, and gasoline is down 3.2 percent for the week.

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Commodity Corner: Dollar Declines, Crude Climbs

- Commodity Corner: Dollar Declines, Crude Climbs

Tuesday, May 31, 2011
Rigzone Staff
by Saaniya Bangee

Crude futures climbed to a three-week high Tuesday as concerns eased over Europe's debt crisis.

July's oil prices gained $2.11 Tuesday before settling at $102.70 a barrel on the New York Mercantile Exchange. The greenback fell against the euro as the European Union debated on sending additional financial aid to boost Greece's economy. Luxembourg Prime Minister Jean-Claude Juncker said a new aid package will be decided on by the end of June. A weaker dollar increases the appeal of the dollar-denominated commodities making it cheaper for foreign buyers.

After noticing a 40-barrel spill at a pump station in Kansas, TransCanada temporary closed down its Keystone pipeline—further pressuring oil prices Tuesday. The Keystone pipeline carries half a million barrels of crude per day from Alberta to Cushing, Okla., the largest oil storage hub in the U.S.

Oil prices peaked at $103.39 a barrel and bottomed out at $99.60 on Tuesday.

Natural gas for July delivery traded up Tuesday, adding 15 cents to settle at $4.67 per thousand cubic feet. Prices rose to their highest in four weeks on forecasts predicting above-average weather. Hotter weather increases demand for fuel which is required for air conditioning. The intraday range for natural gas was $4.525 to $4.71 per thousand cubic feet.

Gasoline prices also ended higher Tuesday. After fluctuating between $3.07 and $3.165, gasoline settled at $3.15 a gallon, 5.84 cents higher from the previous trading session.

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Commodity Corner: Oil Declines on bin Laden News

Commodity Corner: Oil Declines on bin Laden News

Monday, May 02, 2011
Rigzone Staff
by Matthew V. Veazey

News that Osama bin Laden was killed in a U.S. covert operation in Pakistan contributed to a temporary dip in oil futures Monday, with oil bottoming out at $110.82 a barrel.

June crude oil would ultimately settle at $113.52, though. Despite reports that bin Laden's remains are now somewhere in the ocean as well as assurances by President Obama that the world is "safer" without the 9/11 mastermind, Al-Qaeda and other terrorist organizations remain a serious threat to the world's oil supply. This latter realization, along with unconfirmed reports by Iranian state media that Israeli military jets were preparing airstrikes against Iran, caused the oil price to regain territory lost earlier in the day.

Crude oil peaked at $114.83 Monday.

Natural gas for June delivery also ended the day higher, settling at $4.69 per thousand cubic feet. The National Oceanic and Atmospheric Administration's Climate Prediction Center recently forecast below-normal temperatures for May throughout the northern tier of the Lower 48 states. This outlook has been bullish for natural gas given the boost in heating demand that could occur should it come to fruition.

Front-month natural gas traded within a range from $4.64 to $4.73 Monday. June gasoline slipped to $3.35 a gallon after fluctuating from $3.31 to $3.42.

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Gauging the Gulf: Anticipated Production Declines

Gauging the Gulf: Anticipated Production Declines

Monday, March 28, 2011
Rigzone Staf
by  Trey Cowan

As of the most recent data provided by the EIA (October 2010), crude oil production coming from the Gulf of Mexico makes up approximately 29% of total U.S. daily production. We would note that this is a drop from the month of May when the Gulf contributed to 31% of all crude production.

In the U.S. Energy Information Administration's July Short-term Energy Outlook, the EIA projected that the moratorium would result in lost production of approximately 82,000 bbl/d on average during 2011 or a cumulative 30 million barrels.

Given how early in the game it was when the government made these projections, we doubt they fully considered how slowly the permitting process would resume once they rescinded the moratorium. Using average decline rates, taking the slow resumption into account, we believe the average lost production in 2011 will approximate 95,700 bbl/d or 35 million barrels in total.

The chart above illustrates that after the hurricanes of 2004 & 2005, it took several years to regain production crippled by the storms. The years 2009 and 2010 benefit from projects started in the previous six years that resulted in Gulf of Mexico production exceeding the prior peak set early in the decade.

The impact from suppressed drilling in the Gulf of Mexico over the next two years will be mitigated by operators exploiting horizontal drilling for oil in regions like the Bakken and Eagle Ford shale. This boost in the lower 48, along with the anticipated declines in production from the gulf, suggests the percentage of production from offshore sources will drop. We are anticipating that the Gulf of Mexico's annual contribution will drop from 30% to approximately 26% in U.S. supplies over the next two years.