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Bank Of America Sees Oil Prices Heading Toward $90 This Year

Oil prices will return to above $80 per barrel in the second half of this year. This could continue rising toward $90 due to a deepening supply deficit at Francisco Blanch. This is what the head of commodities research at Bank of America has been telling Bloomberg Television on Friday.

This quarter will be a little weaker, with oil prices averaging in the mid-$70s, Blanch said.

“We’ll get back up over $80 in the second half of the year toward $90. The deficit is going to get deeper over the course of the next six to nine months”. This is what the BofA’s head of commodities research was mentioning.

The supply deficit becomes wide due to the OPEC+ cuts and the lack of response from U.S. shale. This is as seen in previous cycles as Blanch was noting.

“Demand will eventually turn around and get a little better in the developed markets. So those three things start to push inventories lower again into the year-end and into 2024, and that’s what gets you higher in terms of prices,” he added.

Analysts in the latest monthly Reuters survey also see prices rising toward $90 per barrel by the end of this year, driven by Chinese demand and a tightening market following OPEC+’s latest production cuts.

So far this year, Brent prices have averaged around $82 per barrel.

Earlier this week, the International Energy Agency (IEA) said that the decline in oil prices over the past few weeks contrasts with an expected tightening of the market later this year when demand is set to exceed supply by nearly 2 million barrels per day (bpd).

Since the middle of April, oil prices have lost all the gains from OPEC+’s latest announcement of new production cuts.

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Source: Oil Price

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United States Crude Oil Inventories

U.S. Crude Oil Inventories Increase by 5.0 Million Barrels

United States commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 5.0 million barrels from the previous week.  At 467.6 million barrels, U.S. crude oil inventories are slightly below the five-year average for this time of year, according to the EIA crude oil and petroleum weekly storage data, reporting inventories as of May 12, 2023.

U.S. crude oil refinery inputs averaged 16.0 million barrels per day during the week ending May 12, 2023, which was 245 thousand barrels per day more than the previous week’s average. Refineries operated at 92.0% of their operable capacity last week.

  • Gasoline production decreased last week, averaging 9.5 million barrels per day.
  • Distillate fuel production increased last week, averaging 4.9 million barrels per day.

Imports related to United States Crude Oil

U.S. crude oil imports averaged 6.9 million barrels per day last week, increased by 1,306,000 barrels per day from the previous week. Over the past four weeks, crude oil imports averaged about 6.3 million barrels per day, 0.3% more than the same four-week period last year.

Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 844,000 barrels per day, and distillate fuel imports averaged 128,000 barrels per day.

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Source: Oil & Gas 360

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Global Investment

Global Investment In Oil And Gas Soars

Are you ready to talk more about how the global investment in oil and gas soars? Read further below.

1. Canada Wildfires Curb Gas Output

– Canada’s constant state of emergency triggered by rampant wildfires across the province of Alberta. It is taking a heavy toll on gas production in the country. It is now shedding some 15% from production levels in April.

– Seven oil and gas producers announced production curtailments totaling 319,000 barrels of oil equivalent per day. This is considering the shut-ins of gas processing plants.

– The decline in natural gas production is pushing Canadian gas prices higher. This is in both Alberta and British Columbia. Both are up 60-70 cents per mmBtu in comparison to last week and trading around 2.5 per mmBtu.

– Simultaneously, Canadian gas exports to the US have been dropping from 5.2 BCf per day to 3.9 BCf per day. This is even though there has been some upside, supplies into the Pacific Northwest depend on the weather in Alberta.

2. Lithium Merger to Create Battery Metal Major

– The $10.6 billion merger of two lithium-focused mining companies Australia’s Allkem. and the US-headquartered Livent, is set to create the world’s third-largest lithium miner.

– Livent CEO Paul Graves will become chief executive of the new company, to be US-based and listed on NYSE, while Allkem’s non-executive chairman will be its chairman.

– The deal has buoyed shares of other lithium producers as more M&A deals are now on the table, in a bid to consolidate production lines and ease sourcing for EV carmakers globally.

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Source: Oil Price

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Enterprise Products’ Oil Pipeline Volumes Rise on Permian Basin Output Growth

Enterprise Products Partners (EPD.N) first-quarter crude oil pipeline volumes increased slightly. The pipeline and storage company said on Tuesday, helped by production growth in the top U.S. shale basin.

Enterprise has remained bullish on oil production from the Permian Basin. It spread across Texas and New Mexico and is looking to build a crude oil export terminal. The target is on the Gulf Coast to help push some of those barrels into the foreign market.

