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Shale unlikely to pick up the slack after Opec+ cut

  • : Crude oil
  • 22/10/06

US shale oil, once the bane of Opec+ producers, is in no position to fill the gap left by the group's planned 2mn b/d output cut designed to put a floor under prices.

Shale explorers started the year reluctant to significantly step up drilling, as shareholders demanded they focus on returns. The cash windfall they reaped on the back of higher oil prices from the war in Ukraine supported this stance. And then rising costs — for everything from rigs to workers to drill pipe — became another barrier in the way of lifting output.

Inflationary pressures have not eased in recent months, and 2023 is not shaping up to be much better.

"Investor pressure, infrastructure and supply chain bottlenecks, unprecedented cost inflation — all these factors impose a hard ceiling on US tight oil growth capacity these days," said Artem Abramov, head of global energy systems at Rystad Energy.

The Federal Reserve Bank of Dallas flagged ongoing cost pressures and supply-chain delays as a major source of pessimism among oil and gas producers in its third quarter energy survey.

Costs increased for the seventh quarter in a row, while firms reported it was taking longer to obtain materials and equipment. An employment index measuring the demand for workers was at a record high, while companies reported wages continuing to rise.

"The biggest issue that our company is facing is a shortage of personnel and equipment from our oilfield service vendors," wrote one executive in the anonymous survey. "Another impediment is a shortage of steel tubulars and a corresponding increase in their price."

The head of North Dakota's mineral resources department recently referenced a "steady drumbeat" of drillers complaining about worker shortages.

Companies have said they are "just unable to attract the skilled labor that we need to deploy more drilling rigs and more frac (hydraulic fracturing) crews," said Lynn Helms.

Little appetite to up output

After engaging in damaging price wars in the past with Opec, shale has little appetite to compete for market share these days.

Publicly-traded companies are heeding investor calls for higher payouts after years of profligate spending resulted in heavy losses.

While private drillers have picked up the slack to some degree, they face the same sort of price pressures as their public peers, and their acreage is often of lesser quality.

Coming out of the pandemic, many firms relied on a record inventory of drilled-but-uncompleted (DUC) wells to start up new production, saving them the expense of starting from scratch. They accounted for more than a third of new wells from mid-2020 to mid-2021.

But that backlog has now been largely exhausted. Only 2pc of new capacity came from DUC wells in August, according to the Energy Information Administration (EIA). The upshot is that companies will have to boost spending to keep output going.

After rebounding from the pandemic-induced collapse in drilling, the US rig count, as measured by oilfield services provider Baker Hughes, has also struggled to make further headway. Recent gains have mostly been incremental, and the overall rig count closed out September unchanged at 765 from the end of August.

At the same time, the EIA has scaled back US output growth projections. Although production next year is still expected to surpass the record 12.3mn b/d set in 2019, initial forecasts for hefty gains this year have proved wide of the mark. Output is now seen growing by 540,000 b/d this year to 11.79mn b/d, down from earlier 1mn b/d projections from some analysts.

The White House had largely given up its unsuccessful efforts earlier this year to get producers to increase output, pivoting more recently to getting the energy industry to boost fuel inventories to help lower pump prices. But the severity of the Opec+ production cuts may lead the administration to makes its plea to the shale patch once again.


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25/02/10

Nigeria Dangote targets full capacity within a month

Nigeria Dangote targets full capacity within a month

London, 10 February (Argus) — Nigeria's privately-owned 650,000 b/d Dangote refinery could reach maximum operating capacity within a month, according to sources with knowledge of the matter who said the plant touched 85pc of nameplate capacity at the end of January. The stated goal appears ambitious, with data from Kpler and Vortexa showing Dangote ran at an implied range of 395,000-430,000 b/d to date this month, which is between 61-66pc of capacity. The implied range was 350,000-400,000 b/d in January, or 54-62pc operating capacity. Argus pegged Dangote's crude receipts at 405,000 b/d in January, a record. Dangote runs may be boosted by upstream regulator NUPRC's decision in early February to ensure Nigeria's crude is supplied to meet domestic refinery demand, before it issues crude export permits. Routine maintenance at state-owned NNPC's 125,000 b/d Warri refinery could have made more domestic crude available for Dangote use. Crude allocations to Warri were cancelled and offered out to the wider market last week, according to a market participant. But this would have been a short-term measure, with a source saying the work at Warri was completed as of 9 February, and around 1.15mn bl of crude are scheduled to be pumped to the plant. Downstream regulator NMDPRA projected that Dangote will require 550,000 b/d of Nigerian crude grades for the period January–June 2025, while NNPC's 210,000 b/d Port Harcourt and 125,000 b/d Warri plants will require 60,000 b/d and 75,000 b/d, respectively. Nigeria produced 1.51mn b/d of crude in January, according to Argus' estimate. Warri restarted at the end of 2024, having been offline since 2019. Diesel loadings from the refinery have averaged eight trucks per day, sources said last week, with sufficient supply available to sustain ongoing truck load-out operations. Warri has not started producing gasoline, according to sources. By George Maher-Bonnett, Adebiyi Olusolape and Sanjana Shivdas Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Mexico inflation slows to 4-year low in January


