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US shale oil output falls as drilling activity slumps

  • Spanish Market: Crude oil
  • 24/07/23

US shale oil output is expected to fall next month as drilling and completion activity slows and legacy output declines exceed new well production.

Oil production in the seven major shale formations covered by the EIA's monthly Drilling Productivity Report (DPR) is forecast to fall by 18,000 b/d in August — the first drop since December, when bad weather disrupted operations. DPR-7 output growth is expected to slow to just below 6,000 b/d this month as fewer new wells are completed, while legacy declines continue to rise. Output growth has slowed month on month since the start of this year, as drilling and completion activity in the shale sector slumped owing to rising costs, labour shortages and lower oil and gas prices.

US oil rig counts have fallen again, dropping by 15 since mid-June to 537 by mid-July — the lowest count since April 2022, according to upstream service firm Baker Hughes (see graph). Fewer new wells are being drilled and firms are drawing on their inventory of drilled-but-uncompleted (DUC) wells to help sustain output. Only 933 wells were drilled in June in the DPR-7 regions — 7pc down on the end of last year. But 957 new wells were completed as 24 DUC wells were also deployed to bring new production on line last month. And DPR-7 DUC wells are at their lowest in nine years (see graph).

The business activity index for the oil and gas sector in Texas, northern Louisiana and southern New Mexico stalled in the second quarter, according to the Dallas Fed's quarterly energy survey. Oil and natural production growth slowed as firms reported rising costs for a 10th consecutive quarter and oil service firms indicated worsening conditions. Around 71pc of oil and gas firms expect that input costs — excluding labour — will be higher at the end of 2023 than at the end of 2022. "Expenses for everything have increased dramatically," one respondent says. "I would drill if costs were not so high."

Diverging expectations

But the survey also reveals divergent expectations between large and small firms. Nearly half of larger firms producing 10,000 b/d or more expect drilling and completion costs to be lower at the end of this year than at the end of 2022, while two-thirds of smaller firms producing less than 10,000 b/d expect costs to be higher. Bigger firms typically lock in costs in advance, buying steel and other inputs ahead and agreeing term contracts with service companies, while smaller firms are more exposed to spot pricing. "Wells that are being completed today have been drilled a few months back under a higher service price environment, so things are, I think, softening," EOG Resources chief executive Ezra Yacob says.

Slowing activity in the sector means that new-well production no longer offsets legacy declines from existing wells, and output will inevitably go into reverse. Legacy oil declines in the DPR-7 regions are expected to rise again to 611,000 b/d (6.5pc of total output), but new-well production is dropping as fewer wells are completed (see graph). DPR-7 well completions were 11pc down in June, compared with the end of last year, and look unlikely to recover soon as firms are cutting back completions. The number of "frac spreads" — completion crews — active in the US remains on a downward trend, data from industry monitor Primary Vision show.

EIA forecasts of US lower-48 onshore oil production, which is driven by shale oil, show output falling slowly this summer from a peak of 10.45mn b/d in April and not recovering to that level before May next year. Overall output is expected to rise by 600,000 b/d year on year for 2022-23, but entry-to-exit growth this year is only 390,000 b/d.

DPR-7 shale oil production drivers

Well completions and legacy declines

Rigs & frac spreads

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21/07/24

Biden abandons bid for re-election: Update

Biden abandons bid for re-election: Update

Updates with reaction Washington, 21 July (Argus) — President Joe Biden has dropped his bid for a second term and is endorsing vice president Kamala Harris to serve as his party's presidential nominee, bowing to pressure from top Democrats who no longer saw a viable path for him to defeat former president Donald Trump in the November election. Biden committed to serve out the remainder of his term, which ends on 20 January 2025. Biden's abrupt withdrawal from the presidential race will leave it up to Democratic delegates to decide who will become their nominee by no later than the Democratic National Convention on 19-22 August. "While it has been my intention to seek re-election, I believe it is in the best interest of my party and the country for me to stand down and to focus solely on fulfilling my duties as president for the remainder of my term," Biden wrote in a letter posted on the social media site X. In calling for Democrats to rally around Harris as the nominee, Biden said he was giving his "full support and endorsement" of Harris and urged Democrats to "come together and beat Trump". Other top voices in the Democratic Party have called for a "mini-primary" to allow a new candidate to emerge, but doing so could run the risk of a protracted and politically risky intraparty fight. Trump, who has spent years attacking Biden's mental competency and age, said in a post today on Truth Social that Biden is not "fit to run for President" and had never been capable to lead the country. Other Republican leaders urged Biden to resign from the White House, which would lead to Harris being sworn in as president. "If Joe Biden is not fit to run for president, he is not fit to serve as president," US House of Representatives speaker Mike Johnson (R-Louisiana) said in a post on X. "He must resign the office immediately." House minority leader Hakeem Jeffries (D-New York) called Biden "one of the most accomplished and consequential leaders in American history". Jeffries did not explicitly endorse Harris. The Democratic revolt against Biden staying in the race followed the first presidential debate last month, when Biden often appeared feeble and confused and struggled to clearly articulate his policy positions. Biden called the debate "a stupid mistake" and blamed it on his busy travel and work schedule. But efforts by Biden and his campaign to reach out to Democratic lawmakers and donors have failed to assuage their concerns. Trump has also made polling gains in must-win battleground states such as Pennsylvania and Michigan, and even threatened to be competitive in typically Democratic strongholds such as New Jersey. Biden is the first sitting US president since Lyndon Johnson in 1968 to prematurely end his re-election campaign. Biden said he would speak "in more detail" later this week about his decision. The Trump campaign had already started preparing for the possibility that Biden would drop out of the race after the presidential debate last month. Last week, a senior adviser for the Trump campaign declined to set a date for the vice presidential debate, saying it would be "unfair" to "whoever Kamala Harris picks as her running mate", in a taunting reference to the uncertainty of Biden's candidacy. By Chris Knight and Haik Gugarats Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Israel strikes Yemen’s Houthi-held Red Sea port city