The company’s Sea Port Oil Terminal (SPOT) project received a record of the decision late last year, a significant milestone in obtaining a license.

Enterprise said on Tuesday it expects the SPOT project to receive other permits and a license in the second half of 2023, Jim Teague, the company’s co-chief executive officer, told analysts on a conference call.

“Across our integrated system we continue to see crude oil, natural gas, and NGL production growth from the Permian Basin,” Teague said in a statement, adding that domestic and international demand for U.S. energy and energy products remains resilient.

Enterprise sees growth opportunities from gathering and processing in the Permian broadly, the company said.

Total crude oil pipeline transportation volumes rose to 2.3 million barrels per day (bpd) in the three months to March 31, from 2.2 million bpd a year earlier, the company said.

Crude oil marine terminal volumes rose 5.7% to 841,000 bpd.

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Source: Reuters

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U.S. Energy Development Corp. Expands Footprint in Permian Basin With $225M Investment

U.S. Energy Development Corp., an Arlington-based exploration and production company. They acquired a 25% working interest in the Mascot Project. It is stacked pay asset in core Midland Basin for $225 million cash and other considerations, the company announced.

U.S. Energy said it anticipates full development of the project to comprise another $130 million in capital expenditures. This is over the next two years. It will be bringing the total transaction value to more than $300 million.

The majority owner has a strong track record

Located in Midland County, the Mascot Project includes multiple producing properties, associated midstream assets, and upwards of 50 undeveloped locations expected to produce roughly 6,500 BOE per day during 2023.

The Mascot Project is majority-owned by Midland Petro D.C. Partners LLC, a David H. Arrington-owned business, and operated by an affiliate of MPDC, Permian Deep Rock Oil Co.

“Mr. Arrington has decades of experience operating quality projects in the basin, and we are pleased to partner with him in bringing this asset to full development,” Jayson said.

Including the Mascot Project, U.S. Energy said it has overseen the investment of $575 million over the past 24 months, focusing primarily on near-term drilling opportunities and actively producing assets.

Building a bigger footprint U.S. Energy Development Corp in the Permian Basin

In late 2022, U.S. Energy announced a planned allocation of up to two-thirds of its operating budget for projects in the Permian Basin over the next two to three years, totaling $200-$300 million annually.

The company said this deal will build upon its sizable footprint in the basin, expanding upon recent investments of over $400 million during the past 12 months. The firm said it anticipates operating a one- to two-rig program in the basin during the second half of 2023 and carrying this program into 2024.

In an article on World Oil earlier this month, Jayson wrote, “the impressive hydrocarbon output is the primary reason that U.S. Energy Development Corp places a substantial amount of our investment, manpower, resources, and assets in the Permian region.”

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Source: Dallas Innovates

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New Oil & Gas Investment Is Still Needed In The Energy Transition Per Carney

Investment in new oil and gas production will still be needed in the energy transition. This is as demand will still be there over the next few decades says Mark Carney. He is the former governor of the Bank of Canada and the Bank of England.

The world is raising investments in clean energy. However, oil and gas will still be necessary and will need investment to keep up with demand. Carney is currently head of transition investing at Brookfield Asset Management.

The energy crisis and policy actions sent global investment in low-carbon energy sources. It is soaring to a record $1.1 trillion in 2022. The money spent on the energy transition equaled for the first time investment in the supply of fossil fuels.

“We’ve moved from investment around the world of about 50 cents in clean energy five years ago relative to every dollar in fossil fuels, in conventional energy, to now, that ratio is we’re spending more on clean energy than we’re spending on fossil fuels in terms of investment,” Carney told CTV.

“But that ratio, by the end of this decade, to be on track to where the world needs to get to, needs to go to about four-to-one or five-to-one, clean to fossil fuels.”

“But it’s four-to-one, it’s not four to zero, so there still does need to be some investment in fossil fuels,” he added.

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Source: Oil Price

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Energy Deal Gathers | Steam Permian in Spotlight

Companies with a focus on the oil-rich Permian basin are likely to be at the center of the next wave of consolidation in the U.S. energy sector as favorable oil prices prompt cash-rich drillers to tap into the largest source of shale oil. Learn more about this energy deal.

Top producers have built a war chest to fund acquisitions after reaping windfall profit in 2022 from skyrocketing oil prices following Russia’s invasion of Ukraine.

The current oil prices are only making Permian assets more attractive to companies looking to quickly rebuild their depleting assets to take advantage of the world’s never-ending thirst for fossil fuel.