25/02/10
25/02/10

Mexico inflation slows to 4-year low in January

Mexico City, 10 February (Argus) — Mexico's consumer price index (CPI) eased to an annual 3.59pc January, the lowest in four years, as deceleration in agriculture prices offset faster inflation in energy and consumer goods prices. This marks the lowest annual inflation since January 2021 and a significant slowdown from July's annual peak of 5.57pc, which was driven by weather-impacted food prices. The result, reported by statistics agency Inegi on 7 January, was slightly below than the 3.63pc median estimate from 35 analysts polled in Citi Research's 5 February survey. It compares with the 4.21pc headline inflation in December, marking five months of declines in the past six months. Mexican core inflation, which excluded volatile energy and food, sped slightly to 3.66pc in January from 3.65pc in December, while non-core inflation decelerated to 3.34pc from 5.95pc the previous month. Movement, in the non-core, said Banorte, was mostly explained by a positive basis of comparison, and "will reverse as soon as the second half of February to push the headline metric above 4pc," said Banorte. Core inflation accelerated slightly to 3.66pc in January from 3.65pc in December, marking the second uptick after 22 consecutive months of deceleration. Services inflation slowed to 4.69pc from 4.94pc, while consumer goods inflation ticked up to 2.74 from 2.4pc. Non-core inflation slowed sharply to 3.34pc from 6.57pc in December. This was largely due to base effects, Banorte said, adding these base effects are likely to fade this month to speed headline annual inflation back above 4pc. The base effects most clearly impacted fruit and vegetable price inflation, contracting 7.73pc in January from 6.65pc annual inflation the previous month. Moving forward, agriculture prices are highly exposed to the coming hot, dry season in Mexico, with the La Nina climate phenomenon, adding a layer of uncertainty. Meanwhile, energy inflation accelerated to 6.34pc in January from 5.73pc the previous month, driven by higher LPG prices. Electricity inflation, meanwhile, sped to 4.32pc in January from 2.65pc in December, while inflation slowed to 0.02pc in January for domestic natural gas prices from 5.67pc in December. Monetary policy The January inflation report followed the central bank's decision Thursday to reduce its target interest rate to 9.50pc from 10pc. This was the bank's sixth rate cut since March 2024, winding down from 11.25pc. The 4-1 decision marked an acceleration in the current rate cycle, opting for a half-point reduction rather than the previous five 25-basis-point cuts. In board comments with the announcement, the bank cited "significant progress in resolving the inflationary episode derived from the global shocks" in 2021 and 2022. These triggered rate hikes from 4pc in June 2021 to 11.25pc in April 2022, the target rate's historic high. Taking into account the "country's weak economic activity" and this progress in reducing inflation, the board said it would "consider adjusting [the target] by similar magnitudes" at upcoming meetings. By James Young Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Opec+ output policy trumps Trump


