Latin America just seems to be unable to synchronize its long-mooted upswing with global energy trends. Venezuela boasts the largest reserves on earth. However, it starts to recover from the havoc US sanctions cripple its entire oil and gas industry. Argentina is assuming to be the next non-US shale boom oil sensation.

Just as international majors started drilling in earnest and exports started to flow out of the country COVID-19 has upended everything. Now Venezuela might be quite a challenge to save under the current circumstances, Argentina, however, is far from being a lost cause despite all the political infighting that surrounds YPF’s activities.

A recent infrastructure deal between Argentina and Chile might provide another ray of hope for Buenos Aires. The embattled Argentinian government concluded on January 26. It is a hope-revamping policy move that has officially signed up for refurbishment and recommissioning.

of the Trans-Andean crude pipeline (TAP). The 115kbpd capacity crude conduit running some 425km from the Neuquen Basin to the Chilean city of Concepcion was commissioned in 1992 and was specifically designed to withstand the hardships of transporting via the Andean Mountains. Its utilization, however, lasted for a bit less than 15 years, shutting down in 2006 after the Argentine government saw off the Chevron supply contract and decided not to continue with Argentinian crude exports towards Chile.

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Source: Oil Price

Image Credit: Max Phillip/Beyond Coal @ Flickr

If you have further questions about the shale boom or more, feel free to reach out to us here. 

U.S. oil prices above $50 a barrel are helping the shale patch to generate more cash flow, especially after the massive capital spending cuts last year. But higher prices are also reviving the good old dilemma of U.S. shale producers—raise production or raise payouts to shareholders, who have grown increasingly frustrated in recent years with the lack of meaningful returns while drillers were sinking cash flows, and even spending beyond cash flow generation into breaking production records.

Most analysts believe that this time around, there won’t be much of a dilemma as shale producers will have to show investors they can be more profitable, return more of those profits to shareholders, and “not drill themselves into oblivion,” as Harold Hamm warned the industry back in 2017.

As oil prices are steadying above $50 per barrel, producers are vowing, once again, capital and drilling restraint, while distributing more cash to shareholders now that the shale patch is set to generate higher cash flows.’

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Source: Oil Price

The grey steel girders of Platform Holly rise 235ft (72m) above the waters of the Pacific Ocean, just a couple of miles off the Santa Barbara coast. Above the water, this decommissioned oil rig is dull and lifeless, but the view below the surface is very different. Beneath the waves, colourful fish, crabs, starfish and mussels congregate on the huge steel pylons, which stretch for more than 400ft (120m) to the ocean floor.

There are more than 12,000 offshore oil and gas platforms worldwide. As they drain their reservoirs of fossil fuels below the sea, they eventually become defunct when they produce too little fuel for extraction to be profitable to their operators.

The big question is what to do with these enormous structures when the fossil fuels stop flowing. With curbing climate change rising up the international agenda, and with some questioning whether we have already passed peak oil, hastened by the coronavirus pandemic, the number of defunct rigs in the ocean is set to get bigger. Removing them from the water is incredibly expensive and labour-intensive. Allowing them to rust and fall into disrepair is an environmental risk that could seriously damage marine ecosystems.

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Source: BBC

The U.S. government is forecasting oil production to rise about 3.5% next year spurred by higher crude prices and a rebound in shale drilling.

Oil output will average 11.49 million barrels a day in 2022, according to the Energy Information Administration. The agency, which left its production estimate for this year unchanged at 11.1 million, said that recent crude price increases and rig additions will help production in the Lower 48 states begin to rise in the second quarter of this year.

U.S. crude production is hovering at about 11 million barrels a day, after climbing above 13 million early last year before the pandemic crushed demand.

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Source: Bloomberg

We have seen strong moves higher in the key crude oil benchmarks-WTI, and Brent, in the last several months. This was initiated by the advent of positive news on the Covid front that the vaccines in development were extremely efficacious, promising an endpoint to the spread of the virus. This upward trend in crude was boosted by the gradual decline in U.S. shale production and inventories over the same period.

Finally, the move in early January, by OPEC+ to restrain output into mid-2021, and an extra “gift” from Saudi Arabia to remove another 1-million BOPD from the market, provided the impetus for WTI to rise firmly into the $50s. In this article, we will discuss key reasons that we think the upward trend for crude will continue this year. Why

Demand will return

In spite of the current lockdowns which inhibit demand, the trend is higher. As implementation of the vaccines increases the pool of the virus-immune population, business activity will resume creating demand for refined petroleum products. The graph below shows the EIA’s, Energy Information Agency, forecast of the trend for refined products over the next couple of years.

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Source: Oil Price