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Crude Summit: US output growth faces headwinds

  • Spanish Market: Crude oil
  • 16/02/23

Investors are still demanding higher returns from oil companies first and foremost, putting a brake on significant gains in US production going forward.

Capital discipline and supply chain bottlenecks weighed on growth last year, according to speakers at the Argus Americas Crude Summit in Houston, Texas, and top executives warned that drilling times for some projects from start to finish more than doubled. More of the same is expected in 2023.

"I suspect there are still challenges, maybe inflation related, that aren't fully understood," said Dan House, North America trading manager at SOCAR Trading. "It's a difficult space to expect a big type of response even if there was a call."

The Paris-based IEA is forecasting an increase of 600-700,000 b/d this year in US crude production, driven by shale and the Permian in particular.

"There's some risks," said Jacob Messing with IEA's oil markets division. "And of course, to get these barrels out of the ground you need to invest."

The past two drilling downturns resulted in a significant restructuring in the industry, with deleveraged balance sheets and the entry of new equity holders.

"These equity holders have demanded substantial capital discipline and I think that's what they received," said Mary Kogut, a partner at law firm Kirkland & Ellis.

The rig count and activity levels over the past year have been fairly constant, which "means we're at this point not in a period of a big uptick in production," she said.

Companies that are successfully returning their cash windfalls from higher oil prices to shareholders are also being rewarded on Wall Street, which also mitigates against any big uptick in output.

As well as showing restraint, a lack of spare capacity in terms of hydraulic fracturing crews is also holding firms back.

"We are really seeing a more mature industry now," said Messing, trying to become more stable and reduce the volatility seen in the past when prices have been high.


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01/11/24

TMX exports reach new record in October

TMX exports reach new record in October

Houston, 1 November (Argus) — Crude exported via the 590,000 b/d Trans Mountain Expansion (TMX) pipeline reached a new high in October at 413,000 b/d. TMX loadings out of Vancouver were up by 103,100 b/d from September and surpassed the previous record of 368,800 b/d in August by 12pc, according to data by analytics firm Vortexa. The exports loaded onto 24 Aframax tankers, up from an average 20 per month, according to Teekay Tankers in an earnings call. Of those 24 Aframaxes, nine went directly to Asia-Pacific ports while at least four went to the Pacific Area Lightering zone (PAL), where the vessels discharged onto very large crude carriers (VLCCs) for Asia-Pacific. The rest traveled to ports along the US west coast. China overtook the US west coast as the largest importer of TMX crude in October, increasing its loadings from 139,900 b/d in September to 208,300 b/d, or over 50pc of the total volume. A record amount of TMX crude still departed for the US west coast in October at 204,700 b/d, up 20pc from the prior month. Future imports into the region might be stifled in the short-term, with US independent refiner PBF planning to run less TMX crude during the fourth quarter amid higher prices and ongoing maintenance on equipment used to remove impurities from heavy sour crude, like the grades exported from TMX. Long-term, TMX transportation rates could become more economical for California refineries, PBF said in its third quarter earnings call. Canadian high-TAN crude fob Vancouver averaged a roughly $11.35/bl discount to December Ice Brent in August, when October cargoes were trading, while heavy sour Cold Lake averaged a roughly $10.60/bl discount. By Rachel McGuire Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Lyondell Houston refinery closure to begin in January


01/11/24
01/11/24

Lyondell Houston refinery closure to begin in January

Houston, 1 November (Argus) — LyondellBasell's 264,000 b/d Houston, Texas, refinery will begin shutting units in January and complete its previously-announced exit from the crude refining business by the end of the first quarter 2025. The Houston plant will shut a crude distillation unit (CDU) and coking unit in January followed by a secondary CDU, coking unit and the refinery's fluid catalytic cracking unit (FCC) in February, the company said in an earnings presentation today. The February unit shutdowns will include the closure of "ancillary units", LyondellBasell said. The company today re-iterated its time line of exiting the refining business by the end of the first quarter and continues to evaluate an advanced recycling or renewable fuels conversion at the plant. By Nathan Risser Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

TMX adds to ‘pulse’ of 4Q freight market: Teekay


31/10/24
31/10/24

TMX adds to ‘pulse’ of 4Q freight market: Teekay

Houston, 31 October (Argus) — An increase in monthly Aframax crude tanker loadings in Vancouver, British Columbia, is poised to add a new dynamic to the tanker market this winter, Teekay Tankers chief executive Kenneth Hvid said. So far, tanker rates in the fourth quarter, often the strongest time of year for the market, have lagged the trajectory of fourth quarter 2023. But it is too early in the quarter to assume a rally will not happen, Hvid said. "It feels like the market has called the winter over before it started," he said. "But there is absolutely a pulse in the markets." Part of the support for tanker rates likely will come from heightened demand on Canada's Pacific coast, where exports in Vancouver are continuing to rise following the Trans Mountain Expansion (TMX). In October, 24 Aframaxes loaded in Vancouver, Hvid said. That marks a new high since TMX began operations in May, with the monthly average at around 20 loadings from June through September, according to Teekay. Nine of the 24 cargoes went directly to Asia-Pacific ports and at least four went to the Pacific Area Lightering zone (PAL), where the vessels discharged onto very large crude carriers (VLCCs) for shipment across the Pacific. An increase in direct shipments from Vancouver to Asia-Pacific can clear out available tonnage on the west coast of North America and pressure rates higher, which lifted rates in September . Teekay profits down on year Teekay reported a profit of $58.8mn in the third quarter, down from $81.4mn in the third quarter of 2023, with rates under pressure from lower Chinese crude oil imports. The tanker company expects rates to climb in the fourth quarter on seasonally higher oil demand. Teekay has a fleet of 42 tankers, including 24 Suezmaxes and 18 Aframax/long range 2 tankers, with six additional vessels on time charter. By Tray Swanson Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