25/02/10
25/02/10

Opec+ output policy trumps Trump

London, 10 February (Argus) — A key meeting of Opec+ ministers last week effectively backed the alliance's current output policy, which would not see any production returned to market until April. Opec+ has not, for now at least, heeded US president Donald Trump's call for the producer group to "bring down the cost of oil", something it could potentially do by raising output. As things stand, Opec+ members are due to start unwinding 2.2mn b/d of voluntary crude production cuts from April, and it intends to do this over an 18-month period rather than a previously scheduled 12 months. When the group took that decision in December, the Opec secretariat said this was "to support market stability" — an implicit nod to the uncertain demand picture and projections of a looming supply surplus in 2025. There appears to be little chance of this being expedited by Trump's call, which he made within days of taking office in January. The producer group's Joint Ministerial Monitoring Committee (JMMC) gave no indication that the alliance intends to change its output policy. But if anything, Trump's call could marginally increase the chances that the alliance finally pushes ahead with its plan to increase output in April — something it has delayed three times. This would have to fit with global supply and demand realities and the interests of the producer group. Opec+ continues to insist that it will only go ahead with the plan if market conditions allow. It is still far from clear whether there will be sufficient room in the market for added Opec+ output this year. One key uncertainty relates to Trump himself and the impact his tariff policies will have on the global economy. For now, the demand picture remains uncertain. Trump's threat to tighten sanctions on Iran and Russia could have a more direct impact on supply, but his plans remain vague. Opec+ delegates continue to monitor market conditions. A decision on whether to proceed with planned increases from April is due in early March. "We do not believe that Opec has the ability to bring back any barrels to the market through the whole of this year," data analytics firm Kpler head analyst Matt Smith said at the Argus Americas Crude Summit in Texas this week. "Anything that Saudi Arabia wants to bring back is only going to increase that surplus above what we saw in 2020, and we all know what happened to prices back then." He is not the only one who doubts there is sufficient room in the market for more Opec+ output. Energy watchdog the IEA continues to project a sizeable supply surplus this year, even in the absence of additional Opec+ production. Output reduction Opec+ members subject to targets reduced their collective crude output by 20,000 b/d to 33.51mn b/d in January, Argus estimates (see tables). This fall means Opec+ has slashed its production by 4.01mn b/d since October 2022, when it announced the first of its current round of cuts. Compliance has improved in recent months, with output 340,000 b/d below the collective target of 33.85mn b/d in January. There is still room for improvement. Iraq has slipped back into the red, exceeding its target by 20,000 b/d last month. Gabon was 80,000 b/d above its target. Kazakhstan's compliance has picked up recently, but the start of a new production phase at the Tengiz oil field has raised questions over its willingness to stick to its quota this year. But the group is keeping the pressure on. The statement following the JMMC meeting once again put a large emphasis on the importance of member conformity with production targets. It stressed the need for members that have exceeded their targets to fully deliver on their pledges to compensate for past overproduction. These must be delivered by the end of September. By Aydin Calik and Nader Itayim Opec+ crude production mn b/d Jan Dec* Jan target† ± target Opec 9 21.17 21.23 21.23 -0.06 Non-Opec 9 12.34 12.30 12.62 -0.28 Total 33.51 33.53 33.85 -0.34 *revised †includes additional cuts where applicable Opec wellhead production mn b/d Jan Dec Jan target† ± target Saudi Arabia 8.88 8.91 8.98 -0.10 Iraq 4.02 3.99 4.00 +0.02 Kuwait 2.42 2.44 2.41 +0.01 UAE 2.87 2.85 2.91 -0.04 Algeria 0.90 0.91 0.91 -0.01 Nigeria 1.51 1.55 1.50 +0.01 Congo (Brazzaville) 0.26 0.27 0.28 -0.02 Gabon 0.25 0.24 0.17 +0.08 Equatorial Guinea 0.06 0.07 0.07 -0.01 Opec 9 21.17 21.23 21.23 -0.06 Iran 3.33 3.40 na na Libya 1.35 1.31 na na Venezuela 0.90 0.90 na na Total Opec 12^ 26.75 26.84 na na †includes additional cuts where applicable ^Iran, Libya and Venezuela are exempt from production targets Non-Opec crude production mn b/d Jan Dec* Jan target† ± target Russia 8.96 8.97 8.98 -0.02 Oman 0.75 0.75 0.76 -0.01 Azerbaijan 0.49 0.49 0.55 -0.06 Kazakhstan 1.49 1.40 1.47 +0.02 Malaysia 0.28 0.33 0.40 -0.12 Bahrain 0.19 0.19 0.20 -0.01 Brunei 0.10 0.09 0.08 0.02 Sudan 0.02 0.02 0.06 -0.04 South Sudan 0.06 0.06 0.12 -0.06 Total non-Opec 12.34 12.30 12.62 -0.28 *revised †includes additional cuts where applicable Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Noboa's tight lead triggers runoff in Ecuador


