Facts & Rumors # 529
October 14, 2023
Latest facts and rumors from the Marcellus, Utica, and Permian, Eagle Ford Plays
WSJ Opinion. Oil Doesn’t Need War to Rise. Hopes that oil supply might ease a bit next year, and inflationary pressures with it, are fading after Saturday’s shock attack on Israel.
On Monday, Brent crude futures rose about 4% to $88 a barrel as traders sized up the potential impact on global supply of a new war in the Middle East. Neither Israel nor Gaza are major oil producers, so there isn’t an immediate effect. However, Iran’s Islamic Revolutionary Guard Corps helped Hamas plan Saturday’s assault on Israel, The Wall Street Journal reported. If Tehran’s involvement is confirmed by U.S. officials, the Biden administration will likely take a much harder line on Iranian oil supply than it has in recent months.
At the start of this year, Iran was producing around 2.5 million barrels of oil a day, according to data from the International Energy Agency. By August, production had risen to 3.1 million barrels a day as the U.S. and Europe eased enforcement of sanctions on the country’s oil exports, probably because they were worried that rising energy prices would lead to another unwelcome bout of inflation.
If a lax approach to Iranian shipments is now untenable, an oil surplus expected in the first quarter of next year probably won’t materialize, and the global market could be short up to 2 million barrels a day later in 2024, according to Warren Patterson, head of commodities at ING. He points out that Russia would potentially benefit from a crackdown on Iranian barrels, as Moscow might step in and supply the Chinese refineries that currently buy Tehran’s crude.
The latest violence also jeopardizes a White House-brokered deal that would see Saudi Arabia recognize Israel in return for a defense pact with the U.S. During negotiations, Saudi Arabia signaled that it was willing to increase oil production next year as part of the bargain.
Without a deal, Saudi’s interests aren’t as aligned with the U.S., says Neil Beveridge, senior energy analyst at Sanford C. Bernstein. The kingdom, which needs oil prices to remain above $80 a barrel to balance its budget, may feel less pressure to reverse the 1-million-barrels-a-day voluntary production cuts that are due to expire in December. However, Saudi Arabia faces a balancing act: It needs the oil price to remain high, but not so high that it destroys demand.
Even before war broke out between Hamas and Israel, the oil market looked tight. The world will be short by more than 1 million barrels a day for the rest of the year because of restrictive OPEC+ production policies and additional voluntary cuts by Saudi Arabia and Russia. Last week’s drop in oil prices, owing to worries about Chinese growth and low U.S. gasoline demand, always looked to be short-lived.
While the geopolitical fallout of Hamas’s actions over the weekend is still unfolding, risks to global oil supply are already back on the table.
O&G Companies Winners in Hydrogen Funding. Fossil fuel companies among winners of $7bn in U.S. hydrogen funds. Financial Times. The Joe Biden administration awarded $7bn to US clean hydrogen projects on Friday, including several involving fossil fuel companies, as Washington moves to build up a sector hailed as key to its decarbonization effort. The projects include $1.2bn to a hydrogen hub in Texas that includes oil supermajors ExxonMobil and Chevron as partners. A further $925mn will be granted to a project running through West Virginia, and partnered with Marathon Petroleum and EQT. Both hubs are expected to produce the bulk of their hydrogen from fossil fuels and then capturing the emissions.
Exxon Purchase to Build Resources. Exxon’s $60 billion bid to “build up” U.S. oil supply. Axios. Exxon Mobil emphasized plans to boost production as part of its blockbuster deal announced Wednesday that would make it the single biggest player in the strategically important U.S. Permian Basin. Why it matters: Russia’s war in Ukraine altered world energy markets, underscoring the importance of domestic production for the U.S.