21/07/24
21/07/24

Israel strikes Yemen’s Houthi-held Red Sea port city

Dubai, 21 July (Argus) — Israel's military on Saturday struck Houthi-controlled Red Sea port of Hodeidah in Yemen, in retaliation for a drone attack by the Iran-backed militant group on Tel Aviv a day earlier, further stoking heightened geopolitical tensions in a key shipping lane for the global economy. Israel's airstrikes targeted "the power station that supplies the coastal city of Hodeidah" and also "the Hodeidah port and fuel tanks," Houthi spokesperson Yahya Saree said. The Houthi-run Al Masirah TV broadcast live footage of flames and smoke raging in the port's oil storage facilities that it said were hit. Saree vowed an "inevitable" and "huge" retaliation to Israel's assault. Saree also claimed on Sunday that the group fired ballistic missiles targeting Eilat in southern Israel. Israel's Defence Forces (IDF) said on Sunday it intercepted a "surface-to-surface missile that approached Israeli territory from Yemen." The IDF on 20 July officially claimed the attack on Houthi-controlled Yemeni territory. "After 9 months of continuous aerial attacks by the Houthis in Yemen toward Israel, IAF [Israeli air force] fighter jets conducted an extensive operational strike over 1,800km away against Houthi terrorist military targets in the area of Al Hudaydah Port in Yemen," the IDF said. "This port serves as an entryway for Iranian weapons for the Houthi terrorist regime," the IDF said, and Israeli prime minister Benjamin Netanyahu made similar remarks in a televised speech. Houthi spokesperson and chairman of Al Masirah media network Mohammed Abdulsalam in a statement on social media platform X said that the Israeli attack targeted "civilian facilities." He also vowed that the attacks will only "increase the determination of the Houthis to ramp up their support for Gaza." Yemen's crude production collapsed soon after the start of the country's civil war, from around 170,000 b/d in 2011-13. The Houthi group uses Hodeidah's port to import some needed fuel oil shipments, with data from analytics firm Kpler suggesting the port received two shipments totalling 156,000 bls between June and July. Hodeidah is also an entry port for humanitarian fuel and food deliveries under the UN auspices, which are then distributed both to the internationally-recognized government of Yemen and to the Houthi authorities. Video footage posted on social media appear to show long queues in front of gas stations in Houthi-controlled areas, in anticipation of a possible fuel shortage closing in. Yemen's internationally recognized and Saudi-backed governing body condemned Israel's attack in a statement. It also renewed its warning to "the terrorist Houthi militias against continuing to tie Yemenis' fate in service of the Iranian regime's interests and its expansionist project in the region." Saudi Arabia's defense ministry on Sunday denied any relation or involvement in the targeting of Hodeidah, adding that the country will not allow any entity to violate its airspace. Yemen's Houthis on 19 July claimed responsibility for a drone attack in central Tel Aviv in Israel that claimed the life of one citizen and injured eight, according to the IDF. It marked a significant escalation that risked a regional spillover of the 10-month conflict between Israel and Palestinian group Hamas, especially with Israel highlighting the Iranian origin of the UAV. Israel and Iran avoided a full-blown war in April after a significant escalation led to exchanging direct aerial strikes against each other's territory. But the IDF attack opens yet another area of confrontation for Israel in the region in the aftermath of the 10-month conflict between between Israel and Palestinian group Hamas. Iran-backed Houthis began attacking commercial ships in and around the Red Sea six weeks after the Israel-Hamas war broke out in October last year in what they claim is an act of solidarity with Palestinians in Gaza. Houthis are part of Tehran's so-called 'Axis of Resistance,' a regional proxy network that includes the Gaza-based Hamas militant group, Lebanon's Hezbollah and Iraqi Shia militias. By Bachar Halabi Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Biden abandons bid for re-election