25/02/10
25/02/10

Noboa's tight lead triggers runoff in Ecuador

Quito, 10 February (Argus) — Ecuador will hold a second-round presidential election on 13 April after incumbent President Daniel Noboa had a closer-than-expected lead over his main challenger in Sunday's election, the electoral authority said. Noboa had 44.5pc of votes as of 11:30pm ET on Sunday, closely followed by Luisa Gonzalez, the candidate for the Citizens' Revolution party with 44.1pc, with 80pc of votes counted, the national electoral council (CNE) said. Ecuador's presidential election goes to a second round if the winning candidate does not have more than 50pc of votes or 40pc of votes with a 10-percentage point lead over the runner-up. Gonzalez' party was founded by exiled former president Rafael Correa, a close friend and supporter of Venezuelan president Nicolas Maduro. Correa guided taking on crude-backed loans from China during his term and oversaw a rewrite of the constitution, allowing him to serve for 10 years. Gonzalez in brief comments said she was optimistic about winning the second round, while Noboa did not speak publicly. This is the first time since 2006 that the candidate with Correa's party did not win at least the initial round of a presidential race. Pachacutik candidate Leonidas Iza was in third place with 4.8pc of votes. His party is the political arm of the Confederation of Indigenous Nationalities (Conaie) that led an 18-day national strike in June 2022, cutting Ecuador's crude production by 17pc that month. The remaining 13 candidates obtained about 6.6pc of the valid votes. About 13.7mn Ecuadorians were required to appear at the polls. Voting is mandatory in the South American country, but only around 85pc actually voted. Ecuadorians also voted for 151 members of the national assembly. Gonazalez' party and Noboa's National Democratic Action party are forecast to win the biggest shares, but officials results will not be known for several days. By Alberto Araujo Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Crude Summit: No major tariff impacts yet: Enbridge


25/02/07
25/02/07

Crude Summit: No major tariff impacts yet: Enbridge

Houston, 7 February (Argus) — Canadian midstream company Enbridge said that potential US tariffs on Canadian crude imports have not yet had a major impact on cross-border flows on its 3mn b/d Mainline pipeline system. Enbridge is in a unique position to comment on the US tariffs on Canada and Mexico, which were set to take effect on 4 February, but were delayed this week until early March. The company operates both the Mainline pipeline system, which it describes as the largest single point of commerce between Canada and the US, as well as the largest US crude export terminal near Corpus Christi, Texas. While Enbridge would not pay the tariffs, as it does not hold title to the crude shipments, its shippers could be subject to higher costs in the form of a 10pc US tariff on Canadian crude imports that could take effect in early March. It could also be affected by a 10pc Chinese retaliatory tariff on US imports, effective from 10 February. "We have not seen any significant disruption in the flows on our Canadian systems yet," Enbridge senior vice president of business development Phil Anderson told the Argus Global Crude Summit Americas in Houston, Texas, today. "It is: plan for the worst and hope for the best." Enbridge also owns and operates the Enbridge Ingleside Energy Center (EIEC) near Corpus Christi, which handles about 25pc of all US crude exports. China accounts for a "relatively small" portion of EIEC shipments, and the Chinese counter-tariffs will not have a significant impact, Anderson said. Corpus Christi crude exports set an all-time high in November 2024 at 2.6mn b/d, besting the previous high of 2.5mn b/d set in August. Enbridge and other Corpus Christi shippers have benefited from a channel-deepening project there that allows them to load more crude onto larger vessels. The Port of Corpus Christi is making progress on the last phases of a channel-deepening project, which will give mid-sized tankers better access to export docks in the port's Inner Harbor. The project aims to increase the channel depth to 54ft from 47ft and widen it to 530ft. The latest phase of the project, which runs from west of the La Quinta ship channel and under the Harbor Bridge to the Chemical Turning Basin, will allow bigger tanker ships to dock at the Sunoco crude export terminal, and is expected to be complete by May 2025, Port of Corpus Christi Authority (POCCA) chief executive Kent Britton told the summit today. Current draft restrictions limit Inner Harbor traffic to smaller Aframax vessels, which can carry about 700,000 bl. A deeper draft will allow for Suezmax vessels to load to their full 1mn bl capacity at the Sunoco terminal. By Chris Baltimore Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

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