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The Energy Report

The Energy Report

Phil Flynn
http://www.pricegroup.com/
pflynn&pricegroup.com


The Energy Report 08/08/17

Supply Side Drama

The oil drama continues as Repsol and Statoil move to pull oil workers from Venezuela as the country becomes less stable and may be on a path towards civil war. Saudi Arabia's Saudi Aramco said it is cutting supply to its customers by at least 520,000 barrels per day (bpd) in September raising expectations that OPEC will get its compliance issues under control and start to rein in Libya and Nigerian production.

The oil companies are starting to flee Venezuela. Bloomberg News reported that Repsol SA pulled all foreign workers from its fields in Venezuela, and that Norway's Statoil ASA also removed all expat staff. The exit of oil workers is a major blow to the Maduro government as the lack of foreign expertise we lead to further drops in their oil production and raise the possibility of bond defaults as Venezuela's cash cow starts to run dry due to ignorance and stupidity.

The oil market is shaking off reports of poor compliance and instead now is focusing on a tightening global supply situation. With more press picking up on the sharp decline rates in the Permian basin, as well as risng shale lease costs, the expectation that shale production is near a peak for the year is going to start gaining momentum. Now if OPEC can keep it together, we should see the recent drain on global oil inventories continue into the end of the year. We expect to see oil and products fall around 2 million barrels and refinery runs to stay flat but still near record highs.

Record gasoline demand has helped drive gasoline costs and refiners are in high gear to meet that demand. AAA put the national average price for regular unleaded gasoline is $2.35 per gallon, which is three cents more than last week, nine cents more than one month ago, and 23 cents more than at the same time last year. Still seasonally we have peaked but this year's seasonals have been out of whack. Look for record gas demand to continue.

BP is reporting that it has found a fertile new source of shale gas in New Mexico on land it bought from a U.S. shale driller two years ago according to the Houston Chronicle. "BP said that one of its natural gas wells in the Mancos Shale reached the region's highest production rate in 14 years, pumping 12.9 million cubic feet of gas a day in an initial 30-day period. By comparison, horizontal gas wells in the Eagle Ford Shale in South Texas produce some 8 to 12 million cubic feet of gas a day, according to energy research.

Oil should break out of its range to the upside soon. A big drop in oil inventories could be the trick. Vacation like trading volume is also hampering action.

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Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. PFGBEST, its officers and directors may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

Phil is one of the world's leading energy market analysts, providing individual investors, professional traders and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline and energy markets. Phil's market commentary, fundamental and technical analysis, and long-term forecasts are sought by industry executives, investors and media worldwide.

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Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Alaron Trading Corp. its officers and directors may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

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