21/07/24
21/07/24

Biden abandons bid for re-election

Washington, 21 July (Argus) — President Joe Biden has dropped his bid for a second term and is endorsing vice president Kamala Harris to serve as his party's presidential nominee, bowing to pressure from top Democrats who no longer saw a viable path for him to defeat former president Donald Trump in the November election. Biden committed to serve out the remainder of his term, which ends on 20 January 2025. Biden's abrupt withdrawal from the presidential race will leave it up to Democratic delegates to decide who will become their nominee by no later than the Democratic National Convention on 19-22 August. "While it has been my intention to seek re-election, I believe it is in the best interest of my party and the country for me to stand down and to focus solely on fulfilling my duties as president for the remainder of my term," Biden wrote in a letter posted on the social media site X. In calling for Democrats to rally around Harris as the nominee, Biden said he was giving his "full support and endorsement" of Harris and urged Democrats to "come together and beat Trump". Other top voices in the Democratic Party have called for a "mini-primary" to allow a new candidate to emerge, but doing so could run the risk of a protracted and politically risky intraparty fight. The Democratic revolt against Biden staying in the race followed the first presidential debate last month, when Biden often appeared feeble and confused and struggled to clearly articulate his policy positions. Biden called the debate "a stupid mistake" and blamed it on his busy travel and work schedule. But efforts by Biden and his campaign to reach out to Democratic lawmakers and donors have failed to assuage their concerns. Trump has also made polling gains in must-win battleground states such as Pennsylvania and Michigan, and even threatened to be competitive in typically Democratic strongholds such as New Jersey. Biden is the first sitting US president since Lyndon Johnson in 1968 to prematurely end his re-election campaign. Biden said he would speak "in more detail" later this week about his decision. The Trump campaign had already started preparing for the possibility that Biden would drop out of the race after the presidential debate last month. Last week, a senior adviser for the Trump campaign declined to set a date for the vice presidential debate, saying it would be "unfair" to "whoever Kamala Harris picks as her running mate", in a taunting reference to the uncertainty of Biden's candidacy. By Chris Knight and Haik Gugarats Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

ExxonMobil Joliet refinery may be limited for 3 weeks


19/07/24
19/07/24

ExxonMobil Joliet refinery may be limited for 3 weeks

Houston, 19 July (Argus) — It could take up to three weeks for ExxonMobil's 252,000 b/d Joliet refinery in Channahon, Illinois, to resume normal operations after severe weather caused a facility-wide shutdown Monday . The company has limited its unbranded fuel supply in the region and placed customers on allocation, according to buyers. Restoring power and ramping-up the refinery to full operations could take up to three weeks, lasting well into August. ExxonMobil confirmed this afternoon that power has not been restored to the plant and previously declined to comment on a time line for a return to normal operations as it assesses damage at the plant. Channahon's emergency management director told Argus that Monday's tornado skirted the refinery and it faced no direct damage. US Interstate 55 which borders Exxon's refinery was closed due to downed power lines, but these have since been cleared and the road re-opened. By Nathan Risser Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

New Libyan firm starts exporting crude


19/07/24
19/07/24

New Libyan firm starts exporting crude

State-owned NOC subsidiary Agoco appears to be paying for work at its fields with crude, writes Aydin Calik London, 19 July (Argus) — A little-known Libyan firm has begun exporting crude, according to sources, official documents and ship-tracking data seen by Argus . Arkenu Oil, which describes itself as a private oil and gas development and production firm, exported 1mn bl of Sarir/Mesla from the port of Marsa el-Hariga on 10 July on the Zeus, a Suexmax . Shipping agent and port reports list Chinese trading firm Unipec as the charterer. The Zeus' bill of lading lists Libyan state-owned NOC as the sender of the consignment on behalf of Arkenu. Libyan crude sales have historically been the preserve of NOC and a handful of international oil firms that hold stakes in the country's upstream, including Italy's Eni, TotalEnergies and Austria's OMV. Turkey-based commodities trader BGN, which does not have upstream production in Libya, also regularly appears on loading programmes as a seller of the country's crude. According to a document dated 10 July, NOC allocated to Arkenu an unspecified share of production from its subsidiary Agoco's Sarir and Mesla fields in return for Arkenu carrying out development work at the sites. This implies that Agoco is paying Arkenu for the work in crude. Arkenu's 1mn bl cargo is worth around $84mn at prevailing market rates, Argus estimates. Arkenu, set up in early 2023 in the eastern city of Benghazi, says it owns modern drilling rigs and has a team of experts "who have held high positions in major oil production and development companies". It is unclear what work Arkenu has carried out for Agoco. Sarir and Mesla accounted for most of Agoco's roughly 280,000 b/d of output in 2023. Libya is politically divided between an internationally recognised administration in the west, which has historically controlled oil revenues, and a rival administration in the east, which is home to around three-quarters of the country's production capacity. Agoco is based in the east, and NOC in the west. Arkenu, NOC and Unipec have been contacted for comment. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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