RigData Insights

Weekly Market Pulse - RigData

  • Monday, May 23, 2016
  • Posted By




The closer oil gets to $50/bbl, the more we hear whispers of a “false rally”—2Q 2015 redux. Certainly, the market still seems fundamentally oversupplied. But futures prices get jumpy over, well, the future— not the reality of today.


Outages in Canada and Nigeria persist at this writing, fueled by unprecedented wildfires in Canada’s oil sands region and jihadist terror, respectively. A rise in crude stocks is more than offset by a higher-than-expected drawdown in gasoline and distillate inventories that, together with an brightening US economic outlook, presages a strong summer driving season. Things are getting dicier in Venezuela as the opposition mounts more protests against President Maduro’s state of emergency. The recent shake-up in Saudi Arabia, resulting in the ouster of Ali al-Naimi, the architect of the kingdom’s market share grab, raises questions that could go either bullish or bearish.


Perhaps the most reliable indicator of whether the current rise toward the magic $50/bbl—which could carry the seeds of its own reversal if it yields a surge in completed DUCs and refracs, as some have speculated—is the position that Goldman Sachs has taken.


It’s been our experience that a fairly safe bet is to take the opposite position from Goldman Sachs’. The big bank has reversed its bearish stance of calling for an average NYMEX price of $45/bbl in the second half of this year, jumping it to $51/bbl, as it contends the market has moved from storage saturation to deficit much faster than it had anticipated.


Of course, not long before the recent oil price rally, Goldman Sachs was postulating that oil prices could drop as low as $20/bbl this year. It should be noted that Goldman Sachs heavily promotes its oil price hedging services.  So what to do if Goldman Sachs goes all Pollyanna-ish on oil futures?


Be afraid. Be very afraid. 


The weekly market pulse is a part of RigData's Rigs and Drilling Analytical Report to learn more about this report, go here

The Weekly Market Pulse

  • Tuesday, February 20, 2018
  • Posted By Unknown

Source: RADAR | February 8, 2018 | Trey Cowan


Spot prices for WTI crude are up 18%, or $10 per barrel, over the past 3 months. But you would not know this by looking at how the equities of major producers have performed over the same time span. The majors (which we define as BP, Chevron, Exxon Mobil, Eni, Royal Dutch Shell, Statoil, and Total) have shown only a 1% average improvement in their stock prices during the last 13 weeks.


And, slightly alarming, we note that ExxonMobil (XOM) has seen its share price fall by 5% over this same period. Some explanation for this correction may come from the fact that while liquids volumes for the company grew domestically during 2017 (with a majority of this production derived from the Williston, Delaware, and Midland basins), the overall production on an annual basis fell 2% from 2016 levels. The drop in total production volumes was due to field declines, lower entitlements, and asset sales. Additionally, 4Q17 overall earnings for XOM, which were reported last week, fell short of Wall Street expectations and are weighing on its stock price too.


A silver lining for industry watchers focused on the domestic oilfield services landscape, however, can be found in XOM’s 4Q17 conference call. ExxonMobil expects to ramp up its domestic drilling program by 20% to 36 rigs by yearend. Within these plans the company expects to use 30 rigs in the Permian Basin and the remainder in the Bakken Shale. We also note that XOM continues to successfully push the boundaries via optimizing well design through the use of extended laterals. The company anticipates drilling about 20–30 three-mile horizontal wells in the Bakken during 2018.


Chevron’s 4Q17 earnings per share were also underwhelming relative to Wall Street’s expectations. But they also expressed comments that were similar to Exxon’s sentiments surrounding tight oil projects. Specifically, Chevron has experienced significant production growth in the Permian (up 35% yearover-year) from its 16 drilling rigs and 6 frac spreads deployed during 2017. For 2018 the company anticipates building its drilling fleet out to 20 rigs, or a 25% ramp-up vs. existing levels. So both of these majors are likely to increase their US onshore production volumes.


This brings us back to the paradox of why disciplined majors such as Chevron and ExxonMobil, which are expecting increased activity and growing production (in a higher-price environment than 2017’s) are not experiencing better stock performances? Besides the broader market’s flight rebalancing away from volatile investments and the weaker than expected 4Q17 results published so far, we believe that investors in energy equities are reacting cautiously to the backwardization in futures contracts for both oil and natural gas prices.


However, given the fact that global inventory levels have been falling for the past year and a half consistently, we believe the futures market for crude oil contracts could revert to a more favorable outlook that will bring more investors back to the oil and gas industry. Furthermore, a better outlook for crude markets, if this does occur, will signal that overall energy consumption (i.e., demand) will increase its growth rate, ushering in a wave of greater demand for natural gas and thus higher prices for this commodity, too.


Excerpt from RADAR report. To find out more about this analytical report, contact Customer Service at 800-371-0083. 



Oil Prices Radar WTI Crudes




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