Category Archives: Global Oil system

“Energy independence” won’t free the USA from global oil market & geopolitics [I’m cited: CNNMoney]

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Credit: CNNMoney, 9 August 2016

Mr. Trump promises he’d use the USA’s shale-oil revolution to deliver “complete” independence from foreign oil, telling voters in May: “Imagine a world in which our foes and the oil cartels (sic) can no longer use energy as a weapon. Wouldn’t that be nice?” But, he is confusing two quite distinct things:

“Energy independence” – in the sense of the USA producing more oil than the country consumes – is indeed possible, even “tantalizingly close” as this CNNMoney article (Aug. 9, 2016, by Matt Egan) makes clear, citing myself and other experts.  For clarity, I’ll call this “net oil-exporter status.”

However, Donald Trump asks us to “imagine” he can use this net oil exporter status, to make the US independent of the global oil market and oil in geopolitics where our “foes” and “cartels” have leverage. Continue reading

How fast can Libyan oil recover? (I’m quoted by CNN)

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CNN 20 July 2016

The oil market remains glutted, with price in the mid-$40’s.  Despite furtive hopes over recent weeks  by the business press about “imminent re-balancing” of global supply v. demand and about “draw downs” of record-high global storage inventories, data reveal only incremental re-balancing has occurred since fall of 2014 when this all began. (And, from November 2014,  the Saudi’s responded by fighting for their market-share rather than for boosting price, which would have been impossible for OPEC to do on its own given the huge supply glut.)

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New US tech squeezing oilfields & rivals [IBD quotes me]

U.S. oil companies are developing new technologies and techniques to produce oil cheaper and faster.Gillian Rich at Investors’ Business Daily News (17 June 2016) writes a quite informative survey of the many new technological methods pushing the cost of US shale production ever downward. Here’s Gillian’s article. She asked me about the impact on OPEC producers and my central point (my quotes are below) was that it will be the high-tech, most-efficient producers (such as US shale) and NOT necessarily those with the largest and easiest-to-access proven reserves (e.g., countries such as Venezuela and much of OPEC, many corrupt Russian and Chinese state-dominated firms, etc.)  that will set the pace in the new oil order

If the latter actors can’t find ways to innovate in technology and operational methods they will be at a disadvantage because shale production looks more like manufacturing than  traditional oil extraction.  Many OPEC and other state-owned firms never had to think like a combination of Henry Ford and Silicon Valley, but could instead count on huge, low-cost reserves, inefficient exploration and production and cheap local labor.

Eventually, the new shale methods will of course spread to promising shale fields in Argentina, China, Eastern/Central Europe and elsewhere; but this will require big advances in local infrastructure, training and government regulatory capacity. Again, things those countries must think about very seriously. Here are my quotes (from near the end of her long article).

New Oil Order

…. OPEC countries like Nigeria and Venezuela that haven’t invested in newer technology will be hurt by advances in the U.S., said Thomas O’Donnell, a senior energy analyst at the consulting firm Wikistrat. Russia also can’t exploit shale and Arctic assets because of economic sanctions that limit Westerners from helping develop the new fields.

Meanwhile, Saudi Arabia has low-cost production fields, and state-run oil company Saudi Aramco can bring in foreign experts knowledgeable about fracking and new technologies, he added.

Still, OPEC must now grapple with U.S. shale producers on the rebound, which could lead to volatility, O’Donnell said. “The oil order has changed. It’s conventional oil on one side, and new shale oil on the other.”

Aside

Last night Investor’s Business Daily NEWS’ Gillin Rich interviewed me. The title reflects some rumors, but my point of view, as she reports, emphasizes market realities that bode against any output limit – esp. if the Iranians are still intransigent … and … Continue reading

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Don’t write off American oil boom despite OPEC – CNNMoney cites my analysis

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I was interviewed today by CNNMoney’s Matt Egan on what  OPEC should expect from US shale as they hold their 169th “Ordinary Meeting” in Vienna tomorrow (2 June).  Indeed, at some point oil production and demand will balance (likely in 2017), and then the Saudis and OPEC will have to cautiously test the presently unknown dynamics of high-tech US shale on the rebound. -Egan cites my point  of view in his article. Read on … – Tom O’D.

Don’t bet against the resilience of U.S. oil companies

by Matt Egan @mattmegan5 CNNMoney (New York) June 1, 2016: 12:23 PM ET

Many expected U.S. oil output would collapse under the weight of a lengthy price war with the mighty OPEC, the fractured oil cartel that’s meeting in Vienna Thursday.

The U.S. oil boom, fueled by the shale revolution, has obviously taken a few punches from OPEC’s strategy of all-out pumping. But the latest numbers show that American production continues to remain stubbornly high in recent months despite the crash in crude to as low as $26 a barrel in February.