“I think we’re in a good spot in terms of oil pricing for M&A, somewhere around $80 per barrel is where both buyers and sellers feel comfortable,” said Andrew Dittmar, a director at consultancy Enverus.

“For all of 2023, we’re likely going to have a very active market and we’re gonna continue to see these deals hit.”

At least three analysts have identified Diamondback Energy Inc (FANG.O), Matador Resources Inc (MTDR.N), and Permian Resources Corp (PR.N) as possible takeout targets.

According to Gabriele Sorbara, managing director of equity research at Siebert Williams Shank & Co, these companies have the highest quality of remaining inventory and strong balance sheets and free cash flow, making them good picks.

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Source: Reuters

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Ranger Land and Minerals, a company from Texas that buy mineral rights

Economic Success | Partnership is Key in the Permian Basin

The Permian Basin is expected to need 115,000 additional workers by 2040, according to the Permian Strategic Partnership. On Thursday, the Federal Reserve Bank of Dallas teamed up with local leaders to better understand the economy in the region with the pandemic now mostly in the past. Read more about this economic success goal.

Discussions were very positive all around with education, career readiness, and workforce all highlighted.

Another key theme was partnership among community entities, a significant factor for success moving forward.

“So, I would say it’s going to be ongoing, continued partnerships and levels of engagement, because at the end of the day, whatever we lost as a result of the pandemic, if we’re going to try and close that gap, none of us in this room can do the heavy lifting alone,” said Adrian Vega, Executive Director of the Education Partnership of the Permian Basin. “It’s going to take all of us, because the bottom line is, we all live in this community and so we’re all facing the same challenges.”

The Permian Basin falls into the 11th district of the federal reserve, and with President and CEO of the Federal Reserve Bank of Dallas Lorie Logan on hand to hear panel discussions, there is importance in understanding the economy.

“Particularly the Permian Basin, because it is sort of the seed of energy in the country, and so…our president wants to make sure she really has an understanding of the energy sector, the issues – now and around the corner,” said Alfreda Norman, Senior Vice President of the Federal Reserve Bank of Dallas.

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Source: News West9

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Permian Mega Deal | Is This The Next?

The Wall Street Journal reports that ExxonMobil, (NYSE: XOM), and Pioneer Natural Resources, (NYSE: PXD) are in preliminary discussions about a permian mega deal merger. There has been a good bit of M&A activity the last year or so in shale country. Quite a bit of which was in the Eagle Ford play in South Texas. I have discussed this activity in a couple of recent OilPrice articles, here, and here. Now it appears the liquids rich Midland, sub-basin of the massive Permian basin is drawing the acquisitive eye of companies looking to bulk up their acreage footprint. There have been some smaller deals focusing on the Midland basin over the last six months. Examples would be Diamondback Energy’s pick up of Firebird Energy last fall and early this year, a buyout of Lario Oil and Gas’ interests in the Permian.

It was clear that the late 2022 lull in M&A activity was coming to an end when news broke last week, that megadeal might be in the works for the Midland basin’s, and indeed the entire Permian basin’s largest producer, Pioneer Natural Resources

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Source: Oil Price

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Oil Up Slightly as Market Awaits Key US Inflation Data

Oil prices slightly rose on Wednesday as the market waited for U.S. inflation data later in the day. It will likely influence the Federal Reserve’s policy on future interest rate hikes.

U.S. West Texas Intermediate rose 77 cents, or 0.95% to $82.29 a barrel.

Brent crude climbed 87 cents, or 1.02% to $86.28 a barrel.

Prices had risen about 2% on Tuesday amid optimism that the U.S. Federal Reserve is getting closer to ending its cycle of interest rate hikes. It is making dollar-priced oil cheaper for buyers holding other currencies.

The U.S. consumer price index is expected to show March core inflation rose 0.4% on a monthly basis and 5.6% year-on-year, according to a Reuters poll of economists.

Philadelphia Federal Reserve Bank President Patrick Harker said on Tuesday that he feels the U.S. central bank may soon be done raising interest rates, while Minneapolis Federal Reserve Bank President Neel Kashkari said he believes inflation, now at a rate of 5% by the Fed’s preferred measure, will get to “the mid-threes” by the end of this year.

Yeap Jun Rong, a market analyst at IG said in a note to clients, however, that any “higher-than-expected inflation print could lay the ground for another 25 basis-point rate hike in June”

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Source: Oil & Gas 360

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