Pioneer CEO “Days of Independent Over!” Thanks, MDN. Do you know what the single most responsible force was in liberating the United States from the grip of the dictator thugs of OPEC? Independent shale oil companies. Over the past decade, companies like EOG Resources, Apache, Continental Resources, Concho Resources, and Pioneer Resources broke the grip of OPEC over U.S. oil supplies. Pioneer, as we told you yesterday, has agreed to sell itself to Exxon Mobile for $64.5 billion (see Shale Megadeal: Exxon Buys Pioneer Natural Res. for $64.5 Billion). A few hours after that major announcement, Pioneer CEO Scott Sheffield said in an interview, “Shale companies cannot survive on their own long term,” and “They’re going to have to merge up, consolidate, and be part of diversified companies.” Et tu, Brute? Sheffield has raised the white flag of surrender and plunged a dagger in the back of shale. What a shame.
Shale Boss Warns If Iran Is Swept into the War. Shale boss warns of oil-market peril if Iran is swept into war. Bloomberg. Oil prices will surge if the Israel-Hamas war escalates to include Iran, according to shale magnate Scott Sheffield. The founder and chief executive officer of Pioneer Natural Resources Co. issued the warning during an interview with Bloomberg Television on Wednesday. The 71-year-old executive was joined by Exxon CEO Darren Woods, who said the fate of the crude market hinges on the fundamentals of supply and demand. “It’s really going to be a function of demand, and any loss in supply that’s out there today is going to have a big impact,” Woods said. “As long as that market says tight, we’re gonna see more volatility and higher prices.”
Record Oil Exports. U.S. reports record oil exports. NM Political Report. The U.S. exported a record amount of oil during the first half of the year, according to the U.S. Energy Information Administration. During that time frame, the country averaged 3.99 million barrels of oil a day exported. This was the most oil exported since the U.S. ended its ban on exporting crude in 2015. Exports were up about 19 percent compared to the first half of 2022.
Record Oil Production. U.S. oil production on track for record-breaking year. Gillett News. Despite the challenges faced by the US oil industry, including unfavorable government policies, the country’s oil production is on track to reach a new all-time high in 2023. The US has averaged a production of 12.8 million barrels per day (bpd) for the first three quarters of the year, surpassing the previous record of 12.3 million bpd set in 2019. Weekly production at the end of September reached 12.9 million bpd, a million bpd higher than the previous year. The surge in production can be attributed to favorable oil prices and technological innovations such as hydraulic fracturing.
Record High NatGas Production in 2023. Thanks, MDN. Once a month, U.S. Energy Information Administration (EIA) analysts issue the agency’s Short-Term Energy Outlook (STEO), their best guess about where energy prices and production will go in the next 12 months. Last month, the report predicted new all-time highs for natural gas production in 2023 (see Record High NatGas Production & Demand in 2023 – EIA Sept. STEO). The latest monthly report, issued yesterday, revises those record-high predictions UP even more! EIA projects that dry gas production will end up at 103.72 billion cubic feet per day (Bcf/d) in 2023 and rise to 105.13 Bcf/d in 2024. The current record high is 99.60 Bcf/d, set in 2022.
Doubters Beware. U.S. oil production is setting new records. Forbes. One of my 2023 energy sector predictions was that U.S. oil production would set a new all-time high this year. After record-setting production thus far this year, it would take a collapse along the lines of the huge Covid drop seen in the spring of 2020 for the U.S. to not set a new annual production record for 2023. For the first three quarters of 2023, U.S. oil production has averaged 12.8 million barrels per day (bpd). The previous annual record — set in 2019 just before the Covid-19 pandemic impacted production —was 12.3 million bpd. Unless U.S. production averages 2 million bpd lower in the fourth quarter than current production of 12.9 million bpd, then a new oil production record will be set for the year. With nearly a full quarter to go in 2023, my prediction of a new annual production record is nearly baked in now.
PA October 2, to October 12, 2023
County Township E&P Companies
1. Westmoreland Murrysville Olympus
2. Westmoreland Murrysville Olympus
3. Westmoreland Murrysville Olympus
4. Westmoreland Murrysville Olympus
OH October 1, to October 7, 2023
County Township E&P Companies
1. Harrison Short Creek Ascent
WV Permits October 2 to October 6, 2023
1. No New Permits