The U.S. pumped 9.13 million barrels per day in March, down by a miniscule 6,000 barrels from the prior month, according to stats released this week by the U.S. Energy Information Administration. That represents a deceleration from recent monthly declines. By comparison, daily U.S. output dropped by 58,000 barrels in February and by 83,000 barrels in December.

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Latin American Oil: Beijing Still Lending, But for How Long? – I’m quoted by Energy Compass

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Last week, Energy Intelligence (EI) quoted me on China’s continued appetite for oil and gas investments in Latin America even with its own  economic slowdown and LatAm’s many political upheavals. (Sincere thanks to EI for a PDF of their proprietary Energy Compass to share on my blog. You can access it below here.)

Some thoughts on China’s strategy: In the case of Venezuela, as the price of oil fell, Beijing quickly eased up on PDVSA’s repayment terms for its huge outstanding loans which are repayable in oil. This shows some willingness to help Venezuela cope with the falling market value of oil. Why? Because, mainly, it is the oil that China has always been laser-focused on – not making interest on these loans.

Generally, it is clear that new Chinese investments or loans are still possible in Latin America. In Venezuela however, Continue reading

Wikistrat Report “Saudi Arabia & the Future of Oil” cites my views

Wikistrat - my quote on US continued interestThis Wikistrat Report on the Saudi kingdom’s “reform” plans and the future of oil is from a press webinar I did on 17 May together with Dr. Ariel Cohen (Atlantic Council, Washington) and Prof. Shaul Mishal (Middle East Division, IDC Herzliya & Tel Aviv U.).  A nicely done report on oil market and geopolitical hot topics.

30May16 note: A couple typos I had found have been fixed by Wikistrat since I initially posted this Report.  The latest version is now linked here. – T.O’D.

I’m quoted by MarketWatch: Five key issues for OPEC’s June meet

Oil ministers of Venezuela, Saudi Arabia & Qatar had agreed in February to freeze output if others did too. AFP/Getty Images

After a Wikistrat Webinar I did, MarketWatch asked me about Saudi & OPEC policy, ond US Shale. Read on here, or at MarketWactch! – Tom O’D.

5 key issues OPEC must wrestle with at its June meeting

Oil output freeze is needed to ‘create a firm price floor’: analyst

The oil market has given members of the Organization of the Petroleum Exporting Countries a reason to crack a cautious smile when they meet June 2 in Vienna.

Signs of a more stable oil market have emerged since the cartel members last held a regularly-scheduled meeting. Oil prices CLN6, +0.04% LCON6, -0.38%  have gained more than 30% so far this year. And both West Texas Intermediate, the U.S. benchmark, and Brent crude, the global benchmark, briefly traded above $50 on Thursday.

Global production is falling following a larger-than-expected weekly decline in crude supplies, according to a report from the American Petroleum Institute late Tuesday. The report comes as the number of active-drilling rigs have been in a steady state of decline and oil-company spending cuts, oil-and-gas sector bankruptcies, and recent outages in Africa and North America, have been supportive for crude prices.

“OPEC members are likely to be a little happier going into June’s meeting than they were in December,” Tom Pugh, commodities economist at Capital Economics, said in recent research note.

Oil prices have “surged by about a third since the start of the year,” he said. The “higher prices will have removed some of the pressure on [OPEC] to act to prop up prices.”

But that doesn’t mean major oil producers can sit back and relax when they get together. Oil market supply and demand haven’t fully stabilized and there a lot of factors than can, and probably will, rock OPEC’s boat.

Here’s a rundown of what analysts see as the key issues at hand and possible outcomes for the OPEC summit: Continue reading

Falling oil price & Saudi strategy: My Sky News interview (London)

Here’s my live interview recently on Sky News – the all-news UK channel. It just went up.

Here’s the gist: Years-long high prices brought the US shale revolution and other new higher-cost oil online like offshore of Brazil and Africa. This glut was already dropping prices when the Saudi’s decided in November 2014 that OPEC alone could not cut enough production to reverse the slide. So what to do if Russia and Mexico won’t join an OPEC cut? Continue reading

MY REPORT | Washington Viewpoints: Assessing Berlin’s Leadership on EU Energy Security

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Merkel and Obama answer questions. 6 June 2014 [Denver Post]

During April and May, I interviewed over a dozen Washington-based experts in European energy and geopolitics.  My report on these interviews–along with some policy proposals in light of Brussels’ “institutional incapacities” and the “fundamental contradictions” of German leadership–is here: [PDF with a Table of Contents for navigation] or at the AICGS website [HTML].

This work was conducted as a resident fellow of the AICGS (American Institute of Contemporary German Studies) in Washington, DC and supported by a generous grant from the German Academic Exchange Office (DAAD) with additional support from the Foreign Office.  My thanks to the AICGS for their collegial support and warm hospitality.

Next, the plan is to interview in Berlin and perhaps Brussels energy experts and officials for their viewpoints on European energy vulnerabilities and on their work with the U.S. side.