CNRL 3Q oil and gas output dips


31/10/24
31/10/24

CNRL 3Q oil and gas output dips

Calgary, 31 October (Argus) — Canadian Natural Resources' (CNRL) crude, natural gas and natural gas liquids (NGL) output decreased by 2.2pc in the third quarter. The Calgary-based integrated oil and gas company produced 1.36mn b/d of oil equivalent (boe/d) during the third quarter, down slightly from 1.39mn boe/d in the same quarter last year, the company said Thursday. CNRL's upgraders produced 498,000 b/d of synthetic crude, up from 491,000 b/d in the same quarter last year as the Athabasca Oil Sands Project's (AOSP) Scotford upgrader produced stronger than expected volumes and completed a planned turnaround nine days ahead of schedule. The impact of planned turnarounds to CNRL's annual synthetic crude output was reduced to 5,400 b/d, down from the company's initial forecast of 11,000 b/d. The company also acquired Chevron's Canadian oil sands and Duvernay shale production for $6.5bn in the quarter, increasing CNRL's annual synthetic crude production by 62,500 b/d and its stake in AOSP to 90pc. Bitumen production at CNRL's thermal in-situ projects was 272,000 b/d, up from 269,000 b/d in the same quarter of 2023 as output at Jackfish reached 128,000 b/d, a new quarterly record. The company's crude and NGL output, excluding thermal in-situ, was 228,000 b/d, down from 232,000 b/d in the same quarter last year. CNRL will also increase its committed capacity on the 590,000 b/d Trans Mountain Expansion (TMX) by 75,000 b/d to 169,000 b/d, allowing the company to secure almost one third of the line's committed capacity after PetroChina Canada offloaded its capacity on 10 October. The newly expanded pipeline has provided Canadian producers with more meaningful access to global buyers, reducing Canadian heavy crude price volatility and adding significant egress capacity out of Alberta. Yet, it is uncertain how long unconstrained egress in Alberta can be sustained with oil sands production expected to grow. "It certainly helps secure those barrels which would otherwise be potentially in an egress constrained situation," said CNRL president Scott Stauth on Thursday, adding stronger pricing is now possible by aiming volumes at California or Asia. CNRL posted a profit of C$2.27bn ($1.63bn) in the quarter, down from a C$2.34bn profit during the third quarter of 2023. By Kyle Tsang Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

CNRL’s upsized TMX commitment to start in December


31/10/24
31/10/24

CNRL’s upsized TMX commitment to start in December

Calgary, 31 October (Argus) — Canadian Natural Resources (CNRL) will have 80pc more space on the 590,000 b/d Trans Mountain Expansion (TMX) crude pipeline at its disposal in about a month's time, executives said today. The country's largest oil and gas producer will push its contracted capacity on the country's newest export pipeline to 169,000 b/d starting on 1 December, up from 94,000 b/d. Ensuring the continuously growing company would be able to place additional volumes was top of mind for executives. "It certainly helps secure those barrels which would otherwise be potentially in an egress constrained situation," said CNRL president Scott Stauth on Thursday, adding stronger pricing is now possible by aiming volumes at California or Asia. CNRL will then hold about one-third of TMX's roughly 472,000 b/d of contracted space for the line, which moves crude from Edmonton, Alberta, to the docks at Burnaby, British Columbia. The remaining 20pc, about 118,000 b/d, is set aside for uncommitted shippers. "When you take a look at the opportunities off the west coast to further expand and diversify to additional refining destinations, that provides a significant forward opportunity for us," said Stauth. TMX has stabilized the Canadian market "more so than it ever was before," he said. PetroChina Canada on 10 October said it had offloaded its TMX capacity in a letter to the federal pipeline regulator, with some market participants suggesting CNRL was the other party in that deal. TMX roughly tripled the capacity of the existing 300,000 b/d line when it went into service on 1 May. CNRL is known for pushing production higher through acquisitions in the Western Canadian Sedimentary Basin (WCSB) and struck another major deal earlier this month. The Calgary-based company is buying Chevron's oil sands and Duvernay shale production for $6.5bn with the acquisition expected to close in the fourth quarter, but be effective for 1 September. CNRL produced 997,000 b/d of crude and natural gas liquids (NGL) in the third quarter, down slightly from 1.01mn b/d in the same quarter 2023. By Brett Holmes Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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